Reliance Power - Annual Report - 2008-2009

RELIANCE POWER LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

Dear Shareowners,

Your Directors have pleasure in presenting the 15th Annual Report, together
with the audited statement of accounts of the Company for the year ended
March 31, 2009.

Financial Results:

The performance of the Company for the financial year ended March 31, 2009
is summarised below:

Particulars Financial Year ended Financial Year ended
March 31, 2009 March 31, 2008

Rs. in US$ in Rs. in USS in
million million* million million

Total Income 3,347.16 65.99 1,328.67 33.12

Profit before tax 2,564.74 50.57 1,014.39 25.28

Less: Provision
for taxation

- Current tax 71.00 1.40 58.00 1.45

- Frinqe benefit tax 4.60 0.09 4.00 0.10

- Wealth Tax 0.10 - - -

- Taxes of
earlier years 0.00 - 5.70 0.13

Profit after tax 2,489.04 49.07 946.69 23.60

Balance of Profit
brought forward 946.84 18.67 0.15 -
from previous year

Balance carried
to Balance Sheet 3,435.88 67.74 946.84 23.60

* Rs. 50.72 = US$ 1 Exchange rate as on March 31, 2009 (Rs. 40.12 = US$ 1
as on March 31, 2008).

Financial Performance:

During the year under review, your Company recorded total income of
Rs. 334.72 crore, against Rs.132.87 crore in the previous year. Net Profit
for the financial year ended March 31, 2009 increased to Rs. 248.90 crore
from Rs. 94.67 crore in the previous year. Shareholders equity (networth)
increased to Rs. 13,792.81 crore from Rs. 13,542.68 crore in the previous
year.

Issue and allotment of Bonus Shares:

Subsequent to the closing of the Initial Public Offering (IPO) of the
Company, the global and Indian equity markets suffered an extraordinary
meltdown. In tine with the global trend, the Company's share price had also
nosed below the IPO price after listing on February 11, 2008. Equity
shares, by their very nature, are risk-bearing instruments and there is no
obligation on behalf of any issuer to insure investors against possible
losses. However, in keeping with the Reliance ADA Group's fundamental and
over-riding philosophy of creating value for genuine long term investors,
the board of directors of the Company deemed appropriate as one-time
measure to reduce the effective cost of acquisition of the Company's shares
below the IPO price by issue of bonus shares.

Accordingly, the board had recommended issue of bonus shares to all the
shareholders of the Company under public category in the ratio of three new
fully paid-up equity shares of Rs. 10 each for every five existing fully
paid-up equity shares of Rs. 10 each held. The Promoters of the Company
viz, AAA Project Ventures Private Limited (AAA) and Reliance Infrastructure
Limited (RInfra), who held 45% each of the equity shares of the Company
waived their entitlement to receive the bonus shares Besides, in order to
ensure that the holding of RInfra is not diluted, AAA undertook to gift
6.15 crore shares of the Company out of its holding to RInfra.

The members through Postal Ballot approved the proposal on April 21, 2008,
for issue and allotment of bonus equity shares in the proportion of three
new fully paid-up equity shares of Rs. 10 each for every five fully paid-up
equity shares of Rs. 10 each held as on the Record Date.

Pursuant to approval of the members, the Company issued and allotted 13.68
crore equity shares of Rs. 10 each aggregating Rs. 136.80 crore as bonus
shares credited as fully paid up by capitalisation of the sum standing to
the credit of the Securities Premium Account to all members (other than the
Promoters) of the Company, holding equity shares of Rs. 10 each of the
Company at the close of business hours on June 2, 2008, being the date
prior to the book closure from June 3, 2008 to June 5, 2008 (both days
inclusive), notified by the Board of Directors for this purpose, in the
ratio of three new fully paid-up equity shares of Rs. 10 each for every
five fully paid up equity shares of Rs. 10 each held.

As per the undertaking given to RInfra as mentioned above, AAA, gifted 6.15
crore shares of the Company to RInfra. As a result RInfra continue to hold
44.96 per cent of the equity shares of the Company, white holding of AAA
declined to 39.82 per cent 40 of the equity shares of the Company.

The equity shares allotted through bonus issue were listed at the Bombay
Stock Exchange Limited and the National Stock Exchange of India Limited and
started trading from June 18, 2008.



Dividend:

Your Directors have not recommended any dividend on equity shares for the
year under review.

Management Discussion and Analysis:

The Management Discussion and Analysis of financial condition including the
result of operations of the Company for the year under review, as required
under clause 49 of the listing agreement with the stock exchanges, is given
as a separate statement in Annual Report.

The Company and its subsidiaries have entered into various contracts in the
areas of power business. While benefits from such contracts will accrue in
the future years, their progress is periodically reviewed.

