Mytrah Energy Regulatory News (MYT)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN

12 June 2017

Mytrah Energy Limited

("Mytrah" or the "Company")

Final Results for the year ended 31 December 2016

Power generation capacity increased 72% in 2016, reaching 1000 MW 6 months ahead of our initial target

Reported EBITDA increased 94%

Secured close to $1 billion of capital to refinance and support growth

Mytrah Energy Limited, the India-based renewable focused Independent Power Producer, is pleased to announce its full year results for the year ended 31 December 2016.

2016 marked a major milestone and acceleration in Mytrah's development. The company reached 1 GW of wind power generation capacity - adding 417 MW in just one year - as well as delivering a strong operating result and moving its new solar business into the construction phase. To do this, Mytrah secured close to $1bn of financing during the year.

Financial highlights

· The 2016 results reflect adoption of IFRIC 12 - Service Concession Arrangements, which has affected the treatment of revenue and revision of estimated useful life of property, plant and equipment which has accelerated depreciation/amortisation, as previously announced and detailed below

· Reported Revenue of USD 362.23m, an increase of 385% (63% on a directly comparable basis as per previous year policies) over the previous year (2015: USD 74.72m)

· Reported EBITDA of USD 128.13m, up 94% (70% on a directly comparable basis as per previous year policies) (2015: 65.92m)

· Underlying Profit Before Tax of USD 4.76m, up by 121% (2015 2.15m)

· Secured a direct loan facility of up to USD 175m from Asian Development Bank to fund the development of a portfolio of wind and solar projects

· Refinanced the existing portfolio of sites through a USD 380m debt package with three banks, the largest such domestic refinancing in India's renewables sector

· Received USD 23m from GE Energy Financial Services for an equity stake in Mytrah Vayu (Tungabhadra) Private Limited, a subsidiary of Mytrah Energy

· Repaid remaining mezzanine debt of USD 14.91m outstanding with PTC India Financial Services Limited

Operational highlights

· Completed construction of 417 MW wind projects, enhancing installed capacity to 1 GW (over 600 wind turbines), significantly ahead of the Company's initial target

· Entered into power purchase agreements for 140 MW of solar power capacity, bringing the total to 422 MW AC (480MW DC) in Telangana, Punjab and Karnataka

· Signed contracts with Tier-1 suppliers for 175MW solar modules and 150MW solar inverters

· Initiated the construction of solar projects in Telangana and Punjab

· Post period end, won 250MW wind power project in auction through the first competitive bid in the Indian wind power sector

· Vikram Kailas and Shirish Navlekar were appointed as the CEO and CFO of Mytrah Energy Limited respectively

Commenting on the results, Ravi Kailas, Chairman, said:

"I am delighted with these results, which show just how far Mytrah has come in only 6 years. In 2016 we commissioned more wind capacity than ever before, underlining both the capability of our team and the depth of our pipeline. This additional capacity helped to drive our EBITDA up 70% from last year on a directly comparable basis. India also experienced better wind conditions in 2016, which led to a 7% increase in power production on a like-for-like basis.

Our ability to re-finance 543 MW of wind assets with USD 380 million from sophisticated lenders in India demonstrates the quality and revenue visibility in our operating wind farms. This was the single largest domestic refinancing in the sector ever, continuing our leadership in financial innovation. This innovation has also been applied to solar this year, and I am pleased to say that we have managed to secure senior loans of over USD 300 million to build out our solar projects." 

For further information please visit www.mytrah.com or contact:

Chairman's statement

India's renewable energy sector is still in its early development stages, but a lot has happened in such a short time, and a lot continues to happen. Mytrah can't stand still, and it won't.

Yes, we want to build on what we've already successfully achieved. But we also have to respond quickly to capture the opportunities presented by changing markets and technologies.

Five years of growth in just one year

We commissioned 417MW of wind energy capacity for 2016 - close to the total amount we'd commissioned during the first five years of our existence, up to the end of 2015. So we closed 2016 with 1 GW of wind energy capacity with total of 617 wind turbines now installed. I believe this could be the quickest time a renewable energy company has taken to reach this coveted milestone, anywhere in the world.

