Reliance Power Limited - Financial andStrategic Analysis Review Summary Reliance Power Limited (Reliance Power) is engaged in developing,

c o n s t r u c t i n g a n d operating power plants in domestic and international markets. The company is developing 13 power plants in India with a total installed capacity of 28,200 MW. The company is a part of Reliance Anil Dhirubhai Ambani Group, a leading Indian industrial house. Reliance Power o p e r a t e s t h r o u g h i t s s u b s i d i a r i e s a n d i t s p o w e r p l a n t p o r t f o l i o c o n s i s t s o f s i x c o a l - f i r e d projects, two gasfired projects and four hydroelectric projects.G l o b a l M a r k e t s D i r e c t , t h e l e a d i n g b u s i n e s s i n f o r m a t i o n p r o v i d e r , p r e s e n t s a n i n - d e p t h business, strategic and financial analysis of Reliance Power Limited. The report provides ac o m p r e h e n s i v e i n s i g h t i n t o t h e c o m p a n y , i n c l u d i n g b u s i n e s s s t r u c t u r e a n d o p e r a t i o n s , executive biographies and key competitors. The hallmark of the report is the detailed strategicanalysis and Global Markets Directs views on the company. Scope -The companys strengths and weaknesses and areas of development or decline are analyzed.Financial, strategic and operational factors are considered.-The opportunities open to the company are considered and its growth potential assessed.Competitive or technological threats are highlighted.-The report contains critical company information business structure and operations, the company history, major products and services, key competitors, key employees and executive biographies, different locations and important subsidiaries.-It provides detailed financial ratios for the past five years as well as interim ratios for the lastfour quarters.-Financial ratios include profitability, margins and returns, liquidity and leverage, financial position and efficiency ratios. Reasons to buy -A quick one-stop-shop to understand the company.-Enhance business/sales activities by understanding customers businesses better.-Get detailed information and financial & strategic analysis on companies operating in your industry.-Identify prospective partners and suppliers with key data on their businesses and locations.Capitalize on competitors weaknesses and target the market opportunities available to them.-Compare your companys financial trends with those of your peers / competitors. Scout for potential acquisition targets, with detailed insight into the companies strategic, financial and operational performance.

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CORPORATE RESPONSIBILITY

Corporate Social Responsibility

Reliance power believes in integrating with the local community and promotes inclusive growth.

Reliance Power in its continuous efforts to positively impact the society, especially the areas around its sites and offices, has formulated policies for social development that are based on the following guiding principles:

Adopt an approach that aims at achieving a greater balance between social development and economic development. Adopt new measures to accelerate and ensure the basic needs of all people. Work towards elimination of all barriers for the social inclusion of disadvantaged groups- such as the poor and the disabled Give unfailing attention to children for in their hands lies the country's future. It is for their sake that health, education and environment get topmost priority in our programmes and investments.

In areas around its power plant sites in Sasan,Rosa,Krishnapatnam,Butibori,Chitrangi and others,Reliance Power has been actively involved in various social and environmental organizations to address the issue of sustainable

development and social uplift. The Company in discharge of its responsibility as a corporate citizen actively contributes to community welfare measures and takes up several social initiatives every year. Reliance Power Ltd. has been closely working with institutions and social organizations and supporting their programmes for social development, adult literacy, adoption of village, tree plantation schemes etc.

Health
Health and safety are of universal concern across the spectrum of communities. As a company, we are not only committed to compliance with legal norms but its is our endeavour to voluntarily go beyond that and provide quality healthcare facilities in the regions around our site. We are committed to providing all possible support to create awareness on various health related issues impacting the local people.We believe in a multidimensional approach that considers the needs of the area leading to an effective plan to address all issues in consultation with the local administration, community workers and NGOs working in the area. At its various project sites,Reliance Power sites runs medical facility center, physiotherapy center, and mobile medical vans that dispenses free medicines and provide free health check-ups. Also periodically we come up with health camps like general health check up camps, gynaecology camps, eye check up camps and corrective surgery camps for disabled children.

Patients queing up at an eye camp

Children being treated at corrective surgery camp

Lady availing medical help at the medical centre

Education
Education is a basic tool to bring development to an area and its people. We aim to create an awareness pool of human resource both within and across our area of operations. We are committed to bridging the digital divide between the haves and have nots in educational infrastructure and facilities. Exposure to technology along with a sustainable education model could be strengthened through partnership with government and quasi-government agencies. Reliance Power is involved in a surfeit of activities that have changed the lives of the people residing at the sites or the PAFs (Project Affected Families).Education is the main thrust of these activities.Major contributions made in the area include building of a DAV school at the site for the children of the PAFs and the children of the villages around the sites, free school bus facility for the students, stipend to every child who attends school (a boy child gets Rs. 250 per month while a girl child gets a stipend of Rs. 300 per month), free uniforms, study tours for children, teaching aids to the teachers, training of teachers,as well as night schools for uneducated adults etc.

Inauguration of the school at one of our sites

Children attending training at the computer centre

Children at our DAV school

Employment
Community is an integral part of the business environment and the basic commitment lies towards augmenting the overall economic and social development of local communities by discharging our social responsibilities in a sustainable manner. Reliance Power invests significantly in skill upgradtion of people around the sites. The trained manpower available for construction will ensure quality and accident free working. CIDC, a Government of India initiative has been engaged and has trained about 300 project affected youths as electricians, welders, carpenters and masons and bar benders in batches of 40 each. To further encourage them we paid them, a monthly stipend of Rs.1000 per month. In addition efforts are on to enroll the oustees in short term courses at the ITI operating in the region. Apart from these, training is also provided are:

Computer coaching centre English speaking classes Personality development classes Physiotherapy training center Training by NAC (National Academy of Construction)and use them for future requirement of the construction. For the women folk of the villages, in an effort to empower them the company trains them in soft skills like tailoring and poultry farming etc. Reliance Power provides assistance to women keen on starting their own businesses.

Youths getting trained in engineering skills

At our computer centre

Training youths in construction skills

The Human Touch beyond policy imperatives.

Although the main thrust of Reliance Powers CSR lies in providing quality education, health care and livelihood, we dont restrict ourselves to it. In order to better lives around our areas of interest and business, we strive to provide

basic amenities like electrification in the villages, augmentation and development of roads connecting the village to the main roads, old age support for senior citizens of the project affect families, development of the grazing lands for the cattle of the villagers, afforestation and veterinary camps for domestic cattle. Moral and financial support is extended during social occasions like marriages, community prayers, funerals and other such occasions.

