Notes to the financial statements for the year ended March 31, 2015

1) General information

Reliance Power Limited ("the Company") together with its subsidiaries ("Reliance Power group") is primarily engaged in the business of generation of power. The projects under development include coal, gas, hydro, wind and solar based energy projects. The portfolio of the Reliance Power group also includes ultra mega power projects (UMPP).

2) Significant accounting policies:

(a) Basis of accounting

The Financial Statements have been brpared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the relevant provisions of the Companies Act, 2013 ("the Act") and the Accounting Standards notified under the Act. The Financial Statements are brpared on accrual basis under the historical cost convention.

(b) Use of estimates

The brparation and brsentation of Financial Statements requires the management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent liabilities as on the date of the Financial Statements and reported amount of revenue and expenses during the reporting period. Difference between the actual results and estimates is recognised in the period in which the results are known/ materialised.

(c) Tangible assets and Capital Work-in-Progress:

Tangible assets are stated at cost net of recoverable taxes, duties, trade discounts and rebates, less accumulated debrciation and impairment of loss, if any. The cost of Tangible Assets comprises of its purchase price, borrowing costs and adjustment arising for exchange rate variations attributable to the assets, including any cost directly attributable to bringing the assets to their working condition for their intended use. Subsequent expenditure related to an item of tangible assets are added to its book value only if they increase the future benefits from the existing assets beyond its brviously assessed standards of performance.

Expenditure incurred on assets which are not ready for their intended use comprising direct cost, related incidental expenses and attributable borrowing costs are disclosed under Capital Work-in-Progress.

(d) Intangible assets:

I ntangible assets are stated at cost of acquisition net of recoverable taxes less accumulated amortization/ depletion and impairment loss, if any. The cost comprises of purchase price, borrowing costs and any cost directly attributable to bringing the asset to its working condition for the intended use and adjustment arising from exchange rate variation attributable to the intangible assets.

Expenditure incurred on acquisition of intangible assets which are not ready to use at the reporting date is disclosed under Capital Work-in-Progress.

(e) Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or recoverable amount of the cash generating unit to which the asset belongs is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss.

(f) Debrciation/ Amortisation:

(i) Tangible assets:

Debrciation on tangible assets is provided to the extent of debrciable amount on Straight Line Method (SLM) based on useful life of the assets as brscribed in Part C of Schedule II to the Companies Act, 2013 except in case of motor vehicles where the estimated useful life has been considered as five years based on a technical evaluation by the management.

(ii) Intangible assets:

Software expenses are amortised on a straight line basis over a period of three years.

(g) Investments

Long-term investments are carried at cost. However, provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined of value of long-term investments and made for each investment individually. Current investments are valued at lower of cost and fair value.

h) Provisions, Contingent Liabilities & Contingent Assets:

Provisions: Provisions are recognised when there is brsent obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation in respect of which reliable estimate can be made of the amount of the obligation.

Contingent liabilities: Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or a brsent obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or reliable estimate of the amount cannot be made, is termed as contingent liability.

Where there is a possible obligation or a brsent obligation but the likelihood of outflow of resources is remote, no provision or disclosure is made as specified in Accounting Standard 29 - "Provisions, Contingent Liabilities and Contingent Assets".

Contingent assets: A contingent asset is neither recognised nor disclosed in the Financial Statements.

(i) Borrowing costs

Borrowing costs include costs that are ancillary and requires as per the terms of agreement. Borrowing costs that are attributable to the acquisition or construction of qualifying assets are capitalized as part of the cost of such assets. A qualifying asset is one that necessarily takes substantial period of time to get ready for its intended use. All other borrowing costs are charged to the Statement of Profit and Loss in the period in which they are incurred.

(j) Foreign currency transactions:

(i) Transactions in foreign currencies are recorded at the exchange rate brvailing on the date of the transaction or that approximates the actual rate at the date of the transaction.

(ii) All exchange differences arising on reporting of short-term foreign currency monetary items other than derivative contracts at rates different from those at which they were initially recorded are recognised in the Statement of Profit and Loss.

