RNS Number : 7288Z
Greenko Group plc
28 September 2009
Greenko Group plc
(All amounts in Euros unless otherwise stated)
---------------------------------------
Greenko Group plc
Financial Results for the year ended 31 March 2009
Greenko Group plc ("Greenko", the "Company" or the "Group"), the Indian renewable energy developer, owner and operator, today announces its results for the year ended 31 March 2009.
Financial Highlights
* Turnover increased from EUR13.1 million in 2008 to EUR13.9 million
* EBITDA of EUR6.1 million(2008: EUR5.3 million)
* Profit before tax of EUR 3.2 million(2008: EUR2.8 million)
* Basic EPS 3.91 cents(2008: 6.13 cents)
* Stock of 156,000 CERs at the year end
* Cash balances and deposits totalling EUR11.4 million (2008: EUR24.0 million)
Operating Headlines
* Total secured production capacity as at year ended 31 March 2009 of 255.5 MW including:
* * 101.5 MW of assets operational and due to be commissioned
* 154 MW under development
* Signing of non regulated Power Purchase Agreements ("PPAs") at Roshni and Rithwik for Rs.6 /kwh compared to Rs 3.2 /kwh
* Tariffs increased for 3 out of 5 operational biomass plants (approximately Rs 4 /kwh from Rs 3.2 /kwh)
* In advanced stages of negotiation to acquire 500 MW of capacity in small (<25MW) and medium (25-100 MW) hydro projects.
Post year end
* AMR (24.75MW) and Rithwik (24.75MW) hydro power plants are commissioned and exporting power to the grid.
* Reached an Agreement for acquisition of 96 MW hydro plant in Sikkim (North East India) which makes 250 MW capacity under development.
* Strong pipeline of potential new projects targeting secured capacity of 1,000 MW by end of FY 2014(31 March 2015).
* Bank facilities of Rs2850 million (approximately EUR41 million) signed to refinance existing and new projects.
* Sonna hydro plant is on line for commissioning in the final quarter of 2009.
Anil Chalamalasetty, CEO for Greenko, commenting on the results said:
'This been an important year for Greenko. We have continued to grow the pipeline of assets under development and successfully negotiated significant increases in the tariffs of our operational plants. Alongside these advances, the developments post year end include enhanced banking facilities, our agreement on the Sikkim hydro plant and the strong pipeline of potential new projects. We believe we will be able to target 1,000 MW of secured capacity by the end of Financial Year 2014. We believe that Greenko can continue to generate sustainable shareholder value across our diversified asset portfolio against the background of a rapidly growing Indian power sector, and the global environmental commodities market.'
Chairman's & President's Statement:
I am very pleased to announce Greenko's financial results for the year ended 31 March 2009. The Group continues to make excellent progress in meeting the following key strategic objectives:
* To become India's fastest growing renewable energy producer providing attractive long term returns
* Transitioning from being a niche player operating in an environment of State-driven regulatory support, to a mainstream Independent Power Project developer participating in the de-regulated merchant power space. The acquisition of the Sikkim licence is an example of this.
* To become a leading developer in the Indian IPP sector through a combination of late stage project acquisitions, fast track development and greenfield expansion.
* Acquiring a diversified portfolio of both small and medium scale projects to reduce risk and enhance shareholder value.
Results
The Group recorded broadly flat revenues of EUR13,874,927 (2008: EUR13,120,570) due in large part to the Group's decision to retain CERs in a weak market at the time of the Company's year end. Profit after tax was EUR2,659,973 (2008: EUR2,503,425). EBITDA, a key performance indicator for Greenko, was EUR 6,063,796 (2008:EUR 5,324,626). Basic EPS was 3.91 cents (2008: 6.13 cents) reflecting the full year impact of shares issued on the IPO in October 2007. Cash in hand and current bank deposits at the Company's end was EUR11,376,356 (2008: EUR 23,965,075).
Dividends
In line with our stated policy, earnings will be fully re-invested to finance the ongoing growth of the business. The Directors therefore do not recommend the payment of a dividend for the year to 31 March 2009. Our dividend policy will be reviewed on an annual basis depending on the profitability and cash requirements of the Group at that time.
Developments during the year
We have evaluated a number of projects, primarily hydro and wind, which has grown the pipeline of future assets. The Group's focus during the year has been the development of small hydro projects as opposed to the acquisition of operational assets with long term PPAs in order to create optimum shareholder value.
We continue to make progress on tariff negotiations for our operational biomass assets. This increase in tariffs combined with improved efficiency of the operating plants has helped offset lower load factors and the fall in the CER price which occurred towards the end of this year. This led to the decision to retain 156,000 CER's in inventory in order to maximise returns when the CER price recovers.
During the year Greenko also put in place many of the mechanisms needed to enable it to develop into a market leader within the Indian clean energy sector including a power trading licence and the signing of a new debt facility. The Group now employs over 450 people and the head office function in Hyderabad has been significantly strengthened in order to manage further anticipated growth.
India's Economy and Greenko's Market Place
India's continued economic growth prospects (annual GDP growth of 5.6% predicted for 20101), at the time of global recession is characterised by a large domestic market, resilient banking system and a policy of gradual economic liberalisation to allow increased foreign capital inflows.
The Indian power industry has historically been characterised by energy shortages and with clean energy the fastest growing capacity in the sector across all utility asset forms. Short-term electricity prices in the country have tripled over the last five years, with forecasts of a further rise as the peak shortage is projected to exceed 18 per cent by the end of this fiscal year. The weighted average price of short-term power - electricity transacted by distribution utilities through trading firms and over the two functional power exchanges - has surged three times from Rs 2.32/kWh (unit) in 2004-05 to Rs 7.31 in 2008-09, according to the Central Electricity Regulatory Commission (CERC) data.
* Between April 2008 and March 2009, India suffered from an overall power deficit of 11.0% and peak deficit of 12.0%2
* Peak deficit of more than 20% forecast by the end of the 12th Five Year Plan (April 2012 to March 2017) compared with 18% during the 8th Five Year Plan3
* A report by McKinsey & Company suggests that if India's economy continues to grow at an average rate of 6% for the next 10 years, the country's demand for power will soar from around 140 GW at present to 315 - 335 GW by 2017, approximately 100 GW higher than earlier estimates
* The per capita electricity consumption is only at 23% of the global average.4
The market for CERs, which form an important secondary revenue stream for Greenko, has seen lower trends compared to last year driven by the marked downturn in related commodity markets in 2008. The Copenhagen summit in Dec 2009 should provide clarity on market direction for the future and provide the guidelines for Carbon Credit trading post 2012. The market is currently trading at EUR13 /tonne which is broadly in line with Greenko's expectations.
Strategic Review
The Group with its demonstrable track record of developing and operating clean energy assets is now broadening its focus to include medium sized run of the river hydro assets (25-100 MW) and wind assets to create scale combined with the key characteristics of the Greenko projects i.e. attractive returns and a sustainable asset class.
The group's acquisition of a 96 MW run of river hydro project at Sikkim with all the required planning permissions needed to start the build process is a key strategic addition to the portfolio. The project is close to the recently commissioned 500 MW Teesta V by NHPC which will provide valuable experience in terms of understanding of the geological and hydrological risks. The project has all key Ministry of Environment and forests clearances and land acquired to start the physical construction of the project.
The Group is in advanced stages of negotiation over similar assets with the intent to build a balanced portfolio of highly profitable small hydro assets (10-25 MW) enabling measured capacity addition of approximately 150 MW while the medium scale (25-100 MW) hydro assets providing the exciting growth potential (500 MW) with combination of PPA and open power market tariff structures ensuring de-risked long term value creation. Greenko's aims is to achieve a portfolio of 1,000 MW of secured capacity by the end of the financial year 2014 (31 March 2015).
This strategy is intended to achieve three overall goals: firstly to move the Group from being an owner operator through to a developer of projects and secondly to significantly increase the capacities of projects under development to be achieved by FY 2014. Finally, we aim to take Greenko from the traditional Indian utility model of 'long term PPAs and Regulatory dependence' to a model that captures the maximum value from the high demand markets of Indian Power and the EU's Emission Trading Scheme ("EU ETS").
Outlook
The Board believes that Greenko's strategy of developing a strong portfolio of assets across geographic locations within India, regulatory regimes and different tariff structures will reduce risks associated with any local factors and deliver sustainable growth as we progress towards our goal of becoming a major developer and provider of clean energy assets in India.
I would like to take this opportunity to thank our key management and our expanded teams in operations, implementation, business development and administration for all their hard work. We enter the new financial year in a strong position with a clear strategy to deliver sustainable growth.
Y. Harish Chandra Prasad Mahesh Kolli
Chairman Jt.Managing Director & President
____________
1 IMF April 2009
2 Minsitry of Power, CEA and McKinsey: Capacity includes both renewable and conventional capacity
3 Minsitry of Power, CEA and McKinsey: Capacity includes both renewable and conventional capacity
4 Ministry of Power and CEA
CEO's REPORT
Introduction
I am pleased to present Greenko's results for the year ended 31 March 2009. The Group has made considerable progress during the period under review, having increased secured capacity to 254 MW, as well as renegotiated short and long term PPAs at substantially improved rates.
Greenko is focused on developing a portfolio of clean energy assets within India and intends to increase its installed capacity through a combination of acquiring both existing assets and projects under construction, as well as winning concessions to develop greenfield projects. The Group's income is generated from receipts for power sold to state electricity boards and from the sale of CERs which are generated from the Group's United Nations registered clean energy projects. In the future, the Directors believe that new opportunities, such as the direct sale of electricity to industrial users and trading of Green Power from third party renewable assets, will broaden the income streams of the Group and enhance profitability.
During the year the Group's operating performance was broadly in line with expectations with the lower load factors of the operating biomass assets, due to coordinated shutdowns as part of the tariff negotiations, being offset by the improved efficiency of the plants and higher tariffs. There was also a marked reduction in CER revenues due to management's decision to retain 156,000 CER's in the face of weak markets around the Company's financial year end. The Group is well positioned to maximise shareholder returns through excellent growth prospects within a sector that offers maintainable, long term rates of return.
Financial Review
In the year ended 31 March 2009, the Group's revenues were EUR13.9m (2008:EUR13.1m) and the profit after tax was EUR2.7m (2008 EUR2.5m) which equates to earnings per share of 3.91 cents (2008 6.13 cents). EBITDA for the year was EUR6.1m (2008: EUR5.3m). Cash in hand and current bank deposits at the year end was EUR11,376,356 (2008: EUR 23,965,075).
Greenko Group has recently signed an agreement for Rs 285 crores ( about EUR 41 million ) with an Indian bank to refinance all existing assets and provide a long term debt facility at the Indian holding company level Greenko Energies Private Ltd (GEPL). a wholly owned subsidiary of the Company. The proposal allows the Group to leverage its existing low project debt levels to release cash and also providing the option to finance debt for new projects under development.
Operational review
Greenko divides its secured capacity into two categories; assets already operating and concessions currently under development. In addition, there is a pipeline of operating assets and concessions currently under assessment.
Operating Assets:
During the year Greenko was operating six biomass facilities totalling 41.5 MW of capacity. In addition the two hydro assets of 49.5 MW have become operational post year end and Sonna is expected to come on line in the final quarter of 2009.
Biomass: The financial year 2008-09 was a busy period for Greenko both in terms of active tariff restructuring and also in implementing consistent operating disciplines and financial controls across the 6 Biomass plants.
The Biomass plants were being operated at less than optimum capacity due to a period of shut downs as part of the tariff negotiations but were able to meet the targeted financial parameters for each project. The Group has undertaken additional investment at plant level in order to improve efficiency and reduce auxiliary consumption across the portfolio, in order to maximise returns.
Hydro: Post year end, the hydro projects AMR and Rithwik are commissioned and exporting power to the grid.The projects now supply power to the grids at low loads under respective contracts. The project is expected to enter optimal loads in a few weeks as the capacity is slowly ramped up in its first year of commercial operation.
As announced on 20 August 2008, Greenko has signed a PPA with PTC India Ltd at Rs 6 /kwh for Rithwik which replaces the previous agreement with the local SEB for Rs 2.8 /kwh.
Concessions under development:
The Company is evolving from being an aggregator of operational energy assets to being a project developer. The Board believe this strategy will assist in maximising shareholder value given the backdrop of the strong long term market opportunities in India.
During the year the Group acquired concessions totalling 126 MW in a range of hydro power plants. As at the end of the financial year Greenko had a total controlled capacity of 255.5 MW. Subsequent to the year end the Group has announced additional concession acquisitions which takes our total capacity (operational and under development) to 351.5 MW including Sikkim as at 24 September 2009.
Business Development
Greenko has a robust pipeline of clean energy opportunities which cover both operating assets and new concessions.
Hydro: The Group is in negotiation for over 100 MW of operational assets and over 800 MW of run of river hydro concessions across both the north and south of India. This asset class is relatively quick to build and has the flexibility to feed into peak load demands as well as offering higher returns on equity than large hydro assets. The projects under evaluation also meet EU ETS guidelines to enable CERs to offset emissions for EU installations.
