Mytrah Energy Regulatory News (MYT)

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17 March 2014

Mytrah Energy Limited

('Mytrah Energy' or the 'Company')

Final Results for the Year Ended 31 December 2013

The Board of Directors of Mytrah Energy Limited (the "Board") is pleased to announce the Company's financial results for the year ended 31 December 2013. The audited report and accounts will be posted to shareholders in due course together with the Annual General Meeting notice and associated documents.

Highlights

· Revenue of USD 50.92m, an increase of 65% from the previous period (nine months period ended 31 December 2012: USD 30.92m)

· EBITDA of USD 46.51m, an increase of 72% from the previous period (nine months period ended 31 December 2012: USD 35.12m)

o An EBITDA margin of approximately 91%

· Profit before tax ('PBT) of USD 10.70m1, an increase of 107% from the previous period (nine months ended 31 December 2012: PBT of USD 5.17m adjusted for an exceptional income of USD 7.99m)

· 65% increase in revenue. 72% increase in EBITDA and 107% increase in PBT despite depreciation in the average Indian Rupee/USD exchange rate by 7.47% from 54.37 in FY2012 to 58.44 in FY2013

· In Indian Rupee terms revenue increased by 77.0%. Adjusted for one-off's and non-recurring income, EBITDA by 85.03%, and PBT by 122%

· The tax expense for the year ended 31 December 2013 was USD 1.47m (nine months ended 31 December 2012: USD 1.19m). The tax expense is non-cash in nature and represents a net deferred tax liability on timing differences

· Strong liquidity position of USD 117.96m at 31 December 2013, comprising of USD 32.62m cash equivalents and liquid investments and USD 85.34m of undrawn loan facilities

· Currently 459.75 megawatts ('MW') of fully operational capacity and 88.35 MW under final stages of construction

· Average age of trade receivables 50 days (2012: 49 days)

· Group's revenue, costs and debt are denominated in Indian Rupees and are therefore matched. The dollar strengthening has no cash and economic impact on the Company as all of its contracts are in Indian rupees

Current Operational Highlights:

· Performance of operational projects slightly ahead of expectations

· Strong receivable position with no significant payment delays

· Burgula 37.4 MW fully commissioned and stabilised along with 56.95 MW out of 100.3MW at Savalsang 1 and 55.5 MW out of 100.5 MW at Vagarai which are now operational and undergoing final stabilisation

o Resulting in a total operating portfolio of 459.75 MW with the balance 88.35 MW due for completion before the start of the 2014 wind season

· Generation Based Incentive ('GBI') scheme reinstated with improved terms

· Post year-end, secured further working capital facilities of USD 6.5m

· In the process of securing in-principal sanction of approximately USD 200.00m for upcoming projects of 227 MW

1After excluding one-off interest cost of USD 0.65m (note 11) and non-cash cost relating to employee stock options of USD 1.24m (note 35) and USD 0.44m relating to un-eliminated one-time indirect tax cost on inter-group transactions.  

Chairman and CEO's Statement 

Over the last twelve months, Mytrah has consolidated its position as a profitable, cash generative, independent power producer ('IPP') with an expanding portfolio of operating wind farm projects across India.

Our operational portfolio, which post year end has risen from 309.9 MW to 459.75 MW, has performed slightly ahead of our expectations with an average plant load factor ('PLF') of 25.5% at the portfolio level. Within the portfolio the stabilised sites are performing well ahead of our initial expectations, in some cases exceeding P50 estimates, with machine and grid availability in excess of 97%. The machine availability at the Jamanwada, Gujarat and Kaladongar, Rajasthan sites was approximately 90% for the 2013 wind season, these sites have now been stabilised and we expect the performance at these sites also to be ahead of our expectations during 2014. This productivity will have a further positive impact on the overall revenue and financial performance of the portfolio.

As I mentioned in our interim results, I would like to reiterate that the Group's consistent strategy of holding project and turbine costs generally constant over a long period allows us to capture the positive momentum provided by rising tariffs we have highlighted. In addition, the fall in the rupee during 2013, although now seemingly stabilised, will undoubtedly put further upward pressure on the electricity price as the cost of production from coal increases due to higher import costs.

We are able to maintain one of the lowest costs of production in the industry due to Mytrah's significant land assets and our various turbine supply agreements, a substantial and non-replicable advantage in the market. Due to this we expect to see increasing margins across our portfolio as electricity prices rise across India.

We now have 139 wind masts across India, collecting significant valuable proprietary wind data on a daily basis. This allows our internal wind resource team to evaluate and model this data alongside independent studies. The collection and analysis of this data allows the Company to maximise the value of our land assets and efficiently allocate our resources. We believe that the scale of our development activities and our ability to obtain licences and concessions across our land assets located in wind-rich States are important drivers for future growth, long-term sustainability and the creation of shareholder value.

We believe that Mytrah's continued access to financing in India, our access to land enabling us to take greater control over our roll-out schedule, our diversified range of strong partnerships with wind turbine manufacturers, our ability to build assets at a competitive cost whilst managing development risk, and the quality of our management and teams will enable the Group to continue to grow rapidly and generate significant value for our shareholders.

Further information please visit www.mytrah.com or call

Mytrah Energy Limited

Ravi Kailas / Alastair Cade +44 (0) 20 3402 5790

Investec Bank plc

Chris Sim / Jeremy Ellis +44 (0) 20 7597 5970

Mirabaud Securities LLP

Peter Krens / Rory Scott +44 (0) 20 7321 2508

St Brides Media & Finance Limited

Elisabeth Cowell / Frank Buhagiar +44 (0) 20 7236 1177

Business Review

It is a pleasure to present Mytrah's audited financial results for the year ended 31 December 2013.

Financial Review

A summary of key financial results is set out in the tables below and discussed in this section.

Income statement summary

\* The financial results for the previous year ended 31 December 2012 has been restated upon retrospective adoption of the revised IAS 19. Refer note 36 of financial statements.

Note: Due to change in the Group's balance sheet date during the previous year, the previous year financial results were presented for nine months period. Hence the prior year results are not fully comparable with the current year results.

Revenue

For the year ended 31 December 2013 the Group's revenue was USD 50.92m, (nine month period ended 31 December 2012: USD 30.92m). The increase in revenues is primarily on account of a 71% increase in units generated during the year due to an increase in average operational capacity from 236MW in the previous year to 307MW in the current year and an increase in average PLFs. The increase is also on account of GBI income of USD 0.4m relating to the previous year recognised during the current year.

Gross profit

As a result of increased revenues the Group has recorded a gross profit of USD 42.68m for the year ended 31 December 2013 (nine month period ended 31 December 2012: USD 25.60m). The gross profit margins increased from 82.8% to 83.8% for the year ended 31 December 2013. Gross profit increased by USD 17.07m primarily on account of the increase in the Group's operating revenues and the increase in fully operational installed capacity during the current year.

EBITDA

EBITDA for the year ended 31 December 2013 increased to USD 46.52m (nine month period ended 31 December 2012: USD 35.12m), an increase of USD 18.39m approximately 72% increase (adjusted for exceptional income of US$ 7.99 million in previous period) following the increase in the Group's operating revenues.

Finance costs

Finance costs for the year ended 31 December 2013 were USD 29.00m compared with USD 16.67m for the nine month period ended 31 December 2012. The increase is primarily attributable to expensing of interest on operating assets during the current year which were in construction stage during the previous year and was capitalised.

Depreciation and amortisation

Depreciation and amortisation for the year ended 31 December 2013 was USD 8.55m (nine month period ended 31 December 2012: USD 5.29m). The increase in depreciation is mainly on account of the increase in average operational capacity from 236MW in the previous year to 307MW in the current year.

Taxation

The tax expense for the year ended 31 December 2013 was USD 1.47m (nine month period ended 31 December 2012: USD 1.19m). The tax expense is non-cash in nature and represents net deferred tax liability on timing differences accounted during the year.

