Opg Power Regulatory News (OPG)

2 July 2012

OPG Power Ventures PLC

("OPG", "the Group" or "the Company")

Final Results for the Year to 31 March 2012

OPG (AIM: OPG), the developer and operator of Group Captive power plants in India, announces results for the year ended 31 March 2012.

The Chairman, Mr M.C.Gupta, said: "In the year under report, we continued to maintain and increase the tempo of progress in the accomplishment of our stated goals. We benefited during the year from a strong, full year contribution from the Chennai 1 (77 MW) plant even as we forged ahead with our projects under construction. It is, therefore, gratifying to be able to report that we expect the first of these initiatives, a further 77 MW plant at Chennai, to join its operational twin in the next few weeks, thereby increasing Group operating capacity to 190 MW.

"The emphasis on accelerated development and delivery continues, both at Chennai and Gujarat, with this largely brownfield expansion portfolio being increasingly de-risked. In the light of what we see as structural, and beneficial, changes taking place with regard to power sector pricing in the country, we are confident that the Group's differentiated and profitable business model will increasingly contribute to build superior shareholder value".

For further information, please visit www.opgpower.com or contact:

Chief Executive's Statement

The year ended 31 March 2012 has been characterised by strong operational performance of the Company's flagship asset and rapid de-risking of projects despite a challenging trading environment which is now beginning to show signs of recovery. I am pleased to provide a summary of our results and major operational events during the year as well as a discussion of our trading environment. Our focus remains maximising the performance of our assets and de-risking our projects.

Returns on our flagship asset prove the business model

Revenue was up 37% to £ 45.25 M and Income from continuing operations before period expenses on Projects, exceptional and non-cash items and tax was £ 9.6 M. These figures reflect a reduced contribution during the period from the 26 MW and 10 MW legacy plants notwithstanding a strong showing from the Chennai I - 77 MW, in its first full year of operations, with revenues up 78%, a gross profit contribution of £ 12.56 M and gross margin of 33%, similar to last year at 36%. Chennai I, for which we raised equity as part of our IPO in May 2008, has consistently delivered a load factor of 92% throughout the year. The pre-tax return on equity of this project during 2012 was just under 50%, making it one of the most profitable generation units in India. Our balance sheet has net debt of £ 31.59 M at the year end representing a gearing ratio of 0.19.

Increased revenues compared with the prior year reflected the operation of Chennai I for the whole of the year. In addition, OPG demonstrated that its flexible group captive model secures optimum market prices for the Company's power. Average tariffs achieved of Rs 4.93per kWh were similar to the prior yearRs.4.95 per KWH and at the time of writing, following the regulated tariff changes announced in April 2012, the Tamil Nadu Electricity Board has filed an application with the state regulator which would enable them to purchase a large proportion of generation from our Chennai I and II at between Rs 5.30 and Rs 5.70 per kWh from July 2012 onwards. Had the Company's model been to sell power on a typical long term Power Purchase Agreement it would not have been in line to benefit from these much needed changes in the tariff structure.

Gross margins remained healthy at 33% and the fuel-flexibility of Chennai I in particular enabled us to maintain our load factors and gross margins in the wake of increased average international coal prices. The sharp appreciation of the US dollar against the Indian Rupee exacerbated the effect of rising coal prices further in Rupee terms. Notably, capital equipment purchases are principally denominated in Indian Rupees and accordingly projects remained within budget although interest costs were higher than expected due to several increases in rates during the year. The translation and presentation of our results is also adversely affected by the circa 10% depreciation of the Rupee against sterling during the year. 

A fuller analysis of operating and profit performance, highlighting the strong contributions from Chennai I, is provided in the financial review.

Accelerated growth

At the time of writing, the 77 MW Chennai -II project, an accelerated replica of Chennai I, which has been connected to the infrastructure that it shares with its operational twin unit, is undergoing full scale early commissioning. In the space of a few weeks OPG should be a 190 MW generating company, compared to 20 MW at IPO just over four years ago.

We announced during the year that our use of the Company's Chennai site has been expanded by the combination of two 80 MW projects (now 160 MW Chennai III) making way for the development of a new 80 MW project on the same site (Chennai IV). Despite being a young company the profitability of our business model has enabled us to fund the equity for Chennai IV from internal cash flows and not revert to shareholders, thereby accelerating potential returns on capital.

Construction has progressed at our 300 MW Gujarat project site with boiler foundations nearly complete and progressive deliveries of equipment on site having commenced. Although the Company had obtained the necessary environmental approvals, these were challenged before the National Green Tribunal which upheld the clearances given. Notwithstanding this, the Company has now decided to further exceed requirements by adopting an air-cooled cooling process as opposed to water cooling. Accordingly neither the pipeline nor the inlet that had been the primary basis of the failed challenges will remain as part of the project development plan. Our legal advisers confirm that all approvals for moving to air-cooled cooling are in place and whilst our EPC contractors advise that commissioning is more likely to be by H2 14 we are pleased to report that the project budget is not being modified. 