Wind: Greenko has evaluated several pipeline opportunities for developing wind power capacities and acquiring operational wind farms. The economics for value creation in the wind sector in India is very limited due to extensive tax incentive offered and the monopoly of wind technology suppliers. However, certain recent developments including the potential for introducing Renewable Obligation Certificates ("ROCs"), reduction of grid interconnection charges and removing the non-supply penalties for non-firm wind power and finally substantial reduction in turbine costs due to improved capacity in the market has allowed Greenko to increase its focus in the sector.
Greenko is also exploring opportunities to enter into joint development agreement to develop concessions awarded by the state of Andhra Pradesh and Karnataka to develop over 300 MW of potential good wind sites. The Company with its development partner is planning to collect the data by erecting wind masts and working with Garrad Hassan & Partners Ltd, UK to conduct further micro site analysis. The data from the development activities will be analysed in Q42009 to take a strategic decision on potential of major investment in this sector following the presentation of a detailed business plan to the board .
Greenko is also currently in the process of conducting due diligence on developed wind farm sites with the potential of third party energy sales. The Group's acceptable minimum rate for contracting wind assets is at least a 16% return on equity.
Greenko is obtaining licenses for developing Solar Energy Power Generation Projects and is also investing in R&D for new renewable opportunities.
Direct Power Sales
Following the 2003 Electricity Deregulation Act, there has been a movement towards selling electricity directly to the industrial end user or to power trading merchants. This has led to a significant increase in tariffs received by power generating companies. Greenko has obtained an interstate power trading licence from the Central Electricity Regulatory Commission to trade power produced by its generating stations and other assets. The power trading licence enables Greenko to fast track the launch of green power products and direct energy sales to industrial customers. This is carried out primarily through the recently launched Indian power exchange, which provides a free market platform for the sale of power. This exchange has already seen trades at prices close to European peak rates and significantly above the PPA prices of currently operational Greenko assets.
Presently, Greenko has a balanced portfolio of renewable energy assets with approximately 30% of installed assets now under improved direct power sale contracts. It is likely that this ratio will increase as Greenko strives towards capturing more of the growth opportunities that the Indian power and global emissions markets have to offer.
Current Trading
In the first six months of the Financial Year 2009-10, our Biomass assets have traded in line with expectations in terms of the production of units.The significantly improved tariffs are improving profitability although there has been small increases in raw material costs.The delayed Monsoon as well as negotiations on the tariff meant that commissioning commenced late on our Hydro Projects and whilst both AMR and Rithwik are building nicely, the full benefits will only show next year. As a result, our hydro results for this year will be below market forecast. However,the long term prospects from both AMR and Rithwik remain very good and Sonna is expected to commission in Q4 2009. The recovery in the CER price during 2009 has meant that good proportion of the CER inventory have been sold at approximately EUR13.
Outlook
Greenko's strategy is to build upon the core proposition of owning, developing and managing clean energy assets which produce superior returns. It is our intention to vertically integrate into clean energy technology initiatives as well as marketing environmental commodities at premium prices. From our current portfolio of assets either operational or under development, we believe the Company has visibility to deliver upon its initial target of 400 MW installed capacity. We believe Greenko has scalable infrastructure with teams and pipeline in place which, together with new finance initiatives, would allow a target of 1,000 MW of secured capacity by the end of the financial year 2014, to be achieved.
Anil Chalamalasetty
Managing Director & CEO
Enquires:
Greenko Group plc
Anil Chalamalasetty +91 (0)98 49643333
Mahesh Kolli +44 (0)7767 692729
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Christopher Hardie +44 (0)20 7398 1630
Adrian Trimmings
Cardew Group
Rupert Pittman +44 (0)20 7930 0777
Jamie Milton
Catherine Maitland
Consolidated balance sheet
Note As at 31 March
2009 2008
ASSETS
Non-current assets
Property, plant and equipment 5 67,433,711 58,941,658
Intangible assets 6 11,344,181 9,149,441
Investment in associates 7 761 -
Available-for-sale financial assets 9 16,746 34,022
Bank deposits 8 272,245 288,081
Trade and other receivables 11 335,163 86,878
79,402,807 68,500,080
Current assets
Inventories 12 2,353,970 1,361,601
Trade and other receivables 11 14,661,726 7,806,666
Available-for-sale financial assets 9 10,323 10,018
Derivative financial instruments 10 156,725 -
Bank deposits 8 7,718,453 534,950
Current income tax assets 15,286 25,410
Cash and cash equivalents 13 3,657,903 23,430,125
28,574,386 33,168,770
Total assets 107,977,193 101,668,850
EQUITY
Capital and reserves attributable to equity
holders of the company
Ordinary shares 14 339,946 339,946
Share premium 55,812,421 55,812,421
Share-based payment reserve 14 592,056 -
Revaluation reserve 25 333,033 417,147
Currency translation reserve (6,180,179) (2,743,759)
Other reserves 14 337,771 2,314
Retained earnings 5,311,153 2,592,148
Total equity 56,546,201 56,420,217
LIABILITIES
Non-current liabilities
Borrowings 16 32,517,641 34,526,796
Deferred income tax liabilities 17 2,518,908 1,743,231
Retirement benefit obligations 18 23,151 23,775
35,059,700 36,293,802
Current liabilities
Trade and other payables 15 5,806,504 4,213,983
Borrowings 16 10,564,788 4,740,848
16,371,292 8,954,831
Total liabilities 51,430,992 45,248,633
Total equity and liabilities 107,977,193 101,668,850
Anil Kumar C Mahesh K
Managing Director & Chief Executive Joint Managing Director & President
Officer
24 September 2009
Consolidated income statement
Note Year ended 31 March
2009 2008
Saleof power 12,647,764 10,653,003
Saleof emission reductions 1,227,163 2,467,567
Total revenue 13,874,927 13,120,570
Other operating income 439,894 1,669
Cost of material and power generation expenses (6,892,335) (6,208,036)
Employee benefit expense 19 (1,962,556) (684,208)
Depreciation and amortization 5 & 6 (1,521,807) (1,121,231)
Other operating expenses 20 (1,197,110) (1,121,420)
Excess of group*s interest in the fair value 25 1,800,976 216,051
of acquiree*s assets and liabilities over cost
Operating profit 4,541,989 4,203,395
Finance income 917,406 852,120
Finance cost (2,293,650) (2,231,834)
Finance costs * net 21 (1,376,244) (1,379,714)
Share of loss of associate 7 - (2,334)
Profit before income tax 3,165,745 2,821,347
Income tax expense 22 (505,772) (317,922)
Profit for the year 2,659,973 2,503,425
Attributable to:
Equity holders of the company 2,659,973 2,503,425
Earnings per share for profit attributable to 23
the equity holders of the company during the
year
*basic (in cents) 3.91 6.13
*diluted (in cents) 3.91 5.62
Consolidated statement of changes in equity
Attributable to equity holders of the company Total equity
Series Aordinary shares Ordinary shares Series A irredeemable Share warrants Share premium Revaluation reserve Currency translation Other reserves Retained earnings
preferred shares reserve
Number of shares Amount Number of shares Amount Number of shares Amount
At 1 April 2007 3,200 32,000 - - 6,800 68,000 235,414 2,864,883 - 6,165 - 73,488 3,279,950
Fair value gains, net of tax
- available-for-sale - - - - - - - - - - 2,314 - 2,314
financial assets
- intangible assets - - - - - - - - 432,382 - - - 432,382
Amortization transfer, - - - - - - - - (15,235) - - 15,235 -
intangible assets
Currency translation - - - - - - - - - (2,749,924) - - (2,749,924)
differences
Net income/ (expense) - - - - - - - - 417,147 (2,749,924) 2,314 15,235 (2,315,228)
recognised directly in equity
Profit for the year - - - - - - - - - - - 2,503,425 2,503,425
Total recognised - - - - - - - - 417,147 (2,749,924) 2,314 2,518,660 188,197
income/(expense) for the year
Proceeds from issue of shares - - 2,650 26,500 - - (235,414) 383,914 - - - - 175,000
prior to IPO
Conversion of other classes of (3,200) (32,000) 10,000 100,000 (6,800) (68,000) - - - - - - -
shares into ordinary shares
Sub-division of shares - - 25,287,350 - - - - - - - - - -
Proceeds from issue of shares - - 42,689,237 213,446 - - - 56,058,774 - - - - 56,272,220
in IPO
Direct costs relating to issue - - - - - - - (3,495,150) - - - - (3,495,150)
of shares in IPO
(3,200) (32,000) 67,989,237 339,946 (6,800) (68,000) (235,414) 52,947,538 - - - - 52,952,070
At 31 March 2008 - - 67,989,237 339,946 - - - 55,812,421 417,147 (2,743,759) 2,314 2,592,148 56,420,217
Attributable to equity holders of the company Total equity
Ordinary shares Share premium Share-based payment Revaluation reserve Currency translation Other reserves Retained earnings
reserve reserve
Number of shares Amount
At 1 April 2008 67,989,237 339,946 55,812,421 - 417,147 (2,743,759) 2,314 2,592,148 56,420,217
Fair value gains, net of tax
-available-for-sale financial - - - - - - (15,207) - (15,207)
assets
Amortization transfer, - - - - (59,032) - - 59,032 -
intangible assets
Grants received from - - - - - - 350,664 - 350,664
Government of India(note 14)
Currency translation - - - - (25,082) (3,436,420) - - (3,461,502)
differences
Net income/ (expense) - - - - (84,114) (3,436,420) 335,457 59,032 (3,126,045)
recognised directly in equity
Profit for the year - - - - - - - 2,659,973 2,659,973
Total recognised - - - - (84,114) (3,436,420) 335,457 2,719,005 (466,072)
income/(expense) for the year
Value of employee services - - - 592,056 - - - - 592,056
At 31 March 2009 67,989,237 339,946 55,812,421 592,056 333,033 (6,180,179) 337,771 5,311,153 56,546,201
Consolidated cash flow statement
Note Year ended 31 March
2009 2008
A. Cash flows from operating activities
Profit before income tax 3,165,745 2,821,347
Adjustments for
Depreciation and amortization 5 & 6 1,521,807 1,121,231
Impairment of Electricity PPA 20 77,858 -
Profit on sale of assets - (64)
Share based payment 592,056 -
Share of loss of associates 7 - 2,334
Finance income 21 (917,406) (852,120)
Finance cost 21 2,293,650 2,231,834
Excess of group's interest in the fair 25 (1,800,976) (216,051)
value of acquiree's assets and
liabilities over cost
Changes in working capital
Inventories (1,119,952) (813,730)
Trade and other receivables (4,909,775) (3,465,700)
Trade and other payables 320,974 (1,537,915)
Cash used in operations (776,019) (708,834)
Taxes paid (228,687) (237,685)
Net cash used in operating activities (1,004,706) (946,519)
B. Cash flows from investing activities
Purchase of property, plant and (10,074,558) (5,728,962)
equipment and capital expenditure
Proceeds from sale of property, plant - 27,163
and equipment
Purchase of investments, net of - (36,437)
redemption
Acquisition of business, net of cash 25 (1,567,754) (17,963,129)
acquired
Investment in associates (761) -
Acquisition of licence holding companies - (435,817)
Advance for purchase of equity (2,447,568) (501,124)
Bank deposits (7,478,350) (28,535)
Interest received 754,042 768,066
Dividends received 985 38,344
Net cash used in investing activities (20,813,964) (23,860,431)
C. Cash flows from financing activities
Proceeds from issue of shares - 52,851,341
Grants received from Government of India 14 350,664 -
Proceeds from borrowings 6,377,506 3,431,078
Repayments of borrowings (2,428,343) (5,751,698)
Interest paid (2,004,417) (2,274,709)
Net cash from financing activities 2,295,410 48,256,012
Net (decrease)/increase in cash and cash (19,523,260) 23,449,062
equivalents
Cash and cash equivalents at the 13 23,430,125 1,195,139
beginning of the year
Exchange losses on cash and cash (248,962) (1,214,076)
equivalents
Cash and cash equivalents at the end of 13 3,657,903 23,430,125
the year
The notes are an integral part of these consolidated financial statements.
Notes to the consolidated financial statements
1. General information
Greenko Group plc ("the company") was originally incorporated on 12 January 2006 as Greenko S.A., a soci? anonyme (a public company with limited liability), under the laws of the Grand Duchy of Luxembourg, having its registered office at L-1736, Luxembourg, IB, Heienhaff and duly registered with the Registre de Commerce et des Soci?s de Luxembourg (the Luxembourg Trade and Companies Register) under B 113,730. On 31 October 2007, the Company was migrated to the Isle of Man as a company limited by shares under company number 001805V pursuant to the provisions of Part XI of the Isle of Man Companies Act 2006 having its registered office at 4th floor, 14 Athol Street, Douglas, Isle of Man, IM1 1JA. The company is listed on the London Stock Exchange-Alternative Investment Market ("AIM").