The sun starts to shine

Our business had been focused on wind energy for its first five years. As tempting as it is to focus just on your strengths, we continued to look for new opportunities. During this period, the solar energy business was becoming more viable, as the commissioning costs of solar plants were coming down, and electricity sales prices were becoming attractive.

We entered this new market in 2016 with vigour. More than 100 people are working on our maiden projects in 21 locations, with a sizeable 480MW of capacity. We secured these projects in competitive bidding processes, with attractive 25-year contracted electricity sales prices. I expect this combination of scale and attractive prices to give us years of profitable growth.

Data mining and analysis - a worthwhile investment

We recognise that a series of one-off profitable projects doesn't necessarily lead to multi-year growth and outperformance. We need to find new ways to do things better, and, indeed, find completely new approaches to take.

One method of doing this is to 'mine' and analyse large amounts of operational data, leading to many small improvements in how we do things. When all these are added together, this leads to better spreads, cash flows, and returns on investment. It's the so-called 'aggregation of marginal gains' that is critical to get the very best performance from our assets.

World recognition

We're constantly comparing ourselves with our competitors - if only to make sure what we're doing is still cutting edge. So we were, of course, thrilled that two of our research papers were shortlisted as breakthrough papers at the 2016 European Wind Energy Awards, reflecting our achievements in the market.

Dealing with market trends

In the past 18 months, solar has joined wind as a cost competitive renewable energy supply source. This means competition is increasing, and electricity prices are declining. Being able to adapt quickly and efficiently is crucial.

While prices have fallen for new plants, we have continued to achieve good margins by carefully selecting our projects. In fact, the larger we've grown, the more profitable we've become. I believe this validates our business model, and confirms our commitment to it.

Operational performance

2016 has been a strong year for Mytrah's operating wind plant portfolio, with revenues and EBITDA ahead of market expectations on an underlying basis, and well ahead as reported.

This result has been facilitated by good winds across much of the portfolio - and by the tireless work of our asset management team in driving continuous improvements in wind farm availability. 2016 has seen a marked improvement in machine performance across a number of plants, particularly in Rajasthan where our Kaladonger plant showed a 4% improvement in availability.

Overall, we believe that our portfolio approach, with plants spread across multiple geographies, equipment suppliers and regulatory regimes continues to benefit the company in smoothing our cash flow, and is increasingly effective as our fleet size increases.

Project Construction

The construction portfolio described in Mytrah's 2016 half year results has been completed, taking us to 1000 MW well ahead of our target of mid-2017. This fantastic result, achieved through the focused dedication of our projects, business development and finance teams, clearly demonstrates the level of execution capability which Mytrah has built. The plants constructed during 2016 are listed below.

In addition to completing construction of these projects, we have also begun construction on a number of wind and solar plants which are due for completion in 2017 / 18. These are summarised below. We will provide further details of progress on these projects in due course.

Project pipeline

In addition to the projects under construction, Mytrah has an extensive pipeline of wind projects exceeding 4000 MW. With data from 221 wind masts across 10 states, the Company's wind database provides differentiated access to new project sites. For solar, we continue to develop project options and participate in auctions as these are announced. We never bid so low in an auction that this compromises our returns, and so we do not win all of the bids we participate in. We have a wide range of options for developing our solar business, including more large-scale government contracted plants as well as direct sales to private business customers and, when the time is right, consumers.

Financing

During 2016, the Group secured close to USD 1bn of financing in various forms, including a USD 380m refinancing of all the senior debt in its first 543 MW operating wind plants which set a new benchmark for the industry. This new facility was used to refinance twenty-two existing senior lenders in operating wind projects, reducing the interest rate by an average of 140 basis points and extending the average maturity of debt by approximately 3 years.

