Ksk Power Regulatory News (KSK)

12 Dec 2007 10:18

KSK Power Ventur PLC12 December 2007 The following announcement replaces RNS7068J released at 07:00am this morning. KSK's projects under construction total 675 MW, giving a total project pipelineof 7,000 MW. All other project capacities in the Company's pipeline remain the same. KSK Power Ventur plc ("KSK", the "Company" or the "Group") Interim Results for the six months ended 30 September 2007 KSK Power Ventur plc (AIM: KSK), the power project development company withinterests in multiple power plants across India, today announces its unauditedinterim financial results for the six months ended 30 September 2007. Financial Highlights •Turnover up 431% to $13.5m (2006: $3.1m) •Gross profit up 371% at $5.9m (2006: $1.6 m) •Profit from operations up at $3.5m (2006: $(0.5)m) •Profit before tax up at $23.5m (2006: $(1.1)m) •Net profits up at $20.9m (2006: $(1.3)m) All financial figures represented are in US dollars unless otherwise stated. Thefigures for the corresponding reporting period last year relate to KSK EnergyVentures Private Limited, the 100% owned Indian subsidiary of the Company. TheCompany acquired a controlling interest in the downstream subsidiary and jointventure companies on 4 November 2006. The profit before tax for the current reporting period includes $17.4m onaccount of valuation of investments held for trading at fair market value,premium on sale of equity $3.6m and interest income of $3.4m. Operational Highlights •Operational capacity of 210 MW •Plants under construction of 675 MW •Significant progress in the development of the Wardha Power 1,200 MW power plant in Chattisgarh •Additional projects in pipeline - 2,000 MW thermal and 400 MW renewable energy, totalling 7,000MW, as a combination of projects under operation, construction, development and pipeline •Agreement for a new coal block allotted , with a capacity of 250 MT, resulting in the addition of 2,000 MW in thermal capacity, as described above •Acquisition of strategic stake by General Electric Company in Sayi Power Energy Limited •Appointment of Mr. Scott Bayman to the Board as a Non-Executive Director Commenting on the results, T L Sankar, Chairman of KSK said: "The period was highly successful for KSK. Since our admission to AIM inNovember 2006, the Company has not only focused on the growth opportunities opento us through the development and construction initiatives of a range of powerprojects across India but also taken advantage of investing in opportunities tocreate significant shareholder value in the medium term. "The Company sees significant opportunities in the second half and early part ofthe next year. These are exciting times for the Company with a number of furtherprojects underway. We remain confident in our growth prospects and in ourability to meet expectations for the full year." For further information, please contact: www.ksk.co.in KSK Power Ventur plc +(91) 40 2355 9922 - 25S. Kishore, Executive DirectorK.A. Sastry, Executive Director Arden Partners plc +44(0) 20 7398 1632Richard DayAdrian Trimmings Buchanan Communications Limited +44(0) 20 7466 5000Mark EdwardsBen Willey Chief Executive Review Introduction This has been another period of significant progress for the Group, both in ourcontinuing development programme and new opportunities being pursued. Theresults for the period detail the unaudited consolidated results for the Companyfor the six months period ending 30 September 2007. Overall, the financial performance for the period has been good, with continuingdevelopment activities as well as the profitable underlying power plantoperations. Review of Projects The Company currently is working with project pipeline opportunities of 7200+ MWtotal capacities, as detailed below Projects under Operation (a) Prior plants directly held •RVK Energy, 19.2 MW natural gas based power plant in Andhra Pradesh operating since January 2000 •Kasargod Power 20.4 MW LSHS based power plant in the state of Kerala Operating since May 2001 •Coromandel Electric 26.2 MW natural gas based power plant in the state of Tamil Nadu operating since November 2004 (b) Three plants have been commissioned during the last year •Arasmata 43 MW coal based power plant in the state of Chattisgrah operating with supplies to Lafarge India •Sai Regency 58 MW natural gas based power plant in the state of Tamil Nadu operating with supplies to multiple industrial customers •Sitapuram 43 MW coal based power plant in state of Andgra Pradesh with supplies to Zuari Cements & Sri Vishnu Cements (Italcementi Group) Total 210 MW Projects under Construction •VS Lignite, 135 MW lignite based power plant in Rajasthan with supplies to multiple industrial customers. This plant is due for completion and commissioning in Q3 2008. Materials required for construction have reached the site and progress is encouraging. •Wardha Power, 540 MW Warora power plant, the coal based power plant in Maharashtra is due for completion and commissioning in 2009. The land required for the project has been acquired and orders have been placed for equipment supply, erection and commissioning, and construction. Importing the power plant equipment is expected to commence in Q1 2008 while the commissioning of the plant is expected to be completed in 2009. Additional coal linkage has been obtained for the power plant to ensure availability of coal for power generation in the interim pending commencement of coal mining. Total 875 MW Projects under Advanced Development •Wardha Power, 1,200 MW power plant in Chattisgarh has witnessed significant progress with respect to land acquisition, water linkage, and granting various statutory approvals required for the project. This project is now on fast track for development and we expect significant movement towards financial closure and finalisation of the EPC contractors over the next six months. •Arasmeta, 43 MW coal based, expansion power plant in Chattisgrah with supplies to Lafarge and multiple industrial customers. The Company has received term sheets from General