The company together with its subsidiaries ("the group") is in the business of owning and operating clean energy facilities. All the energy generated from these plants is sold to the State Electricity Boards and other electricity transmission and trading companies in India through long-term power purchase agreements ("PPA"). The group obtained a licence for inter-state trading in electricity in the whole of India except Jammu and Kashmir for trading up to 100 million units of electricity in a year. The group is yet to commence trading in electricity. The group is also a part of the Clean Development Mechanism ("CDM") process and generates and sells Certified Emission Reductions ("CER"). The group also generates and sells Voluntary Emission Reductions ("VER").
These group consolidated financial statements were authorised for issue by the board of directors on 24th September 2009.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
2.1. Basis of preparation
The consolidated financial statements of Greenko Group plc have been prepared in accordance with the International Financial Reporting Standards ("IFRS") as adopted by the European Union. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The preparation of financial information in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial information are disclosed in the critical accounting estimates and judgments section.
2.1.1 Interpretations effective as at 31 March 2009
· IFRIC 12, Service concession arrangements, applies to contractual arrangements whereby a private sector operator participates in the development, financing, operation and maintenance of infrastructure for public sector services. Management assessed the contractual arrangements and concluded that there are no arrangements falling within the scope of IFRIC 12.
2.1.2 Amendments and interpretations effective as at 31 March 2009 but not relevant
The following standards, amendments and interpretations to published standards are effective as at 31 March 2009 but are not relevant to the group*s operations:
· IFRIC 14, IAS 19 * The limit on a defined benefit asset, minimum funding requirements and their interaction;
· IAS 39 (Amendment), Financial instruments: Recognition and measurement, and IFRS 7, Financial instruments: Disclosure, which permit the reclassification of some financial assets.
2.1.3 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the group
The following standards, amendments and interpretations to existing standards have been published and are mandatory for the group*s financial year beginning on 1 April 2009 or later periods, but the group has not early adopted them:
· IAS 1 (Revised), Presentation of financial statements. The new standard prohibits the presentation of items of income and expenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'owner changes in equity' to be presented separately from non-owner changes in equity. In addition, entities making restatements or reclassifications of comparative information will be required to present a restated balance sheet as at the beginning of the comparative period. The group will apply the revised standard from 1 April 2009. It is likely that both the income statement and statement of comprehensive income will be presented as performance statements.
· IAS 23 (Amendment), Borrowing costs. It requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed. The group has already elected to capitalise borrowing costs and hence the amendment does not have an impact on the group*s financial statements.
· IAS 27 (Revised), Consolidated and Separate Financial Statements. It requires a mandatory adoption of the economic entity model which treats all providers of equity capital as shareholders of the entity. Consequently, a partial disposal of interest in a subsidiary in which the parent company retains control does not result in a gain or loss but in an increase or decrease in equity. Purchase of some or all of the non-controlling interests (also known as minority interests) (*NCI*) is treated as a treasury transaction and accounted for in equity. A partial disposal of interest in a subsidiary in which the parent company loses control triggers recognition of gain or loss on the entire interest. A gain or loss is recognised on the portion that has been disposed of; a further holding gain is recognised on the interest retained, being the difference between the fair value of the interest and book value of the interest.
The revised standard requires an entity to attribute their share of net income and reserves to the NCI even if this results in the NCI having a deficit balance.
The group will apply IAS 27 (Revised) from 1 April 2010. The group does not expect the adoption of this standard to have a material effect on the consolidated financial statements.
· IFRS 2 (Amendment), Share-based payment. It clarifies that only service conditions and performance conditions are vesting conditions. All other features need to be included in the grant date fair value and do not impact the number of awards expected to vest or the valuation subsequent to grant date. The amendment also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment. The group will apply the amendment from 1 April 2009. It is not expected to have a material impact on the group*s financial statements.
· IFRS 3 (Revised), Business Combinations. It has expanded the scope to include combinations by contract alone and combination of mutual entities and slightly amended the definition of business as *capable of being conducted* rather than *are conducted and managed*. All the acquisition-related costs are to be recognised as period expenses in accordance with the appropriate IFRS. Costs incurred to issue debt or equity securities will be recognised in accordance with IAS 39.
Consideration would include fair value of all interests previously held by the acquirer. Remeasurement of such interests to fair value would be through the income statement. Contingent consideration is required to be recognised at fair value even if not deemed probable of payment at the date of acquisition. All subsequent changes in debt contingent consideration are recognised in income statement and not in goodwill as required in the existing standard.
IFRS 3 (Revised) provides an explicit option, available on a transaction-by-transaction basis, to measure any NCI in the entity acquired at fair value of their proportion of identifiable assets and liabilities or full fair value. The first will result in measurement of goodwill little different from existing IFRS 3; the second approach will record goodwill on the NCI as well as on the acquired controlling interest.
The standard further provides additional guidance on share-based payment grants that form part of the business combination and on assessment for classification of certain contracts and arrangements of the acquired business at the date of the acquisition. Current guidance requires deferred tax assets of the acquired business that are not recognised at the date of the combination but subsequently meet the recognition criteria to be adjusted against goodwill. The revised standard will only allow adjustments against goodwill within the one-year window for finalisation of the purchase accounting.
The group will apply IFRS 3 (Revised) from 1 April 2010. The effect of the standard on future periods will depend on the nature and significance of any acquisitions that are subject to this standard.
· IFRS 8, Operating segments. IFRS 8 replaces IAS 14 and aligns segment reporting with the requirements of the US standard SFAS 131, *Disclosures about segments of an enterprise and related information*. The new standard requires a *management approach*, under which segment information is presented on the same basis as that used for internal reporting purposes. The group will apply IFRS 8 from 1 April 2009.
· IFRS 5 (Amendment), Non-current assets held-for-sale and discontinued operations (and consequential amendment to IFRS 1, First-time adoption). The amendment is part of the IASB*s annual improvements project published in May 2008. The amendment clarifies that all of a subsidiary*s assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met. A consequential amendment to IFRS 1 states that these amendments are applied prospectively from the date of transition to IFRSs. The group will apply the IFRS 5 (Amendment) prospectively to all partial disposals of subsidiaries from 1 April 2010.
· IAS 23 (Amendment), Borrowing costs. The amendment is part of the IASB*s annual improvements project published in May 2008. The definition of borrowing costs has been amended so that interest expense is calculated using the effective interest method defined in IAS 39, Financial instruments: Recognition and measurement. This eliminates the inconsistency of terms between IAS 39 and IAS 23. The group will apply the IAS 23 (Amendment) prospectively to the capitalisation of borrowing costs on qualifying assets from 1 April 2009.
· IAS 36 (Amendment), Impairment of assets. The amendment is part of the IASB*s annual improvements project published in May 2008. Where fair value less costs to sell is calculated on the basis of discounted cash flows, disclosures equivalent to those for value-in-use calculation should be made. The group will apply the IAS 36 (Amendment) and provide the required disclosure where applicable for impairment tests from 1 April 2009.
· IAS 19 (Amendment), Employee benefits. The amendment is part of the IASB*s annual improvements project published in May 2008.
* The amendment clarifies that a plan amendment that results in a change in the extent to which benefit promises are affected by future salary increases is a curtailment, while an amendment that changes benefits attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the defined benefit obligation.
* The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defined benefit obligation.
* The distinction between short term and long term employee benefits will be based on whether benefits are due to be settled within or after 12 months of employee service being rendered.
* IAS 37, Provisions, contingent liabilities and contingent assets, requires contingent liabilities to be disclosed, not recognised. IAS 19 has been amended to be consistent.
The group will apply the IAS 19 (Amendment) from 1 April 2009.
· IAS 1 (Amendment), Presentation of financial statements. The amendment is part of the IASB*s annual improvements project published in May 2008. The amendment clarifies that some rather than all financial assets and liabilities classified as held for trading in accordance with IAS 39, Financial instruments: Recognition and measurement are examples of current assets and liabilities respectively. The group will apply the IAS 39 (Amendment) from 1 April 2009. It is not expected to have an impact on the group*s financial statements.
· There are a number of minor amendments to IFRS 7, Financial instruments: Disclosures, IAS 8, Accounting policies, changes in accounting estimates and errors, IAS 10, Events after the reporting period, IAS 18, Revenue and IAS 34, Interim financial reporting, which are part of the IASB*s annual improvements project published in May 2008 (not addressed above). These amendments are unlikely to have an impact on the group*s accounts and have therefore not been analysed in detail.
· IFRIC 17, Distributions of non-cash assets to owners. IFRIC 17 clarifies how an entity should measure distributions of assets, other than cash, when it pays dividends to its owners. The Interpretation states that 1) a dividend payable should be recognised when appropriately authorised, 2) it should be measured at the fair value of the net assets to be distributed, and 3) the difference between the fair value of the dividend paid and the carrying amount of the net assets distributed should be recognised in profit or loss. The group will apply IFRIC 17 from 1 April 2010.
· IFRIC 18, Transfers of assets from customers. IFRIC 18 clarifies the accounting for arrangements where an item of property, plant and equipment, which is provided by the customer, is used to provide an ongoing service. The interpretation applies prospectively to transfers of assets from customers received on or after 1 July 2009, although some limited retrospective application is permitted.
· IFRS 2 (Amendment), Share-based payment. The amendment is part of the IASB*s annual improvements project published in April 2009. The amendment clarifies that the contribution of a business on the formation of a joint venture and common control transactions are not within the scope of IFRS 2. The group will apply the IFRS 2 (Amendment) from 1 April 2010. It is not expected to have an impact on the group*s financial statements.
· IAS 1 (Amendment), Presentation of financial statements. The amendment is part of the IASB*s annual improvements project published in April 2009. The amendment clarifies that classification of a liability, that can at the option of the counterparty be settled by the issue of the entity*s equity instruments, on the basis of the requirements to transfer cash or other assets rather than on settlement better reflects the liquidity and solvency position of an entity. The group will apply the IAS 1 (Amendment) from 1 April 2010. It is not expected to have an impact on the group*s financial statements.
· IAS 7 (Amendment), Statement of cash flows. The amendment is part of the IASB*s annual improvements project published in April 2009. The amendment clarifies that only an expenditure that results in a recognised asset can be classified as a cash flow from investing activities. The group will apply the IAS 7 (Amendment) from 1 April 2010. It is not expected to have an impact on the group*s financial statements.
· IAS 17 (Amendment), Leases. The amendment is part of the IASB*s annual improvements project published in April 2009. The amendment modified the criteria for classification of lease that includes both land and buildings elements requiring an entity to assess the classification of each element as a finance or an operating lease separately in the same way as leases of other assets. Further the amendment also clarifies that, in determining whether the land element is an operating or a finance lease, an important consideration is that land normally has an indefinite economic life. The amendment requires entities to reassess the classification of land elements of unexpired leases on the date of adoption of the amendments on the basis of information existing at the inception of those leases. The group will apply the IAS 17 (Amendment) from 1 April 2010. The impact, if any, will be known after assessing the company*s lease arrangements that include both land and building elements.
· IAS 36 (Amendment), Impairment of assets. The amendment is part of the IASB*s annual improvements project published in April 2009. The amendment clarifies that the required unit for goodwill impairment in IAS 36 is not larger than the operating segment level as defined in paragraph 5 of IFRS 8 before the permitted aggregation. The group will apply the IAS 36 (Amendment) from 1 April 2010. It is not expected to have an impact on the group*s financial statements.
· IAS 38 (Amendment), Intangible assets. The amendment is part of the IASB*s annual improvements project published in April 2009. This additional consequential amendment arising from IFRS 3 (Revised) clarifies that intangible assets acquired in a business combination that are separable, but only together with a related contract, identifiable asset or liability, are recognised together with the related item. The amendment also clarifies the description of valuation techniques commonly used to measure intangible assets at fair value when assets are not traded in an active market. The group will apply the IAS 38 (Amendment) from 1 April 2010.
· IAS 39 (Amendment), Financial instruments: Recognition and measurement. The amendment is part of the IASB*s annual improvements project published in April 2009. The amendment makes an exemption from separation in respect of embedded prepayment penalties the exercise prices of which compensate the lender for the loss of interest by reducing the economic loss from reinvestment risk.
· IAS 28 (Amendment), Investments in associates (and consequential amendments to IAS 32, Financial Instruments: Presentation, and IFRS 7, Financial instruments: Disclosures) (effective from 1 January 2009). The amendment is part of the IASB*s annual improvements project published in May 2008. An investment in associate is treated as a single asset for the purposes of impairment testing. Any impairment loss is not allocated to specific assets included within the investment, for example, goodwill. Reversals of impairment are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate increases.
· IAS 38 (Amendment), Intangible assets (effective from 1 January 2009). The amendment is part of the IASB*s annual improvements project published in May 2008. A prepayment may only be recognised in the event that payment has been made in advance of obtaining right of access to goods or receipt of services.
