Interim Results - Replaced
KSK Power Ventur PLC
12 December 2007
The following announcement replaces RNS7068J released at 07:00am this morning.
KSK's projects under construction total 675 MW, giving a total project pipeline
of 7,000 MW. All other project capacities in the Company's pipeline remain the
same.
KSK Power Ventur plc
('KSK', the 'Company' or the 'Group')
Interim Results
for the six months ended 30 September 2007
KSK Power Ventur plc (AIM: KSK), the power project development company with
interests in multiple power plants across India, today announces its unaudited
interim financial results for the six months ended 30 September 2007.
Financial Highlights
•Turnover up 431% to $13.5m (2006: $3.1m)
•Gross profit up 371% at $5.9m (2006: $1.6 m)
•Profit from operations up at $3.5m (2006: $(0.5)m)
•Profit before tax up at $23.5m (2006: $(1.1)m)
•Net profits up at $20.9m (2006: $(1.3)m)
All financial figures represented are in US dollars unless otherwise stated. The
figures for the corresponding reporting period last year relate to KSK Energy
Ventures Private Limited, the 100% owned Indian subsidiary of the Company. The
Company acquired a controlling interest in the downstream subsidiary and joint
venture companies on 4 November 2006.
The profit before tax for the current reporting period includes $17.4m on
account of valuation of investments held for trading at fair market value,
premium on sale of equity $3.6m and interest income of $3.4m.
Operational Highlights
•Operational capacity of 210 MW
•Plants under construction of 675 MW
•Significant progress in the development of the Wardha Power 1,200 MW
power plant in Chattisgarh
•Additional projects in pipeline - 2,000 MW thermal and 400 MW renewable
energy, totalling 7,000MW, as a combination of projects under operation,
construction, development and pipeline
•Agreement for a new coal block allotted , with a capacity of 250 MT,
resulting in the addition of 2,000 MW in thermal capacity, as described
above
•Acquisition of strategic stake by General Electric Company in Sayi Power
Energy Limited
•Appointment of Mr. Scott Bayman to the Board as a Non-Executive Director
Commenting on the results, T L Sankar, Chairman of KSK said:
'The period was highly successful for KSK. Since our admission to AIM in
November 2006, the Company has not only focused on the growth opportunities open
to us through the development and construction initiatives of a range of power
projects across India but also taken advantage of investing in opportunities to
create significant shareholder value in the medium term.
'The Company sees significant opportunities in the second half and early part of
the next year. These are exciting times for the Company with a number of further
projects underway. We remain confident in our growth prospects and in our
ability to meet expectations for the full year.'
For further information, please contact: www.ksk.co.in
KSK Power Ventur plc +(91) 40 2355 9922 - 25
S. Kishore, Executive Director
K.A. Sastry, Executive Director
Arden Partners plc +44(0) 20 7398 1632
Richard Day
Adrian Trimmings
Buchanan Communications Limited +44(0) 20 7466 5000
Mark Edwards
Ben Willey
Chief Executive Review
Introduction
This has been another period of significant progress for the Group, both in our
continuing development programme and new opportunities being pursued. The
results for the period detail the unaudited consolidated results for the Company
for the six months period ending 30 September 2007.
Overall, the financial performance for the period has been good, with continuing
development activities as well as the profitable underlying power plant
operations.
Review of Projects
The Company currently is working with project pipeline opportunities of 7200+ MW
total capacities, as detailed below
Projects under Operation
(a) Prior plants directly held
•RVK Energy, 19.2 MW natural gas based power plant in Andhra Pradesh
operating since January 2000
•Kasargod Power 20.4 MW LSHS based power plant in the state of Kerala
Operating since May 2001
•Coromandel Electric 26.2 MW natural gas based power plant in the state of
Tamil Nadu operating since November 2004
(b) Three plants have been commissioned during the last year
•Arasmata 43 MW coal based power plant in the state of Chattisgrah
operating with supplies to Lafarge India
•Sai Regency 58 MW natural gas based power plant in the state of Tamil
Nadu operating with supplies to multiple industrial customers
•Sitapuram 43 MW coal based power plant in state of Andgra Pradesh with
supplies to Zuari Cements & Sri Vishnu Cements (Italcementi Group)
Total 210 MW
Projects under Construction
•VS Lignite, 135 MW lignite based power plant in Rajasthan with supplies
to multiple industrial customers. This plant is due for completion and
commissioning in Q3 2008. Materials required for construction have reached
the site and progress is encouraging.
•Wardha Power, 540 MW Warora power plant, the coal based power plant in
Maharashtra is due for completion and commissioning in 2009. The land
required for the project has been acquired and orders have been placed for
equipment supply, erection and commissioning, and construction. Importing
the power plant equipment is expected to commence in Q1 2008 while the
commissioning of the plant is expected to be completed in 2009. Additional
coal linkage has been obtained for the power plant to ensure availability of
coal for power generation in the interim pending commencement of coal
mining.
