Ksk Power Regulatory News (KSK)

RNS Number : 1654P

KSK Power Ventur PLC

12 July 2010

 

12 July 2010

 

KSK Power Ventur plc

 

("KSK" or "the Company" or "the Group")

 

Preliminary Results

for the 12 months ended 31 March 2010

 

KSK Power Ventur plc (KSK), a leading developer and operator of private power plants in India, is pleased to announce its Preliminary Results for the 12 months ended 31 March 2010.

 

Financial Highlights

 

·; Group revenue of $52.9m (2009: $53.2m)

o 2010 excludes revenue from two divested projects of RVK and KPCL that were included in previous year

 

·; Gross Profit increased 33% to $26.3m (2009: $19.8m)

 

·; Operating Profit increased 118% to $23.1 m (2009: $10.6m)

 

·; Profit before tax increased to $76.9m (2009: $8.6m)

o Includes $31.8m (2009: $1.0m) on account of net foreign exchange gain primarily due to restatement of foreign currency facilities and EPC contractor retention monies on the Warora and Chattisgarh power projects.

·; Basic diluted earnings per share of $0.24 (2009: $0.04)

 

 

Operational Highlights

 

·; Operating capacity increased from 144 MW to 414 MW

·; Projects under construction and to commence power generation of 448 MW

·; Cumulative operational capacity of 862 MW expected to be complete before end of the current year

·; KSK Mahanadi, a 3,600 MW power plant in Chhattisgarh has begun construction following the EPC contract awarded in February 2009 and key subcontractors mobilised at site

·; KSK Dibbin, the 130 MW hydro power project in Arunachal Pradesh, work in progress on environmental clearance and EPC contractor selection

·; Additional thermal projects and hydro projects over 6 GW in the planning stage

·; New collaboration arrangements on additional coal blocks by KSK Mineral Resource subsidiary

·; Renewable energy business opportunities under exploration by the Group

 

 

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

 

"I am pleased to announce a robust financial performance in a period which has witnessed a challenging period in the Indian power plant commissioning market following recent government regulation changes and the impact of the global economic instability.

 

"With the commencement of power generation from VS Lignite Power and the first unit at Wardha Warora project, the anticipated new cash flow cycle has now begun. The Indian listed subsidiary, KSK Energy Ventures, is now anticipating the commissioning of the balance of the three remaining units at Wardha Warora and the Arasmeta expansion project over the next few months which will give the business a substantial operational and financial uplift. Also the construction on the 3,600 MW power project in Chhattisgarh is underway which will be significantly value accretive as the progress continues.

 

"KSK Energy Company, one of the Group's main growth initiatives has had a productive period with the completion of the Gurha (E) mine development and the beginning of the pursuit of larger fuel blocks. We also expect 2010-11 to be a substantial year for us to progress this forward looking initiatives.

 

"These are exciting times for the Company with a number of further projects underway. We remain on course to meet market expectations in 2011 and are confident in our ability to meet our longer term goals."

 

For further information, please contact: www.ksk.co.in

 

KSK Power Ventur plc S. Kishore, Executive Director K.A. Sastry, Executive Director	+(91) 40 2355 9922 - 25
Arden Partners plc Richard Day Adrian Trimmings	+44(0) 20 7614 5917
Financial Dynamics Jonathon Brill Edward Westropp Latika Shah	+44(0) 20 7831 3113

 

 

 

CHAIRMAN'S STATEMENT

 

Energy is the prime mover of economic growth and is vital to the sustenance of a modern economy. Future economic growth generally and more specifically in India crucially depends on the long-term availability of energy from sources that are cost competitive and accessible. KSK with its assets focussed in India and having secured long term access to fuel is well placed to be among the leading private power producers in India by 2014. Also, a focussed approach on renewable energy would ensure that the generation portfolio is adequately balanced.

 

I am pleased to report that this financial year 2009-10, our third full year of operations since the admission of the Company's shares to trading on the London Stock Exchange, has been a successful year for the Company. During the period, the Company successfully moved from the AIM Market to the standard list on the Official List of the London Stock Exchange ("LSE") and to trading on the Main Market of the LSE for listed securities. The period also marked sustained operations and continual progress on the construction of power plants by KSK Energy Ventures Limited (the Indian listed subsidiary), with enhanced capability to handle new growth opportunities.

 

The Group's key developments during the year and recent months include:

 

1. Commencement of power generation from the 135 MW VS Lignite Power project as well as first 135 MW unit of the Wardha Power project, effectively enhancing the installed generation capacity to three times the earlier level;

 

2. Sustained construction activity is underway on the three 135 MW units of the Wardha Warora project and the 43 MW Arasmeta expansion project. The units are expected to be commissioned in the course of the current financial year. The Power Purchase Agreement for the Wardha Warora project with a large distribution licensee in Maharashtra for firm procurement of part of the power generated for the period from April 2011 to March 2014 at attractive prices (as well as the supply to industrial consumers) will significantly contribute to our business growth ahead;

 

3. Construction activity has commenced at the KSK Mahanadi (3,600 MW) site and the Project, consisting of six units of 600 MW each, is expected to have unit wise commissioning through 2012 and 2013. Under the Power Purchase Agreement ("PPA") which has been signed with Gujarat Urja Vikas Nigam Limited ("GUVNL"), the long term supply of 1010 MW of power from its power plant at Nariyara, Chhattisgarh based on dedicated coal supplies from the Gujarat Mineral Development Corporation ("GMDC") and its coal blocks is secured. This development is a significant milestone in view of this being the largest utility PPA of the Group to date as announced on 7th June 2010. The PPA reinforces and validates the strong collaborative partnership KSK has been seeking to develop and sustain with local government corporations through competitive power supplies;

 

4. The Company post its successful flotation on the AIM of the LSE in 2006 has grown significantly and AIM has been an excellent platform to support KSK's development. The Company has recently moved the listing of its shares to the Standard Market of the Official List of the Main Market of the LSE. We are delighted with the strong support of the regulatory authorities and also our existing and new shareholders;

 

5. The Indian subsidiary, KSK Energy Ventures Limited, has successfully raised an amount of approximately US $115m by allotting 26,525,714 Equity Shares of INRs.10/- at INRs. 194.50/- per equity share under a Qualified Institution Placement. The stake of the Company in the subsidiary, immediately post this allotment stood at 51.32%. Further in February 2010 KSK Energy Company acquired 1.4% shareholding in KSK energy Ventures Limited in an open market transaction thereby increasing effective interest to 52.72%.

 

6. Recent efforts have been initiated to identify, evaluate and pursue various ancillary businesses associated with power generation in the areas of fuel sourcing, transmission and water infrastructure. In addition, the Group is seeking to recruit the necessary leadership team to lead these initiatives;

 

7. KSK Mineral Resources is also seeking to pursue new growth areas in the fuel collaboration business.

  

 

Financial performance

 

The overall financial performance for the year was strong, due to continued development activities and profitable underlying power plant operations. The year's gross revenue stood $52.9m while gross profits increased 33% from $19.8 m to $26.3m.

 

The Gross profit and operating profit witnessed significant increase on account of superior margins on the surplus power sale arrangements as well as enhanced cost control at the power plant levels

 

Tariffs

 

Looking at the current trend in the market, the peak market deficit widened to 13.3% in March 2010 compared to 11.1% in March 2009, not accounting for the latent un-serviced demand. At the same time there have been some slippages in capacity execution across the sector. We expect that additional market capacity across the industry may suffer on account of fuel shortages, environmental regulations and shortages in availability of local technical manpower to supplement offshore contractors. Therefore we anticipate that the short term tariffs are likely to remain high in the short and medium term.

 

Project opportunity pipeline

 

1. KSK Energy Ventures- Significant progress on current power projects and broadening portfolio

 

c.4,500 MW of operation, construction and development asset pipeline

·; Operational capacity of 414 MW

·; Plants under construction of 448 MW (to commission over next three quarters)

·; Wardha Power 3,600 MW power plant in Chhattisgarh, EPC contract awarded in February 2009 and work at the site is in full progress, with the key subcontractors mobilised at site.

·; KSK Dibbin 130 MW hydro power project in Arunachal Pradesh, work in progress on environmental clearance and EPC contractor selection

 

Additional planned assets pipeline

·; Projects in the pipeline - 5,400 MW thermal projects progressing well

·; 1,000+ MW of hydro power (renewable energy) in Arunachal Pradesh

 

2. KSK Energy Company- New initiative on mineral and renewable business opportunities

 

·; The Gurha (E) lignite mine fully developed and operational

·; New collaboration arrangements on additional coal blocks by KSK Mineral

·; Renewable energy business opportunities progressing

 

During the year, the Company has made continual progress on the power projects from which associated revenue realisation project development fees and interest earned on risk capital will accrue in the coming years. However, with consolidated financial statements under IFRS, such fees are eliminated to the extent of the Group's equity stake in the underlying projects. Additionally, revenue from sales of power should result in a significant increase in the coming years.

