resus energy plc annual report 2016/17c v kulatilaka, i s somaratne, prof. k a m k ranasinghe, u p...

Resus Energy PLC Annual Report 2016/17

Resus Energy PLCA n n u a l Re p o r t 2 0 1 6 / 1 7

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Coursing through our veins like the currents from which we generate our clean green energy, our thirst for growth is unstoppable. Looking at a year in which we hope to bring

about more progress and harness the energy of our people, systems and innovation, we are pulsing with the possibility of what we can offer as a sustainable business that

constantly seeks excellence and new ventures in renewable energy.


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CONTENTS

GROUP HIGHLIGHTSIntroduction to Our Annual Report 3About Us 4Our Journey 6Group Structure 8Delivery of Value 9Financial Highlights 10

Non-Financial Highlights 11

LEADERSHIP REVIEWChairman’s Statement 12Managing Director’s Review 14Board of Directors 18

Management Team 22

MANAGEMENT DISCUSSION AND ANALYSISBusiness Value Creation 24Material Aspects and Stakeholder Engagement 25

Capitals ReportsFinancial Capital 35Environmental Capital 42Social and Relationship Capital 43Human Capital 47Intellectual Capital 53

Our Business Operation 54

Impact Management ReportsEconomic Impact Management 60Environmental Impact Management 65

Social Impact Management 72

GOVERNANCECorporate Governance 73Directors’ Statement on Internal Controls 112Report of the Audit Committee 113Report of the Remuneration Committee 115Report of the Related Party Transactions Review Committee 116Responsibility Statement of the Managing Director and Head of Finance 118Enterprise Risk Management 120

OUR RESULTSAnnual Report of the Board of Directors 128Directors’ Interest in Contracts 133Directors’ Responsibilities for Financial Statements 135Independent Auditor’s Report 136Statement of Financial Position 137Statement of Profit or Loss 138Statement of Comprehensive Income 139Statement of Changes in Equity 149Statement of Cash Flows 141Notes to the Financial Statements 143Five Year Summary 201

SUPPLEMENTARY INFORMATIONShare Information 204Global Reporting Initiative (GRI) Index 207Independent Assurance Report on Sustainability Reporting 214Notice of Meeting 218Form of Proxy 218Corporate Information Inner Back Cover


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INTRODUCTION TO OUR ANNUAL REPORT

We are pleased to present the second integrated annual report of Resus Energy PLC. The Report provides a clear and concise view of:• The value creation model of the Group combining various

forms of Capital• The economic, social and environmental outcomes and

impacts arising from the value creation activities of the Company and its subsidiaries operating across the country

• Corporate Governance, Risk Management and Environment Management System inculcated within the Group

The Company and its subsidiaries operate in compliance with the governing laws and regulations and conduct business in a socially and environmentally responsible manner. This Report details the Group’s integrated approach of management and strives to deliver balance and relevance.

Scope and BoundaryThis Annual Report covers the business operations of Resus Energy PLC and its subsidiaries based in Sri Lanka for the 12-month period ending 31st March 2017. Comparative information has been provided for the 12-month period ending 31st March 2016. There have been no changes in the scope of reporting, accounting policies and boundaries from the previous year. Non-financial information in this report pertaining to the previous year has not been restated, unless otherwise stated.

The report contains an assessment of the internal and external materiality aspects of the company, and the stakeholder identification process ensuring stakeholder inclusiveness, which is vital as we drive performance, improve our sustainability framework and institutionalize the Group’s corporate governance philosophy.

The organizational profile, vision, mission, values, strategy, group structure, Board of Directors and other corporate information is also presented in the report.

Standards and PrinciplesThis report has been prepared and presented in accordance with the requirements of the following local and international standards, frameworks and regulations;• Sri Lanka Accounting Standards ( LKAS and SLFRS)• The Companies Act No.7 of 2007• Listing Rules of the Colombo Stock Exchange• Code of Best Practice on Corporate Governance issued jointly

by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka

• The Greenhouse Gas Protocol Corporate Standard and Emission factors published by the Sri Lanka Sustainable Energy Authority

• Global Reporting Initiative (GRI-G4) - “In accordance –core”• Integrated Reporting Framework of the International

Integrated Reporting Council (IIRC)

Information VerificationIn establishing transparency and credibility of our reporting process and providing superior value to all users and stakeholder groups, the information presented in this report has been reviewed, as applicable, by:• The Board of Directors• Audit Committee of the Company• Independent Auditors Messrs. Ernst & Young, Chartered

Accountants, confirming the accuracy of the Financial Statements and Non-Financial Information on Sustainability Reporting

FeedbackWe welcome your comments and inquiries on this report. Please contact:Kavinda PereraHead of FinanceResus Energy PLC250/1, Torrington Avenue,Colombo 7, Sri [email protected]

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VISIONRESUS ENERGY STRIVES TO BUILD A COMMERCIALLY SUSTAINABLE AND AN ENERGETIC WORLD CLASS ORGANIZATION THAT “CARES FOR PEOPLE AND PLANET” IN MEETING ELECTRICITY NEEDS OF THE PEOPLE.

MISSIONWE GENERATE ELECTRICITY USING RENEWABLE ENERGY SOURCES. IN DOING SO, WE CREATE AN ORGANIZATION THAT IS: COMMERCIALLY SUSTAINABLE THAT PROVIDES SUPERIOR VALUE TO OUR SHAREHOLDERS; CHALLENGING AND FULFILLING WORK ENVIRONMENT TO OUR EMPLOYEES; CARING FOR STAKEHOLDERS AND OUR NATURAL ENVIRONMENT.

CORE VALUES• CREATIVITY • INTEGRITY • CONCERN FOR PEOPLE AND PLANET• OBSESSION FOR PERFORMANCE• SENSE OF URGENCY

ABOUT US

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The pledges and commitments our country has made to combat global-warming and climate-change at numerous international conventions set a good policy-platform for the renewable energy sector. This is reflected in our national energy policy through which the renewable energy generation is promoted. Presence in a sector that has congruence with the national policy is always useful.

Despite the crowding-out threat in the Small Hydropower segment, we believe that the opportunities are still left for investors to harness. The emerging trends in solar, wind and biomass power make the energy sector vibrant. However, the entry into both solar and wind power sectors has now been restricted as the government is seemingly of the view that these sectors will be promoted through a competitive tender process.

On the other hand, the current macro-economic conditions such as volatility in tax, foreign-exchange and interest rates and increased presence of red-tape make investments into the sector relatively less attractive. However, we believe that some degree of resilience would be required from us at this time since the private sector participation through direct investments to the energy sector is imperative in the medium to long term to respond to the country’s ever increasing demand for energy. At the same time, the probable future reduction in ‘avoided-cost-tariff’ exerts pressure on our profitability, and we will therefore have to tactically divert cash flows from exiting projects to development opportunities in new ones.

It is vital to have efficient and productive capital management to succeed in the sector. We are unceasingly conscious about our returns. Whilst we would strive to maximize the returns from the operational and new projects, we would at the same time, rigorously keep a close eye on our capital structure to assure that we exhaust the opportunities to maximize returns through its optimization.

Considering foregoing factors our growth strategy is currently positioned around the small hydropower segment. We would also cautiously explore the opportunities in the other renewable energy segments such as wind, solar and biomass. Through that, we stand to create “Value” to our stakeholders and fulfill our “Vision” to build a commercially sustainable, energetic world class organization that cares for people and planet in meeting people’s electricity needs.

RESUS STRATEGY


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OUR JOURNEY

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JuneIncorporation of Hemas Power (Pvt) Limited as a fully-owned subsidiary of Hemas Holdings PLC

SeptemberCommissioned the first power project, Heladhanavi Limited a 100MW thermal power plant, as a joint venture between Hemas Power (Pvt) Limited and Lakdhanavi Limited

2004/05

2008/09

2009/10

OctoberCommissioned the first hydropower project, Giddawa Hydro Power (Pvt) Limited – a 2.0MW hydropower project in Digana, Theldeniya

SeptemberRaised Rs. 626Mn by way of an Initial Public Offering and listed on the Main Board of the Colombo Stock Exchange as ‘Hemas Power PLC’

DecemberAcquired an operational hydropower project, Upper Agra Oya Hydro Power (Pvt) Limited – a 2.6MW hydropower project in Lindula, Thalawakelle

2003/04


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2011/12

2014/15

AprilSecured permits for hydro power projects in Bundibugyo, Uganda with an aggregate capacity of 10MW under Butama Hydro Electricity Company Limited, a fully owned subsidiary of Hemas Power PLC incorporated in Uganda

SeptemberCommissioned Magalganga mini hydropower project under Okanda Power Grid (Pvt) Limited – a 2.4MW hydropower project in Maliboda, Deraniyagala

OctoberSale of joint venture stake in Heladhanavi Limited to Lakdhanavi Limited and became a 100% Renewable Energy Company

DecemberSale of entirety of shares of Butama Hydro Electricity Company Limited

DecemberSale of 75% ownership stake in Hemas Power PLC by Hemas Holdings PLC to a consortium comprising NDB Capital Holdings Limited, ACL Cables PLC and Trydan Partners (Pvt) Limited

DecemberChange the name of the Company to ‘Resus Energy PLC’

AugustCommissioned Gomale Oya Hydro Power (Pvt) Limited – a 1.4MW hydropower project in Imewatta, Magala

OctoberSale of 15% ownership stake of Associate Company Panasian Power PLC

MarchCommissioned Moragaha Oya (Pvt) Limited – a 1.5MW hydropower project in Panwila, Kandy

April Signed SPPA’s for 1.5MW Moragaha Oya Hydropower project and 1.4MW Gomale Oya Hydropower project

SeptemberCarried out a Capital Reduction and a Share Repurchase distributing Rs 1.6Bn to its shareholders

SeptemberRaised 1.01Bn bank loans for Group capital restructuring

OctoberSigned an SPPA for 1.9MW Upper Huluganga project

OctoberSale of 7% ownership stake of Panasian Power PLC

2016/17

2015/16


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THE GROUP STRUCTURE

Board of Directors as at 31st March 2017

Company Nature of Business Group status as at 31st March 2017

Names of Directors

Resus Energy PLC Venture Capital Company Parent H A S Madanayake (Chairman), G A K Nanayakkara (MD), U G Madanayake, C V Kulatilaka, I S Somaratne, Prof. K A M K Ranasinghe, U P Egalahewa PC

Alternate Director - C D Coomasaru*

Giddawa Hydro Power (Pvt) Limited

2.0MW Operational Hydropower Plant in Kandy District

Subsidiary (100% owned by Resus)

H A S Madanayake, G A K Nanayakkara, U G Madanayake, C V Kulatilaka, I S Somaratne

Upper Agra Oya Hydro Power (Pvt) Limited

2.6MW Operational Hydropower Plant in Nuwara Eliya District

Okanda Power Grid (Pvt) Limited

2.4MW Operational Hydropower Plant in Kegalle District

Gomale Oya Hydro Power (Pvt) Limited

1.4MW Operational Hydropower Plant in Kegalle District

Moragaha Oya (Pvt) Limited 1.5MW Operational Hydropower Plant in Kandy District

Upper Huluganga (Pvt) Limited

1.9MW Hydropower Project- under development in Kandy District

Rawanakanda Hydro Power (Pvt) Limited

Under feasibility

* Mr. C D Coomasaru was appointed to Resus Energy PLC on 1st November 2016 as alternate director to Mr. U G Madanayake.

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Resus Energy PLC

Moragaha Oya (Pvt) Limited

Giddawa Hydro

Power (Pvt) Limited

Upper Agra Oya Hydro

Power (Pvt) Limited

Okanda Power

Grid (Pvt) Limited

Gomale Oya Hydro

Power (Pvt) Limited

Upper Huluganga

(Pvt) Limited

100% 100% 100% 100% 100% 100%


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DELIVERY OF VALUE

Hydropower sector Revenue

237Mn

Reduction in greenhouse gas emission

11,188 t-CO2

Electricity generation from fully-owned hydropower

plants16.15 GWh

Environmental protection expenses0.3Mn

Investments in community development

0.8Mn

Benefits to employees

77.4Mn

Total Training hours

300 Hrs

Water Recycled

139,683,371 m3

Operating Profit

79.7Mn

Taxes paid to Government

16.4Mn

Hydropower sector Profit

10.3Mn

Group PAT

(88.5)Mn

Net Assets Value Per Share

Rs.14.84

Total Capital Deployed in Renewable Energy Sector

Rs. 2,033Mn


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FINANCIAL HIGHLIGHTS

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Year Ended 31st March 2017 2016 Change 2015 Rs. Rs. Rs.

RESULTS FOR THE YEARGroup Revenue 240,042,608 393,049,638 (39%) 575,575,817Results from Operating Activities 79,673,819 275,269,496 (71%) 389,096,351Net Finance Cost (105,946,124) (60,121,699) 76% (48,325,867)Profit/(Loss) before Tax (85,295,701) 231,092,451 (137%) 340,393,565Profit/(Loss) After Tax from Continuing Operation (88,545,625) 200,316,744 (144%) 304,552,355Loss After Tax from Discontinued Operation - - 0% (280,501,536)Profit/(Loss) After Tax (88,545,625) 200,316,744 (144%) 24,050,819Profit/( Loss) attributable to Equity Holders of the Parent (79,112,656) 200,455,751 (139%) (60,253,848)Profit/( Loss) attributable to Non-Controlling Interest (9,432,969) (139,007) 6686% 84,304,667

Dividends - - 0% -

FINANCIAL POSITIONEquity Attributable to Equity Holders of the Parent 868,138,709 950,815,795 (9%) 2,386,984,352Total Assets 2,091,352,676 2,097,448,430 0% 2,667,845,062Total Debt 1,168,517,308 1,081,886,364 8% 88,442,084No of Ordinary Shares 58,390,263 58,390,263 0% 125,200,002Gearing (%) 57.5% 53.1% 8% 6.1%

SHAREHOLDER INFORMATIONEarnings/(Loss) per Share From Profit/(Loss) for the Year (Rs.) (1.35) 2.24 (161%) (0.48) From Continuing Operations (Rs.) (1.35) 2.24 (161%) 1.76 From Discontinued Operation (Rs.) - - 0% (2.24)Return on Equity (%) (8.70%) 12.01% (172%) (2.46%)Net Assets per Share (Rs.) 14.87 16.28 (9%) 19.07Interest Cover (Times) 0.75 4.58 (84%) 8.10Distributions - Share Repurchase (Rs.) - 1,603,433,736 (100%) 0.00Dividend per Share (Rs.) - - 0% -Dividends Payout (%) - - 0% -Dividend Cover (Times) - - 0% -Market Price as at 31st March (Rs.) 19 22.20 (14%) 18.90Market Capitalisation (Rs.) 1,109,414,997 1,296,263,839 (14%) 2,366,280,038


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NON FINANCIAL HIGHLIGHTS

Year Ended 31st March 2017 2016 2015

FINANCIAL CAPITAL EC1 Financial value added (Rs.Mn) 190.6 385.4 210.1

ENVIRONMENTAL CAPITAL EN3 Energy consumption (GJ) 881.0 776.2 538.3EN8 Total water withdrawal (m3) 139,691,519 246,605,940 241,232,982EN22 Water discharge (m3) 139,683,371 246,605,940 241,232,982EN15 Direct greenhouse gas emissions-Scope1 (t-CO2) 52.2 47.4 36.6EN16 Energy indirect greenhouse gas emissions-Scope2 (t-CO2) 26.6 17.9 2.9EN17 Other indirect greenhouse gas emissions-Scope 3 (t-CO2) 6.8 10.0 -EN29 Environmental fines and non-compliance Nil Nil Nil

HUMAN CAPITAL Total workforce 85 71 65LA6 Number of injuries 1 3 NilLA6 Lost days 3 25 NilLA9 Average training hours per employee 3.5 6.7 11.8LA16 Number of labour practices grievances 3 1 NilHR3 Incidences of discrimination Nil Nil NilHR5 Incidences of child labour Nil Nil NilHR6 Incidences of forced labour during the year Nil Nil NilHR12 Human rights grievances Nil Nil Nil

SOCIAL AND RELATIONSHIP CAPITAL SO1 Community engagement 56 45 44SO8 Incidences of non-compliance with laws and regulations Nil Nil NilSO11 Grievances on impacts on society Nil Nil Nil

PR2 Incidences of non-compliance concerning health and safety impacts of services Nil Nil Nil


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CHAIRMAN’S STATEMENT

The year was a difficult one for us with a sustained drought causing a severe drop in rainfall. The electricity generation dropped 33% over the previous year

During the year, Gomale Oya and Moragaha Oya Projects were commissioned. With that, the group’s total opera-tional capacity now stands at 9.9MW

“as a business entity that operates in the renewable energy space, we remain hopeful that a more conducive environment for development will emerge soon.”

Suren MadanayakeChairman


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Dear Shareholder,

I take great pleasure in warmly welcoming you to the fourteenth Annual General Meeting of Resus Energy PLC and in presenting to you the Annual Report and Audited Financial Statements for the year ended 31st March, 2017.

The year was a difficult one for us with a sustained drought causing a severe drop in rainfall. The electricity generation dropped 33% over the previous year. Combined with a 4% decrease in avoided-cost-tariff, our operational profits for the year dropped 71% to stand at Rs.79.7Mn when compared to Rs.275.3Mn reported in the previous year. That eventually translated into a net loss of Rs.88.5Mn against the net profit of Rs.200.3Mn year-on-year.

As part of the portfolio reorganization plan, the group divested 15% of its ownership in Panasian Power PLC leaving a 7.3% stake behind and also sold off the land held for the development of the biomass project in Elpitiya. We have decided to discontinue with the biomass project.

During the year, Gomale Oya and Moragaha Oya Projects were commissioned. With that, the group’s total operational capacity now stands at 9.9MW. Pre-construction work of 1.9MW Upper Huluganga project is progressing. Additionally, in April 2017, we purchased the development rights of a 700 KW hydropower project in Kegalla District. Once these two projects are developed, the total capacity of our portfolio will stand at 12.5MW.

Although, the national policy is directionally in favor of renewable energy, the macro economic conditions and the general working environment were not sufficiently conducive attract investments into the sector. However, as a business entity that operates in the renewable energy space, we remain hopeful that a more conducive environment for development will emerge soon.

On the pricing front, the avoided-cost-tariff may even decrease further in the years to come. Therefore, the development of new projects under the cost-based-tariff system is imperative to nullify the potential negative impact that could arise from the two plants operating on avoided-cost-tariff.

With that summary, I wish to conclude this note by thanking our team for their commitment and hard work to bring the Company to this level. I would also extend my gratitude to my colleagues on the Board for steering the Company and guiding it at high-level with great success. I thank all of you, our valued shareholders for the continued trust and confidence placed in us.

Suren MadanayakeChairman

Colombo, Sri Lanka15th May 2017


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MANAGING DIRECTOR’S REVIEW

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As a 100% renewable-energy company, we have kept faith in small-hydropower segment, which we have considera-ble experience in, for our growth

Amongst all our power plants, the Magal Ganga plant recorded the highest generation for the year. It generated 6.65GWh (8% less than the last year) at 32% plant-utiliza-tion-level

“The year under review was an arduous one in more than one way. The country experienced a prolonged period of severe drought, which affected the company’s results negatively. At the same time, our development work too suffered due to considerable increase in red-tape at public institutions.”

Kishan NanayakkaraManaging Director


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The year under review was an arduous one in more than one way. The country experienced a prolonged period of severe drought, which affected the company’s results negatively. At the same time, our development work too suffered due to considerable increase in red-tape at public institutions.

Nevertheless, we were able to commission two projects which were under construction. The 1.4MW Gomale Oya and 1.5MW Moragaha Oya projects are now connected to the National Grid. Therefore, the aggregate capacity of our fully-owned operational projects now stands at 9.9MW.

As part of the effort to reorganize our asset portfolio, we sold a 15% stake in Panasian Power PLC, bringing our current holding down to 7.3%. The sale triggered a direct disposal gain of Rs.23.5Mn at the Company-level. However, this sale translates in to a loss of Rs.19.5Mn at the Group-level. The Group-level loss is arising from the difference between the net proceeds and the fair-valuation of the stake sold and the stake held back. Furthermore, the proposed biomass project in Elpitiya was called off and the land earmarked for the development work was disposed of. This led to a Rs.39.5Mn write off into our books. The cash realized will be diverted to our fully owned development projects such as 1.9MW Upper Huluganga project and the newly acquired 700KW Ranwala Oya project. The development work of these projects is expected to start in the ensuing year.

Operational and Financial PerformancesWeather and its impactDespite the heavy rainfall in May 2016, the cumulative rainfall in our catchment areas for the year was far below the long term averages as both the south west and north east monsoons failed to bring sufficient rain. The resulting energy generation for the year was 16.15GWh vis-à-vis 24.24GWh recorded for the previous year. This was a 33% reduction.

Electricity GenerationAmongst all our power plants, the Magal Ganga plant recorded the highest generation for the year. It generated 6.65GWh (8% less than the last year) at 32% plant-utilization-level. On the other hand, the Agra Oya plant generated 3.97GWh (52% less than the last year) at 17% plant-utilization-level and the Giddawa plant generated 4.64GWh (47% less than the last year) at 26% plant-utilization-level. The Gomale Oya plant, commissioned in August 2016 and the Moragaha Oya plant, commissioned in March 2017, generated 0.75GWh and 0.1GWh respectively.

Financial resultsOwing to these poor operational performances, the Group recorded a 71% reduction in operating profits. The operating profits stood at Rs.79.7Mn for the year against Rs.275.3Mn reported for the previous year. The book losses arose from the impairment of the biomass project and the loss on the disposal of the stake at Panasian Power PLC, together with a 4% reduction in avoided-cost-tariff and higher finance cost, further depressed our financial performances. As a result, the Group recorded a consolidated net loss of Rs. 88.5Mn for the year. This compares with the net profit of Rs.200.3Mn reported for the previous year.

The finance cost that stood at Rs.106.7Mn compared with the Rs.61.0Mn in the previous year arose from two fronts. The debt raised by the fully owned operational companies during the latter part of the previous year, had the full year interest effect this year. On the other hand, the post-commissioning interest expenses at the two newly commissioned power plants was expensed to the Income Statement. The pre-commissioning interest expenses were capitalised. Accordingly, the aggregate net profits from our fully owned hydropower plants came down 98% to stand at Rs.4.1Mn for the year in comparison to Rs.181.1Mn reported for the previous year.


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Economic and the Sector OutlookEconomic ChallengesFundamental facets of the current economy are neither favorable nor encouraging for business. Sudden increase in interest rates, constant tax amendments together with high volatility in the foreign exchange rates have caused loss of investor confidence.

The Average Weighted Prime Lending Rate (AWPLR) shot up 250 basis points year-on-year to 11.7% from 9.19% a year before. The bank borrowings at fixed rates for the long-term are prohibitively expensive now. In the absence of a derivatives market locally for interest rate fixing or taking hedge-positions, the investors have no option but to borrow at exorbitantly high fixed rates or at highly volatile variable rates. At the same time, the LKR depreciated 6.4% year-on-year against the USD to stand at Rs.153.91 as of end March 2017 from Rs.144.69 a year before. This scenario is detrimental to project development work. It increases projects associated risks which in turn will translate into higher expectations on investor returns. That puts the cost of capital and investment hurdle rates up. When that happens, number of new investment opportunities will become unviable and have to be shelved.

Yet, we remain optimistic on a turnaround of the economy. The growth in economy is likely to be consumption led and thus would directly increase the consumption of electricity. It is evident that our per capita electricity consumption, in comparison to many of South Asian countries, is low despite the growth in the power infrastructure and household electrification. This signifies that our electricity demand is bound to increase.

Government Policy and ground realityThe government authorities have set numerous policy directions for the energy sector. In the ‘National Energy Policy and the Strategies’ gazetted back in 2008, a target was that 10% of electrical energy supplied to the grid as of 2015 to be met from Non-Conventional-Renewable-Energy (NCRE). This target was met. At the same time, the Ministry of Power and Energy have released numerous other policy documents such as the “Energy

Sector Development Plan for a Knowledge based Economy” emphasizing on “green economy” and “self-sufficient nation in energy by 2030”. Whilst all these can be commended for, the commitment on the part of the government to implement these policies and address the issues that hamper implementation, have been somewhat disappointing. There is increased red-tape in public offices. The Central Environmental Authority, the approving agency for most of the projects, recently halted granting approvals for new projects and in some instances also halted the work of some ongoing projects. This understandably was a reaction to the protest-actions of a few pressure-groups against the small hydropower sector. It is suboptimal on the national policy. It is paradoxical to experience these at a time that the country has opted to procure emergency power at exorbitantly high price.

Moreover, the tariffs that are applicable to NCRE sector have not been revised since 2012. The major cost factors including exchange rates, inflation rate and tax holidays etc., assumed in determining the tariff for new hydro projects have substantially changed. Since the tariff is by and large fixed for the tenure of the Power Purchase Agreement, if the tariffs are set on outdated historical cost parameters, the development of financially viable projects becomes extremely challenging.

We firmly believe that if not for the obstacles the developers face, largely due to the lack of congruence between policy setting and implementation agencies, the NCRE sector could have grown into much greater heights.

Despite the issues and the challenges, the NCRE developers continue to deliver. Not only that the supply-target set in the Energy Policy was achieved, the NCRE sector, hitherto, since inception in 1996, added 497.1MW to the national grid through 197 power plants. It produced 1,466GWh for the year. Capacity-wise this reflects more than 10% of the country’s installed capacity and energy-wise more than 11% of total energy generation. Of this, the small-hydropower sector accounts for 337.7MW from 169power plants.

MANAGING DIRECTOR’S REVIEW CONTD.


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Strategic outlook of the CompanyAs a 100% renewable-energy company, we have kept faith in small-hydropower segment, which we have considerable experience in, for our growth.

As expected, the avoided-cost-tariff applicable to both Giddawa and Agra Oya plants came down. With the prevalence of 900MW of low-cost coal-fired power plants in the system and the reduction in global oil prices may cause further reduction in the avoided-cost-tariff. Thus, the revenues from both Giddawa and Agra Oya plants may come under pressure in the years to come. This impact can be best circumvented with the addition of new projects that would operate under the cost-based and technology-specific tariff. This means more development work in a challenging economic environment.

To endure the dynamism in a multiple project development environment, it is vital to concentrate on the productivity of human capital and efficient use of information systems. The company is continuously upgrading its human resources and marching towards successful expansion through wider use of information technology.

Our top priority is to maximize the returns to our shareholders. We returned Rs.1,600Mn to the shareholders in 2015 through our capital restructuring exercise. The previous debt-free capital structure was transformed to reflect a meaningful debt-equity mix. Accordingly, we raised debt capital through Giddawa, Agra Oya and Magal Ganga project companies. The debts carry fixed rates of interest. With the prevalence of the tax shield in these companies, the effective interest cost of debt to the Group became even less. However, the development loans raised for Gomale Oya and Moragaha Oya projects carry floating interest rates.

ConclusionAmidst numerous challenges of a difficult year, all the achievements of your Company have largely been due to the dedication and the efforts of an exceptionally committed team which we are fortunate to have. Our team-work exemplifies and personifies the commitment to each other and our organization. I thank my colleagues who have worked hand in hand with me in our quest to taking this company into greater heights.

Finally, let me extend my sincere gratitude to my fellow colleagues on the Board and to all of you, our valued shareholders, for your trust and confidence placed in us.

G A K NanayakkaraManaging Director



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BOARD OF DIRECTORS

Appointed to the Board on 6th January 2015

Skills and Experience: Mr Suren Madanayake had his education at Royal College, Colombo and qualified as a Mechanical Engineer from the University of Texas at Austin, USA.

Membership of Board Sub-Committees: Member of Board Remuneration Committee

Current Memberships on Corporate Boards: Non-Executive Chairman, Resus Energy PLC; Managing Director, ACL Cables PLC, ACL Plastics PLC, Lanka Olex Cables (Pvt) Ltd.; Deputy Chairman, Kelani Cables PLC; Director, Ceylon Bulbs and Electricals Ltd., ACL Metals and Alloys (Pvt) Ltd., ACL Polymers (Pvt) Ltd., ACL-Kelani Magnet Wire (Pvt) Ltd., Ceylon Copper (Pvt) Ltd., ACL Electric (Pvt) Ltd., SM Lighting (Pvt) Ltd., Fab Foods (Pvt) Ltd., Ceylon Tapioca Ltd., National Asset Management Ltd(NAMAL),; Trustee, CCC Foundation of Sri Lanka, an approved charity.

Appointed to the Board at inception of the Company in 2003

Skills and Experience: Mr Kishantha Nanayakkara is a Fellow of the Chartered Institute of Management Accountants, UK and an Associate of the Institute of Chartered Accountants in England and Wales. He also holds an MSc in Finance from the Birmingham Business School, University of Birmingham, UK and the AMP from Said Business School, University of Oxford.

Mr Nanayakkara has held several senior management positions and directorships in companies ranging from manufacturing to financial services during a career spanning over 20 years. He has served on the Board of the Sri Lanka Sustainable Energy Authority, as an advisor to the National Council for Economic Development and as a Consultant to the PERC in the past.

Membership of Board Sub-Committees: Member of Board Related Party Transactions Review Committee

Current Memberships on Corporate Boards: Managing Director, Resus Energy PLC.