(iii) I n respect of foreign exchange differences arising on revaluation or settlement of long-term foreign currency monetary items, the Company has availed the option available in the Companies (Accounting Standards) (Second Amendment) Rules, 2011, wherein:

• Foreign exchange differences on account of debrciable asset, is adjusted in the cost of debrciable asset and would be debrciated over the balance life of asset.

• In other cases, foreign exchange difference is accumulated in "foreign currency monetary item translation difference account" and amortised over the balance period of such long-term asset/ liabilities.

• An asset or liability is designated as a long-term foreign currency monetary item, if the asset or liability is exbrssed in a foreign currency and has a term of twelve months or more at the date of origination of the asset or the liability, which is determined taking into consideration the terms of the payment/ settlement as defined under the respective agreement/ memorandum of understanding.

(iv) Non-monetary items denominated in foreign currency are stated at the rates brvailing on the date of the transactions/ exchange rate at which transaction is actually effected.

(k) Revenue recognition:

(i) Revenue from sale of energy of 45 MW wind power project at Vashpet is recognised on an accrual basis in accordance with the provisions of Power Purchase Agreement (PPA)/ sale arrangements read with the regulations of Maharashtra Electricity Regulatory Commission.

(ii) Revenue from sale of goods is recognised when significant risk and reward of ownership is transferred to the buyer as per the terms of contract.

(iii) Service income rebrsents income from support services recognised as per the terms of the service agreements entered into with the respective parties.

(iv) Profit on sale/ redemption of investments is accounted on sale/ redemption of such investments. Interest income on fixed and inter-corporate deposits is recognised on time proportionate basis. Dividend is recognised when the right to receive is established in Company's favour.

(v) Dividend income from subsidiaries is recognised when the Company has established right to receive the same on or before the Balance Sheet date.

benefits:

Employee benefits consist of Provident Fund, Superannuation Fund, Gratuity Scheme and Leave Encashment.

(i) Defined contribution plans:

Contributions to defined contribution schemes such as provident fund and superannuation are charged off to the Statement of Profit and Loss/ Capital Work-in-Progress, as applicable, during the year in which the employee renders the related service.

(ii) Defined benefit plans:

The Company also provides employee benefits in the form of gratuity and leave encashment, the liability for which as at the year-end is determined by independent actuaries based on an actuarial valuation using the projected unit credit method. Such defined benefits are charged off to the Statement of Profit and Loss/ Capital Work-in-Progress, as applicable. Actuarial gain/ losses are recognised in the year in which they arise.

(iii) Short-term/ Long-term employee benefits:

All employee benefits payable wholly within twelve months of rendering the service including performance incentives and compensated absences are classified as Short-term employee benefits. The undiscounted amount of Short-term employee benefits expected to be paid in exchange for the services rendered by employees are charged off to the Statement of Profit and Loss/ Capital Work-in-Progress, as applicable. The employee benefits which are not expected to occur within twelve months are classified as Long-term benefits and are recognised as liability at the net brsent value.

(m) Employee stock option scheme (ESOS)

The employees of the Company and its subsidiaries are entitled for grant of stock options (equity shares), based on the eligibility criteria set in ESOS plan of the Company. The employee compensation expenses are accounted on the basis of "intrinsic value method". The excess, if any, of quoted market price over the exercise price on the date of grant would be recognised as compensation cost over the vesting period. The Company recognizes compensation cost on the basis of estimated number of stock options expected to vest. Subsequently, if there are any indications resulting in a difference in the number of stock options expected to vest, the Company revises its brvious estimate and accordingly recognizes/ (reverses) compensation cost on employee service.

(n) Accounting for taxes on income

Tax expense comprises of current tax and deferred tax. Current tax is measured at the amount expected to be paid to the tax authorities, using the applicable tax rates. Deferred income tax reflects the current period timing differences between taxable income and accounting income for the period and reversal of timing differences of earlier years/ period. Deferred tax assets are recognised only to the extent that there is a reasonable certainty that sufficient future income will be available except that deferred tax assets, in case there are unabsorbed debrciation or losses, are recognised if there is virtual certainty that sufficient future taxable income will be available to realise the same. Deferred tax assets and liabilities are measured using the tax rates and tax law that have been enacted or substantively enacted by the Balance Sheet date.