In addition to the refinancing, we closed USD 150m senior debt financing for our wind projects in construction and USD 315m for our solar projects. Part of this debt was a USD 175m credit line agreed with ADB, the first time this prestigious institution has approved such a structure. Finally, we secured a USD 100m equity line of credit with GE Energy Financial Services which enabled us to invest USD 23m into one of our SPVs and gives us further support for growth.

These transactions, conducted with sophisticated financial institutions, underline the growing maturity of our business and the quality of our asset portfolio.

Macro environment

India continues to be one of the world's fastest-growing economies and renewable energy is contributing to this growth through the rapid deployment of low cost, distributed, generation capability, as well as by generating substantial employment.

As a consequence, the renewable energy sector continues to enjoy strong support from the central Government, with the Prime Minister, in 2015, creating a target of 175 GW of renewable capacity installed by 2022. Of this 100 GW is expected to be solar, 60 GW wind, and 15 GW other technologies. The benefits of this target and the supporting policies were clearly evident, with 3.4 GW of wind capacity installed in 2015 - 16 (2014 - 15, 2.3 GW), and solar installation almost doubling to 4 GW.

A key outcome of the Government's focus is the "UDAY" (Ujwal DISCOM Assurance Yojana) reform approved in November 2015. The scheme has improved the financial health of the state electricity boards (SEBs) which purchase most of Mytrah's electricity under long-term contracts, improving the security of our revenue streams.

Maturing business

Mytrah is a pure-play renewable power generation company with a clear focus on maximising performance of its operating assets, delivering new capacity on time and within budget, and building a sustainable pipeline of future opportunities. Focused on investor returns, the business is growing and maturing in all aspects; setting visible and achievable targets, delivering projects on time and continually improving financial structures.

Experienced management and high quality technical staff, strong relationships with a diverse group of wind turbine suppliers and strong financial capability are now well proven and Mytrah will continue to make a significant investment in its people, systems and processes to ensure we have the foundation needed to support sustained growth and an ever-expanding footprint.

Outlook

Operating in a fast growing and rapidly developing country of 1.2bn people, Mytrah is ideally placed. India is expected to grow at over 7% pa according to the IMF, and there is clear evidence that electricity consumption is correlated to GDP growth. Both wind and solar power are faster to market and cost-competitive with alternative sources of power, which in India is primarily coal. As a result, the Government has set aggressive targets to deliver capacity addition in renewable energy.

Mytrah is among the largest providers of renewable energy, has a strong pipeline of development options and deep capability across the entire value chain in both wind and solar. This, combined with our proven financial capability, gives us a strong platform to continue to grow our business and create value for our investors.

Business Review

[1]In the published 2015 results, Employee Benefit Expenses was reported including Equity Settled Employee Benefits of (0.64) m. In this presentation, this cost is shown below the EBITDA line.

Adoption of IFRIC 12 Service Concession Arrangement Accounting

As a result of our continued focus on prudent accounting, and changes in the Indian accounting standards, the management have reviewed the useful life of our assets and decided to reduce it. We have also determined that this change brings some of our assets into a different accounting treatment, specifically Service Concession Agreements (SCA) referred to above. We have decided to apply these policies to all of our plants prospectively. The impact is illustrated in the table below, which shows how the 2016 results would have looked under our 2015 accounting policies (this table is presented for information only and is not audited).

The impact of the change in useful life for our assets can be seen in the increased depreciation charge in the reported accounts relative to the direct comparison below. As noted under 'Revenue' below, the impact of the SCA treatment is to increase the reported EBITDA because of the inclusion of construction revenue.

Revenue

For the year ended 31 December 2016 the Group's revenue has increased by USD 287.51m, reflecting the capacity growth from 583 MW at 31 December 2015 to 1000 MW at current year end. On a like for like basis, revenue increased by USD 46.92m.