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Mr H A S Madanayake / Non–Executive Chairman Mr G A K Nanayakkara / Managing Director


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Appointed to the Board on 26th June 2015

Skills and Experience: Mr Upali Madanayake had his early education at Ananda College, Colombo. He graduated from the University of Cambridge England in 1958, and had his MA (Cantab) conferred on him in 1962. He is a Barrister-at-law (Lincoln’s Inn) and an Attorney-at-law of the Supreme Court of Sri Lanka.

Mr Upali Madanayake started his working life managing family-owned plantations until most of the lands were taken over by the State under the Land Reform Law of 1972. He still continues to have an active interest in agriculture. He joined the Board of Associated Motorways Limited, and subsequently became the Deputy Chairman of the Company. He became a Director of ACL Cables PLC (then Associated Cables Limited) in January 1963, its Managing Director in July 1978 and Chairman cum Managing Director in May 1990. He relinquished his duties as Managing Director in September 2005 after appointing Mr Suren Madanayake as Managing Director. With the acquisition of Kelani Cables PLC by the ACL group in October 1999, he was appointed as Chairman of Kelani Cables PLC. He has over 50 years’ experience in the cable industry.

Membership of Board Sub-Committees: None

Current Memberships on Corporate Boards: Non-Executive Director, Resus Energy PLC; Chairman, Fab Foods (Pvt) Ltd., Ceylon Tapioca Ltd., ACL Plastics PLC, Lanka Olex Cables (Pvt) Ltd.; Director, ACL Metals and Alloys (Pvt) Ltd., ACL Polymers (Pvt) Ltd., Ceylon Copper (Pvt) Ltd., ACL-Kelani Magnet Wire (Pvt) Ltd., Ceylon Bulbs and Electricals Ltd., and ACL Electric (Pvt) Ltd.


Skills and Experience: Mr Vajira Kulatilaka holds a BSc in Civil Engineering with First Class Honours from the University of Moratuwa; MSc in Industrial Engineering and Management from the Asian Institute of Technology, Thailand; a Chartered Financial Analyst (CFA) and a Fellow Member of The Chartered Institute of Management Accountants, UK.

Mr Kulatilaka counts over 32 years of experience in Banking and Finance and Capital Market operations in Sri Lanka. He has been instrumental in introducing a number of innovative financial products to the country and also, adjudged the ‘Best Investment Banking CEO Sri Lanka 2014 and 2015’ by Global Banking and Finance Review in recognition of his contribution to the investment banking arena of Sri Lanka. Prior to joining the NDB Group, Mr Kulatilaka worked at Sampath Bank, USAID and CKN Fund Management (Pvt) Limited.


Current Memberships on Corporate Boards: Non-Executive Director, Resus Energy PLC; CEO of the Investment Banking cluster of the NDB Group; a Director of NDB Capital Holdings Limited, NDB Investment Bank Ltd., NDB Securities (Pvt) Ltd., NDB Wealth Management Ltd., NDB Capital Ltd-Bangladesh., NDB Zephyr Partners Limited – Mauritius,, N D B Zephyr Partners Lanka (Private) Limited and Emerald Sri Lanka Fund I Limited – Mauritius; Chairman of the Colombo Stock Exchange and South Asian Federation of Exchanges (SAFE).

Mr U G Madanayake / Non–Executive Director Mr C V Kulatilaka / Non–Executive Director


20

Appointed to the Board on 16th February 2015 as the Alternate Director to Mr C V Kulatilaka and appointed as a Non-Executive Director w.e.f 14th October 2015

Skills and Experience: Mr Isuru Somaratne holds a BSc in Mechanical Engineering from the University of Moratuwa, and an MBA in Finance from the UCLA Anderson School of Management; An Associate Member of the Chartered Institute of Management Accountants, UK.

Mr. Somaratne started his investment banking career in 2007 in the Corporate Advisory division at NDB Investment Bank and now functions as the Vice President – Investments at NDB Capital Holdings Limited. He was actively involved in many successful transactions carried out at NDB Group’s investment banking cluster during his career including IPOs, M&A, Financial Restructurings, etc. Mr. Somaratne was also part of the team which floated the Group’s Private Equity management company and its first Private Equity Fund, the Emerald Sri Lanka Fund. Previously he had worked at MAS Active Linea Intimo and EMC Corporation of the United States.

Membership of Board Sub-Committees: Member of Board Audit Committee and Board Related Party Transactions Review Committee

Current Memberships on Corporate Boards: Non-Executive Director, Resus Energy PLC and Lanka Communication Services (Pvt) Limited


Skills and Experience: Prof. Malik Ranasinghe is a Senior Professor in Civil Engineering and the immediate past Vice-Chancellor at the University of Moratuwa; an International Professional Engineer, Chartered Engineer and a Fellow of the Institution of Engineers, Sri Lanka; Fellow of the National Academy of Sciences, Sri Lanka; PhD from University of British Columbia, Vancouver, Canada in Civil Engineering as a Canadian Commonwealth Scholar; Published extensively on Engineering and Environmental Economics with Project Management; Recipient of accolades and awards including the General Research Committee Award for Outstanding Contribution to Sri Lankan Science from the Sri Lanka Association for Advancement for Science, the Committee of Vice-Chancellors and Directors (CVCD) Excellence Award for 2012 for the Most Outstanding Senior Researcher in Technology and related Sciences, the Award for Outstanding Contribution to Education 2012 at World Education Congress and the Education Leadership Award 2013 at the 4th Asia’s Best B-School Awards, Singapore.

Membership of Board Sub-Committees: Chairman of Board Audit Committee, Member of Board Remuneration Committee, and Member of Board Related Party Transactions Review Committee

Current Memberships on Corporate Boards: Independent Non-Executive Director, Resus Energy PLC; Deputy Chairman, Sampath Bank PLC; Independent Non-Executive Director, Textured Jersey Lanka PLC, Access Engineering PLC, and United Motors Lanka PLC.

BOARD OF DIRECTORS CONTD.

Mr I S Somaratne / Non–Executive Director Professor K A M K Ranasinghe / Independent Non–Executive Director


21


Skills and Experience: Mr Uditha Egalahewa had his basic legal education at Sri Lanka Law College followed by a Masters in Law (LLM), University of Colombo; a second Masters degree (LLM), as a World Bank sponsored scholar, from the International Maritime Law Institute of Malta in which he graduated with distinction and was awarded the Professor Walter Muller Prize. He also holds a Postgraduate Diploma in Insurance Law from the University of Colombo.

Mr Egalahewa counts over 25 years at the Bar. He joined the Chamber of the Attorney General of Sri Lanka in 1990 and served as counsel attached to the Government Institutions Branch, a State Counsel and then as a Senior State Counsel for a period of 15 years. He was appointed as a President’s Counsel in 2012.

Membership of Board Sub-Committees: Chairman of Board Remuneration Committee, Chairman of Board Related Party Transactions Review Committee and Member of Board Audit Committee

Current Memberships on Corporate Boards: Independent Non-Executive Director, Resus Energy PLC

Appointed to the Board on 1st November 2016 as the Alternate Director to Mr U G Madanayake

Skills and Experience: Mr Champika Coomasaru is an Associate member of the Institute of Chartered Accountants, SL and the Chartered Institute of Management Accountants, UK. He holds a B.com Special Degree from the University of Colombo. He has started his career as an Accountant at John Keells Holdings PLC and currently holds the position of Group Finance Controller at ACL Cables PLC. Previously he worked at Finlays Combo PLC and completed his audit experience at KPMG, Sri Lanka.


Current Memberships on Corporate Boards: Alternate Director to Mr U G Madanayake, Resus Energy PLC

Mr U P Egalahewa PC / Independent Non–Executive Director Mr C D Coomasaru / Alternate Director


22

MANAGEMENT TEAM

Prasad MudugamaB.Sc. Eng. (Mechanical), B.Sc. Defense Studies and Military Eng. AMIE (IESL)Senior Project Manager

Kishan NanayakkaraM.Sc. Fin, FCMA, ACA(ICAEW), AMP (Oxford)Managing Director

Krishantha WimalasiriB.Sc. Eng. (Electrical), Chartered Engineer Certified Expert in Climate and Renewable Energy FinanceSenior Project Manager

Padmasiri BandaraB.Sc. Eng. (Mechanical), M.Sc. Engineering Mgt, AMIE (IESL)Senior Manager, Operations and Maintenance

Panchavi RanaweeraMBA-UK, B.Sc Business (Hons)-UK, NCC (UK), CIPD (UK), CAHRI (Aus)Head of Human Resources

Kavinda PereraB.Sc. Fin. Mgt, ACMA, CGMAHead of Finance

Chinthaka PereraB.Sc. Eng. (Civil), AMIE (IESL)Senior Civil Engineer

Priyantha BandaraB.Sc.(SP) Agri Science, M.Sc. Plant Protection, M.Sc. Env. ScienceEnvironmental Management and Compliance Officer


23

MANAGEMENT DISCUSSION &

ANALYSIS


24

BUSINESS VALUE CREATION MODEL

Value creation lies at the heart of our business model. Our value creation activities use inputs from five capitals- financial, human, environmental, social and relationship, and intellectual, ensuring all stakeholder expectations are exceeded. We relentlessly work towards efficient and productive management of these five capitals while simultaneously managing the economic, social and environmental impacts of our processes. The entire

value creation model thrives on visionary leadership, corporate strategy, enterprise risk management, code of conduct and governance. Built around responsible corporate citizenship and sustainability, our value creation model succeeds in gaining the trust and confidence of our stakeholders through efficient and continuous delivery of rising value.

Input CapitalsBuild Own and Operate

Renewable Energy Projects Outputs

Project Management

Project Commissioning

and Operations

Supplier Relationship Management

Project Evaluations

and Acquisitions

Financial Feasibility and Due Diligence

Financial Capital(Invested Capital)

Environmental Capital(Head and Flow)

Human Capital(Employees)

Social and Relationship Capital (Customers, Suppliers, Contractors, Government Institutions, Local Communities)

Intellectual Capital(Knowledge and Experience)

PG35

PG42

PG47

PG43

PG53

Economic, Social and Environmental Impacts

Value created for our stakeholders

PG60-72

PG28

Environmental Management System

PG64

Business Ethics and Governance

PG73

Risk Management

PG120

Business Strategy

PG5

Vision, Mission and Values

PG4


25

MATERIAL ASPECTS AND STAKEHOLDER ENGAGEMENT

Reporting Parameters

This Report is one of the primary methods used to communicate the Group’s response to stakeholder concerns during the financial year. The process of recognizing key sustainability related risks, significant stakeholders, the assessment of the material aspects based on their relative importance to both the Group and stakeholders, and the formation of policies and management approaches to manage and mitigate these aspects, have become an integral part of defining this Report.

The materiality assessment process assists in the prioritization of issues based on their potential impact on our business and their

significance to our stakeholders. The needs of our stakeholders are ever-changing and bearing in mind the materiality of issues our response to them must also evolve over time.

An issue becomes material when it affects our ability to remain commercially viable. In particular, material issues are those which have a strong bearing on our stakeholders assessments and decisions about our sustainability and commitment to their needs. These material aspects contribute significantly in shaping our strategic planning and operations and achieving our strategic objectives.

The process for identifying and prioritizing material issues is as follows;

Material aspect boundaries with regard to reporting on sustainability impacts for GRI context index – Specific Standard Disclosures are given in the ensuing section. There are no restatements or changes in scope and aspect boundaries compared to 2016.

Aspect Aspect Boundary Materiality

Internal External To the Group To the Stakeholder

ECONOMICEconomic Performance * High High

Market Presence Low Low

Indirect Economic Impact * Moderate High

Procurement Practices * High High

ENVIRONMENTMaterials * Moderate Moderate

Energy * * High High

Water * High High

Biodiversity * Moderate High

Emissions * High High

Effluents and Waste * Moderate High

Identification of issuesEvaluation of significance

Prioritization of material issues

Reporting based on materiality

G4 - 18, 19, 20, 21


26



Products and Services Low Low

Compliance * High High

Transport Low Low

Overall * * Moderate Moderate

Supplier Environment Assessment * High Low

Environment Grievance Mechanisms * Moderate High

SOCIAL: LABOUR PRACTICES AND DECENT WORKEmployment * High High

Labour/Management Relations Low Low

Occupational Health and Safety * High High

Training and Education * High High

Diversity and Equal Opportunity * Moderate Moderate

Equal Remuneration for Women and Men Low Low

Supplier Assessment for Labour Practices * High Moderate

Labour Practices Grievance Mechanisms * High High

SOCIAL: HUMAN RIGHTSInvestment Low Low

Non-discrimination * High High

Freedom of Association and Collective Bargaining * High High

Child Labour * High High

Forced Labour or Compulsory Labour * High High

Security Practices Low Low

Indigenous Rights Low Low

Assessment Low Low

Supplier Human Rights Assessment Low Low

Human Rights Grievance Mechanisms * High High

SOCIAL: SOCIETYLocal Communities * High High

Anti-Corruption * High Moderate

Public Policy Low Low

MATERIAL ASPECTS AND STAKEHOLDER ENGAGEMENT CONTD.


27



Anti-Competitive Behaviour Low Low


Supplier Assessment for Impacts on Society * Moderate Moderate

Grievance Mechanisms for Impacts on Society * High High

SOCIAL: PRODUCT RESPONSIBILITYCustomer Health and Safety * High High

Product and Service Labeling Low Low

Marketing Communications Low Low

Customer Privacy * Moderate High


Stakeholder Engagement

At Resus, we believe that stakeholder engagement is a driving force behind creating sustainability and deciding how we manage our capitals to create value. Needs and expectations of stakeholders which emerge from the engagement process contribute largely towards identifying our strategic direction. Through our ethical code of business conduct, environmental management system, structured human resources and financial management functions and relationship management, we ensure that we effectively address stakeholder expectations and make a positive impact though our business conduct.

Management approach for stakeholder identification and engagementOur project team comprehensively identifies stakeholders at the planning stages of the projects and this is an integral element of our in-house project management manual. Stakeholder expectations are identified using the data collected from various stakeholder groups from initial engagements and based on their

past experiences. Then the identified stakeholders are ranked based on the following criteria;

Parties likely to be affected by operations of ResusParties who have responsibilities towards ResusParties likely to influence Resus’s operations

Based on the above aspects, Resus determines the importance and the extent of engagement with the stakeholders. The Group engages stakeholders on a periodic basis with a view to identifying stakeholder expectations and assess the outcomes of its engagement.

G4 - 24, 25, 26, 27


28

Shareholders

Shareholder funds

Rs. 868.1Mn

Lenders

Borrowings

Rs. 1,073Mn

Total Training Hours

300

Taxes Paid

Rs. 16.4MnEnvironment Protection Expenditure

Rs. 0.3Mn

Capital Repayments

Rs. 232.9Mn

Employee Benefits

Rs. 77.4Mn

Commissioned

2.9MW power plants during the year

Capital investment on hydropower

377.6Mn

Interest Paid

Rs.108.9Mn

ENGAGEMENT AND VALUE CREATED FOR

STAKEHOLDERS

Generation

16.15 GWh

*Career development*Rewards and recognition

Contracts signed with overseas suppliers

Rs.81Mn

Reduction in t-CO2 emissions for electricity generated through hydropower

11,188

Suppliers Payments to Civil Contractors

Rs. 579.1Mn to date

Local Community Engagement

56 Employment opportunities to villagers

Community Development

Rs. 0.8Mn

Customers

Suppliers

Natural Environment

RegulatorsSociety

Employees

Zero non-compliance

Zero default on capital and interest payments

Zero non-compliance Zero non-compliance



29

Shareholders

Equity partners and

public shareholders

Frequency of EngagementAnnually, Quarterly and Regularly

Methods of Engagement Board meeting discussions among representative members of main equity partners Annual general meeting Announcements and financial publications on the CSE website

Discussion Topics Business plan and strategic direction Business performance drivers and sustainability Governance and Ethics Return on Investment and Risk Management

Our Response Creating Economic Value Added (EVA) to our shareholders by undertaking projects with high Internal Rate of Return and appropriate risk management measures

Lenders

Banks and

financial institutions

Frequency of EngagementAs required

Methods of Engagement Announcements and financial publications on the CSE website Performance updates via submission of monthly, quarterly and annual financials for facility reviews Meetings and discussions

Discussion Topics Project financing Debt service coverage Banking transactions Business performances Loan covenants

Our Response Strict monitoring of compliance with provisions in loan agreements Audit committee review of any non-compliance Timely settlement of dues


30

Customers

Ceylon Electricity Board

Frequency of EngagementRegularly

Methods of Engagement Build close rapport with senior officials at CEB Regular engagement in relationship management activities Compliance with provisions in Standardised Power Purchase Agreements (SPPAs)

Discussion Topics New project approvals Grid connection proposals Projects commissioning and transmission Settlement for electricity units dispatched at applicable tariff rates

Our Response Submiting invoices in accordance with agreed specifications in Standardised Power Purchase Agreement (SPPA)

Suppliers

Electro-mechanical equipment suppliers

and civil contractors

Frequency of EngagementAs required

Methods of Engagement On-site visits to European electromechanical equipment suppliers Regular invitations for bids for supply and construction contracts of hydropower projects Adherence to terms and conditions in supply agreements

Discussion Topics Procurement policies Engineering standards on supply and construction contracts Contractual obligations Supplier Assessments - labour practices, environmental and social impacts Reliability of electromechanical equipment Adherence to civil construction contracts and timely settlements

Our Response Mutual benefits through sharing of information, obtaining references and guarantees provided for the goods supplied Construction agreements signed according to ICTAD guidelines



31

Employees

Employees


Methods of Engagement Management meetings and internal communications via emails and memos Focus group discussions Strategic planning sessions Mentoring and counselling Annual and semi-annual performance review meetings 360 degree evaluations Open door policy to encourage direct employee-management discussions Whistleblowing policy to escalate employee concerns to senior management with confidence Regular HR clinics at hydropower plant sites to listen to employee concerns and grievances Training and impact assessments

Discussion Topics Remuneration and annual goal setting Staff welfare Employee relationship management Training and development Training for youth Occupational health and safety

Our Response On the job technical training for students from HND, NAITA etc. offering opportunities to work with our senior engineers at project sites Providing training and development programmes based on specific requirements and skills Strict adherence to health and safety standards Performance linked incentive schemes


32

Society

Society


Methods of Engagement Close contact with religious leaders in immediate local communities of project sites Scoping committee meetings before starting projects Focus group meetings Investments in rural development work at project sites Employment to villagers surrounding the project sites

Discussion Topics Needs and requirements of society CSR activities Employment for villagers Ethical business conduct

Our response Recruit villagers surrounding the project sites as permanent employees Build, own and operate projects within our ethical code of business conduct and deliver promises as a responsible corporate citizen Strive to reach the best solution with local communities to improve their lifestyles through generous sponsorships

Regulators

Government Institutions

and Agencies

Associated InstitutionsCentral Environment Authority Sri Lanka, Sustainable Energy Authority, Forest Department, Divisional Secretariat Offices, Land Reform Commission, Board of Investments, Inland Revenue Authority


Methods of Engagement Close engagement with senior officials of government institutions Venturing with government agencies for good causes Timely payment of all statutory dues such as employee statutory payments, taxes, levies and duties Submission of special reports as per requirements

Discussion Topics Project approvals Adherence to guidelines of project approvals Governance and Ethics

Our response Regular review of compliance with government approvals and report any non-compliances to the Audit Committee



33

Environment

Natural Environment


Methods of Engagement Development of projects under strict environmental regulations Adoption of an in-house Environmental Management System to ensure compliance with environmental policies and ethics Engage a full-time senior environmental officer directly reporting to the Managing Director Carry out projects with minimum destruction to the environment Partnering in and sponsoring for environmental development programmes

Discussion Topics Environmental Management Compliance Sponsoring for CSR projects Governance and Ethics Corporate Responsibility Emissions and waste Water Generation of clean and green energy Negative environmental externalities

Our response Regularly monitoring compliance with environmental regulations on emission and waste Generation of hydro-electricity based on run-of-the-river model as a sustainable solution to fuel-burned electricity generation Regularly measuring noise levels, pH quality of water etc. and taking immediate corrective action addressing deviations from the standard norms to minimize negative externalities Extending water channel paths to save trees; carrying out minimum blasting during construction with proper approvals and under strict supervision Cleansing and recycling water back to the natural river flow through the tailrace of the powerhouse after being used for electricity generation


34

Materiality of Stakeholder IssuesStakeholder expectations and issues recognized through the engagement process were prioritized as follows;

Stakeholder Issues Prioritisation Matrix

Stakeholder Stakeholder Issues

Shareholders A. Highest return on investment and risk management

Lenders B. Covenants in loan agreements

Customers C. Settlement for electricity units dispatched at applicable tariff rates

Suppliers D. Reliability of electromechanical equipment supplied and timely settlementsE. Adherence to civil construction contracts and timely settlements for work done and certified

Employees F. Training for youthG. Employee training and developmentH. Occupational health and safetyI. Employee recognition and rewards

Society J. New employment opportunities for villagersK. Ethical business conductL. Concerns and needs of local communities

Regulators M. Compliance with conditions and guidelines stipulated in government approvals, laws and regulations

Environment N. Emissions and wasteO. Generation of clean and green energyP. Negative environmental externalitiesQ. Water

H

M

L

L M H LIKELIHOOD OF IMPACT

STAK

EHO

LDER

PRI

ORI

TY

E,F,L B

A, C, D, G, H, I, J, K, M, N,

O, P, QH - High (Issues of High significance on both the stakeholder

and the Company. Addressed in detail in the impact management section of the Annual Report)

M - Medium (Issues of Medium significance on both the stakeholder and the Company. Addressed in limited detail in the impact management section of the Annual Report)

L - Low (Issues of Low significance)



35

FINANCIAL CAPITAL

G4 - EC4

Effective management of Financial Capital is crucial for every organization. Resus has identified the strategic facets of its financial capital and the best uses of them to increase the shareholder’s wealth and to achieve its growth objectives while

Key Highlights 2016/17 2015/16

Profitability Loss of Rs. 88.5Mn

Profit of Rs. 200.3Mn

Revenue Rs. 240.0Mn Rs. 393.1Mn

Net Finance Cost Rs.105.9Mn Rs. 60.1Mn

Tax Expense Rs. 3.2Mn Rs. 30.8Mn

Gearing Ratio 57.5% 53.1%

Cash and Cash equivalents Negative Rs. 3.6Mn

Positive Rs. 36.4Mn

ProfitabilityFor the year under review, the Group recorded a net loss of Rs.88.5Mn compared to Rs.200.3Mn net profit reported in the previous year. This reduction in net profits is primarily resulting from:

Reduction in electricity generation – The total cumulative generation from our hydropower plants decreased 33% year-on-year owing to the prolonged drought prevailed during the year;.

Loss on the sale of Investee-Associates – On 01st November 2016, the Group disposed a 15% stake at Panasian Power PLC, bringing down our current stake to 7.3%. The transaction triggered us to derecognize Panasian Power from its Associate status to an Available-for-Sale Investment in the consolidated financial statements. This resulted in a loss of Rs.19.5Mn which arose from the difference between the net proceeds and the fair-valuation of the stake sold and the stake held back;.

Impairment Loss over subsidiary assets – During the year, Ella Dendro Electric (Pvt) Ltd sold its land in Elpitiya, Galle for Rs.46.2Mn. The company impaired the remaining Carrying Value of its assets amounting to Rs. 38.9Mn. Furthermore, a receivable balance of Rs. 0.6Mn was also impaired fully. Thus, the total impairment that amounting to Rs. 39.5Mn was recognized in the Consolidated Financial Statements; and.

benefiting the society as a whole. The analysis of the financial position, capital structure and financial performance presented in the financial review below provides insights into the financial capital of the Group.

Dividends and Interest

Shareholders Funds and Debt Capital

Invest in hydropower

ProjectsCash from CEB

Economic Value Creation

Internal / External Stakeholders

Operation Expenses

Government Taxes

Overview of the Financial Capital at Resus


36

Higher Finance Cost – For the financial year, the Group’s net finance cost increased Rs.45.8Mn to stand at Rs.105.9Mn from Rs.60.1Mn reported in the previous year.

The Group recorded Rs.79.7Mn operating profit before interest and tax (EBIT) compared to Rs.275.3Mn reported in the previous year. Up to the point of divestment, the Associate - Panasian Power PLC, contributed Rs.6.1Mn to the consolidated operating profit in comparison to Rs.40.2Mn reported a year before.

Analysis of consolidated profit/(loss) after tax

SegmentProfit/(Loss) for the

year Rs. Mn

2016/17 2015/16

Hydropower sector – fully-owned subsidiaries 4.2 181.0

Hydropower sector – Panasian Power PLC only the group’s share of profit, net of tax under the equity method of accounting 6.1 36.0

Total hydropower sector contribution for the consolidated profit/(loss) 10.3 217.0Net Gain/(Loss) on sale of Equity Accounted Investee – Associate (Panasian Power PLC) (19.4) 15.9

Impairment Charge (39.6) -

Others (39.8) (32.6)

Total Consolidated Profit/(Loss) (88.5) 200.3Non-controlling interest (9.4) 0.1

Profit/(Loss) attributable to equity holders of the Parent (79.1) 200.4

2014/15 2016/172015/16-150

100

0

-100-50

200150

50

250Rs.Mn

GROUP NET PROFIT/ (LOSS) AFTER TAX

(89)

200

24

2014/15 2016/172015/16-100

100

-50

0

200

150

50

250Rs.Mn

PROFIT / (LOSS) ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

(79)

(60)

200

FINANCIAL CAPITAL CONTD.


37

RevenueThe Group revenue represents income derived from the sale of electricity to the Ceylon Electricity Board from its hydropower plants and income earned from the other venture capital activities. The Groups’ revenue dropped 39% year-on-year. This

2014

/15

557

378

2015

/16

216

371

2016

/17

237

100

400

200

100

500

300

600Rs.Mn

HYDROPOWER NET PROFITS AND REVENUE

Hydropower RevenueHydropower Net Profits

was primarily due to a 33% reduction in electricity generation that stood at 16.15Mn Units (kWh) for the year in comparison to 24.24Mn Units (kWh) generated in the previous year. It was further compounded by a 4% reduction in the avoided-cost-tariff (effective from 1st January 2016).

Hydropower Plant/Company

2016/17 2015/16

Revenue (Rs.Mn)

Electricity Generation

GWh

Revenue (Rs.Mn)

Electricity Generation

GWh

Giddawa Plant - Giddawa Hydro Power (Pvt) Ltd 67.8 4.64 135.9 8.71

Upper Agra Oya Plant - Upper Agra Oya Hydro Power (Pvt) Ltd 57.1 3.97 130.3 8.33

Magal Ganga Plant - Okanda Power Grid (Pvt) Ltd 96.9 6.65 104.9 7.20

Gomale Oya Plant - Gomale Oya Hydro Power (Pvt) Ltd 13.1 0.75 - -

Moragaha Oya Plant - Moragaha Oya (Pvt) Ltd 2.3 0.14 - -

Resus Energy PLC 2.8 N/A 21.9 N/A

Total 240.0 16.15 393.0 24.24

Net Finance CostThe Group’s net finance cost increased Rs.45.8Mn year-on year to stand at Rs.105.9Mn for the year from Rs.60.1Mn in the previous year. The increase arose from two fronts. The loans raised during the latter part of the last year for the capital restructuring exercise had the full-year interest effect. On the other hand, the post-commissioning interest expenses on loans obtained for Gomale Oya and Moragaha Oya projects were also expensed.

The group-level debt was raised at Giddawa Hydro Power (Pvt) Ltd, Okanda Power Grid (Pvt) Ltd and Upper Agra Oya Hydro Power (Pvt) Ltd. It aggregated to Rs.950Mn term-loans and Rs.60Mn permanent overdrafts. The interest rate applicable on the term-loans are fixed for each year over its tenure, varying from 8.25% to 10.75% per annum. However, the finance cost has been accounted for, based on the Effective Interest Method in accordance with Sri Lanka Accounting Standards. Accordingly, the effective interest rate stands at approximately 9.75% per annum. The Incremental amount of interest charged against the above loans amounted to Rs.33.2Mn.


38

During the year, Gomale Oya Hydro Power (Pvt) Ltd drew down a balance Rs.90.0Mn from the approved term-loan facility of Rs.200.0Mn. The term loan was fully drawn and the interest of Rs.16.4Mn was charged at AWPLR + 0.75%. Moragahoya (Pvt) Ltd serviced Rs.0.4Mn as interest at AWPLR + 2% for Rs.40.0Mn drawn against the approved term loan facility of Rs.246Mn.

TaxationThe Group tax expenses consist of income tax and deferred tax expenses. The income tax expense stood at Rs.3.2Mn compared to Rs.30.8Mn assessed for the previous year. This reduction mainly arose due to the poor profitability of our power plants and the finance expenses incurred on the loans. A reconciliation of accounting profit with the tax expense is available in Note 23.1 to the financial statements. During the year, the tax holiday of Okanda Power Grid (Pvt) Ltd expired and it became liable for income tax at 10%. Giddawa Hydro Power (Pvt) Ltd, Upper Agra Hydro Power (Pvt) Ltd and Gomale Oya Hydropower (Pvt) Ltd were liable pay tax at 12% in accordance with the Inland Revenue Act. Moragaha Oya (Pvt) Ltd currently enjoys a 5-year tax holiday as per the BOI agreement.