 

Divestments

 

The Company's investment interests through its Indian subsidiary in the Gujarat Mineral Development Corporation, which is listed on the Bombay Stock Exchange (ticker BSE: GMDC) has been completed with the sale of the underlying shares. Also, the Company has exited the investment in Asian Infrastructure Pte Limited, Singapore and repaid the facility from Axis Bank, Singapore

 

Current trading and outlook

 

In the coming year, KSK will remain focused on the development and construction of its various power plant projects and increasing its total MW capacity under development in India and also build towards a balanced portfolio of power generation assets.

The Group will devote significant management time and attention over the current year, closely monitoring the construction activities at the KSK Mahanadi power plant, together with new growth initiatives.

 

The pursuit of other power generation opportunities, new renewable power manufacturing alternatives, collaboration with other developers and enabling access to new coal resources are expected to significantly contribute to the Company's growth effort in the coming years.

 

We are looking forward to an exciting year ahead and appreciate the support of all our shareholders.

 

T L Sankar, Chairman

 

 

 

CONSOLIDATED AND COMPANY STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
for the year ended 31 March 2010
(All amount in thousands of U.S. $, unless otherwise stated)
		Consolidated		Company
	Notes	2010	2009	2010	2009
Revenue	8	52,893	53,198	-	-
Cost of revenue		(26,558)	(33,405)	-	-
Gross profit		26,335	19,793
Other operating income, net	9	13,660	1,538	-	5
Distribution costs		(2,660)	(1,802)	-	-
General and administrative expenses		(14,205)	(8,932)	(2,461)	(839)
Operating profit		23,130	10,597	(2,461)	(834)
Finance costs		(11,568)	(25,493)	(1,584)	(2,256)
Finance income		65,422	23,468	4,958	2,663
Profit/(loss) before tax		76,984	8,572	913	(427)
Tax (expense) / income	10	(17,524)	800	-	-
Profit/(loss) for the year		59,460	9,372	913	(427)
Attributable to:
Equity holders of the parent		32,822	5,718	913	(427)
Non controlling interests		26,638	3,654	-	-
		59,460	9,372	913	(427)
Other comprehensive income
Gains/(Losses) on sale / remeasurement of available for sale financial assets		9,533	(139)	-	-
Currency translation differences		78,468	(98,051)	1,134	(4,283)
Reclassification of reserve on disposal of interest in Joint venture		(1,283)	-	-	-
Reclassification adjustment to statement of comprehensive income in respect of available for sale instrument disposed		(8,266)	-	-	-
Other comprehensive income, net of tax		78,452	(98,190)	1,134	(4,283)
Total comprehensive income for the year		137,912	(88,818)	2,047	(4,710)
Attributable to:
Equity holders of the parent		75,747	(46,459)
Non controlling interests		62,165	(42,359)
		137,912	(88,818)
Earnings per share
Weighted average number of ordinary shares for basic and diluted earnings per share		138,541,654	128,878,505
Basic and diluted (U.S. $)		0.24	0.04
(See accompanying notes to the consolidated and Company financial statements)
Approved by the Board of Directors on 10 July, 2010 and signed on behalf by:
S. Kishore K. A. Sastry
Director Director

 

CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION (UNAUDITED)
as at 31 March 2010
(All amount in thousands of U.S. $, unless otherwise stated)
		Consolidated		Company
	Notes	2010	2009	2010	2009
ASSETS
Non-current assets
Goodwill	11	84,482	73,030	-	-
Property, plant and equipment		1,311,309	471,658	-	-
Other non-current assets		15,865	9,132	-	-
Investments and other financial assets	12	51,758	24,898	46,318	49,861
Trade and other receivables		5,710	4,852	-	-
Deferred tax asset		10,746	8,387	-	-
		1,479,870	591,957	46,318	49,861
Current assets
Inventories		7,735	2,286	-	-
Trade and other receivables		22,139	18,960	46	-
Investments and other financial assets	12	111,198	113,643	43,978	30,000
Cash and short-term deposits	13	276,872	204,201	13,133	250
Other current assets		15,019	9,283	-	1,140
		432,963	348,373	57,157	31,390
Non-current assets classified as held for sale	14	23,318	20,125	-	-
		456,281	368,498	57,157	31,390
Total assets		1,936,151	960,455	103,475	81,251
Equity and liabilities
Equity attributable to equity holders of the parent
Issued capital		232	216	232	216
Securities premium		167,228	120,967	98,958	52,697
Translation reserve		968	(42,639)	2,788	1,654
Revaluation reserve		9,731	9,990	-	-
Other reserves		157,304	135,505	-	-
Retained earnings/ (Accumulated deficit)		81,927	48,846	(146)	(1,059)
		417,390	272,885	101,832	53,508
Non controlling interests		303,081	180,267	-	-
Total equity		720,471	453,152	101,832	53,508
Non-current liabilities
Trade and other payables		2,778	2,220	-	-
Interest-bearing loans and borrowings	15	504,078	229,903	-	-
Provisions		1,984	1,542	-	-
Deferred revenue		4,959	3,227	-	-
Employee benefit liability		203	36	-	-
Deferred tax liability		30,900	15,694	-	-
		544,902	252,622	-	-
Current liabilities
Trade and other payables		90,536	97,820	976	771
Interest-bearing loans and borrowings	15	568,467	123,641	-	-
Other current financial liabilities		2,573	25,000	667	26,912
Other current liabilities		7,833	7,800	-	60
Taxes payable		1,369	420	-	-
		670,778	254,681	1,643	27,743
Total liabilities		1,215,680	507,303	1,643	27,743
Total equity and liabilities		1,936,151	960,455	103,475	81,251
(See accompanying notes to the consolidated and Company financial statements)
Approved by the Board of Directors on 10 July, 2010 and signed on behalf by:
S. Kishore K. A. Sastry
Director Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
for the year ended 31March 2009
(All amount in thousands of U.S. $, unless otherwise stated)
	Attributable to equity holders of the parent								Non controlling interests	Total equity
	Issued capital (No. of shares)	Issued capital (amount)	Securities premium	Translation reserve	Revaluation reserve	Other reserves	Retained earnings	Total
At 1 April 2008	128,878,505	216	120,967	9,399	11,252	6,244	42,808	190,886	89,797	280,683
Non controlling interests arising on direct issuance of equity shares by a subsidiary (see note 6(a))	-	-	-	-	(942)	-	-	(942)	132,829	131,887
Gain of direct issuance of equity shares by a subsidiary, net of transaction costs (see note 6(a))	-	-	-	-	-	129,400	-	129,400	-	129,400
Net depreciation transfer for property, plant and equipment	-	-	-	-	(320)	-	320	-	-	-
Transaction with equity holders of the parent	128,878,505	216	120,967	9,399	9,990	135,644	43,128	319,344	222,626	541,970
Profit for the year	-	-	-	-	-	-	5,718	5,718	3,654	9,372
Other comprehensive income
Currency translation differences	-	-	-	(52,038)	-	-	-	(52,038)	(46,013)	(98,051)
Net loss on remeasurement of available for sale financial assets see note (see note 12)	-	-	-	-	-	(139)	-	(139)	-	(139)
Total Comprehensive income for the year	-	-	-	(52,038)	-	(139)	5,718	(46,459)	(42,359)	(88,818)
Balance as at 31 March 2009	128,878,505	216	120,967	(42,639)	9,990	135,505	48,846	272,885	180,267	453,152
(See accompanying notes to the consolidated and Company financial statements)