Total 875 MW
Projects under Advanced Development
•Wardha Power, 1,200 MW power plant in Chattisgarh has witnessed
significant progress with respect to land acquisition, water linkage, and
granting various statutory approvals required for the project. This project
is now on fast track for development and we expect significant movement
towards financial closure and finalisation of the EPC contractors over the
next six months.
•Arasmeta, 43 MW coal based, expansion power plant in Chattisgrah with
supplies to Lafarge and multiple industrial customers. The Company has
received term sheets from General Electric Company ('GE') with respect to
the entire SPV debt requirements and is finalising the EPC contract for
initiating construction work at the site.
•KSK Dibbin Hydro Power, 125 MW hydro-electric power plant in Arunachal
Pradesh has witnessed substantial progress over the last few months. With
availability of detailed project report ('DPR') and necessary permissions,
the Company expects to obtain necessary debt financing before Q2 2008.
Total 1,368 MW
Projects under Development
The Company continues to work on additional power plant opportunities to develop
the pipeline including the following:.
•Kamang Dam hydro-electric power 1,000 MW of hydro-electric power
consisting of 600 MW Kamang Dam and 400 MW of new additional downstream
developer identified power plant opportunities recently acquired from
Government of Arunachal Pradesh.
•JR Power, with potential for 2,000 MW of power plants based on the
recently secured access to coal supplies KSK-Narmada Power Company, pursuit
of 1,800 MW coal based power plant based on a Memorandum of Understanding
('MoU') with Madhya Pradesh State Mining Corporation. (see further details
below)
Total 4,800 MW
Coal block and new project
KSK has continued to seek to take all necessary steps to ensure it has secure
access to coal and lignite blocks in various locations so as to ensure
continuity of fuel supply and control of its fuel costs for its various power
plant initiatives. In addition to its existing access to fuel resources, the
Company is pleased to report access to additional fuel resources of 250 MT, from
an additional coal block in the state of Orissa. This block has been allotted to
the Pondicherry Industrial Development Corporation (PIPDIC) and an agreement has
been entered into to execute this project. The Company estimates that this will
provide an additional capacity of 1,750-2,000 MW. The Company intends to execute
this power project through a special purpose vehicle called JR Power.
Renewable energy
Out of the existing pipeline of 725 MW, KSK has received the DPR for the first
125 MW. It has filed the DPR for the requisite approvals and has since formed a
team for execution under the stewardship of, Mr. Satish Sharma, Senior Technical
Director in one of India's largest government owned hydro- electric project
companies.
The project is expected to achieve financial closure in Q2 of 2008.
Prefeasibility studies have been commissioned in respect of the 600 MW Kameng
hydro-electric projects. Further opportunities have been identified for a number
of hydro electric projects, aggregating to an additional capacity of
approximately 400 MW in the Kamang basin of State of Arunachal Pradesh , for
which an MoU has been signed with the government of Arunachal Pradesh.
With this, the total portfolio of hydro-electric power plants which KSK has
under development have increased from 725 MW to 1,125 MW.
KSK is also broadening its renewable energy project initiatives by entering the
area of solar power generation. KSK is exploring the potential for them to
consider, manufacture and export solar modules in the first phase and,
thereafter, develop large capacity projects in India. The Company is in
discussions with a technology company in the USA for the relevant collaboration
in this regard and intends to have a research and development programme to
address this vast renewable power opportunity in the near future.
GE announcement
As announced on 15 November 2007, KSK entered into a strategic relationship with
GE, a diversified business with extensive global energy sector expertise and
headquartered at Fairfield, Connecticut, USA. As stated at the time, GE will be
participating in the debt and equity of the Company and its subsidiaries. As a
first step, GE purchased the indirect interest of Mr. Hari Kiran Vadlamani, one
of the promoter Directors of KSK, who resigned from the KSK Group.
The appointment of a GE senior executive with significant global experience in
the energy space as an additional Non-Executive Director for the Company should
be finalised and announced shortly.
Lehman JV
The Company through its indirect Indian subsidiary KSK Energy Ventures Private
Limited has a strategic ownership of 35% in a Lehman Brothers ('Lehman') joint
venture.
The Company is reviewing the options for this area of business and has had
discussions with Lehman with a view to enhancing KSK's stake in the joint
venture to a majority holding. This reorganization is currently being reviewed
generally and would also require approval from the relevant authorities. Any
further details will be released in due course. One development currently being
considered is the potential for an Indian initial public offering.
Management appointments
In addition to the GE senior executive who will be joining the Main Board, KSK
is pleased to announce with immediate effect, the appointment of Mr. Scott
Bayman as a Non-executive Director. Mr. Bayman has many years experience and
also sits on the Board of Crompton Greaves Limited, India, Punj Lloyd Limited,
India and Jubilant Energy, Amsterdam. Mr. Bayman is also an Advisor to the
Boeing Company and a Senior Director of Stonebridge International, LLC Mr.
