Final Results

28th Sep 2009 07:00



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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 

Operating Headlines

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

Post year end

Reached an Agreement for acquisition of  96 MW hydro plant in Sikkim (North East India) which makes 250 MW capacity under development.

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:

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 €13,874,927 (2008: €13,120,570) 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  €2,659,973 (2008: €2,503,425). EBITDA, a key performance indicator for Greenko, was € 6,063,796 (2008:€ 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 €11,376,356 (2008: € 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 €13 /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 20092 Minsitry of Power, CEA and McKinsey: Capacity includes both renewable and conventional capacity3 Minsitry of Power, CEA and McKinsey: Capacity includes both renewable and conventional capacity4 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 €13.9m (2008:€13.1m) and the profit after tax was €2.7m (2008 €2.5m) which equates to earnings per share of 3.91 cents (2008 6.13 cents). EBITDA for the year was €6.1m (2008: €5.3m). Cash in hand and current bank deposits at the year end was €11,376,356 (2008: € 23,965,075).

Greenko Group has recently signed an agreement for Rs 285 crores ( about € 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 €13.

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

Arden Partners plc
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 Officer	Joint Managing Director & President
24 September 2009

Consolidated income statement

	Note	Year ended 31 March
		2009	2008
Sale of power		12,647,764	10,653,003
Sale of 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 of acquiree’s assets and liabilities over cost	25	1,800,976	216,051
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 the equity holders of the company during the year	23
— 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 A ordinary shares		Ordinary shares		Series A irredeemable preferred shares		Share warrants	Share premium	Revaluation reserve	Currency translation reserve	Other reserves	Retained earnings
	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 financial assets	-	-	-	-	-	-	-	-	-	-	2,314	-	2,314
- intangible assets	-	-	-	-	-	-	-	-	432,382	-	-	-	432,382
Amortization transfer, intangible assets	-	-	-	-	-	-	-	-	(15,235)	-	-	15,235	-
Currency translation differences	-	-	-	-	-	-	-	-	-	(2,749,924)	-	-	(2,749,924)
Net income/ (expense) recognised directly in equity	-	-	-	-	-	-	-	-	417,147	(2,749,924)	2,314	15,235	(2,315,228)
Profit for the year	-	-	-	-	-	-	-	-	-	-	-	2,503,425	2,503,425
Total recognised income/(expense) for the year	-	-	-	-	-	-	-	-	417,147	(2,749,924)	2,314	2,518,660	188,197
Proceeds from issue of shares prior to IPO	-	-	2,650	26,500	-	-	(235,414)	383,914	-	-	-	-	175,000
Conversion of other classes of shares into ordinary shares	(3,200)	(32,000)	10,000	100,000	(6,800)	(68,000)	-	-	-	-	-	-	-
Sub-division of shares	-	-	25,287,350	-	-	-	-	-	-	-	-	-	-
Proceeds from issue of shares in IPO	-	-	42,689,237	213,446	-	-	-	56,058,774	-	-	-	-	56,272,220
Direct costs relating to issue of shares in IPO	-	-	-	-	-	-	-	(3,495,150)	-	-	-	-	(3,495,150)
	(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 reserve	Revaluation reserve	Currency translation reserve	Other reserves	Retained earnings
	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 assets	-	-	-	-	-	-	(15,207)	-	(15,207)
Amortization transfer, intangible assets	-	-	-	-	(59,032)	-	-	59,032	-
Grants received from Government of India(note 14)	-	-	-	-	-	-	350,664	-	350,664
Currency translation differences	-	-	-	-	(25,082)	(3,436,420)	-	-	(3,461,502)
Net income/ (expense) recognised directly in equity	-	-	-	-	(84,114)	(3,436,420)	335,457	59,032	(3,126,045)
Profit for the year	-	-	-	-	-	-	-	2,659,973	2,659,973
Total recognised income/(expense) for the year	-	-	-	-	(84,114)	(3,436,420)	335,457	2,719,005	(466,072)
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 value of acquiree's assets and liabilities over cost	25	(1,800,976)	(216,051)
	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 equipment and capital expenditure		(10,074,558)	(5,728,962)
	Proceeds from sale of property, plant and equipment		-	27,163
	Purchase of investments, net of redemption		-	(36,437)
	Acquisition of business, net of cash acquired	25	(1,567,754)	(17,963,129)
	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 equivalents		(19,523,260)	23,449,062
	Cash and cash equivalents at the beginning of the year	13	23,430,125	1,195,139
	Exchange losses on cash and cash equivalents		(248,962)	(1,214,076)
	Cash and cash equivalents at the end of the year	13	3,657,903	23,430,125

 

Notes to the consolidated financial statements

 

Greenko Group plc ("the company") was originally incorporated on 12 January 2006 as Greenko S.A., a société 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 Sociétés 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.