Profit after tax

The Group recorded a profit after tax of USD 6.90m for the year ended 31 December 2013 (nine month period ended 31 December 2012: USD 11.97m). Higher profit during the period ended 31 December 2012 is primarily on account of a non-recurring income of USD 7.99m during the previous period. Adjusted for the non-recurring income during last period, the PAT increased by an exceptional 71%.

Earnings per share:

Basic and diluted earnings per share from continuing operations for the year ended 31 December 2013 was USD 0.0422, compared with USD 0.0731 for the nine month period ended 31 December 2012.

Financial position

Our financial position as at 31 December 2013 can be summarised as set out in the table below:

Net assets increased by 1.3% to USD 120.28m (nine month period ended 31 December 2012: USD 118.73 m) and the net assets per share by 1.4% to USD 0.74 (nine month period ended 31 December 2012: USD 0.73). The main movements in the balance sheet items are property, plant and equipment, trade receivables, trade payables, loans drawn down from banks and financial institutions during the financial year.

Capital structure

Strong financial capital management is an integral part of the Directors' strategy to achieve the Group's stated objectives. The Directors review financial capital reports on a quarterly basis and the Group treasury function does the review on a weekly basis, ensuring that the Group has adequate liquidity.

As at 31 December 2013 the Group had gross debt of USD 376.49m (31 December 2012: USD 258.97m). During the year ended 31 December 2013, additional loans of USD 117.51m (net of repayments) were drawn down. The Group continues to be able to borrow at competitive rates and therefore currently deems this to be the most effective means of raising finance. The Group has established good relationships with banks and financial institutions which enabled it to raise further financing since the previous period end.

Further information on the Group's capital structure is provided in note 1 to the consolidated financial statements, including details of how the Group manages risk in respect of capital, interest rates, foreign currencies and liquidity. A debt maturity profile is also included.

Cash flow

The cash generated from operations during the year was USD 29.37m (2012: USD 32.43m). Investing activities for the year ended 31 December 2013 resulted in a cash outflow of USD 132.00m (2012: USD 138.57m). Net financing cash inflows were USD 110.50m (2012: USD 104.81m). The increase in financing cash inflows was mainly due to draw down of loan facilities USD 157.87m (2012: USD 162.81m) and capital contributions from the issue of redeemable preference shares ("RPS") of USD 7.35m (2012: USD nil) during the current year. At 31 December 2013 the Group had cash and bank balances of USD 21.38m (2012: USD 9.47m).

Liquidity and investments

At 31 December 2013 the Group had liquid assets of USD 32.52m and undrawn/ committed credit facilities of USD 84.79m, which will be used to repay the short term (bridge) loans. The Group's net debt position has changed over the course of the year and is mainly on account of drawdown of loan facilities during the year.  

Principal risks and uncertainties

The Group is faced with a variety of risks to the management of the business and the execution of its strategy. These risks are managed on a day-to-day basis by the Management Committee and formally reviewed by the Audit Committee and the Board to monitor that appropriate and proportionate mitigation in the form of processes and controls are in place. A summary of the key business risks are detailed below.

Business Interruption/Critical Service Failure

The Group's current wind farms are dependent on stable patterns of wind, operations and maintenance undertaken by Suzlon Energy Limited ("Suzlon"), grid connectivity and other critical resources. In the event that a critical resource was not available then this could affect the operation of a wind farm and have a knock-on effect on our revenue.

In mitigation of this risk, Mytrah uses independent consultants to conduct wind feasibility studies when evaluating projects and also use independent consultants to evaluate wind turbine generators supplied to our wind farms. We also ensure periodic preventative maintenance is undertaken. The Group is building an asset management team to ensure, and where possible, enhance standards of asset management undertaken both internally for our self-build projects and those projects built and maintained by our turnkey partners.

We are commissioning 100.5 MW of capacity from ReGen Power and 137.7 MW with Gamesa, diversifying our development and asset management risk.

Delay in commissioning projects

Construction projects are by their very nature complicated and subject to numerous factors that could cause a delay in the completion and commissioning of a wind farm. The majority of our current projects and those under construction and at final stages of delivery are under contracts with Suzlon, and more recently, ReGen Power and Gamsea which have provisions that enable Mytrah to make claims for liquidated damages in the event there is a delay in commissioning a project. In addition our projects are closely managed on a daily basis, with issues quickly escalated to senior levels within the organisation.

Information Technology/Processing

As the business expands and processes become increasingly automated, our IT requirements are growing and are now more critical to our operations. We have an experienced IT team in place, ensuring systems are well maintained and our growing IT requirements are being fulfilled. We operate in SAP enterprise resource management software which is facilitating the expansion of the business and enhancing the quality of information available to our management and executive teams.

Environmental Compliance

Non-compliance with environmental legislation would expose the Group to various potential penalties and would run counter to our core values. To mitigate this risk, the Group undertakes an environmental and social due diligence report for each project. The majority of our environmental compliance activities are currently undertaken by Suzlon and Regen Power. However, Mytrah has the necessary expertise and procedures to ensure compliance with environmental legislation in respect to the commissioning of projects under our self-development strategy. Compliance with environmental legislation is at the heart of our self-build development strategy.

Managing Change

The Group continues to be in a rapid growth phase and the Indian renewable energy sector is also one of rapid change, with new measures being introduced on a national and state level. To mitigate this risk, the Group uses independent consultants and outsourced contractors where appropriate to ensure the Group's activities can be scaled up or down as required on a timely basis and help ensure the business can be flexible in response to changes in the industry and the political and economic environment.

Availability and cost of Financing

The Group is reliant, at this early stage of its development, on the timely availability of senior debt and mezzanine financing in order to finance its ambitious asset roll-out schedule. To mitigate this risk, the financing team has established relationships across a diverse range of finance providers in India, including The State Bank of India, which is a testament to the attractiveness of the Group's business model and the strength of our management team. Projects can also be financed from internal cash generation in the event that new debt financing becomes unavailable to the Group.

The largest operational cost of the Group is the cost of debt. The Group's projects are financed by project based debt. Management has structured the projects in such a way that debt is only drawn down once key development milestones are reached and the majority of debt is only drawn down once capacity is installed and it starts generating revenue. The cost of debt is factored into each project at the evaluation stage to ensure it meets or exceeds our minimum IRR requirements. As mentioned in the half year financial report, the Board is also evaluating the possibility of a Business Trust Listing that would substantially or wholly pay down the Group's debt.

Strategy Review and Future Growth

During the financial year we have moved towards completion on our first three projects with both Gamesa and Regen in the states of Karnataka, Andhra Pradesh and Tamil Nadu totalling 238.2 MW. Following the period end a total of 149.85 MW including 37.4 MW at Burgula in Andhra Pradesh, 56.95 MW at Savalsang 1 in Karnataka and 55.5 MW at Vargarai in Tamil Nadu have been added taking our operating portfolio to 459.75 MW. With the balance of 88.35 MW due for completion before the start of the 2014 wind season, Mytrah will have 548.1 MW spread across six states and 10 projects providing a portfolio effect from a risk perspective.

In addition in September 2013 we announced further orders for 227 MW with Suzlon Energy Limited. This order is composed of three projects totalling 227 MW. At Viswa, Rajasthan, 100.8 MW with an expected P50 PLF of 31%; at Vajrakayur 2, Andhra Pradesh, 100.8 MW with an expected P50 PLF of 29%; and at Viraj, Maharashtra, 25.4 MW with an expected P50 PLF of 29%. As we discussed in our interim statement all of these projects are located at outstanding sites and we look forward to updating the market on their progress during 2014.