2014/15 2015/160

60

20

100

120Rs. Mn

GROUP NET FINANCE COST AND INTEREST COVER

0

8

4

9Times

40

80

2016/17

6

21

3

5

7

Net Finance Cost (Rs.Mn)Interest Cover (Times)

48 60

8.1

4.58

0.75

106

2014/15 2016/172015/160

40

10

20

60

50

30

70%

GEARING57

.5

6.1

53.1

According to the Nation Building Tax (Amended) Act No. 22 of 2016, the exemption for service of supply of electricity was revoked. Therefore, with effect from 01st November 2016 our operational subsidiaries are now liable to pay 2% Nation Building Tax on revenue. None of the group companies is liable to pay VAT under the prevailing provisions.

A detailed description of tax rates and concessions of each power plant is depicting under Note 3.4 on page 150 to 152 to the financial statements.

Capital StructureShare holders’ fundsResus is committed towards maintaining a healthy capital structure, which is both efficient and well balanced in achieving the business growth that creates long-term and short-term returns to our shareholders. Due to the Net Loss recorded for the year, our shareholders’ funds decreased 8.7% year-on-year to stand at Rs.868.1Mn.

GearingTotal assets of the Group are funded by equity (41.3%), borrowings (51.3%) and other liabilities (7.4%). As of the financial year end, the group’s gearing ratio stood at 57.5% compared to 53.1% of the previous year.

FINANCIAL CAPITAL CONTD.


39

As at 31st March Group

2016/17 2015/16

Rs. Mn Rs. Mn

Total long-term interest bearing debt 859.8 858.4

Total short-term interest bearing debt (current portion of interest bearing debt) 213.6 124.6

Other long-term Financial Liabilities 84.7 86.8

Bank overdraft 10.3 12.0

Total Debt 1,168.4 1,081.8Surplus cash 6.8 48.4

Net debt/(cash) 1,161.6 1,033.4Equity attributable to equity holders of the Parent 868.8 950.8

Non-controlling interest (3.5) 5.8

Total equity 864.6 956.6Capital employed (total debt + total equity) 2.033.0 2,038.4

Capital employed less surplus cash 2,026.2 1,990.0

Total gearing (total debt / capital employed) 57.5% 53.1%Net gearing (net debt / capital employed less surplus cash) 57.3% 51.9%

Cash and Cash EquivalentsThe group’s cash and cash equivalents stood at a negative Rs.3.6Mn as of the financial year end compared to a positive Rs. 36.4Mn last year. During the year, the Group generated Rs.98.1Mn net cash flows from operations. It also raised Rs.315Mn from Loans, Rs.223.6Mn from the proceeds of the sale of stake in Panasian Power PLC, Rs.46.25Mn from the sale of the land owned by Ella Dendro Electric (Pvt) Ltd and a further Rs.5.3Mn form the sale of other property plant and equipment. At the same time, the Group invested Rs.377.7Mn to acquire Property, Plant and Equipment and repaid Rs.341.8Mn in loan capital and interest during the year.

Investments and Capital ExpenditureOut of the group’s investment of Rs.377.6Mn in Property, Plant and Equipment, Rs.13.1Mn was invested at the company-level. This compares with respective investments of Rs.272.1Mn and Rs.11.5Mn made in the previous year. The Group’s capital work-in-progress as of 31st March 2017 includes the amounts invested in development of Upper Huluganga hydropower project.

Net Assets per ShareThe Group’s Net Assets per Share as at 31st March 2017 stood at Rs.14.87. This is 8.3% decrease over the last year which stood at Rs.16.28 per Share. At Rs.19.0, the market price prevailed at the close of trading on 31st March 2017, our price to book ratio stood at 1.28.

2014/15 2015/160

1,500

500

2,500

3,000Rs.Mn

EQUITY AND NET ASSET PER SHARE

0

20

25Rs.

1,000

2,000

2016/17

10

5

15

Equity (Rs. Mn)Net Asset per share (Rs.)

2,38

7

951

19.0716.28

14.87

868


40

Shareholder ReturnsEarnings per Share (EPS)The EPS of the Group stands at negative Rs.1.35 for the year. Comparatively, the EPS stood at Rs.2.24 for the previous year.

DistributionsNo interim dividends were paid for the financial year under review.

Interest CoverThe interest cover derived based on Earnings before Interest and Tax (EBIT) from the continuing operations indicates 0.8 times for the year and 4.6 times for the previous year. The reduction in interest cover is a result of poor operational results of the group bundled with higher finance cost incurred during the year.

Economic Value Added (EVA)EVA is a tool for gauging the real economic performance of a business and its ability to create shareholder value. EVA provides a means for coupling the two fundamental drivers of economic or shareholder value, namely, operating earnings and capital efficiency. EVA is calculated as follows;

EVA = Net Operating Profit after Tax – Capital Charge

Chiefly driven by the substantial reduction in energy generation, the Economic Profits attributable to its shareholders for the financial year under review, stood at negative Rs.160Mn. Economic Profits mean the additional returns earned over and above the expected rate of return by the shareholders on their invested capital in the business. Consequent to previous years’ capital restructuring exercise, the Group is now appropriately positioned to maximize the returns on its capital.

2016/17Rs. Mn

2015/16Rs. Mn

2014/15Rs. Mn

Net Operating Profit After Tax (NOPAT)

73 263 352

Capital Charge 239 242 419

EVA (166) 21 (67)NOPAT return on Capital Invested

3.6% 11.4% 11.5%

Hurdle Rate of Return - WACC 11.7% 10.5% 13.7%

Value Added/(Shortfall) % (8.1%) 0.9% (2.2%)

NOPAT and Capital Invested were adjusted for operating lease charges.

Average of invested capital was used for EVA, which is the average of the current and prior year total capital invested.Profits from continuing operations were considered for EVA and book depreciation was assumed as economic depreciation.

Cost of equity for hurdle rate was estimated based on 5-Year Treasury Bond yield at the start of the financial year plus 5% for the equity risk premium.

(2.2

4)

2.24

(1.3

5)

-3

1

-1

-2

2

0

3Rs.

EARNINGS PER SHARE

From Profit for the YearFrom Continuing OperationsFrom Discontinued Operations (Thermal Power)

2014/15 2015/16 2016/17

1.76

(0.4

8)FINANCIAL CAPITAL CONTD.


41

Employee Provident

Fund

Employee Trust Fund

PAYE Stamp Duty

Gratuity

8.60

7.43

0

8

4

2

10

6

12(Rs Mn)

COMPANY

2016/17 2015/16

1.01

4.90

0.01

1.71

0.86

4.46

0.01

0.21

Employee Provident

Fund

Employee Trust Fund

PAYE Stamp Duty

Gratuity

10.9

59.

82

0

8

4

2

10

6

12(Rs Mn)

GROUP

2016/17 2015/16

1.36

4.93

0.01

1.71

1.22

4.48

0.02

1.21

Income Tax

Economic Service Charge

Supper Gain Tax

Stamp Duty

Dividend Tax

- -0

1.00

0.40

0.60

0.20

1.40

1.20

0.80

1.80(Rs Mn)

COMPANY

2016/17 2015/16

- - 0.01

1.63

- 0.01

- -

Income Tax

Economic Service Charge

Supper Gain Tax

Stamp Duty

Dividend Tax

15.7

818

.60

0

50.00

20.00

30.00

10.00

70.00

60.00

40.00

80.00(Rs Mn)

GROUP

2016/17 2015/16

- - 0.01

1.63

30.1

3

0.01

0.62

69.9

0

Staturory PaymentsEmployee Related Statutory paymentsThe Group made the following statutory payments in relation to its employees on or before their respective due dates.

Payment of Taxes and Other DutiesThe Group made the following statutory payments to the Government of Sri Lanka in relation to taxes on or before their respective due dates as per the laws and regulations.


42

ENVIRONMENTAL CAPITAL

We are in the business of producing electricity from renewable energy sources. This means “clean” and “green” energy. Renewable Energy nullifies the bad effects to our environment from fossil-fuel-fired electricity generation Therefore, ours’ is an “environmentally-friendly business”.

The ‘water flow’ and the ‘head’ are two key parameters in the design of a hydropower project. Head is the difference in elevation, expressed in feet or meters, between the head- water-level at the forebay tank or weir (in the absence of a diversion channel) and the tail-water-level at the powerhouse. Therefore, hydropower projects are location specific.

Water is the primary environmental capital input in value creation from hydropower generation. The water, after being diverted and used for generation of electricity is released back to the river without causing any impact to the water resource. Hence, water is used as a renewable source of energy.

Resus is engaged in developing and operating small hydropower projects based on run-of-the-river concept where water is not retained in large reservoirs like in large-scale hydropower projects. At all our projects, an uninterrupted “environmental flow” is released at the weir for the benefit of the ecosystem and human livelihood.

At the project design stage, we optimise design parameters in a manner that we optimise the use of the location and the water resource economically and environmentally. Deviations from an optimum design can cause poor utilization of natural resources and at the same time impact the investments negatively.

Therefore, whilst we develop and operate projects in an environmentally friendly manner, we contribute to a bigger national and global cause in helping to substitute electricity generation from burning fossil fuel and thus help to negate its bad effects on the environment.

Our environmental regulations encompass standard guidelines stipulated in the approvals of Central Environmental Authority,

other connected government institutions and also our own guidelines. The following five aspects are prioritized as objectives and targets:

Conservation and optimisation of the use of natural resourcesWaste managementMinimisation of environmental pollution during construction and operationOptimise project design parameters to minimise environmental impactEngage with stakeholders to minimise the environmental impact from our activities

Weir and intake of diversion channel

Water release from powerhouse tailrace


43

SOCIAL AND RELATIONSHIP CAPITAL

Customers

G4 - 8, G4 - PR2, PR8, PR9, EC4, EC7

The Ceylon Electricity Board (CEB) is our sole customer. We have built good relationships with those at the CEB over the years and they are aware that we are an integral part of the national effort to increase the non-conventional renewable energy generation. Our small hydropower plants contribute significantly to the national grid for which we are paid in accordance with agreed tariffs and provisions in the Standardised Power Purchase Agreements (SPPA), struck with the CEB.

Grid interconnection points of our fully-owned hydropower plants, electricity units dispatched and collections from CEB in financial years under review are shown in the table below:

Company CEB inter-connection

point

CEB regional

office

Total Capital

Expenditure (Rs. Mn)

Electricity units dispatched (GWh)

Amount collected from CEB for electricity units

dispatched (Rs. Mn)

2016/17 2015/16 2016/17 2015/16


Ukuwela, Matale

Kandy 389.0 4.64 8.71 63.4 141.0


Polgaswatte, Deraniyagala

Ratnapura 453.0 6.65 7.20 94.3 110.0


Henfold Estate, Lindula

Nuwara Eliya

345.0 3.97 8.33 66.8 144.0

*Gomale Oya Hydro Power (Pvt) Limited

Dikellakanda, Deraniyagala

Ratnapura 276.0 0.75 - 12.3 -

**Moragaha Oya (Pvt) Limited

Ukuwela, Matale

Kandy 378.0 0.14 - - -

Total 1,841.0 16.15 24.24 236.8 395.0 *Commissioned in August 2016**Commissioned in March 2017

In accordance with prevailing tax regulations, the imported electromechanical equipment for hydropower projects that have entered in to SPPAs with the CEB are exempted from VAT and NBT.

For connectivity of our projects with the national grid, we invest in the construction of transmission lines through which we facilitate expansion of CEB’s transmission network. At locations with regular line interruptions, we have assigned a full-time team at our expense to oversee incidents causing line interruptions and take immediate actions to restore such faults together with the CEB. This helps speedy restoration of transmission line failures that benefit our projects, the CEB and the electricity consumers.

Our fully-owned hydropower plants are soundly equipped to ensure that they operate with least interruptions at their maximum capacities. This way, we make the best use of water resources and feed the national grid with hydro-electricity supply to reduce usage of electricity generated burning fossil-fuel.

We comply with rules and regulations stipulated in SPPAs and comply with safety regulations in building and operating our power plants. We, as a policy, manage relationships on ethical grounds and support good-cause events and programmes of the CEB and other stakeholders.


44

The Group did not have any incidents with the CEB nor were charged any fines for non-compliance with laws and regulations concerning the provision and use of products and services, breach of provisions in SPPAs, breach of customer privacy and loss of confidential information, unacceptable engineering standards and safety regulations in project development, commissioning and operations for the year under review and the prior year.

We value the relationship with our sole customer - CEB, built on trust and mutual benefits. This is a key element of Resus’ relationship capital.

Government InstitutionsWe regularly associate with various Government Institutions which are our project approving agencies. Following are such institutions that we are in close contact with:

Sri Lanka Sustainable Energy AuthorityCeylon Electricity BoardPublic Utilities Commission of Sri LankaCentral Environmental AuthorityDepartment of IrrigationNational Water Supply and Drainage BoardForest DepartmentDepartment of Wild Life ConservationDivisional Secretariat OfficesPradeshiya SabaBoard of Investments of Sri Lanka

We manage relationships with Government agencies on ethical grounds with responsible and transparent policies and systems. We ensure that our projects are constructed and operated in accordance with the guidelines stipulated in approvals. Additionally, we also actively support good-causes at government agencies.

Suppliers and Contractors

G4 - 12

Overseas equipment suppliersAll our fully-owned hydropower plants are sourced through top-of-the-range Western-European electromechanical equipment suppliers from Germany, Italy, Austria and UK. Our engagement with suppliers extends beyond mere supply contracts and long-term relationships are built and nurtured, creating long-term value and business sustainability for all parties. Our first supplier (WKV from Germany), who provided electromechanical equipment for the Giddawa hydropower project in 2008 still works with us lodging their bids for our new projects and providing regular maintenance advice for operational plants.

Our team visits overseas suppliers and in turn invites them to our project sites too in order to strengthen relationships and boost confidence between parties.

The value of orders that we placed with overseas electromechanical suppliers are given in the table below:

Company Supplier and country

Amount (Rs. Mn)

Year of investment


WKV-Germany 138.0 2008/09


GHE-Austria 106.0 2011/12


Zeco-Italy 78.0 2015/16


Gugler-Austria 82.0 2015/16


Zeco-Italy 81.0 2016/17

Total 485.0

Upper Agra Oya hydropower plant was acquired as an operational plant in 2009/10 which uses turbines imported from Gilkes, United Kingdom.

SOCIAL AND RELATIONSHIP CAPITAL CONTD.


45

Local suppliers

G4 - SO9, SO10, EC9, EN32, EN33, LA14, LA15, HR5, HR6

We offer civil construction work to local suppliers and thereby indirectly partake in the economic growth of our country.

In selecting local civil contractors, Resus considers organizations that share similar values and commitments.

The amounts that we paid to local civil contractors are given in the table below:

Company Amount (Rs Mn)

Year of investment


231.0 2008/09


194.0 2010/11


65.3 2015/16

Moragaha Oya (Pvt) Limited 88.8 2015/16

Total 579.1

We assess both local and overseas suppliers based on the extent of their compliance with technical standards, impacts on society, good environmental practices, labour standards, ethical business conduct, health and safety at project sites, human rights including child and forced/compulsory labour and laws and regulations. We share our own environmental regulations with suppliers and make it an integral part of the civil construction contracts making our corporate best practices compulsory to our contractors.

At Resus, we always facilitate a win-win proposition to both parties in achieving mutual value creation in a compliant and responsible work set up. We strive to maintain an open communication culture in dealing with both local and overseas suppliers and resolve issues and disputes speedily in the most amicable way.

Turbine-Generator from GHE-Austria for Magal Ganga plant

Turbine-Generator from WKV-Germany for Giddawa plant

Turbine-Generator from ZECO-Italy for Gomale Oya Plant


46

Supplier relationships too are a key element of Resus’ relationship capital and suppliers have shown their continuous willingness to undertake supply and construction contracts repeatedly with Resus Group. There have not been any significant actual or potential negative impacts on society, the environment, labour practices or human rights impacts in the supply chain.

Communities

G4 - SO1, EC7

The surrounding communities of our hydropower projects are integral parts of our projects. We build strong relationships with them based on mutual trust and benefits. As a policy encapsulated in our Code of Ethics, we do not give false promises to the communities that we engage with and we deliver what we promise to them. The villagers often keenly engage in the course of project development and our team shares day to day working life with the surrounding community.

Every project budget includes a significant amount allocated for community development activities. During the year, for the community surrounding Moragaha Oya, we began the construction of a bridge across the river, engaged in the reconstruction of a dilapidated public village hall and constructed the assembly area of Knuckles Tamil College. We also contributed and provided sponsorships for the communal programmes of the villages surrounding the power plants and engaged in various other livelihood development activities. We also offer employment opportunities to the nearby villagers during the project development phase and then permanent employment once the plants are operational.

SOCIAL AND RELATIONSHIP CAPITAL CONTD.

Constructing the assembly area of Knuckles Tamil School-Bambarella

Bridge constructed by the Company for Moragaha Oya Community

Reconstruction of the public village hall - Moragaha Oya


47

HUMAN CAPITAL

Our employees are the key driving force behind our success, whose insights, collective experience, expertise and work ethic have enabled us to consistently contribute towards our value creation process. We therefore place great importance

in understanding our employee demands and aspirations and creating a work atmosphere focused on employee satisfaction and motivation in order to maximize our human capital potential.

Employee Diversity

G4 - 9, 10, G4 - LA1, LA12

Employees of the Group by age, gender and category

CategoryAge

Total< 30 30-50 50 <M F M F M F

Board of Directors - - 4 - 4 - 8

Senior Management 1 - 5 1 1 - 8

Middle Management 1 - - 1 - - 2

Executives 1 3 2 - - - 6

Supervisory Staff - - - - 3 - 3

Technical Staff 2 - 1 - - - 3

Power Plant Staff 11 - 35 - 4 - 50

Other Non-Executives 2 1 1 - 1 - 5

Total 18 4 48 2 13 - 85

All employees (other than the non-executive directors) of the Group as reported in the above section are legally recognized as full time basis employees of the Resus Group.

<30 26%30-50 59%50< 15%

TOTAL EMPLOYEES BY AGE TOTAL EMPLOYEES BY REGION

Colombo 34%Kandy 24%Kegalle 20%Nuwara Eliya 22%


48

Employees of the Group by region

RegionAge

Total<30 30-50 50 <M F M F M F

Kandy 5 - 13 - 2 - 20

Kegalle 4 - 10 - 3 - 17

Nuwara Eliya 2 - 14 - 3 - 19

Colombo* 7 4 11 2 5 - 29

Total 18 4 48 2 13 - 85

New recruits by age, gender and region

RegionAge

Total<30 30-50 50 <M F M F M F

Kandy 1 - 7 - - - 8

Kegalle 1 - 4 - - - 5

Nuwara Eliya - - - - - - -

Colombo* 2 2 3 1 - - 8

Total 4 2 14 1 - - 21

Turnover by age, gender and region

RegionAge

Total<30 30-50 50 <M F M F M F

Kandy 1 - - - - - 1

Kegalle - - - - - - -

Nuwara Eliya - - 2 - - - 2

Colombo* - 1 2 1 - - 4

Total 1 1 4 1 - - 7*Includes Board of Directors

HUMAN CAPITAL CONTD.


49

Employee Training and Development

G4 - LA9, LA10

We provide training for staff both locally and overseas based on identified employee needs and business specific requirements. Training programmes are evaluated by the employee’s supervisor prior to and after attending the programmes, to ascertain the suitability and the impact on both the employee and the Company. Special emphasis is placed on improving the soft skills for personal development as well as for building unity among employees. A culture of mentoring and learning provides valuable learning on the job, that cannot be monetized, but is a key component of our training and development value proposition. Employees who undergo training, share their learnings with the rest of the team members thus maximizing the benefits of their experience.

We also conduct 360 degree evaluations and organise coaching and counselling sessions with external consultants to assist improvements and transformations required to shape up profiles of our employees to effectively cope up with challenges in the business environment and lead the institution to success.

Training hours by gender and employee category

Category Number of Employees Total Training Hours Average Training Hours per Employee Category

M F M F M F

Board of Directors 8 - - - - -

Senior Management 7 1 80 - 11 -

Middle Management 1 1 - - - -

Executives 3 3 50 - 17 -

Supervisory Staff 3 - - - - -

Technical Staff 3 - - - - -

Power Plant Staff 50 - 120 - 2 -

Other Non-Executives 4 1 - 50 - 50

Total 79 6 250 50 30 50

Oth

er N

on-E

xecu

tives

Pow

er P

lant

Sta

ffTe

chni

cal S

taff

Supe

rvis

ory

Staff

Exec

utiv

esM

iddl

e M

anag

emen

tSe

nior

Man

agem

ent

Boar

d of

Dire

ctor

s0

80

40

20

100

60

140(hrs)

TOTAL TRAINING HOURS

120

50 120

50 80


50

Employee relationship management

G4 - LA16

Our employee relationship management process ensures that we build and strengthen our bonds among employees and remain sensitive towards their needs and expectations. Transparency, managing expectations and grievances, performance evaluations and open communication are key aspects of our employee relationship management protocol.

Whistleblowing policyResus expects integrity and ethical behaviour from all its employees and believes that a whistleblowing policy will help foster and maintain an environment where employees can act appropriately, without fear of retaliation. As one of the many facets of the Resus way of doing business, we encourage employees who have concerns about suspected serious misconduct or any breach or suspected breach of law or regulation that may adversely impact the Company, to come forward and express such concerns without fear of punishment or unfair treatment.

The objectives of the whistleblowing policy are:To ensure that business is conducted in an ethical manner and in conformity with applicable laws and regulationsTo enhance the culture of transparency, accountability and integrityTo provide avenues for employees to raise concernsTo assure employees reporting concerns in good faith that they will be protectedTo enable management to be informed at an early stage about acts of misconduct, fraud or illegal activities

Grievance management The senior management takes every effort to address employee grievances and provide amicable solutions to such concerns. If an employee feels that a particular matter cannot be adequately addressed by the supervisor, then the employee may choose to make direct contact with the Managing Director (Mr. G A K Nanayakkara) and/or Independent Non-Executive Director (Mr. U

P Egalahewa, PC) to communicate their concerns and grievances under the ‘open door policy’.

Our Head of Human Resources regularly visits the project sites and speaks to the site employees to understand and address their needs and concerns.

Except for three employee disciplinary matters heard in the labour-tribunal, the Group did not receive any grievances about labour practices through formal grievance mechanisms or through grapevine during the last financial year.

Staff BondingWe host numerous socializing activities focused on teamwork, bonding and building harmony and unity among employees. Outbound training programmes, trips, quiz competitions, formal and informal social gatherings are usually featured every year.

Kite Competition



51

Annual Staff Trip

Resus Childrens’ Art Competition

Performance Management

G4 - LA11

Employee Performance Reviews are carried out annually as part of our performance appraisal system. All employees set goals with the consultation of their supervisors at the start of the financial year followed by a mid-year review and final evaluation at the closure of the year. At the year-end evaluation, achievement of goals and review of competencies are carried out and training needs are addressed for the ensuing financial year.

Employee Health and Safety

G4 - LA6

The Group places the highest importance on ensuring a safe working environment for all its employees, taking steps to ensure that health and safety concerns are prioritized and addressed across the Group.

The Company provides its employees all necessary safety equipment to be used at work and stringent health and safety regulations have been put in place to ensure safety helmets, boots and belts are worn at construction sites and safety standards are adhered to. The Environmental Officer along with external consultation as and when required, monitors the health and safety aspects of the employees of the Group. Our power plants operate in a ‘5S’ environment through which we aim to enhance workplace safety and efficiency.

Injuries to our employees by region and gender

Description KandyM F

Injuries to our employees 1 -

Injuries to public - -

Occupational diseases - -

Work related fatalities - -

Lost working days 3 -

Non-discrimination and Child Labour

G4 - HR3, HR5, HR6

As a responsible corporate entity, we adopt a non-discriminatory and harassment free work environment and no incidents of discrimination occurred during the period. We ensure that these policies are extended to the contractors’ workforce as well.

No incidents of child labour or forced/compulsory labour have been identified.


52


Collective Bargaining

G4 - 11, G4 - HR4

Resus has sustained harmony among employees in all possible ways and the Group does not have any collective bargaining agreements. However, a “check-off” agreement covering the mechanism of dispute resolution between the company and the employees is signed between Upper Agra Oya Hydro Power (Pvt) Limited and the Plantation Staff Congress, a trade union with which the non - executive employees of Upper Agra Oya Hydro Power (Pvt) Limited are registered.

Upper Agra Oya Hydro Power (Pvt) Limited was acquired by Resus Energy PLC in 2009/10 where a total workforce of 24 employees joined the Group with the said acquisition. For the financial year under review, Upper Agra Oya hydropower project had 19 employees. This is approximately 22% of the total employees of the Group.

Employee Benefits

G4 - LA2, LA3

The Groups provides staff loans, reimbursements of professional membership fees, gym memberships and health insurance cover for its full time employees. However, these benefits vary based on the individual grades of the employees. All six female employees of the group are entitled to maternity leave. However, none of these employees took maternity leave during the current and prior years.

Human Rights Grievance Mechanism

G4 - HR12

The group did not receive any grievances about human rights impacts through its formal grievance mechanism for the year under review and the previous year.

Safety arrangements at our Power Plants

Safety at work

5S systems in place


53

INTELLECTUAL CAPITAL

Knowledge BaseBeing in the power sector for over 13 years and in the hydropower sector for over 11 years, we have gained invaluable expertise and experience thereby continuously enhancing our intellectual capital base. This includes experience in managing projects in extremely backward and socially sensitive areas in Sri Lanka; overseas exposure in East Africa; and some valuable learnings in the biomass segment, which ran in to a standoff due to social and political interferences. We strongly believe that intellectual capital is a vital source of competitive advantage and incessantly work towards maximizing the value of this element. We strive to document the experiences we gain, challenges we face and the ways we overcome issues in projects, to use as business cases for our future projects, thus in turn providing superior value to our stakeholders.

Processes, Systems and ProceduresThe processes, systems and procedures that we have designed and implemented contribute largely towards achieving our business strategy and delivering business promises. Environmental Management Systems, Project Management Manuals, Financial and Accounting Controls and Systems have been implemented to ensure that we do business in accordance with set parameters and benchmarks. Our systems are reviewed by independent parties to ensure that they function effectively and serve to accomplish our business objectives.

AwardsAnnual Report Awards 2016- Power and Energy Sector.

Silver AwardAwarded by the Institute of Chartered Accountants of Sri Lanka for the Second Best Annual Report in the Power and Energy Sector for the second consecutive year.


54

OUR BUSINESS OPERATION

G4 - 4, 8, 9

4 REGIONS 5 OPERATIONAL POWER PLANTS

2 UPCOMING PROJECTS

9.9 MW AGGREGATE CAPACITY

16.15 GWH ELECTRICITY GENERATION

HEAD OFFICE

Okanda

Upper Huluganga

Gomale Oya

Giddawa

Upper Agra Oya

Moragaha Oya

Overview of hydro electricity generation from a run-of-the-river mini hydropower plant

POWER HOUSE CONTAINING TURBINE

AND GENERATOR

FOREBAY TANK

DIVERSION CHANNEL

TAILRACE

INTAKE WEIR

PENSTOCK


55


PROJECT SNAPSHOTCapacity - 2.0MWDate of Standardised Power Purchase Agreement (SPPA) - 08/05/2006Tenure of SPPA - 15 YearsCommissioned Date - October 2008Status of the Project - Operational

LOCATION AND SITE DETAILSLocation - Giddawa, DiganaDistrict - KandyRiver - HulugangaHead (meters) - 26.3Freehold Land Extent - 1A-3R-30.90PNumber of Buildings - TwoSquare Feet of Buildings - 4,103 sq ft.

INVESTMENT AND EQUIPMENTInvested Capital - Rs. 389MnElectromechanical Equipment supplier - WKV-GermanyTurbine Equipment type - FransisGenerator Equipment - Hitzinger-Austria

Tariff No. of Reduction in Carbon Number of electricity units employees emission (t-CO2) dispatched during the year (GWh) Avoided-cost-tariff 12 3,216 (2016 – 6,034) 4.64 (2016 – 8.71)

Plant factor for the year Major plant shut downs during the year Impairment adjustments if any 26% (2016 - 50%) None None

2012/13 2013/140

8.00

3.00

1.00

5.00

10.009.00

7.00

GWh

GIDDAWA HYDROPOWER PROJECT - GENERATION

0

10

60

50

30

20

%

6.00

2.00

4.00

2014/15 2015/16 2016/17

40

Generation - GWh Plant Factor - %

2012/13 2013/140

120

20

60

160140

100

Rs.Mn

GIDDAWA HYDROPOWER PROJECT - REVENUE AND EBIT

0

100

40

120

80

Rs.Mn

80

40

2014/15 2015/16 2016/17

60

20

Revenue - Rs Mn EBIT - Rs Mn

6.72

9.01

7.87

8.71

4.64

38

51

45

50

26

64.6

110.

6

120.

9

135.

8

67.8

43.5

88.8 98

.9 112.

6

35.2


56


PROJECT SNAPSHOTCapacity - 2.4MWDate of Standardised Power Purchase Agreement (SPPA) - 09/02/2010Tenure of SPPA - 20 YearsCommissioned Date - September 2011Status of the Project - Operational

LOCATION AND SITE DETAILSLocation - Dikkellakanda, MalibodaDistrict - KegalleRiver - MagalgangaHead (meters) - 110.0Freehold Land Extent - 0A-3R-31.83PNumber of Buildings - TwoSquare Feet of Buildings - 3,504 sq ft.