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
for the year ended 31March 2010
(All amount in thousands of U.S. $, unless otherwise stated)
	Attributable to equity holders of the parent								Non controlling interests	Total equity
	Issued capital (No. of shares)	Issued capital (amount)	Securities premium	Translation reserve	Revaluation reserve	Other reserves	Retained earnings	Total
At 1 April 2009	128,878,505	216	120,967	(42,639)	9,990	135,505	48,846	272,885	180,267	453,152
Issue of equity shares	10,655,738	16	46,261	-	-	-	-	46,277	-	46,277
Deferred tax on share issue expenses	-	-	-	-	-	(1,532)	-	(1,532)	-	(1,532)
Non controlling interests arising on direct issuance of equity shares by a subsidiary (see note 6(a))	-	-	-	-	-	-	-	-	69,117	69,117
Gain of direct issuance of equity shares by a subsidiary, net of transaction costs (see note 6(a))	-	-	-	-	-	37,405	-	37,405	-	37,405
Acquisition of non controlling interest (see note 6(b))	-	-	-	-	-	(13,392)	-	(13,392)	(8,468)	(21,860)
Net depreciation transfer for property, plant and equipment	-	-	-	-	(259)	-	259	-	-	-
Transaction with equity holders of the parent	139,534,243	232	167,228	(42,639)	9,731	157,986	49,105	341,643	240,916	582,559
Profit for the year	-	-	-	-	-	-	32,822	32,822	26,638	59,460
Other comprehensive income		-	-	-	-	-	-	-	-
Currency translation differences	-	-	-	42,941	-	-	-	42,941	35,527	78,468
Gain on sale / remeasurement of available for sale financial assets	-	-	-	-	-	9,533	-	9,533	-	9,533
Reclassification adjustment to statement of comprehensive income in respect of available for sale instrument disposed (see note 12)	-	-	-	-	-	(8,266)	-	(8,266)	-	(8,266)
Reclassification of reserves on disposal of interest in Joint venture	-	-	-	666	-	(1,949)	-	(1,283)	-	(1,283)
Total Comprehensive income for the year	-	-	-	43,607	-	(682)	32,822	75,747	62,165	137,912
Balance as at 31 March 2010	139,534,243	232	167,228	968	9,731	157,304	81,927	417,390	303,081	720,471
(See accompanying notes to the consolidated and Company financial statements)

 

 

COMPANY'S STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

for the year ended 31 March 2010

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

 

	Issued capital (No. of shares)	Issued capital (amount)	Securities premium	Translation reserve	Accumulated deficit	Total equity
As at 1 April 2008	128,878,505	216	52,697	5,937	(632)	58,218
Loss for the year	-	-	-	-	(427)	(427)
Other comprehensive income
Currency translation differences	-	-	-	(4,283)	-	(4,283)
Total Comprehensive income for the year	-	-	-	(4,283)	(427)	(4,710)
Balance as at 31 March 2009	128,878,505	216	52,697	1,654	(1,059)	53,508
Issue of equity shares	10,655,738	16	46,261	-	-	46,277
Profit for the year	-	-	-	-	913	913
Other comprehensive income						-
Currency translation differences	-	-	-	1,134	-	1,134
Total Comprehensive income for the year	-	-	-	1,134	913	2,047
Balance as at 31 March 2010	139,534,243	232	98,958	2,788	(146)	101,832

 (See accompanying notes to the consolidated and Company financial statements)

 

CONSOLIDATED AND COMPANY CASH FLOW STATEMENT (UNAUDITED)
for the year ended 31 March 2010
(All amount in thousands of U.S. $, unless otherwise stated)
	Consolidated		Company
Particulars	2010	2009	2010	2009
Cash inflow/ (outflow) from operating activities
Net profit/(loss) before tax	76,984	8,572	913	(427)
Adjustments
Loss on sale of equity interest in joint venture	2,743	-	-	-
Depreciation and amortization	5,468	5,298	-	-
Finance costs	11,568	25,493	1,584	2,256
Finance income	(61,027)	(6,877)	(2,963)	(1,043)
Provision for impairment of trade receivables	964	157	-	-
Gain on bargain purchase1	(4,964)	-	-	-
Others1	(7,651)	6	-	-
Changes in assets/liabilities
Trade receivables and unbilled revenues	(5,506)	797	-	-
Inventory	(5,840)	(522)	-	-
Other assets	(8,859)	(11,490)	5	(936)
Trade payables and other liabilities	10,044	3,629	699	90
Provisions and employee benefit liability	152	1,540	-	-
Taxes paid	(9,868)	(10,971)	-	-
Net cash provided by/(used in) operating activities	4,208	15,632	238	(60)
Cash inflow/ (outflow) from investing activities
Movement in restricted cash	(148,778)	(10,571)	(3,000)	-
Proceeds from sale of property, plant and equipment	321	1	-	-
Purchase of property, plant and equipment and other non current assets	(560,646)	(165,263)	-	-
Acquisition of wind mills undertaking	(8,482)	-	-	-
Payment for acquisition of non controlling interest	(21,860)	-	-	-
Sale of equity interest in joint venture	3,037	-	-	-
Net cash inflow on business combination	3,554	-	-	-
Purchase of financial instruments	(243,517)	(146,014)	(49,193)	(19,553)
Proceeds from sale of financial instruments	154,348	81,380	38,852	-
Payment for acquisition of non controlling interest in business combination	(19,791)	(34,121)	-	-
Dividend income	589	171	-	-
Finance income	17,946	4,225	543	8
Net cash used in investing activities	(823,279)	(270,192)	(12,798)	(19,545)
Cash inflow/ (outflow) from financing activities
Proceeds from interest-bearing loans and borrowings	897,555	520,993	-	25,000
Repayment of interest-bearing loans and borrowings	(312,285)	(326,559)	(27,810)	-
Proceeds from finance lease arrangement	-	469	-	-
Finance charges	(73,746)	(55,598)	(2,182)	(1,922)
Net proceeds from issue of shares	46,277	-	46,277	-
Net proceeds from issue of shares in subsidiary to non controlling interest	105,731	257,757	-	-
Net cash provided by financing activities	663,532	397,062	16,285	23,078
(D) Effect of exchange rate changes on cash	38,533	(46,230)	6,158	(4,121)
Net increase/ (decrease) in cash and cash equivalents	(117,006)	96,272	9,883	(648)
Cash and cash equivalents at the beginning of the year	154,675	58,403	250	898
Cash and cash equivalents at the end of the year (note 13)	37,669	154,675	10,133	250
(See accompanying notes to the consolidated and Company financial statements)
1Non cash transaction : The principal non cash transactions are issue of shares as consideration for the acquisition discussed in note 7(b) and acquisition of net assets of KSKEIEPL I and KSKEIEPL II as consideration for management fees discussed in note 9.

 

NOTES TO THE CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS (UNAUDITED)

For the year ended 31 March 2010

(All amount in thousands of U.S. $, unless otherwise stated)

1. Corporate information

1.1. Nature of operations

KSK Power Ventur plc ('the Company' or 'KPVP'), 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 jointly controlled entities with heavy industrial companies in India.

The Group strategy for growth is to work with major international and Indian businesses and electricity distribution companies to ensure that they have access to dependable and cost effective source of electrical power through the development construction and operation of optimal sized power plants with appropriate fuel sources.

The principal activities of the Group are described in note 8.

1.2. Basis of preparation

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

The financial statements contained with this report are unaudited and do not constitute statutory financial statements in accordance with the Companies Act.

This unaudited preliminary announcement was approved by the Board on 10 July, 2010 for release.

1.3. Financial period

The Consolidated and Company financial statements cover the period from 1 April 2009 to 31 March 2010, with comparative figures from 1 April 2008 to 31 March 2009.

1.4. General information

KSK Power Ventur plc, a limited liability corporation, is the Group's ultimate parent Company and is incorporated and domiciled in the Isle of Man. The address of the Company's registered Office, which is also principal place of business, is 15-19 Althol Street, Douglas, Isle of Man 1M1 1LB. The Company's equity shares are listed on Standard List on the official list of the London Stock Exchange.

1.5. Basis of consolidation

The consolidated financial statements incorporate the financial information of KSK Power Ventur plc, its subsidiaries and joint ventures for the year ended 31 March 2010.

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

The financial statements of the subsidiaries are prepared using same reporting period as the parent Company, using consistent policies.

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

Non controlling interest represent the portion of profit or loss and net assets that is not held by the Group and are presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from parent shareholders' equity. Acquisitions of additional stake or dilution of stake from/ to non controlling interests/ other venturer in the Group are accounted for using the equity method, whereby, the difference between the consideration paid or received and the book value of the share of the net assets is recognised in 'other reserve' within statement of changes in equity.