Subsidiary Companies:

The Company, as of March 31, 2009 had 14 subsidiaries, viz. Sasan Power
Limited, Rosa Power Supply Company Limited, Maharashtra Energy Generation
Limited, Vidarbha Industries Power Limited, Tato Hydro Power Private
Limited, Siyom Hydro Power Private Limited. Chitrangi Power Private
Limited, Urthing Sobla Hydro Power Private Limited. Kalai Power Private
Limited. Coastal Andhra Power Limited, Reliance Coal Resources Private
Limited, Sasan Power Infrastructure Limited and Sasan Power Infraventures
Private Limited. Reliance Power International Sart, Luxemburg became
subsidiary in terms of Section 4(1)(b)(II) of the Companies Act, 1956.
Besides, Maharashtra Energy Generation Infrastructure Limited, is a wholly
owned subsidiary of Maharashtra Energy Generation Limited and Coastal
Andhra Power Infrastructure Limited, is a wholly owned subsidiary of
Coastal Andhra Power Limited. In terms of Section 4(1)(c) of the Companies
Act, 1956, these two companies are subsidiaries of the Company.

In terms of the approvals granted by the Central Government under Section
212(8) of the Companies Act, 1956, copies of the balance sheet, profit and
loss account and reports of the board of directors and auditors of the
subsisting subsidiaries have not been attached with the balance sheet of
the Company. However, these documents will be made available upon request
by any member of the Company interested in obtaining the same. As directed
by the Central Government, the financial data of the subsidiaries has been
furnished in the Notes on consolidated financial statements, which forms
part of the Annual Report. The annual accounts of the Company including
that of subsidiaries will be kept for inspection by any member. Further,
pursuant to Accounting Standard-21 (AS-21) prescribed under the Companies
(Accounting Standard) Rules, 2006, Consolidated Financial Statements
presented by the Company include financial information about its
subsidiaries.

Fixed Deposits:

The Company has not accepted any fixed deposits during the year.

Directors:

Shri. S.L. Rao and Shri. J.L. Bajaj retire by rotation and are eligible for
re-appointment. Brief resumes of these directors, the nature of their
expertise in specific functional areas, names of companies in which they
hold directorships and the memberships/chairmanship of committees of the
board. their shareholdings, etc. as stipulated under clause 49 of the
listing agreement with the stock exchanges in India are provided in the
report on corporate governance forming part of the Annual Report.

Directors' Responsibility Statement:

Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956, with respect to the Directors' Responsibility Statement, it is hereby
confirmed that:

(i) In the preparation of the annual accounts for the financial year ended
March 31, 2009, the applicable accounting standards have been followed and
that there are no material departures from the same;

(ii) The Directors have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company as at March 31, 2009, and of the profit of the Company for the said
period;

(iii) The Directors have taken proper and sufficient care to the best of
their knowledge and ability for the maintenance of adequate accounting
records in accordance with the provisions of the Companies Act, 1956, for
safeguarding the assets of the Company and for preventing and detecting
fraud and other irregularities; and

(iv) The Directors have prepared the accounts for the financial year ended
March 31, 2009 on a 'going concern' basis.

The above statements were noted by the audit committee at its meeting held
on April 22, 2009.

Group:

Pursuant to an intimation from the Promoters, the names of the Promoters
and entities comprising 'group' as defined under the Monopolies and
Restrictive Trade Practices ('MRTP') Act, 1969, are furnished in the Annual
Report for the purpose of the SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 1997.

Consolidated Financial Statements:

The audited consolidated financial statements based on the financial
statements received from subsidiary companies, as approved by their
respective board of directors, have been prepared in accordance with the
Accounting Standard21 (AS-21) - 'Consolidated Financial Statements' and
Accounting Standard-23 (AS-23)-'Accounting for Investments in 4suzettes';
notified under Section 211 (3C) of the Companies Act 1956, read with
Companies (Accounting Standards) Rules, 2006, as applicable.

Auditors:

Price Waterhouse, Chartered Accountants and Chaturvedi & Shah, Chartered
Accountants, statutory auditors of the Company, hold office until the
conclusion of the ensuing annual general meeting and are eligible for re-
appointment.

The Company has received letters from Price Waterhouse, Chartered
Accountants and Chaturvedi & Shah, Chartered Accountants, to the effect
that their appointment, if made, would be within the prescribed limits
under Section 224 (1B) of the Companies Act, 1956, and that they are not
disqualified for such appointment within the meaning of Section 226 of the
Companies Act, 1956.

Particulars of Employees:

In terms of the provisions of Section 217 (2A) of the Companies Act, 1956,
read with the Companies (Particulars of Employees) Rules, 1975, the names
and other particulars of employees are set out in the Annexure to the
Directors report. However, having regard to the provisions of Section 219
(1) (b) (iv) of the Companies Act, 1956, the Annual Report is being sent to
all members of the Company excluding the aforesaid information. Any member
interested in obtaining such particulars may write to the Company Secretary
at the registered office of the Company.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings
and Outgo:

The Information in accordance with the provisions of Section 217(1)(e) of
the Companies Act, 1956, read with the Companies (Disclosures of
Particulars in the Report of Board of Directors) Rules, 1988, regarding
conservation of energy and technology absorption are not given as the
Company has not undertaken any manufacturing' activity.