Monetary help being provided to the flood affected

Villagers being employed in fly-ash Drinking water facility being brick making units provided to villages

COMPANY PROFILE

Company Profile
Reliance Power is presently developing a power generating portfolio of over 35,000 MW.

Reliance Power Limited is a part of the Reliance Group, one of Indias largest business houses. The group operates across multiple sectors,including telecommunications, financial services, media and entertainment, infrastructure and energy. The energy sector companies include Reliance Infrastructure and Reliance Power . Reliance Power has been established to develop, construct and operate power projects both in India as well as internationally. The Company on its own and through its subsidiaries has a portfolio of over 35,000 MW of power generation capacity, both in operation as well as capacity under development. The power projects are going to be diverse in terms of geographic location, fuel type, fuel source and off-take, and each project is planned to be strategically located near an available fuel supply or load centre. The company has 1,540 MW of operational power generation assets. The projects under development include seven coal-fired projects to be fueled by reserves from captive mines and supplies from India and elsewhere; two gas-fired projects; and twelve hydroelectric projects, six of them in Arunachal Pradesh, five in Himachal Pradesh and one in Uttarakhand. Reliance Power has won three of the four Ultra Mega Power Projects(UMPPs) awarded by the Indian Government so far. These include UMPPs in Sasan( Madhya Pradesh),Krishnapatnam( Andhra Pradesh) & Tilaiya(Jharkhand).UMPPs are a significant part of the Indian government's initiative to collaborate with power generation companies to set up 4,000 MW projects to ease the countrys power deficit situa tion. Besides these, Reliance Power is also developing coal bed methane (CBM) blocks to fuel gas based power generation. The company is registering projects with the Clean Development Mechanism executive board for issuance of Certified Emission Reduction (CER) certificates to augment its revenues.

Future outlook

Future Outlook
Future holds greater role of private sector in power generation and increase in FDIs.

Proposed Capacity Additions during 11th Plan (2007-12):The 11th Plan recommends generation planning based on an estimated 9.5% growth in required energy each year. As a result, a capacity addition of 78,577 MW is recommended in the 11th Plan as given below: Sector Central Hydro 9,685 Thermal 26,800 Nuclear 2,658 Total (%) 39,865 (50.7%) 27,952 (35.6%) 10,760 (13.7%) 78,577 (100%)

State

3,605

24,347

Private

3,263

7,497

All India

16,553

58,644

3,380

Source: Working Group on Power-11th Plan (2007-12)

Required capacity additions foreseen by the 12th Plan:

The requirement of installed capacity and capacity addition to meet the generation requirement during the 12th Plan period is given in table below: Capacity addition required during 12th plan (2012-17): GDP Growth GDP / Electricity Elasticity Electricity Generation Required (BU) Peak Demand (MW) Installed Capacity (MW)

Capacity Addition Required During

12th Plan (MW) 8% 0.8 0.9 0.8 0.9 0.8 0.9 1,415 1,470 1,470 1,532 1,525 1,597 215,700 224,600 224,600 233,300 232,300 244,000 280,300 291,700 291,700 303,800 302,300 317,000 70,800 82,200 82,200 94,300 92,800 107,500

9%

10%

Source: Working Group on Power-11th Plan (2007-12) Under various growth scenarios, the capacity addition required during 12th plan would be in the range of 70,800 107,500 MW, based on normative parameters. The 11th Plan Working Group recommends a capacity addition of 82,200 MW for the 12th Plan based on the scenario of 9% GDP growth rate and an elasticity of 0.8%.

Long term demand of power

The Ministry of Power has set a goal - Mission 2012: Power for All. Based on the 17th EPS, the total energy requirement in India will increase to 968,659 GWh by fiscal year 2012, 1,392,066 GWh by fiscal year 2017 and to 1,914,508 GWh by fiscal year 2022. This would lead to an annual electric peak load of 152,746 MW in fiscal year 2012, 218,209 MW in fiscal year 2017 and 298,253 MW in fiscal year 2022. The northern region is expected to contribute 30.1% and the western region contributes 28.4% of the overall annual electric peak load in fiscal year 2022. The Government has estimated the total investment potential of the sector at Rs. 9,000 billion for a specified period up to fiscal year 2011. This represents a significant opportunity for capacity expansion and growth opportunity for power generation companies, both in the public and the private sector

Current outlook of generation capacity addition

In line with the aggressive targets set by the government, a comprehensive Blueprint for Power Sector development has been prepared encompassing an integrated strategy with following objectives

Sufficient power to achieve GDP growth rate of 8%; Reliability of power Improved quality of power Optimum power cost to ensure availability at affordable prices; and Commercial viability of power industry to make it attractive for private sector participation. The Government, through the Ministry of Power, has laid out the following broad strategies to achieve the objectives: Power Generation Strategy: focusing on low cost generation, optimization of capacity utilization, controlling input costs, optimisation of fuel mix, technology upgrades and utilization of non conventional energy sources; Transmission Strategy: focusing on developing the National Grid, including interstate connections, Technology upgrades and optimization of transmission cost;

Distribution Strategy: achieving distribution reforms by focusing on system upgrades, loss reduction, theft control, consumer service orientation, quality power supply commercialization, decentralized distributed and supply for rural areas Regulation Strategy: protecting consumer interests and making the sector commercially viable; Financing Strategy: to generate resources for required growth of the power sector; Conservation Strategy: to optimise the utilization of electricity with a focus on demand side management, load management and technology upgrades to provide energy efficient equipment; and Communication Strategy: forming political consensus with the media support to enhance public awareness.

Key risks in the sector

Power sector is a highly capital intensive business with long gestation periods before commencement of revenue streams (construction periods of 4-5 years) and an even longer operating period (over 25 years). Since most of the projects have such a long time frame, there are some inherent risks in both the internal and external environment. We monitor the external environment and manage our internal environment to mitigate the concerns on a continuous basis. Some of the key concerns being faced by the sector currently are.

Coal supply position

More than 50 percent of Indias generation capacity is coal based. According to the Integrated Energy Policy, by FY31-32, India requires 2,040 million tonnes of coal for power generation, more than 5 times its current consumption levels. The shortage of coal is so acute that most of the power generation companies are looking at imported coal as a viable alternative to domestic coal.