The table below provides a detailed summary of our existing projects, and those part commissioned and under stabilisation and those in the final stages of construction and under development:

 1 Including current state tariff and GBI where applicable.

During the year, Mytrah continued to draw debt against it facilities for the 238.2 MW asset roll-out scheduled Q1 2014. This debt financing was secured across a diverse range of Indian senior debt providers. In addition during the year, we announced the injection of USD 17.5m in non-dilutive mezzanine financing from our sponsor group companies. This reaffirms the sponsor Groups' commitment to the interests of all shareholders of the Company and of minority shareholders in particular.

Market Environment

As we highlight in each of our reports to shareholders there is a significant shortage of power supply in India. We have seen no change in this position during the period and we believe that this will remain the case for many years to come. Wind energy currently accounts for 20 GW of India's total capacity of 200 GW representing 10% of installed capacity but less than 5% of generating capacity. We expect wind energy to increase significantly over the next 5 years but due to the increase in total capacity expected across India, wind energy's share of the generating capacity is expected to actually reduce. This puts India in an enviable position regarding renewable power generation and we anticipate that Mytrah will continue to be a leading player within the Indian market.

The fundamental market continues to move advantageously for Mytrah. During 2013 Andhra Pradesh increased the tariff for wind power projects to Rs. 4.70 per kWh, Gujarat to Rs. 4.15 per kWh, Rajasthan's 'Jaisalmer' and 'Barmer' districts to Rs. 5.52 per kWh and Rs. 5.80 per kWh respectively and Maharashtra to Rs. 5.81 per kWh.

Rising tariffs have been a constant theme within the sector since our entry in 2010. The average realisation price (including GBI) across our portfolio in 2011 was Rs. 4.75 per kWh. Following the completion of our current development of 238.2 MW taking our total portfolio to 548.1 MW this price is expected to rise to Rs. 5.23 per kWh and we anticipate a continued increase to Rs. 5.35 - 5.40 per kWh during 2014.

During 2013 The Ministry of New and Renewable Energy of the Government of India formally announced the detailed scheme for the re-introduction of GBI in India on 4 September 2013. The re-instated GBI scheme provides an incentive, to qualifying wind assets commissioned on or after 1 April 2012, at 50 paisa (Rs. 0.50) per kWh produced, up to an increased cap of Rs. 10m (USD 0.16m) per MW installed under the new GBI scheme compared to Rs. 6.2m (USD 0.11 m) per MW installed under the old GBI scheme.

Following the announcement of the re-introduction of the GBI scheme, all of our existing projects, totalling 548.1 MW, qualify for the GBI scheme, with 186 MW qualifying under the old scheme and 362.1 MW qualifying under the new scheme.

Human Capital

At Mytrah, our core values drive our valuations. We aspire to be considered as an employer of choice, and thereby have fostered high working standards and positive employee relations. Our work culture is inclusive, where we respect and value individual differences.

Health, safety and wellbeing

As part of our Health Series initiative, the Company continued its investments in various initiatives starting from comprehensive health insurance for its employees to regular health check-ups. We have implemented a Safety Health and Environment Policy (SHE) to ensure safety of our employees at project sites.

Compliance

HR tracks the changes in labour laws in the locations where we have a presence. We also ensure that there is continued emphasis on developing guidelines and approaches for HR governance and compliance in this phase of rapid growth.

Corporate and Social Responsibility ('CSR')

All CSR activities throughout the lifecycle of our turnkey projects are undertaken by our turnkey suppliers, namely Suzlon and more recently, ReGen Power and Gamesa Wind Turbines. These activities are monitored internally.

As we initiate our self-development projects, Mytrah is responsible for CSR activities before and after the construction phase (during which, the manufacturer is responsible for CSR activities).

We have engaged independent third party expertise in this field to assist in the development of our own comprehensive social environmental, health and safety management system alongside establishing detailed standards, policies and procedures and internal accountabilities and governance. These standards, policies and procedures are designed to ensure Mytrah complies with the following standards (which are consistent with local regulatory requirements and guidelines, both generic and sector specific, issued by the World Bank Group):-

· ISO 14001 (Environmental Management Systems)

· ISO 18001 (Occupational Health & Safety)

· ISO 9001 (Quality Management Systems

Compliance with our internal standards, policies and procedures will be monitored by a management steering committee and also subject to quarterly review by internal audit and at least annually by an independent third party.

Summary

During 2013 Mytrah consolidated its position as a leading IPP. We expect to further consolidate this position during 2014 with an operational portfolio of over half a GW completed three years since our inception. We believe that we will create significant shareholder value during the next two years as we reach an operating portfolio of over 1GW of wind assets in India.

Finally, I would like to take this opportunity to welcome our new shareholders and once again thank all our shareholders, management, advisors and associates for their support as we executed our strategy over the period.

Ravi Kailas

Chairman and CEO

17 March 2014

Directors' Report

The Directors present their report, together with the audited financial statements for the year ended 31 December 2013. The information in the Chairman and Chief Executive's Statement, the Business Review, the Directors' Profiles, the Corporate Governance Report and the Directors' Responsibilities Statement form part of the Directors' Report.

Principal activities and review of business

The principle activities of the Group are developing, owning and operating wind energy assets in India. A detailed review of the business is set out in the Chairman and Chief Executive's Statement on page 6.

Business Review

The Company is required by the Companies (Guernsey) Law 2008 to include a Business Review in this report. The information that fulfils the requirements of the Business Review can be found on pages 7 to 12, which are incorporated in this report by reference.

Results and dividends

The Group posted profit after tax of USD 6.90m for the year ended 31 December 2013 (for the period 31 December 2012: USD 11.97m) on a turnover of USD 50.92m (period ended 31 December 2012: USD 30.92m) and EBITDA of USD 46.51m (period ended 31 December 2012: USD 35.12m). At 31 December 2013 the Group had cash and bank balances of USD 21.38m (for the period to 31 December 2012: USD 9.47m).

The Directors do not recommend the payment of a dividend for the current year (31 December 2012: USD nil).

Capital Structure

Details of the Company's issued share capital and movements during the period are shown in note 26. The Company has one class of ordinary share, which carry no right to fixed income. Each share carries the right to one vote at general meetings of the Company. There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the Articles of Incorporation and prevailing legislation. The directors are not aware of any agreements between holders of the Company's shares that may result in restrictions on transfers or on voting rights.

Details of employee share schemes are set out in note 35.

No person has any special rights of control over the Company's share capital and all issued shares are fully paid.

Directors

The directors, who served throughout the year were as follows:

The Board has a breadth of experience relevant to the Group at its current stage of development, and the Directors believe that any changes to the Board's composition can be managed without undue disruption.

The biographical profiles of the Directors can be found on page 5.

The Company's Articles of Incorporation require that all Directors are subject to re-election by shareholders at the first Annual General Meeting following their initial appointment, and at each Annual General Meeting one-third of the Directors retire by rotation. The Board has voluntarily adopted the relevant provisions of the UK Corporate Governance Code regarding annual re-election of directors and will all offer themselves for re-election by shareholders at the 2014 Annual General Meeting.

Directors' Interests

Details of the share interests of the Directors, their service contracts and terms of appointment are shown in the Remuneration Report.

Substantial shareholders

On 31 December 2013, the Company had been notified of the following holdings of 3% or more of the 163,636,000 Ordinary Shares:-

*The Raksha Trust is a Jersey based discretionary trust settled by Ravi Kailas, the Chairman and CEO of the Company, of which he and some of his family members and also a philanthropic trust are discretionary beneficiaries.

Acquisition of the Company's own shares

The Company did not acquire any of its shares during the year ended 31 December 2013 (for the period to 31 December 2012: Nil).

Statement of Directors' responsibilities in respect of the Annual Report and the consolidated financial statements

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

The Directors have elected to prepare the consolidated financial statements in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union. The consolidated financial statements are required to give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for the period.