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.

The consolidated financial statements include the following subsidiaries:

		Country of incorporation	Holding as at 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 Private Limited	India	100 percent
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 Limited	India	100 percent
	- Visveswarayya Green Power Private Limited	India	100 percent
	- Technology House (India) Private Limited	India	100 percent
	- AMR Power Private Limited	India	100 percent
	- Jasper Energy Private Limited	India	100 percent
	- Kukke Hydro Projects Private Limited	India	100 percent
6)	Entity jointly owned by Greenko Mauritius and Greenko Energies Private Limited
	- Ravikiran Power Projects Private Limited	India	100 percent

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.

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.

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' ("€"), 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:

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.

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.

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:

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.

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.

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).

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.

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.

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.

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.

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.

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.

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.

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.

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.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

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.

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.

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.

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.

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.

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.

At 31 March 2009	Less than 1 year	Between 1 and 2 years	Between 2 and 5 years	Over  5 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 than 1 year	Between 1 and 2 years	Between 2 and 5 years	Over  5 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	-	-	-

 

 

5. Property, plant and equipment

	Land	Buildings	Plant and machinery	Furniture, fixtures & equipment	Vehicles	Capital work-in-progress	Total
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 €2,729,265 (2008: €369,193).

Total term loans as at 31 March 2009 aggregating to €38,846,789 (31 March 2008: €34,803,206) (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.

	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 (note 25.2)	3,457,091	3,168,421	2,655,988	9,281,500
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 (note 25.1)	3,164,629	100,710	-	3,265,339
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.

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 €761.

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)

The accounting policies for financial instruments have been applied to the line items below:

 

31 March 2009	Loans and receivables	Assets at fair value through profit and loss	Available- for-sale	Total
Assets as per balance sheet
Available-for-sale financial assets (note 9)	-	-	27,069	27,069
Bank deposits	7,990,698	-	-	7,990,698
Trade and other receivables (note 11)	14,996,889	-	-	14,996,889
Derivative financial instruments (note 10)	-	156,725	-	156,725
Cash and cash equivalents	3,657,903	-	-	3,657,903
Total	26,645,490	156,725	27,069	26,829,284
		Liabilities at fair value through profit and loss	Other financial liabilities	Total
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 receivables	Assets at fair value through profit and loss	Available-for-sale	Total
Assets as per balance sheet
Available-for-sale financial assets (note 9)	-	-	44,040	44,040
Bank deposits	823,031	-	-	823,031
Trade and other receivables (note 11)	5,835,548	-	-	5,835,548
Cash and cash equivalents	23,430,125	-	-	23,430,125
Total	30,088,704	-	44,040	30,132,744
		Liabilities at fair value through profit and loss	Other financial liabilities	Total
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 €7,985,511 (31 March 2008: €817,483).

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.

	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 €985 (2008: €48,320) 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.

	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 €908,461 (31 March 2008: NIL).

	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 receivables	(335,163)	(86,878)
Current portion	14,661,726	7,806,666
Trade and other receivables include financial assets aggregating to	4,826,784	5,835,548

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 €1,185,852 (31 March 2008: €1,029,675) 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 €2,401,806 (31 March 2008: €2,081,557) 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	-	-

 

	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 €1,185,852 (31 March 2008: €1,029,675) are secured against inventory and trade receivables. Cost of material consumed during the year aggregated to €6,044,294 (2008: €5,850,213).

	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

	31 March 2009	31 March 2008
Authorised capital
- 90,000,000 (31 March 2008: 75,000,000) ordinary shares of  €0.005 each	450,000	375,000
Issued and fully paid
- 67,989,237 ordinary shares of €0.005 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 €441.18 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 €0.005 each and issued and paid-up share capital of 25,300,000 ordinary shares of €0.005 each. The ordinary shares of the company were listed on London Stock Exchange-Alternative Investment Market on 7 November 2007. The issue price was €1.40 per ordinary share. Ordinary shares issued during the year ended 31 March 2008 comprise of:

Issued to	Date of allotment	Par value (€)	Number of shares
Directors	24 April 2007	10	650
Bond holders on exercise of warrants	16 October 2007	10	1,000
Directors and relatives	31 October 2007	10	1,000
Conversion of loan notes issued to Aloe Environment Fund II (note 16)	31 October 2007	0.005	7,714,980
A mutual fund in India per the terms of the shareholders agreement executed with a group entity (note 16)	31 October 2007	0.005	2,830,246
Initial public offering ("IPO")	7 November 2007	0.005	32,144,011

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 price (pence per share)	Number of options		Average exercise price (pence per share)	Number of options
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 €0.40 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.

