REG - KSK Power Ventur PLC - Audited Results for the year ended 31 March 2016 <Origin Href="QuoteRef">KSK.L</Origin> - Part 3

KSK Power VenturAnnouncement

19/07/2016 07:05

- Part 3: For the preceding part double click  ID:nRSS5256Eb 

the said order of the MERC, the Company has filed an appeal
before the APTEL on the ground that the non-fulfilment of captive criteria by
the company was attributed to the delay caused by MSEDCL in granting open
access to captive customers. APTEL also rejected the appeal. However Company
has filed review petition with APTEL. The Group has received favorable order
for the financial year 2013-2014. Pending adjudication of the same, the Group
believes that there is a good chance of succeeding before the APTEL and hence
no adjustment has been made in the financial statements. 
 
iv.   KSK Mahanadi, the Group's largest thermal power generation plant with
two units fully operational and balance units in various stages of
construction and commissioning is engaged in the generation and supply of
power to four state utilities of Andhra Pradesh, Telangana, Tamil Nadu and
Uttar Pradesh under Case 1 competitive bid Power Purchase Agreement (PPA). The
respective PPAs in addition to the agreed tariff payable for the power
supplied contains specific provisions providing for tariff adjustment payment
to the generator on account of Change in law.  The Change in law provision
essentially provides reimbursement mechanism for all additional recurring or
non-recurring expenditure incurred by the Generator towards new costs levied /
incurred post the bidding point.  These claims under the PPA cover both (a)
Claim on account of various statutory duties, levies and cess levied by
Central or State Governments or its instrumentalities; and (b) linkage coal
shortfall compensation with respective to Presidential Directive and Ministry
of Power Notification to all Electricity Regulators in India. KSK Mahanadi has
made claims pursuant to the above PPA provisions in excess of US $ 193,517,
wherein claim pertaining to taxes amounts to US $ 35,822 and claim on account
of short supply of coal pursuant to the Presidential Directive amounts to US $
157,695. However, notwithstanding its eligibility for the full claim as per
the PPA, keeping in view the regulatory commitments by the Government
instrumentalities, the necessary legal and administrative process that KSK
Mahanadi has to pursue, on its internal evaluation of the facts and
circumstances of the case on a prudent basis, KSK Mahanadi has recognised a
portion of the claim aggregating to US $ 140,510 in the books of accounts
until date, wherein US $ 109,351 pertains to the current year. KSK Mahanadi
has in its notices to the utilities submitted that it qualifies for the
composite scheme guidelines and hence Central Electrical Regulatory Commission
(CERC) will be the relevant appropriate authority to adjudicate the matter.
While in the earlier period, the claims were to be determined by the State
Regulators, pursuant to a recent ruling by the Appellate Tribunal of
Electricity (APTEL) with respect to multiple power producers, the jurisdiction
of CERC has been reaffirmed. Based on the bid guidelines, the PPA provisions
and the legal advice that KSK Mahanadi has obtained, steps have been initiated
to make appropriate amends in its claim petitions and filings before CERC. 
Based on the legal advice and recent ruling of CERC in similarly placed power
project, KSK Mahanadi is confident that the entire claim amount is fully
receivable. 
 
v. KMPCL has levied capacity charges and transmission charges to AP Discoms
for the period from 16 June 2013 to         13 August 2013 amounting to US $
13,183 (2015: US $ 13,935), on account of delayed fulfilment of obligation
under the PPA. AP Discoms have rejected those claims and made the counter
claim of US $ 3,562 (2015: US $ 3,765) for failure to furnish advance final
written notice of commencement of supply of power as per article 4.1.2 of PPA.
The Group has preferred an appeal before APERC & TSERC for refund of amount
collected by Discoms by encashment of bank guarantee. The Group's contention
is that since the Discoms have failed to fulfil the obligation as per PPA,
there is default on part of Discoms and the counter claim by Discoms is merely
to negate the effect of KMPCL claim of capacity charges. Pending adjudication
of the case, the Group believes that there is a good chance of succeeding
before the regulatory commissions and hence no adjustment has been made in the
financial statements. 
 