Minority Owned Plants

It has been decided, on a comprehensive consideration of the matter, to deconsolidate from Group accounts, effective 1st December 2011, the results of the two minority owned, legacy plants (the 26 MW Mayavaram unit and the 10 MW Waste Heat unit). As we outlined at the time of our interims, In December 2011, the performance and contributions from these minority owned plants is negligible and, in reaching this decision we also took into account their business and earnings outlook, the increasingly marginal contributions from these assets in the light of the scaling up of the majority owned assets and, especially, the management time required to be invested in the running of these units.

Accordingly, a fair valuation of these assets as at 30th November 2011 by independent valuers, as required by the accounting standards, was undertaken and the resulting non-cash, non-operating adjustment of £ 4.82 Million to their carrying value as at that date, applicable to the Company, charged to period revenue. The declared results reflect this charge after taking into account the earnings from these units for the first eight months of the year.

Henceforth, the Group's interests in these units will be treated as Investments at the adjusted carrying value of £ 1.38 Million. This compares with the original outlay by the Group of a modest £ 0.05 Million in these plants.

No problems with coal supply

OPG received all committed supplies of coal under Indian linkages supplemented by imported coal from Asia, largely under contract. 

OPG's plants are engineered to work with either higher ash Indian coal or high moisture Indonesian coal or a blend of the two. Such design specification provides OPG with flexibility at times of either shortage in Indian coal supplies or increased prices of imported coal. Most other Indian power producers are reliant on obtaining coal either from the development of coal blocks allotted to them, which are currently substantially delayed, or entirely on imported coal. Moreover Chennai I uses a lower energy coal for which demand is typically not as high, and therefore prices not as elastic, as some of the higher quality Indonesian or Australian coals, thus enabling us to support our margins. Being located in proximity to the coast means we do not suffer inland transportation costs to the same degree as inland producers. 

While international coal prices have softened in recent weeks we expect prices to trend upwards in the medium term as coal supplies and demand fall more into line.

Macro case remains intact and the tariff environment is showing signs of improvement

Indian GDP registered an increase of 6.5 % for the year to March 2012. Whilst less than the 7.5 to 8 % growth rates of the previous two years, this is still an appreciable performance given the European debt issues and other problems of the world economy. The lower growth figures may be attributed in part to a tighter monetary and exchange policy stance with consequent increases in interest and exchange rates. There are indications that this policy is being relaxed and GDP growth expectations for the current year are 6.5 %.

The 11th Five Year Plan period closed on the 31st March 2012 with increase in power capacity of 55 GW, a near 70 % achievement compared with the target of 78 GW. The persistent shortfall in new capacity additions has only exacerbated the prevailing power deficits, with peak deficits above 12 %.

Against this need to rebalance demand and supply, state utilities, constituting the country's dominant power producers and distributors, have held their price lines for the sale of power virtually static in the last several years notwithstanding fuel availability and cost pressures that became especially acute last year. This affected margins for all private power producers and tempered the incentive to make large scale fresh investments in the sector.

There is now increased recognition, on the part of the Regulators and the Utilities, of the need to charge realistic prices for electricity. This recognition has already translated into a recent 35 % increase in Tamil Nadu tariffs as well as in the imposition of a fuel price adjustment mechanism and the resolve to review tariffs annually. Similar exercises have either been concluded or have been taken up for review across the country.

Looking ahead, however, there are signs that the long awaited structural changes in the sector, primarily in the form of realistic tariffs and pricing by the utilities, are under way. Given the stretched financial position of the state utilities, the central regulator has directed state regulators to ensure that tariffs are reviewed annually. Several state utilities have already, in the last few weeks, filed applications with their state regulators for significant tariff increases.

Tariffs charged to industrial customers under the group captive model are correlated to state utility rates and are therefore expected to rise along with the utility tariff increases.

Our business and our team are maturing

Over the last two years, OPG has strengthened its own in-house management capabilities. At our IPO, we were a young company with a fleet of independent consultants and companies leading many aspects of our project implementation, development and operation. OPG now has 280 employees, many of whom carry out functions that were in the past out-sourced such as our new in-house EPC division that completes balance plant construction and our in-house Operations and Maintenance teams. Further we have now formalised our Health & Safety Environment Committee of the Board. We have also instituted a management Executive Committee and our initiatives to support and interact with communities in and around our projects are better organised. I look forward to our continued maturing and on behalf of the entire Board want to thank the entire OPG team and its associates for their continued enthusiasm and support. 