Electric Company ("GE") with respect to the entire SPV debt requirements and is finalising the EPC contract for initiating construction work at the site. •KSK Dibbin Hydro Power, 125 MW hydro-electric power plant in Arunachal Pradesh has witnessed substantial progress over the last few months. With availability of detailed project report ("DPR") and necessary permissions, the Company expects to obtain necessary debt financing before Q2 2008. Total 1,368 MW Projects under Development The Company continues to work on additional power plant opportunities to developthe pipeline including the following:. •Kamang Dam hydro-electric power 1,000 MW of hydro-electric power consisting of 600 MW Kamang Dam and 400 MW of new additional downstream developer identified power plant opportunities recently acquired from Government of Arunachal Pradesh. •JR Power, with potential for 2,000 MW of power plants based on the recently secured access to coal supplies KSK-Narmada Power Company, pursuit of 1,800 MW coal based power plant based on a Memorandum of Understanding ("MoU") with Madhya Pradesh State Mining Corporation. (see further details below) Total 4,800 MW Coal block and new project KSK has continued to seek to take all necessary steps to ensure it has secureaccess to coal and lignite blocks in various locations so as to ensurecontinuity of fuel supply and control of its fuel costs for its various powerplant initiatives. In addition to its existing access to fuel resources, theCompany is pleased to report access to additional fuel resources of 250 MT, froman additional coal block in the state of Orissa. This block has been allotted tothe Pondicherry Industrial Development Corporation (PIPDIC) and an agreement hasbeen entered into to execute this project. The Company estimates that this willprovide an additional capacity of 1,750-2,000 MW. The Company intends to executethis power project through a special purpose vehicle called JR Power. Renewable energy Out of the existing pipeline of 725 MW, KSK has received the DPR for the first125 MW. It has filed the DPR for the requisite approvals and has since formed ateam for execution under the stewardship of, Mr. Satish Sharma, Senior TechnicalDirector in one of India's largest government owned hydro- electric projectcompanies. The project is expected to achieve financial closure in Q2 of 2008. Prefeasibility studies have been commissioned in respect of the 600 MW Kamenghydro-electric projects. Further opportunities have been identified for a numberof hydro electric projects, aggregating to an additional capacity ofapproximately 400 MW in the Kamang basin of State of Arunachal Pradesh , forwhich an MoU has been signed with the government of Arunachal Pradesh. With this, the total portfolio of hydro-electric power plants which KSK hasunder development have increased from 725 MW to 1,125 MW. KSK is also broadening its renewable energy project initiatives by entering thearea of solar power generation. KSK is exploring the potential for them toconsider, manufacture and export solar modules in the first phase and,thereafter, develop large capacity projects in India. The Company is indiscussions with a technology company in the USA for the relevant collaborationin this regard and intends to have a research and development programme toaddress this vast renewable power opportunity in the near future. GE announcement As announced on 15 November 2007, KSK entered into a strategic relationship withGE, a diversified business with extensive global energy sector expertise andheadquartered at Fairfield, Connecticut, USA. As stated at the time, GE will beparticipating in the debt and equity of the Company and its subsidiaries. As afirst step, GE purchased the indirect interest of Mr. Hari Kiran Vadlamani, oneof the promoter Directors of KSK, who resigned from the KSK Group. The appointment of a GE senior executive with significant global experience inthe energy space as an additional Non-Executive Director for the Company shouldbe finalised and announced shortly. Lehman JV The Company through its indirect Indian subsidiary KSK Energy Ventures PrivateLimited has a strategic ownership of 35% in a Lehman Brothers ("Lehman") jointventure. The Company is reviewing the options for this area of business and has haddiscussions with Lehman with a view to enhancing KSK's stake in the jointventure to a majority holding. This reorganization is currently being reviewed generally and would also require approval from the relevant authorities. Anyfurther details will be released in due course. One development currently beingconsidered is the potential for an Indian initial public offering. Management appointments In addition to the GE senior executive who will be joining the Main Board, KSKis pleased to announce with immediate effect, the appointment of Mr. ScottBayman as a Non-executive Director. Mr. Bayman has many years experience andalso sits on the Board of Crompton Greaves Limited, India, Punj Lloyd Limited,India and Jubilant Energy, Amsterdam. Mr. Bayman is also an Advisor to theBoeing Company and a Senior Director of Stonebridge International, LLC Mr.Bayman holds a Masters degree in Management from the Alfred P. Sloan School ofManagement, MIT, Massachusetts. Further details in accordance with Schedule2(g) of the London Stock Exchange AIM Rules on Mr. Bayman's background will be included in a separate announcement. In addition, the senior management of the Group will be strengthened by a newGroup Chief Financial Officer, Mr. Durga Shankar who has over 24 years ofsenior level experience in all aspects of Corporate Finance. He has beeninvolved in Project Evaluation, Corporate Treasury, International InvestorRelations, Fund Management, Corporate Strategy and Investment BankingAdvisory. Mr Durga Shankar is an Associate Member of the Institute of Charteredaccountants of India (ACA) and has worked with the ICI Bank in India in variouscapacities. Financial Overview The consolidated operating revenue for the reporting period of the Company frompower generating activities and project