· IAS 39 (Amendment), Financial instruments: Recognition and measurement (effective from 1 January 2009). The amendment is part of the IASB*s annual improvements project published in May 2008.
* This amendment clarifies that it is possible for there to be movements into and out of the fair value through profit or loss category where a derivative commences or ceases to qualify as a hedging instrument in cash flow or net investment hedge.
* The definition of financial asset or financial liability at fair value through profit or loss as it relates to items that are held for trading is also amended. This clarifies that a financial asset or liability that is part of a portfolio of financial instruments managed together with evidence of an actual recent pattern of short-term profit taking is included in such a portfolio on initial recognition.
* The current guidance on designating and documenting hedges states that a hedging instrument needs to involve a party external to the reporting entity and cites a segment as an example of a reporting entity. This means that in order for hedge accounting to be applied at segment level, the requirements for hedge accounting are currently required to be met by the applicable segment. The amendment removes the example of a segment so that the guidance is consistent with IFRS 8, Operating segments, which requires disclosure for segments to be based on information reported to the chief operating decision-maker.
* When remeasuring the carrying amount of a debt instrument on cessation of fair value hedge accounting, the amendment clarifies that a revised effective interest rate (calculated at the date fair value hedge accounting ceases) are used.
· IAS 27 (Amendment), Consolidated and separate financial statements (effective from 1 January 2009). The amendment is part of the IASB*s annual improvements project published in May 2008. Where an investment in a subsidiary that is accounted for under IAS 39, *Financial instruments: recognition and measurement*, is classified as held for sale under IFRS 5, Non-current assets held-for-sale and discontinued operations, IAS 39 would continue to be applied. The amendment will not have an impact on the group*s operations because it is the group*s policy for an investment in subsidiary to be recorded at cost in the standalone accounts of each entity.
· IAS 28 (Amendment), Investments in associates (and consequential amendments to IAS 32, Financial Instruments: Presentation and IFRS 7, Financial instruments: Disclosures) (effective from 1 January 2009). The amendment is part of the IASB*s annual improvements project published in May 2008. Where an investment in associate is accounted for in accordance with IAS 39, Financial instruments: recognition and measurement, only certain rather than all disclosure requirements in IAS 28 need to be made in addition to disclosures required by IAS 32, Financial Instruments: Presentation and IFRS 7, Financial Instruments: Disclosures. The amendment will not have an impact on the group*s operations because it is the group*s policy for an investment in an associate to be equity accounted in the group*s consolidated accounts.
· IAS 38 (Amendment), Intangible assets (effective from 1 January 2009). The amendment is part of the IASB*s annual improvements project published in May 2008. The amendment deletes the wording that states that there is *rarely, if ever* support for use of a method that results in a lower rate of amortisation than the straight-line method. The amendment will not have an impact on the group*s operations, as all intangible assets are amortised using the straight-line method.
· IAS 41 (Amendment), Agriculture (effective from 1 January 2009). The amendment is part of the IASB*s annual improvements project published in May 2008. It requires the use of a market-based discount rate where fair value calculations are based on discounted cash flows and the removal of the prohibition on taking into account biological transformation when calculating fair value. The amendment will not have an impact on the group*s operations as no agricultural activities are undertaken.
· IAS 20 (Amendment), Accounting for government grants and disclosure of government assistance (effective from 1 January 2009). The benefit of a below-market rate government loan is measured as the difference between the carrying amount in accordance with IAS 39, Financial instruments: Recognition and measurement, and the proceeds received with the benefit accounted for in accordance with IAS 20. The amendment will not have an impact on the group*s operations as there are no loans received from the government.
· The minor amendments to IAS 20, Accounting for government grants and disclosure of government assistance, which are part of the IASB*s annual improvements project published in May 2008 (not addressed above). These amendments will not have an impact on the group*s operations as described above.
· IAS 18 (Amendment), Revenue, which is issued as part of the IASB*s annual improvements project published in April 2009. The amendment relates to non-mandatory guidance on determining whether an entity is acting as a principal or as an agent.
· IFRS 8 (Amendment), Operating Segments (effective from 1 January 2010). The amendment is part of the IASB*s annual improvements project published in April 2009. The amendment clarifies that a measure of segment assets should be disclosed only if that amount is regularly provided to the chief operating decision maker.
· IFRIC 9 (Amendment), Reassessment of embedded derivatives (effective from 1 July 2009). The amendment is part of the IASB*s annual improvements project published in April 2009. The amendment clarifies the scope of IFRIC 9 to exclude embedded derivatives in contracts acquired in business combinations, combination of entities or businesses under common control, or the formation of joint ventures, or their possible reassessment at the date of acquisition.
2.2. Consolidation
The consolidated financial statements include the following subsidiaries:
Country of Holding as at
incorporation 31 March 2009
1) Greenko Mauritius Mauritius 100 percent
2) Greenko HP Mauritius 100 percent
3) Subsidiaries of Greenko Mauritius
- Glory Corporation Limited Mauritius 100 percent
- Black Hawk Corporation Mauritius 100 percent
- Greenko Energies Private Limited India 100 percent
4) Subsidiary of Greenko HP
- Rithwik Energy Generation India 100 percent
Private Limited
5) Subsidiaries of Greenko Energies
Private Limited
- Roshni Powertech Private Limited India 100 percent
- ISA Power Private Limited India 100 percent
- Ecofren Power & Projects Private India 100 percent
Limited
- Visveswarayya Green Power India 100 percent
Private Limited
- Technology House (India) Private India 100 percent
Limited
- AMR Power Private Limited India 100 percent
- Jasper Energy Private Limited India 100 percent
- Kukke Hydro Projects Private India 100 percent
Limited
6) Entity jointly owned by Greenko
Mauritius and Greenko Energies
Private Limited
- Ravikiran Power Projects Private India 100 percent
Limited
a) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies so as to obtain economic benefits from its activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
Previously held identifiable assets, liabilities and contingent liabilities of the acquired entity are revalued to their fair value at the date of acquisition, being the date at which the group achieves control of the acquired entity. The movement in fair value is taken to the asset revaluation surplus.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.
b) Associates
Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20 percent and 50 percent of the voting rights. Investments in its associate are accounted for using the equity method of accounting and are initially recognised at cost. The group's investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.
The group's share of its associates' post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the group and its associates are eliminated to the extent of the group's interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates are changed where necessary to ensure consistency with the policies adopted by the group. Dilution gains and losses arising in investments in associates are recognised in the income statement.
2.3. Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and return that are different from those of segments operating in other economic environments. The group considers that it operates in a single geography being India and in a single business segment being the generation and sale of electricity and related emission reductions.
2.4. Foreign currency translation
a) Functional and presentation currency
Items included in the financial statements in each of the group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements are presented in 'euro' ("EUR"), which is the company's functional and presentation currency.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
c) Group companies
The results and financial position of all the group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
* assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
* income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
* all resulting exchange differences are recognised as a separate component of equity.
When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
2.5. Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and any impairment in value. Freehold land is not depreciated. Historical cost includes expenditure that is directly attributable to the acquisition of the items and borrowing cost. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with them will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance expenditure are charged to the income statement during the period in which they are incurred. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Industrial buildings 28 * 30 years
General plant and machinery 18 * 20 years
Heavy plant and operating machinery 20 * 30 years
Furniture, fittings and equipment 15 * 20 years
Vehicles 10 years
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is recognised in the income statement in the period the item is derecognised.
2.6. Intangible assets
a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the group's share of the net identifiable assets of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investment in associates and is tested for impairment as part of the overall balance. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.
b) Other intangibles
Intangible assets acquired individually, with a group of other assets or in a business combination are carried at cost less accumulated amortization. The intangible assets are amortised over their estimated useful lives in proportion to the economic benefits consumed in each period. The estimated useful lives of the intangible assets are as follows:
Licence 18 * 30 years
Power purchase agreement 7 * 10 years
2.7. Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
2.8. Financial assets
The group classifies its financial assets in the following categories: loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. The group's loans and receivables comprise trade and other receivables, investment in bank deposits and cash and cash equivalents in the balance sheet (note 2.11, 2.12 and 2.13).
b) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.
Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.
Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognised in equity. When securities classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as 'gains and losses from investment securities'. Dividends on available-for-sale mutual fund units are recognised in the income statement as part of other income.
The fair value of the mutual fund units is based on the net asset value publicly made available by the respective mutual fund managers.
The group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. Impairment testing of trade receivables is described in note 2.11.
2.9. Derivative financial instruments
a) Forward contracts and interest rate swaps
The group purchases foreign exchange forward contracts and interest rate swaps to mitigate the risk of changes in foreign exchange rates and interest rates associated with its loans denominated in US dollars. These derivative contracts do not qualify for hedge accounting under IAS 39, and are initially recognised at fair value on the date the contract is entered into and subsequently remeasured at their fair value. Gains or losses arising from changes in the fair value of the derivative contracts are recognised in the income statement.
b) Sale commitments
IAS 39 requires contracts to buy or sell non-financial items to be treated as derivatives and accordingly fair valued on the balance sheet, unless the contracts qualify for 'own use' exemption. The group qualifies for the limited 'own use' exemption from derivative accounting on the basis that its emission reduction purchase and sale commitments are entered into and continue to be held for the purpose of the receipt or delivery of emission reductions in accordance with the group's expected purchase and sale requirements. Own use contracts are outside the scope of IAS 39 and are therefore accounted for as executory contracts.
2.10. Inventories
a) Raw material, stores and consumables
Inventories of raw material, stores and consumables are valued at the lower of cost and net realisable value. Cost includes expenses incurred in bringing each product to its present location and condition and is determined on a weighted average basis.
b) Certified emission reductions (*CER*)
Inventories of CER are stated at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses. CER are generated and held for sale in the ordinary course of business. Electricity and CER are treated as joint products, as they are generated simultaneously. Cost of generation is allocated in the ratio of relative net sale value of the products. Cost comprises all production, acquisition and conversion costs and is aggregated on a weighted average basis. To the extent that any impairment arises, losses are recognised in the period they occur. The costs associated with generating inventories are charged to the income statement in the same period as the related revenues are recognised.
2.11. Trade and other receivables
Trade receivables are recognized initially at fair value. They are subsequently measured at amortised cost using the effective interest method, net of provision for impairment, if the effect of discounting is considered material. The carrying amounts, net of provision for impairment, reported in the balance sheet approximate the fair value due to their short realisation period. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of receivables. The provision is established at amounts considered to be appropriate, based primarily upon the group's past credit loss experience and an evaluation of potential losses on the receivables. The amount of the provision is recognized in the income statement.
2.12. Investment in bank deposits
Investments in bank deposits represent term deposits placed with banks earning a fixed rate of interest. Investments in bank deposits with maturities of less than a year are disclosed as current assets and more than one year as non current. At the balance sheet date, these deposits are measured at amortised cost using the effective interest method.
2.13. Cash and cash equivalents
Cash and cash equivalents include cash in hand and at bank, and short-term deposits with an original maturity period of three months or less. Bank overdrafts that are an integral part of cash management and where there is a legal right of set-off against positive cash balances are included in cash and cash equivalents. Otherwise bank overdrafts are classified as borrowings.
2.14. Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds.
Equity instruments, convertible into fixed number of equity shares at a fixed pre-determined price, and which are exercisable after a specific period, are accounted for as and when such instruments are exercised. The transaction costs pertaining to such instruments are adjusted against equity.
2.15. Trade payables
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
2.16. Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
The fair value of the liability portion of a non-convertible bond with detachable warrants is determined using a market interest rate for an equivalent non-convertible bond without detachable warrants. This amount is recorded as a liability on an amortised cost basis until extinguished on maturity of the bonds. The remainder of the proceeds is allocated to the warrants. This is recognised in shareholders' equity. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.
2.17. Current and deferred income tax
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future.
2.18. Employee benefits
Wages, salaries, bonuses, social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by employees of the group. The group operates two retirement benefit plans.
a) Gratuity plan
The Gratuity Plan is a defined benefit plan that, at retirement or termination of employment, provides eligible employees with a lump sum payment, which is a function of the last drawn salary and completed years of service. The liability recognised in the balance sheet in respect of the gratuity plan is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, if any, together with adjustments for unrecognised past-service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of Government of India securities and that have terms to maturity approximating to the terms of the related gratuity liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to the income statement in the period in which they arise.
b) State administered Provident Fund
Under Indian law, employees are entitled to receive benefits under the Provident Fund, which is a defined contribution plan. Both the employee and the employer make monthly contributions to the plan at a predetermined rate (currently 12.0 per cent.) of the employees' basic salary. The group has no further obligation under the Provident Fund beyond its contribution, which is expensed when accrued.
c) Share-based compensation
The group operates an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the group. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, including the impact of market conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. The total amount expensed is recognised on a graded vesting basis over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At each balance sheet date, the entity revises its estimates of the number of options that are expected to vest based on the non-marketing vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
2.19. Provisions
Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where the group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as other finance expense.