INVESTMENT AND EQUIPMENTInvested Capital - Rs. 453MnElectromechanical Equipment supplier - GHE-AustriaTurbine Equipment type - FransisGenerator Equipment - Hitzinger-Austria

Tariff No. of Reduction in Carbon Number of electricity units Cost-based-technology employees emission (t-CO2) dispatched during the year (GWh)-specific fixed tariff(Rs.14.58) 14 4,604(2016-4,986) 6.65 (2016 – 7.20)


OUR BUSINESS OPERATION CONTD.

2012/13 2013/140

20

60

120

100

Rs.Mn

OKANDA HYDROPOWER PROJECT - REVENUE AND EBIT

0

90

4030

50

70

100

80

Rs.Mn

80

40

2014/15 2015/16 2016/17

60

2010


2012/13 2013/140

8.00

3.00

1.00

5.00

9.00

7.00

GWh

OKANDA HYDROPOWER PROJECT - GENERATION

0

10

4035

25

15

5

20

%

6.00

2.00

4.00

2014/15 2015/16 2016/17

30


5.51

7.67

7.81

7.20

6.64

26

37 37

34 32

80.2

111.

8

113.

9

104.

9

96.9

59.8

89.7

87.8

80.3

64.9


57

Upper Agra Oya (Pvt) Limited

PROJECT SNAPSHOTCapacity - 2.6MWDate of Standardised Power Purchase Agreement (SPPA) - 29/04/2005Tenure of SPPA - 15 YearsCommissioned Date - February 2006Status of the Project - Operational

LOCATION AND SITE DETAILSLocation - Lindula, ThalawakelleDistrict - Nuwara EliyaRiver - Agra OyaHead (meters) - 40.0Freehold Land Extent - Nil (Leasehold land)Number of Buildings - TwoSquare Feet of Buildings - 5078 sq ft.

INVESTMENT AND EQUIPMENTInvested Capital - Rs. 345MnElectromechanical Equipment supplier - Gilkes- United KingdomTurbine Equipment type - FransisGenerator Equipment - Alconza- Spain

Tariff No. of Reduction in Carbon Number of electricity units employees emission (t-CO2) dispatched during the year (GWh) Avoided-cost-tariff 19 2,749 (2016 – 5,773) 3.97 (2016 – 8.33)


2012/13 2013/140

8.00

3.00

1.00

5.00

10.009.00

7.00

GWh

UPPER AGRA OYA HYDROPOWER PROJECT - GENERATION

0

25

10

4540

30

20

%

6.00

2.00

4.00

2014/15 2015/16 2016/17

15

5

35


2012/13 2013/140

120

20

60

160140

100

Rs.Mn

UPPER AGRA OYA HYDROPOWER PROJECT - REVENUE AND EBIT

0

100

40

120

80

Rs.Mn

80

40

2014/15 2015/16 2016/17

60

20


7.91

8.87

8.85

8.33

3.97

35

39 39 37

17

76.5

108.

4

136.

1

130.

3

57.1

51.8

74.2

99.2

91.1

16.5


58


PROJECT SNAPSHOTCapacity - 1.4MWDate of Standardised Power Purchase Agreement (SPPA) - 28/04/2015Tenure of SPPA - 20 YearsCommissioned Date - August 2016Status of the Project - Operational

LOCATION AND SITE DETAILSLocation - Magala, MalibodaDistrict - KegalleRiver - Gomale OyaHead (meters) - 160.0Freehold Land Extent - 1A-0R-26.91PNumber of Buildings - TwoSquare Feet of Buildings - 2518 sq ft.

INVESTMENT AND EQUIPMENTInvested Capital - Rs. 276MnElectromechanical Equipment supplier - Zeco- ItalyTurbine Equipment type - PeltonGenerator Equipment - Marelli Motori- Italy

Tariff No. of Reduction in Carbon Number of electricity units Cost-based-technology employees emission (t-CO2) dispatched during the year (GWh) -specific three-tier tariff 3 526 0.76

Plant factor for the year Major plant shut downs during the year Impairment adjustments if any 10% None None

OUR BUSINESS OPERATION CONTD.

2012/13 2013/14 2014/15 2015/160

2

6

14

12

10

Rs.Mn

GOMALE OYA HYDROPOWER PROJECT - REVENUE AND EBIT

-1.6

-1

-0.8

-0.4

-0.2Rs.Mn

8

4

-0.6

-1.2

-1.4


2016/172012/13 2013/14 2014/15 2015/160

0.70

0.200.10

0.40

0.80

0.60

GWh

GOMALE OYA HYDROPOWER PROJECT - GENERATION

0

4

12

10

6

2

8

%

0.50

0.30

2016/17


0.75

10

(1.4

3)13

.1


59


PROJECT SNAPSHOTCapacity - 1.5MWDate of Standardised Power Purchase Agreement (SPPA) - 28/04/2015Tenure of SPPA - 20 YearsCommissioned Date - March 2017Status of the Project - Operational

LOCATION AND SITE DETAILSLocation - Panvila, TheldeniyaDistrict - KandyRiver - Moragaha OyaHead (meters) - 78.7Freehold Land Extent - NilNumber of Buildings - OneSquare Feet of Buildings - 1,520 sq ft.

INVESTMENT AND EQUIPMENTInvested Capital - Rs. 378MnElectromechanical Equipment supplier - Gugler- AustriaTurbine Equipment type - FransisGenerator Equipment - Marelli Motori- Italy

Tariff No. of Reduction in Carbon Number of electricity units Cost-based-technology employees emission (t-CO2) dispatched during the year (GWh) -specific three-tier tariff 8 94 0.14

Plant factor for the year Major plant shut downs during the year Impairment adjustments if any 38% None None


PROJECT SNAPSHOTCapacity - 1.9MWDate of Standardised Power Purchase Agreement (SPPA) - 01/10/2015Tenure of SPPA - 20 YearsStatus of the Project - Under Construction

LOCATION AND SITE DETAILSLocation - Panvila, TheldeniyaDistrict - KandyRiver - Moragaha OyaHead (meters) - 63.8

INVESTMENT AND EQUIPMENTInvested Capital - Rs. 325Mn*Electromechanical Equipment supplier - Zeco-ItalyTurbine Equipment type - FransisGenerator Equipment - To be finalized

*planned investment


60

ECONOMIC IMPACT MANAGEMENT

G4 - EC1, EC7, EC8

Resus’ impact on the EconomyWe supply clean and green energy to the country’s national grid. Our fully-owned hydropower plants generated and transmitted 16.15GWh of electricity (compared with 24.24GWh in 2016). We contribute to the country’s economy, the national interest and impact on our stakeholders directly and indirectly.

Clean and green energy - Our electricity generation through renewable energy sources supports the government’s plan to replace fuel-burning electricity generation with renewable energy in the future. Employment and Development - We create employment opportunities in rural villages and develop rural infrastructure around our projects.Adherence and set standards - We adhere to regulations and guidelines set by project approving agencies and also monitor ourselves to progress in an environmentally-friendly manner as set out in our own Environmental Management Plan.

Investment in HydropowerThe cumulative investments we have made into the renewable energy sector as of 31st March 2017 amounted to Rs. 2.0Bn. During the year, the capital invested by the Group in the development and construction of hydropower plants amounted to Rs. 371Mn (Rs. 247Mn in 2016).

2017

2016

0

750

250

1,250

2,000Rs. Mn

INVESTED CAPITAL IN HYDROPOWER PROJECTS

500

1,000

2017

2016

2017

2016

2017

2016

2017

2016

1,750

827

524

345

345

691

670

37.7

35.9

1900

.715

74.91,500

Kandy district

NuwaraEliya district

Kegalle district

Colombo district

Total

EmploymentAs of the reporting date, we have given full-time employment to 56 (2016-45) persons from the villages around our hydropower plants.

2017

2016

0

30

10

50

90No.

EMPLOYMENT CREATED

20

40

2017

2016

2017

2016

2017

2016

2017

2016

70

2014 19 21 17 14

2922

857160

Kandy district

NuwaraEliya district

Kegalle district

Colombo district

Total

80


61

Statement of Financial Value addedGroup

2016/17 2015/16Rs. Mn % Rs. Mn %

Revenue 240.0 - 393.1 -Other Income including share of profits from Associates 10.2 - 56.9 -Less: Operating Costs - cost of goods and services bought in (59.6) - (64.6) -Total Value Added 190.6 - 385.4 100%

Distribution of Value Added:Employees 77.4 41% 69.1 18%Government 15.8 8% 50.4 13%Lenders 106.7 56% 61.0 16%Community 0.8 0% 0.2 0%Shareholders * - 0% - 0%Depreciation set aside 38.9 20% 34.3 9%Economic Value Retained (49.0) -26% 170.4 44%Total Value Added 190.6 100% 385.4 100%

Number of employees 85 71Value Added per employee 2.2 5.4

* No dividends were paid for the year and the previous year. The Company distributed Rs. 1.6Bn to its shareholders during the previous year for share repurchase.

Value Created and Distributed by RegionsThe significance of regions for the below assessment is based on operating regions of our fully-owned hydropower plants.

Kandy Kegalle NuwaraEliya2016/17 2015/16 2016/17 2015/16 2016/17 2015/16

Rs. Mn Rs. Mn Rs. Mn Rs. Mn Rs. Mn Rs. MnRevenue 70.11 135.86 110.01 104.91 57.05 130.33

Other Income 0.39 0.11 0.07 0.44 0.20 0.10

Less: Operating Costs - cost of goods and services bought in

(16.82) (20.57) (26.98) (12.54) (16.72) (31.41)

Total Value Added 53.68 115.39 83.10 92.82 40.54 99.03

Distribution of Value Added:Employees 7.08 8.22 7.97 7.50 9.45 10.61Government 7.10 24.39 0.03 0.04 8.65 24.29Lenders 38.75 25.28 47.59 18.21 17.86 10.96Community 0.05 0.07 0.06 0.01 0.05 0.05Shareholders * - - - - - -Depreciation set aside 9.46 9.32 14.09 10.74 6.61 6.51Economic Value Retained (8.75) 48.11 13.35 56.31 (2.08) 46.61Total Value Added 53.68 115.39 83.10 92.82 40.54 99.03

Number of employees 20 14 17 14 19 21Value Added per employee 2.7 8.2 4.9 6.6 2.1 4.7


62

ECONOMIC IMPACT MANAGEMENT CONTD.

Key economic parameters and their impact on Resus

The Sri Lankan Rupee depreciated against the United States Dollar from Rs.144.69 as at 31st March 2016 to Rs. 153.91 as at 31st March 2017, approximately an 6.4% depreciation over the year.

Exchange rate

Impact on ResusRising project development cost as major parts of electromechanical equipment are imported.

Impact management Factoring the exchange rate risk at the project viability evaluation. Hedging strategies are used as practicable to avoid exchange rate risk.

The Average Weighted Prime Lending Rate (AWPLR) increased from 9.19% at the commencement of the year to 11.7% as at 31st March 2017.

Interest rate

Impact on Resus Higher borrowing cost of future projects would make certain projects financially unviable. Higher cost of borrowings might slow down the country’s overall GDP growth, consumption and private investments which would slow down the energy demand.

Impact management Our borrowings which were raised against capital restructuring in the previous year are at conducive Fixed Rates. However, newly developed projects and projects under construction will be exposed to this risk. Whenever it is practical we would attempt to secure fixed rates borrowings.


63

As at the end of March 2017 year-on-year and annual moving average inflation were recorded at 7.3% (2% in 2016) and 5% (1.1% in 2016) respectively.

Impact on ResusHigher inflation rates lead to higher project development cost due to increases in cost of construction material.

Impact management Negotiate construction contracts keeping a balance between fixed-price contracts and labour supply contracts. Latter is encouraged when we feel we can benefit from sustainable low material costs.

Brent Crude Oil prices have gone down to $50 towards end of March 2017 from $107 in March 2014, a 53% decrease over three years.

Impact on ResusReduction in oil prices therefore would depress the avoided cost tariff calculated on moving average basis. Our two main power plants namely Giddwa and Upper Agra Oya mini hydropower plants are under the avoided cost tariff structure.

Impact managementResus has no control over the tariff setting mechanism. It is part of the commercial risks the Company is exposed to. Except for the above two projects, the others are subject to cost-based tariff, where the tariffs are mainly fixed under three tiers throughout the tenure of the SPPA.

Inflation

Oil Prices


64

ECONOMIC IMPACT MANAGEMENT CONTD.

The GDP grew by 4.4% in 2016 compared to a growth rate of 4.6% in 2015. The Central bank of Sri Lanka states the growth will accelerate to 6.3% in 2017.

Impact on ResusA higher GDP growth rate indicates increase in investments and consumption which would trigger a growth in demand for electricity from both industrial and domestic sectors.

Impact management Plan to expand our renewable energy portfolio making best use of the opportunities available.

Current annual electricity demand in the country is about 12,000GWh. This shows a CAGR of 4% over the last decade, and 5% CAGR for the ensuing decade the generation requirement will stand around 20,000GWh by 2025.

Impact on ResusGovernment’s intention to be self-sufficient in energy by 2030. The demand for electricity is expected to meet through renewable and other indigenous energy resources.

Impact managementResus has great potential and competitive advantage in renewable energy space managing its capital inputs more productively to create economic value.

GDP Growth rate

Demand for electricity


65

ENVIRONMENTAL IMPACT MANAGEMENT

We at Resus strongly believe that a balanced environmental capital management system is a vital component of long-term value creation. ‘Resus’ stands for REnewable energy and SUStainability and our philosophy revolves around the highest level of care towards the environment when developing and operating hydro power projects. Throughout all three stages of project development as identified in the ensuing section, we are committed towards adhering to good environmental practices focused on optimisation of water usage, energy conservation, reduction of carbon footprint, efficient waste management and the conservation of biodiversity.

Pre-Construction PhasePrior to starting a development project, a full assessment of the environmental impact is carried out and we sign off a Project Charter, where the guidelines to ensure socially and environmentally responsible behaviour within our policies and practices are established. Our team identifies and plans for significant environmental aspects associated with the projects in line with our environmental policy, objectives and targets. This becomes part of the Environmental Management Plan.

Construction PhaseAt the construction stage we ensure full compliance of environmental regulations as stipulated by the Central Environmental Authority and also our own environmental management policy. Our own policies are crafted encompassing the ISO-14001 guidelines and some Equator-Principles, thus often going beyond the requirements of the state regulations.

Our Environmental Officer regularly visits project sites to monitor compliance with the Environmental Management Plan and make corrective and preventive measures on the issues that arise. Hierarchically, the Environmental Officer directly reports to the Managing Director. That provides leeway for him to take quick and corrective actions. External contractors who work at our project sites should also abide by our environmental regulations, which become a contractual requirement in construction agreements.

Post-Construction PhaseWe review the Environmental Management System, at planned intervals, to ensure its continuing suitability, adequacy and effectiveness. The outcomes from management reviews include any decisions and actions related to possible changes to the environmental policy, objectives, targets and other elements of the Environmental Management System, consistent with the commitment to continuous improvements.

We set aside a considerable amount of capital to maintain excellent aesthetics and a pleasant and green environment with tastefully contrived landscaping to blend with the natural environment. This way we try to ensure that we develop and operate renewable energy projects in the best possible way to benefit the environment, staff, society and nation.

Our Environmental Management System

G4 - 14

Conservation Efforts


66

Input ManagementWater Management

G4 - EN8, EN9, EN10, EN22

The water used for power generation is released back to the same river without any pollution or consumption whatsoever. In fact, the water gets cleansed and relatively debris-free in the power generation process since bulk of the trash that flows along the stream gets collected at trash racks placed in the diversion channel and is removed.

During project construction, the water in the river is regularly tested for water pollution engaging external consultants from the Industrial Technology Institute or Water Board. At our power plants, we consume water tapped from sub-streams for drinking and other purposes, and municipal water is not consumed except at Giddawa.

Water consumption

Description Water Usage Water recycled (m3) Recycled Water reused (m3)

Percentage recycled

2016/17 2015/16 2016/17 2015/16 2016/17 2015/16 2016/17 2015/16

Municipal water 1,374 580 - - - - - -

Ground water 4,667 5,700 - - - - - -

Surface water 139,685,478 246,605,940 139,683,371 246,605,940 - - 99.99% 100%

Total 139,691,519 246,612,220 139,683,371 246,605,940 - - - -

Regular observations are carried out by our Environmental Officer to identify issues which could affect water pollution. Contractors are not allowed to put up any structures in close proximity to the river. We strictly monitor standard sanitation facilities and proper disposal of waste to ensure that water is not polluted by any activities at project sites. Water is regularly tested as per the specifications of the water board for drinking purposes.

Our fully-owned hydropower plants use a water volume of 21.28m3/sec when operating at their full capacities. Water is fully discharged back to the natural river flow without causing any bad impact to the water resource whatsoever from the powerhouse tailrace. The water discharge destination is located within a 1km radius of the downstream from the diversion point of all our power plants. We release an uninterrupted “environmental flow” at the diversion weir of each power plant for the benefit of the ecosystem and human livelihood. Therefore, our business operation does not affect the water sources.

Energy Management

G4 - EN3

During the year under review, the Group’s energy consumption of 881.02 Gigajoules [2015/16: 776.15 Gigajoules] was derived from the following energy sources.

Energy Consumption

Description Unit of measure

2016/17 2015/16

Diesel for vehicles GJ 445.83 392.47

Petrol for vehicles GJ 302.35 292.84

Electricity* GJ 132.84 90.84

Total GJ 881.02 776.15*Electricity for our internal uses at hydropower stations are partly self-generated.

ENVIRONMENTAL IMPACT MANAGEMENT CONTD.


67

We also reduce our energy consumption through the use of LED technology for lighting, using natural light when buildings are planned, having separate air conditioning units rather than central air conditioning to control usage when not required, setting air conditioning units at a constant minimum of 23C0-26C0, and inculcating a culture amongst the staff of ‘switching off’ when not in use.

Gomale Oya-Natural lighting for buildings planned

Material Management

G4 - EN1

Effective management of scarce resources is a key part of our Environmental Management System and we have adapted our internal processes towards this. Material consumption increased in the current year, mainly as a result of the construction of Moragaha Oya hydropower plant.

Materials Consumption at construction sites

Type of material used

Type Unit of measure

2016/17 2015/16

Steel Non-renewable Tons 120 185

Cement Non-renewable Tons 684 140

Sand Non-renewable Cubes 390 75

Aggregate Non-renewable Cubes 650 110

Output ManagementNoise Management

G4 - EN27

We regularly carry out noise level tests at our project sites engaging professional institutes, such as the Industrial Technology Institute or National Institute of Occupational Health and Safety. A baseline noise level test is carried out before the start of construction work at project sites. Thereafter, the tests are carried out every six-months for comparisons and monitoring.

As per the Noise Control Regulation No. 1 of 1996 of Schedule III of National Environmental Act, we measure noise levels against the below benchmarks;

Day time – Maximum Level – 75 dBNight time – Maximum Level – 50 dB

Site Test Date Time Location Results

Moragaha Oya project site at Panvila

08 July 2016

Day time Power House

45.9

Weir 58.8

Upper Huluganga project site at Panvila

08 July 2016

Day time Power House

62.3

Weir 62.4

Testing noise levels


68


All blasting operations are carried out under strict supervision of a qualified mining engineer. Civil contractors are not permitted to use machineries in bad conditions at project sites to ensure that construction activities do not disrupt the surrounding environment.

Waste Management

G4 - EN23

We have implemented source separation protocols at all project development and power plant locations to separate kitchen waste from other waste. Bio cages or compost bins are maintained for kitchen waste to be composted, paper waste is collected and handed over to a disposal agency, whilst other waste is transported to the nearest dump location of the local authority.

Waste disposals

Type of waste

Type Approx. Quantity disposed

Method of disposal

2016/17 2015/16

Kitchen waste (Kg)

Non-hazardous

1,580 1,308 Composting

Paper and Others (Kg)

Non-hazardous

2,321 3,000 Nearest paper disposal agency/

Waste dumping location of local

authority

As per our organizational regulations, all contractors must clean the site on a daily basis and all waste should be dumped in identified locations. Waste burning and use of polythene are strictly prohibited at construction sites and at power plant premises. Penalties are imposed for any violation of regulations.

Daily inspections are conducted by an assigned representative of the project team to observe any deviations from waste management procedures.

E-WasteOur E-waste initiative covers the disposal of computers and accessories, mobile phones, batteries and other electrical and electronic appliances in a responsible manner. However, due to the low quantity of e-waste collected we have not reported the quantity of e-waste.

Bio cages for kitchen waste

Emissions Management

G4 - EN15, EN16, EN17, EN19, EN20, EN21

Our hydropower plants operate in a zero-emission environment. During project construction, machinery deployed by contractors may have emissions and discharges. All machinery should be in good condition without unacceptable levels of emissions. Machinery in bad conditions are not allowed to be used at our project sites and regular observations are carried out by our Environmental Officer in this regard.

All electromechanical equipment at our hydropower stations are supplied by top-of-the-range Western-European suppliers, which are manufactured under strict European Standards.


69

Through this, we ensure that our equipment operates at highest efficiency and in accordance with acceptable engineering norms and they are environmentally sustainable.

Being engaged in hydropower generation, the nature of our business itself contributes towards the reduction of the carbon footprint, as electricity generation from renewable energy sources replaces electricity generation from burning fossil fuel.

Carbon footprintWe do not use heavy machinery in project construction areas, and emissions from machinery such as concrete mixtures, excavators, and small generators used are not significant. Our operational power plants partly use self- generated electricity for internal consumption needs. As a result, greenhouse gas emissions from these activities are not considered significant in the sector we operate. In fact, our business operation helps to reduce the carbon footprint considerably.

Emission Category Emission of t-CO2

2016/17 2015/16

Scope 1 Fuel Consumption for Generators, Machineries at sites, Transportation/ vehicles for business use

52.2 47.4

Scope 2 Electricity Consumption 26.6 17.9

Scope 3 Business purpose air travel 6.8 10.0

Generation of electricity from our fully owned hydropower plants helps to reduce the CO2 emissions from generation of electricity with fossil fuel.

Reduction of t-CO2 emission

2016/17 2015/16

Electricity generation from fully-owned hydropower plants

16.15 GWh

24.24 GWh

Reduction in t-CO2 emission caused due to our fully owned hydropower plants

11,188 t-CO2

16,793t-CO2

The above calculations are based on a three-year generation based weighted average grid emission factor of 0.6929 t-CO2 / MWh for 2014 published by the Sri Lanka Sustainable Energy Authority.

There are no significant emissions of ozone depleting substances (ODS), NOx, SOx, and other significant air emissions produced from our business.

Resonating our commitment towards environmental sustainability we have taken steps towards implementing a Clean Development Mechanism (CDM) to reduce our greenhouse gas emissions from the Gomale Oya and Moragaha Oya operational hydropower plants as well as the upcoming Upper Huluganga hydropower project. Together with the Sri Lanka Climate Fund (Pvt) Ltd. a reputed carbon consultancy company offering guidance for proper CDM activity and verification of emissions reductions, we will be operating in compliance with proper monitoring, recording and reporting of greenhouse gas emissions.

Conservation EffortsBiodiversity

G4 - EN11, EN12, EN13, EN14

Our Environmental Management System addresses the importance of conservation of biodiversity in the environment. Our projects are developed and operated with minimum destruction to the natural eco system and livelihood on the Earth.

Magal Ganga and Gomale Oya projects are adjacent to protected areas of high biodiversity.

At the Magal Ganga power plant, we constructed a covered water channel to protect wild animals from falling into it. We also diverted the channel path to save and minimize the damage to trees in the surroundings. At the project planning stage, we devote considerable effort to identify the species affected by our project development activities to ensure that variability


70


within species, between species, and between ecosystems are preserved and maintained.

Few flora and faunal threatened species were found in the area where the Gomale Oya project was constructed. However, the effects to the faunal species due to construction is insignificant.

Construction was done on a narrow strip on the ground, therefore the threatened flora species were not found in the excavated and cleared area.

Fauna and Flora species found at Gomale Oya project site- IUCN Red List – 2007

Conservation Status No. of Fauna Species

No. of Flora Species

Near Threatened 2 -

Vulnerable 2 8

Critically Endangered - 1

Endangered - 1

The Moragaha Oya project which was commissioned during the year is not in a protected area of high biodiversity. However, staying true to our value of concern for the people and the planet, a plantation programme was carried out where we planted 800 Bamboo and White Marudah (Kumbuk) plants.

Knuckles ProgrammeResus initiated a joint environmental management programme with the Forest Department of Sri Lanka to conserve the degraded areas of the Knuckles Conservation Forest region. Environmentally conducive species selected from the region were planted with the objective of replenishing and restoring the environment. We deployed our Environmental Officer to coordinate and oversee the project with an expected investment of approximately Rs.3million over a couple of phases. A Memorandum of Understanding (MOU) for this project was signed in March 2016 between the Company and the Forest Department.

Channel designed with optimum environmental protection

Plantation of 800 Bamboo and Kumbuk plants

Knuckles Conservation Programme


71

Environmental Grievance Mechanism

G4 - EN34

The Group did not receive any significant grievances about environmental impacts through its formal grievance mechanism for the year under review and previous year. Minor issues were resolved through speedy corrective actions.

Compliance and Expenditures

G4 - EN29, EN31

The Group was not fined for any non-compliances with environmental laws and regulations for the financial year under review and the previous year.

Environmental Protection Expenditure

Expenditure type Amount Rs.2016/17 2015/16

Noise level testing 28,830 39,980

Water quality testing - 42,604

Waste disposal - 31,299

Knuckles Conservation Programme* 161,257 333,541

Environmental protection awareness 126,300 -

Total 316,387 447,424

*It is expected to extend the project area up to 10 Hectares in phases at an estimated investment of Rs. 3.0 Mn.

In addition to the above, the Group incurred considerable additional costs in changing designs of diversion channel paths of the hydropower projects to save trees in the environment and protect biodiversity in the project areas and conducting awareness programmes regarding environmental regulations.

Conducting awareness programmes on environmental regulations

Raising awareness for environmental protection


72

SOCIAL IMPACT MANAGEMENT

Compliance with laws and regulations

G4 - SO8

Resus Energy PLC is an uncompromising law-abiding corporate citizen, thus legal compliance is regarded as high priority. For development projects as well as operational business-units, we follow the relevant protocol to identify all applicable legal needs, monitor and document new changes and requirements of the relevant regulatory framework and undertake awareness sessions to educate employees to ensure compliance.Taxes and other duties are paid on time. The Group was not charged any fines for non-compliance with laws and regulations.

Ethical Business Conduct

G4 - 56, G4 - SO5

Our values and culture are founded on the principles of good ethics and we are committed to conduct our business operations with honesty, integrity and with respect to the rights of all our stakeholders. Employees are encouraged to do right things and in right ways so that our actions benefit the society and people in a wider manner. All our employees are given a copy of our Code-of-Ethics and we conduct awareness sessions at regular intervals to disseminate our values. Furthermore, we use numerous mechanisms to monitor ethical compliance through formal and informal channels. We have a ‘whistleblowing’ policy to encourage tip-offs and telltales at all levels. This we believe encourages good conduct among the employees, which in turn enhances the organisation’s corporate image. The Group did not come across any incidents of corruption during the year under review.

Grievance Mechanism

G4 - SO11

The Group did not receive any grievances about impacts on society through its formal grievance mechanism for the year under review and the prior year. Minor social issues at project sites were resolved amicably.

Discretionary ResponsibilityThe philanthropic element of our social responsibility encompasses anonymous or low profile donations and

contributions to good causes. We support numerous good-cause-projects usually focused on improving the quality of life of the rural communities in and around the areas where our operational power plants and project development sites are.

Donation for Aranayake flood affected victims

Training for youthTraining and education uplifts personal development and drives economic growth providing valuable exposure for young future professionals. Resus, having registered at technical institutes as an employer who offers training, provides on-the-job training for employees from the following professional bodies and technical institutes;

Institute of Chartered Accountants of Sri Lanka National Apprentice and Industrial Training Authority (NAITA) Higher National Diploma in Engineering (HNDE)

Community Development

G4 - SO2

As a responsible organisation, we continuously monitor and assess the impact of our business on our local communities and have adapted practices that prevent or mitigate any negative impacts. We focus on creating livelihood development opportunities by providing employment to villagers living in close proximity to our developing power plants and also permanent employment for operational plants.

There were no significant actual and potential negative impacts on local communities from our business operation.


73

CORPORATE GOVERNANCE

Chairman’s StatementThe trust and confidence placed on us by our stakeholders’ bares testimony to our integrity and sustained value creation, which in turn reflects our adherence to high standards of governance. Our approach to governance has been based on the belief that high quality governance is essential to the creation of long-term shareholder value and must be pursued resolutely.

The Company has in place a well-structured governance framework, which exceeds the requirements mandated by law. Our corporate culture is based on an organizational environment where sound governance practices have become a way of life in the daily operations of our Group. Policies, procedures and processes are key devices through which governance standards and values are cascaded down to ensure compliance across the Group. The Board is also supported by robust and independent audit and compliance functions that provide effective oversight over the governance process.

The level of compliance with the Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Securities and Exchange Commission of Sri Lanka in 2013 (the Code) and the disclosure requirements and continuing listing rules of the Colombo Stock Exchange are described in the Report below.