(o) Cash and cash equivalents

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

(p) Earnings per share

Basic earnings per share are computed by dividing the net profit or loss by the weighted average number of equity shares outstanding during the year. Earnings considered in ascertaining the Company's earnings per share are the net profit for the year. The weighted average number of equity shares outstanding during the year and for all years brsented is adjusted for events, such as bonus shares, other than the conversion of potential equity shares that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year is adjusted for the effects of all dilutive potential equity shares.

(q) Cash Flow Statement

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

(r) Commercial papers

Commercial papers are recognised as a liability at the face value at the time of issuance of instrument. The discount is amortised as an interest cost over the period of commercial paper at the rate implicit in the transaction.

Notes to the financial statements for the year ended March 31, 2015

1) Capital reserve (arisen pursuant to scheme):

The Capital reserve of Rs. 59,995 lakhs had arisen pursuant to the scheme of amalgamation with erstwhile Reliance Clean Energy Private Limited (RCEPL), sanctioned by the Hon'ble High Court of Bombay vide order dated April 5, 2013. The scheme was effective from January 1, 2013.

2) General reserve (arisen pursuant to various schemes):

(a) The General reserve of Rs. 1 1 1,503 lakhs had arisen pursuant to the composite scheme of arrangement between the Company, Reliance Natural Resources Limited, erstwhile Reliance Futura Limited and four wholly owned subsidiaries viz., Atos Trading Private Limited, Atos Mercantile Private Limited, Reliance Prima Limited and Coastal Andhra Power Infrastructure Limited. The said scheme has been sanctioned by Hon'ble High Court of Judicature at Bombay vide order dated October 15, 2010.

(b) The General reserve of Rs. 18,707 lakhs had arisen pursuant to the scheme of amalgamation with erstwhile Sasan Power Infraventure Private Limited, sanctioned by the Hon'ble High Court of Bombay vide order dated April 29, 201 1. The scheme was effective from January 1, 2011.

(c) The General reserve of Rs. 22,984 lakhs had arisen pursuant to the scheme of amalgamation with erstwhile Sasan Power Infrastructure Limited, sanctioned by the Hon'ble High Court of Bombay, vide order dated December 23, 201 1. The scheme was effective from September 1, 2011.

All the above General Reserves are reserves which arose pursuant to the above schemes and shall not be and shall not for any purpose be considered to be a reserve created by the Company.

3) Scheme of amalgamation between Company and Reliance Clean Power Private Limited

Reliance Clean Power Private Limited (RCPPL), a wholly owned subsidiary in business of development and operation of 45 MW wind power project at Vashpet, was amalgamated with the Company pursuant to the Scheme of Amalgamation (Scheme), sanctioned by the Hon'ble High Court of Judicature at Bombay vide its order dated May 9, 2014 with an appointed date of April 1, 2012.

4) Status of Dadri Project

The Company proposed developing a 7,480 MW gas-fired power project to be located at the Dhirubhai Ambani Energy City in Dehra village, Dadri, Uttar Pradesh. The State of Uttar Pradesh in the year 2004 had acquired 2,100 acres of land and conveyed the same to the Company in the year 2005. The acquisition of further 400 acres of land by the state for the project was challenged by the land owners in the Allahabad High Court. Subsequent to the judgement of High Court on compliances and procedures relating to land acquisition the Company had filed an appeal with the Subrme Court. Before the pronouncement of judgement by the Subrme Court, the Company submitted an affidavit stating its inability to continue with the project because of the difficulty in securing gas. The Subrme Court in its order has disposed off the appeal and upheld the right of the Company to recover the amount paid towards the acquired land on its return to the state.

The Company has already conveyed its intent to return the acquired land to Government of Uttar Pradesh and raised the claim for the cost incurred on the land acquisition as well as other incidental expenditure thereto.