2.20. Revenue recognition
a) Sale of electricity
Revenue from the sale of electricity is recognised on the basis of the number of units of power exported in accordance with joint meter readings undertaken on a monthly basis by representatives of the buyer and the group at the rates prevailing as on the date of export.
b) Generation of CER
In order for the group or a supplier to the group to produce a CER, a number of steps must be performed, as follows:
* either the group enters into a contract with a supplier relating to a project that produces CER or the group enters into an agreement with an energy, agricultural or industrial company to either jointly or solely develop a facility that will generate emission reductions;
* where the project does not use an existing approved baseline and monitoring methodology, approval of that new methodology by the Clean Development Mechanism - Executive Board ("CDM-EB") and recommendation by the Methodologies Panel must occur;
* written approval of voluntary participation from the host country designated national authority of the parties involved is obtained;
* written confirmation from the host country that the project achieves a sustainable development objective is obtained;
* submission for public and CDM-EB review, and approval of a formal Project Design Document;
* project validation by an approved designated operating entity ("DOE");
* project registration, which requires both designated national authority and CDM-EB approval; and
* verification of the emission reductions by an approved DOE
When the CDM-EB receives the verification report, which constitutes a request to the CDM-EB to issue and distribute CER, the CDM Registry administrator issues CER in a temporary CDM account. In order for these CER to be transferred to the registered accounts of parties and project participants, the International Transaction Log must be created by the CDM-EB.
c) Sale of CER and VER
Revenue is recognised when CER have been generated, verified by the CDM-EB, and billed to an end user.
d) Sale of Voluntary emission reductions ("VER")
VER are emission reductions achieved by the power generation plants before the effective date of CDM registration by The United Nations Framework on Climate Change. There are few buyers of VER and their sale totally depends upon the utility value for the buyer. The quantity of the VER is based on the estimation of the management, verification by an independent assessor and subject to the satisfaction of the buyer. Revenue is recognised when VER are delivered to an end user.
e) Interest income
Interest income is recognised as the interest accrues to the net carrying amount of the financial asset using the net effective interest rate method.
2.21. Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.
2.22. Dividend distribution
Final dividends proposed by the Board of Directors are payable when formally approved by the shareholders (who have the right to decrease but not increase the amount of the dividend recommended by the Board of Directors). The Board of Directors declare interim dividends without the need for shareholders* approval.
2.23. Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. The group follows the capital approach under which a grant is credited directly to equity since the grants received by the group represent incentives provided by government, unrelated to costs, to promote power generation based on certain renewable energy sources.
3. Financial risk management
3.1. Financial risk factors
The group*s activities expose it to a variety of financial risks; market risk (for example, currency risk) interest rate risk and liquidity risk. The group*s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group*s financial performance. The financial instruments of the group, other than derivatives, comprise loans from banks and financial institutions, non-convertible bonds, demand deposits and short-term bank deposits.
3.1.1 Market risk
a) Foreign exchange risk
The group prepares consolidated financial statements in Euros and conducts substantially all its business in Indian rupees (*INR*). As a result, it is subject to foreign currency exchange risk arising from exchange rate movements which will affect the group*s translation of the results and underlying net assets of its foreign subsidiaries. In addition, the group has a US dollar (*$*) denominated loan in respect of which it is exposed to foreign currency exchange risk. During the year the group has hedged the foreign currency exposure on the quarterly repayments of this loan by entering into forward foreign currency purchases of $.
If INR had weakened or strengthened by 4 percent against $, with all other variables held constant, post-tax profit for the year ended 31 March 2009 would have been lower or higher by EUR32,253 as a result of foreign exchange gains or losses on translation of the $ denominated borrowings and intercompany balances.
If INR had weakened or strengthened by 4 percent against $, with all other variable held constant, post tax profit for the year would have been lower or higher by EUR32,253 as a result of mark to market losses or gains on forward contracts.
If INR had weakened or strengthened by 3 percent against Euro, with all other variables held constant, post-tax profit for the year would have been higher or lower by EUR31,131 as a result of foreign exchange gains or losses on translation of intercompany balances.
The sensitivity analysis is based on a reasonably possible change in the underlying foreign currencies computed from historical data.
b) Cash flow and fair value interest rate risk
As the group has no significant interest-bearing assets other than investment in bank deposits, the group*s income and operating cash flows are substantially independent of changes in market interest rates. The company considers the impact of fair value interest rate risk on investment in bank deposits as not material. The group*s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. Borrowings issued at fixed rates expose the group to fair value interest rate risk. During the year, the group*s borrowings at variable rate were largely denominated in the functional currency of its Indian entities, being INR, although one loan was denominated in $.
If interest rates on borrowings had been 80 basis points higher or lower with all other variables held constant, post-tax profit for the year would have been lower or higher by EUR78,493 mainly as a result of the higher or lower interest expense on floating rate borrowings.
The sensitivity analysis is based on a reasonably possible change in the market interest rates computed from historical data.
3.1.2 Credit risk
The group*s credit risk arises from accounts receivable balances on sale of electricity and CER. The Indian entities have entered into PPA with transmission companies incorporated by the Indian State Government and other electricity transmission and trading companies to export the electricity generated. The group is therefore committed to sell power to these customers and regards any potential risk of default as being predominantly a governmental one. The group is paid monthly by the transmission companies for the electricity it supplies. The CER are sold under contractual emission reduction purchase agreements (*ERPA*) concluded with the purchaser of the CER. The group assesses the credit quality of the purchaser based on its financial position and other information. In addition, the group requires the purchaser under the ERPA to open an irrecoverable stand-by letter of credit with a reputable bank. If the purchaser defaults on payment the group is entitled to claim for the full amount owed under the letter of credit.
In the year ended 31 March 2009, the group continued to sell its CER to only one customer, being a large established Swedish emissions trader. As the number of CER the group produces are sold to a wider range of purchasers the group intends to develop its credit evaluation and monitoring procedures.
The group maintains banking relationships with only creditworthy banks which it reviews on an on*going basis. The group enters into derivative financial instruments where the counter party is generally a bank. Consequently, the credit risk on the derivatives and bank deposits is not considered material.
3.1.3 Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and maintaining adequate credit facilities.
The group intends to be highly acquisitive in the immediate future. In respect of its existing operations the group funds its activities primarily through long-term loans secured against each power plant. In addition, each of the operating plants has working capital loans available to it which are renewable annually, together with certain intra-group loans. The group*s objective in relation to its existing operating business is to maintain sufficient funding to allow the plants to operate at an optimal level and in particular purchase the necessary raw materials required.
In respect of each acquisition, the group prepares a model to evaluate the necessary funding required. The group*s strategy is to primarily fund such acquisitions by assuming debt in the acquired companies or by borrowing specific long-term funds secured on the power plant to be acquired. In relation to the payment towards equity component of companies to be acquired, the group ordinarily seeks to fund this by the injection of external funds by debt or equity.
The group has identified a large range of acquisition opportunities which it is continually evaluating and which are subject to constant change. In respect of its overall business the group therefore does not, at the current time, maintain any overall liquidity forecasts. The table below analyses the group*s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date.
The amounts disclosed in the table are the contractual undiscounted cash flows.
At 31 March 2009 Less than1 year Between 1 and 2 Between 2 and 5 Over 5 years
years years
Borrowings 9,046,808 5,473,698 15,145,384 9,010,015
Trade and other payables 4,592,060 - - -
Other liabilities 1,214,444 - - -
At 31 March 2008 Less than1 year Between 1 and 2 Between 2 and 5 Over 5 years
years years
Borrowings 8,574,250 13,784,456 14,898,434 8,143,136
Trade and other payables 3,191,629 - - -
Other liabilities 1,416,067 - - -
3.2. Capital risk management
The group*s objective when managing capital is to safeguard the group*s ability to continue as a going concern in order to provide returns for shareholders and benefits for stakeholders. The group also proposes to maintain an optimal capital structure to reduce the cost of capital. Hence, the group may adjust any dividend payments, return capital to shareholders or issue new shares. Total capital is the equity as shown in the consolidated balance sheet. Currently, the group primarily monitors its capital structure in terms of evaluating the funding of potential acquisitions. It plans to balance between risks and returns. In order to reduce the risks, the group diversified into hydro power generation while it concentrated on biomass power projects. Management is continuously evolving strategies to optimize the returns and reduce the risks. It includes plans to optimize the financial leverage of the group.
3.3. Fair value estimation
The fair value of financial instruments that are not traded in an active market (for example, forward contracts) is determined by using valuation techniques. The group uses its judgment to determine an appropriate method and make assumptions that are based on market conditions existing at each balance sheet date. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the balance sheet date.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to the short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments.
4. Critical accounting estimates and judgements
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial information and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources.
The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
a) Income taxes
The group is subject to income taxes in a number of jurisdictions. Significant judgment is required in determining provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
b) Estimated impairment of goodwill
In accordance with the accounting policy stated in note 2.6, the group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates (note 7). No impairment charge was accounted during the year.
If the budgeted gross margin used in the value-in-use calculation had been 1 percent lower than group*s estimates at 31 March 2009, there would not be any impairment of goodwill. Similarly, if the estimated pre-tax discount rate applied to the discounted cash flows had been 1 percent higher than the group*s estimates, there would not be any impairment of goodwill.
5. Property, plant and equipment
Land Buildings Plant and machinery Furniture, fixtures Vehicles Capital Total
& equipment work-in-progress
Year ended 31 March 2008
Opening net book amount 397,661 1,127,541 6,254,361 41,971 30,337 60,712 7,912,583
Acquisition of subsidiary 1,076,070 1,302,599 18,136,783 118,250 162,246 29,915,676 50,711,624
Additions 70,464 22,696 54,316 75,258 148,701 5,362,896 5,734,331
Disposals - - - - (24,917) - (24,917)
Depreciation charge - (62,782) (907,752) (16,350) (20,787) - (1,007,671)
Exchange differences (129,859) (221,874) (2,379,627) (20,394) (25,904) (1,606,634) (4,384,292)
Closing net book amount 1,414,336 2,168,180 21,158,081 198,735 269,676 33,732,650 58,941,658
At 31 March 2008
Cost 1,414,336 2,238,574 22,122,436 215,668 289,946 33,732,650 60,013,610
Accumulated depreciation - (70,394) (964,355) (16,933) (20,270) - (1,071,952)
Net book amount 1,414,336 2,168,180 21,158,081 198,735 269,676 33,732,650 58,941,658
Year ended 31 March 2009
Opening net book amount 1,414,336 2,168,180 21,158,081 198,735 269,676 33,732,650 58,941,658
Acquisition of subsidiary - - - 3,733 11,490 4,291,966 4,307,189
Additions - 9,942 705,805 66,861 68,620 9,223,330 10,074,558
Depreciation charge - (73,066) (1,171,853) (25,721) (39,867) - (1,310,507)
Exchange differences (92,011) (138,669) (1,342,564) (14,352) (30,821) (2,960,770) (4,579,187)
Closing net book amount 1,322,325 1,966,387 19,349,469 229,256 279,098 44,287,176 67,433,711
At 31 March 2009
Cost 1,322,325 2,102,725 21,382,420 269,950 336,525 44,287,176 69,701,121
Accumulated depreciation - (136,338) (2,032,951) (40,694) (57,427) - (2,267,410)
Net book amount 1,322,325 1,966,387 19,349,469 229,256 279,098 44,287,176 67,433,711
Borrowing costs on specific borrowings capitalised during the year aggregated to EUR2,729,265 (2008: EUR369,193).
Total term loans as at 31 March 2009 aggregating to EUR38,846,789 (31 March 2008: EUR34,803,206) (including loans from financial institutions and excluding non-convertible bond) are secured against all of the group's present and future moveable and immovable assets, including the property, plant and equipment shown above. These loans are also secured by the personal guarantees of certain Directors and pledge of shares of the Indian subsidiaries.
6. Intangible assets
Licence Electricity PPA Goodwill Total
Year ended 31 March 2008
Opening net book amount 120,361 204,030 21,480 345,871
Acquisition of subsidiary 3,457,091 3,168,421 2,655,988 9,281,500
(note 25.2)
Additions 413,716 - - 413,716
Amortization charge (11,425) (102,135) - (113,560)
Exchange differences (226,038) (235,960) (316,088) (778,086)
Closing net book amount 3,753,705 3,034,356 2,361,380 9,149,441
At 31 March 2008
Cost 3,765,675 3,140,211 2,361,380 9,267,266
Accumulated amortization (11,970) (105,855) - (117,825)
Net book amount 3,753,705 3,034,356 2,361,380 9,149,441
Year ended 31 March 2009
Opening net book amount 3,753,705 3,034,356 2,361,380 9,149,441
Acquisition of subsidiary 3,164,629 100,710 - 3,265,339
(note 25.1)
Impairment during the year - (77,858) - (77,858)
Amortization charge (15,335) (195,965) - (211,300)
Exchange differences (429,636) (198,183) (153,622) (781,441)
Closing net book amount 6,473,363 2,663,060 2,207,758 11,344,181
At 31 March 2009
Cost 6,488,165 2,927,347 2,207,758 11,623,270
Accumulated amortization (14,802) (264,287) - (279,089)
Net book amount 6,473,363 2,663,060 2,207,758 11,344,181
Additions to licence represent net consideration paid on acquisition of companies that hold licences for power generation. The projects in these companies at the time of acquisition were in a pre-construction stage, the transactions were considered as acquisitions of a group of assets. The net amount, after allocation of consideration to the fair value of tangible assets and net current assets, has been recognised as intangible asset. The value of tangible assets and net current assets is insignificant.