vi.   The Company had made investment of US $ 15,848 in Athena Projects
Private Limited ('APPL') for acquisition of 25% stake. APPL in turn holds
substantial investment in Teesta III hydro project. On 16.07.2009, the parties
entered into a MOU providing for transfer of interest in 68,400,000 shares of
Teesta III in favour of KSK Energy Company Private Limited ('KECPL'). The
arrangement envisaged APPL to complete certain corporate actions. Thereafter,
as a final arrangement a share sale and purchase agreement dated 5 April 2010
was executed between KECPL and APPL promoters that provided for acquisition of
entire shares of US $ 15,848 in one year's time. Upon same being not honoured
KECPL filed the petition with Company Law Board ('CLB'), Principal Bench, New
Delhi which is currently pending. The aforesaid is the significant matter of
minority protection and management believe that they have the good grounds for
the favourable disposal of the case. Hence the Group continue to carry the
investment in APPL at cost. 
 
vii.  The Group had entered into coal supply agreement with Goa Industrial
Development Corporation (GIDC) for sourcing coal from the identified coal
block i.e., Garepelma-III coal block. However, pursuant to the Honourable
Supreme Court Orders during August and September 2014, Garepelma-III was
de-allocated from GIDC. GIDC has kept the group notified that is still
pursuing with the Government for allocation of this mine under the new coal
statute and also has filed a legal case before Honourable High Court of Delhi
wherein interim relief is granted in favor of GIDC. At the same time the
initial development of the Garepelma-III block was entrusted to Group by GIDC,
wherein the Group has incurred all the cost relating to the development of
mine. Government of India has promulgated the Coal Mines (Special Provisions)
Ordinance, which provides for reimbursement of cost incurred towards land and
mine infrastructure by new allottee. Accordingly GIDC has made the claim for
US $ 39,802 for settlement before Nominated Authority appointed under the
Ordinance by Ministry of Coal. Subsequent to the year end, Government of
India, Ministry of Coal has directed to pay towards cost of compensation for
geological report to all the prior allottee and accordingly the Group has
received US $ 4,528. Pending final adjudication of the case by Honourable High
Court of Delhi or pending final settlement of the claim by the Nominated
Authority, the management believes that the entire amount incurred by the
Group is recoverable and accordingly the claim of US $ 39,802 has been
reclassified under other receivable. 
 
viii. Other non-current assets include an amount of US $ 16,502 (2015: US $
20,850) relating to Central Excise, VAT and Service Tax receivable from the
respective departments by SWPL. SWPL is registered as SEZ unit.  A unit in SEZ
is allowed to import goods (purchase from local market is also treated as
import) without payment of Duty for the purpose of its authorised operations.
The exemption from the payment of duties and taxes are provided under Section
26 of the SEZ Act, 2005. In respect of Service Tax, the Group has already
received a refund for the period from January 2013 to March 2015 and a
favourable order from Central Excise & Service Tax Appellate Tribunal (CESTAT)
for the period March 2009 to December 2009 and claims for remaining period is
pending before CESTAT. Thus the Group is confident of receiving refund for the
remaining period as well. In respect of VAT claims the Group has already
received a refund for the financial year 2007-08 to 2010-11 and for the
financial year 2013-14 on adhoc basis however assessment is still pending. The
Company has also received refund order for financial year 2011-12 and thus the
Group is confident to receive the refund for the remaining years as well. The
excise duty refund claims were rejected by the department stating that there
are no provision of refund under the SEZ Act. The Company has filed an appeal
with the CESTAT where in the CESTAT and the Large bench has mentioned that in
respect of rebate on goods supplied from DTA to SEZ within India, the appeal
would not lie to Appellate Tribunal under clause (b) of provision of Section
35(1) of Central Excise Act, however the Group has liberty to file revision
application before Revisionary Authority, Government of India. Accordingly,
the Company has filed a revisionary petition with Ministry of Finance,
Department of Revenue. The Group is confident to receive the refund. 
 