Summary and Outlook

Overall FY2012 saw OPG deliver earnings per share of 0.072 Pence per share, on an enlarged equity base of 351 million ordinary shares and progressing all its projects in a challenging trading environment in which most of our peers incurred losses and deferred projects.

With the continuing maturing of our capacities, we are confident that OPG remains on track to achieve its target of over 700 MW of capacity. Now, with aspects of our trading environment showing signs of recovery and should these persist, we look forward to the forthcoming commissioning of Chennai II and the completion of construction of Chennai IV in the coming year, as these will be important milestones in establishing a stable, multi-asset revenue platform from which to deliver leading returns to shareholders.

Operational Review

In 2012 the 77 MW Chennai I Plant, commissioned during 2010, gave a full year contribution to output. The plant proved its mettle, surpassing expectations in regard to performance parameters. The legacy units of 26 MW and 10 MW did not perform as well and, in fact, output levels at both of these units declined when compared to the previous year due to reduced gas and waste heat availability. The results of these legacy plants are included in the table below for the eight month period up to the 30th November, 2011. 

Production and output levels:

* Data relates to the full year

** Data relates to the first 8 months of the year.

Chennai I - 77 MW

During the year, the Chennai I Plant achieved a PLF of 92.2% and an Availability of 95.1%. Chennai I is sustaining these high levels of performance in the current year too. The Plant has exceeded expectations in the case of certain operating parameters for Plants of this capacity such as auxiliary power consumption and make-up water requirements. The Plant also achieved the lowest specific oil consumption (secondary fuel) in the month of April 2012 at 0.05 ml/kW-hr. The Plant has achieved 100% utilisation of Fly ash and Bottom ash and no ash is stored in the Dyke in the Plant premises, thereby reducing land use.

The Efficiency of the Plant had improved over the months and has been maintaining at near optimum levels since December 2012. We are confident of maintaining these high levels of performance for the financial year 2013.

Development Projects

We are currently developing total capacity at the Chennai site of 317 MW (previously 237 MW) through the following projects:

The Gujarat 2 x 150 MW project has received all clearances. Construction activities have commenced in the Project Site with major equipment foundations completed and ready for installation of equipment. Equipment supplies have commenced from the BTG Supplier, BHEL. The Project is expected to be commissioned in H 2 2014 consequent on the move to air cooled condensers in place of water cooling.-

Bellary

During the year OPG acquired a partially constructed 12MW thermal power plant in the industrial area of Bellary, Karnataka. The plant is on a 120 acres site and has the potential to expand/build up to 250MW of capacity.

Financial Review

The following is a commentary on Group financial performance in the year, highlighting the key financial drivers and performance indicators and financial metrics.

Income Statement

Revenue

OPG revenue has increased by GBP 12.1 million, reflecting a 37% growth year on year, primarily from a full year contribution by the 77 MW plant, partially offset by inclusion of only 8 months results for the 26 MW and 10 MW plants.

Production and output levels from the Group's operating power plants compared to the prior year were as follows:

* Data relates to the full year

** Data relates to the first 8 months of the year.

Gross Profit

 Gross profit (GP) in 2012 was GBP 14.83 Mn (GBP 14.48 Mn in 2011). GP is driven mainly on account of the full year operation of the 77 MW plant and to an extent offset by the inclusion of only 8 months results from the 10 and 26 MW plants. Reconciliation of Gross profit given below

*Excluding Electricity Consumption Tax of GBP 0.93 Mn

Gross Profit Margins: Plant wise contribution

The gross profit contributions of the three operating plants of the group are presented below:

*Excluding Electricity Consumption Tax of GBP 0.93 Mn

GP contribution from the 77 MW plant was strong in the year under report. The GP Margins of the plant at 33% were only marginally lower (2011: 36%) due to the ability to blend (64:36) high moisture Indonesian Coal with Indian Coal the average prices of the later being lower (note 1 below). However GP margins at the 26 MW plant were eroded to 43% (2011 : 51%) due to higher gas prices. Due to non-availability of suitable iron ore during the year, resulting in poor waste heat, the GP margins of the 10 MW plant turned negative.

A lower selling price of Rs.3.80 per kwh paid by the state utility for June to September 2011 (a claim for higher, agreed pricing of Rs.5.05 is being pursued). The effect of this on GP is also shown plant wise (note 2 below)

Note 1

Note 2

EBITDA

Earnings Before Interest, Taxation, Depreciation & Amortisation (EBITDA) is a measure of a business cash generation from operations before depreciation, interest and exceptional and non-standard or non-operational items such as the annual charge for stock options which is a non-cash item or expenses relating to projects under construction. This is reconciled with profit after tax as follows:

EBITDA

Note: Prepayment of Chennai I 77 MW Debt for the year 2012 was GBP 4.43 Mn

Profit before Tax

* Includes -

a) OPG Power Gujarat Pvt Ltd, India b) Gita Power & Infrastructure Pvt Ltd, India

c) Caromia Holdings Ltd, Cyprus d) Gita Energy Pvt Ltd, Cyprus e) Gita Holdings Pvt Ltd, Cyprus

d) OPG Power Ventures Plc, Isle of Man.