Foreign Exchange Earnings and Outgo:

Foreign Exchange earned : Rs. Nil (previous year Rs. Nil)
Foreign Exchange used Rs. 534.76 Lakh (previous
year Rs. 35.41 Lakh)

Corporate Governance:

The Company has adopted the Reliance Anil Dhirubhai Ambani Group- Corporate
Governance Policies and Code of Conduct which has set out the systems,
processes and policies conforming to international standards. As per clause
49 of the Listing Agreement, a separate section on Corporate Governance
forms part of the Annual Report.

A certificate from the Auditors of the Company regarding compliance with
the conditions of Corporate Governance as stipulated under clause 49 of the
Listing Agreement is given in the Annexure hereto.

Acknowledgements:

Your Directors wish to place on record their appreciation for the continued
support and co-operation of the shareholders, bankers. various regulatory
and government authorities and for the valuable contributions made by the
employees of the Company.

On behalf of the Board of Directors

Place: Mumbai Anil D Ambani
Date : April 23, 2009 Chairman

MANAGEMENT DISCUSSION AND ANALYSIS

Forward looking statements:

Statements in this Management Discussion and Analysis of Financial
Condition and Results of Operations of the Company describing the Company's
objectives, expectations or predictions may be forward looking within the
meaning of applicable securities laws and regulations. Forward looking
statements are based on certain assumptions and expectations of future
events.

The Company cannot guarantee that these assumptions and expectations are
accurate or will be realised. The Company assumes no responsibility to
publicly amend, modify or revise forward-looking statements, on the basis
of any subsequent developments, information or events. Actual results may
differ materially from those expressed in the statement. Important factors
that could influence the Company's operations include cost of fuel,
determination of tariff and such other charges and levies by the regulatory
authority, changes in government regulations, tax laws, economic
developments within the country and such other factors.

The financial statements are prepared under historical cost convention, on
accrual basis of accounting, and in accordance with the provisions of the
Companies Act 7956 (the Act) and comply with the accounting standards
notified under Section 211 (3C) of the Act read with Companies (Accounting
Standards) Rules, 2006. The management of Reliance Power Limited ('Reliance
Power' or 'RPower' or 'the Company') accepts responsibility for the
integrity and objectivity of these financial statements, as well as for
various estimates and judgments used therein. These estimates and judgments
relating to the financial statements have been made on a prudent and
reasonable basis, in order that the financial statements reflect in a true
and fair manner, the state of affairs and profits for the year.

The following discussions on our financial condition and result of
operations should be read together with our audited consolidated financial
statements and the notes to these statements included in the Annual Report.

Unless otherwise specified or the context otherwise requires, all
references herein to 'we', 'us', 'our', 'the Company', 'Reliance', 'RPower'
or 'Reliance Power' are to Reliance Power Limited and/or its subsidiary
companies.

Economic Outlook:

The Indian economy entered the financial year 2008-09 on a buoyant note,
During the preceding three years, the country had, witnessed tremendous
economic growth with Gross Domestic Product (GDP) expanding at an average
of 9 per cent. However, the growth momentum was moderated because of the
global economic conditions. Like all other emerging economies, India too
was impacted by the credit crisis, indeed more so than was imagined
earlier. The slowdown in growth was reflected in lower industrial
production, negative exports, deceleration in services activities, dented
corporate margins and diminished business confidence. As per the revised
estimates for the FY 2008-09, the GDP for the year grew at 6.7 per cent as
against 9.1 per cent in the previous year.

But it was not all gloom and doom. There were some comforting signs too.
Well-functioning financial markets, robust rural demand, lower headline
inflation and roboust foreign exchange reserves were all pointers to the
long-term strength and resilience of the Indian Economy. The timely fiscal
stimulus packages announced by the Government, coupled with, swift monetary
easing and regulatory action by the Reserve Bank of India, helped to arrest
the slow down and keep the economy ticking.

The global situation to saw some easing, thanks to an unprecedenteded and
coordinated policy action by authorities across major economies of the
word. It is hope that we will continue to billed on the recovery that His
currently underway.

Indian Power Sector:

During financial year 2008-09, new power generating capacity amounting to
more than 4,905 MW was added taking the total installed capacity at end of
financial year 2008-09 to 1,47,966 MW.

The fuels source-wise and region break-up of power generation capacity in
India as on March 31, 2009 was:
Thermal
Region Coal Gas Diesel Total

North India 19,140 3,531 13 22,684
West India 25,918 6,983 18 32,919
South India 16,410 3,679 939 21,028
East India 15,739 190 17 15,946
North East India 170 766 143 1,079
Islands 0 0 70 70
AR India 77,376 15,149 1,200 93,725

Thermal
Region Nuclear Hydro RES Total

North India 1,180 13,425 1,766 39,055
West India 1,840 7,449 4,024 46,231
South India 1,100 10,954 7,048 40,130
East India 0 3,934 227 20,108
North East India 0 1,116 171 2,364
Islands 0 0 6 76
AR India 4,120 36,878 13,242 147,966

Source:

Power scenerio as a glance, April 2009, Central Electricity Authority (CEA)
India has been traditionally dependent on thermal power as a source of
power generation, which constitutes about 63 per cent of the current
capacity. The balance is contributed by hydroelectric power (25 per cent),
nuclear (3 per cent), and renewable energy (9 per cent). The western region
accounts for the largest share (31 per cent) of the installed power
generation capacity in India followed by the southern region with 27 per
cent and the northern region with 26 per cent. The southern region remains
the dominant region in renewable energy source accounting for more than 53
per cent of the total renewable energy based installed capacity.