development activities stood at $13.5m.Gross Profit on the Operating Revenue stood at $5.9m. Operating income for the period stood at $3.5m as per income statement. $3.4m onaccount of profit earned from sale of equity which by virtue of accountingtreatment is required to be classified under Other income. The Company also hada valuation gain of $17.4m on account of the fair valuation of the equity stakeheld in Gujarat Mineral Development Corporation which is accounted through theIncome Statement in view of the said investment being held as Available for Trading. Finance costs for the reporting period stood at $4.4m. Profit before tax stood at $23.5m including the effect of valuation gain on theinvestments held as Available for Trading. The Earnings per Share for theperiod was $0.162 Outlook The Company sees significant opportunities in the second half and early part ofthe next year. These are exciting times for the Company with a number offurther projects underway. We remain confident in our growth prospects and inour ability to meet expectations for the full year. Comparative statement Comparative interim results for the period to 30 September 2006 are not shown asKSK Power Ventur plc, the listed entity, only came into existence on 17 July2006 and the Directors do not believe any such comparative information would bemeaningful. The Group's audited results for the period to 31 March 2007, asshown in the preliminary results announced on 30 July 2007, are used as acomparative covering the period from 17 July 2006 to 31 March 2007. Consolidated Balance Sheet (Unaudited)(All amounts in thousands of US Dollars, unless otherwise stated) As at 30 As at 31 March September 2007 2007 (Unaudited) (Audited) ASSETSNon current assetsProperty, plant and equipment, net 90,610 92,490Goodwill - 2,703Long termfinancial assets 20,543 10,793Total non current assets 111,153 105,986Current assetsCash and cash equivalents 13,023 3,341Restricted cash 45,822 59,862Available for Sale investments 43 28Trading Securities 49,345 -Accounts receivable, net 4,253 3,689Inventories 1,597 1,129Other current assets 46,417 46,294Total current assets 160,500 114,343Total Assets 271,653 220,329 LIABILITIES AND STOCKHOLDERS' EQUITYNon current liabilitiesLong-term debt (net of current portion) 66,399 73,749Employee obligations 30 17Deferred tax liabilities 2,146 122Other liabilities 30,326 11,952Total non current liabilities 98,901 85,840Current liabilitiesProvisions 660 153Trade and other payables 7,877 6,990Current tax liabilities, net of advances 2,705 2,292Short-term loans and borrowings 14,926 180Current portion of long term debt 54,593 56,661Other liabilities 4,195 3,021Total current liabilities 84,956 69,297Total liabilities 183,856 155,137Stockholders' equityShare capital 216 216Additional paid up capital 52,697 52,697Other reserves 1,942 1,942Translation reserve 4,206 2,521Retained earnings 28,736 7,816Total stockholders' equity 87,797 65,192Total liabilities and stockholders' equity 271,653 220,329 Consolidated Statement of Income (Unaudited)(All amounts in thousands of US Dollars, unless otherwise stated) For the six For the six month period to month period to 30 September 30 September 2007 2006* (Unaudited) (Unaudited) Operating revenue 13,465 3,122Cost of sales (7,543) (1,529)Gross Profit 5,922 1,593 Distribution expenses 206 2General and administrative expenses 2,258 2,007Operating income 3,458 (416) Other income 3,384 142Investment income 21,034 18Finance cost (4,416) (866)Net income before tax 23,460 (1,122) Taxation chargeCurrent tax expenses 527 187Deferred tax expenses 2,013 -Total Tax 2,540 187 Net Income attributable to equity shareholders 20,920 (1,309) Earnings per shareContinuing operationsBasic and diluted (in USD) 0.162 (4.40) * Comparative figures for the six month period to 30 September 2006 are shownfor illustrative purposes only and relate to KSK Energy Ventures PrivateLimited, the 100% owned Indian subsidiary of the Company. The Company acquired acontrolling interest in the downstream subsidiary and joint venture companies on4 November 2006 in connection with the Company's AIM IPO. Consolidated Statement of Cash Flows (Unaudited)(All amounts in thousands of US Dollars, unless otherwise stated) Particulars Period ended 30 Period ended 30 September 2007 September 2006* (Unaudited) (Unaudited) (A) Cash inflow/ (outflow) from operating activities Net income/(loss) before tax 23,460 (1,122) Adjustments to reconcile net income before tax to net cash provided by operating activities: Depreciation and amortization 1,437 489(Profit)/Expense on sale of investments (3,578) 866(Increase)/Decrease in fair value ofTrading Securities (17,050) (121)Dividend Income (406) (1)Changes in operating assets and liabilitiesRestricted cash - (36)Accounts receivable and other assets (687) (8,204)Inventory (468) (152)Loans and Advances 39,197 (3,767)Current Liabilities and Provisions 36,069 -Net changes in operating assets andliabilities 77,975 (12,159)Direct Tax paid (540) (187)Net cash provided by operating activities 77,435 (12,346) (B) Cash inflow/ (outflow) from investing activities(Increase)/Decrease in restricted cash 14,040 -Sale of investment - 145(Additions) to capital work in progress(net) - (4,349)Purchase of investments - (823)Dividends paid to equity shareholders (78) 1Interest paid on loans (4,416) 121Payments for purchase of property plantand equipment - (26)Cash received from sale of interest in JVcompanies 4,583 -Consideration paid for the acquisition ofequity interests in joint ventures (57,801) 17,724Trading Securities (31,911) -Net cash used in investing activities (75,583) 12,793 (C ) Cash inflow/ (outflow) from financing activities Adjustments for changes in controllinginterest - (8,823)Proceeds from Loans 77,550 19,419Decrease/(Increase) in borrowings onaccount of acquisition (38,407) (866)Dividends from equity investments 406 -Interest on loans 4,416 (10)Repayment of secured loans (36,271) (9,149)Proceeds from issue of share capital - 1,464Changes in minority interest - (58)Dividend Paid (including