In preparing those consolidated financial statements, the Directors are required to:

• Select suitable accounting policies and then apply them consistently;

• Make judgments and estimates that are reasonable and prudent;

• State whether applicable accounting standards have been followed, subject to any material departures being disclosed and explained in the consolidated financial statements; and

• Prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the annual consolidated financial statements.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the consolidated financial statements comply with the Companies (Guernsey) Law 2008. They are also responsible for safeguarding the assets of the Group and hence for taking steps to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included in the Company's website.

In addition the Directors confirm, to the best of their knowledge, that:

· The Group financial statements prepared in accordance with IFRS as adopted by the European Union give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

· The Business Review includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principle risks and uncertainties that it faces.

Disclosure of information to auditors

Each Director has responsibility for ensuring that, as far as he is aware, there is no relevant audit information of which the auditors are unaware, and that he has taken all the steps that he ought to have taken to make himself aware of any relevant information that is relevant to the preparation of the auditors' report and to establish that the Group's auditors are aware of that information.

Auditors

The Auditors, KPMG Audit LLC, were appointed at the Annual General Meeting held on 31 July 2013. A resolution concerning the re-appointment of KPMG Audit LLC as Auditors will be proposed at the 2014 Annual General Meeting.

By order of the Board

Susan Wallace

Company Secretary

[ ]

Registered Office:

Frances House

PO Box 156

Sir William Place

St Peter Port

Guernsey

GY1 4EU

Corporate Governance Report

The Board embraces the high standards of corporate governance contained in the 2013 Quoted Companies Alliance Corporate Governance Guidelines for Smaller Quoted Companies ("QCA Guidelines") and, where relevant, the UK Corporate Governance Code issued by the Financial Reporting Council.

· In respect to the QCA Guidelines, as at the date of this report the Group was compliant, save that the Board does not have a chairman deemed independent on appointment as recommended under Guideline 9 of the said QCA Guidelines. However, the Board believes that Ravi Kailas's appointment as Chairman and CEO is appropriate for the business in its current stage of development.

The Board continually reviews its governance arrangements. During the year:-

· An annual Internal Audit Plan was approved and adopted for the Group's subsidiaries in India (where the principle operations of the Group are undertaken). The internal assurance group along with the external advisers were appointed to conduct regular assessments on internal and external regulatory and legislative issues pertinent to the Group, such as compliance with Land Procurement and Land Laws, the UK Bribery Act, EHS compliance, entity level fraud risk management framework and balance of plant operations. These assessments are reviewed by the MEL Audit Committee on a quarterly basis;

· As part of the Annual Internal Audit Plan, the Internal Auditors conducted periodic fraud and corruption and risk assessment audit reviews and reported their findings on a quarterly basis to the Audit Committee which, in turn, made recommendations to the Board where appropriate;

· The Board conducted an annual Board and Committee effectiveness review;

· The Board and its Committees reviewed their terms of references, to ensure they are in line with best practice and corporate governance guidelines.

· The Board maintained a responsibilities' statement setting out the roles and responsibilities of the Board, Chairman and CEO and the Senior Independent Director. In line with best practice, the Board made the current terms of reference for each Board Committee available on the Investor Relations' section of the corporate website.

The Board

Composition

The composition of the Board is shown on page 14. It is considered that a smaller number of directors allow the Board to work more effectively and increase the speed and efficiency of decision making.

The Role and Operations of the Board

The role of the Board is to ensure delivery of the business strategy and long-term shareholder value. The general obligations of the Board and the roles and responsibilities of the Chairman and CEO and Senior Independent Director are set out in a formal Board responsibilities statement approved by the Board. The Board fulfils its role by approving the annual operating plan and monitoring business performance throughout the period. The Board held two formal scheduled Board meetings during the financial year and in addition held a number of unscheduled ad-hoc meetings, typically by conference call. There is in place a schedule of matters reserved for Board approval.

The Board have approved an annual Board calendar setting out the dates, location and standing agenda items for each formal scheduled Board and Committee meeting and scheduled Board calls. Board papers are circulated to Directors in advance of scheduled and unscheduled meetings, which are of an appropriate quality to enable the Directors to fulfil their obligations and adequately monitor the performance of the business. Directors who are unable to attend a meeting are expected to provide their comments to the Chairman and CEO, Senior Independent Director or the Company Secretary as appropriate. The Board also receive management information on a monthly basis which sets out the performance of the business.

During the year, the topics subject to Board discussion at formal scheduled Board meetings included:-

· Business strategy;

· Investor relations;

· Financial and operational performance;

· Project updates;

· Market and competitor reports;

· Acquisitions and Group structure changes;

· Financing activities;

· Industry regulatory and compliance developments;

· Related party transactions;

· Appointment of Nomads;

· Approval of Annual and Half-Year Reports;

· Findings of the Board and Committee effectiveness review;

· Risk and internal controls

Attendance at scheduled Board Meetings during the year is shown below:-

Board Balance and Independence

Following an annual formal review by the Board undertaken in June 2013, taking into account all relevant factors as set out in the QCA Guidelines and UK Corporate Governance Code, the Board considers Rohit Phansalkar and Russell Walls to be independent in character and judgment.

Whilst the Board does not have a Chairman who was deemed independent on appointment, the Board consists of one executive director and two independent non-executive directors. Consequently, over half the Board is comprised of independent non-executive directors to ensure that no individual or small group of individuals can dominate the Board's decision taking.

Senior Independent Director

Russell Walls is the Senior Independent Director. He is available to investors to discuss governance issues or should there be matters of concern that have not, or cannot, be addressed through the normal channels of communication with the Chairman and CEO.

Russell Walls is also available to act as an intermediary between Directors, if required, and to act as a sounding board for the Chairman and CEO.

Advice, Insurance and Indemnities

All Directors have access to the services of the Company Secretary and may take independent professional advice at the Company's expense in conducting their duties.

The Company provides insurance cover for its Directors and officers, which is reviewed annually, and has entered into deeds of indemnity with the Directors who were in service at the time of the IPO in 2010.

Conflicts

Consideration of Directors' interests is a standing agenda item at each formal scheduled Board meeting. Each Director is required to disclose any actual or potential conflicts of interest and a register of Directors' interests is maintained by the Company Secretary. If there is a conflict of interest or a matter relating to a particular Director or a related party transaction, then the Board understands that the relevant Director should excuse themselves from the discussion. In August 2013, Ravi Kailas excused himself from discussions regarding a related party transaction that was approved by the Board and announced to the market on 30 August 2013.

Board Evaluation

A formal and rigorous evaluation of the performance and effectiveness of the Board and its Committees was undertaken in Q4 2012 and was coordinated by the Company Secretary. The Senior Independent Director led the evaluation of Ravi Kailas in his role as Chairman. The review also gave Directors an opportunity to identify technical and wider industry topics where they considered they would benefit from additional training.

The review involved a tailored questionnaire, the results of which were summarised in a Board report. As a result of the above findings, the following actions were taken during the year:-

· The non-executive directors visited the Hyderabad office in April 2013 and September 2013. During the 3 day visit in April, the non-executive directors attended a Board meeting of Mytrah Energy (India) Limited and held meetings with senior management to discuss the business and the wider Indian wind energy sector. They also met representatives of the head of the internal management assurance group and audit partner at Ernst & Young who were appointed as our co-sourced internal audit firm effective 1 April 2013.

· Appropriate time was allocated on the agenda at the Board meeting held in February 2013 to discuss strategy.

· Information of interest to the Board regarding the Group and the Indian wind energy sector are circulated as part of the quarterly board packs.

In Q1 2014 a Board effectiveness review was carried out with satisfactory results. Recommendations of relatively minor importance have been made and will receive due consideration.

The Board will consider each year whether the review should be conducted by an independent third party.

Board Development

All new Directors appointed to the Board receive a comprehensive structured induction programme. In 2013, Russell Walls and Rohit Phansalkar visited the Hyderabad Office twice during the year, where they had a structured programme of meetings with senior management and underwent training sessions on various aspects of the business and the Indian wind energy sector.