Bayman holds a Masters degree in Management from the Alfred P. Sloan School of
Management, MIT, Massachusetts. Further details in accordance with Schedule
2(g) of the London Stock Exchange AIM Rules on Mr. Bayman's background will be
included in a separate announcement.
In addition, the senior management of the Group will be strengthened by a new
Group Chief Financial Officer, Mr. Durga Shankar who has over 24 years of
senior level experience in all aspects of Corporate Finance. He has been
involved in Project Evaluation, Corporate Treasury, International Investor
Relations, Fund Management, Corporate Strategy and Investment Banking
Advisory. Mr Durga Shankar is an Associate Member of the Institute of Chartered
accountants of India (ACA) and has worked with the ICI Bank in India in various
capacities.
Financial Overview
The consolidated operating revenue for the reporting period of the Company from
power generating activities and project development activities stood at $13.5m.
Gross Profit on the Operating Revenue stood at $5.9m.
Operating income for the period stood at $3.5m as per income statement. $3.4m on
account of profit earned from sale of equity which by virtue of accounting
treatment is required to be classified under Other income. The Company also had
a valuation gain of $17.4m on account of the fair valuation of the equity stake
held in Gujarat Mineral Development Corporation which is accounted through the
Income Statement in view of the said investment being held as Available for
Trading.
Finance costs for the reporting period stood at $4.4m.
Profit before tax stood at $23.5m including the effect of valuation gain on the
investments held as Available for Trading. The Earnings per Share for the
period was $0.162
Outlook
The Company sees significant opportunities in the second half and early part of
the next year. These are exciting times for the Company with a number of
further projects underway. We remain confident in our growth prospects and in
our ability to meet expectations for the full year.
Comparative statement
Comparative interim results for the period to 30 September 2006 are not shown as
KSK Power Ventur plc, the listed entity, only came into existence on 17 July
2006 and the Directors do not believe any such comparative information would be
meaningful. The Group's audited results for the period to 31 March 2007, as
shown in the preliminary results announced on 30 July 2007, are used as a
comparative covering the period from 17 July 2006 to 31 March 2007.
Consolidated Balance Sheet (Unaudited)
(All amounts in thousands of US Dollars, unless otherwise stated)
As at 30 As at 31 March
September 2007 2007
(Unaudited) (Audited)
ASSETS
Non current assets
Property, plant and equipment, net 90,610 92,490
Goodwill - 2,703
Long term
financial assets 20,543 10,793
Total non current assets 111,153 105,986
Current assets
Cash and cash equivalents 13,023 3,341
Restricted cash 45,822 59,862
Available for Sale investments 43 28
Trading Securities 49,345 -
Accounts receivable, net 4,253 3,689
Inventories 1,597 1,129
Other current assets 46,417 46,294
Total current assets 160,500 114,343
Total Assets 271,653 220,329
LIABILITIES AND STOCKHOLDERS' EQUITY
Non current liabilities
Long-term debt (net of current portion) 66,399 73,749
Employee obligations 30 17
Deferred tax liabilities 2,146 122
Other liabilities 30,326 11,952
Total non current liabilities 98,901 85,840
Current liabilities
Provisions 660 153
Trade and other payables 7,877 6,990
Current tax liabilities, net of advances 2,705 2,292
Short-term loans and borrowings 14,926 180
Current portion of long term debt 54,593 56,661
Other liabilities 4,195 3,021
Total current liabilities 84,956 69,297
Total liabilities 183,856 155,137
Stockholders' equity
Share capital 216 216
Additional paid up capital 52,697 52,697
Other reserves 1,942 1,942
Translation reserve 4,206 2,521
Retained earnings 28,736 7,816
Total stockholders' equity 87,797 65,192
Total liabilities and stockholders' equity 271,653 220,329
Consolidated Statement of Income (Unaudited)
(All amounts in thousands of US Dollars, unless otherwise stated)
For the six For the six
month period to month period to
30 September 30 September
2007 2006*
(Unaudited) (Unaudited)
Operating revenue 13,465 3,122
Cost of sales (7,543) (1,529)
Gross Profit 5,922 1,593
Distribution expenses 206 2
General and administrative expenses 2,258 2,007
Operating income 3,458 (416)
Other income 3,384 142
Investment income 21,034 18
Finance cost (4,416) (866)
Net income before tax 23,460 (1,122)
Taxation charge
Current tax expenses 527 187
Deferred tax expenses 2,013 -
Total Tax 2,540 187
Net Income attributable to equity shareholders 20,920 (1,309)
Earnings per share
Continuing operations
Basic and diluted (in USD) 0.162 (4.40)