In India, the Group is adopting Ind-AS, (Indian - adoption of International Financial Reporting Standards (IFRS)) for the first time, with effect from 1st April 2016. As part of the first-time adoption, the Group needs to evaluate and align all its accounting treatment under both Ind-AS and IFRS. During the year, the Group has reviewed its accounting treatment with respect to revenue recognition and started implementing IFRIC 12 accounting for revenue recognition from Service Concession Arrangements.

Service Concession Arrangements (SCA) apply to all of the Group's current solar projects and certain wind plants on a prospective basis. As per IFRIC 12 accounting, in the current year the Group has begun recognising construction revenue, which is earned by the Indian holding company, MEIPL, when it constructs assets for its SPVs. In the past construction revenue was not recognised as the same was eliminated as part of Intra-company eliminations. However now as per the requirements of IFRIC 12 accounting the same are being recognised as Revenue. Consequent to the adoption of IFRIC 12 accounting, assets which qualify for SCA accounting are treated as intangibles/intangibles under development.

The impact in the current year financials of this change in accounting policy is given below:

a) Impact on revenue and EBITDA

b) Impact on Balance Sheet

Assets valued at USD 406.86 million, created based on the Service Concession Arrangement, are classified as intangibles and amortised over a period of 25 years as per Group's accounting policy. These assets would have been classified as Property, Plant and Equipment earlier.

EBITDA

EBITDA for the year 2016 increased to USD 128.13m (2015: USD 65.92m) an increase of USD 62.21m, a 94% increase, reflecting the increase in revenue due to capacity expansion and a slight improvement in EBITDA margin as new plants in their initial free O&M period come into the mix.

Finance cost

Financing costs at USD 81.84m were USD 30.62m higher than the prior year due to the increased debt level associated with the capacity expansion.

Finance income

Higher finance income of USD 4.93m (2015: USD 3.34m) was generated due to higher cash balance in the system and resultant increase in interest on bank deposits and investments.

Profit before tax

Profit before tax (PBT) of USD (5.58)m for the period 2016 (2015: USD 0.46m). PBT was affected by the interest costs associated with assets which were not fully performing in 2016, and the change in the estimated useful life of assets, increased depreciation/ amortisation expense. PBT was also affected by one-off costs associated with refinancing. On an underlying basis, PBT was USD 4.76m (2015 USD 2.15m), and increase of 121%.

Taxation

The tax for the year 2016 was a credit of USD 0.98m (2015: cost of USD 0.08m).

Earnings per share:

Basic and diluted earnings per share for the year 2016 was USD (2.5) cents (2015 USD: 0.71 cents) and USD (2.5) cents (2015 USD: 0.71 cents) respectively.

Financial position

The net book value of our Property, plant and equipment and associated intangible assets has increased by USD 257.97m (increase by 33%), almost all of which relates to investments made during the year in the construction of our new plants and that have started generating revenues in the year 2016 and will be operational throughout 2017.

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 2016 the Group had gross debt of USD 945.09m (2015: USD 674.19m). During the year ended 31 December 2016, additional loans of USD 290.73m (net of repayments) were drawn for the construction of new assets that will start generating revenue in the year ending 2017. The Group continues 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 enabling it to raise further financing on competitive terms.

As the assets under construction start generating revenues in 2017, we expect that the Leverage (expressed as Net Debt/EBITDA) position of the Company will improve substantially with the increasing EBITDA.

Further information on the Group's capital structure is provided in the notes to the consolidated financial statements, including details of how the Group manages risk in respect of capital, interest rates, foreign currencies and liquidity.

Cash flow

The cash generated from operations during the year was USD 74.52m (2015: inflow USD 74.64m). Cash flow did not increase in line with EBITDA due to an increase in receivables, primarily those associated with operations in Rajasthan. This situation was resolved post-period end, with an inflow of USD 27.7m received in March 2017 bringing receivables back into line with historic norms.

Investing activities for the current year resulted in a cash outflow of USD 288.67m (2015: outflow of USD 236.62m). Net financing cash inflows were USD 221.73m (2015: inflows of USD 162.72m). The increase in financing cash inflows was mainly due to draw down of loan facilities (net of refinancing) of USD 290.73 m (2015: USD 370.8m) during the current year. At 31 December 2016, the Group had cash and bank balances of USD 45.18m (31 December 2015: USD 55.58m).

