Mytrah Energy Regulatory News (MYT)

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21 April 2015

Mytrah Energy Limited

("Mytrah" or the "Company")

Final Results for the Year Ended 31 December 2014

Mytrah, the India-based renewable focused Independent Power Producer, is pleased to announce its final results for the year ending 31 December 2014.

Strong growth in installed capacity, resulting in increased underlying profitability, proves the strength of the Mytrah business model. Additional finance raised, and projects in construction, combine with the Company's extensive development pipeline to underpin continued rapid growth and shareholder value creation.

Financial highlights

· Revenue of USD 69.55m, an increase of 37% from the previous year (31 December 2013: USD 50.92m)

· Underlying EBITDA of USD 65.39m1, an increase of 36% from the previous year (31 December 2013: USD 48.19m1)

· An underlying EBITDA margin of 94% (31 December 2013: USD 95%)

· Underlying profit before tax ('PBT') of USD 11.10m2, an increase of 10% from the previous year (31 December 2013: PBT of USD 10.05m3)

· In Indian Rupee terms revenue increased by 42%, underlying EBITDA by 41% and PBT by 14%

· Strong liquidity position of USD 216.38m at 31 December 2014, comprising of USD 26.82m cash balances and liquid investments and USD 189.56m of undrawn loan facilities

· Issued USD 98m new non-convertible debenture and loan facility to provide project equity for 300MW assets under construction and repay more expensive mezzanine debt. The first USD 70m drawn in November 2014 and the USD 28m "greenshoe" drawn post-period end

· Post-period end, extended USD 98m funding facility to access an additional USD 32m of new finance, bringing total new finance raised to USD 130m, USD 70m in-year and USD 60m post-period end

· Secured long-term senior loan of USD 137.5m for 150MW of projects under construction and advanced negotiations in progress for senior loans to support an additional 150MW

· Refinanced two existing long-term senior loans in operating wind projects, reducing interest rate by 50 to 100 basis points, extending repayment period by average 2 years and releasing an additional USD 24.20m of cash, which will be used for future project development

· Mytrah's revenue, costs and debt are primarily denominated in Indian Rupees and are therefore matched. Exchange rate movements have no material cash and economic impact on the Company as all of its contracts are in Indian Rupees

Operational highlights

· Currently 543MW of fully operational capacity and 300MW under construction, with 740MW expected to be operating in the 2016 wind season

· Electricity generated during the year increased by 41% on account of increase in the average operating capacity to 442 MW during the current year (31 December 2013: 307 MW)

· Operating assets performed in line with expectations despite some press reports suggesting a late and weak monsoon due to an EL Nino effect

· Well developed pipeline exceeding 3500MW of projects with wind data in place, includes 800MW ready for construction

· Post-period end, signed MOU with Government of Andhra Pradesh for 220MW project

· Average technical machine and grid availability over 97.5% across all operating sites

Commenting on today's results, Ravi Kailas, Chairman and CEO said, "Since inception in 2010, Mytrah has grown to be one of the largest wind independent power producers in India. 2014 was a strong period of asset growth for the Company with operational capacity increased significantly to 528.5MW at 31 December 2014 and additional capacity of 14.5MW added post year-end. This takes our operational portfolio over the landmark of 500MW to a total capacity of 543MW all of which has been created within four years. The additional generating capacity represents a 75% increase since 31 December 2013, when the operating capacity stood at 309.9MW. These assets are among the lowest cost in the industry and have delivered significant EBITDA growth in 2014."

The full report and accounts is available on the Company's website at: www.mytrah.com

About Mytrah Energy Ltd.

Mytrah Energy Ltd. (AIM: MYT) is one of the largest renewable focused Independent Power Producers ('IPP') in India, with 543MW operating today in 10 projects and 6 States. The Company has 172 wind masts installed across multiple States in India, providing a rich source of information from which to select its future projects. Mytrah currently has an active development pipeline of about 3500MW.