Taxation

The Group consolidated PBT at GBP 2.26 Mn is after charging GBP 4.82 Mn towards adjustment in the carrying value of the legacy plants and GBP 1.45 Mn towards amortisation of Employee stock options (both being non-cash charges at the level of holding company). As such the effective PBT subject to tax is GBP 8.53 Mn.

Expenditure on Projects

This relates to expenses incidental to projects under construction. These expenses in 2012 were GBP 0.63 Mn in (2011 GBP 0.40 Mn) .

Employee Stock Option charge

This pertains to the amortization of the value of stock options granted to certain Directors and is non cash in nature.

Loss on Deconsolidation of Subsidiaries

During the year both 10 MW & 26 MW plant were consolidated only for a period of first 8 months of the year, and were subsequently deconsolidated with effect from 01st December 2011. An independent fair valuation of these plants has been carried out and accordingly an amount of GBP 4.82 Mn has been charged to Statement of comprehensive income in the current year

Profits after Tax

Profits After tax have decreased by GBP 8.53 Mn representing 97% decline, from GBP 8.75 Mn in 2011 to GBP 0.22 Mn in 2012. Basic earnings per share 0.072 pence in 2012 has decreased over 2011 by 97%

Property, Plant and Equipment

Property, Plant and Equipment has increased by GBP 19.03 Mn, 25.71% Year on Year growth, mainly reflecting the increase in Capital work in progress on account of additional Power Plants in Chennai and Gujarat and despite of the deconsolidation of 10 MW & 26 MW power plants.

Other Non Current Assets

Other Noncurrent assets have decreased by GBP 5.12 Mn by 62% year on year primarily as a result of deconsolidation of 26 MW and 10 MW power plants.

Current Assets

Current Assets have decreased by GBP 14.7 Mn to 117.4 Mn year on year primarily as a result of the following:

a) Reduction in the cash & cash equivalents by GBP 33.23 Mn due to the increase in investment in the Gujarat and additional Chennai power plants, and also due to the deconsolidation of the 10 MW & 26 MW.

b) Increase in trade receivables by GBP 8.83 Mn Increase in other assets by GBP 7.35 Mn

Current Liabilities

Current liabilities have increased by GBP 7.04 Mn primarily on account of the increased bank borrowings and buyers credit.

Other Non Current Liabilities

Other Non current liabilities have increased by GBP 11.42 Mn primarily on account of increase in bank borrowing to meet the capital project expenses.

Cash Flows

Operating cash flow decreased from £15.15m in 2011 to £12.23m in 2012, a decrease of £2.92m, or 19%. The decrease is primarily due to the reduced profit before tax.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2012 

(All amount in £, unless otherwise stated)

(See accompanying notes to the consolidated financial statements)

The financial statements were authorised for issue by the board of directors on 30th June 2012 and were signed on behalf by

Arvind Gupta V. Narayan Swami

Chief Executive Officer Chief Financial Officer

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March 2012

(All amount in £, unless otherwise stated)

 (See accompanying notes to the consolidated financial statements)

The financial statements were authorised for issue by the board of directors on 30th June 2012 and were signed on behalf by

Arvind Gupta V. Narayan Swami

Chief Executive Officer Chief Financial Officer

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2012

(All amount in £, unless otherwise stated)

 (See accompanying notes to the consolidated financial statements)

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 March 2012

(All amount in £, unless otherwise stated)

(See accompanying notes to the consolidated financial statements)

NOTES TO THE CONSOLIDATED AND FINANCIAL STATEMENTS

For the year ended 31 March 2012

(All amount in ₤, unless otherwise stated)

1. Corporate information

1.1. Nature of operations

OPG Power Ventures plc ('the Company' or 'OPGPV'), and its subsidiaries (collectively referred to as 'the Group') are primarily engaged in the development, owning, operation and maintenance of private sector power projects In India. The electricity generated from the Group's plants is sold principally to public sector undertakings and heavy industrial companies in India or in the short term market. The business objective of the group is to focus on the power generation business within India and thereby provide reliable, cost effective power to the industrial consumers and other users under the 'open access' provisions mandated by the Government of India.

1.2. Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations as adopted by the European Union (EU) and the provisions of the Isle of Man, Companies Act 2006 applicable to companies reporting under IFRS.

1.3. General information

OPG Power Ventures plc, a limited liability corporation, is the Group's ultimate parent Company and is incorporated and domiciled in the Isle of Man. The address of the Company's registered Office, which is also the principal place of business, is IOMA House, Hope Street, Douglas, Isle of Man 1M1 1JA. The Company's equity shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

The Financial statements were approved by the Board of Directors on 30th June 2012.