Coal requirement of power sector (in million tonnes per annum)

Target CAGR 8% Target CAGR 8%

Increasing importance of the private sector

India has emerged as one of the fastest growing economies in the world. Its current economic performance reflects a healthy trend based on increased consumption, investment and exports. Over the next five years, this growth is expected to continue. A key risk to the continued growth of the Indian economy is inadequate infrastructure. Infrastructure investment in India is on the rise, but growth may be constrained without further improvements. The Government of India has identified the power sector as a key sector of focus to promote sustained industrial growth. It has embarked on an aggressive mission Power for All by 2012 and has undertaken multiple reforms to make the power sector more attractive to private sector investment.

Management discussion and problem

Management Discussions
Statements in this Management Discussion and Analysis of Financial Condition andResults of Operations of the Company describing the Companys objectives,expectations or predictions may be forward looking within the meaning of applicablesecurities laws and regulations. Forward looking statements are based on certainassumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate orwill be realized. The Company assumes no responsibility to publicly amend, modify orrevise forward-looking statements, on the basis of any subsequent developments,information or events. Actual results may differ materially from those expressed in thestatement. Important factors that could influence the Companys operations includecost of fuel, determination of tariff and such other charges and levies by the regulatoryauthority, changes in government regulations, tax laws, economic developments within thecountry and such other factors. The financial statements are prepared under historical cost convention, on accrualbasis of accounting, and in accordance with the provisions of the Companies Act, 1956 (theAct) and comply with the accounting standards notified under Section 211 (3C) of the Actread with Companies (Accounting Standards) Rules, 2006. The management of Reliance PowerLimited (Reliance Power or the Company) has used estimates andjudgments relating to the financial statements on a prudent and reasonable basis, in orderthat the financial statements reflect in a true and fair manner, the state of affairs andprofit for the year. The following discussions on our financial condition and result of operations should beread together with our audited consolidated financial statements and the notes to thesestatements included in the Annual Report. Unless otherwise specified or the context otherwise requires, all references herein towe, us, our, the Company,Reliance or Reliance Power are to Reliance Power Limited and/orits subsidiary companies. Economic outlook The Indian economy has rapidly emerged from the slowdown caused by the global financialcrisis of 2007-2009. The advance estimates for the year 2010-2011 indicate a growth rateof 8.6 per cent against a growth rate of 8.0 per cent in the year 2009-2010. Agriculturalgrowth was above trend, following a good monsoon. The index of industrial production(IIP), which grew by 10.4 per cent during the first half of 2010-11, moderatedsubsequently. However, other indicators, such as the manufacturing PMI, tax collections,corporate sales and earnings growth, credit off-take by industry and export performance,indicated strong economic activity. Leading indicators of services sector also indicatedcontinuing growth momentum. However, inflation was the primary macroeconomic concernthroughout the year 2010-11 and the Government and the central bank of the countrycalibrated policies to contain inflation while at the same time trying to balance growthrequirements. The outlook for global economy suggests that global recovery is expected tosustain, although growth will slow down marginally and as far as Indian economy isconcerned, it is expected that high commodity prices coupled with anti-inflationary policystance would moderate growth for the coming year. India Power Sector It is a widely acknowledged fact that one of the major requirements for sustainable

andinclusive economic growth is availability of an extensive and efficient infrastructure. Itis critical for the effective functioning of the economy and industry. The key to globalcompetitiveness of the Indian economy lies in building a high class infrastructure. Toaccelerate the pace of infrastructure development the Government has initiated a host ofprojects and policies in all crucial sectors. Despite several challenges, the positiveresults of the Governments initiatives have started showing up in various sectors ingeneral and power sector in particular. The Electricity Reforms which started in the 1990s and took greater shape with theElectricity Act 2003 have been able to attract private independent power producers and hasaccelerated the capacity addition program. Nevertheless, reforms have remained incompleteparticularly in the distribution sector and the future of the Power sector hinges uponurgent improvement of distribution sector including steps such as revision of tariffs tomore economic levels. Also, further growth of the power sector is critically dependent onavailability of fuel and this requires immediate and focused attention of the governmentto put in place a policy framework which can enable accelerated pace of development offuel sources. Installed generation capacity The total installed power generation capacity of India as on March 31, 2011 is 173,626MW out of which over 18 per cent is contributed by the private sector. Sector wise generation capacity (in MW) as on March 31, 2011 * Excluding captive generation capacity connected to grid: 19509.49 MW Source: CEA India has added generation capacity of 14,228 MW in FY10-11, a 48% per cent increasecompared to capacity addition of 9,585 MW in FY09-10. Private sector was the biggestcontributor with almost 55 per cent of the total capacity added in FY10-11. Sector wise generation capacity added (in MW) in FY 10-11 * Excluding renewable energy and captive generation capacity Source: CEA India has been traditionally dependent on thermal power as a source of powergeneration, which constitutes about 65 per cent of current capacity. The balance iscontributed by hydroelectric power (22 per cent), nuclear (3 per cent), and renewableenergy (10 per cent). Fuel wise generation capacity (in MW) as on 31st March 2011 Fuel Thermal Coal Installed Capacity (MW) 112,824 93,918 Share of installed capacity as % 65.0 54.1

Gas Diesel Hydroelectric Nuclear Renewable energy Total

17,706 1,200 37,567 4,780 18,455 173,626

10.2 0.7 21.6 2.8 10.6 100.0

* Excluding captive generation capacity connected to grid: 19,509.49MW Source: CEA With over half of the capacity added last year coming from coal based projects andcapacity under construction biased towards coal based projects, India is increasinglyexpected to be reliant on coal for achieving its target capacity addition plans. As aresult, shortage of coal remains one of the most critical risks for power generation inIndia. Generation capacity addition plans The Government of India had set an ambitious target of adding 78,700 MW in the Eleventh5 Year Plan period (FY07-12). A total of 41,297 MW (53 per cent of target) has been addedin the first 4 out of 5 years. It is pertinent to note that the capacity addition in theTenth 5 Year Plan period (FY02-07) was 21.1 GW against a target of 41.1 GW (50 per centachievement). Although it is highly likely that India will miss the target capacityaddition in the current 5 Year Plan (FY07-12), the expected capacity addition is asignificant improvement from that of the last Plan period of FY02-07. The private sector has played a significant role in the augmentation of generationcapacity in India in the last 3 years. Private sectors share of operational capacityhas increased from 12.9 per cent in March 2007 to 21.2 per cent in March 2011. Power generation The total power generation in India during FY10-11 was 811.1 billion units (5.2 percent higher than FY09-10) and was 2.4 per cent lower than the target estimates set forFY10-11. Sector wise power generation performance in FY2010-11 Power generation (billion units) Percentage share Percentage of installed capacity as % 343.3 42.3 47.5 Average PLF (thermal) as % 66.70