Electricity PPA recognised on acquisition of one of the subsidiaries in the previous year was impaired in the current year since the group terminated the PPA. The group entered into a new electricity PPA with another customer.
The average remaining amortization period for licences is 29 years and for electricity PPA is 8 years.
Impairment tests for goodwill
Goodwill is allocated to the group's cash-generating units ("CGU"). Management has identified the acquired entities as individual CGU.
A CGU level summary of goodwill is presented below:
31 March 2009 31 March 2008
* Greenko Energies Private Limited 18,507 19,795
* Rithwik Energy Generation Private Limited 465,857 498,272
* AMR Power Private Limited 146,628 156,830
* Roshni Powertech Private Limited 753,968 806,431
* ISA Power Private Limited 331,580 354,652
* Ecofren Power & Projects Private Limited 286,309 306,232
* Ravikiran Power Projects Private limited 204,909 219,168
2,207,758 2,361,380
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections prepared by management. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.
The key assumptions used for value-in-use calculations are as follows:
Budgeted gross margin 40 percent
Growth rate 3 percent
Discount rate 19 percent
Management has determined gross margins based on industry trends and the existing PPA with the transmission companies. The PPA is a long-term contract with agreed price per unit of power sold, and the growth rates used are consistent with those contracts. The discount rate used is pre-tax and reflects the specific risks associated with the entity.
7. Investment in associates
During the year ended 31 March 2009, the group subscribed to a 49 percent interest in Greenko Hatkoti Energy Private Limited, an unlisted entity incorporated in India. Consideration paid was EUR761.
During the period ended 31 March 2007, the group acquired a 50 percent interest in Ravikiran Power Projects Private Limited ("Ravikiran"), an unlisted entity incorporated in India. This has been accounted for as an associate until 31 December 2007. The group acquired the balance of the interest in the company and accounted for the investment as a subsidiary from 1 January 2008.
31 December 2007
Beginning of the period 901,691
Share of loss (2,334)
Exchange differences (19)
Other equity movements (24,489)
End of the period
The group's share of the results of its associate, and the aggregated assets (including goodwill) and liabilities are as follows:
31 December 2007
Assets 5,569,592
Liabilities 4,248,959
Revenue 881,678
Loss (2,334)
8. Financial instruments by category
The accounting policies for financial instruments have been applied to the line items below:
31 March 2009 Loans and Assets at fair value Available-for-sale Total
receivables through profit and
loss
Assets as per balance sheet
Available-for-sale financial - - 27,069 27,069
assets (note 9)
Bank deposits 7,990,698 - - 7,990,698
Trade and other receivables 14,996,889 - - 14,996,889
(note 11)
Derivative financial - 156,725 - 156,725
instruments (note 10)
Cash and cash equivalents 3,657,903 - - 3,657,903
Total 26,645,490 156,725 27,069 26,829,284
Liabilities at fair Other financial Total
value through profit liabilities
and loss
Liabilities as per balance
sheet
Borrowings - 43,082,429 43,082,429
Trade and other payables - 4,027,091 4,027,091
Total - 47,109,520 47,109,520
31 March 2008 Loans and Assets at fair value Available-for-sale Total
receivables through profit and
loss
Assets as per balance sheet
Available-for-sale financial - - 44,040 44,040
assets (note 9)
Bank deposits 823,031 - - 823,031
Trade and other receivables 5,835,548 - - 5,835,548
(note 11)
Cash and cash equivalents 23,430,125 - - 23,430,125
Total 30,088,704 - 44,040 30,132,744
Liabilities at fair Other financial Total
value through profit liabilities
and loss
Liabilities as per balance
sheet
Borrowings - 39,267,644 39,267,644
Trade and other payables - 3,378,936 3,378,936
Total - 42,646,580 42,646,580
Investment in bank deposits as at 31 March 2009 include restricted balances aggregating to EUR7,985,511 (31 March 2008: EUR817,483).
The carrying amounts reported in the balance sheet for cash and cash equivalents, trade and other receivables, trade and other payables and other liabilities approximate their respective fair values due to their short maturity.
9. Available-for-sale financial assets
2009 2008
Beginning of the year 44,040 -
Additions - 1,304,783
Dividend reinvestment - 11,090
Redemption - (1,273,973)
Exchange differences (1,764) (174)
Net (loss)/gains transferred to equity (15,207) 2,314
End of the year 27,069 44,040
Less: Non-current portion (16,746) (34,022)
Current portion 10,323 10,018
During the year ended 31 March 2009, dividend income aggregating to EUR985 (2008: EUR48,320) has been earned on investment in units of mutual funds.
There were no impairment provisions on available-for-sale financial assets during the year. None of the financial assets is either past due or impaired. Available-for-sale financial assets include the following:
31 March 2009 31 March 2008
Unlisted securities:
* Units of closed-ended mutual funds 16,746 34,022
* Units of open-ended mutual funds 10,323 10,018
27,069 44,040
Available-for-sale financial assets are denominated in Indian rupees. The maximum exposure to credit risk at the reporting date is the fair value of the units of mutual funds classified as available-for-sale.
10. Derivative financial instruments
31 March 2009 31 March 2008
Asset Liability Asset Liability
Forward foreign exchange contracts 156,725 - - -
Total 156,725 - - -
The notional principal amounts of the outstanding forward foreign exchange contracts at 31 March 2009 were EUR908,461 (31 March 2008: NIL).
11. Trade and other receivables
2009 2008
Trade receivables * power 3,744,194 3,274,496
Trade receivables * emission reductions 840,462 2,467,567
Trade receivables 4,584,656 5,742,063
Other receivables 7,079,462 1,502,104
Pre-payments 67,441 72,065
Advance for expenses 19,284 4,913
Sundry deposits 155,403 17,636
Advance for purchase of equity 3,090,643 554,763
Total trade and other receivables 14,996,889 7,893,544
Less: Non-current portion * sundry deposits and (335,163) (86,878)
receivables
Current portion 14,661,726 7,806,666
Trade and other receivables include financial assets 4,826,784 5,835,548
aggregating to
Advance for equity represents amount paid under memorandum of understanding with various parties which have been identified as potential entities to be acquired in the future. Other receivables include advances against purchase of raw material, advances for expenses on new projects, and insurance claims receivable. Working capital loans of EUR1,185,852 (31 March 2008: EUR1,029,675) are secured against inventory and trade receivables.
Trade receivables - power that are due for more than one month are considered past due. As at 31 March 2009, trade receivables of EUR2,401,806 (31 March 2008: EUR2,081,557) were past due but not impaired. These relate to power tariff differences that are subject to judicial orders, and in the opinion of the management there is a reasonable certainty of realisation (note 24(b)). There are no past due trade receivables that are impaired.
The ageing analysis of past due trade receivables as at the reporting date is as follows:
31 March 2009 31 March 2008
1 to 6 months 147,961 595,500
6 to 9 months 278,737 765,042
9 to 12 months 394,978 144,849
Beyond 12 months 1,580,130 576,166
2,401,806 2,081,557
The carrying amounts of the group's trade receivables are denominated in the following currencies:
31 March 2009 31 March 2008
Indian rupee 3,744,194 3,274,497
Euro 840,462 2,467,566
4,584,656 5,742,063
Movements on the group provision for impairment of other advances are as follows:
2009 2008
Beginning of the year - 175,558
Receivables written off during the year as uncollectible - (175,558)
End of the year - -
The creation and release of provision for impaired receivables have been included in *other operating expenses* in the income statement (note 20). 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 except in respect of receivables under ERPA (refer note 3.1.2).
12. Inventories
31 March 2009 31 March 2008
Raw material 749,475 604,740
Stores and consumables 445,253 146,105
CER 1,159,242 610,756
2,353,970 1,361,601
Working capital loans of EUR1,185,852 (31 March 2008: EUR1,029,675) are secured against inventory and trade receivables. Cost of material consumed during the year aggregated to EUR6,044,294 (2008: EUR5,850,213).
13. Cash and cash equivalents
31 March 2009 31 March 2008
Cash on hand 73,699 130,819
Cash at bank 3,584,204 23,299,306
3,657,903 23,430,125
14. Equity
14.1. Share capital
31 March 2009 31 March 2008
Authorised capital
- 90,000,000 (31 March 2008: 75,000,000) ordinary 450,000 375,000
shares of
EUR0.005 each
Issued and fully paid
- 67,989,237 ordinary shares of EUR0.005 each 339,946 339,946
On 30 September 2008, the company increased its authorised capital from 75,000,000 to 90,000,000 ordinary shares.
On 2 February 2006, the company issued 6,800 Series A preferred shares at a price of EUR441.18 per share to Aloe Private Equity S.A.S. On 31 October 2007, the share capital of the company was amended, such that the 3,200 Series A ordinary shares and the 6,800 Series A preferred shares were converted on 1:1 basis into 10,000 ordinary shares. Immediately thereafter, the share capital of the company was subdivided on a 2,000:1 basis, such that the company had, at 31 October 2007, authorized share capital of 75,000,000 ordinary shares of EUR0.005 each and issued and paid-up share capital of 25,300,000 ordinary shares of EUR0.005 each. The ordinary shares of the company were listed on London Stock Exchange-Alternative Investment Market on 7 November 2007. The issue price was EUR1.40 per ordinary share. Ordinary shares issued during the year ended 31 March 2008 comprise of:
Issued to Date of allotment Par value (EUR) Number of shares
Directors 24 April 2007 10 650
Bond holders on exercise of 16 October 2007 10 1,000
warrants
Directors and relatives 31 October 2007 10 1,000
Conversion of loan notes 31 October 2007 0.005 7,714,980
issued to Aloe Environment
Fund II (note 16)
A mutual fund in India per the 31 October 2007 0.005 2,830,246
terms of the shareholders
agreement executed with a
group entity (note 16)
Initial public offering 7 November 2007 0.005 32,144,011
("IPO")
14.2. Share-based payment reserve
In a meeting held on 22 April 2008, the board of directors approved the Greenko Group plc 2008 Long Term Incentive Plan for all the employees of the group. The scheme is administered by the remuneration committee of the company. Options over 6,798,924 ordinary shares were granted to the Chief Executive Officer and the President of the company. One-third of the options are subject to a graded vesting over a period of three years with a service condition. The remaining options are subject to a market condition that vesting is allowed in full only if the market value of a share is at any time during three years from the date of grant equal to or greater than a stated price. The exercise price was set at the average of the closing market prices for the ordinary shares of the company on AIM over the ten dealing days prior to the date of grant but not less than the nominal value of the share.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
2009 2008
Average exercise Number of options Average exercise price Number of options
price (pence per share)
(pence per share)
Beginning of the year - - - -
Granted 97.5 6,798,924 - -
Forfeited - - - -
Exercised - - - -
Lapsed - - - -
End of the year 97.5 6,798,924 - -
Options exercisable at end of - -
the year
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Expiry date*21 May Exercise price(pence per share) Shares
2009 2008
2009 97.5 755,436 -
2010 97.5 755,436 -
2011 97.5 5,288,052 -
6,798,924 -
The weighted average fair value of options granted during the year determined using the Binomial option valuation model was EUR0.40 per option (2008: NIL). The significant inputs into the model were share price of 94.5 pence (2008: NIL) at the grant date, exercise price shown above, volatility of 30.4 percent (2008: NIL), dividend yield of NIL (2008: NIL), an expected weighted average option life of 2.8 years, and an annual risk-free interest rate of 8.1 percent (2008: NIL). Annualised volatility is based on the volatility of comparable stocks with relatively longer trading history. Risk-free interest rate is based on the yield on a zero coupon bond issued by the Government of India with the tenor matching the expected term of the stock options. Probability of achieving the market condition was estimated using a binomial lattice to project the stock price and the respective probabilities. Refer note 19 for the total expense recognised in the income statement for share options granted to directors. No forfeitures are expected.
14.3. Other reserves*Government grants
Government of India ("GoI") has been providing cash grants to grid-interactive power generation projects based on renewable energy sources. The quantum of cash grants is linked to the power generation capacity of the project. In respect of projects which are financed by a financial institution, the request for the cash grant has to be placed by the financial institution. The financial institution directly receives the cash grant from GoI towards reduction of loan.
The group obtained and recognised in equity, government grants aggregating to EUR350,664 (2008: NIL) in relation to three biomass power projects. The group's bankers directly received the cash grants towards reduction of loans availed by the group for development of the said projects. The group is obliged not to utilise more than 15 percent of fossil fuel of total energy consumption under the terms of this government grant. These grants are not available for distribution.