tax on dividend) (78) -Net cash provided by/(used in)financing activities 7,615 1,977 (D) Effect of exchange rate changes on cash 215 (162)Net increase/(decrease) in cash and cashequivalents 9,682 2,535Cash and cash equivalents at the beginningof the period 3,341 4,954Cash and cash equivalents at the end of theperiod 13,023 7,327 Cash and cash equivalents compriseCash in hand 7,055 904Balances with banks 5,968 6,423 13,023 7,327 Consolidated Statement of Changes in Shareholders' Equity (Unaudited)(All amounts in thousands of US Dollars, unless otherwise stated) Common Common Other Additional Translation Retained Total stock - No. of stock - Reserve paid in reserve Earnings stockholders' shares Amount capital equity Balance as at 1 April 2007 128,878,505 216 1,942 52,697 2,521 7,816 65,192Currency translationadjustment - - - - 1,685 - 1,685Net income recognised directly in equity - - - - - - -Net Income for the current period - - - - - 20,920 20,920Total recognisedincome and expense for the period - 216 1,942 - 4,206 28,736 35,100Redemption of OCCRPS - - - - - - -Statutory reserve created in JV - - - - - - -Reversal of debenture redemption reserve - - - - - - -Issue of common stock - - - - - - -Dividend paid - - - - - - -Balance as at30 September 2007 128,878,505 216 1,942 52,697 4,206 28,736 87,797 Notes to the Consolidated Financial Statements 1 Nature of Operations KSK Power Ventur plc ('the Company'), its subsidiaries and joint ventures(collectively referred to as 'the Group') are primarily engaged in thedevelopment, operation and maintenance of private sector power projects,predominantly through joint ventures with heavy industrial companies in theIndia. The Group strategy for growth is to work with major international and Indianbusinesses and electricity utilities to ensure that they have access todependable and cost effective source of electrical power through the developmentconstruction operation of optimal sized power plants with appropriate fuelsources. The Group, through one of its subsidiaries also acts as investment manager ofthe Small is Beautiful Fund ('SIB') and is empowered to invest the contributionsreceived by SIB in public limited companies engaged in the business of powergeneration and allied projects, 2 General Information The consolidated financial statements of the Group have been prepared inaccordance with International Financial Reporting Standards ('IFRS') as issuedby the International Accounting Standards Board ('IASB'). KSK Power Ventur plc, a limited liability corporation, is the Group's ultimateparent company and is incorporated and domiciled in the Isle of Man. The addressof KSK Power Ventur plc registered Office, which is also principal place ofbusiness is 15-19 Athol Street, Douglas, Isle of Man 1M1 1LB. KSK Power Venturplc's equity shares are listed on the Alternate Investment Market ('AIM')operated by the London Stock Exchange. The Financial statements for the period 01 April 2007 to 30 September 2007 wereapproved by the board of directors on 10 December 2007. As at 30 September 2007,the Group comprised of the following subsidiaries and joint ventures. Subsidiaries Immediate Parent Country of Incorporation % shareholding KSK Energy Limited ('KEL') KSK Power Ventur plc Mauritius 100%KSK Energy Ventures Private Limited('KSKEVPL' or 'KSK India') KEL India 100% Joint Ventures Country of % economic interest as on % economic interest as Incorporation 30 September 2007 on 31 March 2007 RVK Energy Private Limited India 50.00% 50.00%Kasargod Power Corporation Limited India 50.00% 50.00%Coramandel Electric Company Limited India 71.86% 71.86%KSK Electricity Financing IndiaPrivate Limited India 35.00% 35.00%Marudhar Mining Private Limited India 74.00% 74.00%Sai Regency Power CorporationPrivate Limited India 25.87% 50.14%Arasmeta Captive Power CompanyPrivate Limited India 17.85% 34.26%Sitapuram Power Limited India 17.15% 17.15%VS Lignite Power Private Limited India 30.27% 58.26%Wardha Power Company Private Limited India 34.20% 74.00% 3 Summary of Accounting Policies 3.1 Overall considerations The significant accounting policies that have been used in the consolidatedfinancial statements are summarised below. The financial statements have beenprepared using the measurement bases specified by IFRS for each type of asset,liability, income and expense. The measurement bases are more fully described inthe accounting policies below. The consolidated financial information comprises the Company, its subsidiariesand share of jointly controlled entities (together referred to as "the group")for the period from 1 April 2007 to 30 September 2007. 3.2 Basis of preparation The consolidated financial information has been prepared on the going concernassumption and in the opinion of the directors the group will be able to meetits obligations as they fall due in the foreseeable future. The financial information comprises the consolidated income statement,consolidated balance sheet, consolidated statement of changes in shareholders'equity, consolidated statement of cash flows and related notes. 3.3 Use of estimates In the process of applying the Group's accounting policies, the Group isrequired to make certain estimates, judgments and assumptions that it believesare reasonable based upon the information available. These estimates andassumptions affect the reported amounts of assets and liabilities at the date ofthe financial statements and the reported amounts of revenue and expenses duringthe periods presented. The key estimates used by management for presentation ofthese financial statements include economic lives of property and equipment,deferred taxes, allowances for uncollectible receivables. On an ongoing basis, the Group evaluates its estimates using historicalexperience, consultation with experts and other methods considered reasonable inthe particular circumstances. Actual results may differ significantly from theestimates, the effect of which is recognised in the period in which the factsthat give rise to the revision become known. 