The increase in installed power generation capacity has however not kept
pace with the increase in demand for power thus leading to power shortages.
The per capita consumption of electricity increased from 15 kwh in 1950 to
704 kwh in FY 2007-08, which however continues to be very low in comparison
to other developed and developing countries. The gap in demand and supply
has led to significant shortages as can be seen from the figures of
financial year 2008-09:

Region Energy Energy Peak Peak
requirement Deficit demand Deficit
(million % (Mega %
kwh) want:
10
watts)

North India 224,218 -10.8 33,034 -10.7
West India 254,486 -16.0 37,240 -19.0
South India 204,086 -7.5 28,340 -7.4
East India 82,127 -4.6 12,901 -9.4
North East India 9,407 -13.5 1,820 -25.4
All India 774,324 -11.0 109,809 -12.0

Source:

Power scenario as a glance, April 2009, Central Electricity Authority (CEA)

Major opportunities:

Estimates of demand and supply of power for the coming years have indicated
a continued supply gap for many years to come. The government has taken
various initiatives to increase public as welt as private investments in
the sector to enhance generation capacity and eliminate the deficit.
Following the anactment of the Electricity Act, 2003, the Government has
implemented a series of policy reforms to the power generation sector
attractive for investors.

As a part of these reforms, the Central Government introduced the concept
of Ultra Mega Power Projects (UMPPs) to bridge the demand-supply deficit.
Entairing an investment of nearly Rs. 16,000-18,000 crore per project, the
UMPPs are being developed on supercritical technology. As operating
pressure and temperature of a supercritical boiler is significantly hioer,
it is much more efficient than a subcritical boiler and leads to lower fuel
consumptions and COz emission. Various state governments have also been
pursuing their individual capacity enhancement programmes by inviting
competitive bids for putting up power projects in their respective states.
States have also been inviting bids from developers for supply of power
from projects which may be located outside their states.

Despite all these initiatives, it is expected that demand supply gap may
continue for the next few years. This has provided an opportunity to
developers to put up power projects and sell power on merchant basis
without entering into long-term Power Purchase Agreements (PPAs). Such
short term power sale fetches higher premiums providing attractive returns
to the developers of merchant-power projects.

With increasing focus on environment related issues, power projects,
employing clean and environment-friendly technology can also earn carbon
credits, which are traded extensively in the international market thus
providing an additional source of revenue.

Key Risks and its management:

Power projects are highly capital intensive and have a long gestation
period. There are different stages in the project development cyde, each
one of which carries different risks. Some of the critical milestones of
the development phase are:

* Requisite statutory approvals.
* Land acquisition fuel, water and transmission linkages.
* Financial closure.
* Construction and commissioning.

During the construction phase, ensuring that all supply and erection
contracts are placed on time and within the original cost estimates is a
critical challenge. Afterwards, it is equally cirtical that all the vendors
and contractors perform their responsibilities in the assigned time frame.

During the operations phase, operating and maintaining the power plant
efficiently and ensuring that operational costs and performance are
maintained in line with the norms, is the major challenge.

Reliance Power has put in place a Risk Management Framework, which provides
for identifying, assessing, monitoring, and reporting various risks at all
levels. Under the framework, the Company has constituted a Risk Management
Committee at both the corporate as well as project level to continuously
monitor, report and mitigate various risks faced. The outcome of this
monitoring is reported to the audit committee of the board of directors.

Discussion on Operations of the Company:

The Company does not have any operational power project and has a large
pipeline of power projects under various stages of implementation which
will become operational within the next few years.

Status of Project & Development:

Reliance Power is currently developing sixteen large and medium sized power
projects with a combined planned installed capacity of 33,480 MW, one of
the largest portfolio of power Generation assets under development in
India.

The sixteen power projects are planned to be diverse in geographic
location, fuel type, fuel source and of Rake and each project is planned to
be strategically located near an available fuel supply or load center. The
identified project sites are located in western India (12,220 MW), northern
India (9,080 MW), eastern India (3,960 MW), northeastern India (4,220 MW)
and southern India (4,000 MW). They include eight coal-based projects
(18,580 MW) to be fueled by reserves from captive mines and supplies from
India and abroad, two gas-based projects (10,280 MW) to be fueled primarily
by reserves from the Krishna Godavari Basin (the 'KG Basin') off the east
coast of India and seven hydroelectric projects (4,620 MW), six of them in
Arunachal Pradesh and one in Uttarakhand. The Company intends to sell the
power generated by these projects under a combination of long-term and
short-term Power Purchase Agreements (PPAs) to state-owned and private
distribution companies and industrial consumers.