15. Trade and other payables, and other liabilities
31 March 2009 31 March 2008
Trade payables 613,375 1,794,221
Capital creditors 2,315,991 417,055
Withholding taxes and dues 24,752 306,559
Provision for tax uncertainty (note 22) 70,350 75,245
Other payables 1,684,311 453,243
Cost of acquisition payable 1,097,725 1,167,660
Total * current 5,806,504 4,213,983
Other payables include accruals for expenses, statutory liabilities and other liabilities.
16. Borrowings
31 March 2009 31 March 2008
Non-current
Bank borrowings 28,431,796 30,321,414
Term loans from financial institutions 1,003,072 1,125,250
Non-convertible bond 3,049,788 2,999,895
Equipment and vehicle loans 32,985 80,237
32,517,641 34,526,796
Current
Bank borrowings 9,722,203 2,607,805
Term loans from financial institutions 364,814 2,067,815
Equipment and vehicle loans 41,840 51,925
Interest accrued but not due 435,931 13,303
10,564,788 4,740,848
Total borrowings 43,082,429 39,267,644
Bank borrowings mature over 2011 to 2018 and bear floating rates of interest.
Total borrowings, except non-convertible bonds, are secured against first charge by way of hypothecation of all immovable properties including plant and machinery and all other movable properties both present and future, and mortgage of land and buildings and all other immovable properties both present and future, personal guarantees of directors, pledge of shares. Working capital loans are secured by inventory and trade receivables. Additionally, the borrowings are also secured by a lien on bank deposits amounting to EUR7,834,534 (31 March 2008: EUR817,483).
The maturity profile of the group's borrowings at the balance sheet dates are as follows:
31 March 2009 31 March 2008
1 year or less, or on demand 10,564,788 4,740,848
1 to 2 years 5,449,348 9,403,382
2 to 5 years 18,058,277 11,449,432
Over 5 years 9,010,016 13,673,982
43,082,429 39,267,644
The carrying amounts and fair value of the borrowings are as follows:
31 March 2009 31 March 2008
Carrying amount Fair value Carrying amount Fair value
Bank borrowings 38,589,930 38,589,930 32,929,219 32,929,219
Term loans from financial 1,367,886 1,333,272 3,193,065 3,131,720
institutions
Equipment and vehicle loans 74,825 73,411 132,162 126,601
Non-convertible bond 3,049,788 3,054,881 2,999,895 3,006,256
The fair value of bank borrowings approximates their carrying value as these borrowings carry a floating rate of interest. The fair values of term loans and vehicle loans are based on cash flows discounted using a zero-coupon yield curve in the range of 7.94 percent to 10.21 percent (31 March 2008: 11.49 percent to 11.76 percent).
The non-convertible bond carries an effective interest rate of 8 percent. The fair value is based on cash flows discounted using a rate based on borrowings of 8 percent (31 March 2008: 8 percent).
The carrying amounts of the group*s borrowings are denominated in the following currencies:
31 March 2009 31 March 2008
Indian rupee 39,124,180 35,341,601
Euro 3,049,788 2,999,895
US dollar 908,461 926,148
43,082,429 39,267,644
The group has the following undrawn borrowing facilities:
31 March 2009 31 March 2008
Working capital loans from banks 407,213 519,805
Term loans from financial institutions 794,539 2,150,155
1,201,752 2,669,960
Non-convertible bond
On 12 January 2006 the company issued to two private individuals 1,000 6% non-convertible bonds with par value of EUR3,000 each, for a total consideration of EUR3 million. The non-convertible bond carries detachable warrants entitling the bond holders to subscribe for up to 1,000 ordinary shares at an exercise price of EUR10 per warrant. The warrants were to lapse automatically on 1 January 2011. On 16 October 2007 the bond holders exercised their warrants.
The values of the liability component and the equity conversion component were determined at issuance of the bond. The fair value of the liability component of the non-convertible bond was calculated based on cash flows discounted using a market interest rate for an equivalent non-convertible bond without detachable warrants. The residual amount of EUR235,414, representing the value of the warrants, was included in shareholders' equity as 'share warrants' and later transferred to 'share premium' on issue of shares.
The non-convertible bond recognised in the balance sheet is calculated as follows:
2009 2008
Liability component at 1 April 2,999,895 2,952,917
Interest expense (note 21) 229,893 226,978
Interest paid (180,000) (180,000)
Liability component at 31 March 3,049,788 2,999,895
Convertible loan notes
On 27 April 2007, the company executed an agreement with Aloe Environment Fund II, a French regulated fund, for issue of convertible loan notes aggregating to EUR8 million. The issue proceeds were received in two tranches in May and July 2007 respectively. The loan notes carry step-up coupon in the range of 3-7 percent over the tenure. The loan notes automatically convert into ordinary shares on admission of the company to AIM. The conversion is based on a discounted IPO price that varies with the timing of the admission to AIM. In case there is no admission to AIM prior to 1 April 2009, the loan notes are redeemable at par or convertible into Series A preferred shares based on a pre-determined valuation of the company.
The equity conversion option did not have any value on the date of issue of loan notes since the conversion is contingent upon admission of the company to AIM. The convertible notes were recorded at face value on initial recognition. On 31 October 2007, the loan notes were converted into 7,714,980 ordinary shares at a price of EUR1.05 per ordinary share. Since the convertible loan notes were settled within the year, embedded derivatives in the loan notes were not segregated and accounted since such derivatives were not considered to have significant value.
Redeemable non-convertible preference shares issued by a subsidiary
On 27 April 2007, Greenko Energies Private Limited ("GEPL") and the company executed an agreement with 'Small is Beautiful' ("SIB"), a fund managed by an Indian company, whereby 18 million preference shares of INR10 each for a total consideration of INR180 million were issued by GEPL to SIB. The shares are mandatorily redeemable at an agreed value at the end of 36 months from issuance, and pay dividends annually at a step-up rate in the range of 5-7 percent. The company has granted a call option to SIB to subscribe in the IPO for ordinary shares of the company calculated using a discounted IPO price that varies with the timing of the admission to AIM. Upon exercise of such option, the preference shares would be redeemed at INR equivalent of the exercise price of the option. Further, GEPL has a call option by which the preference shares can be called for redemption at an agreed price at any time till maturity before SIB exercises the option to subscribe in the IPO.
The equity conversion option did not have any value on the date of issue of preference shares since the conversion is contingent upon admission of the company to AIM. On 31 October 2007, SIB exercised the call option and was issued 2,830,246 ordinary shares at a price of EUR1.12 per ordinary share. The preference shares were redeemed by GEPL at par value in February 2008. Loss on foreign currency fluctuation of EUR357,835 on account of the time lag in redemption of preference shares was absorbed by the company per the agreement and was recognised in the income statement.
Since the preference shares were settled within the year, embedded derivatives in such loan notes were not segregated and accounted since such derivatives were not considered to have significant value.
17. Deferred income tax
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The offset amounts are as follows:
31 March 2009 31 March 2008
Deferred income tax liabilities
* to be recovered after more than 12 months 2,518,908 1,743,231
* to be recovered within 12 months - -
2,518,908 1,743,231
The movement in deferred income tax liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Property, plant and equipment Intangible assets Total
At 31 March 2007 493,013 17,539 510,552
Charged to the income 103,150 12,890 116,040
statement
Acquisition of subsidiary 513,617 756,699 1,270,316
Exchange difference (113,842) (39,835) (153,677)
At 31 March 2008 995,938 747,293 1,743,231
Charged to the income 224,417 - 224,417
statement
Acquisition of subsidiary - 717,105 717,105
Exchange difference (75,086) (90,759) (165,845)
At 31 March 2009 1,145,269 1,373,639 2,518,908
18. Employee benefit obligations
31 March 2009 31 March 2008
Balance sheet obligation for
Gratuity 16,343 17,462
Compensated absences 6,808 6,313
23,151 23,775
Income statement charge for
Gratuity 21,212 11,156
Compensated absences 4,136 1,484
25,348 12,640
Gratuity
The amounts recognised in the balance sheet are determined as follows:
31 March 2009 31 March 2008
Present value of funded obligations 38,204 17,462
Fair value of plan assets (21,861) -
Liability in the balance sheet 16,343 17,462
The movement in the defined benefit obligation over the year is as follows:
31 March 2009 31 March 2008
Beginning of the year 17,462 2,719
Current service cost 6,759 10,268
Interest cost 1,354 525
Actuarial losses 13,201 335
Liabilities acquired in a business combination - 5,990
Benefits paid - (548)
Exchange differences (572) (1,827)
End of the year 38,204 17,462
The movement in fair value of plan assets for the year is as follows:
31 March 2009 31 March 2008
Beginning of the year - -
Expected return on plan assets 102 -
Employer contributions 21,763 -
Benefits paid - -
Exchange differences (4) -
End of the year 21,861 17,462
Actual return on plan assets 102 -
The amounts recognised in the income statement are as follows:
31 March 2009 31 March 2008
Current service cost 6,759 10,268
Interest cost 1,354 525
Expected return on plan assets (102)
Actuarial losses 13,201 363
21,212 11,156
The principal actuarial assumptions used were as follows:
31 March 2009 31 March 2008
Discount rate 8.0 percent 8.6 percent
Future salary increases 7 percent 7 percent
Return on plan assets 9.15 percent -
Retirement age 58 years 58 years
Mortality rates at various age groups
18 years 0.000919 0.000919
23 years 0.001090 0.001090
28 years 0.001166 0.001166
33 years 0.001246 0.001246
38 years 0.001721 0.001721
43 years 0.002602 0.002602
48 years 0.004243 0.004243
53 years 0.007116 0.007116
58 years 0.011025 0.011025
Service leaving rates at specimen age groups
21*30 years 5 percent 5 percent
31*40 years 3 percent 3 percent
41*57 years 2 percent 2 percent
The group makes annual contributions under a group gratuity plan to Life Insurance Corporation of India ("LIC") of an amount advised by LIC. The group is not informed by LIC of the investments made by the LIC or the break-down of plan assets by type of investments. The expected rate of return on plan assets is based on the expectation of the average long-term rate of return expected on the insurer managed funds during the estimated term of the obligation. The group expects to contribute EUR5,954 towards gratuity plan in the year ended 31 March 2010.
19. Employee benefit expense
31 March 2009 31 March 2008
Salaries and wages 1,245,867 605,737
Share options granted to directors (note 14) 592,056 -
Employee welfare expenses 59,648 43,553
Retirement benefits-defined contribution plans 39,637 22,278
Retirement benefits-defined benefit plans (note 21,212 11,156
18)
Compensated absences 4,136 1,484
1,962,556 684,208
20. Other operating expenses
31 March 2009 31 March 2008
Advertisement and business promotion expenses 3,663 682
Communication expense 54,552 36,811
Rent 18,855 14,000
Rates and taxes 120,350 84,874
Fringe benefit tax 13,664 11,515
Insurance 137,548 57,989
Printing and stationery 17,961 9,310
Legal and professional charges 231,437 227,401
Audit fee 74,905 88,904
Repairs and maintenance 91,861 62,556
Directors fees and expenses 161,134 387,698
Travelling and conveyance expenses 57,095 79,568
Impairment of Electricity PPA 77,858 -
Other miscellaneous expenses 136,227 60,112
1,197,110 121,420
21. Finance income and costs
31 March 2009 31 March 2008
Finance income
Foreign exchange gain on financing activities 56,796 236,076
Gain on derivative financial instruments 162,380 388
Interest on bank deposits and others 697,245 567,336
Dividend from units of mutual funds 985 48,320
917,406 852,120
Finance cost
Interest cost
* on non-convertible bond 229,893 226,978
* on other borrowings 1,631,450 1,423,935
* on others 85,297 38,389
Bank charges 163,678 73,753
Foreign exchange loss on financing activities 183,332 468,779
2,293,650 2,231,834
Net finance costs 1,376,244 1,379,714
22. Income tax expense
31 March 2009 31 March 2008
Current tax 281,355 201,882
Deferred tax (note 17) 224,417 116,040
505,772 317,922
The tax on the group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:
31 March 2009 31 March 2008
Profit before income tax 3,165,745 2,821,347
Tax calculated at domestic tax rates applicable 992,445 920,815
to profits in the respective countries
Tax losses for which no deferred income tax 14,136 22,404
asset was recognised
Income not subject to tax (880,449) (865,779)
Temporary differences reversing within the tax 98,285 38,600
holiday period
Minimum alternate tax 281,355 201,882
Tax charge 505,772 317,922
The tax rates used in computing the weighted average tax rate is the substantively enacted tax rate. In respect of the Indian entities this was 33.99 percent for both the periods.