1After excluding one-off costs relating to write-off of doubtful advances USD 2.15m (2013: USD nil) related to treatment of supplier liquidated damages, transaction costs of USD 4.25m (2013: USD nil) incurred in relation to raising long-term finance and non-cash cost relating to employee stock options of USD 0.92m (2013: USD 1.24m) (refer note 36 of financial statements), un-eliminated indirect tax cost of USD 0.90m (2013: USD 0.40m) on inter-group transactions.

2After excluding one-off interest cost of USD 0.60m (2013: USD nil) incurred upon re-financing of existing term loans in MVPPL.

3Reported PBT for 2013 re-adjusted from USD 10.70m to USD 10.05m, after including non-recurring cost relating to interest on deferred payments to suppliers.

Chairman and CEO's statement 

Since inception in 2010, Mytrah has grown to be one of the largest wind independent power producers ("IPPs") in India. The current year has been a strong period of asset growth for the Company with operational capacity increased significantly to 528.5 MW at 31 December 2014 and additional capacity of 14.5 MW added post year-end. This takes our operational portfolio over the landmark of 500 MW to a total capacity of 543 MW all of which has been created within four years. The additional generating capacity represents a 75% increase since 31 December 2013, when the operating capacity stood at 309.9 MW. These assets have some of the lowest costs in the industry and have delivered significant EBITDA growth in 2014.

This growth is taking place in an increasingly supportive political environment. Recent announcements by the Government of India have been very supportive of renewable energy, with Prime Minister Mr. Modi publicly committing India to a target of 170 GW by 2022. While specific central policies in support of this goal have yet to be announced, we are seeing increased activity across the sector, and a number of States have taken positive steps to support renewables. We expect more progress in this area during the coming year.

Looking forward, we expect a full year's contribution from our new projects to deliver further EBITDA growth in 2015, and, with new projects already underway, we expect to enter the 2016 wind season with 740 MW operating, and a further 100MW in construction. This operating portfolio generates equity cash flow sufficient to support continued growth at 200 MW per annum, which is underpinned by a pipeline of 3500MW, and we believe that this continued growth will deliver a base level of shareholder value addition that is very attractive.

Returning to 2014, the beginning of the wind season started slowly with capacity factors in May being below average. However in the second half we saw a pick-up in the utilisation rates across the portfolio, particularly during July and August and this year's total Plant Load Factor ("PLF") is in line with our expectations. Our plants have also performed well technically, with availability exceeding 97.5%. As we have mentioned previously, a large and diversified portfolio helps to even out performance variations and provides visible long-term revenue that is highly predictable on a year-by-year basis.

To support future growth, we currently have 172 wind masts across 8 States in India, collecting proprietary wind data on a daily basis. These data are analysed by our wind team and third parties to determine the best locations and designs for future wind plants. Together with our ability to obtain licences and concessions, our electrical grid expertise and our wind farm operating knowledge, we believe that our wind data bank is an important driver for future growth, long-term sustainability and the creation of shareholder value. At present, we are developing projects from a pipeline of 3500MW where we have sufficient wind data, with further sites under evaluation. Construction of the first 300MW from this portfolio is progressing, with site access, foundation installation and grid connection work underway across 4 projects and 200MW targeted to be online before the 2016 wind season.

The depth of our technical capability has enabled us to achieve remarkable progress in 2014, and we have matched this with similar success in finance. During the year, we secured funding of USD 98m. The first tranche of USD 70m was drawn in FY 2014 and second tranche of USD 28m has been drawn post-period end. The financing takes the form of INR 5,560 (approx. USD 91m) India-listed non-convertible bonds issued by Mytrah Energy (India) Limited and a USD 7m loan to Mytrah Energy Limited. Post-period end, we have extended the existing facility by a further USD 32m, bringing the total finance raised under this structure to USD 130m.