All the projects are in various stages of development. During the year,
significant progress has been made in the projects.

1. Rosa Stage 1, a 600 MW coal-based Power Project in Uttar Pradesh:

Rosa Power Supply Company Limited (RPSCL), a wholly owned subsidiary of
Reliance Power, is developing a 1, 200 MW coal-based power project at Rosa
village in Shahjahanpur, Uttar Pradesh in two stages of 600 MW each.

Rosa Stage 1 will be a 2x300 MW coal-based power project and will employ
subcritical Pulverized Coal Combustion (PCC) technology. The project has
been identified as an 1111 plan project by the Ministry of Power (MoP) and
is scheduled to be fully commissioned in the current financial year (2009-
10). Construction of various systems / sub-systems is ahead of schedule and
is currently in the advanced stage of its construction phase.

The first project of the Company, which is about to enter the commissioning
phase, is enjoying support from the Government, with Rosa Stage 1
designated as a 'priority project'. The sale of power to be generated from
the plant is also secured with a Power Purchase

Agreement (PPA) for the entire power generated by Rosa Stage 1 with Uttar
Pradesh Power Company Limited (UPPCL) on a cost plus tariff basis based on
Tariff Guidelines set by State Power Regulatory Body,

The project is ahead of schedule with most of the major infrastructure-
related work either completed or on the verge of completion. Erection of
structural steel platform for all nine levels and roof sheeting has been
completed for Unit 1 and 2 while Turbine Generator (TG) deck casting is
completed for Unit 2. Drum Lifting of Boiler Unit 1 and Unit 2 has also
been rompleted. Unit 1 boiler hydro test, a major milestone, was completed
within six months from the date of drum lifting, which is a record of its
sort.

2. Rosa Stage 2, a 600 MW coal-based Power Project in Uttar Pradesh:

Rosa Stage 2 will be a 2x300 MW coal-based power project. The Stage II is
also scheduled to commence power generation (be 'on-stream') within the 11
t' plan (i.e. by March 2012), Stage 2 got a head-start with the land
acquired and water allocated for Rosa Stage 1 being sufficient to
accommodate Rosa Stage 2 as well. The Rosa Stage 2 expansion project, which
got approval from the Government of Uttar Pradesh, received key clearances
and approvals from Airports Authority of India and Defence for chimney
height.

Like Stage 1 even the Stage 2 secured offtake of its power with
confirmation from Uttar Pradesh Government to buy 300 MW and a PPA has been
signed with Reliance Energy Trading Limited (RETL) for sale of the balance
300 MW. Fuel supply has also been secured with the Government of India
awarding long-term coal linkage for the expansion. Most of the sanctions
for debt from banks and institutions are in place with IDBI Bank acting as
the lead lender.

3. Butibori, a 300 MW coal-based Power Project in Maharashtra:

Vidharbha Industries Power Limited (VIPL), a subsidiary of Reliance Power,
is currently developing a 300 MW coal-based power project with subcritical
technology to be located at Butibori. Maharashtra Industrial Development
Corporation (MIDC) area in Naqpur, Maharashtra. The construction of the
Project, which is expected to be completed in the 11th Plan, was
inaugurated by the Hon'ble Chief Minister of Maharashtra, Shri. Ashok
Chavan in February 2009.

The construction activities at the project site commenced with the project
having physical possession of 91 hectares of land. The Engineering,
Procurement and Construction (EPC) contract was awarded to Reliance
Infrastructure Limited and the Boiler Turbine Generator (BTG) contract was
awarded to Shanghai Electric Company, China, The project obtained all
necessary major clearances and has appointed Axis Bank Limited as the lead
arranger for debt funding. Sanctions have already been received from Axis
Bank (the lead Lender) and other banks and financial institutions to fund
the project.

The plant, which is situated in the midst of industrial area, will
primarily cater to industries thus ensuring perpetual demand for the power
generated from the plant. It has already signed Power Supply Agreement
(PSA) for major part of the capacity, while discussions with other
industrial consumers are in progress.

4. Sasan Ultra Mesa Power Project, a 3,960 MW pithead coal-based Project in
Madhya Pradesh:

Sasan Power Limited (SPL), a wholly owned subsidiary of Reliance Power, is
developing a 3,960 MW coal- 1 based UMPP at Sasan, Madhya Pradesh. Being a
pithead coal based project, the project is free from fuel supply concerns.
The plant has been allocated three captive coal blocks, Moher, Moher-
Amlohri Extension, and Chhatrasal to meet its fuel requirements. The
project is expected to set a new benchmark in terms of commissioning period
after the commissioning schedule was advanced by three years. The first
Unit of the project shall be commissioned in December 2011 and the entire
project would be commissioned by March 2013, more than three years ahead of
schedule with respect to the original power purchase Agreement.

With necessary clearances including clearanees from Ministry of Environment
and Forests (MoEF), mine plan and environmental clearance obtained for
Moher and for Moher-Amlohri extension, the project is well on its course to
meet the advanced commissioning schedule.