3.4 Basis of consolidation The consolidated financial information incorporates the unaudited financialinformation of KSK Power Ventur plc, its subsidiaries, and jointly controlledentities of the subsidiaries made for the half year ending 30 September 2007.The figures corresponding to the half year ended 30 September 2006 were notfurnished as the reporting entity acquired the controlling interest ofsubsidiaries and their joint control entities subsequent to 30 September 2006.The audited consolidated financials for the period ended 31 March 2007 arefurnished. Subsidiaries are those entities controlled by the Company. Control exists whenthe company has the power, directly or indirectly, to govern the financial andoperating policies of an enterprise so as to obtain benefits from itsactivities. Subsidiaries are consolidated from the date on which control isacquired by the group and are no longer consolidated from the date such controlceases. Intra-group balances and transactions and any resulting unrealized gains arisingfrom intra-group transactions are eliminated on consolidation. Unrealized lossesresulting from intra-group transactions are also eliminated unless cost cannotbe recovered. Amounts reported in the financial statements of subsidiaries havebeen adjusted where necessary to ensure consistency with the accounting policiesadopted by the Group. 3.5 Investments in Joint Ventures Entities whose economic activities are controlled jointly by the Group and byother ventures independent of the Group ('Joint Ventures') are accounted forusing proportionate consolidation to the extent of the Group's economic interestin the entity. Where a group company undertakes its activities under joint venture arrangementsdirectly, the group's share of jointly controlled assets and any liabilitiesincurred jointly with the other ventures are recognised in the financialstatements of the relevant company and classified according to their nature.Liabilities and expenses incurred directly in respect of interest in jointlycontrolled assets are accounted for on an accrual basis. Income from the sale orthe use of the group's share of the output of jointly controlled assets, and itsshare of the joint venture expenses, are recognised when it is probable that theeconomic benefits associated with the transactions will flow to/from the groupand their amount can be measured reliably. Amounts reported in the financial statements of joint ventures have beenadjusted where necessary to ensure consistency with the accounting policiesadopted by the Group. 3.6 Business combinations The acquisition of subsidiaries is accounted for using the purchase method. Thecost of acquisition is measured at the aggregate of the fair values, at the dateof exchange, of assets given, liabilities incurred or assumed, and equityinstruments issued by the Group in exchange for control of the acquiree, plusany costs directly attributable to the business combination. The acquiree'sidentifiable assets, liabilities and contingent liabilities that meet theconditions for recognition under IFRS 3 are recognized at their fair value atthe acquisition date, except for non-current assets (or disposal groups) thatare classified as held for resale in accordance with IFRS 5 Non-Current AssetsHeld for Sale and Discontinued Operations, which are recognized and measured atfair value less costs to sell. Goodwill represents the excess of the acquisition cost in a business combinationover the fair value of the group's share of the identifiable net assetsacquired. Goodwill is carried at cost less accumulated impairment losses. Anyexcess of the group's share of the identifiable net assets acquired over theacquisition cost is recognised immediately in profit and loss after reassessingthe identification and measurement of the identifiable assets, liabilities,contingent liabilities and recording necessary adjustments. Refer to note 3.8for a description of impairment testing procedures On disposal of a subsidiary, associate or jointly controlled entity, theattributable amount of goodwill is included in the determination of the profitor loss on disposal. 3.7 Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulateddepreciation and impairment losses. Historical cost includes expenditure that isdirectly attributable to the development or acquisition of the items. Subsequentcosts are included in the asset's carrying amount or recognized as a separateasset, as appropriate, only when it is probable that future economic benefitsassociated with the item will flow to the group and the cost of the item can bemeasured reliably. Borrowing costs associated with the Property, plant andequipment are capitalised up to the date the said property, plant and equipmentare ready to be put to use. Repairs and maintenance are charged to the incomestatement during the financial period in which they are incurred. Assets in the course of construction are not depreciated. Other assets aredepreciated by writing off their cost less estimated residual value evenly overtheir estimated useful lives, based on management's judgment and experience,which are principally as follows: Nature of asset Useful life (years)Buildings 30 yearsInfrastructure assetsGas engine based installation 15 yearsThermal power plants 25 yearsHydro-electric power plants 35 yearsOffice equipment and motor vehicles 7 yearsFurniture and fittings 7 yearsVehicles 5 yearsComputer software 5 years Land held for use in production is stated at cost and the related carryingamounts are not depreciated. 