Considering the above facts, the Company has classified assets related to Dadri project under 'other current assets' as 'assets held for sale' and 'advance recoverable towards land', which were earlier shown as 'fixed assets' and 'capital advance', respectively.

5) Project status of subsidiaries

(a) Coastal Andhra Power Limited (CAPL)

CAPL, a wholly owned subsidiary, has been set up to develop an Ultra Mega Power Project (UMPP) of 3,960 MW located in Krishnapatnam, District Nellore, based on imported coal.

CAPL had entered into a firm price fuel supply agreement with Reliance Coal Resources Private Limited (RCRPL), a wholly owned subsidiary of the Company. In view of below mentioned new regulation, RCRPL cannot supply coal at the already agreed price, because of which an element of uncertainty has arisen in the fuel supply for the CAPL project, whereas the power needs to be supplied at a br-agreed tariff as per the terms of Power Purchase Agreement (PPA) dated March 23, 2007. The Government of Indonesia introduced a new regulation in September, 2010 which prohibits sale of coal, including sale to affiliate companies, at below Benchmark Price which is linked to international coal prices and requires adjustment of sale price every 12 months. This regulation also mandates to align all existing long-term coal supply contracts with the new regulations within one year i.e. by September, 2011. The said issue has been communicated to the power procurers and also to the Government of India through the Association of Power Producers to arrive at a suitable solution to the satisfaction of all the stakeholders.

Since no resolution could be arrived at CAPL invoked the dispute resolution provision of PPA. The procurers have also issued a notice for termination of PPA and have raised a demand for liquidated damages of Rs. 40,000 lakhs (including bank guarantee of Rs. 30,000 lakhs, which has been issued by the holding company on behalf of CAPL).

CAPL has filed a petition before the Hon'ble High Court at Delhi inter-alia for interim relief under Section 9 of the Arbitration and Conciliation Act, 1996. The Court vide its order dated March 20, 2012 has prohibited the procurers from taking any coercive steps against the Company. The single judge of the Delhi High Court vide order dated July 2, 2012 dismissed the petition and the appeal filed by CAPL against the said order is pending before the Division Bench of the Delhi High Court. The interim protection against encashing bank guarantees continues to be available.

CAPL has also filed a petition before the Central Electricity Regulatory Commission without brjudice to the proceedings pending before the Delhi High Court and the arbitration process has already been initiated. The Commission adjourned the Petition sine a die with permission to mention the matter after disposal of the appeal pending before the Division Bench of the Delhi High Court.

Based on the legal opinion obtained with regard to applicability of force majeure clause for the change in law in Indonesia and other impacts thereof on the implementation of the project and considering the nature of expenditure incurred till date at the project and its valuation done by the management of CAPL, no provision for diminution is considered in respect of investment made by the Company and demands raised by the procurers of power.

(b) Samalkot Power Limited (SMPL)

SMPL, a wholly owned subsidiary, is in the process of constructing a 2,262 MW (754 MW x 3) gas based power plant at Kakinada, which based on the current circumstances, has planned its construction work and consequential commercial operations thereafter progressively starting from 2016 - 2017, and it has incurred an aggregated cost of Rs. 868,791 lakhs as at March 31, 2015. SMPL has applied for allocation of gas and Ministry of Petroleum and Gas (MoPNG) is yet to allocate the gas linkage. Considering that the gas availability in the country has dropped significantly and also based on gas availability projected scenarios in subsequent years, SMPL is actively pursuing/ making rebrsentations with various government authorities to secure the gas linkage/ supply and is evaluating alternative arrangements/ various approaches to deal with the situation. Based on the business plans and valuation assessment done by the management of SMPL, it is confident that the carrying value of the net assets of SMPL is appropriate and consequently, there is no diminution in the value of investment made by the Company.