Reappointment of Directors at the Annual General Meeting

The Company's Articles of Incorporation require all new Directors to submit themselves for re-election by shareholders in their first year following appointment. The Company's Articles of Incorporation also require all Directors to submit themselves for re-election at least every three years if they wish to continue to serve on the Board and are considered by the board to be eligible.

Following the publication of the UK Corporate Governance Code, it is deemed best practice in the UK for the boards of FTSE350 listed companies to annually submit themselves for re-election by shareholders. The Board has decided to voluntarily comply with this provision of the UK Corporate Governance Code and annually submit themselves for re-election at the Annual General Meeting.

Relations with investors

Throughout the year, Ravi Kailas and Alastair Cade, an Executive Director of Mytrah Energy (India) Limited, met regularly with shareholders and their views were reported back to the Board. This allowed all Directors to develop a good understanding of the shareholders' needs and expectations and in turn for the shareholders to appreciate the opportunities and constraints faced by the Group. Consideration of investor relations issues is a standing agenda item at each formal scheduled Board meeting.

The Company produces an Annual Report which is distributed to all shareholders and available on the investor relations section of the Company's website, which also contains information on the Group, copies of Board Committee terms of references and market announcements.

The Board ensure that financial reporting and operational updates are communicated to the market on a timely basis and give an accurate and balanced assessment of the business. The Company's market communications policy sets out how the Directors meet their obligations under the AIM rules in this regard and how the advisers are involved in the market communications process coordinated by the Company Secretary.

Board Committees

The terms of reference of the Board Committees set out below are all available in the corporate governance section of the Company's website at www.mytrah.com.

The Composition of all Board Committees are compliant with best practice as set out in the QCA Guidelines and the UK Corporate Governance Code.

Nomination

Membership

Since November 2012, the Nomination Committee is chaired by Ravi Kailas and its other members are Rohit Phansalkar and Russell Walls. The Committee formally met once during the year to review Board and Committee composition. The Committee has a calendar of activities for the year.

Attendance at scheduled Committee Meetings during the year is shown below:-

Responsibilities

The key responsibilities of the Committee are:-

i. Recommending Director nominees to the Board;

ii. Recommending Committee chairs and membership to the Board and Committees;

iii. When appropriate, taking into account the current the early stage of the Company's development, reviewing succession plans for the Board and Committees;

iv. Making recommendations to the Board in respect of the re-appointment of any non-executive Director at the conclusion of their specified term of office taking into account their performance and their contribution together with the knowledge, skills, leadership and experience requirements of the Board and Committees; and

v. Regularly reviewing the structure, size and composition (including the balance of skills, knowledge and experience) required for the Board.

Remuneration

Full information on the composition, role, operation and meeting attendance of the Remuneration Committee is set out in the Remuneration Report on page 22.

Audit

Membership

Since November 2012, the Audit Committee is chaired by Russell Walls and its other member is Rohit Phansalkar. Russell Walls is considered by the Board to have recent and relevant financial experience.

The Committee has a calendar of activities agreed each year. Senior management, the external auditors and a representative of the out-sourced internal audit service providers, (Brahymayya & Co, and Ernst & Young), attend meetings at the request of the Committee. Ravi Kailas has a standing invite to attend all meetings and receive all meeting materials.

Attendance at scheduled Committee Meetings during the year is shown below. Additional ad-hoc meetings by conference call were also held during the year.

Responsibilities

The key responsibilities of the Committee are:-

i. Monitoring the integrity of financial statements, including approving any material changes in accounting policy, reviewing the financial statements, and any market announcements relating to the Group's financial performance;

ii. Reviewing the integrity of internal financial control and risk management systems and codes of corporate conduct and ethics and any published statements regarding these systems and codes;

iii. Making recommendations to the Board regarding the engagement of the external auditors, approving their terms of engagement, monitoring their objectivity and performance and setting policy regarding the provision of non-audit services by the external auditors;

iv. Reviewing the plan, scope and results of the annual audit, the external auditors' letter of comments and management's response thereto; and

v. Receiving reports from internal audit relating to risk control and management's response to internal audit review findings.

During the year, the topics subject to Committee discussion at formal scheduled Board meetings included:-

· Receipt and consideration of reports from the external auditors regarding the scope and findings of their audit of the annual report and review of the half-year report;

· Recommendation of the annual report and half-year report to the Board for approval, together with the management representation letter and audit fees;

· Review of audit and non-audit related fees paid to the external auditors and monitoring the independence of the external auditors;

· Receipt and consideration of reports from the internal auditors and management's responses to their findings; and

· Review and consideration of accounting treatment policy changes in line with industry practice, as recommended by external auditors.

To ensure the objectivity and independence of the external auditors, any service provided by the external auditors must be approved in accordance with the Group's policy on auditor independence and the provision of non-audit services, which is consistent with the UK Auditing Practices Board's Ethical Standards for Auditors.

The external auditor is only selected to provide non-audit services if they are well placed to provide the required service at a competitive cost and the Committee is satisfied that the assignment will not impair their objectivity. In accordance with relevant professional standards, the external auditors have confirmed their independence as auditors in a letter to the Directors. Details of fees paid to the external auditors for both audit and non-audit services are given in the note 8 to the financial statements.

Internal Control

The Board is responsible for ensuring the Group has effective and sound systems of internal controls, which are designed to manage, but not eliminate the risk of failure to achieve business objectives and provide reasonable, but not absolute, assurance against material misstatements and loss.

The day-to-day management and monitoring of the Group's systems of internal control is delegated to the Executive Director and the Management Committee, comprising the Chairman & Chief Executive, Chief Financial Officer and Managing Director of the Group's main operating subsidiary, Mytrah Energy (India) Limited, President, and Finance Director of Mytrah Energy (India) Limited.

The Management Committee ensures that the Group's risk management framework and control culture are embedded within the business, and to that end, during the year the Management Committee ensured that each employee undertook induction training on the Group Code of Conduct established during the year. The Executive Director and senior management provides assurance to the Board, through the Audit Committee, that risks are monitored, appropriately escalated and managed within the risk appetite of the Board.

The systems of internal control are designed to cover all business, financial, reputational and legal risks of the Group and are embedded within the day to day operations of the Group.

The financial reporting controls in place are designed to maintain proper accounting records and provide reasonable assurance concerning the accuracy and integrity of financial information reported both internally and externally. The financial reporting controls are monitored on a monthly basis by internal audit and are reported on a monthly basis to the Management Committee and on a quarterly basis to the Audit Committee.

Effectiveness of the identification and evaluation of business risk and the mitigation provided by controls are assessed on an annual basis by each business area. This annual review is coordinated by the internal auditors and reported to the Management Committee for review and challenge before ultimately being reported to the Audit Committee. This risk and control assessment process forms a key part of the annual internal audit plan and links to the Board's assessment of the key risks and the overall effectiveness of internal controls.

In accordance with the QCA Guidelines and UK Corporate Governance Code and best practice guidance for directors on internal controls issued by the Financial Reporting Council, the Board, with the advice of the Audit Committee, has reviewed the effectiveness of the systems of internal control for the year to 31 December 2013. As part of this review, the Board received assurances from the Chairman & Chief Executive and the Chief Financial Officer of Mytrah Energy (India) Limited that the Directors Responsibilities Statement on page 15 is founded on a sound system of risk management and internal controls and that the systems of internal controls are operating effectively in all material respects in relation to reporting financial risks and the mitigation of material business risks.

Relationship Agreement

The Company, Mirabaud (the Company's co-broker), Strand Hanson and certain shareholders, namely, Bindu Urja Capital Inc, Bindu Urja Investments Inc, Bindu Urja Holdings Inc, Ravi Kailas, Sila Energy Inc, Esrano Overseas Limited and Angad Paul (the 'Shareholders') entered into a relationship agreement on 4th October 2010 whereby those Shareholders undertake to the Company and Strand Hanson, inter alia, not to exercise their voting rights to take control of the Board and to conduct all transactions and relationships between them (and any of their associates or concert parties) and the Company on terms which allow the Company to carry on its business independently, at arm's length and on a normal commercial basis. The agreement remains in force for so long as such Shareholders, their associates and concert parties together control, directly or indirectly, more than 30% of the voting rights of the Company.