As required in the Code, I hereby confirm that, I am not aware of any material violations of any of the provisions of the Code of Business Conduct and Ethics by any Director or any member of the Corporate Management of Resus Energy PLC.

H A S MadanayakeChairman

Colombo, Sri Lanka 15th May 2017


74

Corporate Governance Framework

G4 - 34, 38, 39, 41

The corporate governance framework at Resus Energy PLC is built on the core principles of accountability and transparency, which are essential for the creation, enhancement and maintenance of a sustainable business model. Thus, the Group has in place a well-structured corporate governance framework, which is integral in creating sustainable shareholder value. The Group has also established its own set of internal benchmarks, processes and structures in meeting accepted best practices in governance, which have lent credence to Resus’s continuous and consistent value creation for its stakeholders.

The Company operates with an Integrated Governance framework with due considerations given to Corporate Governance Best Practice issued jointly by the Institute of

Chartered Accountants of Sri Lanka (CA Sri Lanka) and the Securities and Exchange Commission of Sri Lanka (SEC) and also continuing listing rules of the Colombo Stock Exchange.

The following sections describe in detail:• The components of the Resus Corporate Governance System• Resus’ level of compliance with the above Code comprising

the following seven sections A – Directors B – Directors’ remuneration C – Relations with Shareholders D – Accountability and Audit E – Institutional Investors F – Other Investors G – Sustainability Reporting• The monitoring and review mechanisms in place to ensure

strict compliance to the Group’s Governance policy in order to gain assurance of its effectiveness

Governance Structure

CORPORATE GOVERNANCE CONTD.

Internal Regulations

Internal Governance StructureExternal Regulations

Code of Best Practice on Corporate Governance issued jointly by SEC and CA Sri Lanka

Corporate Governance rules published by the CSE

Companies Act No. 7 of 2007

Sri Lanka Accounting Standards (LKAS and SLFRS)

GRI Guidelines on Sustainability

Independent Audit

Internal Audit

Articles of Association

Environmental Management System

Project Management Manual

Code of Business Ethics

Internal Control System

Enterprise Risk Management Framework

HR Policies

Shareholders

Board of Directors

Audit Committee

Remuneration Committee

Related Party Transactions Review

Committee

Managing Director

Environmental ManagementFinance

Human Resources

Project Management Operations


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SEC and CA Sri Lanka Code Reference No

Corporate Governance Principle

Level of Compliance

A. DirectorsA.1 The Board The Company should be headed by a Board, which should direct, lead and control the Company.

All Directors except the Managing Director serve the Board in Non-Executive capacity. The Board consists of professionals in the fields of Engineering, Legal, Accounting, Finance, Investment Banking and Management. All Directors possess the skills, experience and knowledge with a greater sense of integrity and independent judgment. The Board gives leadership in setting the strategic direction and establishing sound internal control framework for the successful accomplishment of business goals.

A.1.1 Frequency of Board Meetings

Adoption status : Adopted

The Board generally meets on a quarterly basis, but more frequently whenever it is necessary.

Accordingly, four Board Meetings are scheduled annually to determine the Company’s strategic direction, review the Company’s operational and financial performances and to provide insight.

Ad-hoc meetings are also scheduled to discuss and review specific matters which require the attention of the Board between scheduled Board meetings.

Apart from taking decisions at Board meetings, the Board also takes decisions via circular resolutions which are required to be signed by all the Directors.

The attendance at Board meetings held in the financial year is set out on page 77.A.1.2 Responsibilities

of the BoardAdoption status : Adopted

The Board of Directors is responsible to the shareholders for creating sustainable shareholder value and all concerned stakeholder interests are safeguarded in business decisions.

The Board adopted the following responsibilities; formulation, implementation and monitoring the business strategy placing effective systems to secure the integrity of information, internal controls, business continuity and risk management compliance with laws, regulations and ethical standards all stakeholder interests are considered in corporate decisions

The Board has delegated some of its functions to Sub-Committees, while retaining final decision rights pertaining to matters under the purview of the Committees. The composition and the functions of these Sub–Committees are discussed in detail under the relevant sections of this Report.


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Level of Compliance

A.1.3 Compliance with laws and access to independent professional advice


The Board collectively and the Directors individually act in accordance with the laws of the country of operation which are applicable to the business enterprise. The Board of Directors ensures that procedures and processes are in place to ensure that the Company complies with all applicable laws and regulations.

A procedure has been established for Directors to seek independent professional advice from external parties when necessary at the expense of the Company. There were instances during the financial year under review that Board members sought such advice which were attended to by the Company.

A.1.4 Board Secretary Adoption status : Adopted

The Directors have access to the advice and services of the Board Secretary. The Board Secretary ensures that Board procedures, relevant statutory obligations and other applicable rules and regulations are complied with.

The Board Secretary had provided the Board with support and advice relating to Corporate Governance matters, Board procedures, and applicable rules and regulations during the financial year. The Board Secretary ensures that the Board members are provided with timely and accurate information to fulfill their duties.

The appointment and removal of the Board Secretary is a decision taken by the Board as a whole.

A.1.5 Independent judgment


The Directors exercise independent judgment in all decisions pertaining to strategy, performance, resource allocation and standards of business conduct.

Non-Executive Directors are responsible for bringing independent and objective judgment, and scrutinizing the recommendations/proposals made by the corporate management led by the Managing Director on issues of strategy, performance, resource utilization and business conduct.



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Level of Compliance

A.1.6 Dedication of adequate time and effort by the Board and Board Committees


The members of the Board dedicate adequate time and effort to fulfill their duties and responsibilities as Directors of the Company. In addition to attending Board meetings, they have attended Sub-Committee meetings and have also contributed to decision making through circular resolutions where necessary. The Board Sub-Committees include;

- Audit Committee- Remuneration Committee- Related Party Transactions Review Committee

The number of meetings of the Board, Board appointed Sub-Committees and individual attendance by members is shown below;

Name of Director Directorship status

Board Audit Committee

Remuneration Committee

Related Party Transactions

Review Committee

Total Noof meetings

05 04 02 04

Mr H A SMadanayake

Chairman 04/05 - 02/02 01/04

Mr G A KNanayakkara

MD 05/05 04/04 02/02 03/04

Mr C VKulatilaka

NED 04/05 - - -

Mr I SSomaratne

NED 05/05 04/04 - 04/04

Mr U GMadanayake

NED 01/05 - - -

Mr C D Coomasaru (appointed w.e.f 01/11/2016)

Alternate Director to Mr. U G Madanayake

01/05 - - -

*Prof. K A M K Ranasinghe

ID 05/05 04/04 02/02 04/04

**Mr U P Egalahewa PC

ID 04/05 04/04 02/02 04/04


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Level of Compliance

NED – Non-Executive DirectorID – Independent Non-Executive DirectorMD – Managing Director

*Chairman – Audit Committee**Chairman – Remuneration Committee and Related Party Transactions Review Committee

A.1.7 Induction and Training for Directors


The Board recognizes the need for continuous training and expansion of knowledge and undertakes such professional development as they consider necessary in assisting them to carry out their duties as Directors. Directors are therefore encouraged to participate in continuous professional and self-development activities.

In addition, an induction programme is in place for newly appointed Directors to familiarize them with the Company’s business operation and internal control system.

A.2 Chairman and Chief Executive Officer

There should be a clear division of responsibilities between the Chairman and the Chief Executive Officer to ensure a balance of power and authority, in such a way that any individual has no unfettered powers of decisions.

The roles of the Chairman and Managing Director are segregated at Resus. The Chairman’s main responsibility is to lead, direct and manage the Board to ensure that it operates effectively and fully discharges its legal and regulatory responsibilities. The Managing Director is responsible for the day-to-day operations of the Company and the Group.

A.2.1 Separation of the responsibilities of Chairman and Managing Director


A clear division of responsibility is maintained between the Chairman and the Managing Director ensuring that the balance of power and authority is preserved.

The role of the Managing Director is to recommend the strategy to the Board and managing the day-to-day running of the Company. The Board has delegated this responsibility to the Managing Director and he then leads the corporate management team in making and executing operational decisions.

A.3 Chairman’s Role

The Chairman should lead and manage the Board, ensuring that it discharges its legal and regulatory responsibilities effectively and fully, and preserves order, and facilitates the effective discharge of the Board function. (The profile of the Chairman is given on page 18)



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Level of Compliance

A.3.1 Role of the Chairman


The Chairman in running the Board facilitates the effective discharge of Board proceedings. All the Directors are encouraged to participate in decision making and their views are obtained to ensure that the Board functions in an efficient manner which is beneficial to the stakeholders and the Company.

The Chairman of Resus Energy PLC is a Non-Executive Director appointed by the Board. The Chairman’s role encompasses the following;- Ensuring that the new Board members are given appropriate induction- Leading the Board and managing the business of the Board- Approving the agenda for each Board meeting- Ensuring that the Board members receive accurate, timely and clear information to

enable the Board to take sound decisions- Ensuring regular meetings, the minutes of which are accurately recorded and where

appropriate include the individual and collective views of the Directors- Facilitates and encourages discussions among all Directors in the decision making- Representing the views of the Board to the public

A.4 Financial Acumen

The Board should ensure the availability within of those with sufficient financial acumen and knowledge to offer guidance on matters of finance.

The Board is equipped with members having sufficient financial acumen and knowledge.

A.4 Availability of sufficient financial acumen and knowledge


The Board comprises of several members who possess the necessary knowledge and competence to offer guidance on matters pertaining to finance.

The details of Directors’ qualifications and experience have been set out on page 18 to 21.

A.5 Board Balance There should be balance of Executive and Non-Executive Directors so that no individual or small group of individuals can dominate the Board’s decision-making.

All Directors are Non-Executive Directors except the Managing Director. Each of them bring vast experience and the ability to exercise independence and judgment when taking informed decisions.


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Level of Compliance

A.5.1 Presence of Non-Executive Directors


All Directors except for the Managing Director are Non-Executive Directors. The requirement as per the Code has been complied with throughout the financial year.

Executive Directors 01

Non-Executive Directors 06

Total Number of Directors 07

The Board possesses the appropriate balance of skills, experience, independence and knowledge enabling it to discharge its duties and responsibilities effectively.

A.5.2 Independent Directors


Two out of the six Non-Executive Directors are considered independent. The requirement as per the Code has been complied with throughout the financial year.

A.5.3 Criteria to evaluateIndependence of Non-Executive Directors


Please refer Section A.5.5 below.

The Board considers Non-Executive Directors’ independence on an annual basis and concluded for the financial year that each of them continues to be free from any business or other relationship that could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgment.

A.5.4 Signed declarations of independence by the Non- Executive Directors


Independent Directors have submitted written declarations of their independence as required by Schedule J of the Code and section 7.10.2(b) of the Listing Rules.



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Level of Compliance

A.5.5 Determination of independence of the Directors by the Board


The Board annually determines the independence of each Non-Executive Independent Director based on the declarations submitted by them. Circumstances have not arisen for the determination of independence by the Board, beyond the criteria set out in the Code.

The following Directors are considered independent for the financial year under review in terms of 7.10.4 of the Listing Rules of the Colombo Stock Exchange.- Prof. K A M K Ranasinghe- Mr. U P Egalahewa PC

A.5.6 Alternate Directors


Mr. C D Coomasaru was appointed as the Alternate Director to Mr. U G Madanayake on 1st November 2016.

A.5.7 Senior Independent Director

Adoption status : N/A

A senior Independent Director has not been appointed by the Board as the Chairman and the Managing Director are separate persons.

The requirement to appoint a Senior Independent Director does not arise under this Code.

A.5.8 Confidential discussion with the Senior Independent Director


Please refer the comment in A.5.7 above.

A.5.9 Meeting of Non-Executive Directors


The Chairman meets with the Non-Executive Directors without the presence of the Executive Director on a need basis. However, there were no formal specific meetings held with Non-Executive Directors during the year.

A.5.10 Recording of concerns in Board minutes


All concerns raised by the Directors on matters of the Company and wished to be recorded have been duly recorded in the Board minutes in sufficient detail.


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Level of Compliance

A.6 Supply of Information

Management should provide time bound information in a form and of quality appropriate to enable the Board to discharge its duties.

Financial and non-financial information are analysed and presented to the Board to make informed and accurate decisions.

A.6.1 Management’s obligationto provide appropriate and timely information


The Board was provided with appropriate and timely information by the management by way of Board papers and proposals to discharge its duties. In the event the information volunteered by management is not adequate, the Directors are free to make further inquiries and obtain the necessary information.

Members of the senior mangement team made presentations to Directors on important issues relating to strategy, risk management, new acquisitions and new developments in financial and legal aspects. The Chairman ensured that all Directors were briefed on issues arising at Board meetings. The Directors have free and open contact with the senior management of the Company.

A.6.2 Adequate time for effective Board meetings


The minutes, agenda and connected discussion papers are dispatched to the Directors in advance to facilitate the effective conduct of meetings.

A.7Appointments to the Board

A formal and transparent procedure should be followed for the appointment of new Directors to the Board.

The Board assesses the suitability of the prospective nominees to the Board and approves the persons as “fit and proper” to serve as a member of the Board.

Mr. C D Coomasaru was appointed to the Board as alternate director to Mr. U.G. Madanayake w.e.f 01/11/2016. The profile of Mr. C D Coomasaru is given on page 21.

A.7.1 Appointments to the Board


The Board has not established a Nominations Committee to make recommendations on Board appointments. Hence, appointments to the Board are made collectively and with the consent of all the Directors.



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Level of Compliance

A.7.2 Assessment of Board composition


An assessment is made of the Board composition to ascertain whether the combined knowledge and experience of the Board matches the strategic demands facing the Company when considering new appointments to the Board.

A.7.3 Disclosure of details of new Directors to shareholders


Details of new Directors are disclosed to the shareholders at the time of their appointment by way of public announcements to the Colombo Stock Exchange as well as in the Annual Report, along with a brief resume of the Director which includes;

the nature of his expertise in relevant functional area other Directorships or memberships in Board Sub-Committees whether the Director is considered “Independent”.

A.8 Re-election All Directors should submit themselves for re-election at regular intervals and at least once in every three years, and all Non-Executive Directors should be appointed for a specific term and subject to re-election.

A.8.1 Appointment of Non-Executive Directors


All Directors are subject to re-election as per the Articles of Associaton of the Company.

One half of the Directors including the Executive Director retire by rotation at each Annual General Meeting in conformity with the Articles of Association of the Company.

A.8.2 Election of Directors by the shareholders


A Director appointed during the year by the Board retires at the next Annual General Meeting of the Company and seeks re-appointment by the shareholders.

Mr. G A K Nanayakkara, Prof. K A M K Ranasinghe and Mr. U P Egalahewa PC will retire by rotation at the Annual General Meeting under the Articles of Association of the Company, and they have offered themselves for re-election with the unanimous support of the Board.

In addition, a Director who has reached 70 years of age vacates office at the conclusion of the Annual General Meeting commencing next after he attains the age of 70 years or if he is re-appointed as a Director after attaining the age of 70 years at the Annual General Meeting following that re-appointment.


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Level of Compliance

A.9 Appraisal of Board Performance

The Board should periodically appraise its own performance against the pre set targets in order to ensure that the Board responsibilities are satisfactorily discharged.

A.9.1 Appraisal of Board Performance


The Board carries out an evaluation of its performance in the discharge of its key responsibilities. Each member of the Board and Board Sub-Committees carried out a self assessment of his own effectiveness as an individual as well as effectiveness of the Board as a team.

A.9.2 Annual self- evaluation of the Board and its Committees

Please refer the comment for A.9.1

A.9.3 Disclosure of the method of Appraisal of Board and Board Sub-Committees

Please refer the comment for A.9.1

A.10 Disclosure of Information in respect of Directors

Details in respect of each Director should be disclosed in the Annual Report for the benefit of the shareholders.

A.10.1 Disclosure of information in respect of Directors


The biographical details of the Directors including their qualifications, nature of expertise in relevant functional areas, memberships in Board Sub-Committees and other directorships are given on page 18 to 21. Directors’ attendance at Board and Board Sub-Committee meetings are given on page 77, and Directors’ interest in contracts with the Company are disclosed on page 133 to 134 of this Report.

The Board seats held by each Director as at 31st March 2017 is given on ‘Board of Directors’ section on page 18 to 21 and ‘Group Structure’ on page 8.



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Level of Compliance

A.11 Appraisal of the Chief Executive Officer

The Board of Directors should at least annually assess the performance of the Chief Executive Officer.

A.11.1 Target/Goals for the Managing Director


At the commencement of each financial year, the Board in consultation with the Managing Director sets financial and non-financial goals based on the short, medium and long term objectives of the Company.

A.11.2 Evaluation ofthe performanceof the ManagingDirector


The annual appraisal of the Managing Director is carried out by the Board at pre-agreedperformance targets at the end of each financial year.

B. Directors’ RemunerationB.1Remuneration Procedure

The Company should have a formal and transparent procedure for developing policy on executive remuneration and fixing the remuneration packages of individual Directors. No Director should be involved in deciding his/her remuneration in order to avoid the self-review threat.

B.1.1 Remuneration Committee


The Remuneration Committee makes recommendations to the Board on remuneration policy for the Executive Director and the corporate management that is consistent with the objectives of the Company.

The Committee determines and agrees with the Board the broad policy framework for the remuneration of the Managing Director. The Managing Director participates at meetings when deciding the remuneration of the corporate management in order to recruit, retain and motivate the corporate management team.


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Level of Compliance

B.1.2

B.1.3

Compositionof theRemunerationCommittee


The Remuneration Committee consists of two Independent Non-Executive Directorsand a Non-Executive Director, and the following Directors served on the RemunerationCommittee during the financial year under review.

Mr U P Egalahewa PC – ChairmanProf. K A M K RanasingheMr H A S Madanayake

The Chairman of the Committee is an Independent Non-Executive Director appointed by the Board.


The names of the members of the Remuneration Committee are indicated on page 115.

A Board approved Terms of Reference of the Committee and a Remuneration Policy for the Board of Directors are in place.

The Remuneration Committee Report is given on page 115.

B.1.4 Remunerationof the Non-ExecutiveDirectors


In terms of the Articles of Association of the Company, the Board of Directors as a whole determines the fees payable to Non-Executive Directors.

The Independent Non-Executive Directors receive a fee for being a Director of the Board and an additional fee for being a member of a Committee. They do not receive any performance related/incentive payments.

B.1.5 Consultationof the Chairmanand access toprofessionaladvice


The Committee consults the Chairman on proposals relating to the remuneration of the Executive Director and has access to professional advice in discharging their duties.



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Level of Compliance

B.2 Level and make-up of Remuneration

The level of remuneration of both Executive and Non-Executive Directors should be sufficient to attract and retain the Directors needed to run the Company successfully. A proportion of Executive Directors’ remuneration should be structured to link rewards to the corporate and individual performance.

B.2.1 Level andmake-up of theremuneration ofthe ManagingDirector

Adoption status : Adopted The Board makes assessments on the fact that the remuneration of Executive and the Non-Executive Directors reflects the market expectations and is sufficient enough to attract and retain the quality of Directors needed to run the Company.

The remuneration package of the Managing Director is structured to link rewards tocorporate and individual performance, ensuring there is strong alignment between the short-term and long-term interests of the Company.

B.2.2 Comparisonof remunerationwith othercompanies


The Committee ensures that remuneration of executives at each level of management is competitive and in line with their performance. Surveys are conducted as and when necessary to ensure that the remuneration is on par with those of competitive companies.

B.2.3 Comparisonof remunerationwith othercompanies in theGroup


It also takes into consideration data concerning executive pay among the related group companies when determining annual salary increases.

B.2.4 Performancerelated paymentsto the ManagingDirector


Performance based incentives have been determined to ensure that the total earnings of the Executive Director is aligned with the achievement of objectives and budgets of the Company.

B.2.5 Executive share options


There are no share options that have been offered to the Executive Director and senior management.

B.2.6 Deciding the Executive Directors’ Remuneration


In deciding the remuneration of the Managing Director, the Committee takes note of the provisions set out in Schedule E of the Code.


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Level of Compliance

B.2.7 Early termination of Directors


Not applicable to the Board except for the Managing Director who is an employee of the Company and his terms of employment is governed by the employment contract.

B.2.8 Early termination not included in the initial contract


Please refer comment in B.2.7 above.

B.2.9 Remuneration of Non-Executive Directors


Please refer B.1.4 above.

B.3 Disclosure of Remuneration

The Company should disclose the Remuneration Policy and the details of Remuneration of the Board as a whole.

B.3.1 Disclosure of Remuneration


Remuneration policy is disclosed in Remuneration Committee Report on page 115 of the Annual Report.

The total remuneration paid to the Directors is disclosed in note 30.1 to the Financial Statements.

C. Relations with ShareholdersC.1 Constructive use of the Annual General Meetingand Conduct of General Meetings

The Board should use the Annual General Meeting to communicate with shareholders and encourage their active participation.

C.1.1 Use of proxy votes


The Company records and counts all proxy votes lodged on each resolution and the percentage of votes for and against on each resolution.

C.1.2 Separate resolution for all separate issues


The Company proposes a separate resolution for each item of business at the Annual General Meeting giving shareholders the opportunity to vote on each issue separately.



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Level of Compliance

C.1.3 Availability of all Board Sub-Committee Chairmen at the Annual General Meeting


The Chairpersons of the Audit Committee and Remuneration Committee were present at the 2015/16 Annual General Meeting to answer questions raised by shareholders if so requested by the Chairman of the Board.

C.1.4 Adequate notice of the Annual General Meeting


The Notice of the Annual General Meeting and the relevant documents are published and dispatched to the shareholders 15 working days prior to the meeting as required by Section 135(1) of the Companies Act No. 7 of 2007.

C.1.5 Procedures of voting at General Meetings


The procedure governing voting at the Annual General Meeting is circulated with the Notice of Meeting.

C.2Communication with shareholders

The Board should implement effective communication with shareholders.

C.2.1 Channel to reach allshareholders of the Company


The Company disseminates information pertaining to the performance of the Company through the publication of the Interim Financial Statements and the Annual Report in a timely manner. Information is provided to the shareholders prior to the Annual General Meeting to give them an opportunity to raise any issues relating to business of Resus, either verbally or in writing prior to the Annual General Meeting.

Immediate announcements are also made to the Colombo Stock Exchange on any information which is considered price sensitive.

The Company Secretary could be contacted in relation to any shareholder matter.

C.2.2 Policy and methodology for communication with shareholders


The Company will focus on open communication and fair disclosure, with emphasis on the integrity, timeliness and relevance of the information provided. The Company will ensure information is communicated accurately and in such a way as to avoid the creation or continuation of a false market.


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Level of Compliance

C.2.3 Implementation of the policy and methodology for communication with shareholders


The Company adopts a two way communication policy with shareholders. At the Annual General Meeting, the Company openly welcomes any suggestions from the shareholders and shareholders may elect to receive the Annual Report in printed form. The Board of Directors is prepared to provide comprehensive explanations for queries of shareholders.

C.2.4C.2.6

Contact person in relation to shareholders’ matters


Shareholders may, at any time, direct questions, request for publicly available information and provide comments and suggestions to Directors or Management of the Company.Such questions, requests and comments should be addressed to the Company Secretary.

C.2.5 Process to make allDirectors aware of major issues and concerns of shareholders


The Company Secretary shall maintain a record of all correspondence received and will deliver as soon as practicable such correspondence to the Board or individual Director/s as applicable.

The Board or individual Director/s, as applicable, will generate an appropriate response to all validly received shareholder correspondence and will direct the Company Secretary to send the response to the particular shareholder.

C.2.7 The process of responding to shareholder matters


Please refer the comment for C.2.5 above.

C.3 Major and Material Transactions

Directors should disclose to shareholders all proposed material transactions which would materially alter the net asset position of the Company, if entered into.

C.3.1 Major transactions


The Directors ensure that any transaction that would materially affect the net asset base of the Company or Group is communicated to the shareholders and required approvals are obtained in accordance with the Statutes.



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Level of Compliance

D. Accountability and AuditD.1 Financial Reporting

The Board should present a balanced and understandable assessment of the Company’s financial position, performance and prospects.

D.1.1 Statutory and Regulatory Reporting


Resus Energy PLC has reported a true and fair view of its financial position and performance for the year ended 31st March 2017 and at the end of each quarter of 2016/17 financial year.

The Board ensures that the quarterly and annual Financial Statements of the Company and Group are prepared and published in compliance with the requirements of the Companies Act No. 7 of 2007, Sri Lanka Accounting Standards (LKASs and SLFRSs) and the Rules of the Colombo Stock Exchange.

D.1.2 Directors’ Report in the Annual Report


The “Annual Report of the Board of Directors” which is given on page 128 to 132 covers all areas of this Section.

D.1.3 Statement of Directors’ and Auditors’ responsibility for the Financial Statements


The declarations required to be made by the Board is given in the Annual Report of the Board of Directors.

“Statement of Directors’ Responsibilities in relation to Annual Financial Statements” in preparation of the Financial Statements is given on page 135 of this Report while the “Independent Auditors’ Report” on page 136 states the Auditors’ Responsibility for the Financial Statements. The “Directors’ Statement on Internal Control” is given on page 112.

D.1.4 Management Discussions and Analysis


A Management Discussion and Analysis is contained in the “Managing Director’s Review” on page 14 to 17 and Capitals Reports on page 35 to 53 and Our Business Operation on page 54 to 59 and Impact Management Reports on page 60 to 72.

D.1.5 Declaration by the Board that the business as a Going Concern


The declaration by the Board that the Company is a Going Concern is given in the “Annual Report of the Board of Directors” on page 128 to 132.


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Level of Compliance

D.1.6 Summoning an Extra Ordinary General Meeting (EGM) to notify serious loss of capital


Likelihood of such occurrence is remote. However, should the situation arise, an EGM will be called for and shareholders will be notified.

D.1.7 Related party transactions


The Directors have instituted an effective and comprehensive system of Internal Controls for identifying, recording and disclosure of related party transactions.

Steps have been taken by the Board to avoid any conflict of interest that may arise, in transacting with related parties. Further, the Board ensures that no related party benefits from favourable treatment. The pricing applicable to such transactions is based on the assessment of risk and pricing model of the Company and is comparable with that what is applied to transactions between the Company and its unrelated parties.

Related Party Transactions Review Committee was established by the Board w.e.f 1st January 2016 in accordance with the guidelines of the Code of Best Practices on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka with the following Board members;

Mr. U P Egalahewa PC (Independent Non-Executive Director) – ChairmanProf. K A M K Ranasinghe (Independent Non-Executive Director)Mr. G A K Nanayakkara – Managing Director Mr. I S Somaratne – (Non-Executive Director)

Related Party Transactions Review policy and procedures are discussed in the Related Party Transactions Review Committee report on page 116 to 117.

All related party transactions as defined in Sri Lanka Accounting Standard-24 (LKAS 24) on “Related Party Transactions” are disclosed in note 30 to the Financial Statements on page 191 to 193.



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Level of Compliance

D.2 Internal Control

The Board should have a sound system of internal controls to safeguard shareholders’ investments and Company’s assets.

D.2.1 Annual evaluation of the risks facing the Company and the effectiveness of the system of internal controls


The Board is responsible for establishing a sound framework of risk management and internal control and monitoring its effectiveness on a continuous basis. Through such an effective framework, Resus manages business risks and ensures that the financial information on which business decisions are made and published is reliable, andalso ensures that the Company’s assets are safeguarded against unauthorised use or disposition.

The Board has appointed a three-member Audit Committee comprising of two Independent Non-Executive Directors. The Audit Committee on quarterly basis reviews the Risk Register of the Company and the Group in the context of likelihood and their impact to the Group along with the effectiveness of the system of internal controls to address them to a satisfactory level.

D.2.2 Internal audit function


The internal auditors under the direction of the Audit Committee are tasked with reviewing the adequacy and the effectiveness of the internal controls of the Group. Internal audit function is outsourced to a firm of Chartered Accountants and is generally carried out annually.

D.2.3 Review of the process and effectiveness of risk management and internal controls by the Audit Committee


The Audit Committee monitors, reviews and evaluates the effectiveness of the risk management and internal control system including the internal controls over financial reporting.

The internal auditors review the adequacy and effectiveness of the Internal control system and report their findings to the Audit Committee.

In the financial year under review, the Board of Directors was satisfied with the effectiveness of the system of internal controls of the Company. Please refer Directors’ Statement on Internal Control on page 112 and Audit Committee Report on page 113.


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Level of Compliance

D.2.4 Responsibilities of Directors in maintaining a sound system of internal control


Please refer Directors’ Statement on Internal Control on page 112.

D.3 Audit Committee

The Board should have a formal and transparent arrangement in selecting and applying the accounting policies, financial reporting and internal control principles and maintaining an appropriate relationship with the Company’s External Auditors.

D.3.1 Composition of the Audit Committee


The following Directors served on the Audit Committee during 2016/17. Prof. K A M K Ranasinghe – Chairman (Independent Non-Executive Director) Mr. U P Egalahewa PC - (Independent Non-Executive Director) Mr. I S Somaratne - Non-Executive Director

The said Committee met four (04) times during the year.

The Board Secretary functions as the Secretary to the Audit Committee.

The Managing Director, Head of Finance, Senior Project Managers, and the External and Internal Auditors attend meetings on invitation.

D.3.2 Reveiw of Objectivity of the External Auditor


The Audit Committee monitors and reviews the External Auditors’ independence, objectivity and the effectiveness of the audit process taking into account relevant professional and regulatory requirements.