(c) Jharkhand Integrated Power Limited (JIPL)

JIPL, a wholly owned subsidiary, has been set up to develop Ultra Mega Power Project of 3,960 MW located in Tilaiya, Hazaribagh District, Jharkhand. 3,960 MW Tilaiya Ultra Mega Power Project (UMPP) the project being developed by JIPL was awarded to the Company through International Competitive Bidding (ICB), under the UMPP regime. Consequently, JIPL was handed over to Company on August 7, 2009 by Power Finance Corporation (PFC). JIPL has signed Power Purchase Agreement (PPA) with 18 procurers in 10 states for 25 years. For fuel security, the project was allocated Kerendari BC captive coal mine block.

As per the Power Purchase Agreement (PPA) between JIPL and procurers, the procurers were obligated to comply with conditions subsequent to entering the PPA which inter-alia required providing requisite land for the project within 6 months of the Project Transfer. The Company has not been handed over the possession of the land as stipulated in the PPA even after the lapse of more than 5 years and persistent efforts of the Company since the transfer of project. Considering the updates from the procurers at the meeting held after the year end and their failure to fulfill their obligation under PPA, the Company terminated the PPA on April 28, 2015 as per the option available therein.

Considering the nature of expenditure incurred till date at the project and internal assessment done by management of JIPL, no adjustments to the value of investments is considered necessary.

6) Disclosure under Micro, Small and Medium Enterprises Development Act, 2006

Disclosure of amounts payable to vendors as defined under the "Micro, Small and Medium Enterprise Development Act, 2006" is based on the information available with the Company regarding the status of registration of such vendors under the said Act. There are no overdue principal amounts/ interest payable amounts for delayed payments to such vendors at the Balance Sheet date. There are no delays in payment made to such suppliers during the year or for any earlier years and accordingly there is no interest paid or outstanding interest in this regard in respect of payments made during the year or brought forward from brvious years.

7) Exchange Difference on Long-term Monetary Items

In respect of exchange difference arising on Long-term foreign currency monetary items, the Company has availed the option available in the Companies (Accounting Standard) (Second Amendment) Rules, 2011, vide notification dated December 29, 2011 issued by Ministry of Corporate Affairs. Accordingly, the Company has accumulated a gain of Rs. 28,384 lakhs (Previous year: Rs. 29,407 lakhs) to "Foreign currency monetary item translation difference account" towards exchange variation on revaluation of Long-term monetary items other than on account of debrciable assets and the Company has adjusted the value of Plant and equipment by Rs. 558 lakhs (Previous year: Rs. 1,115 lakhs) towards the exchange difference arising on Long-term foreign currency monetary liabilities towards debrciable assets.

8) Corporate social responsibility (CSR)

The Company is under obligation to incur an expenditure of Rs.318 lakhs, being 2% of the average net profits during the three immediately brceding financial years, towards CSR calculated in the manner as stated in the Act. Accordingly, the Company has made a contribution of Rs. 587 lakhs to a Non-profit organization to facilitate the setting up of day care oncology centers in different districts of Maharashtra.

9) Consequent to the Act, being effective from April 1, 2014, the Company has provided debrciation based on useful life as brscribed under Part A and Part C of Schedule II of the Act. Had the Company continued the earlier accounting policy, debrciation for the year would have been lower by Rs. 113 lakhs and profit would have been higher by an equivalent amount.

10) The Company's wind power project at Vashpet is eligible for a tax holiday under Section 80- IA of Income Tax Act, 1961. Considering the principles of prudence and virtual certainty, the Company has not recognised a net deferred tax asset amounting to Rs. 85 lakhs.

11) The figures for the brvious year are re-classified/ re-grouped, wherever considered necessary

As per our attached report of even date

For Price Waterhouse

Firm Registration No: 301112 E

Chartered Accountants

Uday Shah

Partner

Membership No: 46061

For Chaturvedi & Shah

Firm Registration No: 101 720 W

Chartered Accountants

Vijay Napawaliya

Partner

Membership No: 109859

For and on behalf of the Board of Directors

Anil D Ambani Chairman

Sateesh Seth Director

Dr. V K Chaturvedi Director

D J Kakalia Director

Rashna Khan Director

Ashutosh Agarwala Chief Financial Officer

Ramaswami Kalidas Company Secretary and Manager

Place : Mumbai

Date : May 26, 2015