1.6. List of subsidiaries and jointly controlled entities

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

(a) Subsidiaries

Subsidiaries	Immediate parent	Country of incorporation	% shareholding
			2010	2009
KSK Energy Limited ('KEL')	KPVP	Mauritius	100	100
KSK Asset Management Services Private Limited ('KASL')	KPVP	Mauritius	100	100
KSK Energy Ventures Limited ('KEVL' or 'KSK India') (refer note 6)	KEL	India	52.73	55.25
KSK Energy Company Private Limited ('KECPL')	KEL	India	100	100
KSK Surya Ventures Limited formerly KSK Surya Holdings Limited ('KSVL')	KEL	Mauritius	100	100
KSK Surya Limited ('KSL')	KEL	Mauritius	100	100
KSK Electricity Financing India Private Limited ('KEFIPL')	KEVL	India	100	100
KSK Vidarbha Power Company Private Limited, ('KVPCPL')	KEVL	India	100	100
KSK Narmada Power Company Private Limited ('KNPCPL')	KEVL	India	100	100
Bahur Power Company Private Limited ('BPCPL')	KEVL	India	100	100
KSK Technology Ventures Private Limited ('KTVPL')	KEVL	India	100	100
Sai Maithili Power Company Private Limited ('SMPCPL')	KEVL	India	100	100
KSK Dibbin Hydro Power Private Limited ('KDHPPL')	KEVL	India	100	100
Kameng Dam Hydro Power Private Limited ('KDHPL')	KEVL	India	100	100
KSK Mahanadi Power Company Limited ('KSKMPCL')	KEVL	India	100	-
KSK Surya Photovoltaic Venture Private Limited ('KSPVPL')	KECPL	India	100	100
Marudhar Mining Private Limited ('MMPL')	KECPL	India	100	100
KSK Energy Resources Private Limited ('KERPL')	KECPL	India	100	100
KSK Mineral Resources Private Limited ('KMRPL')	KECPL	India	100	100
KSK Investment Advisor Private Limited ('KIAPL')	KECPL	India	100	100
KSK Water Infrastructures Private Limited ('KWIPL')	KECPL	India	100	100
KSK Power Transmission Ventures Private Limited ('KPTVPL')	KECPL	India	100	100
KSK Cargo Mover Private Limited ('KCMPL')	KECPL	India	100	-
SN Nirman Infra Projects Private Limied ('SNNIPPL')	KECPL	India	100	-
KSK Emerging India Energy Private Limited I ('KSKEIEPL I')1	KASL	Mauritius	100	-
KSK Emerging India Energy Private Limited II ('KSKEIEPL II') 1	KASL	Mauritius	100	-

1As of 13 July, 2009 pursuant to settlement agreement between KASL and KSK Emerging India Energy Fund Limited ("KSKEIEF"), entire shares held in KSKEIEPL I and KSKEIEPL II have been transferred by "KSKEIEF" to "KASL". (See note 9).

(b) Jointly controlled entities

Joint ventures	Joint venturer	Country of incorporation	% shareholding
			2010	2009
RVK Energy Private Limited ('RVK')1	KECPL	India	-	50
Kasargod Power Corporation Limited ('KPCL')1	KECPL	India	-	50
Sai Regency Power Corporation Private Limited ('SRPCPL')	KEFIPL	India	73.92	73.92
Arasmeta Captive Power Company Private Limited ('ACPCPL')	KEFIPL	India	51	51
Sitapuram Power Limited ('SPL').	KEFIPL	India	49	49
VS Lignite Power Private Limited ('VSLPPL')	KEFIPL	India	74	74
Wardha Power Company Limited ('WPCL') 2	KEFIPL	India	74	74
JR Power Gen Private Limited ('JRPGPL')	KEVL	India	51	51

1 On 1 April 2009 the Group sold its interest in RVK and KPCL to the other joint venturer for a consideration of US $ 4,112.

2 As of 31 March 2010 the group holds 80.78 percent of the outstanding share capital of WPCL, of which 6.78 percent is held temporarily on behalf of the consumer shareholders for the Wardha Warora project According to the contractual agreements and established legal practices, the group would ultimately hold 74 percent in WPCL and hence no adjustments have been done for the additional interest held in these financial statements.

The terms of the contractual agreements and established legal practices provides the Group and the joint venture partners (JV partners) to jointly control the key operating decisions to which both parties must agree unanimously. Accordingly, these entities have been treated as jointly controlled entities.

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 1April 2009, noted below:

• IAS 1 Presentation of Financial Statements (Revised)

• IFRS 8 Operating Segments

The principal effects of these changes are as follows:

 IAS 1 Presentation of Financial Statements (Revised)

The adoption of IAS 1 (Revised) makes certain changes to the format and titles of the primary financial statements and to the presentation of some items within these statements. It also gives rise to additional disclosures. The measurement and recognition of the Group's assets, liabilities, income and expense is unchanged. However, some items that were recognised directly in equity are now recognised in other comprehensive income, for example revaluation of property, plant and equipment. IAS1 affects the presentation of owner changes in equity and introduces a 'Statement of comprehensive income'. In accordance with the new standard the entity does not present a 'Statement of recognised income and expenses' as was presented in the 31 March 2009 consolidated and Company's financial statements. Further, a 'Statement of changes in equity' is now presented as a primary statement.

IFRS 8 Operating Segments

The adoption of IFRS 8 has not affected the identified operating segments for the Group. However, reported segment results are now based on internal management reporting information that is regularly reviewed by the chief operating decision maker. In the previous annual financial statements, segments were identified by reference to the dominant source and nature of the Group's risks and returns.

The accounting policies have been applied consistently throughout the Group and the parent Company for the purposes of the preparation of these consolidated and Company financial statements.

3. Summary of significant accounting policies

3.1. Basis of preparation

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

The financial statements have been presented in United States Dollars ('U.S. $'), 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.

3.2. Business combinations and goodwill

Business combinations are accounted for using the purchase method. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. Identifiable assets, liabilities and contingent liabilities assumed in a business combination are measured initially at fair value at the date of acquisition, irrespective of the extent of any non controlling interest.

Goodwill, initially measured at cost, represents the excess of the acquisition cost in a business combination over the fair value of the Group's share of the identifiable net assets acquired. Any excess of the Group's share of the identifiable net assets acquired over the acquisition cost is recognised immediately in the statement of comprehensive income after reassessing the identification and measurement of the identifiable assets, liabilities, contingent liabilities and recording necessary adjustments.

Goodwill is carried at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from acquisition date, allocated to each of the Group's cash generating units that are expected to benefit from synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed off, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed off in this circumstance is measured based on the relative values of the operation disposed off and the portion of the cash-generating unit retained.

Business combination achieved in stages is accounted by treating each transaction separately, using the cost of the transaction and fair value information at the date of each exchange transaction, to determine the amount of any goodwill associated with that transaction. This results in a step-by-step comparison of the cost of the individual investments with the acquirer's interest in the fair values of the acquiree's identifiable assets, liabilities and contingent liabilities at each step. Adjustment to fair values relating to previously held interests of the acquirer were accounted for as revaluation reserve within statement of changes in equity.

3.3. Interests in joint ventures

Entities whose economic activities are controlled jointly by the Group and by other venturers by virtue of a contractual arrangement or by established legal practices are accounted for using the proportionate consolidation to the extent of the Group's economic interest in the entity.

The Group combines its share of each of the assets, liabilities, income and expenses of the joint venture with similar items, line by line, in its consolidated financial statements. The financial statements of the joint venture are prepared for the same reporting period as the parent company. Adjustments are made where necessary to bring the accounting policies in line with those of the Group.

Adjustments are made in the Group's consolidated financial statements to eliminate the Group's share of intra-Group balances, income and expenses and unrealised gains and losses on transactions between the Group and its jointly controlled entity. Losses on transactions are recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss. The joint venture is proportionately consolidated until the date on which the Group ceases to have joint control over the joint venture.

 

3.4. Non-current assets held-for-sale

Non-current assets and disposal groups classified as held-for-sale are measured at lower of carrying amount and fair value less costs to sell. Non-current assets and disposal groups are classified as held-for-sale if their carrying amounts will be recovered through a sale transaction rather than through continuous use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale generally within one year from the date of classification.

3.5. Foreign currency translation

The functional currency of the Company and its subsidiary in Mauritius is the Pound Sterling ('£'). The functional currency of the Company's subsidiaries and joint ventures operating in India, determined based on evaluation of the individual and collective economic factors is Indian Rupees ('INR'). The presentation currency of the Group is the U.S. $ as submitted to the London Stock exchange where the shares of the Company are listed.

At the reporting date the assets and liabilities of the Group are translated into the presentation currency which is U.S.$ at the rate of exchange ruling at the balance sheet date and the income statement is translated at the average exchange rate for the year. Any differences arising from this procedure have been charged/ credited to the foreign currency translation reserve (FCTR) in the statement of comprehensive income.

Foreign currency transactions

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

3.6. Revenue recognition

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

Sale of electricity

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

Income from project development fees

Income from project development activities, with respect to the relevant power generating entities, is recognised when the services are provided by reference to the stage of completion of the contract at the reporting date. The Group's development contracts define milestones for the project work to be carried out and related revenue is recognised when the conditions applicable to the milestone specified in the contract have been fulfilled.

Management fees

Income from management services is recognised as per the terms and conditions of the service agreement on the performance of services.

Interest and dividend

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

 

 

3.7. Taxes

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date. Current income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences, except:

·; Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

·; In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

·; Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

·; In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax relating to items recognised directly in equity is recognised in equity and not in the statement of comprehensive income.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

3.8. Financial assets

Initial recognition

Financial assets within the scope of IAS 39 are classified as:

·; Loans and receivables

·; Financial assets at fair value through profit or loss

·; Available-for-sale financial assets

·; Held-to-maturity investments.