Sector

State

sector Central sector Private sector Imported Total

346.0

42.7

31.3

85.11

116.2

14.3

21.2

76.70

5.6 811.1

0.7 100.0

100.0

75.07

Source: CEA The private sector accounted for only 14 per cent of the total power generated, but itsshare in the total pie is expected to increase significantly, since more than half ofcapacity addition in XIth Plan is expected to be contributed by the private sector. Coalbased capacity contributed 66 per cent of the total power generated although itconstituted only 54 per cent of the generation capacity. This also highlights theimportance of coal based projects for meeting the base load capacity requirements Fuel wise power generation performance in FY2010-11 Power generated (MU) 664.9 114.3 26.3 5.6 811.1 Share in generation as % 82.0 14.1 3.2 0.7 100 Share in generation capacity as % 65.0 21.6 2.8 10.6 100.0

Fuel

Thermal Hydroelectric Nuclear Imported Total

Outlook of power generation sector l Demand and supply outlook In order to sustain a GDP growth rate of over 8 per cent, it is essential that thepower sector also grows at a similar rate. The power sector has witnessed acute shortageof electricity over the last few years. The energy deficit in FY10-11 was 7.5 per cent andthe peak power deficit was 10.3 per cent indicating a huge gap between demand and supplyof electricity. The gap between demand and supply has not decreased in the last few years,leading to persistent power shortages. The following table highlights the deficitsituation in the last few years Power deficit scenario - all India in the period FY05-11 (in %) Source: CEA

In recent years, Indias energy demand has been increasing very fast due to t hepopulation growth and economic development. The increase in installed power generationcapacity has however not kept pace with the increase in demand for power thus leading topower shortages. Despite the overall increase in energy demand, per capita energyconsumption in India, at 704 kwh, is still very low compared to other developingcountries. Source: Think BRIC-Comparative study of power sector by KPMG (Jan 2010) According to the 17th Electric Power Survey, India requires 968.7 billion units ofelectricity in FY11-12 while the current generation in FY10-11 is 811.1 billion units.This implies that power generation has to increase by 19.4 per cent in FY 2011-12 just tomeet the demand, almost double the growth rate of 5.5 per cent witnessed in FY10-11. Long term demand and supply outlook As per the Ministry of Power, to deliver a sustained GDP growth of 8 per cent tillFY31-32, Indias generation capacity has to grow to 962,210 MW, more than 6 times thecurrent generation capacity. This implies a CAGR of 8.6 per cent over 22 years and anaverage capacity addition of over 36,000 MW every year, almost 4 times the capacityaddition rate in the current 5 Year Plan till date (41,297 MW added in 4 years). The GDP growth of India in the last few years has been significantly higher than thepower sector growth thus putting more pressure on the sector. In the period FY02-11,while the GDP has been growing at an average of over 8 per cent, the power generationcapacity has been growing at a CAGR of 7.0 per cent (from 132,329 MW in FY07 to 173,626 MWin FY11). Opportunities and threats In the last decade, the government has taken various initiatives to increase public aswell as private investments in the sector to enhance generation capacity and eliminatepower deficit. The Parliament enacted the Electricity Act, 2003 and the Government hasfollowed up on the reform agenda with various other policy measures to make the powergeneration sector attractive for investors. The Electricity Act, 2003, requires theCentral Electricity Authority (CEA) to lay out the National Electricity Plan once in everyfive years and revise the same from time to time in accordance with the NationalElectricity Policy. This Plan serves as a roadmap for accelerated growth of the powersector. Now 100 per cent Foreign Direct Investment (FDI) is allowed in generation,transmission and distribution segments. Incentives are given to the sector through waiverof duties on capital equipments under the Mega Power Policy. These policy initiatives haveresulted in building up investor confidence in the power sector and have created an idealenvironment for increased participation by the private sector. In order to attract further private participation in the power sector, the Governmentof India had announced the Ultra Mega Power Projects (UMPP) scheme under which thegovernment would partner with the private sector for developing large power projects. The policy framework for the power sector encourages developers to put power projectsfrom which they can sell power through long term Power Purchase Agreements (PPA) atattractive and sustainable returns and also , to sell power through short term contracts(bilateral contracts) or spot markets (unscheduled interchange, power exchanges) atsignificantly high premium to the long term tariffs till there is a critical power deficitin India. Gas based projects account for around 10 per cent of the total generation capacity ofIndia,