* Comparative figures for the six month period to 30 September 2006 are shown
for illustrative purposes only and relate to KSK Energy Ventures Private
Limited, the 100% owned Indian subsidiary of the Company. The Company acquired a
controlling interest in the downstream subsidiary and joint venture companies on
4 November 2006 in connection with the Company's AIM IPO.
Consolidated Statement of Cash Flows (Unaudited)
(All amounts in thousands of US Dollars, unless otherwise stated)
Particulars Period ended 30 Period ended 30
September 2007 September 2006*
(Unaudited) (Unaudited)
(A) Cash inflow/ (outflow) from operating
activities
Net income/(loss) before tax 23,460 (1,122)
Adjustments to reconcile net income before
tax to net cash provided by operating
activities:
Depreciation and amortization 1,437 489
(Profit)/Expense on sale of investments (3,578) 866
(Increase)/Decrease in fair value of
Trading Securities (17,050) (121)
Dividend Income (406) (1)
Changes in operating assets and liabilities
Restricted cash - (36)
Accounts receivable and other assets (687) (8,204)
Inventory (468) (152)
Loans and Advances 39,197 (3,767)
Current Liabilities and Provisions 36,069 -
Net changes in operating assets and
liabilities 77,975 (12,159)
Direct Tax paid (540) (187)
Net cash provided by operating activities 77,435 (12,346)
(B) Cash inflow/ (outflow) from investing
activities
(Increase)/Decrease in restricted cash 14,040 -
Sale of investment - 145
(Additions) to capital work in progress
(net) - (4,349)
Purchase of investments - (823)
Dividends paid to equity shareholders (78) 1
Interest paid on loans (4,416) 121
Payments for purchase of property plant
and equipment - (26)
Cash received from sale of interest in JV
companies 4,583 -
Consideration paid for the acquisition of
equity interests in joint ventures (57,801) 17,724
Trading Securities (31,911) -
Net cash used in investing activities (75,583) 12,793
(C ) Cash inflow/ (outflow) from financing
activities
Adjustments for changes in controlling
interest - (8,823)
Proceeds from Loans 77,550 19,419
Decrease/(Increase) in borrowings on
account of acquisition (38,407) (866)
Dividends from equity investments 406 -
Interest on loans 4,416 (10)
Repayment of secured loans (36,271) (9,149)
Proceeds from issue of share capital - 1,464
Changes in minority interest - (58)
Dividend Paid (including tax on dividend) (78) -
Net cash provided by/(used in)
financing activities 7,615 1,977
(D) Effect of exchange rate changes on cash 215 (162)
Net increase/(decrease) in cash and cash
equivalents 9,682 2,535
Cash and cash equivalents at the beginning
of the period 3,341 4,954
Cash and cash equivalents at the end of the
period 13,023 7,327
Cash and cash equivalents comprise
Cash in hand 7,055 904
Balances with banks 5,968 6,423
13,023 7,327
Consolidated Statement of Changes in Shareholders' Equity (Unaudited)
(All amounts in thousands of US Dollars, unless otherwise stated)
Common Common Other Additional Translation Retained Total
stock - No. of stock - Reserve paid in reserve Earnings stockholders'
shares Amount capital equity
Balance as at
1 April 2007 128,878,505 216 1,942 52,697 2,521 7,816 65,192
Currency translation
adjustment - - - - 1,685 - 1,685
Net income recognised
directly in equity - - - - - - -
Net Income for the
current period - - - - - 20,920 20,920
Total recognised
income and expense
for the period - 216 1,942 - 4,206 28,736 35,100
Redemption of OCCRPS - - - - - - -
Statutory reserve
created in JV - - - - - - -
Reversal of debenture
redemption reserve - - - - - - -
Issue of common stock - - - - - - -
Dividend paid - - - - - - -
Balance as at
30 September 2007 128,878,505 216 1,942 52,697 4,206 28,736 87,797
Notes to the Consolidated Financial Statements
1 Nature of Operations
KSK Power Ventur plc ('the Company'), its subsidiaries and joint ventures
(collectively referred to as 'the Group') are primarily engaged in the
development, operation and maintenance of private sector power projects,
predominantly through joint ventures with heavy industrial companies in the
India.
The Group strategy for growth is to work with major international and Indian
businesses and electricity utilities to ensure that they have access to
dependable and cost effective source of electrical power through the development
construction operation of optimal sized power plants with appropriate fuel
sources.
The Group, through one of its subsidiaries also acts as investment manager of
the Small is Beautiful Fund ('SIB') and is empowered to invest the contributions
received by SIB in public limited companies engaged in the business of power
generation and allied projects,
2 General Information
The consolidated financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards ('IFRS') as issued
by the International Accounting Standards Board ('IASB').
KSK Power Ventur plc, a limited liability corporation, is the Group's ultimate
parent company and is incorporated and domiciled in the Isle of Man. The address
of KSK Power Ventur plc registered Office, which is also principal place of
business is 15-19 Athol Street, Douglas, Isle of Man 1M1 1LB. KSK Power Ventur
plc's equity shares are listed on the Alternate Investment Market ('AIM')
operated by the London Stock Exchange.