Financial assets are assigned to the different categories on initial recognition, depending on the characteristics of the instrument and its purpose. Financial assets are recognised initially at fair value plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

The Group's financial assets include cash and short-term deposits, trade and other receivables, loan and other receivables and quoted and unquoted financial instruments.

Subsequent measurement

The subsequent measurement of financial assets is dependent on their classification and it is as follows:

Financial assets at fair value through profit and loss

Financial assets at fair value through profit or loss include financial assets that are held for trading or are designated by the entity to be carried at fair value through profit or loss upon initial recognition. Financial assets at fair value through profit and loss are carried in the balance sheet at fair value with gains or losses recognised in the profit or loss.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or do not qualify for inclusion in any of the other categories of financial assets. After initial measurement, available-for-sale financial assets are measured at fair value, with subsequent changes in value recognised in other comprehensive income. Gains and losses arising from financial instruments classified as available-for-sale are recognised in profit or loss only when they are sold or when the investment is impaired. In the case of impairment, any loss previously recognised in equity is transferred to the statement of comprehensive income.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment, any change in their value is recognised in the income statement. Receivables are considered for impairment on a case-by-case basis when they are past due at the balance sheet date or when objective evidence is received that a specific counterparty will default.

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity. Investments are classified as held-to-maturity if it is the positive intention and ability of Group's management to hold them until maturity. Held-to-maturity investments are subsequently measured at amortised cost using the effective interest method. This method uses an effective interest rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Gains and losses are recognised in the consolidated income statement when the investments are derecognised or impaired, as well as through the amortisation process. In addition, if there is objective evidence that the investment has been impaired, the financial asset is measured at the present value of estimated cash flows. Any changes to the carrying amount of the investment are recognised in profit or loss. The Group did not have any held-to-maturity investments during the year ended 31 March 2010 and 2009.

Reclassification

Held-for-tradingfinancial assets that no longer meet the definition of financial assets at fair value through profit or loss may, in rare circumstances, be transferred to available-for-sale financial assets. These reclassified financial assets are transferred to their new category at their fair value on the date of reclassification and then are measured according to the rules that apply to the new category.

Investment in subsidiaries

In the parent company's financial statements, the investments in subsidiaries are accounted for using the cost method with income from the investment being recognised only to the extent that the parent Company receives distributions from accumulated profits of the investee arising after the date of acquisition. Distributions received in excess of such profits are regarded as a recovery of investment and are recognised as a reduction of cost of the investment.

Impairment of financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. In case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in Groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

Derecognition

A financial asset (or, where applicable a part of a financial asset or part of a Group of similar financial assets) is derecognised when:

·; The rights to receive cash flows from the asset have expired; or

·; The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

3.9. Financial liabilities

Initial recognition

Financial liabilities within the scope of IAS 39 are classified as

·; Fair value through profit or loss

·; Loans and borrowings

The Group determines the classification of its financial liabilities at initial recognition. Financial liabilities are recognised initially at fair value and in the case of loans and borrowings, net of directly attributable transaction costs. The Group's financial liabilities include trade and other payables, loans and borrowings, financial guarantee contracts.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities designated upon initial recognition at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on liabilities held for trading are recognised in the income statement.

Financial liabilities at fair value through profit and loss are carried in the balance sheet at fair value with gains or losses recognised in the income statement.

Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.

Financial guarantee contracts

Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified Group entity fails to make a payment when due in accordance with the terms of the bond. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the balance sheet date and the amount recognised less cumulative amortisation.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Amortised cost of financial instruments

Amortised cost is computed using the effective interest method less any allowance for impairment and principal repayment or reduction. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the income statement.

3.10. Fair value of financial instruments

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

3.11. Property, plant and equipment

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

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

Depreciation is computed on straight-line basis over the useful life of the asset based on management's estimate as follows:

Nature of asset	Useful life (years)
Buildings	30
Power stations	15-35
Other plant and equipment	3-7

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

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

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

3.12. Mining assets

Development expenditure incurred by or on behalf of the Group is accumulated separately for each area of interest in which economically recoverable resources have been identified. Such expenditure comprises cost directly attributable to the construction of a mine and the related infrastructure. Once a development decision has been taken, the carrying amount of the exploration and evaluation expenditure in respect of the area of interest is aggregated with the development expenditure and classified under non current assets as "development of mineral assets''. A development of mineral assets is reclassified as a "mining property'' at the end of the commissioning phase, when the mine is capable of operating in the manner intended by management. No depreciation is recognised in respect of development properties until they are reclassified as "mining properties''.

When further development expenditure is incurred in respect of a mining property after the commencement of production, such expenditure is carried forward as part of the mining property when it is probable that additional future economic benefits associated with the expenditure will flow to the consolidated entity. Otherwise such expenditure is classified as a cost of production. Depreciation is charged using the units-of production method, with separate calculations being made for each area of interest. The units -of- production basis results in a depreciation charge proportional to the depletion of proved and probable reserves.

3.13. Leases

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

Group as a lessor

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

Finance lease receivables are stated in the balance sheet at the amount of the net investment in the lease being the minimum lease payments and any unguaranteed residual value discounted at the interest rate implicit in the lease. Finance lease income is allocated to accounting periods so as to give a constant periodic rate of return before tax on the net investment. Unguaranteed residual values are subject to regular review to identify potential impairment.

If there has been a reduction in the estimated unguaranteed residual value, the income allocation is revised and any reduction in respect of amounts accrued is recognised immediately.

Group as a lessee

Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term.

3.14. Borrowing costs

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

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

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

3.15. Impairment of non-financial assets

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

Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset, except for property previously revalued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation.

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

Goodwill

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-generating unit (or Group of cash generating units) to which the goodwill relates. Where the recoverable amount of the CGU is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

3.16. Cash and short-term deposits

Cash and short-term deposits in the balance sheet comprise cash at banks and on hand and short-term deposits.

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

3.17. Inventories

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

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

Raw materials  purchase cost on a first in, first out basis.

Stores and spares  purchase cost on a first in, first out basis.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

3.18. Segment reporting

In identifying its operating segments, management generally follows the Group's service lines, which represent the generation of the power and other related services provided by the Group.

The activities undertaken by the Power generation segment includes sale of power and other related services. The project management of these power plants is undertaken by the service segment. The accounting policies used by the Group for segment reporting are the same as those used for consolidated entity's financial statements. Further, income, expenses and assets which are not directly attributable to the business activities of any operating segment are not allocated.

3.19. Earnings per share

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

3.20. Other provisions and contingent liabilities

General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Decommissioning liability

The provision for decommissioning costs arose on construction of a power plant and development of mines. Decommissioning costs are provided at the present value of expected costs to settle the obligation using estimated cash flows and are recognised as part if the cost of that particular asset. The cash flows are discounted at a current a pre-tax rate.

3.21. Employee benefits

Gratuity

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

Liabilities with regard to the gratuity plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The Group fully contributes all ascertained liabilities to the gratuity fund administered and managed by Life Insurance Corporation of India a Government of India undertaking which is a qualified insurer.

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

Provident fund

Eligible employees of Group receive benefits from a provident fund, which is a defined contribution plan. Both the employee and the group make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee's salary. The benefits are contributed to the government administered provident fund, which is paid directly to the concerned employee by the fund. The group has no further obligation to the plan beyond its monthly contributions.

4. Significant accounting judgements, estimates and assumptions

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

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

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

The policies where significant estimates and judgments have been made are as follows:

Estimates and assumptions

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

§ Application of business combination accounting rules, including identification of intangible assets acquired in a business combination: The Group allocates the purchase price of the acquired companies towards the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The Group engages third-party external appraisal firms to assist in determining the fair values of the acquired assets and liabilities. Such valuation requires the Group to make significant estimate and assumptions, especially with respect to identification and valuation of intangible assets. (see note 3.2 and note 7);

§ Recoverability of deferred tax assets: The recognition of deferred tax assets requires assessment of future taxable profit. (see note 3.7).

§ Estimation of fair value of acquired financial assets and financial liabilities: While preparing the financial statements the Group makes estimates and assumptions that affect the reported amount of financial assets and financial liabilities. Specifically, the Group make estimates relating to

o Unquoted equity and other instruments at fair value: The Group, on need basis, engages third-party external appraisal firms to assist in determining the fair values of the unquoted equity and other instruments. Such valuation requires the Group to make significant estimate and assumptions, especially with respect to observable market inputs, i.e. discount rates, foreign currency exchange prices, volatility etc. (see note 3.8 and note 12);

o Other financial liabilities: Interest-bearing loans and borrowings held by the Group are measured at amortised cost except where designated at fair value through profit or loss. Further, liabilities associated with financial guarantee contracts in the Company financial statements are initially measured at fair value and re-measured at each balance sheet date. (see note 3.9 ); and

o Uncollectability of trade receivables:Analysis of historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required. 