3.8 Impairment testing of goodwill and property plant and equipment Property, plant and equipment are reviewed for impairment at each reporting dateto determine whether there is any indication that those assets may have sufferedan impairment loss. If any such indication exists, the recoverable amount of theasset is estimated in order to determine the extent of the impairment loss, ifany. For the purposes of assessing impairment, assets are grouped at the lowestlevels for which there are largely independent cash inflows (cash-generatingunits). As a result, some assets are tested individually for impairment and someare tested at cash-generating unit level. Goodwill is allocated to thosecash-generating units that are expected to benefit from synergies of the relatedbusiness combination and represent the lowest level within the Group at whichmanagement monitors goodwill. Cash-generating units to which goodwill has been allocated are tested forimpairment at least annually. All other individual assets or cash-generatingunits are tested for impairment whenever events or changes in circumstancesindicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's orcash-generating unit's carrying amount exceeds its recoverable amount. Todetermine the recoverable amount, KSK Power Ventur plc's management estimatesexpected future cash flows from each cash generating unit and determines asuitable interest rate in order to calculate the present value of those cashflows. Discount factors are determined individually for each cash-generatingunit and reflect their respective risk profiles as assessed by KSK Power Venturplc's management. Impairment losses for cash-generating units reduce first the carrying amount ofany goodwill allocated to that cash-generating unit. Any remaining impairmentloss is charged pro rata to the other assets in the cash-generating unit. Withthe exception of goodwill, all assets are subsequently reassessed forindications that an impairment loss previously recognised may no longer exist.An impairment charge that has been recognised is reversed if the cash-generatingunit's recoverable amount exceeds its carrying amount. 3.9 Financial Instruments Financial assets and liabilities are recognised on the Group's balance sheetwhen the Group becomes a party to the contractual provisions of the instrument. Trade receivables Trade receivables are typically short term in nature and are initially recordedat fair value and subsequently adjusted for allowances Financial investments Investments (other than interests in joint ventures and fixed deposits) arerecognised and derecognised on a trade date and are initially measured at fairvalue, including transaction costs. Investments are classified as eitherheld-to-maturity, held-for-trading, loans and receivables or available for sale.Held-to-maturity investments and loans and receivables are measured at amortisedcost. Held-for-trading and available-for-sale investments are measured atsubsequent reporting dates at fair value. Where securities are held for tradingpurposes, gains and losses arising from changes in fair value are included innet profit or loss for the period. For available-for-sale investments, gains andlosses arising from changes in fair value are recognized directly in equity,until the security is disposed of or is determined to be impaired, at which timethe cumulative gain or loss previously recognized in equity is included in thenet profit or loss for the period. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and othershort term highly liquid investments that are readily convertible to a knownamount of cash and are subject to an insignificant risk of change in value. Financial liabilities and equity Financial liabilities and equity instruments are classified according to thesubstance of the contractual arrangements entered into. An equity instrument isany contract that evidences a residual interest in the assets of the group afterdeducting all of its liabilities. Compound financial instruments are broken down into their equity and liabilitycomponents and classified accordingly in the balance sheet. The initial carryingamount of a compound financial instrument is allocated to its equity andliability components, and the equity component is assigned the residual amountafter deducting from the fair value of the instrument as a whole the amountseparately determined for the liability component. The carrying amount of theliability component is determined by measuring the fair value of a similarliability that does not have an associated equity component. Such measurementtakes into account management's estimates of the Group's contractual obligationto make future payments and the market interest rate for a similar liability. Bank borrowings Interest-bearing bank loans and overdrafts are recorded at the proceedsreceived, net of direct issue costs. Finance charges, including premiums payableon settlement or redemption and direct issue costs, are accounted for on anamortised cost basis to the income statement using the effective interest methodand are added to the carrying amount of the instrument to the extent that theyare not settled in the period in which they arise. Trade payables Trade payables are initially measured at fair value, and are subsequentlymeasured at amortised cost, using effective interest rate method. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received,including premium, if any, and the issue expenses are deducted from the sharepremium received. 3.10 Inventories Inventories are stated at the lower of cost and net realisable value. Costincludes all expenses directly attributable to the manufacturing process as wellas suitable portions of related production overheads, based on normal operatingcapacity. Financing costs are not taken into consideration. Costs of ordinarilyinterchangeable items are assigned using the first in, first out cost formula.Net realisable value is the estimated selling price in the ordinary course ofbusiness less any applicable selling expenses. 