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 €350,664 (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.

	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.

	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 €7,834,534 (31 March 2008: €817,483).

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 institutions	1,367,886	1,333,272		3,193,065	3,131,720
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

	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

 

	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

 

On 12 January 2006 the company issued to two private individuals 1,000 6% non-convertible bonds with par value of €3,000 each, for a total consideration of €3 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 €10 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 €235,414, 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

 

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 €8 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 €1.05 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 €1.12 per ordinary share. The preference shares were redeemed by GEPL at par value in February 2008. Loss on foreign currency fluctuation of €357,835 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.

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 statement	103,150	12,890	116,040
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 statement	224,417	-	224,417
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

	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 €5,954 towards gratuity plan in the year ended 31 March 2010.

	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 18)	21,212	11,156
Compensated absences	4,136	1,484
	1,962,556	684,208

 

	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

	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

	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 to profits in the respective countries	992,445	920,815
Tax losses for which no deferred income tax asset was recognised	14,136	22,404
Income not subject to tax	(880,449)	(865,779)
Temporary differences reversing within the tax holiday period	98,285	38,600
Minimum alternate tax	281,355	201,882
Tax charge	505,772	317,922

 

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 company	2,659,973	2,503,425
Weighted average number of ordinary shares in issue	67,989,237	40,817,905
Basic earnings per share (in cents)	3.91	6.13

 

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 €1.40 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 company	2,659,973	2,503,425
Interest expense on convertible debt instruments	-	100,729
Profit used to determine diluted earnings per share	2,659,973	2,604,154
Weighted average number of ordinary shares in issue	67,989,237	40,817,905
— Assumed conversion of convertible debt instruments	-	4,441,478
— Share warrants	-	1,078,103
Weighted average number of ordinary shares for diluted earnings per share	67,989,237	46,337,486
Diluted earnings per share (in cents)	3.91	5.62

 

	Date of acquisition	Percentage acquired
Jasper Energy Private Limited (JEPL)	11 November 2008	100%
Kukke Hydro Projects Private Limited (KHPPL)	31 March 2009	100%

 

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 €179,312 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 acquisition paid	11,557	-	11,557
- Direct costs relating to the acquisition payable	8,255	7,410	15,665
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 value of acquiree's assets and liabilities over cost	(1,433,298)	(367,678)	(1,800,976)

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 cash		1,084,696	489,034	1,573,730
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

 

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 (“Ecofren”)	1 September 2007	100 percent
AMR Power Private Limited (“AMR”)	27 January 2008	100 percent
Rithwik Energy Generation Private Limited (“REGPL”)	8 March 2008	60 percent

 

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 €18,495,359 in respect of all the above acquisitions was allocated to tangible assets of €46,078,470, intangible assets of €5,525,546, net current liabilities of €759,386, borrowings of €33,483,960, and deferred income tax liabilities of €1,262,828 resulting in a residual goodwill of €2,397,517. 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 €1,749,416 was allocated to tangible assets of €4,633,149, intangible assets of €1,099,966, net current assets of €742,726, borrowings of €4,248,513, deferred income tax liabilities of €7,580, and share of earnings and reserves in respect of the previously held interests of €43,395 resulting in an asset revaluation surplus of €469,357, residual goodwill on the date of first exchange of €258,471, excess of group's interest in the fair value of acquiree's assets and liabilities over cost on the date of second exchange of €216,051. Excess of group's interest in the fair value of acquiree's assets and liabilities over cost of €216,051 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.

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:

	2009	2008
Salaries paid through an entity in which key management personnel have an interest	-	126,000
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 €124,583 (2008: €87,375) were paid to the non-executive directors.

During the year ended 31 March 2008, 75 shares of face value €10 each have been issued to a relative of a key management personnel at a price of €100 per share.

The group completed the acquisition of licence for the development of 24 MW hydro power project in the state of Himachal Pradesh.

ENDFR LRMJTMMJTTJL

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Related Shares:

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