Liquidity and investments

At 31 December 2016, the Group had a strong liquidity position comprising of liquid assets of USD 56.22m and undrawn/committed credit facilities of USD 71.31m, which will be used for financing the projects under construction. The Group's net debt position at 31 December 2016 has increased to USD 945.10 m (31 December 2015: USD 674.20m). The increase is mainly on account of drawdown of loan facilities during the year.

Ravi Kailas

Chairman

Mytrah Energy Limited 

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 consolidated financial statements were approved by the Board of Directors and authorised for release on 24 May 2017.

Signed on behalf of the Board of Directors by:

Ravi Kailas Russell Walls

Chairman Director

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 2016

1. General information

Mytrah Energy Limited ("MEL" or the "Company" or the "Parent 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 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" or the "Company"), all of which are directly or indirectly held by the Company, for which consolidated financial statements have been prepared, as set out below:

1 Wound off against application by the Group to concerned authority with effect from 02 January 2016.

2Acquired by the Group on 01 August 2015.

The principal activity of the Group is to operate Wind Energy Farms and Solar Power Plants as a leading independent power producer and to engage in the sale of energy to the Indian market through the Company's subsidiaries.

2. Adoption of new and revised accounting standards and interpretations

2.1 New and amended standards adopted during the year

The Group has adopted the following new standards and amendments, including any consequential amendments to other standards with date of initial application of 01 January 2016:

2. Adoption of new and revised accounting standards and interpretations (Continued)

Based on the Group's current business model and accounting policies the adoption of these standards or interpretations did not have a material impact on the consolidated financial statements of the Group.

2.2 New standards and interpretations not yet adopted:

At the date of authorisation of these consolidated financial statements, the following standards and interpretations, have not been applied in these financial statements, were in issue but not yet effective. The Group is in the process of evaluating the impact of the following new standards on its consolidated financial statements.

IFRS 9 Financial instruments

IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption period.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

IFRS 16 Leases

In January 2016, the IASB issued a new standard, IFRS 16, "Leases". The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting, however, remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 supersedes IAS 17, 'Leases', and related interpretations and is effective for actual period beginning on after 01 January 2019, not yet endorsed by European Union(EU). Earlier adoption of IFRS 16 is permitted if IFRS 15, 'Revenue from Contracts with Customers', has also been applied.

At the date of authorisation of these financial statements, the following Standards and relevant Interpretations, have not been applied in these financial statements and were effective for the actual period beginning on or after the below mentioned respective dates, but not yet endorsed by EU.

3. Significant accounting policies

The Group accounting policies are summarized below:

3.1 Basis of accounting

These financial statements comprise of the consolidated statement of financial position, consolidated income statement, consolidated statement of other comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows, significant accounting policies and notes to the accounts (together referred as the "consolidated financial statements").

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standard and its interpretations as adopted by the European Union (EU) ('IFRS').

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; and

e) Net employee benefit (asset) / liability that is measured based on actuarial valuation.

The Directors have taken advantage of the exemption offered by Section 244 (5) of the Companies (Guernsey) Law, 2008 from preparation of standalone financial statements of the Company as the Company is preparing and presenting consolidated financial statements for the financial year ended 31 December 2016.

The accounting policies set out below have been applied consistently to all years and presented in these consolidated financial statements.

3.2 Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) 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.

Non-controlling interests in subsidiaries are identified separately from the Group's equity therein. The interests of non-controlling shareholders may be initially measured either at fair value or at the non-controlling interests' proportionate share of the fair value of the acquiree's identifiable net assets. The choice of measurement basis is made on the acquiree's identifiable net asset basis. Subsequent to acquisition, the carrying amount of non-controlling interest is the amount of those interests at initial recognition plus the non-controlling interests' share of subsequent changes in equity.