The Committee sets out the policy for the engagement of the External Auditors to provide non-audit services, taking into account:(a) Relevant regulations with regard to the provision of non-audit services;(b) The External Auditors’ skills and experience for providing the particular non-audit

service;(c) The nature of non-audit services, the related fee levels individually and in aggregate

relative to the audit firm.

The Audit Committee has the primary responsibility for making recommendations on the appointment, re-appointment or removal of the External Auditor in-line with professional standards and regulatory requirements.



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Level of Compliance

D.3.3 Terms of Reference of the Audit Committee


The Terms of Reference of the Audit Committee has been approved by the Board. Duties of the Committee encompasses:- Recommending Financial Statements to the Board for approval- Company’s compliance with applicable regulations- Assess the processes to ensure internal controls are adequate, especially in relation to

financial reporting- Assess the Company’s ability to continue as a Going Concern

The Audit Committee monitors and reviews the effectiveness and specific requirements of Internal Audit function.

The Audit Committee is authorised to obtain external professional advice and to invite outsiders with relevant experience to attend if necessary. The Committee also has full access to information in order to investigate into matters relating to any matter within its terms of reference.

D.3.4 Disclosures of the Audit Committee


The names of the members of the Audit Committee are given in the Audit Committee Report on page 113 to 114. The attendance of the members of the Audit Committee is set out in the same report.

The External Auditor has provided a Confirmation of Independence in compliance with the “Guidelines for Appointment of Auditors of Listed Companies” issued by SEC.

D.4 Code of BusinessConduct and Ethics

The Company should develop a Code of Business Conduct and Ethics for Directors and members of the senior management team.


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Level of Compliance

D.4.1 Code of Business Conduct and Ethics


The Company has adopted a Code of Business Conduct and Ethics and the Directors are committed to the Code and the principles contained therein.

A set of guidelines for ethical behaviour has also been compiled to assist employees to act responsibly and to make the correct decisions in their day to day work. The Code of Conduct explains the principles for dealing with business associates, general partners, colleagues and the community in which the Company operates.

The Corporate Governance Report sets out the manner and extent to which the Company has complied with the principles and provisions of the Code.

The Board is not aware of any material violations of any of the provisions of the Code of Business Conduct and Ethics by any Director or any corporate management member of the Company.

D.4.2 Affirmation by the Chairman that there is no violation of the Code of Conduct and Ethics


Please refer Chairman’s Statement on Corporate Governance on page 73 for details.

D.5 Corporate Governance Disclosures

The Company should disclose the extent of adoption of Best Practices in Corporate Governance.

D.5.1 Disclosure of Corporate Governance


This requirement is met through the presentation of this report.



97



Level of Compliance

E. Institutional InvestorsE.1 Shareholders voting

Institutional shareholders are required to make considered use of their votes and encouraged to ensure their voting intentions are translated into practice.

E.1.1 Institutional shareholders


The Company is committed to maintain good communications with investors.The Chairman conducts a structured dialogue with the shareholders based on the mutual understanding of objectives and ensures that the views of the shareholders are communicated to the Board as a whole.

The Annual General Meeting is used to have an effective dialogue with the shareholders on matters which are relevant and concern to the general membership.

The Managing Director has regular discussions with key institutional shareholders to share highlights of the Company’s performance and also with the view to obtaining constructive feedback. The feedback obtained from institutional shareholders is communicated to the entire Board by the Managing Director.

E.2 Evaluation of Corporate Governance initiatives


Institutional investors are encouraged to give due weight to all relevant factors drawn to their attention when evaluating the governance arrangements particularly in relation to Board structure and composition.

F. Other InvestorsF.1 Investing/ Divesting decision

F.1 Individual shareholders


Individual shareholders are encouraged to carry out adequate analysis and seek the independent advice prior to make investing or divesting directly in shares of the Company.

F.2 Invidividual shareholders voting


All shareholders are encouraged to participate at meetings of the Company and a Form of Proxy accompanies each Notice providing shareholders who are unable to attend such meeting the opportunity to cast their vote.


98



Level of Compliance

G. Sustainability ReportingG.1 Principles of Sustainability Reporting

Please refer Capitals Reports on 35 to 53, Impact Management Reports on page 60 to 72 and GRI Index on page 207 to 213.

G.1.1 Economic sustainability


Please refer “Financial Capital” on page 35 to 41 and “Economic Impact Management” on page 60 to 64

G.1.2 The Environment Adoption status : Adopted

Please refer “Environmental Capital” on page 42 and “Environmental Impact Management” on page 65 to 71

G.1.3 Labour practice Adoption status : Adopted

Please refer “Human Capital” on page 47 to 52

G.1.4 Society Adoption status : Adopted

Please refer “Social and Relationship Capital” on page 43 to 46 and “Social Impact Management” on page 72.

G.1.5 Product and Service responsibility


Please refer “GRI Index” on page 206 to 212.

G.1.6 Stakeholder identification, engagement and effective communication


Please refer “Stakeholder Engagement” on page 25 to 34.

G.1.7 Sustainable reporting and disclosure


Please refer “GRI Index” on page 207 to 213.

G A K Nanayakkara H A S MadanayakeManaging Director Chairman




99

Compliance with Section 7 - Continuing Listing Rules issued by the Colombo Stock Exchange (CSE)

CSE Rule Number and Caption

Description Status of Compliance Section Reference in the Annual Report

7.1 Dividend Payment

7.1.aThe Entity shall, immediately upon authorizing a dividend distribution, make an announcement to the Exchange

√

Annual Report of the Board of Directors

7.1.fThe Entity shall forward to the Exchange a certified copy of the certificate of solvency issued by a firm of auditors as soon as the same is issued and in any event prior to dispatching the dividend payment

√Annual Report of the Board of Directors

7.4 Interim Financial Statements

7.4.a (i)A Listed Entity shall give to the Exchange for public release, an Interim Financial Statement prepared on a quarterly basis, as soon as the figures have been approved by the Board of Directors of the Entity and in any event not later than forty five (45) days from the end of the first, second and third quarters and two (2) months from the end of the fourth quarter

√ Financial Calendar

7.4.bA Listed Entity shall ensure that the Interim Financial Statements fulfill the following requirements;

(i) comply with the Sri Lanka Accounting Standard (LKAS) 34 - Interim Financial Reporting and include group and company results separately in the case of a Holding Company

(ii) include the additional notes and ratios as set out in Appendix 7B to the Rules

(iii) be signed by two Directors

(iv) state that the Interim Financial Statements are not audited

√


100



7.5 Circulation of Annual Report

7.5.aA Listed Entity shall ensure that the Annual Report is issued to the Entity’s shareholders and given to the Exchange within a period not exceeding five(05) months from the close of the financial year of the Listed Entity. The Audited Financial Statements shall be published in accordance with the Sri Lanka Accounting Standards

√

7.6 Contents ofAnnual Report

A Listed Entity must include in its Annual Report and accounts, inter alia;

i) Names of persons who during the financial year were Directors of the Entity

ii) Principal activities of the Entity and its subsidiaries during the year and any changes therein

iii) The names and the number of shares held by the 20 largest holders of voting and non-voting shares and the percentage of such shares held

iv) The Public Holding percentage

v) A statement of each Director’s holding and Chief Executive Officer’s holding in shares of the Entity at the beginning and end of each financial year

vi) Information pertaining to material foreseeable risk factors of the Entity

vii) Details of material issues pertaining to employees and industrial relations of the Entity

viii) Extents, locations, valuations and the number of buildings of the Entity’s land holdings and investment properties

ix) Number of shares representing the Entity’s stated capital

x) A distribution schedule of the number of holders in each class of equity securities, and the percentage of their total holdings in different categories

√

√

√

√

√

√

√

√

√

√

Board of Directors

Annual Report of theBoard of Directors

Share Information

Share Information

Share Information

Enterprise RiskManagement

Corporate Governance,Human Capital

Notes to the FinancialStatements (note 4.3),Our Business Operation

Notes to the FinancialStatements, ShareInformation

Share Information



101



xi) The following ratios and market price information:

Dividend per share Dividend pay out Net asset value per share Market value per share- highest and lowest values recorded during

the financial year- value as at the end of financial year

xii) Significant changes in the Entity’s or its subsidiaries’ fixed assets and the market value of land, if the value differs substantially from the book value

xiii) If during the year, the Entity has raised funds either through a public issue, Rights Issue, and private placement;

a statement as to the manner in which the proceeds of such issue has been utilized;

b if any shares or debentures have been issued, the number, class and consideration received and the reason for the issue; and,

c any material change in the use of funds raised through an issue of Securities

xv) Disclosures pertaining to Corporate Governance practices in terms of Rules 7.10.3, 7.10.5 (c) and 7.10.6 (c)

xvi) Related Party transactions exceeding 10% of the Equity or 5% of the total assets of the Entity as per Audited Financial Statements, whichever is lower. Details of investments in a Related Party and/or amounts due from a Related Party to be set out separately

√

√

N/A

√

√

Financial Highlights,Five Year Summary,Financial Capital, ShareInformation

Notes to the FinancialStatements (note 4.3)

Corporate Governance

Notes to the FinancialStatements (note 30.1)


102



The details shall include, as a minimum;i The date of the transactionii The name of the Related Partyiii The relationship between the Entity and the

Related Partyiv The amount of the transaction and terms of the

transactionv The rationale for entering into the transaction

(This section was repealed on 1st January 2016 and the Code of Best Practices on Related Party Transactions are applicable w.e.f 1st January 2016)

Compliance with Section 7.10 of the Listing Rules on Corporate Governance issued by the Colombo Stock Exchange

CSE Rule No. Applicable Rule Requirement Status of compliance Section Reference in the Annual Report

Board of Directors

7.10.1 Non-Executive Directors (NEDs)

Two or at least one-third of the total number of Directors should be NEDs

√Six NEDs out of total of Seven Directors


7.10.2(a) Independent Directors (IDs)

Two or one-third of NEDs (whichever is higher) should be independent

√Two IDs out of Six NEDs Corporate Governance

7.10.2(b) Declaration of Independence

Each Non-Executive Director should submit a declaration of independence / non-independence in the prescribed format

√NEDs have submitted the declaration in the prescribed format


7.10.3(a) Disclosures relating to Directors

Names of Independent Directors should be disclosed in the Annual Report

√Corporate Governance

7.10.3(b) Disclosures relating to Directors

The basis for determining the independence of NEDs, if criteria for independence is not met

√The Board has determined that criteria for independence is met for IDs




103


7.10.3(c) Disclosures relating to Directors

A brief resume of each Director should be included in the Annual Report, including his area of expertise

√Board of Directors

7.10.3(d) Disclosures relating to Directors

Upon appointment of a new Director a brief resume of the Director should be submitted to the Exchange

√CSE Announcements dated 02/11/2016 on change in Directorates


Remuneration Committee7.10.5(a) Composition The Committee shall comprise of a

minimum of two Independent Directors or of Non–Executive Directors, a majority of whom shall be independent

The Chairman of the Committee shall be a Non-Executive Director

√The Remuneration Committee consists of three NEDs of which two are independent.

The Chairman of the Committee is an Independent Non- Executive Director


Report of the Remuneration Committee

7.10.5(b) Functions The Committee shall recommend the remuneration payable to the Executive Directors and Chief Executive Officer or equivalent role

√ Report of the Remuneration Committee

7.10.5(c) Disclosure in the Annual Report

The Annual Report should set out the names of the members of the Committee, a statement of Remuneration Policy and the aggregate remuneration paid to Executive and Non-Executive Directors

√Report of the Remuneration Committee


104


Audit Committee

7.10.6(a) Composition The Committee shall comprise of a minimum of two Independent Directors or of Non–Executive Directors, a majority of whom shall be independent

The Chairman of the Committee shall be a Non-Executive Director

Unless otherwise determine by the Committee, the CEO and the CFO shall attend meetings

Chairman or one member of the Committee should be a member of a recognized professional accounting body

√The Audit Committee consists of three NEDs of which two are independent

The Chairman of the Committee is an Independent Non- Executive Director

The Managing Director and the Head of Finance attend Audit Committee meetings by invitation

One Committee member is a member of The Chartered Institute of Management Accountants, UK


Report of the Audit Committee



105


7.10.6(b) Functions - Overseeing the preparation, presentation and adequacy of disclosures in the Financial Statements in accordance with the LKASs and SLFRSs

- Overseeing compliance with financial reporting related regulations and requirements

- Overseeing the processes to ensure that internal controls and risk management are adequate

- Assessing the independence and performance of the external Auditors

- Recommending to the Board the appointment, re-appointment and removal of the external Auditors and approving their remuneration and terms of engagement

√The terms of reference of the Audit Committee adopted by the Board covers the areas outlined



7.10.6(c) Disclosure in the Annual Report

The names of the members of the Audit Committee

The basis of determination of the independence of Auditors

A report of the Audit Committee setting out the manner of compliance with their functions

√ Corporate Governance



106

Compliance with Section 9 of CSE Listing Rules and the Code of Best Practice on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka w.e.f 1st January 2016

Rule No. Applicable Rule Status of compliance

Section Reference in the Annual Report

9.1 Shareholder Approval Required;The Listed Entity shall obtain shareholder approval by way of a Special Resolution for the following Related Party Transactions:

9.1.1 In the event of non-recurrent transactions;

9.1.1 (a) Any non-recurrent Related Party Transaction or when aggregated with other non-recurrent transactions entered into with the same Related Party during the same financial year, of a value equal to, or more than 1/3 of the Total Assets of the Entity as per the latest Audited Financial Statements of the Entity

None

9.1.2 In the event of recurrent transactions;

9.1.2 (a) Any recurrent Related Party Transaction or when aggregated with other recurrent transactions entered into with the same Related Party during the same financial year, of a value equal to, or more than 1/3 of the gross revenue (or equivalent term for revenue in the Income Statement) and in the case of group entity consolidated group revenue of the Entity as per the latest Audited Financial Statements of the Entity

None

9.2 Related Party Transactions Review Committee9.2.1 Except for transactions set out in Rule 9.5 (exempted related party

transactions), all other Related Party Transactions should be reviewed by the “Related Party Transactions Review Committee” as required in terms of the provisions set out in Appendix 9A of these Rules, either prior to the transaction being entered into or, if the transaction is expressed to be conditional on such review, prior to the completion of the transaction.

√ Report of the Related Party Transactions Review Committee

9.2.2 The Committee should comprise a combination of non-executive directors and independent non-executive directors. The composition of the Committee may also include executive directors, at the option of the Listed Entity. One independent non-executive director shall be appointed as Chairman of the Committee.




107



9.2.3 In a situation where both the parent company and the subsidiary are Listed Entities, the Related Party Transactions Review Committeeof the parent company may be permitted to function as the Related Party Transactions Review Committee of the subsidiary. However, if the parent company is not a Listed Entity, then the Related Party Transactions Review Committee of the parent company is not permitted to act as the Related Party Transactions Review Committee of the subsidiary. The subsidiary shall have a separate Related Party Transactions Review Committee.

√Resus Energy PLC is the parent company and the Related Party TransactionsReview Committee acts as the Committee for its unlisted subsidiaries

9.2.4 The Committee shall meet at least once a calendar quarter. The Committee shall ensure that the minutes of all meetings are properly documented and communicated to the Board of Directors.



9.2.5 Directors of the Committee should ensure that they have, or have access to, enough knowledge or expertise to assess all aspects of proposed Related Party Transactions, and where necessary, they should obtain appropriate professional and expert advice from an appropriately qualified person.


9.2.6 Where necessary, the Committee shall request the Board of Directors to approve the Related Party Transactions, which are under review by the Committee. In such instances, the approval of the Board of Directors should be obtained prior to entering in to the relevant Related Party Transaction.


9.2.7 If a director of the Listed Entity has a material personal interest in a matter being considered at a directors’ meeting to approve a Related Party Transaction as required in Rule 9.2.6 above, such director shall not:(a) be present while the matter is being considered at the meeting, and;(b) vote on the matter.



108



9.3 Disclosures9.3.1 Immediate Disclosures9.3.1 (a) and (b)

(i) A Listed Entity shall make an immediate announcement to the Exchange of any non-recurrent Related Party Transaction or when aggregated with other non-recurrent transactions entered into with the same Related Party during the same financial year, with a value exceeding 10% of the Equity or 5% of the Total Assets whichever is lower, of the Entity as per the latest Audited Financial Statements

(ii) Listed Entity shall disclose subsequent non-recurrent transactions which exceed 5% of the Equity of the Entity, entered into with the same Related Party during the financial year

None

9.3.2 Disclosures in the Annual Report9.3.2 (a) In the case of non-recurrent Related Party Transactions, if aggregate value of

the non-recurrent Related Party Transactions exceeds 10% of the Equity or 5% of the Total Assets, whichever is lower, of the Listed Entity as per the latest Audited Financial Statements, the following information must be presented in the Annual Report:- Name of the Related Party- Relationship- Value of the Related Party Transactions entered into during the financial

year- Value of Related Party Transactions as a % of Equity and as a % of Total

Assets- Terms and Conditions of the Related Party Transactions- The rationale for entering into the transactions

√ Notes to the Financial Statements (note 30.2)



109



9.3.2 (b) In the case of recurrent Related Party Transactions, if the aggregate value of the recurrent Related Party Transactions exceeds 10% of the gross revenue/income (or equivalent term in the Income Statement and in the case of group entity, the consolidated revenue) as per the latest Audited Financial Statements, the Listed Entity must disclose the aggregate value of recurrent Related Party Transactions entered into during the financial year in its Annual Report with the following information;- Name of the Related Party- Relationship- Nature of the transaction- Aggregate value of Related Party Transactions entered into during the

financial year- Aggregate value of Related Party Transactions as a % of Net Revenue/

Income- Terms and Conditions of the Related Party Transactions

√ Notes to the Financial Statements (note 30.2)

9.3.2 (c) Annual Report shall contain a report by the Related Party Transactions Review Committee, setting out the following:- Names of the Directors comprising the Committee- A statement to the effect that the Committee has reviewed the Related

Party Transactions during the financial year and has communicated the comments/observations to the Board of Directors

- The policies and procedures adopted by the Committee for reviewing the Related Party Transactions

- The number of times the Committee has met during the Financial Year


9.3.2 (d) A declaration by the Board of Directors in the Annual Report as an affirmative statement of the compliance with these Rules pertaining to Related Party Transactions or a negative statement in the event the Entity has not entered into any Related Party Transaction/s.

√ Annual Report of the Board of Directors

9.4 Acquisition and Disposal of assets from/to Related Parties9.4.1 Except for transactions set out in Rule 9.5 (exempted Related Party

Transactions), a Listed Entity shall ensure that neither the Listed Entity nor any of its subsidiaries, acquires a substantial asset from, or disposes of a substantial asset to, any Related Party of the Entity without obtaining the approval of the shareholders of the Entity by way of a Special Resolution. An asset is substantial if its value or the value of the consideration relating to such asset exceeds 1/3 of the Total Assets of the Entity as per the latest Audited Financial Statements

N/A


110



However, this Rule 9.4.1 does not apply to:- a transaction between the Listed Entity and a wholly owned subsidiary- a transaction between wholly owned subsidiaries of the Listed Entity- a takeover offer made by the Listed Entity in accordance with Takeovers

and Mergers Code 1995 (as amended)- any transaction entered into by the Listed Entity with a Bank as principal,

on arm’s length terms and in the ordinary course of its banking business

N/A

9.4.2 In the event a transaction requires shareholder approval as set out in Rule 9.4.1 above, such approval shall be obtained either prior to the transaction being entered into or, if the transaction is expressed to be conditional on such approval, prior to the completion of the transaction.

N/A

9.4.4 The members of the Related Party Transactions Review Committee should obtain ‘competent independent advice’ from independent professional experts with regard to the value of the substantial assets of the Related Party Transaction under consideration. A person who is in the same group of the Listed Entity or who has a significant interest in or financial connection with the Listed Entity or the relevant Related Party shall not be eligible to give such advice.

N/A

9.4.5 The competent independent advice obtained in terms of Rule 9.4.4 above should be circulated with the notice of meeting to obtain the shareholder approval as set out in Rule 9.4.1 above.

N/A

N/A - Not Applicable



111

Disclosures required by the Companies Act No. 7 of 2007

Section reference in the Companies Act No. 7 of 2007

Disclosure Requirement Reference in the Annual Report

168 (1) (a) The nature of the business of the Group and the Company together with any change thereof during the accounting period

Notes to the financial statements – page 143 to 200

168 (1) (b) Signed Financial Statements of the Group and the Company for the accounting period completed

Financial Statements and notes to the financial statements – page 137 to 200

168 (1) (c) Auditors’ Report on Financial Statements of the Group and the Company

Independent Auditors’ Report – page 136

168 (1) (d) Accounting Policies and any changes therein Notes to the financial statements – page 143 to 200

168 (1) (e) Particulars of the entries made in the Interests Register during the accounting period

Annual Report of the Board of Directors – page 130

168 (1) (f) Remuneration and other benefits paid to Directors of the Company during the accounting period

Notes to the financial statements – page 191

168 (1) (g) Corporate Donations made by the Company and its subsidiaries during the accounting period


168 (1) (h) Information on the Directorate of the Company and its subsidiaries during and at the end of the accounting period

Group structure – page 8

168 (1) (i) Amounts paid/payable to the External Auditors as audit fees and fees for other services rendered during the accounting period


168 (1) (j) Auditors’ relationship or any interest with the Company and its subsidiaries

Annual Report of the Board of Directors – page 132Audit Committee Report - page 113

168 (1) (k) Acknowledgement of the contents of this Report and signatures on behalf of the Board

Annual Report of the Board of Directors – page 128 to 132


112

DIRECTORS’ STATEMENT ON INTERNAL CONTROLS

RequirementThe ‘Code of Best Practice on Corporate Governance 2013’ (The Code) issued jointly by the Securities and Exchange Commission and the Institute of Chartered Accountants of Sri Lanka recommends that the Board of Directors present a statement on internal controls.

ResponsibilityThe Board of Directors is responsible for the Company’s system of internal controls and for reviewing its design and effectiveness. The Board has delegated this responsibility to the Audit Committee for review and to report any findings and concerns in this regard.

Internal control processThe Audit Committee of Resus Energy PLC adopts a continuous review protocol to ensure the system of internal controls both at Company level and individual subsidiary levels are operating effectively. The Committee obtains quarterly operational compliance certificates signed by each Senior Manager of the respective functional areas and the Managing Director’s confirmation that the system of internal control of the Group functions without major control weaknesses and breakdowns. The Audit Committee carries out annual independent discussions with both external and internal auditors of the Company and reports to the Board of Directors of any material control aspects revealed from such discussions for immediate attention of the Board.

There is an ongoing process in every Audit Committee meeting agenda to review the risk matrix of the Company and the Group to continuously identify, evaluate, and manage risks faced by the Group. The risk register requires the management to identify all risks at Company level and individual subsidiary levels and prioritize risks based on the set rating framework. The Audit Committee reviews the risk rating and obtains explanations from the Managing Director and functional heads regarding any

updates and risk responses. The risk register with the comments of the Audit Committee is tabled at Board meetings and Board discussions are carried out to ensure appropriate procedures are in place to evaluate and manage the identified risks.The Board ensures that the disclosures of risks and mitigation actions provide meaningful, information for facilitating the decision makers about the Company and do not give a misleading impression for their decisions.

Statement of ConfirmationBased on the said processes, the Board of Directors of Resus Energy PLC confirms that the financial reporting system of the Company and the Group has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Financial Statements forexternal purposes has been done in accordance with applicable Accounting Standards and regulatory requirements.

By order of the Board,

Professor Malik Ranasinghe N K L PereraChairman- Audit Committee Head of Finance

G A K Nanayakkara H A S MadanayakeManaging Director Chairman



113

REPORT OF THE AUDIT COMMITTEE

Composition of the CommitteeThe Audit Committee is formally established as a Sub-Committee of the main Board of Resus Energy PLC, and comprises of two Independent Non-Executive Directors (Professor K A M K Ranasinghe and Mr U P Egalahewa PC) and one Non-Executive Director (Mr I S Somaratne) as of the date of this Report. The Chairman of the Audit Committee is an Independent Non- Executive Director.

The names of the Members and their attendance at the Audit Committee meetings are shown in the table below.

Member Capacity No of Meetings Attended

Board Capacity

Professor K A M K Ranasinghe

Chairman 4/4 Independent Non- Executive Director

Mr U P Egalahewa PC

Member 4/4 Independent Non- Executive Director

Mr I S Somaratne Member 4/4 Non-Executive Director

Mr I S Somaratne, who is a member of the Audit Committee is an Associate Member of the Chartered Institute of Management Accountants (CIMA), United Kingdom.

Mr G A K Nanayakkara, Managing Director and Mr N K L Perera, Head of Finance of Resus Energy PLC attended Committee meetings by invitation. The Company Secretary, Nexia Corporate Consultants (Pvt) Limited serves as the Secretary to the Audit Committee.

Other officials were invited to attend whenever required.

The proceedings of the Audit Committee are reported to the Board of Directors.

MeetingsThe Audit Committee held four meetings during the period under review, and the attendance of the members is shown in the above table.

Role of the Audit CommitteeThe Audit Committee is established for the purpose of assisting the Board in fulfilling their responsibilities regarding the integrity of the Financial Statements, risk management, business ethics, internal control, compliance with legal and regulatory requirements, review of External Auditors’ performance and independence and internal audit.

Compliance with Financial ReportingThe Audit Committee discusses the Company’s quarterly and annual Financial Statements prior to publication with the management and the External Auditors, including the extent of compliance with Sri Lanka Accounting Standards (LKASs and SLFRSs), and the adequacy of disclosures required by other applicable laws, rules, objectives and guidelines. The Audit Committee also regularly discusses the operations of the Company and its future prospects with management and is satisfied that all relevant matters have been taken into account in the preparation of the Financial Statements.

The Audit Committee performs the following;

Oversee the preparation, presentation and adequacy of disclosures in the Financial Statements in accordance with the LKASs and SLFRSs Review appropriateness and changes in Accounting Policies Review significant estimates and judgments made by the management Oversee compliance with financial reporting related regulations and requirements Oversee the processes to ensure that internal controls and risk management measures are adequate Assess the independence and performance of the external Auditors Recommend to the Board the appointment, re-appointment and removal of the External Auditors and approving their remuneration and terms of engagement Review the Company’s ability to continue as a Going Concern


114

Internal Audit, Risks and ControlsThe Internal Audit function is carried out by Messrs PricewaterhouseCoopers (Pvt) Limited, a firm of Chartered Accountants. Internal Auditors directly submit their findings to the Audit Committee annually and their reports are made available to External Auditors.

The main focus of the Internal Audit is to provide independent assurance on the overall system of internal controls, business and associated risk management and governance based on internal controls, and compliance with laws and regulations and established policies and procedures of the Group. The Audit Committee monitors and reviews the scope of the Internal Audit plan, the follow-up actions taken by the management on recommendations of Internal Auditors, and the effectiveness of the Internal Audit function.

The Audit Committee also reviews the processes for the identification, evaluation and management of all significant development and operational risks faced by the Group. The Committee reviews the Risk Register on a quarterly basis in order to identify and assess the risks attached to different areas of operation and effectiveness of internal controls. Formal confirmations and assurances are obtained from management regularly regarding the efficiency of the internal control system and risk management system, and compliance with applicable laws and regulations. The Board of Directors and Audit Committee obtain and are guided by technical advice from external consultants as required.

The key risks associated with the business are given in the Enterprise Risk Management Report on page 120 to 126.

Independent External AuditorsErnst & Young were appointed as the External Auditors of the Company and its Subsidiaries. Audit plans and the scope of work and a letter of engagement are formulated in consultation with the Finance Division of the Company.

The Audit Committee is satisfied that the independence of the External Auditors has not been adversely influenced by any event or service that could result in a conflict of interest. Due consideration has been given to the level of audit and non-audit fees received by the External Auditors from Resus Energy PLC and its Subsidiaries.

The Audit Committee meets the External Auditors on an annual basis and reviews their findings.

The performance of the External Auditors has been discussed with the senior management of the Company and the Audit Committee has recommended to the Board that Ernst & Young, Chartered Accountants be re-appointed as External Auditors of Resus Energy PLC for the financial year ending 31st March 2018, subject to approval by the shareholders at the Annual General Meeting.

ConclusionBased on the reports submitted by the External Auditors, the Internal Auditors and the Risk Management system of the Company, the Audit Committee is satisfied with the control environment, and of the implementation of the Group’s accounting policies and operational controls and the financial position of the Group and is confident that the financial position of the Group is secure.

Professor Malik RanasingheChairman-Audit Committee


REPORT OF THE AUDIT COMMITTEE CONTD.


115

REPORT OF THE REMUNERATION COMMITTEE

Composition of the CommitteeThe Remuneration Committee, appointed by the Board of Directors of Resus Energy PLC, consists of two Independent Non-Executive Directors, namely Messrs U P Egalahewa PC (Chairman) and Prof. K A M K Ranasinghe and one Non- Executive Director (Mr H A S Madanayake). The Chairman of the Remuneration Committee is an Independent Non-Executive Director.

There were no new appointments nor resignations from the Committee during the year.

The Committee was established for the purpose of recommending the remuneration of the Executive Directors. The Committee also approves the remuneration of the members of the Senior Management on the recommendations made by the Managing Director.

Committee Meetings and AttendanceThe Committee met twice for the year under review and all members attended all the meetings.