which is much lower than the world average. The current gas production in India is165 mmscmd out of which 68 mmscmd is utilized by the power generation sector. The bulk ofthe additional production has to be absorbed by the fertilizer and power generationsector, the two biggest consumers of natural gas. This will lead to increased availabilityof gas for power generation and at reasonable prices. Due to an expected jump in thequantum of supply, gas is expected to increase its share of the total power generation pieby the next few years. Considering the ever increasing electricity demand and inadequate availability of fuelthere is a dire need to tap various new sources of energy including renewable energy.Further, growing awareness with regard to benefits of clean energy have also promptedrenewed focus on renewable energy by all the stakeholders in the energy ecosystem. India has one of the highest potentials for the effective use of renewable energy.India has a potential of 48,500 MW in wind energy and 25,000 MW in solar energy. Besidesthis, there is an additional potential of 148,700 MW of hydroelectric capacity, out ofwhich only 25 per cent has become operational till now. The renewable energy capacity hasgone up from 7,761 MW in March 31, 2007 to 18,455 MW in March 31, 2011 (growth of over 135per cent in 4 years). With coal shortage becoming a reality in the last couple of years,it is imperative for India to have a focused strategy for renewable energy. The Governmenthas already started acting on this agenda. Some of the significant steps taken recentlyare Policy envisaging that all states should mandatorily meet Renewable PurchaseObligations (RPO) of 5 per cent of total generation which goes up by 1 per cent with everypassing year till FY2020 to reach a level of 15 per cent. Launch of Jawaharlal Nehru National Solar Mission (JNNSM), which aims to e nsurethat solar energy technologies in the country achieve grid parity by 2022. It has plansfor deployment of 20 GW of solar power by 2022. Imposition of Carbon cess of Rs. 50 per tonne for all domestic and imported coalbased projects. The funds raised will be utilized to drive development in the renewableenergy sector. With increasing focus on environment related issues, power projects, employing cleanand environment-friendly technology (hydroelectric and other renewable energy sources) canalso earn carbon credits, which are traded extensively in the international market; thusproviding an additional source of revenue. Key risks and concerns Power sector is a highly capital intensive business with long gestation periods beforecommencement of revenue streams (construction periods of 4-5 years) and an even longeroperating period (over 25 years). Since most of the projects have such a long time frame,there are some inherent risks in both the internal and external environment. We monitorthe external environment and manage our internal environment to mitigate the concerns on acontinuous basis. Some of the key concerns being faced by the sector currently are: 1. Coal supply position More than 50 per cent of Indias generation capacity is coal based. According to the Integrated Energy Policy, by FY31-32, India requires 2,040 million tonnes of coal forpower generation, more than 5 times its current consumption levels. The shortage of coalis so acute that most of

the power generation companies are looking at imported coal as aviable alternative to domestic coal. The total imported non cooking coal quantity has increased more than 3 times within thelast 5 years and is expected to go up at a much faster rate once most of the imported coalbased projects including the two Ultra Mega Power Projects which are being commissioned inthe Country. The increase in the prices of imported coal is a matter of serious concernand there is an urgent need to undertake a review of the mechanism for passing on theincreasing coal costs to end-consumers. Realizing this, the Government has recently announced some policy changes andinitiatives in coal mining. Currently coal blocks are awarded to private sector companiesthrough a Screening Committee called the Standing Linkage Committee. The Government hasamended the Mines and Minerals (Development and Regulation) Act, 1957 so that theallocation process by the Screening Committee is replaced by a transparent auctionprocess. The Government has also announced draft guidelines for bidding of coal miningblocks. The Government is also in the process of announcing various policy initiativeswhich would encourage faster development of coal mines and thus reduce the demand-supplymis-match for coal. 2. Weak financial condition of electricity distribution companies The financial health of electricity distribution companies (DISCOMs), is fast emergingas an area of major concern threatening the very viability of the power sector. Theirinability to generate adequate resources is affecting their ability to make capitalinvestment, borrow funds at competitive rates and make timely payments of otherstakeholders. Book losses of the utilities are rising with increasing power purchase costswithout commensurate increase in tariffs. Further, the Aggregate Technical and Commercial(AT&C) losses of the Utilities are still at very high levels. The average of theAT&C losses reported by Indian distribution utilities is almost 30 per cent. AT&Closses in Indian utilities vary from one state to another. The cumulative losses incurredby the distribution companies is projected to rise to Rs. 116,089 crore by FY 2014-15assuming 2008 tariff level with no increases, according to a Mercados study for the 13thFinance Commission. Power Finance Corporation has also brought out a report on thefinancial condition of the various distribution companies. The study shows that 35 out ofthe 39 utilities studied were incurring losses, and net worth of 22 utilities were foundto be negative. 3. Execution risk Power projects are highly capital intensive and have a long development andconstruction phase thus exposing them to various macroeconomic as well as project specificrisks. During the development phase, a project faces the following key risks: Delays in statutory approvals and clearances from the authorities Delays in Land acquisition Non-availability / delays in obtaining Fuel, water & transmission linkages Availability and cost of capital - both equity and debt funding During the construction stage which covers the period from the commencement ofconstruction

till the commissioning of projects, the key risks that need to be monitoredare: Delays leading to time over-runs Increase in project costs leading to cost over -runs Challenges in transportation/logistics of equipments Hydrological & geological risks in case of hydroelectric projects During the construction phase, ensuring that all the supply and erection contracts areplaced on time and within the cost estimates is a critical challenge and thereafterensuring that all the vendors and contractors perform their responsibilities as envisagedis a key risk. Internal control systems and their adequacy The Company has put in place internal control systems and processes commensurate withits size and scale of operations. An Enterprise Resource Planning System developed by SAPhas been implemented in the Company. The system has control processes designed to takecare of various control and audit requirements. In addition, the Company has an InternalAudit function, which oversees the implementation and adherence to various systems andprocesses and preparation of Financial Statements as per Generally Accepted Principles andPractices. Further, the internal audit group also appoints reputed audit firms toundertake the exercise of conduct of Internal Audit at various locations. The report ofthe Internal Auditors is placed at the Audit Committee Meetings. Reliance Power has put in place a Risk Management Framework, both at the corporate aswell as the project level, which provides a process of identifying, assessing, monitoring,reporting and mitigating various risks at all levels at periodic intervals. Under theframework the Company has constituted a Risk Management Committee at both the CorporateLevel as well as Project Level to continuously monitor report and mitigate various risksfaced. The outcome of this monitoring is reported to the Audit Committee of the Board ofDirectors on a quarterly basis. Discussion on Operations of the company The Company is in the business of setting up and operating power projects and in thedevelopment of coal mines associated with such projects. The Company has identified alarge portfolio of power projects of over 35,000 MW and is also developing coal mines witha potential to develop almost 95 million tonnes of coal per annum (MTPA). Of the powerprojects which the company is developing 600 MW are already operational while the balancecapacities are under various stages of development. Operational projects 1. Rosa Phase 1, a 600 MW coal-based power project in Uttar Pradesh The successful commissioning of the second 300 MW unit of Rosa Phase 1 in June 2010marked the commencement of operations of the entire 600 MW of the project. This is thefirst operational project of the company. However, fuel supply and evacuation constraintsresulted in a lower Plant Load Factor (PLF) during the first nine months of the