2. Changes in accounting policies

The Group has adopted the following revisions and amendments to IAS 24 - Related Party Disclosures issued by the International Accounting Standards Board, which is relevant to and effective for the Group's financial statements for the annual period beginning 1 April 2011:

IAS 24 R introduced changes with respect to the definition of a related party which has been clarified to ensure all the relevant information is still being captured. The group has already identified the related parties in a similar manner as suggested by the revised standard. Hence there was no impact on these financial statements.

2.1 Standards, amendments and Interpretations to existing standards that are not effective and have not been early adopted by the group. 

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group.

Management anticipates that all of the relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. Information on new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements is provided below. Certain other new standards and interpretations have been issued but are not expected to have a material impact on the Group's financial statements.

Standards and Interpretations adopted by the European Union as at 31 March 2012

The management is yet to assess the impact of IFRS 9 on the group's consolidated financial statements. However they do not expect to implement IFRS 9 until all of its chapters have been published and they can comprehensively assess the impact of all changes.

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

3. Summary of significant accounting policies

3.1   Basis of preparation

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

The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements (Revised 2007) and have been presented in Great Britain Pound ('₤'), which is the functional and presentation currency of the Company.

3.2. Basis of consolidation

The consolidated financial statements incorporate the financial information of OPG Power Ventures Plc and its subsidiaries for the year ended 31 March 2012.

A subsidiary is defined as an entity controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.Subsidiaries are fully consolidated from the date of acquisition, being the date on which control is acquired by the Group, and continue to be consolidated until the date that such control ceases. All subsidiaries have a reporting date of 31st March and use consistent accounting policies adopted by the group.

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

Non-Controlling interest represents the portion of profit or loss and net assets that is not held by the Group and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from parent shareholders' equity. Acquisitions of additional stake or dilution of stake from/ to minority interests in the Group where there is no loss of control are accounted for as equity transaction, whereby, the difference between the consideration paid or received and the book value of the share of the net assets is recognised in 'other reserve/ retained earnings' within statement of changes in equity.

The practice of presenting stand alone accounts of the Company has been dispensed with, effective this reporting period, given that the Company is principally a holding Company with no independent business income of its own and that the principal earnings of the Group are derived from its subsidiaries in India.

3.3. List of subsidiaries

Details of the Group's subsidiaries which are consolidated into the Group's consolidated financial statement, are as follows:

1 As of 10 February, 2011 pursuant to agreement for assignment of debt between CHL and OPGPV the entire shares held in GEPL and GHPL have been transferred by "OPGPV" to "CHL".

2 Partly paid equity shares in OPGG have been forfeited and thereby the Economic Interest and voting rights of the GEPL and GHPL together stand increased to 100%.

3 Refer note 23 for deconsolidation of these subsidiaries.

3.4. Foreign currency translation

The functional currency of the Company is the Great Britain Pound Sterling (£). The Cypriot entities are an extension of the parent and pass through investment entities. Accordingly the functional currency of the subsidiaries in Cyprus is the Great Britain Pound Sterling. The functional currency of the Company's subsidiaries operating in India, determined based on evaluation of the individual and collective economic factors is Indian Rupees ('₹'). The presentation currency of the Group is the Great Britain Pound (£) as submitted to the AIM counter of the London Stock Exchange where the shares of the Company are listed.

At the reporting date the assets and liabilities of the Group are translated into the presentation currency which is Great Britain Pound Sterling (£) at the rate of exchange ruling at the Statement of financial position date and the statement of comprehensive income is translated at the average exchange rate for the year. Exchange differences are charged/ credited to other comprehensive income and recognized in the currency translation reserve in equity.

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the Statement of financial position date are translated into functional currency at the foreign exchange rate ruling at that date. Aggregate gains and losses resulting from foreign currencies are included in general and administrative expenses within the profit or loss. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to functional currency at foreign exchange rates ruling at the dates the fair value was determined.

The Great Britain Pound (£): Indian Rupee (INR) exchange rates used to translate the INR financial information into the presentation currency of Great Britain Pound (£) were as follows:

3.5. Revenue recognition

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

Sale of electricity

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

Interest and dividend

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

3.6. Taxes

Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, taxation authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements.

Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full.

Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income. For management's assessment of the probability of future taxable income to utilise against deferred tax assets. Deferred tax assets and liabilities are offset only when the Group has a right and the intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively.

3.7. Financial instruments

Financial assets and financial liabilities are measured initially at fair value adjusted by transactions costs, except for financial assets and financial liabilities carried at fair value through profit or loss, which are measured initially at fair value.

Financial assets and financial liabilities are measured subsequently as described below

Financial assets are de-recognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is de-recognised when it is extinguished, discharged, cancelled or expires.