3.11 Foreign Currency Transactions The functional currency of the Company and its subsidiary in Mauritius is theBritish Pound ('GBP') and the Indian Rupee for all the entities operating inIndia. The reporting currency of the Group is the US dollar as submitted to theAIM exchange where the shares of KSK Power Ventur plc are listed. Transactions and balances Foreign currency transactions are translated into the functional currency of therespective group entity, using the exchange rates prevailing at the dates of thetransactions (spot exchange rate). At each balance sheet date, monetary assetsand liabilities denominated in foreign currencies are translated into US dollarsat the relevant rates of exchange ruling on the balance sheet date. Gains andlosses arising on translation are included in net profit or loss for the period,except for exchange differences arising on non-monetary assets and liabilitieswhere the changes in fair value are recognised directly in equity. Translation On consolidation, the balance sheets of the subsidiaries and joint ventures aretranslated into US dollars at exchange rates applicable at the balance sheetdate. The income statements are translated into US dollars using the averagerate unless exchange rates fluctuate significantly in which case the exchangerate at the date the transaction occurred is used. Exchange differencesresulting from the translation of such balance sheets at rates ruling at thebeginning and end of the period, together with the differences between incomestatements translated at average rates and rates ruling at the period end, arecharged/credited to the foreign currency translation reserve in equity. Suchtranslation differences are recognised as income or as expenses in the period inwhich the operation is disposed of. 3.12 Segment reporting In identifying its operating segments, management generally follows the Group'sservice lines, which represent the generation of the power and other relatedservices provided by the Group. The activities undertaken by the Power generation segment includes sale of Powerand other related services. The project management of these power plants isundertaken by the service segment. The accounting policies used by the Group forsegment reporting are the same as those used for the financial statements.Further, income, expenses and assets which are not directly attributable to thebusiness activities of any operating segment are not allocated. 3.13 Provisions for liabilities and charges Provisions are recognised when present obligations will probably lead to anoutflow of economic resources from the Group and they can be estimated reliably.Timing or amount of the outflow may still be uncertain. A present obligationarises from the presence of a legal or constructive commitment that has resultedfrom past events, for example, product warranties granted, legal disputes oronerous contracts. Restructuring provisions are recognised only if a detailedformal plan for the restructuring has been developed and implemented, ormanagement has at least announced the plan's main features to those affected byit. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle thepresent obligation, based on the most reliable evidence available at the balancesheet date, including the risks and uncertainties associated with the presentobligation. Where there are a number of similar obligations, the likelihood thatan outflow will be required in settlement is determined by considering the classof obligations as a whole. Long term provisions are discounted to their presentvalues, where the time value of money is material. All provisions are reviewed at each balance sheet date and adjusted to reflectthe current best estimate of Group management. In those cases where the possible outflow of economic resource as a result ofpresent obligations is considered improbable or remote, no liability isrecognised, unless it was assumed in the course of a business combination These contingent liabilities are recognised in the course of the allocation ofpurchase price to the assets and liabilities acquired in the businesscombination. They are subsequently measured at the higher amount of a comparableprovision as described above and the amount initially recognised, less anyamortisation. 3.14 Employees' benefits Defined benefit plans A defined benefit plan is a pension plan that defines an amount of benefit thatan employee will receive on retirement/separation. The legal obligation for anybenefits remains with the Group, even if plan assets for funding the definedbenefit plan have been set aside. Plan assets may include assets specificallydesignated to a long term benefit fund as well as qualifying insurance policies.The liability recognised in the balance sheet for defined benefit pension plansis the present value of the defined benefit obligation (DBO) at the balancesheet date less the fair value of plan assets, together with adjustments forunrecognised actuarial gains or losses and past service costs. The managementestimates the DBO annually with the assistance of independent actuaries. Theestimate of its post-retirement benefit obligations is based on standard ratesof inflation, medical cost trends and mortality. It also takes into account theGroup's specific anticipation of future salary increases. Discount factors are determined close to each year-end by reference to highquality corporate bonds that are denominated in the currency in which thebenefits will be paid and that have terms to maturity approximating to the termsof the related pension liability. The liabilities recognised for defined benefitplans sponsored by the Company, however, are subject to change as these factorsmay vary over the passage of time. Current service costs for defined benefitplans are accrued in the period to which they relate with the difference betweenthe expected return on scheme assets and interest on scheme liabilities areincluded within the income statement within employee costs. Defined contribution plan In addition, the group operates a defined contribution scheme where payments arecharged as employee costs as they fall due. The group has no further payment orobligations once the contributions have been paid. 3.15 Revenue recognition Revenue is measured at the fair value of the consideration received orreceivable in accordance with the relevant agreements, net of discounts, VAT andother applicable taxes. Sale of power Revenue from the sale of power is recognised when all the following conditionshave been satisfied: (i) The group has transferred to the buyer the significant risks and rewards ofownership of the power supplied or the services provided. This is generally whenthe customer has approved the services that have been provided or has takenundisputed delivery of power. (ii) it is probable that the economic benefits associated with the transactionwill flow to the group, a (iii) the costs incurred or to be incurred in respect of the transaction can bemeasured reliably. Income from services Income from services is recognised as per the terms and conditions of thedevelopment activity with respect to the relevant power generating company andits stage of development. Interest income and expenses are reported using the effective interest ratemethod. Dividends received, other than those from investments in associates, arerecognised at the time of their distribution. 