financialyear 2010-11. However, with the resolution of the fuel supply and evacuation problems theplant has been operating very efficiently and has been consistently operating at over 100per cent PLF. During the last quarter of the financial year the plant achieved a PLF ofover 87 per cent. To ensure continued efficient operations at the plant, the Company has installed worldclass Operations and Maintenance (O&M) systems. There is a strong O&M team at thesite supported by an experienced O&M team at the corporate office. A trainingsimulator which is a replica of unit distributed control system has been set up at Rosafor training operation staff at regular frequency. Employees are provided in housetraining as well as specialized training by equipment manufacturer. The Company has installed a centralized fleet wide optimization and performancemanagement center for monitoring, optimizing and condition monitoring of assets across thepower stations. Latest reliability centered maintenance techniques have been employed inRosa which gives the project significant benefits in terms of diagnostics and preventivemaintenance and reduction of outages. 2. Projects under development and execution Reliance Power is developing a number of large and medium sized power projects with acombined planned installed capacity of over 35,000 MW, one of the largest portfolios ofpower generation assets under development in India. These power projects are planned to be diverse in geographic location, fuel type, fuelsource and off-take, and each project is planned to be strategically located near anavailable fuel supply or load center. Reliance Power has been successful in bagging threeUltra Mega Power Projects (3,960 MW each at Sasan in Madhya Pradesh, Tilaiya in Jharkhandand Krishnapatnam in Andhra Pradesh). The Company intends to sell the power generated fromother projects under a combination of long-term and short-term PPAs to state-owned andprivate distribution companies and industrial consumers. All the projects are in various stages of operation, construction and development. Abrief on the developments on these projects is provided. Coal Based Power Projects 1. Rosa Phase 2, a 600 MW coal-based power project in Uttar Pradesh Rosa Phase 2 is being implemented by Rosa Power Supply Company Limited (RPSCL) a whollyowned subsidiary of Reliance Power. Like Rosa Phase 1, this is also a coal based projectwith two subcritical technology based units of 300 MW each. The project is scheduled tocommence power generation within the 11th plan (i.e. by March 2012). This is a brownfieldexpansion and hence is utilizing the additional land acquired and water allocated for RosaPhase 1. The project has obtained all major approvals from the Government of UttarPradesh and construction activities are in full swing at the site. The power generatedfrom the plant will be sold to Uttar Pradesh Power Company Limited. Fuel supply has beensecured for the project with Government of India awarding long-term coal linkage for thecapacity expansion. The project has achieved financial closure with a consortium of banksled by IDBI Bank. 2. Butibori, a 600 MW coal-based power project in Maharashtra

Vidarbha Industries Power Limited (VIPL) is currently developing a 600 MW coal-basedpower project (2 units of 300 MW each) with subcritical technology located at Butibori,Maharashtra Industrial Development Corporation (MIDC) in Nagpur, Maharashtra. Theconstruction of the Project is expected to be completed in the 11th Plan. The project iscurrently in the construction phase and is expected to begin commissioning by March 2012.The power generated from the project would be sold to industrial consumers and the balanceto other off-takers through longterm and medium-term contracts. 3. Sasan Ultra Mega Power Project, a 3,960 MW pithead coal-based Project inMadhya Pradesh The project is being developed by Sasan Power Limited (SPL), a wholly owned subsidiaryof Reliance Power. Reliance Power was awarded the Sasan project following an internationalcompetitive bidding process and the project will be selling power to 14 Procurerscomprising 7 States. The project will use coal from the captive coal blocks allocated forthe project. The first unit of the project is expected to be commissioned towards the endof the calendar year 2012. The project has achieved financial closure. The constructionactivities at the project are progressing as per plans. The Company has also madesignificant progress in the development of coal mines allocated for the Sasan project.Coal production from the mines is expected to commence before the commissioning of thefirst unit of Sasan UMPP. 4. Krishnapatnam Ultra Mega Power Project, a 3,960 MW imported coal-basedProject in Andhra Pradesh Coastal Andhra Power Limited (CAPL), a wholly owned subsidiary of the Company isdeveloping the project. Reliance Power was awarded the Krishnapatnam project following anInternational Competitive Bidding process and it will be selling power to 11 Procurerscomprising 4 States. The Krishnapatnam project is located approximately 3 km from thenearest port where imported coal will be delivered to supply fuel for the project. Coalfor the project is planned to be imported from Indonesia. The project has achievedfinancial closure and is scheduled to be completed in the year 2015. 5. 3,960 MW coal-based power project in Madhya Pradesh Chitrangi Power Private Limited (CPPL), a wholly owned subsidiary of Reliance Power hasplans to develop a 3,960 MW coal-based power project at Madhya Pradesh in differentphases. The coal required for the project is likely to be sourced from the captive coalmines allocated to Reliance Power. The Company intends to sell the power through long termcontracts. 6. Tilaiya Ultra Mega Power Project, a 3,960 MW pithead coal-based power projectin Jharkhand Jharkhand Integrated Power Limited (JIPL), a wholly owned subsidiary of Reliance Poweris developing the Tilaiya Ultra Mega Power Project at Hazaribagh District in Jharkhand.The project was awarded to Reliance Power under international competitive bidding processand will be selling power to 18 Procurers comprising 10 states in Northern, Western andEastern India. The project would be using coal from the captive coal mine blocks awardedalong with the project. As per the PPA the first unit is scheduled to be commissioned inMay 2015 and the entire project is scheduled to be commissioned by May 2017. Gas Based Power Projects