Added to this, we have refinanced senior debt in a number of our wind plants, reducing the interest rate and increasing the loan size, as well as securing new rupee-denominated senior loans of USD 137.5m that will support 150 MW of the 300 MW currently in construction. Negotiations with lenders for senior loans to support the additional 150 MW are well advanced.

In an environment of ever increasing demand for power in India, developing, owning and operating a diversified portfolio of wind assets puts Mytrah in a strong position for profitable and sustained growth. We believe that Mytrah's continued access to financing in India, from established relationships with major lenders in public and private sectors combined with our access to wind data and land enable us to take greater control over our roll-out schedule. Our diversified range of strong partnerships with domestic and overseas 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.

Business review

It is a pleasure to present Mytrah's audited financial results for the year ended 31 December 2014.

Financial review

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

Income statement summary

Revenue

For the year ended 31 December 2014 the Group's revenue was USD 69.55m, (31 December 2013: USD 50.92m). The increase in revenues is primarily on account of 41% increase in electricity generated during the year due to an increase in the average operating capacity from 307MW in the previous year to 442MW in the current year.

Gross profit

As a result of increased revenues the Group has recorded a gross profit of USD 57.35m for the year ended 31 December 2014 (31 December 2013: USD 42.67m), an increase of USD 14.68m. The gross margin decreased slightly by 1.3% from 83.8% in FY 2013 to 82.5% in FY 2014 primarily on account of operations and maintenance (O& M) cost of USD 0.72m (31 December 2013 :USD nil) incurred during the year as free O&M period on some projects were completed.

EBITDA

Underlying EBITDA for the year ended 31 December 2014 increased to 65.39m (year ended 31 December 2013: USD 48.19m) an increase of USD 17.20m approximately 36% increase following the increase in the Group's operating revenues without proportionate increase in administrative overheads.

Finance cost

Finance cost for the year ended 31 December 2014 is USD 43.53m compared with USD 29.01m for the previous year ended 31 December 2013. The increase is primarily on account of an increase in the term loans from USD 279.49m as at 31 December 2013 to USD 339.86m as at 31 December 2014 as well as expensing of interest on operating assets commissioned during the current year, which were under construction during the previous year and capitalised.

Depreciation and amortisation

Depreciation and amortisation for the year ended 31 December 2014 was USD 11.36m (31 December 2013: USD 9.13m). The increase in depreciation is mainly on account of an increase in the average operating capacity from 307MW in the previous year to 442MW in the current year.

Taxation

The tax expense for the year ended 31 December 2014 was USD 0.40m (31 December 2013: USD 1.47m). The tax expense is primarily 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 (PAT) of USD 1.88m for the year ended 31 December 2014 (31 December 2013: USD 6.90m). Lower PAT during FY 2014 is on account of one-off costs relating to write-off of doubtful advances USD 2.15m (31 December 2013: USD nil), transaction costs incurred in relation to raising of long-term finance USD 4.25m (2013: USD nil) and O&M expenses of USD 0.72m (31 December 2013: USD nil) incurred during the year as the free warranty period in some projects was completed.

Earnings per share:

Basic and diluted earnings per share for the year ended 31 December 2014 was USD 1.14 cents (31 December 2013 USD: 4.22 cents) and USD 1.14 cents (31 December 2013 USD: 4.22 cents) respectively.

Financial position

Our financial position as at 31 December 2014 can be summarised as set out in the table below:

Net assets increased by 7% to USD 128.53m (31 December 2013: USD 120.28m) and the net assets per share by 7.1% to USD 0.79 (31 December 2013: USD 0.74). 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 2014 the Group had gross debt of USD 456.26m (31 December 2013: USD 376.49m). During the year ended 31 December 2014, additional loans of USD 92.59m (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 year 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 50.07m (31 December 2013: inflows of USD 40.60m). Investing activities for the year ended 31 December 2014 resulted in a cash outflow of USD 94.68m (31 December 2013: outflow of USD 139.20m). Net financing cash inflows were USD 42.04m (31 December 2013: inflows of USD 106.47m). The increase in financing cash inflows was mainly due to draw down of loan facilities of USD 176.22m (31 December 2013: USD 153.84m) and capital contributions from issue of redeemable preference shares ("RPS") of USD 9.36m (31 December 2013: USD 7.35m) during the current year. At 31 December 2014 the Group had cash and bank balances of USD 14.27m (31 December 2013: USD 21.38m).