§ Impairment tests: The determination of recoverable amounts of the CGUs assessed in the annual impairment test requires the Group to estimate of their fair value net of disposal costs as well as their value in use. The assessment of value in use requires assumptions to be made with respect to the operating cash flows of the CGUs as well as the discount rates (see note 3.15 and note 11); and

§ Estimation of liabilities for decommissioning costs: Provisions for decommissioning and restoration costs require assessment of the amounts that the Group will have to pay and assumptions in terms of phasing and discount rate. (see note 3.20).

Actual results can differ from estimates.

Judgement

In the process of applying the Group's accounting policies, management has made the following judgements which have the most significant effect on the amounts recognised in the consolidated financial statements:

§ Application of joint venture accounting rules, including identification of joint venture: The terms of the contractual agreements and established legal practices provides the Group and the joint venture partners (JV partners) to jointly control the key operating decisions to which both parties must agree unanimously. The management has judged these entities to be treated as jointly controlled entities and are accounting for using proportionate consolidation to the extent of the Group's economic interest in these entities (see note 3.3); and

§ Significant or prolonged decline in fair value of available-for-sale equity securities: At each balance sheet date, an assessment is made whether there is objective evidence that an available-for-sale equity instrument is impaired. A significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the asset is impaired. Judgement is used in determining what a significant or prolonged decline is. As a Group policy, available-for-sale investments in equity securities and investment funds are assessed for impairment when the market value as at the balance sheet date is 30% or more below cost, or the market value remained below cost for the previous 12 months or longer (see note 3.8).

5. Standards and Interpretations not yet applied

Standards and Interpretations adopted by the European Union at the closing date

Standard	Description	Effective for in reporting periods starting on or after
IFRS 2	Group Cash-settled Share-based Payment Transactions - Amendment	1 January 2010
IAS 32	Classification of Rights Issues - Amendment	1 February 2010
IFRS 3 (R)	Business Combinations	1 July 2009
IAS 27 (R)	Consolidated and Separate Financial Statements - Amendments	1 July 2009

The application of IFRS 3R and IAS 27R in accounting for any business combinations and changes in ownership interests in Group entities may have a material impact on the Group's financial statements when these standards become effective for future business combinations.

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

Standards and Interpretations issued but not yet adopted by the European Union at the closing date

 

Standard	Description	Effective for in reporting periods starting on or after
IFRS 9	Financial Instruments	1 January 2013
IAS 24 (R)	Related Party Disclosures	1 January 2011
IFRIC 14	Prepayments of a Minimum Funding Requirement - Amendment	1 January 2011
IFRIC 15	Agreements for the Construction of Real Estate	1 January 2009
IFRIC 17	Distributions of Non-cash Assets to Owners	1 July 2009
IFRIC 19	Extinguishing Financial Liabilities with Equity Instruments	1 July 2010
	Improvements to IFRS	some changes effective from 1 July 2010, others effective from 1 January 2011

 

Based on the Group's current business model and accounting policies, management does not expect the application of the above standards, yet to be endorsed by EU, to have any material impact on its financial statements when those Standards become effective. The Group does not intend to apply any of these pronouncements early.

Improvement to IFRSs

Improvements to IFRSs contain amendments to existing standards. The amendments are effective, in most cases for financial periods beginning on or after 1 July 2009 or otherwise for financial period beginning on or after 1 January 2010.

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

6. (a) Dilution of ownership interest in a subsidiary

Qualified Institutional Placement (QIP) by KSK Energy Ventures Limited ('KEVL')

As of 1 April 2009, KSK Energy Limited (KEL) held 191,221,952 equity shares (55.25 percent equity ownership) in KSK Energy Ventures Limited ('KEVL'). During the month of November 2009, KEVL issued additional 26,525,714 equity shares of face value of Rs. 10 (U.S. $ 0.20) each at a premium of Rs. 184.50 (U.S. $ 3.76) per share in the Indian domestic market by way of Qualified Institutional Placement (QIP). The issue was fully subscribed and KEVL raised Rs. 5,048,079,807 (U.S. $ 106,522) net of share issue expenses, net of deferred taxes of Rs 73,384,351 (US $ 1,537).

Pursuant to the issuance of the additional equity share's the ownership interest of the Group in KEVL decreased from 55.25 percent to 51.32 percent resulting in a 3.93 percent deemed partial disposal of the Group's controlling interest in a subsidiary without loss of control.

The partial disposal of the investment in a subsidiary without loss of control is accounted as an equity transaction, and no gain or loss is recognised in the statement of comprehensive income. The difference of U.S. $ 37,405, (net of tax) between the fair value of the net consideration received (U.S. $ 106,522)) and the amount by which the non controlling interest are adjusted (U.S. $ 69,117), is credited to 'other reserve' within statement of changes in equity and attributed to the equity holders of the parent.

Initial Public Offering made by KSK Energy Ventures Limited ('KEVL')

As of 1 April 2008, KSK Energy Limited (KEL) held 191,221,952 equity shares (65 percent equity ownership) in KSK Energy Ventures Limited ('KEVL'). During the year ended 31 March 2009, KEVL issued additional 51,917,000 equity shares of face value of Rs. 10 (U.S. $ 0.25) each at a premium of Rs. 230 (U.S. $ 5.46) per share in the Indian domestic market by way of Initial Public Offering. The issue was fully subscribed and KEVL raised Rs. 12,460,080 (U.S. $ 268,142). The transaction cost incurred adjusted with the consideration received, net of deferred taxes amounting Rs. 165,020 (U.S. $ 3,530), is Rs. 318,535 (U.S. $ 6,855).

Pursuant to the issuance of the equity shares to general public the ownership interest of the Group in KEVL decreased from 65 percent to 55.25 percent resulting in a 9.75 percent deemed partial disposal of the Group's controlling interest in a subsidiary without loss of control.

The Group accounted for partial disposal of the investment in a subsidiary without loss of control as an equity transaction, and no gain or loss is recognised in the income statement. The difference of U.S. $ 129,400, between the fair value of the net consideration received (U.S. $ 261,287) and the amount by which the non controlling interests are adjusted (U.S. $ 131,887), has been credited to 'other reserve' within statement of changes in equity and attributed to the equity holders of the parent.

Further, an adjustment to revaluation reserve attributed to the equity holders of the parent amounting U.S. $ 942 has been transferred to non controlling interest on the deemed disposal of the asset without loss of control.

(b) Acquisition of non controlling interest

During the month of February 2010, KSK Energy Company Private Limited (KECPL) acquired 5,284,555 equity shares of KSK Energy Ventures Limited (KEVL) of face value of Rs. 10 (U.S. $ 0.22) each at a premium of Rs. 181.31 (U.S. $ 4.02) per share from the Indian domestic market.

Pursuant to the acquisition of the additional equity share, the ownership interest of the Group in KEVL increased from 51.32 percent to 52.73 percent resulting in a 1.43 percent additional interest in subsidiary.

The acquisition of interest in subsidiary from non controlling interest is accounted as an equity transaction, and no gain or loss is recognised in the statement of comprehensive income. The difference of U.S. $ 13,392, between the fair value of the net consideration paid (U.S. $ 21,860) and the amount by which the non controlling interest (U.S. $ 8,468) is adjusted and debited to 'other reserve' within statement of changes in equity and attributed to the equity holders of the parent.

7. Business combinations

The Group entered into the following business combinations during the year ended 31 March 2010, which are summarised as below:

(a) Acquisition of windmill undertaking

During the year ended 31 March 2010, the Group has acquired 23 windmill undertakings under slump sale for a total consideration of U.S. $ 8,482. The acquisition of the aforesaid mentioned windmills is accounted as a business combination and accordingly the purchase price was allocated to the assets and liabilities of the business based on their fair values as at the date of the acquisition. The fair values of the recognised assets and liabilities are determined based on purchase price allocation report issued by an independent valuer.

 

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

	Amount (U.S. $)
Tangible assets	23,229
Trade receivables	749
Trade and other payables	(15,496)
Total purchase consideration - Cash	8,482

 

 There are no intangible assets identified in the transaction.

From the date of the acquisition, the above acquired windmills have contributed U.S. $ 52 of revenue of the group. Disclosure of the revenues and profit before tax, if the above business combination had been effected at the beginning of the year and the carrying amount of the acquiree's assets and liabilities immediately before the combination in accordance with IFRS was impracticable as the assets acquired form part of the pool of assets available with the acquiree and there are no separate accounting records maintained for the assets acquired in business combination.