The Managing Director of the Company attends the meetings by invitation to discuss the performance of the senior executives and to make proposals as deemed necessary except where his own remuneration is discussed.

The Company Secretary functions as the Secretary to the Committee.

The Remuneration Committee meetings and members’ attendance are given on page 77.

MinutesThe minutes of meetings of the Remuneration Committee are circulated to all members of the Board.

Remuneration PolicyThe Remuneration policy is to determine appropriate remuneration packages for the Executive Director and the Senior Management with a view to assessing the appropriateness of compensation with market benchmarks.

Role of the CommitteeThe role of the Remuneration Committee is:

To determine and recommend to the Board the Company’s remuneration philosophy and the principles of its remuneration policy, ensuring that these are in line with the business strategy, objectives, values and long-term interests of the Company To make recommendations to the Board on the Company’s framework of executive remuneration and its cost, and to determine on behalf of the Board specific remuneration packages and conditions of employment (including compensation entitlements) for Executive DirectorsTo make recommendations to the Board and monitor the level and structure of remuneration for Senior Management To make recommendations to the Board regarding the content of the Board’s Annual Report to shareholders on Directors’ Remuneration (including the Company’s policy on Executive Director’s remuneration, details of individual remuneration and other terms and conditions)

AdvisersThe Committee is authorised by the Board to seek appropriate professional advice inside and outside the Company as and when it considers this necessary.

Remuneration to DirectorsThe Remuneration paid to Directors during the year under review is indicated in note 30.1 to the Financial Statements.

All Independent Non-Executive Directors receive a fee for serving on the Board and serving on Sub-Committees. They do not receive any performance related incentive payments.

The Company does not have an Employee Share Ownership Plan for Directors and Key Management Personnel (KMPs).

ConclusionThe annual evaluation of the Committee was carried out by the Board during the year and it was concluded that the Committee continues to operate effectively.

U P Egalahewa PCChairman-Remuneration Committee



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REPORT OF THE RELATED PARTY TRANSACTIONS REVIEW COMMITTEE

The Company established the Related Party Transactions Review Committee (RPTRC) on 31st December 2015 as a Board Sub-Committee. RPTRC comprises the following Directors of the Company.

Mr. U P Egalahewa PC - (Independent Non-Executive Director) - ChairmanProfessor K A M K Ranasinghe - (Independent Non-Executive Director)Mr. G A K Nanayakkara - (Managing Director)Mr. I S Somaratne - (Non-Executive Director)

ObjectiveRelated Party Transactions Review Committee was formed to ensure that the Company complies with the requirements of the Code of Best Practices on Related Party Transactions issued by the Securities and Exchange Commission of Sri Lanka with effect from 1st January 2016 which is part of the CSE Listing Rules.

The objective of these related party transaction rules is to ensure that the interests of shareholders as a whole are taken into account when entering into related party transactions by the Company.

The Committee specifies a process to capture related party transactions and to report to the Board of Directors of Resus Energy PLC as per the Code of Best Practices on Related Party Transactions.

Scope of the Committee- The Committee reviews in advance all proposed related party

transactions to ensure they are carried out on an arm’s length basis.

- At each subsequent scheduled meeting of the Committee, the management shall update the Committee as to any proposed material changes in any previously reviewed related party transactions and seek approval of the Committee for such proposed material changes prior to the completion of the transaction.

- The Committee reviews related party transactions based on rules stipulated in the Code (rules 28 – 33 in the appendix to the Code) and the need of special approval from shareholders and disclosure requirements for such transactions.

- The Committee intends to meet as and when a need arises. However, quarterly meetings are scheduled to review related party transactions of the Company. The minutes of all meetings are properly documented and communicated to the Board of Directors.

- The Company Secretary, Nexia Corporate Consultants (Pvt) Limited serves as the Secretary to the RPTRC.

- Directors of the RPTRC ensures that they have, or have access to, enough knowledge or expertise to assess all aspects of proposed related party transactions, and where necessary, they shall obtain appropriate professional and expert advice from an appropriately qualified person.

Role of the Committee- Recommend and develop terms of reference of the RPTRC for

adoption by the Board of Directors of the Company.

- Review of related party transactions as required in terms of the provisions set out in Appendix 9A of CSE Rules, either prior to the transaction being entered into or, if the transaction is expressed to be conditional on such review, prior to the completion of the transaction.

- The Committee shall update the Board of Directors on the related party transactions of the Company on a quarterly basis.

- Where necessary, the Committee shall request the Board of Directors to approve the subject related party transactions. In such instances, the approval of the Board of Directors should be obtained prior to entering into the relevant related party transactions.


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- If a Director has a material personal interest in a matter being considered at a Directors’ meeting to approve a related party transaction, such Director may not be present while the matter is being considered at the meeting or may not vote on the matter.

- Make recommendations to obtain shareholder approval for applicable related party transactions as per the provisions in the Code and Section 9 of CSE Listing Rules. Such approval shall be obtained either prior to the transaction being entered into or, if the transaction is expressed to be conditional on such approval, prior to the completion of the transaction.

- Obtain ‘competent independent advice’ from independent professional experts with regard to the value of the substantial assets of the related party transaction under consideration and circulate the same with the notice of meeting to obtain the shareholder approval.

- Make immediate market disclosures on applicable related party transactions as required by the Listing Rules of CSE.

- Make appropriate disclosures on related party transactions in the Annual Report as required by CSE Listing Rules.

- Any concerning transactions, to be highlighted to the Board

Committee MeetingsFour Committee meetings were held for the year to review related party transactions for the financial year ending 31st March 2017. The Finance Division submitted a comprehensive report on related party transactions to the Committee.

Attendance of the members of the Committee for the said meeting is provided on page 77.

Any concerns of the Committee will be reported to the Board of Directors on a continuous basis.

The Committee meets at least quarterly, to monitor, review and report to the Board on matters pertaining to related party transactions.

ConclusionThe Committee confirms that all applicable rules in the Code of Best Practice on Related Party Transactions and Section 9 of CSE Listing Rules have been complied with by the Group as at the date of this Report.

U P Egalahewa PCChairman-Related Party Transactions Review Committee



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RESPONSIBILITY STATEMENT OF MANAGING DIRECTOR AND HEAD OF FINANCE

Compliance with Laws and RegulationsThe Financial Statements of Resus Energy PLC (the Company) and the Consolidated Financial Statements of the Company and its subsidiaries (the Group) for the year ended 31st March 2017 are prepared and presented in compliance with the requirements of the followings:

Sri Lanka Accounting Standards issued by The Institute of Chartered Accountants of Sri Lanka (SLFRS/LKAS), Companies Act No. 07 of 2007, Listing Rules of the Colombo Stock Exchange, Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and Code of Best Practice on Corporate Governance issued jointly by the Institute of Chartered Accountants of Sri Lanka and the Securities and Exchange Commission of Sri Lanka.

Financial ReportingThe Significant Accounting Policies used in the preparation of the consolidated Financial Statements are appropriate and are consistently applied, except unless otherwise stated in the notes accompanying the Financial Statements. The Significant Accounting Policies and estimates that involved a high degree of judgment and complexity were discussed with the Audit Committee and Company’s External Auditors. There are no departures from the prescribed Accounting Standards in their adoption. Comparative information has been reclassified wherever necessary to comply with the current presentation.

The Board of Directors and the management of the Company accept responsibility for the integrity and objectivity of these Financial Statements. The estimates and judgments relating to the Financial Statements were made on a prudent and reasonable basis, in order that the Financial Statements reflect a true and fair view and the form and substance of transactions reasonably present the Company’s state of affairs.

We confirm that to the best of our knowledge, the Financial Statements, significant Accounting Policies and other financial information included in this Annual Report, fairly present all material aspects regarding the financial position, results of the

operations and the Cash Flows of the Group during the year under review. We also confirm that the Group has adequate resources to continue in operation and have applied the Going Concern basis in preparing these Financial Statements.

System of Internal ControlThe Company has taken proper and sufficient care in installing a system of internal control and accounting records, for safeguarding assets, and for preventing and detecting frauds as well as other irregularities, which are reviewed, evaluated and updated on an ongoing basis. We have evaluated the internal controls and procedures of the Group for the financial period under review and confirm, based on our evaluations that there were no significant deficiencies and material weaknesses in the design or operation of internal controls and frauds that involves management or other employees. The Internal Auditors conduct periodic audits to provide reasonable assurance that the established policies and procedures of the Group were consistently followed. However, there are inherent limitations that should be recognised in weighing the assurances provided by any system of internal control and accounting.

Report of Independent AuditorsThe Financial Statements were audited by Messrs Ernst & Young, Chartered Accountants, the Independent Auditors and their report is given on page 136.

Audit CommitteeThe Audit Committee pre-approves the audit and non-audit services provided by Messrs Ernst & Young. The Audit Committee meets periodically with the Internal Auditors and the Independent Auditors to review the manner in which these Auditors are performing their responsibilities, and to discuss auditing, internal control and financial reporting issues. To ensure complete independence, the Independent Auditors and the Internal Auditors have full and free access to the members of the Audit Committee to discuss any matter of substance.

The Audit Committee Report is given on page 113 to 114.


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ConclusionWe confirm that to the best of our knowledge:

The Group has complied with all applicable laws, regulations and guidelines and there is no material litigation against the Group other than those disclosed in note 28.4 of the Financial Statements. The system of internal control is operating effectively. The Financial Statements reflect in a true and fair manner, the form and substance of transactions, and reasonably present the Company’s state of affairs and have applied the Going Concern basis in preparing these Financial Statements. All taxes, duties, levies and all statutory payments by the Group and all contributions, levies and taxes payable on behalf of and in respect of the employees of the Group as at 31st March 2017 have been paid, or where relevant provided for.

G A K NanayakkaraManaging Director

Kavinda PereraHead of Finance



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ENTERPRISE RISK MANAGEMENT

Overview

G4 - 2

Enterprise risk management (ERM) plays a vital role in our corporate agenda. The Board and the management of Resus Energy PLC continuously face the challenge of striking a balance between risk and opportunity to optimize or preserve value creation.

ERM is a process, stimulated by an entity’s Board of Directors, management and other personnel, applied in strategy setting across the enterprise, designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite to provide reasonable assurance regarding the achievement of entity objectives.

At Resus, we seek to create value for all stakeholders by ensuring that Group companies effectively identify and mitigate a range of operational, structural, financial and strategic risks that may otherwise prevent the organisation from meeting its objectives.

Risk management processIn the pursuit of opportunities, we are inevitably subject to various risks. The Board is primarily responsible for ensuring that risks are identified promptly and appropriately managed across the Group. The Board has delegated the responsibility for reviewing the effectiveness of the Group’s risk management process to the Audit Committee. A well structured ERM framework has been established under which the risks are being assessed at enterprise level, subsidiary level and business unit process level.

The identified risks in the Risk Register are reviewed by the Audit Committee at the Company level as well as at the Group level. Under the Framework, the risks are prioritized and business units use both preventive and mitigation controls to manage risk exposures within the prescribed tolerance limits. Risks are assessed based on their likelihood of occurrence and the probable impact of the event. Risks are then ranked as very-high,

high, medium and low considering impact and likelihood factors. The impact of the event is assessed by determining the loss or damage it would cause and the extent of the impact. Likelihood of occurrence is assessed on the basis of past experience and the preventive measures in place. The Risk Register is updated quarterly and discussed at each Audit Committee meeting along with the operational compliance statements submitted by the heads of business units.

We have introduced various risk management templates into our project management process to facilitate project managers to adopt risk management protocols at project levels to ensure that projects are completed and delivered within anticipated parameters. An effective communication network has been established to encourage fruitful dialogue and debate among team members in drafting a risk matrix for their respective projects.

The risk management policy of the Group is to respond to risks pro-actively to ensure continued growth within a competitive and uncertain business environment. Accordingly, we operate with an integrated risk management system, while maintaining business flexibility to identify, assess and mitigate significant risks associated with our business.


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Risk Prioritization framework adopted by the Group based on Impact vs. Likelihood analysis

Medium (1, 2, 16)

Low(9, 15)

High(5, 6, 7, 10, 12, 13, 14)

Very High(3, 4, 8, 11)

1 2 3 4

1 2

3 4

LIKE

LIH

OO

D

IMPACT

Audit Comm

ittee Supervision

ERM FRAMEWORK

Inte

rnal

cont

rols

and

Inte

rnal

Aud

it

Risk Management Strategy, Risk Appetite

Board Oversight and Senior Management Involvement

Risk Awareness Culture

Risk Monitoring

Process Level

Activity Level

Entity Level

Risk Assessment

Event Identification

Risk Measurement

Risk Prioritization Risk Management

Like

lihoo

d Hig

hReduce the risk

Avoid the risk

Low

Accept the risk

Transfer the risk

Low High

Impact


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Risks and mitigating activitiesThe principal risks in achieving the Company’s objective of enhancing stakeholder value and safeguarding its assets have been identified and are set out below. The nature and the scope of risks are subject to change and not all of the factors listed below are within the control of the Company.

Description of Risk and Exposure Affected Segment Mitigating Actions Risk Rating2016/17 2015/16

1. Business RiskLow returns due to inaccurate projections on business parameters. This includes deviation from expected rainfall patterns, design discrepancies and inaccurate assessments of hydrological properties for hydropower plants

All Stakeholders Obtain expert knowledge on establishing business parameters

Utilize in-house capabilities to perform cross verifications on estimates and assumptions

Medium Medium

2. Default RiskRenegotiation of Power Purchase Agreements before the termination dates

Default of settlements by Ceylon Electricity Board (CEB)

Delays in settlements by CEB

Financial Capital Standardised Power Purchase Agreements (SPPAs) entered into with CEB for all power plants

Carry out necessary and appropriate representative efforts

Medium Medium

3. Growth RiskSlow growth due to lack of viable new projects

Government’s plan not to execute SPPAs or limit the private developers’ participation in development of non-conventional renewable energy projects

All StakeholdersStrengthen business leads, generation and reference network

Exert lobbying efforts both at Company and industry level

Explore other countries for viable projects that match risk-return profile

Very High Very High

4. Adverse movements in tariffDownward revisions of non-conventional renewable energy tariff adversely impacting on returns and profitability of existing projects (owing to adverse volatility of avoided-cost tariff) and viability of future projects (owing to adverse volatility of cost- based-and-technology-specific tariff)

Financial Capital Participate in representative and lobbying efforts through industry groups and associations

Very High Very High

ENTERPRISE RISK MANAGEMENT CONTD.


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5. Inflation RiskSpare-parts price increases leading to high Operation and Maintenance cost of hydropower plants

Capital expenditure overruns of new projects under development

Financial Capital Use of appropriate financial and hedging strategies

Use of top quality electromechanical equipment is expected to keep the spare-parts requirement at low levels.

High Low

6. Interest Rate RiskAdverse impact on profitability due to high interest cost resulting from increase in interest rates

Financial Capital Use of appropriate financial and hedging strategies

Maintain an appropriate combination of fixed and floating rate borrowings

Negotiate for concessionary interest rates using Group strength and Resus Energy PLC’s strength as a listed Company

High High

7. Exchange Rate RiskLosses due to unfavourable movements in exchange rates

Financial Capital Effective management of exchange rate exposure using financial risk management tools

High High

8. Regulatory and Compliance RiskIntroduction of new regulations affecting the business adversely and complexity in complying with regulatory requirements, which includes unexpected tax burdens, abolishing of tax and import duty concessions and enforce infeasible environmental regulations.

All Stakeholders Monitor compliance with regulatory requirements

Participate in representative efforts against regulations that could have a negative impact on business/industry

Very High Very High

9. Credit RiskImpact on liquidity due to delays/non payments by CEB

Financial Capital Protection through legally enforceable agreements

Low Low


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10. Risk arising due to Adverse Environmental ConditionsImpact on returns from hydropower plants due to adverse environmental conditions such as droughts, floods etc

Financial Capital Carry out preventive maintenance work to mitigate the plant down-time risk in bad weather conditions

Have a business continuity plan to reduce the plant start-up lag after a disaster

Obtain adequate insurance cover against natural perils

High High

11. Project Development Risk and Crowd-ing Out threatDelays in project development work due to deadlocks leading to loss of revenue.This includes social and political issues that result in abandoning viable projects.

Lack of government support to encourage credible developers and government’s attempt to engage in the sector as a developer (crowding out threat)

All Stakeholders Strengthen project management expertise

Build and maintain good rapport with the project stakeholders

Exert lobbying efforts both at Company and industry level

Very High Very High

12. Funding ConstraintsUnavailability of funding lines at favourable terms

Financial Capital Build and maintain good rapport with banks, financial institutions and funding agencies

Maintenance of a desired mix of financial slack

Search for foreign funding sources

Selecting projects with high internal rate of returns for development to attract investors/ lenders

High High



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13. Human Resource RiskImpact on business competitiveness due to difficulties in recruiting/retaining required talent

Losses from low productivity and low employee engagement as a result of industrial disputes

Human Capital- Employees

Build strong employer brand

Due importance is given to human resource management function

Adoption of best practices in human resource management

Investment in training and development, and mentoring programmes

Policy of competitive remuneration

Adoption of ‘whistleblowing policy’ and ‘open door policy’

High High

14. Project Cost Overrun RiskProject cost exceeding budgets and estimates impacting the project returns

Financial Capital Detailed Planning

Making accurate project cost estimates using expert knowledge

Having tight budgetary controls on development cost

High Medium

15. Operational RiskLosses arising from fraud, human errors, inefficient processes, natural perils and loss of sensitive information

All Stakeholders Conduct periodic internal audit reviews and report to the Audit Committee

Maintain a business continuity plan to ensure disaster preparedness

Low Low


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16. Reputational RiskPotential exposure of the Group to financial losses, litigation and unacceptable corporate behaviour

Loss of reputation arising from corporate behaviour against the interest of the society

Loss of confidence due to the Group not being perceived as a responsible corporate

All Stakeholders Operate within a code of business ethics that requires compliance with laws and regulations by all employees

Projects are developed according to the Environmental Management System of the Group

Environmental sustainability is within corporate DNA of Resus

Engagement in various community related activities, including community development in surrounding areas of project sites

Developing the social and physical infrastructure in rural villages where our projects are developed

Medium Medium



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OUR RESULTS

Interim Financial StatementsThree months ended 30th June 2016 2nd August 2016Six months ended 30th September 2016 1st November 2016Nine months ended 31st December 2016 19th January 2017Twelve months ended 31st March 2017 15th May 2017

Annual Report for the year ended 31st March 201613th Annual General Meeting 29th June 2016

Annual Report for the year ended 31st March 201714th Annual General Meeting 29th June 2017


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ANNUAL REPORT OF THE BOARD OF DIRECTORS

The Board of Directors of Resus Energy PLC takes pleasure in presenting its report combined with the Audited Consolidated Financial Statements for the year ended 31st March 2017.

The details set out herein provide the pertinent information required by the Companies Act No. 7 of 2007 and the Colombo Stock Exchange’s Continuing Listing Requirements and are guided by Recommended Best Practice.

Principal Activities and Review of Business Segment PerformanceThere was no significant change in the nature of business of the Company and its subsidiaries during the year that may have a significant impact on the state of the Company’s affairs. Investing in power generation projects remained the principal activity of Resus Energy PLC and its subsidiaries during the year under review.

The Group portfolio consists of 100% hydropower projects and the strategic intent of the Group’s business now focuses on non-conventional renewable energy projects. Out of three hydropower projects that were under development, the construction work of Gomale Oya and Moragaha Oya hydropower projects were completed. These two projects were commissioned during the current financial period. The Upper Huluganga

project is on track with its pre-development work. The Group acquired the entirety of JB Power (Pvt) Ltd, a company owning the approvals to develop a 700KW small hydropower project in Kegalle District, for a purchase consideration of Rs. 20.3Mn during the beginning of April, 2017. The development work of this project is expected to start within the ensuing year. With expected commissioning of these two projects in the ensuing financial year, our fully-owned operational hydropower portfolio would enhance to 12.5MW.

The Company’s revenue was derived from venture capital activities and Group’s revenue chiefly represents economic benefits derived from selling of electricity by its hydropower plants. Consequent to a partial disposal of shares held in Panasian Power PLC during the year (October 2016), the Company’s stake in Panasian Power PLC reduced to 7.3% from 22.3%. The resultant gain/loss for the Company and the Group from this partial disposal is recorded in the Statement of Profit or Loss. The Associate status of Panasian Power PLC was derecognised to an Available-for-Sale Asset and the fair value loss as at 31st March 2017 is recorded in the Consolidated Statement of Comprehensive Income. The details of operational hydropower projects under their respective companies for the year ended 31st March 2017 are depicted in the table below.

Name of Special Purpose Entity Generation

Capacity

Location River Electricity Units Dispatched

GWh

2016/17 2015/16

Giddawa Hydro Power (Pvt) Ltd 2.0MW Giddawa, Digana, Kandy District Hulu Ganga 4.64 8.71

Upper Agra Oya Hydro Power (Pvt) Ltd 2.6MW Lindula, Talawakelle, Nuwara Eliya District Agra Oya 3.97 8.33

Okanda Power Grid (Pvt) Ltd 2.4MW Maliboda, Deraniyagala, Kegalle District Magal Ganga 6.65 7.20

Gomale Oya Hydro Power (Pvt) Ltd 1.4MW Magala, Maliboda,Kegalle District Gomale Oya 0.75 -

Moragaha Oya (Pvt) Ltd 1.5MW Panvila, Theldeniya, Kandy District Moragaha Oya 0.14 -

Total 9.9MW 16.15 24.24

Segmental information on the Group’s operational performances and assets allocation among different classes of business is given in note 31 to the Financial Statements. Business Segmental performance has been extensively presented and discussed in the Managing Director’s Review on page 14 to 17 and in Financial Capital Report on page 35 to 41 of this Report.

The Directors to the best of their knowledge and belief confirm that neither the Company nor its subsidiaries have been engaged in any activity that contravenes laws and regulations.


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Financial StatementsThe Financial Statements of the Company and the Group are given on page 137 to 200.

Results and Appropriations

For the year ended 31st March Group Company

2017 2016 2017 2016

Rs. Rs. Rs. Rs.

Revenue 240,042,608 393,049,638 30,913,890 81,076,217

Gross Profit 167,217,392 319,603,820 30,913,890 81,076,217

Share of profits of Equity Accounted Investees – Associate 6,140,499 40,150,218 - -

Operating profit/(loss) before interest and tax 79,673,819 275,269,496 (12,155,038) 31,384,585

Net Gain/(Loss) on Sale of Equity Accounted Investees - Associate (19,460,389) 15,944,654 23,506,346 33,658,054

Impairment Charge (39,563,007) - (21,509,828) -

Net Finance cost (105,946,124) (60,121,699) (8,762,163) (5,678,053)

Other operating income/(expenses) 4,016,055 (49,043) 1,762,715 (136,914)

Profit/(Loss) before tax (85,295,701) 231,092,451 (18,920,683) 59,364,586

Provision for tax including deferred tax (3,249,924) (30,775,707) - (3,125,166)

Profit/(Loss) for the Year (88,545,625) 200,316,744 (18,920,683) 56,239,420 Deficit/(Profit) attributable to Non-controlling interests (9,432,969) (139,007) - -

Profit/(Loss) available to Group’s shareholders (79,112,656) 200,455,751 (18,920,683) 56,239,420 Other comprehensive income/(expense) (2,948,491) 10,619,576 (3,320,991) 187,304

Balance brought forward from the previous year 632,646,405 834,845,150 311,072,572 624,041,773

Super Gain Tax paid - (30,130,793) - -

Tax on subsidiary dividends (615,939) (4,350,000) - -

Changes in non-controlling interest - 255,767 - -

Amount available for appropriation 564,839,248 1,002,042,330 292,480,898 680,468,497

Interim dividends paid - - - -

Final dividends declared - - - -

*Capital Reduction - 1,239,882,957 - 1,239,882,957

*Distribution on Share Repurchase - (1,603,433,736) - (1,603,433,736)

Share Repurchase cost - (5,845,146) - (5,845,146)

Balance to be carried forward to the next year 564,839,248 632,646,405 292,480,898 311,072,572

*Shareholders of Resus Energy PLC approved the Capital Reduction and Share Repurchase by way of special resolutions at the EGM held on 14th August 2015.


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Auditors’ ReportThe Auditors’ Report on the Financial Statements is given on page 136.

Accounting PoliciesThe Accounting Policies adopted in the preparation of the Financial Statements are given on page 143 to 162. There were no changes to the Accounting Policies adopted during the year.

Interest Register and Directors’ interests in ContractsDirectors’ interest in contracts or proposed contracts are disclosed on page 133 to 134 and have been disclosed at meetings of the Directors and recorded in the Interest Register as per Section 192 of the Companies Act No. 7 of 2007. The Directors did not have any material interest in any contract of significance to the Group’s business, other than those disclosed on page 133 to 134, “Directors’ Interest in Contracts” of this Report.

During the year, entries made in the Interest Register consisted of Directors’ Interest in Contracts, remuneration paid to the Directors and renewal of Directors’ and Officers’ liability insurance. The Interest Register is available at the registered head office of the Company, in keeping with the requirements of the Section 119(1)(d) of the Companies Act No. 7 of 2007.

Directors of the CompanyNames of the Directors and their profiles including the names of the Directors who held office and resigned during the year have been disclosed on page 18 to 21 of the Annual Report.

Review of Performance of the Board and Board Sub-CommitteesThe review of performance of Board and Board Sub- Committees were carried out during the year by way of a discussion during the Board Meetings.

Board and Board Sub-Committee MeetingsThe number of Board meetings, Audit Committee meetings, Remuneration Committee meetings and Related Party Transactions Review Committee meetings held during the year

ANNUAL REPORT OF THE BOARD OF DIRECTORS CONTD.

and the attendance of Directors at these meetings are given on page 77 of Corporate Governance Report. The Board established a ‘Related Party Transactions Review Committee’ on 31st December 2015.

Directors’ RemunerationThe Directors’ remuneration paid by the Company and the Group is disclosed in note 30.1 to the Financial Statements.

Directors’ Interest in SharesThe Directors’ shareholdings are disclosed on page 206 of this Report.

Corporate GovernanceThe Board is committed to maintain high standards of Corporate Governance, the process by which the Company is directed and managed. The Corporate Governance Report is given on page 73 to 111 of the Annual Report.

Risks and Internal ControlsThe Enterprise Risk Management Report is given on page 120 to 126 of the Annual Report, which includes information pertaining to material foreseeable risks of the Group and the mitigation actions.

The Directors accept the ultimate responsibility for the system of internal control of the Company and the Group. The systems are geared to provide reasonable assurance that the assets of the Group are safeguarded and that all transactions are conducted as relevant, properly authorised and duly recorded. Further details of the internal control system in operation are also contained in the Directors’ Statement on Internal Controls on page 112, Statement of Directors’ Responsibilities in relation to Annual Financial Statements on page 135, Corporate Governance on page 73 to 111, and the Audit Committee Report on page 113 to 114 of the Annual Report.

TaxationThe tax liability of the Company and its subsidiaries has been computed according to the provisions of the Inland Revenue


131

Act No. 10 of 2006 and amendments thereto. The applicable provisions under the Board of Investments (BOI) law have been taken into consideration for taxation of subsidiary companies.

The method of computation of income taxes of the Company and the Group has been depicted in the note 3.4 and 23.1 to the Financial Statements.

Corporate DonationsThe Group and the Company made Rs. 0.84Mn (2016 - Rs. 0.18Mn) and Rs 0.04Mn (2016 – Rs. 0.05Mn) donations during the year respectively.

Property, Plant and EquipmentThe book carrying value of property, plant and equipment as at the reporting date amounted to Rs. 28.94Mn (2016 - Rs. 28.21Mn) and Rs. 1743.29Mn (2016 - Rs. 1,471.2Mn) for the Company and Group respectively. Capital expenditure during the year for the Company and Group amounted to Rs. 13.0Mn (2016 - Rs. 11.5Mn) and Rs. 397.4Mn (2016 - Rs. 272.1Mn) respectively.

Details of property, plant and equipment are given in note 4 to the Financial Statements.

The Company, Resus Energy PLC does not own any land, buildings and investment properties.

The most recent revaluation of the Company’s subsidiaries’ freehold land was carried out by a qualified independent valuer on 31st March 2016, and the carrying value of freehold land was adjusted accordingly. The details of freehold revalued lands as per the valuation report are given in note 4.3 to the Financial Statements and the Directors are of the view that these values reflect the current market values of freehold lands of the Group.

The Directors are of the view that the carrying values of Group’s fixed assets do not substantially differ from their market values and no indications of impairment have been noted as of the date of this Report.

Stated CapitalThe Stated Capital of the Company as at 31st March 2017 was Rs. 300,000,000 consisting of 58,390,263 ordinary shares. There was no change in the stated capital during the year.

ShareholdingsThere were 2,837 registered Ordinary Voting Shareholders as at 31st March 2017 (3,058 – as at 31st March 2016).

The distribution of shareholdings is shown on page 204 to 206 of the Annual Report. This gives information on the top twenty shareholders’ names, number of shares held and the percentage held by each shareholder with the Public holding percentage and the distribution schedule of the number of holders in each class of equity securities and the percentage of their total holding.

Each of Director’s including the Managing Director’s direct and indirect holdings in shares of the Company at the beginning and end of each financial year are given on page 205 to 206 of the Annual Report.