Liquidity and investments

At 31 December 2014 the Group had liquid assets of USD 26.82m and undrawn/committed credit facilities of USD 189.56m, which will be used to repay the short term (bridge) loans used for financing the projects under construction. The Group's net debt position at 31 December 2014 has increased to USD 441.98m (31 December 2013: USD 355.1m). The increase 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") and others, 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 uses independent consultants to evaluate wind turbine generators supplied to our wind farms. We also ensure periodic preventative maintenance is undertaken. The Group has built 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.

In 2014, we have added 100.5 MW of capacity from ReGen Power and 132.6 MW from 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 projects which were under final stages of construction during the announcement of our interim results were commissioned during the second half of the current year. Our contracts with Suzlon, ReGen Power and Gamsea 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. During the year we have automated various manual processes using tailor made application software to strengthen the internal controls. SAP has been constantly upgraded with latest updates.

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. Mytrah has formalised its Environmental Health and Safety (EHS) policy and this is being updated as needs evolve. Annual EHS audits are being carried out at site to ensure compliance with EHS policies.

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 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 and India Infrastructure Finance Company Limited (IIFCL), 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.

Strategy Review and Future Growth

Projects in operation:

Our operational portfolio comprises 543.0 MW of installed capacity, diversified across multiple locations, counter parties, technology suppliers and regulatory regimes. This diversification reduces the impact of changes in any one plant, resulting in stable cash flow at the portfolio level. Regional diversification of the operating plants is also helpful in selecting and developing future projects since relationships, and a track record of delivery, are already in place and many sites can be expanded.

Projects commissioned during current year:

During the current financial year we have moved towards completion on our first three projects with Gamesa and Regen turbines in the States of Karnataka, Andhra Pradesh and Tamil Nadu totalling 233.1 MW. Unlike the first 309.9 MW in the portfolio, which was purchased from Suzlon on a turnkey basis, the 2014 projects were developed by Mytrah and construction was managed in detail by our own team. This "self-construction" model gives Mytrah greater control of the construction process and reduces the risk of delays or future problems.

Burgula Wind Farm (37.4 MW) in Andhra Pradesh, Mytrah's first project under the self-construction model, was commissioned with 44 Gamesa 0.85MW G-58 turbines during December 2013 and fully stabilised in March 2014.

Savalsang1 Wind Farm (95.2 MW) in Karnataka is Mytrah's second major self-constructed project. As at 31 December 2014 86.7MW was commissioned with Gamesa 0.85 MW G-58 turbines. The balance capacity of 8.5MW was commissioned in January 2015. We have demonstrated Mytrah's strong execution capability in this project by successfully building 62 km of high voltage overhead electrical transmission infrastructure and laying 20,144 cubic meters of structural concrete.

Vagarai Wind Farm (100.5 MW) is Mytrah's first project operating under the "Group Captive" model and is selling power directly to commercial customers in Tamil Nadu via power purchase agreements ("PPAs") with durations of 10 to 15 years. It uses the well-proven Vensys V87 1.5 MW gearless turbine made by ReGen. As at 31 December 2014 we have commissioned 94.50 MW and the remaining 6.0 MW was commissioned during January and February 2015.

Following the completion of these projects, Mytrah's total installed capacity has increased to 543.0 MW across ten projects in six states.