The Group builds solar and wind power plants under public-to-private Service Concession Arrangements (SCAs), and the same are treated as Intangible assets and gains/ losses arising from construction / development services, (where work is sub-contracted within the Group) are treated as realized and not eliminated on consolidation.

3.3 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 are contained in the Directors Report.

3. Significant accounting policies (Continued)

3.4 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 as the Company's shares are listed on AIM. The functional currency of the parent company is Pound Sterling ("GBP"). The functional currency of all the subsidiaries is Indian Rupee (INR), except for BVML and MESPL, which are determined as USD. These financial statements are presented in US dollars (USD).

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 year, 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 year. 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 year. Income and expense items are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during that year, 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.

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:

3.5 Revenue recognition

Revenue is recognised when it is probable that future economic benefits will flow to the group 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. Electricity generated from the last bill cycle date to the end of the period/ year are recognized as unbilled revenue and are billed in subsequent period on actualization basis as per the terms of contractual arrangements.

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.

Sale of Renewable Energy Certificates (RECs)

Revenue from sale of RECs is recognised after registration of the project with central and state government authorities, generation of power and execution of a contract for sale through recognised exchanges in India.

Sale of Verified Carbon Units (VCUs) and Certified Emission Reductions (CERs)

Revenue from sale of VCUs/CERs is recognized after registration of the project with United Nations Framework Convention on Climate Change (UNFCCC), generation of emission reductions and on execution of a firm contract of sale and billing to the customers.

3. Significant accounting policies (Continued)

Interest income

Interest income is recognised as it accrues using the effective interest rate method.

Construction Revenue from Service Concession Arrangements

Revenue related to construction under a service concession arrangement is recognised based on the stage of completion of the work performed, consistent with the accounting policy on recognising revenue on construction contracts. Operation or Service revenue is recognised in the period in which services are provided by the Group.

Contract expenses are recognized as incurred unless they create an asset related to future contract activity. An expected loss on a contract is recognised immediately in profit or loss.

3.6 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.

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 year. The effective interest rate is the rate that exactly discounts estimated future cash receipts (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 debt instrument, or (where appropriate) a shorter year, 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 initially recognised at fair value plus any directly attributable costs. Subsequent to initial recognition they 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. Deposits with banks and financial institutions maturing after 12 months from the date of balance sheet have been classified under non-current assets as 'other investments'.

3. Significant accounting policies (Continued)

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 consolidated profit and loss are carried in the statement of financial position at fair value with gains or losses recognised in the income statement. Directly attributable costs are recognised in profit and loss as incurred.

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 plus any attributable transaction costs. Subsequent to initial recognition they are measured at fair value with changes in fair value being 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. 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.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting year. 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. Changes in the carrying amount of the allowance account are recognised in the consolidated income statement.

Impairment of available-for-sale

Impairment losses on available-for-sale financial assets are recognised by classifying the losses accumulated in the fair value reserve to profit or loss. The amount reclassified is the difference between the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any impairment loss previously recognized in profit or loss. If the fair value of an impaired available-for-sale debt security subsequently increases and the increase can be related objectively to an event occurring after the impairment loss was recognized, then the impairment loss is reversed through profit or loss, otherwise, it is reversed through Other Comprehensive Income.

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.

3. Significant accounting policies (Continued)

Non-derivative financial liabilities

Non-derivative financial liabilities are initially recognised at fair value less any directly attributable costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using effective interest method.

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 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. Subsequent to initial recognition the liability component of compound financial instrument is measured at amortised cost using effective interest method. 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 year. 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 compulsorily convertible preference shares held by the non-controlling interest (NCI) shareholders are classified as equity and the related put options are accounted for as derivative liabilities under IAS 39 at fair value with changes therein recognised in profit and loss.

3.7 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 a capital advance within other non-current assets in the consolidated statement of financial position.

Notes to the consolidated financial statements for the year ended 31 December 2016 (continued)

3. Significant accounting policies (Continued)

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 embedded 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 year 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.