3.8. Financial assets

For the purpose of subsequent measurement, financial assets are classified into the following categories upon initial recognition:

·; loans and receivables

·; available-for-sale financial assets.

The category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in other comprehensive income.

Loans and receivables:

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments.

Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identified group.

Available-for-sale financial assets:

Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group's available-for-sale financial assets include Mutual funds, listed securities and equity instruments. Available-for-sale financial assets are measured at fair value. Gains and losses are recognised in other comprehensive income and reported within the available-for-sale reserve within equity, except for impairment losses and foreign exchange differences on monetary assets, which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired the cumulative gain or loss recognised in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income.

Reversals of impairment losses are recognized in other comprehensive income, except for financial assets that are debt securities which are recognised in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognised.

.

3.9. Financial liabilities

The Group's financial liabilities include borrowings, trade and other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest method, except for financial liabilities held for trading or designated at fair value through profit or loss, that are carried subsequently at fair value with gains or losses recognised in profit or loss.

All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within 'finance costs' or 'finance income'.

3.10. Fair value of financial instruments

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

3.11. Property, plant and equipment

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

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

Land is not depreciated. Depreciation on other assets is computed on straight-line basis over the useful life of the asset based on management's estimate as follows:

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

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

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

3.11. Leases

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

Group as a lessee

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

Operating lease payments are recognised as an expense in the profit or loss on a straight line basis over the lease term. Lease of land is classified separately and is amortised over the period of lease.

3.12. Borrowing costs

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

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

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

3.13. Impairment of non-financial assets

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

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

3.14. Cash and cash equivalents

Cash and cash equivalents in the Statement of financial position comprise cash at banks and on hand and short-term deposits.

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

3.15. Inventories

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

Costs incurred in bringing each product to its present location and condition is accounted based on weighted average price.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling expenses.

3.16. Earnings per share

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

3.17. Other provisions and contingent liabilities

Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events, for example, product warranties granted, legal disputes or onerous contracts. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan's main features to those affected by it. Provisions are not recognised for future operating losses.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised, unless it was assumed in the course of a business combination. In a business combination, contingent liabilities are recognised on the acquisition date when there is a present obligation that arises from past events and the fair value can be measured reliably, even if the outflow of economic resources is not probable. They are subsequently measured at the higher amount of a comparable provision as described above and the amount recognised on the acquisition date, less any amortisation.

3.18. Share based payments

The Group operates equity-settled share-based remuneration plans for its employees. None of the Group's plans feature any options for a cash settlement.

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions).

All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to 'Other Reserves'.

If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium.

3.19. Employee benefits

Gratuity

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

Liabilities with regard to the gratuity plan are determined by actuarial valuation, performed by an independent actuary, at each Statement of financial position date using the projected unit credit method.

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

Employees Benefit Trust

Effective during the year, the Group has established an Employees Benefit Trust (hereinafter 'the EBT') for investments in the Company's shares for employee benefit schemes. IOMA Fiduciary in the Isle of Man have been appointed as Trustees of the EBT with full discretion invested in the Trustee, independent of the company, in the matter of share purchases. As at present, no investments have been made by the Trustee nor any funds advanced by the Company to the EBT. The Company is yet to formulate any employee benefit schemes or to make awards thereunder.

3.20. Business Combinations

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established using pooling of interest method. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder's consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity. Any excess consideration paid is directly recognised in equity.

4. Significant accounting judgements, estimates and assumptions

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

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

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

The following are significant management judgments in applying the accounting policies of the Group that have the most significant effect on the financial statements.

·; 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.

Estimates and uncertainties:

When preparing the financial statements management undertakes a number of judgments, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgments, estimates and assumptions made by management, and will seldom equal the estimated results. Information about significant judgments, estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below.

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

§ Recoverability of deferred tax assets: The recognition of deferred tax assets requires assessment of future taxable profit. (see note 3.6).

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

o Other financial liabilities: Borrowings held by the Group are measured at amortised cost except where designated at fair value through profit or loss. Further, liabilities associated with financial guarantee contracts in the financial statements are initially measured at fair value and re-measured at each Statement of financial position date. (see note 3.9 and note 18); and

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

§ 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.

§ Provisions: The Group has currently provided for electricity tax based on demand received from the concerned authorities (see note 6a).

§ Uncollectability of trade receivables: Analysis of historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required (see note 13)

5. Segment information

The Group has adopted the "management approach" in identifying the operating segments as outlined in IFRS 8. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segment has been identified as the steering committee that makes strategic decisions. Management has analysed the information that the chief operating decision maker reviews and concluded on the segment disclosure. In identifying its operating segments, management generally follows the Group's service lines, which represent the generation of the power and other related services provided by the Group. The activities undertaken by the Power generation segment includes sale of power and other related services. The accounting policies used by the Group for segment reporting are the same as those used for Consolidated financial statements.