Going Concern

The Directors have considered the net current liabilities of USD 41.1m of the Group at 31 December 2013, the Group's cash position and forecast cash flows for 18 months period from the date of these consolidated financial statements. The Directors also continue to monitor the cash flows from time to time including the short term and long term liquidity position. At the balance sheet date, the Company has unused long term credit facilities to offset the short term loans taken. The Directors have a reasonable expectation that the Group has adequate resources to continue its operational existence for a foreseeable future and thus adopt going concern basis of accounting in preparing these consolidated financial statements.

Remuneration Report

This report describes the Group's overall remuneration policy and gives details of the compensation arrangements for Directors for the year to 31 December 2013.

The Remuneration Committee

Membership

Since November 2012, the Remuneration Committee is chaired by Rohit Phansalkar and its other member is Russell Walls. A calendar of activities for the Committee for the year has been agreed.

Senior management attend meetings at the request of the Committee and recuse themselves from discussions and decisions taken by the Remuneration Committee in respect of their own remuneration.

Attendance at scheduled Committee Meetings during the year is shown below. Additional ad-hoc meetings by conference call were also held during the year.

Role and Responsibilities

The Remuneration Committee determines and agrees with the Board the broad policy for the remuneration of the Group's employees, as well as reviewing the ongoing appropriateness and relevance of the Group's remuneration policy, ensuring that it is structured in a way that aligns reward with performance, shareholder interests and the long-term interests of the business.

The key responsibilities of the Committee are:-

i. Determining the total individual remuneration packages, including pension arrangements, of the Executive director, senior management and the Company Secretary;

ii. Reviewing and approving share incentive plans and non-material changes to them;

iii. Approving and determining targets for performance-related pay schemes, including the annual discretionary bonus scheme;

iv. Ensuring that the remuneration and other incentives of newly appointed directors and senior management are within the Company's overall remuneration policy;

v. Reviewing and approving the scope of any termination payments and severance terms for Executive directors, ensuring that contractual terms on termination and any payments made are fair to the individual and the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised.

The full terms of reference of the Remuneration Committee are available on the Company's website (www.mytrah.com) and on request from the Company Secretary.

The Committee has access to the advice and views of the Chairman and Chief Executive as well as the use of external consultants, if required. No external consultants were engaged by the Committee during the period.

Remuneration Policy

The Board considers that appropriate remuneration policies are a key driver of performance and a central element of corporate strategy. The Group remuneration policy aims to:-

· provide market competitive total compensation;

· motivate, retain and promote individual and corporate outperformance;

· differentiate on merit and performance;

· emphasise variable performance-driven remuneration;

· ensure adherence to the Group's Code of Conduct;

· align senior management with shareholders' interests; and

· deliver clarity, transparency and fairness of process.

The Group remuneration policy has a strong focus on variable compensation as the Board believes that the interests of the business, shareholders and employees are best served by containing fixed remuneration costs and maximizing the proportion of total remuneration that is directly performance related.

The key components of the Group's total remuneration package include:

Basic salary

Salaries are reviewed annually for the Executive Director and certain executive directors of Mytrah Energy (India) Limited.

Annual bonus

At the discretion of the Committee, each Executive Director and certain executive directors of Mytrah Energy (India) Limited may receive a cash bonus subject to achieving performance targets set by the Committee and are generally paid in May each year. The Committee has the discretion and flexibility to take into account other factors in determining any bonus.

Each element of the Executive Directors' reward package supports the achievement of key business measures and rewards outperformance.

Mytrah Share Option Schemes

The Company has three Share Option Plans - The Caparo Energy Employee Cashless Stock Option Scheme, Mytrah Energy Employee Cashless Stock Option Scheme and the Mytrah Energy Executive Cashless Stock Option Scheme.

All three schemes enable participants to acquire shares at an option price fixed at the time of grant. A participant may receive one or several awards of stock options.

Benefits and benefits in kind

The Chairman & Chief Executive is contractually entitled to a lump-sum life assurance benefit and private healthcare medical insurance, car and housing allowances. The Chairman & Chief Executive does not have any pension entitlements.

The Directors, both executive and non-executive, also benefit from indemnity arrangements in respect of their services as Directors, and from Directors' and Officers' liability insurance.

Directors' Service Contracts

The Chairman & Chief Executive have a service agreement with the Company, which is terminable by either party on not less than 12 months notice. There are no provisions for remuneration payable on early termination.

Non-Executive Directors

The remuneration of the non-executive Directors is determined by the Executive Director. The non-executive Directors serve the Company under formal letters of appointment that are terminable on six month's written notice which sets out their role, obligations as a director and the expected time commitment required. It is the Company's policy that the non-executive Directors participate in the Mytrah Share Option Plan to align the interests of non-executive Directors with shareholders. Such awards are approximate in value on grant with one year's fees and, in compliance with the QCA Guidelines, are not subject to performance conditions. The Group share dealing code requires non-executive Directors to hold shares acquired through the exercise of options throughout their tenure (other than to the extent of paying taxes related to the exercise of an option).

During the year, the annual fee payable to each non-executive Director was £45,000 per annum. An additional fee of £10,000 is payable in respect to the chairmanship of a Board committee and £5,000 in respect to the Senior Independent Director role.

Directors' emoluments and compensation (audited)

Directors' remuneration for the year ended 31 December 2013 was as follows:

* Alastair Cade, Vikram Kailas, Peter Neville and Philip Swatman stepped down from the Board on 8th November 2012 at the conclusion of the AGM.

Certain annual bonuses for senior executives and the salary for one senior executive is being paid by The Raksha Trust, of which Ravi Kailas is a beneficiary, however these costs may be borne by the Company in future years. All payments made under these arrangements are in line with recommendations made by the Remuneration Committee.

Directors' share interests (audited)

The interests of the Directors in shares of the Company as at 31 December 2013 are shown below.

* 94,250,000 shares are held by R&H Trust Co (Jersey) Limited (the "Trustee") as trustee of The Raksha Trust (the "Trust"), a Jersey based discretionary trust settled by Mr. Kailas, of which he and some of his family members and also a philanthropic trust are discretionary beneficiaries. 38,000 shares are held under Mr.Kailas within Roy Nominees a/c 22607.

Director's interests in share awards

As at 31 December 2013, the Directors held the following share options (refer to note 35 of the consolidated financial statements for more detail):

During the year, no Director held any interest in the shares or loan stock of any subsidiary of the Company.

Approved and signed on behalf of the Board

Rohit Phansalkar

Remuneration Committee Chairman

Independent auditor's report to the members of Mytrah Energy Limited

We have audited the Group financial statements (the "consolidated financial statements") of Mytrah Energy Limited (the "Company") and its subsidiaries (together the "Group") for the for the year ended 31 December 2013 which comprise the Consolidated Income Statement, Consolidated Statement of Other Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and the related notes to the consolidated financial statements. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditor

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the Group financial statements:

· give a true and fair view of the state of the Group's affairs as at 31 December 2013 and of its profit for the year then ended;

· have been properly prepared in accordance with IFRSs as adopted by the European Union; and

· have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

· proper accounting records have not been kept; or

· the financial statements are not in agreement with the accounting records; or

· we have not received all the information and explanations we require for our audit.

28 February 2014

KPMG Audit LLC

Chartered Accountants

Heritage Court,

41 Athol Street

Douglas,

Isle of Man

The accompanying notes form an integral part of these consolidated financial statements.

The accompanying notes form an integral part of these consolidated financial statements.