In respect of an intangible asset, borrowing costs attributable to the construction of power plants are capitalised up to the date of commercial operations date (COD). All borrowing costs subsequent to the COD are charged to the Income Statement in the year in which such costs are incurred.

All other borrowing costs are expensed in the year 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 3-5 years

Computers 4 years

Vehicles 5 years

Plant and machinery 5-50 years

Buildings 20 years

Lease acquisition costs, leasehold improvements and leased assets 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 and adjusted prospectively, if appropriate. The Group adopted component accounting of depreciation for the plant and machinery class of the property, plant and equipment.

During the year, Management has re-assessed and revised the estimated useful lives to the Wind Turbine Generators (WTG's) based on experience and technical evaluation. The Company also revised the residual value between 0 - 10% (previous year: 20%) of the cost, in order to reflect the actual usage of the assets. The revised useful lives of the components of Plant and Machinery or WTG's are as follows:

3. Significant accounting policies (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. The recoverable amount of an asset is the greater of its value in use and fair value less cost to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

3.8 Intangible assets

The Group has identified the following intangible assets.

a) Service Concession Arrangements (SCA)

b) Software

Service Concession Arrangements

Under the SCAs, where the Group has received the right to charge the State Electricity Utilities (Grantor), such rights are recognised and classified as "Intangible Assets". Such right is not an unconditional right to receive consideration because the amounts are contingent to the extent the Grantor uses the services and thus are recognised and classified as intangible assets.

Software

Software that are acquired by the Group and have finite useful lives are measured at costs less accumulated amortization and accumulated impairment losses.

Amortisation

The amortization method used is selected on the basis of the expected pattern of consumption of the expected future economic benefits embodied in the asset, and is applied consistently from period to period, unless there is a change in the expected pattern of consumption of those future economic benefits. The Group determined that the amortisation method that reflects appropriately the expected pattern of consumption of the expected future economic benefits is correlated with the amortisation of the asset base.

Intangibles are amortised over its useful life using straight line method as stated below:

Service Concession Arrangements - Over the period of Power Purchase Agreement i.e., 25 years using the differential depreciation methodology under straight line method as per the principles envisaged in the CERC Guidance in this regard.

Application software 4 years

ERP software license 4 years

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

3.9 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, using the rates enacted or substantially enacted at the reporting date. 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.

3. Significant accounting policies (Continued)

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 year 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.

3.10 Leases

Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether the arrangement is or contains a lease. At inception or on re-assessment of an arrangement that contains a lease, the Group separates the payment and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset. Subsequently, the liability is reduced as the payments are made and an imputed finance cost on the liability is recognised using the Group's incremental borrowing rate.

Leased Assets

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 year in which they are incurred. Land taken on lease are amortised over a year ranging upto 25 years in line with the lease agreements.

3.11 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.

A provision for onerous contracts, if any, is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.

3.12 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.

3. Significant accounting policies (continued)

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 years, 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.

Re-measurements 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 year by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual year to the then-net defined benefit liability/ (asset), taking into account any changes in the net defined benefit liability/ (asset) during the year 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.

3.13 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 year, 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 year.

For cash settled share based payments, a liability is recognised for the amount payable at the balance sheet date with a corresponding charge being made to the income statement.

3.14 Earnings 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. 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 and Directors, CCPS, CCDs and share warrants issued to investors and lenders.

3.15 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.

3.16 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. 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.

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 year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future years.

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 and intangible assets under service concession arrangement

Management reviews the useful lives of depreciable assets and intangible 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/amortisation 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 had assessed the applicability of IFRIC 12: Service Concession Arrangements for certain arrangements. In assessing the applicability, management had exercised significant judgement in relation to the underlying ownership of the assets, the ability to enter into Power Purchase Arrangements ('PPA') with any customer and the ability to determine prices and concluded that the arrangements do not meet the criteria for service concession arrangements in the past.