The Indian subsidiaries of the group engaged in power generation currently benefit from a tax holiday from the standard Indian corporate taxation rate which for the years ended 31 March 2008 and 2009 was 33.99 percent. The tax holiday period under the Indian Income Tax Act is for 10 consecutive tax assessment years out of a total of 15 consecutive tax assessment years from the tax assessment year in which commercial operations commenced. However, these companies are still liable for Minimum Alternate Tax which is calculated on the book profits of the relevant entity and is currently at a rate of 11.33 percent.
The group has recognised a provision for tax uncertainty on the sale of CER. Management is of the opinion that a liability should be recognised at the full substantively enacted rate of tax on the sale of CER, as the allowance of tax relief on such sale is not probable of being sustained on examination by the relevant tax authority.
23. Earnings per share
a) Basic
Basic earnings per share, is calculated by dividing the profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year.
31 March 2009 31 March 2008
Profit attributable to equity holders of the 2,659,973 2,503,425
company
Weighted average number of ordinary shares in 67,989,237 40,817,905
issue
Basic earnings per share (in cents) 3.91 6.13
b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The company has three categories of dilutive potential ordinary shares: convertible debt instruments, warrants issued along with non-convertible debt and share options issued under a share-based payment plan. The convertible debt instruments are assumed to have been converted into ordinary shares, and the net profit is adjusted to eliminate the interest expense less the tax effect. For the share warrants, a calculation is done to determine the number of shares that could have been acquired at fair value (assumed to be the placing price of EUR1.40 per share) based on the monetary value of the subscription rights attached to outstanding share warrants. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share warrants. For share options, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the company's shares) based on the monetary value of the subscription rights attached to and including the unrecognised compensation expense on outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.
31 March 2009 31 March 2008
Profit attributable to equity holders of the 2,659,973 2,503,425
company
Interest expense on convertible debt - 100,729
instruments
Profit used to determine diluted earnings per 2,659,973 2,604,154
share
Weighted average number of ordinary shares in 67,989,237 40,817,905
issue
* Assumed conversion of convertible debt - 4,441,478
instruments
* Share warrants - 1,078,103
Weighted average number of ordinary shares 67,989,237 46,337,486
fordiluted earnings per share
Diluted earnings per share (in cents) 3.91 5.62
Share options to purchase 6,798,924 ordinary shares (2008: NIL) during the year ended 31 March 2009 were not included in the computation of diluted earnings per share as these options were anti-dilutive.
For the year ended 31 March 2008 the basic and diluted earnings per share have been computed adjusting for the subdivision of the company*s share capital that occurred on its migration to the Isle of Man, as disclosed in note 14.
24. Commitments and contingencies
a) As at 31 March 2009, the group has a long-term contractual commitment under an ERPA to sell 51,642 CER (31 March 2008: 77,463) to a third party at a fixed price of EUR12 per CER. Subsequent to 31 March 2009, the group has sold NIL CER (31 March 2008: NIL CER) in respect of this ERPA.
If the group is unable to generate sufficient quantities of CER to fulfil its remaining contractual commitment to the third party, the CER would need to be sourced from elsewhere by the group. Whilst the projected cost of these alternate CER is indeterminable, it is possible that the group would have to acquire the CER at market prices in excess of their contractual sales value.
b) Andhra Pradesh Electricity Regulatory Commission (*APERC*) through its order dated 20 March 2004 did a downward revision of billing rates, effective from 1 April 2004. Consequent to the downward revision of the billing rates, the Non-Conventional Energy developers approached the High Court of Andhra Pradesh on the APERC*s order. The High Court issued an interim order allowing Transmission Corporation of Andhra Pradesh (*AP Transco*) to implement the revised tariff in addition to payment of 50% of the differential amount between the tariff payable as per the Power Purchase Agreement and as per APERC order. The case was referred to the Appellate Tribunal for Electricity which related that the order pronounced by the APERC is not valid and that the payment has to be made as per the original PPA. AP Transco filed appeals in the Supreme Court of India and the final judgment for the same is pending. In respect of the power generation units of the group situated in Andhra Pradesh, India, the group continued to raise invoices on AP Transco per the rates in the PPA.
Similarly, in respect of a power generation unit of the group situated in Karnataka, India, the group has filed a case which is pending before the Karnataka Electricity Regulatory Commission against the unilateral termination of the PPA and downward revision of billing rates by the Karnataka Power Transmission Corporation Limited (*KPTCL*). In similar cases, other renewable energy generating units got favourable orders. The group continued to raise invoices on KPTCL per the rates in the original PPA.
c) Capital commitments
Capital expenditure contracted for at 31 March 2009 but not yet incurred aggregated to EUR2,794,755 (31 March 2008: EUR2,491,809).
25. Business combinations
25.1. Acquisitions during the year ended 31 March 2009
During the year ended 31 March 2009, the group acquired the following companies. Details of these acquisitions are set out below:
Date of acquisition Percentage acquired
Jasper Energy Private Limited 11 November 2008 100%
(JEPL)
Kukke Hydro Projects Private 31 March 2009 100%
Limited (KHPPL)
The group has acquired and is a registered shareholder of 59 percent of the shares in issue of JEPL. The group controls more than 50 percent of the Board of JEPL. The operating and financial decision making powers vest with those directors. The consideration for additional 18 percent shares has already been paid by the group as at 31 March 2009, pending legal transfer. The time lag is on account of statutory compliances and approval from lenders that are perfunctory and do not affect the transaction. A liability for the consideration payable in respect of the balance 23 percent shares has been recognised in the books of account, since the group, though not the legal owner, is the beneficial owner of the remaining interest and effectively controls 100 percent interest in JEPL by virtue of the share purchase agreement. Consequently, no minority interest has been recognised in the consolidated financial statements as at 31 March 2009.
The group has acquired 100 percent of the shares of KHPPL. The group controls more than 50 percent of the Board of KHPPL as on 31 March 2009. The operating and financial decision making powers vest with those directors. Substantial consideration was paid and the transfer of shares to the group was approved by the board of directors of KHPPL as on 31 March 2009. The legal transfer of shares got completed on 16 April 2009. A liability for the consideration payable EUR179,312 has been recognised in the books of accounts.
Results of the acquired entities have been consolidated in the income statement from the date of acquisition. If the acquisition had occurred on 1 April 2008, the group's revenue and net profit for the year ended 31 March 2009 would not be affected since JEPL and KHPPL are development stage entities.
Details of net assets acquired and goodwill are as follows:
JEPL KHPPL Total
Purchase consideration
- Cash paid 1,073,139 489,034 1,562,173
- Amount payable 742,942 179,312 922,254
- Direct costs relating to the 11,557 - 11,557
acquisition paid
- Direct costs relating to the 8,255 7,410 15,665
acquisition payable
Total purchase consideration 1,835,893 675,756 2,511,649
Fair value of net assets acquired 3,269,191 1,043,434 4,312,625
Excess of group's interest in the fair (1,433,298) (367,678) (1,800,976)
value of acquiree's assets and
liabilities over cost
JEPL has three licences for the construction of hydro power projects in the state of Karnataka, India, aggregating to 27.5 MW. Construction of one hydro power project of 10.5 MW was in progress at the time of acquisition. KHPPL is developing two hydro power projects aggregating to a capacity of 22.75 MW in the state of Karnataka, India. The implementation of the project was in progress at the time of acquisition. Licences were obtained and certain agreements were executed for implementation of the project.
Generally, the total gestation period, starting from obtaining licence till commencement of commercial operations, for hydro power projects of this size and model is 5 to 6 years. Hence, the project has enormous value embedded in it, which is generally not reflected in the books of account, and captured in the fair value of licences. The excess of the group's interest in the fair value of acquiree's assets and liabilities over cost is resulting on account of the time value which the group gained, the value in near readiness for starting the commercial operations in a quick time, the value in ordering and almost readiness of all required equipment, suppliers and contractors, and the negotiation skills of the group.
The fair value of the acquiree's assets and liabilities arising from the acquisition were as follows:
JEPL KHPPL Total
Property, plant and equipment 4,297,074 10,114 4,307,188
Licence 1,816,081 1,348,548 3,164,629
Electricity PPA 100,710 - 100,710
Trade and other receivables 43,069 - 43,069
Cash and cash equivalents 5,509 467 5,976
Borrowings (2,400,305) - (2,400,305)
Trade and other payables (181,423) (10,114) (191,537)
Deferred income tax liabilities (411,524) (305,581) (717,105)
Net assets acquired 3,269,191 1,043,434 4,312,625
Purchase consideration settled in 1,084,696 489,034 1,573,730
cash
Cash and cash equivalents acquired (5,509) (467) (5,976)
Cash outflow on acquisition 1,079,187 488,567 1,567,754
The acquiree's carrying amount of assets and liabilities arising from the acquisition are as follows:
JEPL KHPPL Total
Property, plant and equipment 4,348,538 10,114 4,358,652
Licence - - -
Electricity PPA - - -
Trade and other receivables 43,069 - 43,069
Cash and cash equivalents 5509 467 5,976
Borrowings (2,400,305) - (2,400,305)
Trade and other payables (165,283) (10,114) (175,397)
Deferred income tax liabilities - - -
Net assets 1,831,528 467 1,831,995
25.2. Acquisitions during the year ended 31 March 2008
During the year ended 31 March 2008, the group acquired the following companies. Details of these acquisitions are set out below:
Date of acquisition Percentage acquired
Roshni Powertech Limited (*Roshni) 27 June 2007 100 percent
ISA Power Private Limited (*ISA*) 1 September 2007 100 percent
Ecofren Power & Projects Limited 1 September 2007 100 percent
(*Ecofren*)
AMR Power Private Limited (*AMR*) 27 January 2008 100 percent
Rithwik Energy Generation Private 8 March 2008 60 percent
Limited (*REGPL*)
AMR and REGPL are hydel power projects which were in the final stages of construction. These two companies were common control entities. The acquisition of these two companies was negotiated as one transaction and considered accordingly for the purposes of accounting under IFRS 3. The group had acquired and was a registered shareholder of 60 percent of the shares in issue of REGPL at acquisition. The group controlled 50 percent of the Board of REGPL. The operating and financial decision making powers vested with those directors. The consideration for additional 20% shares was paid by the group as at 31 March 2008, pending legal transfer. The time lag was on account of statutory compliances and approval from lenders that were perfunctory and did not affect the transaction. Consequently, no minority interest was recognised in the consolidated financial statements as at 31 March 2008. A liability for the consideration payable in respect of the balance 20 percent shares was recognised in the books of account. Consideration was paid for 16 percent shares and the balance is yet to be paid.
The total purchase consideration of EUR18,495,359 in respect of all the above acquisitions was allocated to tangible assets of EUR46,078,470, intangible assets of EUR5,525,546, net current liabilities of EUR759,386, borrowings of EUR33,483,960, and deferred income tax liabilities of EUR1,262,828 resulting in a residual goodwill of EUR2,397,517. There have been no subsequent changes to the fair values of the assets acquired and liabilities assumed.
During the year ended 31 March 2008, the group acquired the balance 50 percent interest in Ravikiran Power Projects Private Limited ("Ravikiran"). The group was already holding 50 percent interest in Ravikiran which was accounted as an associate till 31 December 2007 (note 7). The investment was accounted as a step acquisition in accordance with IFRS 3.
The total purchase consideration of EUR1,749,416 was allocated to tangible assets of EUR4,633,149, intangible assets of EUR1,099,966, net current assets of EUR742,726, borrowings of EUR4,248,513, deferred income tax liabilities of EUR7,580, and share of earnings and reserves in respect of the previously held interests of EUR43,395 resulting in an asset revaluation surplus of EUR469,357, residual goodwill on the date of first exchange of EUR258,471, excess of group's interest in the fair value of acquiree's assets and liabilities over cost on the date of second exchange of EUR216,051. Excess of group's interest in the fair value of acquiree's assets and liabilities over cost of EUR216,051 was recognised in the income statement for the year ended 31 March 2008. There have been no subsequent changes to the fair values of the assets acquired and liabilities assumed.
26. Related-party transactions
The group is not controlled by any single individual or group or entity. Aloe Environment Fund and Aloe Environment Fund II (which are both managed by Aloe Private Equity S.A.S.) together with a share holding of 34.5 percent as at 31 March 2009 have significant influence over the group.
The following transactions were carried out with related parties:
a) Key management compensation
2009 2008
Salaries paid through an entity in which key management - 126,000
personnel have an interest
Salaries and other short-term employee benefits 666,125 247,500
Consultancy fee - 61,250
IPO bonus - 100,000
Share options granted to directors 592,056 -
Reimbursement of expenses 37,368 -
1,295,549 534,750
In addition to the above, fees aggregating to EUR124,583 (2008: EUR87,375) were paid to the non-executive directors.
b) Other transactions
During the year ended 31 March 2008, 75 shares of face value EUR10 each have been issued to a relative of a key management personnel at a price of EUR100 per share.
27. Events after the balance sheet date
The group completed the acquisition of licence for the development of 24 MW hydro power project in the state of Himachal Pradesh.
This information is provided by RNS
The company news service from the London Stock Exchange
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FR LRMJTMMJTTJL
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