 

(b) Demerger of undertaking of WPCL to KSKMPCL under the scheme of Arrangement

Pursuant to the scheme of the arrangement between the Group and WPCL (joint venture), effective from 31 March 2010, the Group has acquired 100% controlling stake in an under construction power generating asset, in the State of Chhattisgarh. The scheme provided total consideration of U.S. $ 13,880 to be discharged by allotment of 62.5 million equity shares of Rs 10 each/- to 'KEVL' in 'KSKMPCL' in lieu of the equity interest held by 'KEVL' in 'WPCL'. The group has accounted for this acquisition as a business combination achieved in stages and accordingly the purchase price was allocated to the assets and liabilities of the business based on their fair values as at the date of the acquisition.

 

The fair values of the recognised assets and liabilities were determined based on a purchase price allocation report issued by an independent valuer. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:  

	Fair value recognised on acquisition	Previous carrying Value
Property, plant and equipment	656,656	654,992
Cash and short-term deposits	170,964	170,964
Trade & other receivable	9,450	9,450
Financial & other instruments	32,829	32,829
Other current & non current assets	27,055	27,055
Deferred tax liability	(6,191)	(6,191)
Interest bearing loans and borrowings	(683,436)	(683,436)
Trade & other payable	(171,707)	(171,707)
Other current financial liability	(2,380)	(2,380)
Other current liability	(4,052)	(4,052)
Income taxes Payable	(352)	(352)
Employee benefit liability	(61)	(61)
Net gain on bargain purchase	(14,895)	-
Purchase consideration - Equity	(13,880)	-

 

At the acquisition date, no intangible asset qualified for recognition in this respect due to the nascent stage of the operations of the project.

 

Since, the effective date of the business combination is last day of the year (i.e. 31 March 2010); there is no contribution to the revenues and profit before tax of the group. The Group finance income and profit before tax for the year ended 31 March 2010 would have been increased by U.S. $ 25,020 and U.S. $ 21,886 respectively, if the above business combination had been effected at the beginning of the year.

 

8. 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.

 

The Group accounts for inter-segment sales and transfers based on market prices.
Year ended 31 March 2010	Project development activities	Power generating activities	Reconciling/ Elimination activities	Consolidated
Revenue
External customer	8,948	43,870	75	52,893
Inter-segment	25,096	-	(25,096)	-
Total revenue	34,044	43,870	(25,021)	52,893
Segment results (refer (f) below)	31,300	11,496	(24,843)	17,953
Unallocated income, net				5,177
Finance costs, net				(11,568)
Finance income				65,422
Profit before tax				76,984
Tax expense / (income)				17,524
Profit after tax				59,460
Segment assets	13,312	1,592,584	(502)	1,605,394
Unallocated assets				330,757
Total assets				1,936,151
Segment liabilities	3,258	74,049	(502)	76,805
Unallocated liabilities				1,138,875
Total liabilities				1,215,680
Other segment information:
Depreciation	278	5,000	190	5,468
Capital expenditure	511	755,550	19,741	775,802

 

Year ended 31 March 2009	Project development activities	Power generating activities	Reconciling/ Elimination activities	Consolidated
Revenue
External customer	6,170	47,028	-	53,198
Inter-segment	16,683	-	(16,683)	-
Total revenue	22,853	47,028	(16,683)	53,198
Segment results	21,263	8,396	(16,678)	12,981
Unallocated expenses, net				(2,384)
Finance costs, net				(25,493)
Finance income				23,468
Profit before tax				8,572
Tax expense / (income)				(800)
Profit after tax				9,372
Segment assets	23,507	596,408	-	619,915
Unallocated assets				340,540
Total assets				960,455
Segment liabilities	2,220	109,496	-	111,716
Unallocated liabilities				395,587
Total liabilities				507,303
Other segment information:
Depreciation	276	5,010	12	5,298
Capital expenditure	4,694	226,723	5,331	236,748

 

 

Notes to segment reporting:

a. Inter-segment revenues are eliminated on consolidation.

b. Profit / (Loss) for each operating segment does not include finance income and finance costs of U.S. $ 65, 422 and U.S. $ 11,568 respectively (2009: U.S. $ 23,468 and U.S. $ 25,493 respectively).

c. Segment assets does not include deferred tax U.S. $ 10,746 (2009: U.S. $ 8,387), financial assets and other investments U.S. $155,296 (2009: U.S. $ 130,495), short-term deposits with bank U.S. $ 78,371 (2009: U.S. $ 172,364), non-current assets classified as held for sale U.S. $ 23,318 (2009: U.S. $ 20,125) and corporate assets U.S. $ 63,026 (2009: U.S. $ 9,169).

d. Segment liabilities do not include deferred tax U.S. $ 30,900 (2009: U.S. $ 15,694), current tax payable U.S. $ 1,369 (2009: U.S. $297), interest-bearing current and non-current borrowings U.S. $ 1,072,545 (2009: U.S. $ 378,544) and corporate liabilities U.S. $ 34,061 (2009: U.S. $ 1,052).

e. The Company operates in one business and geographic segment. Consequently no segment disclosures of the Company are presented.

f. Includes loss on disposal of investment in joint venture amounting to U.S. $ 2,743 (2009: U.S. $ Nil) and gain on bargain purchase amounting to U.S. $ 4,964 (2009: U.S $ Nil).

g. Revenues from two customers relating to power generating activities represent $ U.S. 15,893 (2009: U.S. $ 13,995) of the total revenue.

9. Other operating income, net

Other operating income comprises of:

	Consolidated		Company
	2010	2009	2010	2009
Income from management fees, net1	11,094	698	-	-
Loss on disposal of investment in joint venture2	(2,743)	-	-	-
Gain on bargain purchase	4,964	-	-	-
Miscellaneous income	378	846	-	5
Loss on disposal of property, plant and equipment	(33)	(6)	-	-
Total	13,660	1,538	-	5

 

1Includes, management fees amounting to U.S. $ 10,552 (net of legal and professional charges of U.S $ 2,620) received by KSK Asset Management Services Private Limited, ("KASL") pursuant to a settlement agreement entered into with KSK Emerging India Energy Fund Limited ("KEIEF") towards claims for loss of potential management fees. The claim was settled partly in cash U.S. $ 5,163 (₤ 3,325), and partly by transfer of the net assets of KSK emerging India Private Limited I ("KSKEIEPL I") and KSK emerging India Private Limited II ("KSKEIEPL II) U.S. $ 8,009 (₤ 4,942). Pursuant to the above, both KSKEIEPL I & KSKEIEPL II have become wholly owned subsidiaries of the Group.

2Loss on disposal of joint venture represents loss on sale of equity interest in RVK and KPCL.

10. Tax expense / (income)

The major components of income tax expense for the years ended 31 March 2010 and 2009

Consolidated statement of comprehensive income

	2010	2009
Current tax	6,481	10,228
Deferred tax	11,043	(11,028)
Tax expense / (income) reported in the statement of comprehensive income	17,524	(800)

 

Consolidated statement of changes in equity:

Net deferred income tax benefit/ (charge) amounting to U.S. $ (786) (2009: U.S. $ 3,530) relates to share issue expenses directly charged to equity during the year.

11. Goodwill and impairment testing

	2010	2009
Opening balance	73,030	95,521
Deletions	(134)	-
Exchange adjustment	11,586	(22,491)
Closing balance	84,482	73,030

 

The goodwill acquired through business combinations have been allocated to the following cash generating units of the Group, for impairment as follows:

	2010	2009
VS Lignite Power Private Limited	28,924	24,957
J R Power Gen Private Limited	30	26
Wardha Power Company Limited	21,794	18,805
Sitapuram Power Limited	7,343	6,336
Sai Regency Power Corporation Private Limited	16,627	14,347
Arasmeta Captive Power Company Private Limited	9,764	8,425
Kasargod Power Corporation Limited	-	134
Total	84,482	73,030

The recoverable amount of the cash generating unit at 31 March 2010 was determined using estimated fair value in use. The calculation was based on a discounted cash flow valuation over the lives of the power stations, using available market information to reflect the amount that the Group estimates that it could have obtained, at the balance sheet date, from the disposal of the asset in an arm's length transaction between knowledgeable, willing parties, after deducting the estimated costs of disposal.

Key assumptions used in value-in-use calculations:

The calculation of value in use less costs to sell for the cash generating unit is most sensitive to the following key assumptions:

·; electricity prices;

·; projected output;

·; fuel costs;

·; other operating costs and investment;

·; growth and discount rates

The Group's approach in determining the key assumptions was as follows:

·; Electricity prices were based on contracted prices for electricity. Projected output was based on expected levels of output over the expected operating lives of the power stations using the Group's own engineering projections which considered historical performance, plant degradation, plant maintenance activity and investment, and allowances for scheduled timings of outages.