During the year, as a result of review of useful lives of Property Plant and Equipment ('PPE'), based on technical evaluation, wherever the estimated economic life of wind and solar projects are in line with the PPA period i.e 25 years, management has adopted IFRIC 12 prospectively for such wind and solar assets. Management believe that the financial statements will provide more reliable and relevant information with the application of IFRIC 12.

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

In assessing the applicability of IFRIC 12, Management has exercised significant judgement in relation to (i) the arrangements that are covered under the scope of the accounting for service concessions which in turn depends on the specific terms and conditions of the power purchase agreements with the counter parties and estimates of the life of the related assets, (ii) the understanding of the nature of the payments in order to determine the classification of the service concession arrangement as a financial asset or as an intangible asset and (iii) the recognition of the revenue from construction including the timing and related margin to be recognized.

f) Measurement of fair value

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 (Chief Financial Officer).

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.

g) Measurement of earnings before interest, tax, depreciation and amortization (EBIDTA)

The Group has elected to present earnings before interest, tax, depreciation and amortisation (EBIDTA) as a separate line item on the face of the statement of profit and loss. The Group measures EBIDTA on the basis of profit / (loss) from continuing operations. In its measurement, the Company has not included depreciation and amortisation expenses, finance cost, equity settled employee benefits expenses, tax expense and finance income.

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 earns its revenues from customers located in India.

6. Revenue

1 Generation based incentives are recognised on fulfilment of eligibility criteria prescribed under Indian Renewable Energy Development Agency Limited - Generation Based Incentive Scheme.

2 The amount of revenue, corresponding cost and margin recorded in statement of consolidated income statement on account of exchange of construction services for an intangible asset under service concession arrangement is USD 240,590,269 (31 December 2015: USD Nil), USD 224,672,249 (31 December 2015: USD Nil) and USD 15,918,020 (31 December 2015: USD Nil) respectively.

3 Other operating income recognised during the year represents liquidated damages claimed from project suppliers in relation to low machine availability as against the guaranteed machine availability amounting to USD 1,118,180 (Previous Year: USD 881,589) and delay in commissioning of wind projects amounting to USD 5,103,605 (31 December 2015: USD Nil).

7. Employee benefits expense

8. Other operating expenses include costs relating to write-off of doubtful advances USD 424,142 (31 December 2015: USD Nil), provision for trade receivables USD 101,010 (31 December 2015: USD 225,991), repairs and maintenance cost of USD 6,277,548 (31 December 2015: USD 2,421,039).

9. Auditor's remuneration

The auditor's remuneration is as follows (excluding taxes, if any):

10. Finance income

11. Finance costs

1Includes finance cost on finance lease obligations USD 1,302,032 (31 December 2015: USD 1,272,277).

2Amounts included in the cost of qualifying assets during the year represent interest on project specific as well as general borrowings which are sanctioned for the purpose of construction of a qualifying asset and it represents the actual finance costs incurred on those borrowings, calculated using the effective interest rate method.

12. Other finance costs on refinancing

Loan refinancing costs represents the cost of prepayment and unamortized transaction costs incurred upon refinancing the existing senior term loans.

13. Taxation

The Company is exempt from Guernsey income tax under the Income Tax (Exempt bodies) (Guernsey) Ordinance, 1989 and is subject to an annual fee of USD 1,480. As such, the Company's tax liability is zero. However, considering that the Company's operations are entirely based in India, the effective tax rate of the Group of 34.61% (31 December 2015:34.61%) has been computed based on the current tax rates prevailing in India

Indian companies are subject to corporate income tax or Minimum Alternate Tax ("MAT"). If MAT is greater than corporate income tax then MAT is levied. The Company has recognised MAT of USD 1,558,712 (31 December 2015: USD 3,538,655) as MAT is greater than corporate income tax for the current year. The tax expense represents current tax charge and non-cash net deferred tax liability on timing differences accounted during the year.

The prima-facie tax expense for the year is reconciled to the tax expense recognised in consolidated income statement as follows: