Opg Power Regulatory News (OPG)

20 June 2013

OPG Power Ventures plc

("OPG" or the "Company")

Preliminary results for the year ended 31st March 2013

Transformational growth

OPG Power Ventures PLC, the developer and operator of power generation plants, announces its results for the year ended 31st March 2013.

Financial Highlights

·; Revenue up by 46% to £56m (2012: £38m)*

·; Underlying rupee revenues up by 63% to Rs4.8bn (2012: Rs2.95bn)

·; EBITDA up to £17.7m from £11.3m and EBITDA margin up to 32% from 29% in 2012*

·; PBT (pre-exceptional items) up by 50% to £13.23m (2012: £8.84m)*

·; EPS up to 2.48 pence from 0.08 pence in 2012*

·; Average tariff realized up by 13% to Rs5.58/kWh from Rs4.93 in 2012*

·; £95m invested in projects

·; Cash and cash equivalents of £22.9m and gearing of 37%

*excluding legacy assets no longer consolidated from December 2011

Operational Highlights

·; Generating capacity more than doubled

·; Chennai I and II delivered 932m units of electricity, up 44% from 2012

·; 77 MW Chennai I and 77 MW Chennai II maintained average PLF of 92% and 99% respectively

·; 77 MW Chennai II commissioned in September 2012, on time and within budget

·; 80 MW Chennai III commissioned in June 2013, ahead of schedule and within budget

·; 160 MW Chennai IV and 300 MW Gujarat projects in advanced construction and on track

·; In house EPC and operations teams leading all activities

Commenting on the results, Mr M C Gupta, Chairman stated: "The Group has grown substantially during the period in scale, performance and confidence. We have navigated the difficult trading conditions that the electricity sector in India, in general, has experienced courtesy of our flexible business model and through the delivery of our projects. Whilst the sector in India remains under recovery, conditions have improved as a result of recent regulatory changes following action taken by the Government of India to improve the financial health of the state utilities. With our increased cash generation and project roll out continuing we feel well positioned to contemplate our future developments remaining focused on profitable growth and shareholder value."

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

Disclaimer

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities. The making of this announcement does not constitute a recommendation regarding any securities. Certain statements, beliefs and opinions contained in this announcement, particularly those regarding the possible or assumed future financial or other performance of OPG, industry growth or other trend projections are or may be forward looking statements. Forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond OPG's ability to control or predict. Forward-looking statements are not guarantees of future performance. No representation is made that any of these statements or forecasts will come to pass or that any forecast result will be achieved. Neither OPG, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place reliance on these forward-looking statements. Other than in accordance with its legal or regulatory obligations, OPG is not under any obligation and OPG expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per OPG share for the current or future financial years would necessarily match or exceed the historical published earnings per OPG share.

Chief Executive's Review

On completion of our fifth year as a listed company I am pleased to report that we now have 270 MW of power generation assets compared with just 20 MW at the time of listing on AIM in May 2008. Over that time our Company has transformed itself from a promising growth story into a strong cash generative business with a superior growth profile and further potential. Our earnings at 2.48 pence in 2013 were an all-time high. We have commissioned two assets in the last nine months thus completing the first major phase of our growth program. Bringing this portfolio of three significant co-located assets to a steady state gives us the basis on which to deliver further value to our customers and shareholders.

Robust operating and financial performance

The commissioning of 77 MW Chennai II in September 2012, load factors of over 90% on both assets and 13% higher average tariffs led to a strong performance for the year.  Underlying revenues in rupee terms were up 63% whilst EBITDA margins were firm at 32% and we generated our highest earnings per share to date of 2.48pence.

Our plants performed ahead of expectations and I commend our operating team led by our COO, T Chandramoulee, for the quick stabilization and ramp up of Chennai II. Further, the team has ensured Chennai I and II achieved excellent load factors in spite of an extended 25 day shutdown at Chennai I.

A few days ago we announced the accelerated delivery and commencement of commercial operations at 80 MW Chennai III. This unit has been commissioned several months ahead of schedule by our own in-house team.

Increased Tariffs

Burgeoning financial losses of the state electricity boards triggered a much needed rise in tariffs across India during the year. Financial restructuring packages and regulatory changes are expected to require regular review of tariffs going forward and we have already seen more than one round of tariff increases and the introduction of Fuel Price Adjustment charges in some states. 

Accordingly, as our flexible model allows, we continue to supply the bulk of our power to the Tamil Nadu state utility on short term contracts as tariffs are attractive. We have recently agreed to supply c.90% output from Chennai I and II until May 2014 and a further 90% output from Chennai III until September 2013 at Rs5.50/Kwh.

Imported coal prices lower but expected to remain flat in short term

Whilst international coal prices have been lower than the prior year by 3%, domestic coal prices increased by 21% during the year. As we used a higher quantity of imported coal and Chennai II burnt exclusively imported coal our overall average unit cost remained flat. This once again demonstrated the advantages of our flexible boilers.

Our strategy is to continue to procure imported coal through a mix of short and long term contracts as efficiently as possible.

Our projects

On 29 May 2013 we updated shareholders as to the degree of completeness of each of our projects under development. We did so in continuation of our strategy to adopt an open communication style and to promote an understanding of the value we believe to be built in to each project.

Both of our remaining principal projects at Chennai and Gujarat remain on schedule to achieve commissioning in 2014 with civil works and foundations largely complete at both sites and other construction activities well progressed.

Building a strong team

The health and safety of our employees and contractors is of paramount importance to us. During the year we instituted a formal Health, Safety and Environment (HSE) committee which has already led initiatives to improve standards and practices at our various sites. For instance, our flagship 77 MW Chennai I unit has recently been awarded ISO 14001 and OHSAS 18001 certification.

Our team has gained in experience at all levels from development to management with all Engineering, Procurement and Construction ("EPC") and Operations and Maintenance ("O&M") principally performed in-house. The team has incorporated lessons from each of the projects to achieve continuous improvements and efficiencies across projects and operations. We are proud of our team's achievements.

Outlook

We believe the macro environment for electricity generation in India is recovering gradually. Forecasts for growth in India remain moderate at over 5% in this pre-election year. However, even at moderate growth levels, taken over a 2-3 year time horizon we see recent trends in the electricity generation sector as unstoppable - namely supply shortages in most parts of the country and the recognition amongst policymakers that power must continue to pave the way for both industrial growth and improvements in living standards. Accordingly over that same time period we do anticipate tariffs to rise gradually, more new capacity (thermal and renewable), and minor improvements in domestic fuel supplies accompanied by measures to moderately improve the investment climate for Indian infrastructure. As a result we believe the 460 MW second phase of our asset delivery program to be well-timed as industry conditions should further stabilize and our priorities during the coming months are therefore to maximize our existing operations, de-risk the final elements of the project portfolio and evaluate our further growth strategy.

Arvind Gupta

Chief Executive Officer

Financial Review

The following is a commentary on Group's financial performance in the year.

Income Statement (£m)

*Excluding Legacy Assets, ie., OPG - 25.4 MW & OPG - 10 MW, with effect from 1st December 2011.

Revenue

OPG revenue has increased by £17.71m, reflecting a 46% growth year on year, on account of a full year contribution from 77 MW Chennai I and nearly 6 months contribution from 77 MW Chennai II and a 13% increase in tariff to Rs5.58/Kwh from Rs4.93/Kwh in FY12. Underlying rupee revenues increased by 63%.

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

* Commissioned on 10th October 2012

Gross Profit

Gross profit ("GP"), excluding depreciation in 2013 was £22.94m (£12.94m in 2012). GP is driven mainly on account of the 173 days operation of Chennai II (77 MW) plant and also due to a higher realization of tariff and to an extent offset by the lower generation by Chennai I (77 MW) plant.

Cost of revenue was 59% of revenue in FY13 lower from 66% in FY12. Over 90% of the costs of revenue are fuel costs i.e coal. The average factory gate costs for Indian coal increased 21% while Indonesian coal costs decreased by 3%. The table below shows the price and blend of Indian and Indonesian coal consumed in FY13 and FY 12 for Chennai I. Chennai II burnt imported coal during the year.

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.

EBITDA was £17.7m in FY13 up from £11.3m in FY12 and EBITDA margin up to 32% from 29% in 2012.

Profit before Tax (£m)

*Includes:

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

c) Caromia Holdings Ltd, Cyprus d) OPG Power Ventures Plc, Isle of Man

Taxation

The Group consolidated PBT at £10.54m is after charging £ 1.11m towards adjustment in the carrying value of the legacy plants and £0.97m 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 £12.62m.

Expenditure on Projects

This relates to expenses incidental to projects under construction. These expenses in 2013 were £0.61m in (FY12 £0.63m).

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.

Profits after Tax

Profits After tax have increased by £8.55m from £0.28m in 2012 to £8.83m in 2013.

Property, Plant and Equipment

Property, Plant and Equipment has increased by £89.47m, 96.2% year on year growth, mainly reflecting the capitalization of 77 MW Chennai II plant and the increase in Capital work in progress on account of additional power plants in Chennai and Gujarat.

Other Non-Current Assets

Other Non-current assets have decreased by £1.60m by 50.7% year on year primarily as a result of decrease in the fair value of the investments made in the de consolidated assets.