Projects under construction:

With all this in place, I am pleased to announce further capacity addition of 300 MW, out of which senior debt is in place for 150MW. The details of these projects are as follows:

Vajrakarur 2 Wind Farm (100 MW) in Andhra Pradesh is under construction and purchase orders are issued to Suzlon on a turnkey basis. The Group has successfully managed to secure senior debt of INR 5,760m. The wind resource assessment has been conducted and the PLF at P50 level has been estimated at 29%. To date 80% of the land has been acquired and construction of substation and high voltage lines is well under way. The project is expected to be commissioned ahead of the 2016 wind season.

Viswa Wind Farm (50 MW) in Rajasthan is under construction and purchase orders are issued to Suzlon on a turnkey basis. The Group has successfully managed to secure senior debt of INR 2,766m. The wind resource assessment has been conducted and the PLF at P50 level has been estimated at 31.0%. To date all land required for the project has been acquired and construction of the substation and high voltage lines is well under way. The project is expected to be commissioned ahead of the 2016 wind season.

Viraj Wind Farm (50 MW) in Maharashtra is under construction. The project will be developed using Suzlon S97 WTGs with a capacity of 2.1MW. Senior debt negotiations are at an advanced stage. The wind resource assessment has been conducted and the PLF at P50 level has been estimated at 27.6%. To date 80% of the land has been acquired and foundation work has been completed for 10 locations. The project is expected to be commissioned ahead of the 2016 wind season.

Anila Wind Farm (100 MW) in Telangana is under the initial stages of construction. Terms of turbine supply are currently under progress with the suppliers and senior debt negotiations have begun with lenders. The project is expected to be commissioned in 12 months from financial closure.

Projects in development:

At present, we own a fleet of 172 wind masts across 8 states, with 3500 MW of projects having passed wind assessment, preliminary engineering and financial evaluation. From this pipeline, we select projects for construction based on our strategy to maintain diversification, timing of grid connection, financial returns and external events such as State electricity tariff changes. Mytrah currently has 800MW of projects that can begin construction once financial close has been reached.

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 year 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.

Recent announcements by the Government of India have been very supportive of renewable energy, with Prime Minister Mr.Modi publicly committing India to a target of 170 GW by 2022. While specific central policies in support of this goal have yet to be announced, we are seeing increased activity across the sector, and a number of States have taken positive steps to support renewables. We expect more progress in this area during the coming year.

The electricity market continues to move advantageously for Mytrah. During February 2015 the state of Karnataka has increase the tariff for wind power projects to INR. 4.70 per kWh. The state of Gujarat is evaluating a proposal to increase the tariff to INR 4.15 per kWh, Rajasthan's 'Jaisalmer' and 'Barmer' districts to INR 5.52 per kWh and INR 5.80 per kWh respectively and Maharashtra to INR 5.81 per kWh. Rising tariffs have been a constant theme within the sector since our entry in 2010. The weighted average realisation price (including GBI) across our portfolio in 2013 was INR 5.10 per kWh. Following the completion of our recent development of 233.1 MW, which has taken our total portfolio to 543.0 MW, this price is expected to rise to INR 5.23 per kWh.

Summary

During 2014 Mytrah consolidated its position as a leading renewable IPP in India, building operating capacity from 309.9MW to 543MW and delivering a solid operating result.

With new projects already underway, we expect to continue to grow rapidly, entering the 2016 wind season with 740 MW operating, and a further 100MW in construction. This operating portfolio generates equity cash flow sufficient to support continued growth at 200 MW per annum and we believe that this will create a base level of shareholder value growth that is very attractive.

Indian remains a very attractive location to build wind power plants and we have a strong position through our fully integrated team, our financial capability and our track record. I look forward to reporting our continued success in the future.

I would like to take this opportunity to welcome our new shareholders and investors 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

16 April 2015

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 16 April 2015

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.

Consolidated statement of changes in equity for the year ended 31 December 2014

(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 2014

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" 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:

The principal activity of the Group 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.