The Company has identified and is developing various sites located in the states ofUttar Pradesh, Andhra Pradesh, Maharashtra and Gujarat for setting up of gas based powerprojects. Construction work has commenced at Samalkot located in Andhra Pradesh forsetting up of a 2,400 MW gas power capacity. The construction activities at the site arein full swing and the first unit of the plant is scheduled for commissioning in the year2011. Hydroelectric Power Projects The Company is developing various hydroelectric power projects located in ArunachalPradesh, Himachal Pradesh and Uttarakhand. These projects are in different stages ofdevelopment. Hydroelectric power projects by nature have long gestation periods andrequire clearances from various authorities before commencement of constructionactivities. Some of these projects have achieved various milestones and are likely to bedeveloped in the next few years. Renewable Power Projects The Company has plans to have a portfolio of projects which are based on renewableenergy such as Wind and Solar. Rajasthan Sun Technique Energy Private Limited (RSTEPL), awholly-owned subsidiary, is developing a 100 MW concentrated solar power project inJaisalmer, Rajasthan. Solar Power generated from this plant will be sold to NTPC VidyutVyapar Nigam (NVVN). The project will be set up at Dhursar in the state of Rajasthan andis scheduled for commissioning in 2013. The Company is also devoloping a 40 MW solarphotovoltaic project at the same location which is scheduled for commissioning in 2012. Coal Mines The Company has been allocated coal mines in India along with the ultra mega powerproject. The Company has prepared mine plans for taking out coal from these mines and themine plans have been approved by the Ministry of Coal for producing up to 65 MTPA. TheCompany has also acquired coal mine concessions in Indonesia for which the Company isfinalizing plans to produce 25 MTPA. The development of the mines are in different stagesand are linked to the schedule of the projects for which the coal would be used. Coal Bed Methane (CBM) Blocks The Company has stakes in Four Coal Bed Methane (CBM) blocks and one Oil and Gas block.Drilling work has commenced in one of the CMB blcoks while exploratory work is in progressin all the blocks. Clean Development Mechanism (CDM) Clean Development Mechanism (CDM) is one of the three market based mechanisms agreedunder the Kyoto Protocol to reduce Greenhouse Gases (GHG). CDM encourages projectdevelopers, in the developing countries, to adopt environmental friendly technologiesand/or fuels so that the GHG emissions can be reduced. Such reduced GHG emissions willenable the developers of those projects to generate Certified Emission Reductions (CERs).Such a move allows developing countries to implement GHG emission reduction projects in amanner that they assist developed countries to meet their GHG limitation targets in acost-effective manner.

The Company had applied for the CDM registration of Sasan project in May 2010. InOctober 2010, Sasan project achieved the distinction of the worlds la rgest powergeneration plant ever registered under CDM. It also established the unique recognition ofbeing the first Ultra Mega Power Project (UMPP) from India to be registered with CDMExecutive Board. Sasan Project will generate approximately 22.5 Million CERs during theinitial 10 years with a revenue generation potential of Rs. 2,000 crore. The Company has applied for the CDM registration for the Krishnapatnam and TilaiyaUMPPs. Decision of the CDM Executive Board on both these UMPPs is expected in the currentfinancial year. The Company is also developing Samalkot project as a CDM project in three phases. TheCompany is also implementing the 100 MW solar thermal project located in Rajasthan as aCDM project. Health, safety and environment The Company attaches utmost importance to safety standards at all installations of theCompany. Necessary steps are regularly undertaken to ensure the safety of employees andequipment. Both external and internal safety audits are regularly conducted. Mock drillsare conducted to gauge emergency and disaster management preparedness. The Board has alsoconstituted a committee comprising of Independent Directors to have a oversight on theseissues and to monitor and report to the Board actions being taken in this regard. Human Resources The Company has been building up its human resources for the implementation of itslarge power capacity addition program. We are now a family of over 700 professionals.Teams have been put in place both at the Corporate Office and in all the projectlocations. The Company has adopted a strategy of putting senior and experienced (in thepower sector) professionals as Project Leaders and Functional heads and teams are beingbuilt around them. Considering the fact that many of the power projects are located inremote areas, suitable compensation schemes as well as facilities for townships witheducation and medical facilities are being planned. The Company also has a GraduateEngineer Trainee Program under which Graduate Engineers are recruited and trained forworking in Power Plants. These Graduate Engineers are recruited through a National Levelcompetition offering opportunities to all the meritorious candidates across the country.The selection process involves online screening of the candidates followed by GroupDiscussion and Personal Interviews. The Company is planning to have simulators at variousproject locations where operational training services can be provided. Discussion on Financial Condition and Financial Performance Financial Condition Reliance Power Limited is the holding Company with the following subsidiary companieswhich are developing various power projects. Company Rosa Power Supply Company Limited Project Rosa Stage I and Stage II

Vidarbha Industries Power Limited Sasan Power Limited Coastal Andhra Power Limited Chitrangi Power Private Limited Maharashtra Energy Generation Limited Jharkhand Integrated Power Limited Siyom Hydro Power Private Limited Urthing Sobla Hydro Power Private Limited Tato Hydro Power Private Limited Kalai Power Private Limited Amulin Hydro Power Private Limited Emini Hydro Power Private Limited Mihundon Hydro Power Private Limited Samalkot Power Limited Rajasthan Sun Technique Energy Private Limited Dahanu Solar Power Private Limited

Butibori GCPP Sasan UMPP Krishnapatnam UMPP Chitrangi Shahpur Tilaiya UMPP Siyom HEPP Urthing Sobla HEPP Tato II HEPP Kalai II Amulin Emini Mihundon Samalkot Jaisalmer Dahanu

An extract of the Consolidated Balance Sheet is placed below: Rs. in crore As on March 31 2011 Source of Funds Net Worth Loan Funds Total 16,833.44 7,334.83 24,168.27 14,463.05 2,240.61 16,703.66 2010

Application of Funds Fixed Assets Investments Net Current Assets Total 16,259.53 9,143.63

5,678.99 2,229.75 24,168.27

7,915.24 -355.21 16,703.66

Loan Funds have increased to Rs. 7,334.83 crore from Rs. 2,240.61crore. Fixed assets have increased to Rs. 16,259.53 crore from Rs. 9,143.63 crore. Investments were at Rs. 5,678.99 in FY11 end as compared to Rs. 7,915.24 crore in FY10end. Financial Performance The first unit of Rosa Phase I, was declared commercially operational in March 2010 andthe second unit become operational in June 2010. The remaining projects are presentlyunder various stages of implementation. The Company made an Initial Public Offering (IPO)in January 2008 through which it raised Rs. 11,563.20 crore to be used mainly for equityinfusion into various projects. The un-utilized cash available from the IPO is invested invarious moneymarket instruments and earn income. An extract of the Consolidated Profitand Loss Account Statement is placed below: Rs. in crore Year ended 31.03.2011 Year ended 31.03.2010

Particulars

Income Sale of Energy Income from Other Operations Dividend Income Profit on redemption of MFs Miscellaneous Income Total Expenditure 1,023.68 31.08 190.94 531.49 140.84 1,918.03 20.72 224.80 572.89 24.97 843.38

Cost of Fuel Other Operating Expenditure Employee Cost/Managerial Remuneration General, Administration & Other Expenses Depreciation Interest Total PBT Taxes PAT EPS (Rs.) (basic and diluted)