The Financial statements for the period 01 April 2007 to 30 September 2007 were
approved by the board of directors on 10 December 2007. As at 30 September 2007,
the Group comprised of the following subsidiaries and joint ventures.
Subsidiaries Immediate Parent Country of Incorporation % shareholding
KSK Energy Limited ('KEL') KSK Power Ventur plc Mauritius 100%
KSK Energy Ventures Private Limited
('KSKEVPL' or 'KSK India') KEL India 100%
Joint Ventures Country of % economic interest as on % economic interest as
Incorporation 30 September 2007 on 31 March 2007
RVK Energy Private Limited India 50.00% 50.00%
Kasargod Power Corporation Limited India 50.00% 50.00%
Coramandel Electric Company Limited India 71.86% 71.86%
KSK Electricity Financing India
Private Limited India 35.00% 35.00%
Marudhar Mining Private Limited India 74.00% 74.00%
Sai Regency Power Corporation
Private Limited India 25.87% 50.14%
Arasmeta Captive Power Company
Private Limited India 17.85% 34.26%
Sitapuram Power Limited India 17.15% 17.15%
VS Lignite Power Private Limited India 30.27% 58.26%
Wardha Power Company Private
Limited India 34.20% 74.00%
3 Summary of Accounting Policies
3.1 Overall considerations
The significant accounting policies that have been used in the consolidated
financial statements are summarised below. The financial statements have been
prepared using the measurement bases specified by IFRS for each type of asset,
liability, income and expense. The measurement bases are more fully described in
the accounting policies below.
The consolidated financial information comprises the Company, its subsidiaries
and share of jointly controlled entities (together referred to as 'the group')
for the period from 1 April 2007 to 30 September 2007.
3.2 Basis of preparation
The consolidated financial information has been prepared on the going concern
assumption and in the opinion of the directors the group will be able to meet
its obligations as they fall due in the foreseeable future.
The financial information comprises the consolidated income statement,
consolidated balance sheet, consolidated statement of changes in shareholders'
equity, consolidated statement of cash flows and related notes.
3.3 Use of estimates
In the process of applying the Group's accounting policies, the Group is
required to make certain estimates, judgments and assumptions that it believes
are reasonable based upon the information available. These estimates and
assumptions affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the periods presented. The key estimates used by management for presentation of
these financial statements include economic lives of property and equipment,
deferred taxes, allowances for uncollectible receivables.
On an ongoing basis, the Group evaluates its estimates using historical
experience, consultation with experts and other methods considered reasonable in
the particular circumstances. Actual results may differ significantly from the
estimates, the effect of which is recognised in the period in which the facts
that give rise to the revision become known.
3.4 Basis of consolidation
The consolidated financial information incorporates the unaudited financial
information of KSK Power Ventur plc, its subsidiaries, and jointly controlled
entities of the subsidiaries made for the half year ending 30 September 2007.
The figures corresponding to the half year ended 30 September 2006 were not
furnished as the reporting entity acquired the controlling interest of
subsidiaries and their joint control entities subsequent to 30 September 2006.
The audited consolidated financials for the period ended 31 March 2007 are
furnished.
Subsidiaries are those entities controlled by the Company. Control exists when
the company has the power, directly or indirectly, to govern the financial and
operating policies of an enterprise so as to obtain benefits from its
activities. Subsidiaries are consolidated from the date on which control is
acquired by the group and are no longer consolidated from the date such control
ceases.
Intra-group balances and transactions and any resulting unrealized gains arising
from intra-group transactions are eliminated on consolidation. Unrealized losses
resulting from intra-group transactions are also eliminated unless cost cannot
be recovered. Amounts reported in the financial statements of subsidiaries have
been adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group.
3.5 Investments in Joint Ventures
Entities whose economic activities are controlled jointly by the Group and by
other ventures independent of the Group ('Joint Ventures') are accounted for
using proportionate consolidation to the extent of the Group's economic interest
in the entity.
Where a group company undertakes its activities under joint venture arrangements
directly, the group's share of jointly controlled assets and any liabilities
incurred jointly with the other ventures are recognised in the financial
statements of the relevant company and classified according to their nature.
Liabilities and expenses incurred directly in respect of interest in jointly
controlled assets are accounted for on an accrual basis. Income from the sale or
the use of the group's share of the output of jointly controlled assets, and its
share of the joint venture expenses, are recognised when it is probable that the
economic benefits associated with the transactions will flow to/from the group
and their amount can be measured reliably.
Amounts reported in the financial statements of joint ventures have been
adjusted where necessary to ensure consistency with the accounting policies
adopted by the Group.
3.6 Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The
cost of acquisition is measured at the aggregate of the fair values, at the date
of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree, plus
any costs directly attributable to the business combination. The acquiree's
identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3 are recognized at their fair value at
the acquisition date, except for non-current assets (or disposal groups) that
are classified as held for resale in accordance with IFRS 5 Non-Current Assets
Held for Sale and Discontinued Operations, which are recognized and measured at
fair value less costs to sell.