·; Fuel costs were based on contracted and projected commodity prices, for coal and gas fuel, and using the Group's own engineering projections for consumption having considered historical consumption data and projected plant performance.

·; Other operating costs and investment was estimated using the Group's own engineering projections, where relevant, and having considered historical performance, plant degradation, plant maintenance activity and investment. The estimates of other operating costs and investment used in the discounted cash flow projection were consistent with those used in the Group's three year business plan. In subsequent periods the growth rate applied to other operating costs fully reflects the expected operating lives of the power stations.

·; Growth rates are based on published industry research. The discount rate reflects the current market assessment of the risks specific to the cash generating units. The discount rate was estimated based on the average percentage of a weighted average cost of capital for the industry.

The following growth and discount rates have been considered for the purpose of the impairment testing:

	2010	2009
Growth rate	5%	7%
Discount rate	15%	15%

With regard to the assessment of value of the cash generating unit, the Group is of the opinion that based on current knowledge; reasonably possible changes in any of the above key assumptions would not cause the carrying value to exceed the recoverable amount.

 

12. Investments and other financial assets

 

	Consolidated		Company
	2010	2009	2010	2009
Current
Financial assets at fair value through profit or loss
held for trading	10,422	1,433	-	-
designated at fair value through profit or loss…	-	30,000	-	30,000
Available-for-sale investment
quoted equity shares	-	5,676	-	-
Loans and receivables	74,542	34,493	16,188	-
Loans and receivables to JV partners	26,234	42,041	-	-
Loans and receivables to subsidiaries	-	-	27,790	-
	111,198	113,643	43,978	30,000
Non-current
Available-for-sale investments	8,526	645	-	-
Loans and receivables	33,776	17,434	-	-
Loans and receivables to JV partners	9,456	6,819	-	-
Loans and receivables to subsidiaries	-	-	-	3,965
Investment in subsidiaries	-	-	46,318	45,896
	51,758	24,898	46,318	49,861
Total	162,956	138,541	90,296	79,861

Financial assets at fair value through profit or loss

The Group holds non controlling interest (2%-5%) in entities which are in the business of power generation and allied projects. The Group designated these unquoted equity shares at fair value through profit or loss in accordance with the documented investment strategy of the Group to manage and evaluate performance of the equity shares along with the financial liability, i.e. borrowing from bank, on fair value basis. In the absence of such designation, such unquoted equity shares would have been classified as available-for-sale. The fair value of unquoted ordinary shares has been estimated using a discounted cash flow model. The valuation requires management to make certain assumptions about the inputs including credit risk and volatility. The probabilities of the various estimates within the range can be reasonably assessed and are used in management's estimate of fair value of these unquoted equity investments. Management has determined that the potential effect of using reasonable possible alternatives as inputs to the valuation model would not cause the fair value to change significantly. Further the Group has also invested in into short-term mutual fund units. The fair value of the mutual fund units are determined by reference to published data.

Available-for-sale investment - quoted equity shares and short-term mutual fund units

The Group has investments in listed equity securities of Andhra Bank Limited being quoted on the Indian stock markets. The fair value of the quoted equity shares are determined by reference to published data. During the year ended 31 March 2010, the Group has sold the investment in listed equity securities of Gujrat Mineral Development Corporation (GMDC) and Bank of India (BOI) being quoted on the Indian stock market.

Loans and receivables

This primarily includes interest-bearing inter-corporate deposits of U.S. $ 31,750 (2009: U.S. $ 23,055), deferred loan origination costs U.S. $ 25,273 (2009: U.S. $ 12,806), security deposit to supplier U.S. $ 8,504 (2009: U.S. $ 6,690) and other financial assets U.S. $ 42,791 (2009: U.S. $ 9,376).

Loans and receivables to JV partners

This primarily includes the share application money in the joint venture entities, short-term loans to joint venture partners and redeemable preference share capital held in the joint venture entities redeemable between 5 to 20 years.

Investment in subsidiaries

Investment primarily includes unquoted investments other than trade investments in subsidiaries in the Company financial statements. KSK Energy Limited (KEL) and KSK Asset Management Services Private Limited (KASL) are 100% held subsidiary of the Company. The Company has invested in 41,839,200 equity shares (2009: 41,839,200) in KEL and 12,000 (2009: 12,000) in KASL totalling to U.S. $ 46,318 (2009: U.S. $ 45,896).

The carrying amounts disclosed above are maximum possible credit risk exposure in relation to these financial assets.

Financial assets amounting of U.S. $ 96,707 (2009: U.S. $ 87,684) and U.S. $ Nil (2009: U.S. $ 30,000) for the Group and the Company respectively are subject to security restrictions (refer note 15)

13. Cash and short-term deposits

Cash and short term deposits comprise of the following:

	Consolidated		Company
	2010	2009	2010	2009
Cash at banks and on hand	24,933	8,563	7,133	250
Short-term deposits	251,939	195,638	6,000	-
Total	276,872	204,201	13,133	250

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

 The Group has pledged a part of its short-term deposits amounting U.S. $ 233,137 (2009: U.S. $ 49,526) in order to fulfil collateral requirements (refer note 15).

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

	Consolidated		Company
	2010	2009	2010	2009
Cash at banks and on hand	24,933	8,563	7,133	250
Short-term deposits	251,939	195,638	6,000	-
Less: Restricted cash	(239,203)	(49,526)	(3,000)	-
Cash and cash equivalent	37,669	154,675	10,133	250

14. Non-current assets held for sale

In year 2008, the Group had acquired 25 percent equity stake in Athena Project Private Limited ('Athena'), and associate, with the intention that the investment would be transferred at cost to KSK Emerging India Fund Limited ('the fund'), in accordance with the binding relationship agreement with the fund prior to its admission to AIM. Accordingly, necessary regulatory approval for the transfer of the investment at cost to the fund was obtained in November 2008 from FIPB.On 22 January, 2009, the investors of the fund decided to liquidate the fund. Accordingly, the Group could not transfer its investment in Athena to the said fund. On 20 February 2009, AIPL approached the Group to sell the investment in Athena directly to AIPL.

On 5 April 2010, the Group has entered into "Share sale and purchase agreement" for the transfer of the investment at its carrying value in books, i.e. fair value, with no additional cost to sell. Considering the above, the Group continues to account for the equity interest in Athena as non-current asset held for sale at cost as of 31 March 2010.

15. Interest-bearing loans and borrowings

The borrowings comprise of the following:

	Interest rate (range %)	Final Maturity
			2010	2009
Long-term "project finance" loans	8.94 to 16.22	March-26	520,305	193,349
Short-term loans	4 to 18	March-11	173,046	83,818
L C bills discounting and buyers' credit facility	1.87 to 8.25	March-11	368,583	48,333
Cash credit and other working capital facilities	8.50 to 12.50	March-11	3,500	21,906
Obligation under finance lease	-	-	-	1
Share of loan in a joint venture	0.01	-	7,111	6,137
Total			1,072,545	353,544

Total debt of U.S. $ 1,072,545 (2009: U.S. $ 353,544) comprised:

§ Long-term "project finance" loans of the Group amounting U.S. $ 520,305 (2009: U.S. $ 193,349) is fully secured on the property, plant and other assets of joint venture entities and subsidiaries that operates power stations and by a pledge over the promoter's shareholding in equity and preferred capital of each joint venture entities.

§ The short-term loan taken by the Group is secured by the corporate guarantee provided by the Company.

§ L C bills discounting, buyers' credit facility, cash credit and other working capital facilities is fully secured against property, plant and other assets on pari-passu basis with other lenders of the respective entities availing the loan facilities.

§ Obligation under finance lease is secured against the asset purchased on lease.

§ Share of loan in a joint venture relates to Group's percentage of the joint venture preference share and share application money pending allotment contributed by joint venture partners. The preference share is due for repayment in full between 5 to 20 years.

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 2010, the Group has met all the relevant covenants.

The fair value of borrowings at 31 March 2010 was U.S. $ 1,073,246 (2009: U.S. $ 352,808). The fair values have been calculated by discounting cash flows at prevailing interest rates.

The borrowings mature as follows:

	Consolidated
	2010	2009
Current liabilities
Amounts falling due within one year	568,467	123,641
Non-current liabilities
Amounts falling due after more than one year but not more than five years	291,938	147,881
Amounts falling due in more than five years	212,140	82,022
Total	1,072,545	353,544

The Group capitalised finance costs incurred during the year amounting U.S. $ 63,667 (2009: U.S. $ 31,579) at an effective interest rate of 12.35% (2009: 12.41%).