For management purposes, the Group is organised into only a single business unit of power generation and distribution of the same to customers. There are no geographical segments as all revenues arise from India.  

Revenue on account of sale of power to one party amounts to £ 22,237,514 (2010: £ 25,790,162)

6. Depreciation, costs of inventories and employee benefit expenses included in the consolidated statements of comprehensive income

a) Depreciation and costs of inventories included in the consolidated statements of comprehensive income

Other direct costs include electricity tax provided/paid during the year amounting to £928,336 (2011: £ 0). Depreciation included in general and administrative expenses amount to £ 83,919 (2011: £ 63,081)

b) Employee benefit expenses forming part of general and administrative expenses are as follows:

c) Auditor's remuneration for audit services amounting to £ 45,000 (2011: £ 38,900) is included in general and administrative expenses.

d) Foreign exchange (loss)/ Gain included in the general and administrative expenses/ other income is as follows:

7. Other income

a) Other income comprises of:

The item "Compensation for loss of profit" consists £ 370,277, due to OPG PG, a subsidiary, from the EPC contractor for delay in guaranteed commissioning date of their 77 MW plant, non achievement of guaranteed performance parameters at the plant and consequent loss of revenue to OPG PG. This amount represents loss of profits which is reliably measurable as at the reporting date and has been recognized based on the terms and conditions as specified in the EPC Contract and on acceptance of claim by the contractor.

Interest on overdue receivables consists of interest charged to a customer, as per the terms of the agreement on account delay in payment.

Miscellaneous income includes commission receivable of £ 225,000 (previous year Nil).

8. Finance costs

Finance costs comprises of:

Interest expenses on loans and borrowings, pertains to interest expenses on financial liability at amortised cost of £ 4,068,516 (2011: £2,271,354) in consolidated financial statement.

9. Finance income

The finance income comprises of:

Other finance income includes the income earned by OPGPV on the investment of its funds raised by way of further issue during the previous year.

10. Tax expense / (income)

The major components of income tax expense for the years ended 31 March 2012 and 2011

Consolidated statement of changes in equity: Tax reconciliation

Reconciliation between tax expense and the product of accounting profit multiplied by India's domestic tax rate for the years ended 31 March 2012 and 2011 is as follows:

Consolidated statement of comprehensive income

The Company is subject to Isle of Man corporate tax at the standard rate of zero percent. As such, the Company's tax liability is zero. Additionally, Isle of Man does not levy tax on capital gains. However, considering that the Company's operations are entirely based in India, the effective tax rate of the Group has been computed based on the current tax rates prevailing in India. Further, a substantial portion of the profits of the Group's India operations are exempt from Indian income taxes being profits attributable to generation of power in India. Under the tax holiday the taxpayer can utilize an exemption from income taxes for a period of any ten consecutive years out of the fifteen years from the date of commencement of the operations.

The Group is subject to the provisions of Minimum Alternate Tax ('MAT') under the Indian Income taxes for the year ended 31 March 2012 and 2011. Accordingly, the Group calculated the tax liability for current taxes in India after considering MAT.

Deferred income tax for the group at 31 March 2012 and 2011 relates to the following:

Movement in temporary differences during the year

In assessing the reliability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

Shareholders resident outside the Isle of Man will not suffer any income tax in the Isle of Man on any income distributions to them. Further, dividends are not taxable in India in the hands of the recipient. However, the Company will be subject to a "dividend distribution tax" currently at the rate of 15% (plus applicable surcharge and education cess) on the total amount distributed as dividend.

As at 31 March 2012 and 31 March 2011, there was no recognised deferred tax liability for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries, the Group has determined that undistributed profits of its subsidiaries will not be distributed in the foreseeable future.

11. Property, plant and equipment

The property, plant and equipment comprises of:

The net book value of land and buildings block comprises of:

Property, plant and equipment with a carrying amount of £ 42,672,465 (2011: £ 55,365,466) is subject to security restrictions (refer note 18).

An amount of £ 3,407,430 (previous year £ 1,701,620) pertaining to interest on borrowings was capitalised as the funds were deployed for the construction of qualifying assets.

12. Investments and other assets

Available-for-sale financial asset

The current portion of Available for sale financial asset represents the group's investments in mutual fund units. The fair value of the mutual fund instruments are determined by reference to published data. These mutual fund investments are redeemable on demand.

The non-current portion of Available for sale financial asset represents the group's investments in OPG E and OPG RE have been fair valued and the share of the group has been determined and disclosed as available for sale classified under non current. The management has not contemplated any sale of these investments and has not explored any options for the disposal of the same.