Goodwill represents the excess of the acquisition cost in a business combination
over the fair value of the group's share of the identifiable net assets
acquired. Goodwill is carried at cost less accumulated impairment losses. Any
excess of the group's share of the identifiable net assets acquired over the
acquisition cost is recognised immediately in profit and loss after reassessing
the identification and measurement of the identifiable assets, liabilities,
contingent liabilities and recording necessary adjustments. Refer to note 3.8
for a description of impairment testing procedures
On disposal of a subsidiary, associate or jointly controlled entity, the
attributable amount of goodwill is included in the determination of the profit
or loss on disposal.
3.7 Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated
depreciation and impairment losses. Historical cost includes expenditure that is
directly attributable to the development or acquisition of the items. Subsequent
costs are included in the asset's carrying amount or recognized as a separate
asset, as appropriate, only when it is probable that future economic benefits
associated with the item will flow to the group and the cost of the item can be
measured reliably. Borrowing costs associated with the Property, plant and
equipment are capitalised up to the date the said property, plant and equipment
are ready to be put to use. Repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
Assets in the course of construction are not depreciated. Other assets are
depreciated by writing off their cost less estimated residual value evenly over
their estimated useful lives, based on management's judgment and experience,
which are principally as follows:
Nature of asset Useful life (years)
Buildings 30 years
Infrastructure assets
Gas engine based installation 15 years
Thermal power plants 25 years
Hydro-electric power plants 35 years
Office equipment and motor vehicles 7 years
Furniture and fittings 7 years
Vehicles 5 years
Computer software 5 years
Land held for use in production is stated at cost and the related carrying
amounts are not depreciated.
3.8 Impairment testing of goodwill and property plant and equipment
Property, plant and equipment are reviewed for impairment at each reporting date
to determine whether there is any indication that those assets may have suffered
an impairment loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the impairment loss, if
any.
For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are largely independent cash inflows (cash-generating
units). As a result, some assets are tested individually for impairment and some
are tested at cash-generating unit level. Goodwill is allocated to those
cash-generating units that are expected to benefit from synergies of the related
business combination and represent the lowest level within the Group at which
management monitors goodwill.
Cash-generating units to which goodwill has been allocated are tested for
impairment at least annually. All other individual assets or cash-generating
units are tested 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 or
cash-generating unit's carrying amount exceeds its recoverable amount. To
determine the recoverable amount, KSK Power Ventur plc's management estimates
expected future cash flows from each cash generating unit and determines a
suitable interest rate in order to calculate the present value of those cash
flows. Discount factors are determined individually for each cash-generating
unit and reflect their respective risk profiles as assessed by KSK Power Ventur
plc's management.
Impairment losses for cash-generating units reduce first the carrying amount of
any goodwill allocated to that cash-generating unit. Any remaining impairment
loss is charged pro rata to the other assets in the cash-generating unit. With
the exception of goodwill, all assets are subsequently reassessed for
indications that an impairment loss previously recognised may no longer exist.
An impairment charge that has been recognised is reversed if the cash-generating
unit's recoverable amount exceeds its carrying amount.
3.9 Financial Instruments
Financial assets and liabilities are recognised on the Group's balance sheet
when the Group becomes a party to the contractual provisions of the instrument.
Trade receivables
Trade receivables are typically short term in nature and are initially recorded
at fair value and subsequently adjusted for allowances
Financial investments
Investments (other than interests in joint ventures and fixed deposits) are
recognised and derecognised on a trade date and are initially measured at fair
value, including transaction costs. Investments are classified as either
held-to-maturity, held-for-trading, loans and receivables or available for sale.
Held-to-maturity investments and loans and receivables are measured at amortised
cost. Held-for-trading and available-for-sale investments are measured at
subsequent reporting dates at fair value. Where securities are held for trading
purposes, gains and losses arising from changes in fair value are included in
net profit or loss for the period. For available-for-sale investments, gains and
losses arising from changes in fair value are recognized directly in equity,
until the security is disposed of or is determined to be impaired, at which time
the cumulative gain or loss previously recognized in equity is included in the
net profit or loss for the period.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other
short term highly liquid investments that are readily convertible to a known
amount of cash and are subject to an insignificant risk of change in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the group after
deducting all of its liabilities.
Compound financial instruments are broken down into their equity and liability
components and classified accordingly in the balance sheet. The initial carrying
amount of a compound financial instrument is allocated to its equity and
liability components, and the equity component is assigned the residual amount
after deducting from the fair value of the instrument as a whole the amount
separately determined for the liability component. The carrying amount of the
liability component is determined by measuring the fair value of a similar
liability that does not have an associated equity component. Such measurement
takes into account management's estimates of the Group's contractual obligation
to make future payments and the market interest rate for a similar liability.