ix. The Group has received claims for US $ 9,807 (2015: US $ 10,367) from
Joint Director General of Foreign Trade (DGFT) towards the recovery of the
duty drawbacks, earlier refunded. The Group had earlier made claims for the
refund of the duties paid on the machinery and other items purchased for the
construction of the power projects under the scheme of deemed export benefit,
which were accepted and refunds were granted. The communications from the DGFT
regarding the recovery of the duties paid are based on the interpretations by
the Policy Interpretation Committee held on 15 March 2011. The Group contends
that the above change in interpretation requires an amendment to the foreign
trade policy to be legally enforceable in law. Since, no such amendment can be
made with retrospective effect, the Group believes that outcome of the above
dispute would be in favour of the Group and there would be no material impact
on the financial statements. 
 
x. SWPL has lodged a claim relating to quality and price on Western Coalfields
Limited (WCL), the coal supplier for abuse of dominant position by WCL and
Coal India Limited (CIL). Honourable Commission has passed an order on 27
October 2014 in favour of the Group as far as price claim is concerned whereas
for the quality claim, the Commission has referred to its earlier order dated
13 January 2014, of similar case which is presently pending at Competition
Appellate Tribunal (COMPAT). WCL has preferred an appeal against the order of
the Commission before the COMPAT wherein hearing is presently underway. The
Group has filed a total claim of US $ 137,045 with COMPAT under provision 53N
of The Competition Act, 2002. Further Company has received a demand of US $
11,494 from WCL towards short lifting of minimum quantity of coal which is
also contested by the Company on various grounds including of inferior quality
& high price. The Group believes that the final outcome of the above matters
would be in favour of the group and adjustments if any will be incorporated in
the financial statements after finalisation of the legal proceedings. 
 
In addition, the Group is also subject to various other legal proceedings and
claims which have arisen in the ordinary course of business including claims
before various tax authorities. The Management does not reasonably expect that
these legal proceedings, when ultimately concluded and determined, will have a
material and adverse effect on the Group's results of operations or financial
conditions. The Group has accrued appropriate provision wherever required. 
 
Guarantees 
 
·      The Company has guaranteed to unrelated parties for the loans and
non-fund based facilities availed by subsidiaries for US $ 319,535 (2015: US $
275,977) and 
 
·      The Group guaranteed the performance of the joint ventures under the
power delivery agreements to unrelated parties. No liability is expected to
arise. 
 
15.  Financial Instruments 
 
Carrying amounts versus fair values 
 
The fair values of financial assets and financial liabilities, together with
the carrying amounts in the Consolidated statement of financial position are
as follows: 
 
 Non- current financial assets                                                       
 Trade and other receivables             2,593      2,593      2,845      2,845      
 Equity securities - available-for-sale  17,938     17,938     19,155     19,155     
 Loans and receivables                   32,024     32,024     53,532     53,532     
 Derivative assets                       45,872     45,872     49,702     49,702     
 Non-current bank deposits               4,994      4,994      8,102      8,102      
 Total non-current                       103,421    103,421    133,336    133,336    
                                                                                     
 Current financial assets                                                            
 Trade and other receivables             367,139    367,139    154,212    154,212    
 Equity securities - held for trading    115        115        152        152        
 Debt securities-held for trading        5,062      5,062      2,437      2,437      
 Loans and receivables                   44,446     44,446     28,724     28,724     
 Cash and short-term deposits            122,800    122,800    197,996    197,996    
 Total current                           539,562    539,562    383,521    383,521    
 Total                                   642,983    642,983    516,857    516,857    
                                                                                     
 Non- current financial liabilities                                                  
 Trade and other payables                30,496     30,496     47,581     47,581     
 Loans and borrowings                    2,700,202  2,700,202  2,722,596  2,722,596  
 Interest rate swaps                     6,174      6,174      4,763      4,763      
 Option premium payable                  17,065     17,065     22,099     22,099     
 Total non-current                       2,753,937  2,753,937  2,797,039  2,797,039  
 Current financial liabilities                                                       
 Trade and other payables                493,099    493,099    369,590    369,590    
 Loans and borrowings                    623,600    623,600    521,953    521,953    
 Foreign exchange forward contract       629        629        453        453        
 Option premium payable                  5,469      5,469      5,506      5,506      
 Total current                           1,122,797  1,122,797  897,502    897,502    
 Total                                   3,876,734  3,876,734  3,694,541  3,694,541  
 