During the year, MEIL has entered into an agreement with MVUPL for transfer of its wind power business. As at 31 December 2014, the transfer is yet to be executed as certain conditions specified in the agreement are yet to be satisfied.

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 1 January 2014:

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 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). The Group is in the process of evaluating the impact of the following new standard 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 recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Contruction Contracts and IFRIC 13 Customer loyalty Programmes. IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2017, with early adoption permitted.

Further, the following new or amended standards are not expected to have a significant impact on the Group's consolidated financial statements:

· IFRS14: Regulatory deferral accounts.

· Accounting for acquisitions of interest in Joint Operations (amendments to IFRS 11)

· Clarification of acceptable methods of depreciation and amortisation ((amendments to IAS 16 and IAS 38)

· Defined benefit plans: Employee contributions (Amendments to IAS 19)

3. Significant accounting policies

The Group accounting policies are summarized below:

3.1 Basis of accounting

These financial statements comprise of 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 accounts (together referred as "consolidated financial statements").

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 standalone financial statements of the Company as the Company is preparing and presenting consolidated financial statements for the financial year ended 31 December 2014.

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.

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.

3.4 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 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.

The functional currency of all the above subsidiaries is Indian Rupee (INR), except for BVML, MESPL, MECPL and CCSPL which are determined as USD. These financial statements are presented in US dollars (USD).

3. Significant accounting policies (continued)

3.4 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:

3.5 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.

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.

Interest income

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

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.

3. Significant accounting policies (continued)

3.6 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 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'.

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 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. Changes in the carrying amount of the allowance account are recognised in the consolidated income statement.

3. Significant accounting policies (continued)

3.6 Financial instruments (continued)

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 OCI.

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

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 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 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.

3. Significant accounting policies (continued)

3.6 Financial instruments (continued)

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 a derivative liablilities 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.

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

3. Significant accounting policies (continued)

3.7 Property, plant and equipment (continued)

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.

Further, the Group has adopted component accounting of depreciation for the plant and machinery class of the property, plant and equipment and accordingly adopted the following useful lives for each of the components:

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

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 revised, 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 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.

3. Significant accounting policies (continued)

3.9 Taxation (continued)

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.

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 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.

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.

Defined contribution plans

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

3. Significant accounting policies (continued)

3.12 Employee benefits (continued)

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.

3.13 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.

3.14 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.

3.15 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.

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 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

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.

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

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

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.

7. Expenses by nature

8. Auditor's remuneration

The auditor's remuneration is as follows:

9. Employee costs

1Includes costs relating to write-off of doubtful advances USD 2,154,881 (31 December 2013: USD nil), transaction costs of USD 2,990,977 (31 December 2013: USD nil) incurred in relation to raising of long-term finance, one-off bonus expense of USD 1,262,650 (31 December 2013: USD nil) attributable to successful financing transaction and non-cash cost relating to employee stock options of USD 919,946 (31 December 2013: USD 1,241,244), un-eliminated indirect tax cost of USD 902,779 (31 December 2013: USD 440,000) on inter-group transactions.

10. Finance income

11. Finance costs

Amounts 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. The balance represents the actual finance costs incurred on those borrowings, calculated using the effective interest rate method.

1Includes finance cost of USD 605,748 (31 December 2013: USD nil) incurred upon re-financing of existing term loans in MVPPL.

12. Taxation

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

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 962. 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 33.99% 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 803,932 (31 December 2013: USD 347,757) 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.

Tax assets / liabilities recognised in the consolidated statement of financial position:

13. Earnings per share

Basic earnings per share is calculated by dividing profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.

At 31 December 2014, 29,450,597 shares, share options and share warrants (31 December 2013: 26,495,272) were excluded from the diluted weighted average number of shares calculation because their effect would have been anti-dilutive.

The average market value of the Company's shares for the purpose of calculating the dilutive effect of share options was based on quoted market prices for the year during which the shares and share options were outstanding.

14. Intangible assets

Application software

15. Property, plant and equipment