Bank borrowings
Interest-bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Finance charges, including premiums payable
on settlement or redemption and direct issue costs, are accounted for on an
amortised cost basis to the income statement using the effective interest method
and are added to the carrying amount of the instrument to the extent that they
are not settled in the period in which they arise.
Trade payables
Trade payables are initially measured at fair value, and are subsequently
measured at amortised cost, using effective interest rate method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received,
including premium, if any, and the issue expenses are deducted from the share
premium received.
3.10 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
includes all expenses directly attributable to the manufacturing process as well
as suitable portions of related production overheads, based on normal operating
capacity. Financing costs are not taken into consideration. Costs of ordinarily
interchangeable items are assigned using the first in, first out cost formula.
Net realisable value is the estimated selling price in the ordinary course of
business less any applicable selling expenses.
3.11 Foreign Currency Transactions
The functional currency of the Company and its subsidiary in Mauritius is the
British Pound ('GBP') and the Indian Rupee for all the entities operating in
India. The reporting currency of the Group is the US dollar as submitted to the
AIM exchange where the shares of KSK Power Ventur plc are listed.
Transactions and balances
Foreign currency transactions are translated into the functional currency of the
respective group entity, using the exchange rates prevailing at the dates of the
transactions (spot exchange rate). At each balance sheet date, monetary assets
and liabilities denominated in foreign currencies are translated into US dollars
at the relevant rates of exchange ruling on the balance sheet date. Gains and
losses arising on translation are included in net profit or loss for the period,
except for exchange differences arising on non-monetary assets and liabilities
where the changes in fair value are recognised directly in equity.
Translation
On consolidation, the balance sheets of the subsidiaries and joint ventures are
translated into US dollars at exchange rates applicable at the balance sheet
date. The income statements are translated into US dollars using the average
rate unless exchange rates fluctuate significantly in which case the exchange
rate at the date the transaction occurred is used. Exchange differences
resulting from the translation of such balance sheets at rates ruling at the
beginning and end of the period, together with the differences between income
statements translated at average rates and rates ruling at the period end, are
charged/credited to the foreign currency translation reserve in equity. Such
translation differences are recognised as income or as expenses in the period in
which the operation is disposed of.
3.12 Segment reporting
In identifying its operating segments, management generally follows the Group's
service lines, which represent the generation of the power and other related
services provided by the Group.
The activities undertaken by the Power generation segment includes sale of Power
and other related services. The project management of these power plants is
undertaken by the service segment. The accounting policies used by the Group for
segment reporting are the same as those used for the financial statements.
Further, income, expenses and assets which are not directly attributable to the
business activities of any operating segment are not allocated.
3.13 Provisions for liabilities and charges
Provisions are recognised when present obligations will probably lead to an
outflow of economic resources from the Group and they can be estimated reliably.
Timing or amount of the outflow may still be uncertain. A present obligation
arises from the presence of a legal or constructive commitment that has resulted
from past events, for example, product warranties granted, legal disputes or
onerous contracts. Restructuring provisions are recognised only if a detailed
formal plan for the restructuring has been developed and implemented, or
management has at least announced the plan's main features to those affected by
it. Provisions are not recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the
present obligation, based on the most reliable evidence available at the balance
sheet date, including the risks and uncertainties associated with the present
obligation. Where there are a number of similar obligations, the likelihood that
an outflow will be required in settlement is determined by considering the class
of obligations as a whole. Long term provisions are discounted to their present
values, where the time value of money is material.
All provisions are reviewed at each balance sheet date and adjusted to reflect
the current best estimate of Group management.
In those cases where the possible outflow of economic resource as a result of
present obligations is considered improbable or remote, no liability is
recognised, unless it was assumed in the course of a business combination
These contingent liabilities are recognised in the course of the allocation of
purchase price to the assets and liabilities acquired in the business
combination. They are subsequently measured at the higher amount of a comparable
provision as described above and the amount initially recognised, less any
amortisation.
3.14 Employees' benefits
Defined benefit plans
A defined benefit plan is a pension plan that defines an amount of benefit that
an employee will receive on retirement/separation. The legal obligation for any
benefits remains with the Group, even if plan assets for funding the defined
benefit plan have been set aside. Plan assets may include assets specifically
designated to a long term benefit fund as well as qualifying insurance policies.
The liability recognised in the balance sheet for defined benefit pension plans
is the present value of the defined benefit obligation (DBO) at the balance
sheet date less the fair value of plan assets, together with adjustments for
unrecognised actuarial gains or losses and past service costs. The management
estimates the DBO annually with the assistance of independent actuaries. The
estimate of its post-retirement benefit obligations is based on standard rates
of inflation, medical cost trends and mortality. It also takes into account the
Group's specific anticipation of future salary increases.