These financial statements were approved by the Board of Directors and authorised for use on 28 February 2014

Signed on behalf of the Board of Directors by:

Ravi Kailas Russell Walls

Chairman and CEO Director

The accompanying notes form an integral part of these consolidated financial statements.

(Amount in USD)

The accompanying notes form an integral part of these consolidated financial statements.

The accompanying notes form an integral part of these consolidated financial statements.

Notes to the consolidated financial statements for the year ended 31 December 2013

1. General information

Mytrah Energy Limited ("MEL" or the "Company") is a non-cellular company liability limited by shares incorporated on 13 August 2010 under the Companies (Guernsey) Law, 2008 and is listed on the Alternate Investment Market ('AIM') of the London Stock Exchange. The address of the registered office is PO Box 156, Frances House, Sir William Place, St Peter Port, Guernsey, GY1 4EU. Mytrah Energy Limited has the following subsidiary undertakings, (together the "Group"), all of which are directly or indirectly held by the Company, for which consolidated financial statements are being prepared, as set out below:

The principal activity of the Company is to operate wind energy farms as a leading independent power producer and to engage in the sale of energy to the Indian market through the Company's subsidiaries.

The functional currency of all the above subsidiaries is Indian Rupee (INR), except for BVML which is determined as USD.

These financial statements are presented in US dollars (USD). Foreign operations are included in accordance with the policies set out in note 3.

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

2. Adoption of new and revised accounting standards and interpretations

2.1. New and amended standards adopted during the year:

During the current year, the following new and revised standard and interpretation have been adopted by the Group:

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

The main change resulting from this amendment is a requirement for entities to group items presented in 'other comprehensive income' (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassificable adjustments).

b) IAS 19 Employee Benefits (as revised in 2011)

IAS 19, 'Employee Benefits' was revised in June 2011 and effective from 1 January 2013. The revised standard requires the actuarial gains or losses to be recognised through 'Other comprehensive income'. Furthermore the revised standard also requires the interest expense / income on the plan assets to be considered in profit and loss to be restricted to the discount rate based on the government securities yield. Refer note 36 for impact on financial statements upon adopting the revised standard.

c) IFRS 13 Fair Value Measurement

The Group has applied IFRS 13 during current year. IFRS 13 establishes a single source of guidance for measuring fair value and requires disclosures about fair value measurements. The scope of IFRS 13 is broad; the fair value measurement requirements of IFRS 13 apply to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosure about fair value measurements. Fair value under IFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also IFRS 13 includes extensive disclosure requirements. IFRS 13 requires prospective application from 1 January 2013. Other than the additional disclosures, the application of IFRS 13 has not had any material impact on the amounts recognised in the consolidated financial statements.

2.2. New standards and interpretations not yet adopted:

At the date of authorisation of the financial statements, the following standards and interpretations, have not been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been endorsed by the EU).

Based on the Group's current business model and accounting policies, Management does not expect that the adoption of these standards or interpretations will have a material impact on the financial statements of the Group. The Group does not intend to early adopt any of these pronouncements.

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

3. Significant accounting policies

The Group accounting policies are summarized below:

Basis of accounting

These consolidated financial statements have been prepared in accordance with and comply with IFRS as adopted by the European Union.

The consolidated financial statements have been prepared on the historical cost basis, except for the following material items in the statement of financial position. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

a) Derivative financial instruments are measured at fair value

b) Available-for-sale financial assets are measured at fair value

c) Long term borrowings, except obligations under finance leases which are measured at amortised cost using the effective interest rate method.

d) Share based payment expenses are measured at fair value

The Directors have taken advantage of the exemption offered by Section 244 (5) of the Companies (Guernsey) Law, 2008 from preparation of individual financial statements of the Company as the Company is preparing and presenting consolidated financial statements for the financial year ended 31 December 2013 and the period ended 31 December 2012.

Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control is ceased.

Going concern

The Directors have considered the financial position of the Group, its cash position and forecast cash flows for the 18 months period from the date of these consolidated financial statements. The Directors have, at the time of approving the consolidated financial statements, a reasonable expectation that the Group has adequate resources to continue its operational existence for a foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing these consolidated financial statements. Further details is contained in the Directors Report on page 21.

Foreign currencies

The consolidated financial statements are presented in USD, which is the presentational currency of the Company, as the financial statements will be used by international investors and other stakeholders because the Company's shares are listed on AIM. The functional currency of the parent company is sterling ("GBP"). The functional currency of the subsidiaries is mentioned in note 1.

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in income statement in the period. For the purposes of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into US dollars (USD) using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

3. Significant accounting policies (continued)

Foreign currencies (continued)

The following exchange rates were used to translate the INR financial information into USD:

The following exchange rates were used to translate the GBP financial information into USD:

Revenue recognition

Revenue is recognised when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably.

Sale of electricity

Revenue from the sale of electricity is recognised when earned on the basis of contractual arrangements and reflects the number of units supplied in accordance with joint meter readings undertaken on a monthly basis by representatives of the buyer and the Group at rates stated in the contract or as applicable, net of any actual or expected trade discounts.

Generation-based incentives

Revenue from generation-based incentives are recognised based on the number of units supplied, when registration under the relevant programme has taken place or if the eligibility criteria is met under the Indian Renewable Energy Development Agency Limited - Generation Based Incentive scheme.

Interest income

Interest income is recognised in the consolidated income statement, as it accrues using the effective interest rate method.

Financial instruments

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Non-derivative financial assets

All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs.

Financial assets within the scope of IAS 39 are classified into the following specified categories as:

• loans and receivables

• financial assets at fair value through profit or loss

• available-for-sale financial assets

• held-to-maturity investments

The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are categorised as current assets if they are expected to be settled within 12 months otherwise they are classified as non-current.

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

3. Significant accounting policies (continued)

Financial instruments (continued)

Effective interest rate method

The effective interest rate method is a method of calculating the amortised cost of a financial asset held at amortised cost and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Loans and receivables (including cash and bank balances)

Cash and bank balances and trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment.

Cash and bank balances comprise cash in hand and cash at bank and deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash, which are subject to an insignificant risk of change in value.

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 statement of financial position at fair value with gains or losses recognised in the income statement.

Available-for-sale financial assets ("AFS")

Investments in mutual funds held by the Group that are traded in an active market are classified as being AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in fair value reserve with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, which are recognised directly in the income statement.

Held-to-maturity investments ("HTM")

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 statement of comprehensive income 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.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For financial assets carried at amortised cost, the amount of the impairment loss recognised is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the consolidated income statement.

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

3. Significant accounting policies (continued)

Financial instruments (continued)

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

Non-derivative financial liabilities

Debt and equity instruments issued by a Group are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

Compound instruments

The component parts of compound instruments (convertible bonds) issued by the Group are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non-convertible instrument. This amount is recorded as a liability on an amortised costs basis using the effective interest method until extinguished upon conversion or at the instruments' maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured.

Financial liabilities

Financial liabilities are initially measured at fair value, net of transaction costs and subsequently measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire.

Embedded derivatives

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through profit and loss.

An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the hybrid instrument to which the embedded derivative relates is more than 12 months and is not expected to be realised or settled within 12 months.

The Company has taken an accounting policy choice in accordance with IAS 32 and IAS 39 wherein the Company writes options that give non-controlling shareholders right to put subsidiary's shares to the Company in exchange for a variable number of Company's shares and the Company has an option to settle in cash when the non-controlling shareholders exercise the options. Accordingly the preference shares held by the non-controlling interest (NCI) shareholders are classified as equity and the related put options are accounted for as a derivative liablilities under IAS 39 at fair value with changes therein recognised in profit and loss.

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

3. Significant accounting policies (continued)

Property, plant and equipment

Recognition and measurement

Property, plant and equipment are recognised as assets in the statement of financial position if it is probable that the Group will derive future economic benefits from them and the cost of the asset can be reliably estimated.