Construction activities have begun at site and considerable progress has
been made with regard to preliminary construction activities including site
levelling, boundary wall, office building, batching plant, erection of
poles and switchyard for construction power supply, etc. The construction
of Resettlement and Rehabilitation (R&R) colony has been completed. EPC
contract has been awarded to a consortium of Reliance Infrastructure
Limited and Reliance Infra Projects (UK) Limited.

On the financial front, the project has achieved a major milestone with the
execution of the financing agreements with a consortium of 13 Banks and
Financial Institutions. This was a landmark event in India's project
finance history as banks and financial institutions have appraised an
integrated coal mine cum-power project of this scale for the first time in
India. The achievement is immensely significant when seen in the backdrop
of financial and economic turmoil in all global economies.

5. Krishnapatnam Ultra Mega Power Project, a 4,000 MW imported coal-based
Project in Andhra Pradesh:

Coastal Andhra Power Limited (CAPL), a wholly owned subsidiary of the
Company is currently developing a 4,000 MW coal-based UMPP to be located
near Krishnapatnam, Andhra Pradesh. The Krishnapatnam project, which was
awarded to Reliance Power following an international competitive bidding
process, is located approximately 3 kms from the nearest port where
imported coal will be delivered to supply fuel for the project.

The Krishnapatnam project will be a coal-based project and will employ
super-critical technology. The project is scheduled to come on-stream by
September 2013, when the first unit is commissioned and the project is
scheduled to be fully commissioned by October 2015.

Construction activities at the site have commenced with the Company already
in possession of nearly 90 per cent of the land. The Company has taken up
the exercise of construction of Resettlement and Rehabilitation (R&R)
dwelling units and other site enabling works. All key clearances and
approvals required for the project are in place. All the required site
studies have been completed.

Good progress has been achieved in construction activities which include
site leveling, boundary wall, levelling site office, stores. switchward for
construction power etc.

The Company is now focusing on early financial closure. IDBI Bank Limited
and Power Finance Corporation Limited (PFC) have been appointed as the co-
lead arrangers for the project and have also sanctionea Rupee Loans.
Reserve Bank of India has already accorded approval for External Commercial
Borrowings to the tune of USS 2 billion.

6. Chitrangi Power Project, a 3,960 MW coal-based Power Project in Madhya
Pradesh:

Chitrangi Power Private Limited (previously MP Power Generation Private
Limited), a wholly owned subsidiary of the Company, is set to develop a
3,960 MW coal based power project at Chitrangi Tehsil, Singrauli District,
Madhya Pradesh.

In September 2007, the Company entered into a Memorandum of Understanding
(MoU) with the Government of Madhya Pradesh (GoMP) under which the Company
agreed to establish coal-based power project, subject to completion of
feasibility studies and approval of the board.

With land already identified for the project, the Company had filed
application for government and private Land. The project has also obtained
in principle water allocation from GoMP. Regarding source of fuel,
permission has been obtained from the Government of India to se the
incremental from the captive coal blocks allocated for Sasan UMPP.

Reliance Power has already secured a bid to supply 1,241 MW power to Madhya
Pradesh Power Trading Company Limited (MPPTCL) at a levelized tariff of
Rs. 2.45 a uniform the Project. The Company is also pursuing other
opportunities to tie up for offtake of balance capacity.

7. Shahpur Coal and Gas, a 4,000 MW combined gas based and coal-based Power
Project, in Shahpur in Maharashtra:

Maharashtra Energy Generation Limited (MEGL), a wholly owned subsidiary of
the Company, is currently developing a combined 1,200 MW coal-based and a
2,800 MW gas-based power project at Shahpur, Dist Raigad in Maharashtra.

The project has received all major clearances and approvals including
environmental clearance from the Ministry of Environment and Forest (MoEF),
of the Government of India, including for Captive Jetty and other
infrastructure facilities in Coastal Regulation Zone (CRZ). The Government
of Maharashtra (GoM) has already granted firm water allocation for the
project. Meanwhile, MEGL's Resettlement & Rehabilitation (R&R) proposal
has been reviewed by the Maharashtra State Rehabilitation Committee and
granted in-principle approval.

8. Dodri, a 7,480 MW gas-based Power Project, Uttar Pradesh:

The project entails the development, construction and operation of a 7,480
MW gas based power generation project at Dhirubhai Ambani Energy City, near
Dadri in Ghaziabad District of Uttar Pradesh.

The power project, to be developed in phases, will be the world's largest
gas based power generation plant at a single location. The Company has
already obtained possession of 850 hectares of land required for the
project and acquisition and transfer of around 160 hectares is underway.
The project has received all statutory clearances from the Central and
Uttar Pradesh Government authorities including environmental clearance from
the MoEF for the full capacity of 7,480 MW award of Mega Power Project
Status from the Ministry of Power, water allocation (allocation from Ganqa
Canal and ground water resources), etc.