Trade Receivables (£m)

As at date, all amounts invoiced prior to March 2013 have been collected.

Current Assets

Current Assets have decreased by £3.04m to £114.38m year on year primarily as a result of the following :

- Reduction in the cash & cash equivalents by £14.97m due to the increase in investments made in the Gujarat and additional Chennai power plants and

- Increase in trade receivables by £17.40m, Decrease in other assets by £5.48m

Current Liabilities

Current liabilities have increased by £24.34m primarily on account of the increased bank borrowings and buyers credit.

Other Non-Current Liabilities

Other Non-Current liabilities have increased by £ 50m primarily on account of increase in bank borrowing to meet the capital project expenses.

Gearing

Net borrowings (Borrowings net of Cash and cash equivalents) increased by £52.98m on account of capital expenditure on projects. Gearing ratio was 37%. The table below shows the investment in the projects under development and the total amount spent in both equity and debt up to 31 March 2013.

Cumulative Outlays during the year on projects under construction £m

Cash Flows

Operating cash flow increased from £12.26m in 2012 to £18.10m in 2013, an increase of £5.84m, or 48%. The increase is primarily due to the increased profit before tax.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March

(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 17 June 2013 and were signed on behalf by

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 March

(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 17 June 2013 and were signed on behalf by

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 March 2013

(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 2013

(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 2013

(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 17 June 2013

2 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 2013

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 going concern basis which assumes the Group will have sufficient funds to continue its operational existence for the foreseeable future covering atleast 12 months. As the Group has forecast it will be able to meet its debt facility interest and repayment obligations, and that sufficient funds will be available to continue with the projects development the assumption that these financials statements are prepared on a going concern basis is appropriate.

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 2013.

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/ other venturer in the Group where there is no loss of control are accounted for as an 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' within statement of changes in equity.

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 The shareholders of GEPL, GHPL and GPIPL have entered into a scheme of arrangement which has become effective during the current year. As a result of the scheme of arrangement the assets and liabilities of GEPL and GHPL have been taken over by GPIPL and shares in GPIPL have been allotted to the shareholders of GEPL and GHPL on 25 January 2013. The liquidation process of GEPL and GHPL is yet to commence as at 31 March 2013. (Also refer Note 23)

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

3 During the year Name changed as OPGS Power Gujarat Private Limited

Also refer note 24 for deconsolidation of OPG Renewable Energy Private Limited ('OPGRE') and OPG Energy Private Limited ('OPGE') effective 30 November 2011, where the Group holds an economic interest of 33% and 44.22% respectively.

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 finance income or costs 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

3.7. Financial assets

Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss which are measured initially at fair value.

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 liabilities

The Group's financial liabilities include borrowings and trade and other payables. Financial liabilities are measured subsequently at amortised cost using the effective interest method and 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'.

3.9. 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.

3.10. 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.

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 the 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.

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. 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. Impact of market condition are included in the computation of the fair value at the grant date. 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 actual results may differ from the judgments, estimates and assumptions made by the management and will seldom equal the estimated results.

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.

·; Recognition of interest income:

The group has a contractual right to receive interest on overdue receivables from TANGEDCO. Notwithstanding this right, the group has not recognized any interest, on a prudent basis, for the current year. Further, the management has also reversed past interest receivables amounting to during the year

Estimates and uncertainties:

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 Available for sale financial assets: Management apply valuation techniques to determine the fair value of available for sale financial assets where active market quotes are not available. This requires management to develop estimates and assumptions based on market inputs, using observable data that market participants would use in pricing the asset. Where such data is not observable, management uses its best estimate. Estimated fair values of the asset may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date

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 Company financial statements are initially measured at fair value and re-measured at each Statement of financial position date. (see note 3.9 and note 28); and

o Impairment tests: In assessing impairment, management estimates the recoverable amount of each asset or cash-generating units based on expected future cash flows and use an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate;

·; Useful life of depreciable assets: Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets.

5. Segment information

The Group has adopted the "management approach" in identifying the operating segments as outlined in IFRS 8 - Operating segments. 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 £ 49,577,179 (2012: £ 22,237,514)

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

Depreciation included in general and administrative expenses amount to £ 187,905 (2012: £ 83,920)

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

c) Auditor's remuneration for audit services amounting to £ 35,000 (2012: £ 45,000) 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:

8. Finance costs

Finance costs comprises of:

Interest expenses on loans and borrowings, consists of interest expenses on financial liability at amortised cost of £4,742,403 (2012: £4,068,516).

9. Finance income

The finance income comprises of:

Other finance income represents the interest income earned by OPGPV on the investment of its funds.