559.64 23.24

22.10

76.90

43.32

165.85

60.94

100.88 219.52 1,146.03 772.00 11.56 760.44 2.94

5.71 8.71 140.78 702.60 18.71 683.89 2.85

COMPANY PROFILE

Company Profile Reliance Power Ltd is part of the Reliance Anil Dhirubhai Ambani Group, one of India's largest business houses. The company is engaged in the development, construction and operation of power generation projects with a combined planned capacity of 35,000 megawatts. Their projects are diverse in geographic location, fuel source and offtake. Reliance Power Ltd was incorporated on January 17, 1995 as a private limited company with the name of Bawana Power Pvt Ltd. In February 1, 1995, the name of the company was changed from Bawana Power Pvt Ltd to Reliance Delhi Power Pvt Ltd. During the year 2003-04, the company started 3740 MW Natural Gas based Combined Cycle Power Plant at Dadri. In February 17, 2004, the name of the company was changed from Reliance Delhi Power Pvt Ltd to Reliance EGen Pvt Ltd

and in March 10 2004, the name of the company was further changed to Reliance Energy Generation Pvt Ltd. In March 19, 2004, the company was converted into a public limited company and the name was changed to Reliance Energy Generation Ltd. During the year 2006-07, the company signed a joint communique with Govt of Orissa to set up a 12000 MW coal based pit head power project at Hirma in Dist Jharsuguda in Orissa. In November 2006, the company acquired 100% shareholding in Rosa Power Supply Company Ltd, which is implementing the 1,200 MW coal based power plant in Uttar Pradesh. Thus, Rosa Power Supply Company became a wholly owned subsidiary company. During the year 2007-08, Sasan Power Ltd, Maharashtra Energy Generation Ltd, Vidarbha Industries Power Ltd, Tato Hydro Power Private Ltd, Siyom Hydro Power Private Ltd, MP Power Generation Pvt Ltd, Urthing Sobla Hydro Power Pvt Ltd, Kalai Power Pvt Ltd, Coastal Andhra Power Ltd and Reliance Coal Resources Pvt Ltd became the subsidiaries of the company. During the year, as per the scheme of amalgamation, the assets and liabilities of the erstwhile Reliance Public Utility Private Limited (RPUPL), were transferred to and vested in the Company with effect from September 29, 2007. In July 2007, the name of the company was changed from Reliance Energy Generation Ltd to Reliance Power Ltd. During the year 2008-09, the company entered into an MoA with Government of Arunachal Pradesh for execution of four hydro power projects of 1,200 MW Kalai II on Lohit River Basin, 420 MW Amulin, 500 MW Emini and 400 MW Mithundon on river Dibang in the state of Arunachal Pradesh. During the year, Reliance Power International Sarl, a Perpetual, Limited Liability Company became a subsidiary company with effect from October 30, 2008. In March 2009, Sasan Power Infrastructure Ltd and Sasan Power Infraventures Pvt Ltd became the subsidiaries of the company. During the year 2009-10, the company incorporated Amulin Hydro Power Pvt Ltd, Emini Hydro Power Pvt Ltd and Mihundon Hydro Power Pvt Ltd as wholly owned subsidiaries of the company. In August 7, 2009, the entire investment of Power Finance Corporation Ltd in Jharkhand Integrated Power Ltd was transferred to the company for a consideration of Rs 6988 lakh. Thus Jharkhand Integrated Power Ltd became the wholly owned subsidiary of the company. Rosa Power Supply Company Ltd, a wholly owned subsidiary, commissioned their first unit of 300 MW with effect from March 12, 2010. In June 2010, Reliance Patalganga Power Ltd, Bharuch Power Ltd, Ballerina Advisory Services Pvt Ltd and Reliance Futura Ltd became wholly owned subsidiaries of the company. In addition, the company disposed of their majority shareholding in Sasan Power Infrastructure Ltd and Sasan Power Infraventures Pvt Ltd. In May 2010, the company acquired three power plants with a total capacity of 433 megawatts from Reliance Infrastructure Ltd at a transfer value of Rs 10.95 billion. During the year 2010-11, Reliance CleanGen Ltd (formerly Reliance Patalganga Power Ltd), Bharuch Power Ltd, Rajasthan Sun Technique Energy Pvt Lied (formerly Ballerina Advisory Services Pvt Ltd), Atos Trading Pvt Ltd, Atos Mercantile Pvt Ltd, Reliance Prima Ltd, Reliance Futura Ltd (since merged) Reliance Power Netherlands BV, Samalkot Power Ltd, PT Heramba Coal Resources, Indonesia, PT Avaneesh Coal Resources, Indonesia, Solar Generation Company (Rajasthan) Pvt Ltd, Dahanu Solar Power Pvt Ltd, Sasan Power Infrastructure Ltd, Sasan Power Infraventures Pvt Ltd (since merged), Reliance Fuel Resources Ltd, Reliance Natural Resources (Singapore) Pte Ltd, Reliance Natural Resources Ltd, Reliance Renewable Power Pvt Ltd, Reliance

Biomass Power Pvt Ltd, Reliance Solar Resources Power Pvt Ltd, Reliance Clean Power Pvt Ltd, Reliance Tidal Power Pvt Ltd, Reliance Geothermal Power Pvt Ltd, Reliance Wind Power Pvt Ltd, Reliance Green Power Pvt Ltd, PT Sumukha Coal Services, Indonesia, PT Brayan Bintang Tiga Energi, Indonesia, PT Sriwijaya Bintang Tiga Energi, Indonesia, became the subsidiaries of the company. As per the scheme of arrangement between Reliance Natural Resources Ltd (RNRL) and Reliance Power Ltd (RPower) and Atos Trading Pvt Ltd (ATPL) and Atos Mercantile Pvt Ltd (AMPL) and Coastal Andhra Power Infrastructure Ltd (CAPIL) and Reliance Prima Ltd (RPL) and Reliance Futura Ltd (RFL), the business undertakings of RNRL consisting of four Exploration Blocks situated at Barmer in Rajasthan, Kothagudem in Andhra Pradesh, Sohagpur in Madhya Pradesh and in Mizoram were demerged and vested into the company. The appointed date of the Scheme was October 15, 2010. Also, as per the Scheme, Reliance Futura Ltd was amalgamated into the company. Sasan Power Infraventures Pvt Ltd, a wholly owned subsidiary of the company was amalgamated into the company with effect from May 25, 2011, The appointed date was January 1, 2011.