9. Urthing Sob(a, a 400 MW hydroelectric Project in Uttarakhand:

Urthing Sobla Hydro Power Private Limited (USHPPL), an 80 per cent
subsidiary of Reliance Power, is setting up a 400 MW (4x100 MW) run-of-the-
river hydroelectric power project on the Dhauliqanqa River in Pithoraqarh,
Uttarakhand. A Project Development Agreement (PDA) was entered into with
the Government of Uttarakhand to carry out studies and investigations, to
prepare the Detailed Project Report (DPR) and to develop and operate the
project. SMEC, Australia has been appointed as the consultant for
preparation of DPR.

10. Siyom, a 1,000 MW hydroelectric Project in Arunachal:

Siyom Hydro Power Private Limited (SHPPL), a wholly owned subsidiary of
Reliance Power, is developing a 1,000 MW (4x250 MW) run-of-the-river
hydroelectric power project on the Siyom River in West Siang, Arunachal
Pradesh.

A Memorandum of Agreement (MoA) was signed in February 2006 with the
Government of Arunachal Pradesh, Under the terms of the MoA, the project is
required to be implemented on a Build-Own-Operate-Transfer (BOOT) basis for
a concession period of forty years from the commissioning date. The
detailed project report had been prepared by NHPC in 2003 and is being
reviewed/updated by Halcrow, UK. The Project has got statutory
environmental clearance from Ministry of Environment & Forest and Defence
clearance and is currently moving forward at brisk pace.

11. Tato II, a 700 MW hydroelectric Project in Arunachal Pradesh:

Tato Hydro Power Private Limited (THPPL), a wholly owned subsidiary of
Reliance Power, is currently developing a 700 MW (4x175 MW) run-of-the-
river hydroelectric power project on the Siyom River in West Siang,
Arunachal Pradesh.

A Memorandum of Agreement (MoA) was signed in February 2006 with the
Government of Arunachal Pradesh on similar lines like Siyom. The Detailed
project report has been prepared by SNC Lava(in, Canada and the same has
since been submitted to CEA for according Techno Economic Clearance (TEC).

Preliminary work including surveys, design of project layout for DPR and
construction methodology are either completed or well on their course of
completion.

12. Tilaiya Ultra Meqa Power Project a 3, 960 MW pithead coal-based Power
Project in Jharkhand:

Reliance Power emerged as the successful bidder for the fourth UMPP through
the International Competitive Bidding (ICB) route at a levelized tariff of
Rs. 1.77 a unit. Having received the letter of Intent (LOI), which was
issued to Reliance Power on February 12, 2009, the Special Purpose Vehicle
Company viz. Jharkhand Integrated Power Limited, will be transferred to
Reliance Power after completing the requisite obligation of the Procurer as
per the bid process.

Other Hydroelectric Projects in Arunachal Pradesh:

Reliance Power signed Memorandum of Agreements (MoA) with the Government of
Arunachal Pradesh for the implementation of four Hydro-electric power
projects in the state that includes:

1. 1,200 MW Kalai-II hydroelectric Project on the river Lohit in Anjaw
District.

2. 420 MW Amulin hydroelectric project on the river Mathun in Dibang Valley
District.

3. 500 MW Emini hydroelectric project on the river Mathun in Dibang Valley
District; and

4. 400 MW Mithundon hydroelectric project on the river Mathun in Dibang
Valley District.

These projects were awarded on the basis of Competitive Bidding carried out
by the state government. As per the bid, the free power to be provided to
the State varies between 15 to 18 per cent of the energy generated from the
projects.

These projects are part of Government of India's 50,000 MW Hydro
Initiative. As per the terms of the MoAs, all these projects, which are
Run-of-the-River schemes, are required to be implemented on Build-Own-
Operate Transfer (BOOT) basis.

Other Opportunities:

Clean Development Mechanism (CDM):

Clean Development Mechanism, which is one of the three mechanisms under
Kyoto Protocol to reduce Greenhouse Gases (GHG) from the environment,
provides immense opportunity for project developers in developing countries
to carry out CDM based projects to earn carbon credits, which are known as
Certified Emission Reductions (CERs) units. These CERs are sold for a price
to the buyers in Annexure 1 countries (mostly developed countries) that
have to either reduce their GHG emissions or buy equivalent carbon credits
in the global emission trading market to meet their compliance.

The Company is in the process of applying for registration with Clean
Development Mechanism (CDM)-Executive Board for its various power projects
including Sasan and Krishnapatnam Ultra Mega Power Projects (UMPPs). Sasan
and Krishnapatnam UMPPs shall be qualified under CDM to earn carbon credits
as the projects will employ supercritical technology, which helps in GHG
reduction. Besides, the environment-friendly hydroelectric power projects
under implementation, our gas based generation projects will also become
eligible under CDM scheme because of the lesser GHG emissions.

The Company has already begun work towards registering the UMPPs with CDM-
Executive board. Consultants and Validators for these two projects were
appointed and CDM activities are progressing as per schedule.

Global stakeholder consultation of Sasan UMPP has already concluded and the
host country approval letter from the National CDM Authority in the
Ministry of Environment and Forests (MoEF), Government of India was
obtained on February 6, 2009. Sasan UMPP is currently under validation and
the process is expected to conclude shortly.