Discount factors are determined close to each year-end by reference to high
quality corporate bonds that are denominated in the currency in which the
benefits will be paid and that have terms to maturity approximating to the terms
of the related pension liability. The liabilities recognised for defined benefit
plans sponsored by the Company, however, are subject to change as these factors
may vary over the passage of time. Current service costs for defined benefit
plans are accrued in the period to which they relate with the difference between
the expected return on scheme assets and interest on scheme liabilities are
included within the income statement within employee costs.
Defined contribution plan
In addition, the group operates a defined contribution scheme where payments are
charged as employee costs as they fall due. The group has no further payment or
obligations once the contributions have been paid.
3.15 Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable in accordance with the relevant agreements, net of discounts, VAT and
other applicable taxes.
Sale of power
Revenue from the sale of power is recognised when all the following conditions
have been satisfied:
(i) The group has transferred to the buyer the significant risks and rewards of
ownership of the power supplied or the services provided. This is generally when
the customer has approved the services that have been provided or has taken
undisputed delivery of power.
(ii) it is probable that the economic benefits associated with the transaction
will flow to the group, a
(iii) the costs incurred or to be incurred in respect of the transaction can be
measured reliably.
Income from services
Income from services is recognised as per the terms and conditions of the
development activity with respect to the relevant power generating company and
its stage of development.
Interest income and expenses are reported using the effective interest rate
method. Dividends received, other than those from investments in associates, are
recognised at the time of their distribution.
3.16 Income Taxes
The tax expenses represent the sum of the tax currently payable and deferred
tax.
Current taxation
Current tax is based on the taxable profit for the period and is provided at
amounts expected to be paid (or recovered) using the tax rates and laws that
have been enacted or substantially enacted at the balance sheet date.
Taxable profit differs from the net profit or loss as reported in the income
statement because it excludes items of income or expense that are taxable or
deductible in other years and further excludes items that are never taxable or
deductible.
Deferred taxation
Deferred taxation is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of
taxable profit. Deferred tax liabilities are provided, using the liability
method, on all taxable temporary differences at the balance sheet date. Such
assets and liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a business
combination) of other assets an liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and interests in joint ventures, except
where the group is able to control the reversal of the temporary difference and
it is probable that the temporary difference will not reverse in the foreseeable
future.
Deferred tax is measured, without discounting, at the average tax rates that are
expected to apply in the periods in which the temporary timing differences are
expected to reverse based on tax rates and laws that have been enacted or
substantially enacted at the balance sheet date.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer more likely than not that
sufficient taxable profit will be available to allow all or part of the asset to
be recovered.
Deferred tax is not recognised on temporary differences arising from the initial
recognition of goodwill.
Deferred tax is charged or credited in the income statement, except when it
relates to items charged or credited to equity, in which case the deferred tax
is also dealt with in equity.
3.17 Financing costs and interest income
Borrowing costs, excluding borrowing cost directly attributable to acquisition
or construction of qualifying assets, are recognized in the income statement in
the period in which they are incurred, the amount being determined using the
effective interest rate. Interest income and expenses is recognised using the
effective interest rate method. Finance income is recognised in the income
statement in the period in which they are accrued.
3.18 Equity and Dividend Payments
Share capital is determined using the nominal value of shares that have been
issued.
Additional paid-in capital includes any premiums received on the initial issuing
of the share capital. Any transaction costs associated with the issuing of
shares are deducted from additional paid-in capital, net of any related income
tax benefits.
Other reserves comprise gains and losses due to the revaluation of certain
financial assets and property, plant and equipment. Foreign currency translation
differences are included in the translation reserve.
Retained earnings include all current and prior period results as disclosed in
the income statement.
Dividend distributions payable to equity shareholders are included in 'other
short term financial liabilities' when the dividends are approved in the general
meeting prior to the balance sheet date.
3.19 Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together
with other short-term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of
changes in value.
3.20 Earnings per share
The earnings considered in ascertaining the company's earning per share (EPS)
comprise of the net profit after tax less dividend (including dividend
distribution tax) on preference shares. The number of shares used for computing
the basic EPS is the weighted average number of shares outstanding during the
year.
4 Subsequent events
(i) Agreements were entered into with M/s Lafarge India Private Limited for
setting up and operating a 43 MW coal based power plant at the existing
facility, Arasmeta Captive Power Company Private Limited, a Joint Venture
Company of KSK Energy Ventures Private Limited.
(ii) The constitution of the Board of the Company and its subsidiaries, joint
venture companies of KSK Energy Ventures Private Limited changed consequent to
the exit of Mr Hari Kiran Vadlamani from the Group. Further the Company and the
Group is taking necessary action for filling up the vacancy caused by the exit
of Mr Hari Kiran Vadlamani.
(iii) GE Capital International (Mauritius) had acquired the entire stake held by
Mr Hari Kiran Vadlamani in Sayi Power Energy Limited, the Holding Company.
(iv) Reliability Run Tests were conducted successfully in M/s Sitapuram Power
Limited, a joint venture company of KSK Energy Venture Private Limited and
further necessary action is being taken for conducting the Performance Guarantee
Tests at the Plant.
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