Items of property, plant and equipment are stated at cost less accumulated depreciation and any provision for impairment. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour and any other costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Advances paid in respect of work that is yet to be executed is classified as an capital advance within other non current assets in the consolidated statement of financial position.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The cost of replacing part of an item of plant and equipment is recognised in the carrying amount of an item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The cost of the day-to-day servicing of plant and equipment are recognised in the consolidated income statement as incurred.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised in the consolidated income statement.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction and production of qualifying assets are capitalised as part of the costs of those assets. Qualifying assets are those that take a substantial period of time to prepare for their intended use. Capitalisation of borrowing costs continues up to the date when the assets are substantially ready for their use.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are expensed in the period in which they are incurred.

Depreciation

Depreciation is provided to write off the cost of property, plant and equipment over their estimated useful lives after taking into account their estimated residual value, using the straight-line method as stated below:

Furniture and fittings 5 years

Office equipment 4-5 years

Computers 4 years

Vehicles 5 years

Plant and machinery 5-50 years

Buildings 20 years

Lease acquisition costs and leasehold improvements are depreciated over the primary period of the lease or estimated useful lives of the assets,whichever is less. Assets under construction are not depreciated, as they are not available for use.

The depreciation methods, useful lives and residual value, are reviewed at each reporting date.

Further, the Company has adopted component accounting of depreciation for the plant and machinery class of the fixed asset and accordingly revised the useful lives of the different components of the plant and machinery as mentioned below:

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

3. Significant accounting policies (continued)

Property, plant and equipment (continued)

Impairment

At each reporting date, management reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Intangible assets

Intangible assets that are acquired by the Group and have finite useful lives are measured at costs less accumulated amortization and accumulated impairment losses. Intangibles are amortised over its useful life using straight line method as stated below:

Application software 4 years

ERP software license 4 years

Amortisation method and useful lives are reviewed at each reporting date and adjusted, if appropriate.

Taxation

Income tax expense represents the sum of current tax and deferred tax.

Current tax

Current tax is the expected tax payable on the taxable income for the year/ period, using the rates enacted or substantially enacted at the reporting date and any adjustments (if any) to the tax payable in respect of previous year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in future years and it further excludes items that are permanently exempt from tax or allowable as a tax deduction.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit, and is accounted for using the balance sheet approach. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Any deferred tax asset or liability arising from deductible or taxable temporary differences in respect of unrealised inter-company profits are recognised using the tax rate enacted or substantially enacted of the jurisdiction in which the company owns the assets.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised on tax laws and rates that have been enacted at the balance sheet date. Deferred tax is charged in the consolidated income statement, except when it relates to items charged or credited in other comprehensive income, in which case the deferred tax is also recognised with in other comprehensive income.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

3. Significant accounting policies (continued)

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards incident to the ownership. The leased assets are measured initially at an amount equal to the lower of their fair value and present value of minimum lease payments. All other leases are classified as operating leases.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. Land taken on lease basis from the suppliers of wind turbine generators is amortised over the period ranging upto 20 years.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation, as a result of past events, and it is probable that an outflow of resources that can be reliably estimated will be required to settle such an obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows to net present value using an appropriate pre-tax discount rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Unwinding of the discount is recognised in the consolidated income statement as a finance cost. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimate.

A contingent liability is disclosed where the existence of an obligation will only be confirmed by one or more future events or where the amount of the obligation cannot be measured reliably. Contingent assets are not recognised, but are disclosed where an inflow of economic benefits is probable.

Employee benefits

Short term employee benefits

Short term employee benefits are expensed as the related services are provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Defined contribution plans

Obligations for contributions to defined contribution plans are expensed as the related service is provided.

Defined benefit plans

The Group's net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligations is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Group, the recognized asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan. To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognized immediately in other comprehensive income (OCI). The Group determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognized in consolidated income statement.

Earning per share

The Group presents basic and diluted earnings per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year/ period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which includes all stock options granted to employees.

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

3. Significant accounting policies (continued)

Government grants

The Group recognises government grants only when there is reasonable assurance that the conditions attached to them will be complied with, and the grants will be received. Government grants received in relation to assets are presented as a reduction to the carrying amount of the related asset. Grants related to income are recognised as a credit to the consolidated income statement.

Share-based payments

Equity-settled share-based payments to employees, directors and key management personnel are measured at the fair value of the equity instruments at the grant date with a corresponding increase in the equity over the vesting period, based on the Group's estimate of equity instruments that will eventually vest. The fair value excludes the effect of non-market-based vesting conditions.

At each balance sheet date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the income statement such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves.

Share options granted to employees are treated as cancelled as and when employees cease to contribute to the scheme. This results in accelerated recognition of the expenses that would have arisen over the remainder of the original vesting period.

Finance income and expense

Finance income consists of interest income on funds invested (including available-for-sale financial assets), dividend income and gains on the disposal of available-for-sale financial assets. Interest income is recognised as it accrues in the consolidated income statement, using the effective interest method. Dividend income is recognised in the consolidated income statement on the date that the Company's right to receive payment is established. The associated cash flows are classified as investing activities in the statement of cash flows.

Finance expenses consist of interest expense on borrowings and debentures. Borrowing costs are recognised in the consolidated income statement using the effective interest method. The associated cash flows are classified as financing activities in the statement of cash flows.

Foreign currency gains and losses are reported on a net basis with in finance income and expense.

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

4. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group's accounting policies, which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements and estimates in applying the Group's accounting policies

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

a) Useful life of depreciable assets

Management reviews the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets to the Group and any change in useful lives and methods of depreciation are adjusted prospectively if appropriate.

b) Classification of financial instruments as equity or liability

Significant judgement is required to apply the rules under IAS 32, Financial Instruments: Presentation and IAS 39: Financial Instruments: Recognition and Measurement to assess whether an instrument is equity or a financial liability. Management has exercised significant judgement to evaluate the terms and conditions of certain financial instruments with reference to the applicability of contingent settlement provisions, evaluation of whether options under the contract will be derivative or a non-derivative, assessing if certain settlement terms are within the control of the Company and if not whether the occurrence of these events are extremely rare, highly abnormal and very unlikely, clarifications between the parties to the agreement subsequent to the date of the agreement to conclude that the instruments be classified as an equity instrument.

c) Deferred tax assets

The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group's latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in India in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.

d) Recoverability of trade receivables

The Group analyses the historical payment patterns of customers, customer concentrations, customer creditworthiness and current economic trends on an ongoing basis. If the financial condition of a customer deteriorates, additional provision is made in the accounts.

e) Determination if the arrangement meets the definition of a service concession under IFRIC 12 Service Concession Arrangements

Management has assessed applicability of IFRIC 12: Service Concession Arrangements for certain arrangements. In assessing the applicability, management has exercised significant judgement in relation to the underlying ownership of the assets, the ability to enter into power purchase arrangements with any customer and ability to determine prices and concluded that the arrangements do not meet the criteria for service concession arrangements.

f) Measurement of fair value

A number of the Group's accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values, and reports directly to the CFO.

Notes to the consolidated financial statements for the year ended 31 December 2013 (continued)

4. Critical accounting judgements and key sources of estimation uncertainty (continued)

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from third parties to support the conclusion that such valuation meets the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

Significant valuation issues are reported to the Group Audit Committee.

When measuring the fair value of an asset or liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

· Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

· Level 3: Inputs for the asset or liability that is not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of asset or liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

5. Segment information

IFRS 8 establishes standards for the way to report information on operating segments and related disclosures about products and services, geographic areas, and major customers. The Group operations predominantly relate to generation and sale of electricity. The chief operating decision maker evaluates the Group's performance and allocates resources based on an analysis of various performance indicators at operational unit level. Accordingly there is only a single operating segment "generation and sale of electricity". Consequently no segment disclosures of the Group are presented.

The Group has all of its non-current assets located within India and earn its revenues from customers located in India.

6. Revenue