Similarly, Project Design Document (PDD) has already been submitted, for
obtaining the host country approval letter for Krishnapatnam UMPP. The
validator has been appointed for the Krishnapatnam UMPR Other CDM related
formalities would commence shortly.

Thus, sales proceeds by selling carbon credits in the global emission
market shall act as a new revenue stream for the Company.

Internal control systems:

The Company has put in place internal control system and processes
commensurate with its size and scale of operations. An Enterprise Resource
Planning System developed by SAP has been implemented in the Company. The
system has control processes designed to take care of various control and
audit requirements. In addition, the Company has internal audit function,
which oversees the implementation and adherence to various systems and
processes and preparation of Financial Statements as per Generally Accepted
Accounting Principles and Practices. Further, the internal audit. group
also appoints reputed external audit firms to undertake the exercise of
conduct of internal audit at various locations. The report of the internal
auditors is placed before the audit committee meetings.

Human Resources:

The Company has been building up its human resources for executing the
implementation of its large power capacity addition programme. We are now a
family of over 375 professionals. Teams have been put in place both at the
corporate office and in all the project locations. The Company has adopted
a strategy of putting senior and experienced (in the power sector)
professionals as Project Leaders and Functional heads and teams are being
built around them. Considering the fact that many of the power projects are
located in remote areas, suitable compensation schemes as well facilities
for townships with education and medical facilities are being planned. The
Company also has a Graduate Engineer Trainee Program under which graduate
engineers are recruited and trained for working in Power Plants. The
Company is planning to have simulators at various project locations where
operational training services can be provided.

Discussion on Financial Condition and Financial Performance:

Financial Condition:

Reliance Power is a holding company of following subsidiary companies which
are developing various power projects.

Company Project

Rosa Power Supply Company Rosa Stage I and

Limited Stage II

Vidarbha Industries Power Limited Butibori GCPP

Sasan Power Limited Sasan UMPP

Coastal Andhra Power Limited Krishnapatnam UMPP

Chitrangi Power Private Limited Chitrangi

Maharashtra Energy Shahpur
Generation Limited

Siyom Hydro Power Siyom HEPP
Private Limited

Urthing Sobla Hydro Power Urthing Sobla HEPP
Private Limited

Tato Hydro Power Private Limited Tato II HEPP
GCPP - Group Captive Power Project
UMPP - Ultra Mega Power Project
HEPP - Hydroelectric Power Project

An extract of the Consolidated Balance Sheet is placed below:

(Rs. Crore)
As on March 31
2009 2008
Source of Funds
Net worth 13,779.15 13,533.41
Lain Funds 1,332.49 448.27
Total 15,111.64 13,981.68
Fixed Assets (including) 4,965.89 1,030.96
Capital Work-in-Progress)
Investments 10,317.24 13,123.39
Net Current Assets -171.48 -172.67
Total 15,111.64 13,981.68

Share capital has increased to Rs. 2,396.80 crore, since 13.68 crore bonus
shares of face value Rs. 10 each were issued and allotted on June 11, 2008.

Loan Funds have increased to Rs. 1,332 crore from Rs. 448 crores.

Fixed assets have increased to Rs. 4,966 crore mainly enting the increase
in the Capital Work-in-progress the Rs. 4,678 crore from Rs. 8.18 crore.

Investments were at Rs. 10,317 crore in FY 2008-09 as compared to Rs.13,123
crore in FY 2007-08.

Financial Performance:

The Company presently does not have any operational cash flows as all its
projects are presently under various stages of implementation. The Company
made an Initial Public Offering (IPO) in January 2008 through which it
raised Rs. 11,562 crore to be used mainly for equity infusion into various
projects. The un-utilized cash available from the IPO is invested in
various money-market instruments and earn interest income. An extract of
the Consolidated Profit and Loss Account Statement is placed below:

(Rs. Crore)

Year ended Year ended
31.03.2009 31.03.2008
Income:

Dividend 284.86 112.79

Profit on redemption of IMSP6 60.93 20.04

Mutual Funds

Miscellaneous Income 14.59 0.06

Total 360.38 132.89
Expenditure

Employee Cost+ 24.64 3.23

Administration & Other Expenses 78.50 37.51

Depreciation 0.22 -

Total 103.36 40.74

Profit before Taxes 257.02 92.15

Taxes 12.51 6.77

Profit after Taxes 244.51 85.38

Earnings per share (Rs) 1.02 0.15

+ Includes managerial remuneration.

* Dividend income has increased by 152 per cent in FY 2008-09 compared to
FY 2007-08 mainly on account of interest income from IPO proceeds invested
in liquid investments.

* Profit from investment in Mutual Funds has increased by 204 per cent in
FY 2008-09 compared to FY 2007-08.

* Expenditure has increased by 154 per cent in FY 2008-09 compared to FY
2007-08 because of significant increase in employee strength. The Company
is building its human resources team for executing the capacity addition
plan and has increased its strength from about 100 employees to more than
375 employees in the last financial year.