Prepayments (Current)

Advances to Suppliers include the amounts paid as advance for supply of fuel to the group. Other advance of the group primarily includes additional import duty on imported coal paid under protest amounting to £ 754,442 (2011: £ 211,459). Capital advances comprise of payment made to EPC contractors for construction of assets and advances paid for purchase of capital equipment. The management expects to realise these in the next one year.

13. Trade and other receivables

Trade receivables are generally due within 14 days terms and are therefore short term and the carrying values are considered a reasonable approximation of fair value. Out of the above, £ 17,405,365 (2011: £ 8,576,366) has been pledged for security as borrowings (refer note 18). As at 31 March 2012, trade receivables of £ 60,314 (2011 £ Nil) were collectively impaired and provided for.

The age analysis of the overdue trade receivables is as follows:

Also refer note 25 for credit risk.

The movement in provision for trade receivables is as follows:

14. Inventories

Out of the above, £ 5,546,740 (2011: £----4,708,191) has been pledged for security as borrowings (refer note 18)

15. Cash and cash equivalents

Cash and short term deposits comprise of the following:

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

 Restricted cash represents deposits maturing between three to twelve months amounting to £ 3,712,150 (previous year £ 1,080,877) and maturing after twelve months amounting to £ 868,996 (previous year £ 1,214,699) which have been pledged by the group in order to fulfil collateral requirements (refer note 18)

16. Issued share capital

Share Capital

The Company presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders meeting, every holder of ordinary shares, as reflected in the records of the Group on the date of the shareholders' meeting, has one vote in respect of each share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Group.

The Company has an authorized and issued share capital of 351,504,795 equity shares (2011: 351,504,795) at par value of £ 0.000147 (2011: £ 0.000147) per share amounting to £ 51,671 (2011: £ 51,671).

The Company has issued share capital at par value of £ 51,671 (£0.000147) per share.

Reserves

Share premium represents the amount received by the Group over and above the par value of shares issued and the excess of the fair value of share issued in business combination over the par value of such shares. Any transaction costs associated with the issuing of shares are deducted from securities premium, net of any related income tax benefits.

Translation reserve is used to record the exchange differences arising from the translation of the financial statements of the foreign subsidiaries.

Other reserve represents the difference between the consideration paid and the adjustment to net assets on change of controlling interest, without change in control. Other reserves also include any costs related with share options granted and gain/losses on re-measurement of Available for sale financial assets.

Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income less dividend distribution.

17. Share based payments

The board has granted share options to directors and nominees of directors which are limited to 10 percent of the group's share capital. Once granted, the share must be exercised within ten years of the date of grant otherwise the options would lapse.

The vesting conditions are as follows:

·; The 300 MW power plant of Kutch in the state of Gujarat must have been in commercial operation for

three months.

·; The Closing share price being at least £ 1.00 for consecutive three business days.

The related expense has been amortised over the estimated vesting period of 4.21 years (expected completion of the Kutch plant) and an expense amounting to £ 1,454,247 (2011: £ 1,454,247) was recognised in the profit or loss with a corresponding credit to other reserves.

Movement in the number of share options outstanding and their related weighted average exercise price are as follows:

Assumptions on Valuation of Options

The weighted average price fair value of options granted during the previous period was determined using the Black-Scholes valuation model was £ 0.28 per option. The significant inputs into the model were weighted average share price of £ 0.66 (2011) at the grant date, exercise price shown above, volatility of £ 0.60 (2011 £ 0.60), dividend yield of NIL (2011 NIL), an expected option life of 4.21 years (2011 - 4.21 Yrs) and annual risk free rate of 3% .The volatility measured at the standard deviation of continuously compounded share returns is based on daily share prices of the last three years.

18. Borrowings

The borrowings comprise of the following:

Total debt of £ 70,862,398 (2011: £50,319,196) is secured as follows:

§ Financial liabilities are measured at amortised cost of the Group.

§ The long-term loans taken by the Group are fully secured on the property, plant and other movable current assets of subsidiaries which have availed such loans. All the loans are personally guaranteed by a director.

§ The short-term loan and cash credits taken by the Group are secured against hypothecation of current assets and in certain cases by deposits and margin money as collateral.

§ LC bills discounting and buyers' credit facility is fully secured by hypothecation of current assets and in certain cases by margin money deposits and other fixed deposits of the respective entities availing the facility.

Long-term "project finance" loans contain certain restrictive covenants stipulated by the facility providers and primarily require the Group to maintain specified levels of certain financial metrics and operating results. The terms of the other borrowings arrangements also contain certain restrictive covenants primarily requiring the Group to maintain certain financial metrics. As of 31 March 2012, the Group has met all the relevant covenants.

The fair value of borrowings at 31 March 2012 was £ 70,862,398 (2011: £50,319,196). The fair values have been calculated by discounting cash flows at prevailing interest rates.

The borrowings mature as follows:

19. Trade and other payables