10. Tax expense

The major components of income tax expense for the years ended 31 March 2013 and 2012

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 2013 and 2012 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 group'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 a total of fifteen consecutive 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 2013 and 2012. Accordingly, the Group calculated the tax liability for current taxes in India after considering MAT.

The Group has carried forward credit in respect of MAT tax liability paid to the extent it is probable that future taxable profit will be available against which such tax credit can be utilized.

Deferred income tax for the group at 31 March 2013 and 2012 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 group 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 2013 and 31 March 2012, 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 £ 87,607,389(2012: £ 42,672,466) is subject to security restrictions (refer note 18).

An amount of £ 4,753,396 (previous year £ 3,407,430) 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 investment - quoted short-term mutual fund units

The Group has 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 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 as non-current.

Effective 01 December 2011, the group has given up control and significant influence over OPGE and OPGRE, pursuant to non-renewal of voting rights agreement entered by GEPL, GHPL and OPGPG (hereinafter referred as Shareholders) with Tamil Nadu Property Developers Limited (TNPDL). There was no consideration that was received and the Group's interests in the said companies are being accounted as investments.

Accordingly, the Group had derecognised the carrying value of assets, liabilities and non-controlling interest of the former subsidiaries and recognised the fair value of the retained investments at the date when control was lost. Further, the Group also reclassified to profit and loss, such amounts pertaining to these erstwhile subsidiaries that were earlier recognised through other comprehensive income and has accounted for the resulting difference as loss attributable to the Group.

As at the date of consolidation, the company has fair valued the investments grouped under available for sale investments. There is no change in the valuation technique to those adopted in the previous year. The fair value of OPGE is performed using discounted cash flow approach. Significant inputs into the model are based on management's assumption of the expected cash flows up to 31 March 2024 and a discount rate of 17%

The carrying amount of investments, its fair value and the resultant impact on the statement of comprehensive income is as follows:

Loans and receivables (Current)

Advances to Suppliers include the amounts paid as advance for supply of fuel. Other advance of the group primarily includes additional import duty on imported coal paid under protest amounting to £ Nil (2012: £ 754,442). 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

Since received from TANGEDCO is £ 25.79m for the sales made upto February 2013.

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. The entire sum of £ 34,814,660 (2012: £ £ 17,405,365) has been pledged as security for borrowings (refer note 18). As at 31 March 2013, trade receivables of £ 978,893 (2012 £ 60,314) were collectively impaired and provided for. In determining the timing and amount of interest income receivable from TANGEDCO for past dues, the group has considered its contractual rights and recent favourable regulatory commission orders passed for similar customers. Trade receivables that are neither past due nor impaired represents billings for the month of March.

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

The movement in provision for trade receivables is as follows:

The creation of provision for impaired receivables has been included in 'other expenses' in the profit and loss. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The group does not hold any collateral as security.

14. Inventories

The entire amount of £6,140,973 (2012: £5,546,740) has been pledged as security for borrowings (refer note 18)

15. Cash and cash equivalents

Cash and short term deposits comprise of the following:

 Short-term deposits are placed 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 £ 4,705,601 (previous year £ 3,712,150) and maturing after twelve months amounting to £ 394,782 (previous year £ 868,996) which have been pledged by the group in order to secure borrowing limits with banks. (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 (2012: 351,504,795) at par value of £ 0.000147 (2012: £ 0.000147) per share amounting to £ 51,671 (2012: £ 51,671) in total.

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 includes 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 4.96 years (expected completion of the Kutch plant) and an expense amounting to £ 974,222 (2012: £ 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 in 2010-11 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 of £ 0.60 (2011 £ 0.60), volatility of 31.34% (2012 31.34%) dividend yield of Nil (2012 NIL), an expected option life of 4.96 years (2012 - 4.21 years) 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 £ 108,870,336 (2012: £ 70,862,398) is secured as follows:

§ The long-term loans taken by the Group are fully secured by the property, plant, assets under construction and other 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 is provided 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 2013, the Group has met all the relevant covenants.

The fair value of borrowings at 31 March 2013 was £ 108,870,336 (2012: £70,862,398). The fair values have been calculated by discounting cash flows at prevailing interest rates.

The borrowings are reconciled to the statement of financial position as follows:

19. Trade and other payables

With the exception of certain trade payables, all amounts are short term.

§ Trade payables are non-interest bearing and are normally settled on 45 days terms.

§ Creditors for capital goods are non-interest bearing and are usually settled within a year.

§ Other payables include provision for gratuity and other provision for expenses.

20. Related party transactions

Where control exists:

Key Management Personnel:

Related parties with whom the group had transactions during the period