3.16 Income Taxes The tax expenses represent the sum of the tax currently payable and deferredtax. Current taxation Current tax is based on the taxable profit for the period and is provided atamounts expected to be paid (or recovered) using the tax rates and laws thathave been enacted or substantially enacted at the balance sheet date. Taxable profit differs from the net profit or loss as reported in the incomestatement because it excludes items of income or expense that are taxable ordeductible in other years and further excludes items that are never taxable ordeductible. Deferred taxation Deferred taxation is the tax expected to be payable or recoverable ondifferences between the carrying amounts of assets and liabilities in thefinancial statements and the corresponding tax bases used in the computation oftaxable profit. Deferred tax liabilities are provided, using the liabilitymethod, on all taxable temporary differences at the balance sheet date. Suchassets and liabilities are not recognised if the temporary difference arisesfrom goodwill or from the initial recognition (other than in a businesscombination) of other assets an liabilities in a transaction that affectsneither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differencesarising on investments in subsidiaries and interests in joint ventures, exceptwhere the group is able to control the reversal of the temporary difference andit is probable that the temporary difference will not reverse in the foreseeablefuture. Deferred tax is measured, without discounting, at the average tax rates that areexpected to apply in the periods in which the temporary timing differences areexpected to reverse based on tax rates and laws that have been enacted orsubstantially enacted at the balance sheet date. The carrying amount of deferred tax assets is reviewed at each balance sheetdate and reduced to the extent that it is no longer more likely than not thatsufficient taxable profit will be available to allow all or part of the asset tobe recovered. Deferred tax is not recognised on temporary differences arising from the initialrecognition of goodwill. Deferred tax is charged or credited in the income statement, except when itrelates to items charged or credited to equity, in which case the deferred taxis also dealt with in equity. 3.17 Financing costs and interest income Borrowing costs, excluding borrowing cost directly attributable to acquisitionor construction of qualifying assets, are recognized in the income statement inthe period in which they are incurred, the amount being determined using theeffective interest rate. Interest income and expenses is recognised using theeffective interest rate method. Finance income is recognised in the incomestatement in the period in which they are accrued. 3.18 Equity and Dividend Payments Share capital is determined using the nominal value of shares that have beenissued. Additional paid-in capital includes any premiums received on the initial issuingof the share capital. Any transaction costs associated with the issuing ofshares are deducted from additional paid-in capital, net of any related incometax benefits. Other reserves comprise gains and losses due to the revaluation of certainfinancial assets and property, plant and equipment. Foreign currency translationdifferences are included in the translation reserve. Retained earnings include all current and prior period results as disclosed inthe income statement. Dividend distributions payable to equity shareholders are included in "othershort term financial liabilities" when the dividends are approved in the generalmeeting prior to the balance sheet date. 3.19 Cash and Cash Equivalents Cash and cash equivalents comprise cash on hand and demand deposits, togetherwith other short-term, highly liquid investments that are readily convertibleinto known amounts of cash and which are subject to an insignificant risk ofchanges in value. 3.20 Earnings per share The earnings considered in ascertaining the company's earning per share (EPS)comprise of the net profit after tax less dividend (including dividenddistribution tax) on preference shares. The number of shares used for computingthe basic EPS is the weighted average number of shares outstanding during theyear. 4 Subsequent events (i) Agreements were entered into with M/s Lafarge India Private Limited forsetting up and operating a 43 MW coal based power plant at the existingfacility, Arasmeta Captive Power Company Private Limited, a Joint VentureCompany of KSK Energy Ventures Private Limited. (ii) The constitution of the Board of the Company and its subsidiaries, jointventure companies of KSK Energy Ventures Private Limited changed consequent tothe exit of Mr Hari Kiran Vadlamani from the Group. Further the Company and theGroup is taking necessary action for filling up the vacancy caused by the exitof Mr Hari Kiran Vadlamani. (iii) GE Capital International (Mauritius) had acquired the entire stake held byMr Hari Kiran Vadlamani in Sayi Power Energy Limited, the Holding Company. (iv) Reliability Run Tests were conducted successfully in M/s Sitapuram PowerLimited, a joint venture company of KSK Energy Venture Private Limited andfurther necessary action is being taken for conducting the Performance GuaranteeTests at the Plant. This information is provided by RNS The company news service from the London Stock Exchange