 
1,122,797 
 
1,122,797 
 
897,502 
 
897,502 
 
Total 
 
3,876,734 
 
3,876,734 
 
3,694,541 
 
3,694,541 
 
The fair values of financial assets and financial liabilities, together with
the carrying amounts in the Company statement of financial position are as
follows: 
 
 Non-current financial assets                                               
 Loans and receivables to subsidiaries  155,978  155,978  171,676  171,676  
 Loans and receivables                  -        -        5,100    5,100    
 Total non-current                      155,978  155,978  176,776  176,776  
 Current financial assets                                                   
 Loans and receivables                  -        -        27       27       
 Cash and short-term deposits           1,194    1,194    1,065    1,065    
 Total current                          1,194    1,194    1,092    1,092    
 Total                                  157,172  157,172  177,868  177,868  
 Current financial liabilities                                              
 Trade and other payables               1,503    1,503    1,372    1,372    
 Loans and borrowings                   115,798  115,798  114,245  114,245  
 Total current                          117,301  117,301  115,617  115,617  
 
 
115,798 
 
115,798 
 
114,245 
 
114,245 
 
Total current 
 
117,301 
 
117,301 
 
115,617 
 
115,617 
 
Fair value hierarchy 
 
The table below analyses recurring fair value measurements for financial
assets and financial liabilities. These fair value measurements are
categorised in to different levels in the fair value hierarchy based on the
inputs to valuation techniques used. The different levels are defined as
follows. 
 
• Level 1: quoted prices (unadjusted) in active markets for identical assets
or liabilities. 
 
• Level 2:  inputs other than quoted prices that is observable for the asset
or liability, either directly or indirectly. 
 
• Level 3: valuation techniques that include inputs for the asset or liability
that are not based on observable market data (unobservable inputs). 
 
 2016                                          Level 1  Level 2  Level 3  Total   
 Financial assets measured at fair value                                          
 Equity securities - available-for-sale        509      -        17,429   17,938  
 Equity securities - held for trading          115      -        -        115     
 Debt securities-held for trading              5,062    -        -        5,062   
 Derivative assets                             -        45,872   -        45,872  
 Total                                         5,686    45,872   17,429   68,987  
                                                                                  
 Financial liabilities measured at fair value                                     
 Interest rate swaps                           -        6,174    -        6,174   
 Option premium payable                        -        22,534   -        22,534  
 Foreign exchange forward contract             -        629      -        629     
 Total                                         -        29,337   -        29,337  
 
 
The Group recognises transfers between levels of the fair value hierarchy as
of the end of the reporting year during which the transfer has occurred.
During the year ended 31 March 2016, there were no transfers between Level 1
and Level 2 fair value measurements. 
 
Reconciliation of Level 3 fair value measurements of financial assets: 
 
 2016                                                        Available-for-sale  Total    
                                                             Unquoted Equities            
 Opening balance                                             18,644              18,644   
 Total gains or losses:                                                                   
 - in income statement                                       2                   2        
 - in other comprehensive income                                                          
 change in fair value of available for sale financial asset  (159)               (159)    
 foreign currency translation difference                     (1,004)             (1,004)  
 Settlements                                                 (54)                (54)     
 Transfers into level 3                                      -                   -        
 Closing balance                                             17,429              17,429   
 
 
16.  Subsequent events: 
 
Out of the total Warrants of 80,808,080 issued by KEVL to KSK Power Holdings
Limited ("KPHL"), 10,951,280 warrants has been exercised and converted in to
equity share capital of KEVL during March 2015 and April 2015. Balance
warrants of 69,856,800 outstanding as at 31 March 2016 lapsed subsequent to
the balance sheet date on account of non-exercise of option by KPHL and same
shall stand forfeited. 
 
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