No Employee Share Ownership Plans and Profit Sharing Plans prevailed during the year for the Company and the Group.

Share InformationInformation relating to earnings, dividends, net assets and market value per share is available in “Share Information” on page 204 to 206 and “Financial Highlights” on page 10 of the Annual Report along with information on share trading.

Substantial ShareholdingsThe twenty major shareholders as at 31st March 2017 are given on page 204 of the Annual Report.

The Directors neither paid any interim dividends nor recommended a final dividend for shareholders’ approval at the AGM.


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Environment ProtectionThe Directors confirm that the Company and its subsidiaries have not engaged in any activities, which have caused detriment to the environment. The activities are carried out in accordance with the Group Environmental Management System to preserve the environment.

Statutory PaymentsThe Directors confirm, to the best of their knowledge and belief that all statutory obligations due to the Government and to the Employees have been either duly paid or adequately provided for in the Financial Statements. Details are given on page 42 of Financial Capital report.

Related Party TransactionsThe Directors confirm that Section 9 of the CSE Listing Rules and the Code of Best Practices on Related Party Transactions issued by Securities and Exchange Commission of Sri Lanka pertaining to Related Party Transactions have been complied with by the Company and the Group with effect from 1st January 2016.

Events after the Reporting PeriodCircumstances giving rise to disclosure in the Financial Statements since the Reporting Date have been disclosed in note 27 to the Financial Statements. No circumstances have arisen since the Reporting Date that would require adjustments in the Financial Statements.

Going ConcernThe Board of Directors is satisfied that the Company and its subsidiaries will have adequate resources to continue its operations without any disruption in the foreseeable future. Accordingly, the Directors consider that it is appropriate to prepare Financial Statements on Going Concern basis.

AuditorsThe Financial Statements of the Company and the Group for the year have been audited by Messrs Ernst & Young, Chartered Accountants, who are recommended for re-appointment.

The Audit Fees payable and fees paid to them by the Company for other services rendered for the year under review are as follows;

Audit Fees and Expenses - Rs. 528,652/- (2016 – Rs. 489,493/-)Fees for non-audit services - Rs. 729,740/- (2016 – Rs. 425,463/-)

The Directors have recommended a resolution to be passed at the forthcoming Annual General Meeting for re-appointment of Messrs Ernst & Young as Auditors and authorizing the Directors to fix their remuneration.

The Auditors of the Group have confirmed that they do not have any relationships (other than that of Auditor) with, or interests in, the Company or any of its Subsidiaries other than those disclosed above.

Annual General MeetingThe Annual General Meeting of the Company will be held at the Auditorium of the Development Holdings Private Limited, 3rd Floor, No. 42, Navam Mawatha, Colombo 02 on Thursday, the 29th day of June 2017 at 9.00 a.m. The Notice of the Annual General Meeting appears on page 218 of the Annual Report.

Board of Directors,

H A S Madanayake G A K NanayakkaraChairman Managing Director

Nexia Corporate Consultants (Pvt) LimitedSecretaries




133

DIRECTORS’ INTEREST IN CONTRACTS

Directors’ Interest in Contracts with the Company Related party disclosures as required by the Sri Lanka Accounting Standard-LKAS 24 ‘Related Party Disclosures’ are detailed in note 30 to the Financial Statements. In addition, the Company carries out transactions in the ordinary course of business in an arm’s length basis with the entities where the Chairman or a Director of the Company is the Chairman or a Director of such entity as detailed below.

Company Director Nature of Transaction Amount Rs.

2016/17 2015/16


Mr. G A K NanayakkaraMr. H A S MadanayakeMr. U G Madanayake Mr. C V Kulatilaka Mr. I S Somaratne

Dividend Income - 39,150,000

Funds Received 33,000,000 370,754,191

Funds Transferred (78,754,292) (35,322,377)

Reimbursement of Expenses (7,921,450) (17,071,230)

Proceeds from Share Repurchase - 155,599,632

Conversion of Preference Shares to Ordinary Shares - 145,000,000



Dividend Income 5,543,446 -

Funds Received 22,213,109 135,626,711






Funds Received 88,600,000 213,921,170




Gomale Oya Hydro Power (Pvt) Ltd


Funds Received 80,742,059 60,100,000


Reimbursement of Expenses (8,017,769 ) (4,917,833)

Investment in Subsidiaries - (50,000,000)


134

Company Director Nature of Transaction Amount Rs.

2016/17 2015/16

Ella Dendro Electric (Pvt) Limited


Funds Received 46,310,000 -

Reimbursement of Expenses (422,206) (526,029)

Provision for impairment (14,009,828) -

Upper Huluganga (Pvt) Ltd




Investment in Subsidiaries (66,000,000) -

Moragaha Oya (Pvt) Ltd



Funds Received 40,000,000 -


Investment in Subsidiaries 67,000,000 -

Rawanakanda Hydro Power (Pvt) Ltd

Mr. G A K Nanayakkara Reimbursement of Expenses (168,595) (115,896)

NDB Group Mr. C V Kulatilaka Interest Income from NDB Wealth Money Plus Fund 2,604,738 21,945,299

Preference Share Redemption - (67,500,000)

Preference Share Dividends - (3,870,617)

Interest paid on term loan to NDB Bank PLC* (33,887,297) (18,019,031)

Capital repayments on term loan to NDB Bank PLC* (104,953,264) (32,700,000)

Consultancy fee paid to NDB Investment Bank (293,250) (10,404,918)

Loan Received from NDB Bank PLC* - 445,000,000

*These transactions occurred between NDB Bank PLC and fully-owned subsidiaries of Resus Energy PLC, namely, Giddawa Hydro Power (Pvt) Limited, Upper Agra Oya Hydro Power (Pvt) Limited and Okanda Power Grid (Pvt) Limited.



135

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RELATION TO ANNUAL FINANCIAL STATEMENTS

The following statement which should be read in conjunction with the Auditors’ Statement of their responsibilities, as set out in their report, is made with a view to distinguish the respective responsibilities of the Directors and the Auditors, in relation to the Financial Statements.

The Companies Act No. 7 of 2007 requires that the Directors prepare the Financial Statements for each financial year giving a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and the profit or loss of the Company and the Group for the financial year and present it to the shareholders. These Financial Statements comprise a Statement of Comprehensive Income, which presents a true and fair view of the profit or loss of the Company and the Group for the financial year and a Statement of Financial Position, which presents a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year which complies with the requirements of the Companies Act No. 7 of 2007.

The Directors consider that in preparing the Financial Statements disclosed on page 137 to 200, the Company has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgment and estimates, and that all Accounting Standards (LKASs/SLFRSs) which they consider to be applicable have been followed. The Directors also ensure that the requirements of the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 and Listing Rules of the Colombo Stock Exchange have been followed and complied with.

The Directors have the responsibility for ensuring that the Company keeps accounting records which disclose with reasonable accuracy of the financial position of the Company and which enable them to ensure that the Financial Statements comply with the provisions of the Companies Act No. 7 of 2007.The Directors are required to provide the Auditors with every opportunity to take whatever steps necessary to enable them to form their audit opinion. The responsibility of the Auditors in relation to the Financial Statements appears in the Report of the Independent Auditors on page 136. Messrs Ernst &

Young, Chartered Accountants, the Independent Auditors of the Company has examined the Financial Statements and the related records and information. Their opinion on Financial Statements is given on page 136.

The Board of Directors accepts responsibility for the integrity and objectivity of the Financial Statements presented. The Directors have general responsibility for taking reasonable steps to safeguard the assets of the Company and in this regard to give proper consideration to the establishment of appropriate internal control systems, with a view to preventing and detecting frauds and other irregularities.

The Directors confirm that to the best of their knowledge, all taxes, duties and levies payable by the Company and its subsidiaries and all contributions, levies and taxes payable on behalf of and in respect of the employees of the Company and its subsidiaries and all other known statutory dues as were due and payable by the Company and its subsidiaries as at the reporting date have been paid, or where relevant provided for in the Financial Statements.

The Directors are satisfied that the Company and its subsidiaries have adequate resources to continue in business for the foreseeable future, and have continued to adopt the Going Concern basis in preparing Financial Statements for the Company and the Group.

By order of the Board,

Nexia Corporate Consultants (Pvt) LimitedSecretaries



136

INDEPENDENT AUDITORS’ REPORT

TO THE SHAREHOLDERS OF RESUS ENERGY PLCReport on the Financial StatementsWe have audited the accompanying financial statements of Resus Energy PLC, (“the Company”), and the consolidated financial statements of the Company and its Subsidiaries (“Group”), which comprise the statement of financial position as at 31st March 2017, and the statement of profit or loss and other comprehensive income, statement of changes in equity and, cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information. (set out on pages 137 to 200)

Board’s Responsibility for the Financial StatementsThe Board of Directors (“Board”) is responsible for the preparation of these financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as Board determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies

used and the reasonableness of accounting estimates made by Board, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31st March 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

Report on Other Legal and Regulatory RequirementsAs required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

a) The basis of opinion, scope and limitations of the audit are as stated above.

b) In our opinion:- we have obtained all the information and explanations that

were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company,

- the financial statements of the Company give a true and fair view of its financial position as at 31st March 2017, and of its financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards, and

- the financial statements of the Company and the Group comply with the requirements of sections 151 and 153 of the Companies Act No. 07 of 2007.

Colombo, Sri Lanka

15th May 2017


137

Group CompanyAs at 31st March 2017 2016 2017 2016 Note Rs. Rs. Rs. Rs.

ASSETSNon-Current AssetsProperty, Plant and Equipment 4 1,743,124,558 1,471,196,681 28,944,866 28,212,063Intangible Assets 5 126,752,566 126,752,566 - -Investments in Subsidiaries 6 - - 784,967,767 659,467,767Investments in Associates 7 - 365,144,265 - 313,265,529Financial Investments - Available-for-Sale 8 109,500,000 - 109,500,000 -Deferred Tax Assets 16 1,992,860 988,791 - - 1,981,369,984 1,964,082,303 923,412,633 1,000,945,359 Current Assets Inventories 9 5,095,893 6,355,928 - -Trade and Other Receivables 10 79,692,214 70,009,926 860,158,361 531,697,077Income Tax Recoverable 18,421,846 8,585,138 8,584,042 8,584,042Cash and Cash Equivalents 11 6,772,739 48,415,135 4,892,449 20,606,153 109,982,692 133,366,127 873,634,852 560,887,272Total Assets 2,091,352,676 2,097,448,430 1,797,047,485 1,561,832,631

EQUITY AND LIABILITIESEquityStated Capital 12 300,000,000 300,000,000 300,000,000 300,000,000Other Components of Equity 3,299,461 18,169,390 (3,650,000) -Retained Earnings 564,839,248 632,646,405 292,480,898 311,072,572Equity Attributable to Equity Holders of the Parent 868,138,709 950,815,795 588,830,898 611,072,572Non-Controlling Interest (3,587,767) 5,845,202 - -Total Equity 864,550,942 956,660,997 588,830,898 611,072,572

Non-Current LiabilitiesNon-Current Financial Liabilities 13 84,742,102 86,863,640 - - Interest Bearing Loans and Borrowings 14 859,799,835 858,398,542 - -Employee Benefit Obligations 15 9,758,925 9,874,380 7,858,942 8,077,425Deferred Tax Liabilities 16 9,122,402 6,146,157 - - 963,423,264 961,282,719 7,858,942 8,077,425

Current LiabilitiesTrade and Other Payables 17 36,858,890 35,721,844 1,109,467,718 942,682,634Income Tax Liabilities 2,544,209 7,158,688 - -Interest Bearing Loans and Borrowings 14 213,581,782 124,634,707 85,000,000 -Bank Overdrafts 11 10,393,589 11,989,475 5,889,927 - 263,378,470 179,504,714 1,200,357,645 942,682,634Total Equity and Liabilities 2,091,352,676 2,097,448,430 1,797,047,485 1,561,832,631

I certify that the financial statements are in compliance with the requirements of the Companies Act No. 07 of 2007.

N K L PereraHead of Finance

The Board of Directors is responsible for the preparation and presentation of these financial statements.Signed for and on behalf of the board by:

H A S Madanayake G A K NanayakkaraChairman Managing DirectorThe Accounting Policies and Notes as set out in page 143 to 200 form an integral part of these financial statements.15th May 2017Colombo, Sri Lanka

STATEMENT OF FINANCIAL POSITION


138

STATEMENT OF PROFIT OR LOSS

Group CompanyYear ended 31st March 2017 2016 2017 2016 Note Rs. Rs. Rs. Rs.

Revenue 18 240,042,608 393,049,638 30,913,890 81,076,217Cost of Electricity Generated (72,825,216) (73,445,818) - -Gross Profit 167,217,392 319,603,820 30,913,890 81,076,217Other Operating Income/(Expense) 19 4,016,055 (49,043) 1,762,715 (136,914)Administrative Expenses (97,700,127) (84,435,499) (44,831,643) (49,554,718)Share of Profits of Equity Accounted Investee - Associate 7 6,140,499 40,150,218 - -Results from Operating Activities 79,673,819 275,269,496 (12,155,038) 31,384,585

Net Gain/(Loss) on Sale of Equity Accounted Investee - Associate 7.2 (19,460,389) 15,944,654 23,506,346 33,658,054Impairment Charge 20 (39,563,007) - (21,509,828) -Finance Income 21.2 768,307 892,637 108,444 106,900Finance Cost 21.1 (106,714,431) (61,014,336) (8,870,607) (5,784,953)Profit/(Loss) Before Tax 22 (85,295,701) 231,092,451 (18,920,683) 59,364,586Tax Expense 23 (3,249,924) (30,775,707) - (3,125,166)Profit/(Loss) for the year (88,545,625) 200,316,744 (18,920,683) 56,239,420

Attributable to: Equity Holders of the Parent (79,112,656) 200,455,751 (18,920,683) 56,239,420 Non-Controlling Interest (9,432,969) (139,007) - - (88,545,625) 200,316,744 (18,920,683) 56,239,420

Earnings/(Loss) Per Share - Basic/Diluted 24 (1.35) 2.24 (0.32) 0.63

Figures in brackets indicate deductions.The Accounting Policies and Notes as set out in page 143 to 200 form an integral part of these financial statements.


139

STATEMENT OF COMPREHENSIVE INCOME


Profit/(Loss) for the year (88,545,625) 200,316,744 (18,920,683) 56,239,420 Other Comprehensive Income Other Comprehensive Income not to be reclassified to Profit or Loss in subsequent periodsRe-measurement Gain/(Loss) on Defined Benefit Plans 15.2 748,399 1,032,480 329,009 187,304Deferred Tax Effect on Actuarial Gain/(Loss) 16.2 (46,890) (100,892)Revaluation of Lands - 9,653,121 - -Share of Other Comprehensive Income of Equity Accounted Investees 7 - 34,867 - -Other Comprehensive Income to be reclassified to Profit or Loss in subsequent periods - - - -Loss on Fair Valuation of Financial Investments - Available-for-Sale (3,650,000) - (3,650,000) -Other Comprehensive Income for the year, net of tax (2,948,491) 10,619,576 (3,320,991) 187,304

Total Comprehensive Income for the year, net of tax (91,494,116) 210,936,320 (22,241,674) 56,426,724

Attributable to: Equity Holders of the Parent (82,061,147) 209,950,327 (22,241,674) 56,426,724 Non-Controlling Interest (9,432,969) 985,993 - - (91,494,116) 210,936,320 (22,241,674) 56,426,724



140

STATEMENT OF CHANGES IN EQUITY

Attributable to Equity Holders of the Parent Other Components of Equity Group Stated Revaluation Available Retained Total Non - Total Capital Reserve -for-Sale Earnings Controlling Equity Reserve Interest Note Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 01st April 2015 1,539,882,957 12,256,245 - 834,845,150 2,386,984,352 2,500,000 2,389,484,352

Super Gain Tax Paid 23.4 - - - (30,130,793) (30,130,793) - (30,130,793)Restated Balance as at 01st April 2015 1,539,882,957 12,256,245 - 804,714,357 2,356,853,559 2,500,000 2,359,353,559Profit/(Loss) for the year - - - 200,455,751 200,455,751 (139,007) 200,316,744Revaluation of Lands - 8,528,121 - - 8,528,121 1,125,000 9,653,121Other Comprehensive Income/(Expense) - - - 966,455 966,455 - 966,455Total Comprehensive Income/(Expense) for the year - 8,528,121 - 201,422,206 209,950,327 985,993 210,936,320Capital Reduction 12.1.1 (1,239,882,957) - - 1,239,882,957 - - -Share Repurchase 12.1.2 - - - (1,603,433,736) (1,603,433,736) - (1,603,433,736)Cost incurred on Capital Reduction and Share Repurchase - - - (5,845,146) (5,845,146) - (5,845,146)Changes in Non-Controlling Interest - (2,614,976) - 255,767 (2,359,209) 2,359,209 -Tax on Dividends paid by Subsidiaries - - - (4,350,000) (4,350,000) - (4,350,000)Balance as at 31st March 2016 300,000,000 18,169,390 - 632,646,405 950,815,795 5,845,202 956,660,997Profit/(Loss) for the year - - - (79,112,656) (79,112,656) (9,432,969) (88,545,625)Other Comprehensive Income/(Expense) - - (3,650,000) 701,509 (2,948,491) - (2,948,491)Total Comprehensive Income/(Expense) for the year - - (3,650,000) (78,411,147) (82,061,147) (9,432,969) (91,494,116)Land Revaluation Reserve Transfer to Retained Earnings - (11,219,929) - 11,219,929 - - -Tax on Dividends paid by Subsidiaries - - - (615,939) (615,939) - (615,939)Balance as at 31st March 2017 300,000,000 6,949,461 (3,650,000) 564,839,248 868,138,709 (3,587,767) 864,550,942

Company Stated Available-for-Sale Retained Total Capital Reserve Earnings Equity Note Rs. Rs. Rs. Rs.

Balance 1st April 2015 1,539,882,957 - 624,041,773 2,163,924,730Profit for the Year - - 56,239,420 56,239,420Other Comprehensive Income/(Expense) - - 187,304 187,304Total Comprehensive Income/(Expense) for the year - - 56,426,724 56,426,724Capital Reduction 12.1.1 (1,239,882,957) - 1,239,882,957 -Share Repurchase 12.1.2 - - (1,603,433,736) (1,603,433,736)Cost incurred on Capital Reduction and Share Repurchase - - (5,845,146) (5,845,146)Balance as at 31st March 2016 300,000,000 - 311,072,572 611,072,572Profit/(Loss) for the Year - - (18,920,683) (18,920,683)Other Comprehensive Income/(Expense) - (3,650,000) 329,009 (3,320,991)Total Comprehensive Income/(Expense) for the year - (3,650,000) (18,591,674) (22,241,674)Balance as at 31st March 2017 300,000,000 (3,650,000) 292,480,898 588,830,898



141

STATEMENT OF CASH FLOWS


Cash Flows From/(Used in) Operating Activities Profit/(Loss) for the period (85,295,701) 231,092,451 (18,920,683) 59,364,586 Adjustments for; Depreciation 4.1 38,885,832 34,291,284 8,828,478 7,714,743Impairment Charge 20 39,563,007 - 21,509,828 -Provision for Defined Benefit Plan - Gratuity 15 2,342,154 2,112,482 1,819,736 1,562,089Finance Cost 21.1 106,714,431 61,014,336 8,870,607 5,784,953Loss/(Profit) on Sale of Fixed Assets 19 (4,016,055) 49,043 (1,762,715) 136,914Share of Profit from Equity Accounted Investees - Associate 7.1 (6,140,499) (40,150,218) - -Loss/(Profit) on Disposal of Associate 7.2 19,460,389 (15,944,654) (23,506,346) (33,658,054)Dividend Income from Equity Accounted Investees - Associate 7.1 - - (15,052,500) (59,130,916)Finance Income 21.2 (768,307) (892,637) (108,444) (106,900)Operating Profit/(Loss) before Working Capital Changes 110,745,251 271,572,087 (18,322,039) (18,332,585) Decrease / ( Increase ) in Inventories 1,260,035 40,581 - -Decrease / ( Increase ) in Trade and Other Receivables (10,248,390) 32,227,796 (342,471,112) 315,339,352Decrease / ( Increase ) in Financial Assets - (2,019,898) - (772,977)(Decrease) / Increase in Financial Liabilities (2,121,538) (65,926,992) - (66,224,613)(Decrease) / Increase in Trade and Other Payables (1,545,373) (58,048,534) 166,785,084 216,007,229Cash Generated/(Used) from Operations 98,089,985 177,845,040 (194,008,067) 446,016,406 Finance Cost Paid 14.1 (108,955,277) (54,497,583) (8,870,607) (5,784,953)Gratuity Paid 15 (1,709,210) (205,345) (1,709,210) (205,345)Income Tax Paid (15,775,825) (50,363,019) - (1,635,199)Net Cash Flows From/(Used in) Operating Activities (28,350,327) 72,779,093 (204,587,884) 438,390,909

Cash Flows From/(Used in) Investing Activities Acquisition of Property, Plant and Equipment 4 (377,606,630) (272,103,113) (13,048,523) (11,525,753)Net Proceeds from Sale of Property, Plant and Equipment 51,640,704 5,310,983 5,249,957 5,220,983Dividend Received from Equity Accounted Investees - Associate 7.1 15,052,500 59,130,916 15,052,500 59,130,916Finance Income Received 21.2 768,307 892,637 108,444 106,900Proceeds from Disposal of Associate 7.2 223,621,875 131,992,525 223,621,875 131,992,525Investments in Subsidiaries 6 - - (133,000,000) (49,999,990)Net Cash Flows From/(Used in) Investing Activities (86,523,244) (74,776,052) 97,984,253 134,925,581


142


Cash Flows From/(Used in) Financing ActivitiesProceeds from Interest Bearing Loans and Borrowings 14.1 314,983,000 1,046,661,496 185,000,000 -Consideration Distributed for Share Repurchase - (1,603,433,736) - (1,603,433,736)Capital Repayments - Interest Bearing Loans and Borrowings 14.1 (232,990,000) (70,145,000) (100,000,000) -Payments for Transaction Cost-Share Repurchase - (5,845,146) - (5,845,146)Dividends Paid - Preference Shares (6,550,000) (13,100,000) - -Tax on Dividends Paid by Subsidiaries (615,939) (4,350,000) - -Proceeds from Share Repurchase by Subsidiaries - - - 367,629,081Net Cash Flows From/(Used in) Financing Activities 74,827,061 (650,212,386) 85,000,000 (1,241,649,801)

Net Increase/(Decrease) in Cash and Cash Equivalents (40,046,510) (652,209,345) (21,603,631) (668,333,311)Cash and Cash Equivalents at the beginning of the Year 36,425,660 688,635,005 20,606,153 688,939,464

Cash and Cash Equivalents at the end of the Year (3,620,850) 36,425,660 (997,478) 20,606,153

Analysis of Cash and Cash EquivalentsCash in Hand and at Bank 6,772,739 48,415,135 4,892,449 20,606,153Bank Overdrafts (10,393,589) (11,989,475) (5,889,927) -Cash and Cash Equivalents at the End for the Purpose of Statement of Cash Flow 11 (3,620,850) 36,425,660 (997,478) 20,606,153


STATEMENT OF CASH FLOWS CONTD.


143

NOTES TO THE FINANCIAL STATEMENTS

1. Reporting Entity1.1 Corporate InformationResus Energy PLC (the ‘Company’) is a public limited liability company listed on the Colombo Stock Exchange incorporated and domiciled in Sri Lanka. The Company and its subsidiaries have the registered office at No. 250/1, Torrington Avenue, Colombo 07. The ordinary shares of the Company are being traded on the Colombo Stock Exchange. The staff strength of the group as at 31st March 2017 was 85 (2016-71).

1.2 Consolidated Financial StatementsThe Consolidated Financial Statements of Resus Energy PLC as at and for the year ended 31st March 2017 comprise the Company and all its subsidiaries whose accounts have been consolidated therein (the ‘Group’). The financial statements of all companies in the Group have a common financial year which ends on 31st March.

Resus Energy PLC does not have any identifiable parent of its own. The Company is the ultimate parent of the Group.

1.3 Principal Activities and Nature of OperationsThere were no significant changes in the nature of the principal activities of the Group and the Company during the financial year under review. Activities of the Group are described in more detail in the ‘Group Structure’ on page 8.

All subsidiaries of the Company as at reporting date have been incorporated in Sri Lanka.

The Company, Resus Energy PLCThe Company was incorporated on 11th June 2003, with the objective of investing in power generating companies and to carry on the business of a Venture Capital Company including investment in shares, stocks, options, funds, debentures, debenture stocks, bonds, obligations, or securities or acquiring any other interest whatsoever in any company, public authority, or business concern, investing in ordinary shares in a company engaged in any project specified in section 21H (1) (i) to (iv) of Inland Revenue Act No. 38 of 2000 as amended by the Inland Revenue (Amended) Act No. 37 of 2003 and to dispose of such

investments of such terms and conditions as may be thought fit either in the name of the company or any nominee. The Company was engaged in investing in power generating companies and related venture capital activities during the year under review.

The Company’s name was changed to Resus Energy PLC from Hemas Power PLC with effect from 5th December 2014 consequent to the 75% ownership change of the Company from Hemas Holdings PLC to a consortium comprising NDB Capital Holdings Limited, ACL Cables PLC and Trydan Partners (Pvt) Limited.

Group EntitiesFully-owned subsidiariesGiddawa Hydro Power (Pvt) Limited - The Company acquired 100% of shares in Giddawa Hydro Power (Pvt) Limited, a special purpose entity with rights to develop a 2.0MW hydro power project located in Giddawa, Digana in the district of Kandy in September 2006 and commenced its commercial operations in October 2008. Giddawa Hydro Power (Pvt) Limited generated 4.64GWh (8.71GWh – in 2015/16) of electricity from hydro power during the year under review and transmitted to feed the national grid.

Okanda Power Grid (Pvt) Limited - The Company acquired 100% of shares in Okanda Power Grid (Pvt) Limited, a special purpose entity with rights to develop a 2.4MW hydro power plant located in Maliboda, Deraniyagala in the district of Kegalle and in January 2008 and commenced its commercial operations in September 2011. Okanda Power Grid (Pvt) Limited generated 6.65GWh (7.20GWh – in 2015/16) of electricity from hydro power during the year under review and transmitted to feed the national grid.

Upper Agra Oya Hydro Power (Pvt) Limited - The Company acquired 100% of ordinary shares of an operational hydro power generation company, Upper Agra Oya Hydro Power (Pvt) Limited (formerly known as Senok Mark Hydro (Pvt) Limited) in December 2009. Upper Agra Oya Hydro Power (Pvt) Limited generated 3.92GWh (8.33GWh – in 2015/16) of electricity from hydro power during the year under review and transmitted to feed the national grid.


144

Gomale Oya Hydro Power (Pvt) Limited - The Company has 100% ownership in Gomale Oya Hydro Power (Pvt) Ltd, a special purpose entity with rights to develop 1.4MW hydro power plant in Maliboda, Deraniyagala in the district of Kegalle and commenced its commercial operations in August 2016. Gomale Oya Hydro Power (Pvt) Limited generated 0.75GWh of electricity from hydro power during the year under review and transmitted to feed the national grid.

Moragaha Oya (Pvt) Limited – The Company has 100% ownership in Moragaha Oya (Pvt) Ltd, a special purpose entity with rights to develop 1.5MW hydro power plant located in Panvila, Theldeniya in the district of Kandy and commenced its commercial operations in March 2017. Moragaha Oya (Pvt) Limited generated 0.14GWh of electricity from hydro power during the year under review and transmitted to feed the national grid.

Upper Huluganga (Pvt) Limited - The Company has 100% ownership in Upper Huluganga (Pvt) Ltd with rights to develop 1.9MW hydro power Panvila, Theldeniya. Upper Huluganga project is progressing with construction work as of the reporting date.

AssociatesThe Company sold 15% of its investment in Panasian Power PLC during the year (October 2016) resulting a reduction in its equity stake to 7.3%. The Company recognised Panasian Power PLC as an associate company in its consolidated financial statements until the date of stake dilution on equity method of accounting and thereafter, continued to record as an Available-for-Sale Investment.

OthersThe company has 75% stake in Ella Dendro Electric (Pvt) Limited (a subsidiary company formed to develop a 3.0MW biomass project in Elpitiya) and 100% in Rawanakanda Hydro Power (Pvt) Limited (hydropower project under feasibility) which are dormant companies as of the reporting date. Investment in Ella Dendro Electric (Pvt) Limited and its assets were impaired during the year which is further described in note no 4.6 to the financial statements.

1.4 Date of Authorisation for IssueThe Consolidated Financial Statements of Resus Energy PLC for the year ended 31st March 2017 were authorised for issue by the Board of Directors on 15th May 2017.

2. Basis of preparation and other accounting policies2.1 Basis of preparation2.1.1 Statement of ComplianceThe Consolidated Financial Statements of the Group and separate financial statement of the Company comprise of the statement of financial position, statement of profit or loss, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes thereto have been prepared in accordance with Sri Lanka Accounting Standards, promulgated by the Institute of Chartered Accountants of Sri Lanka (CA-Sri Lanka) and comply with the requirements of the Companies Act, No. 7 of 2007 and the listing rules of the CSE.

2.1.2 Responsibility for financial statementsThe board of directors is responsible for the preparation and presentation of the financial statements of the Group and the Company as per Sri Lanka Accounting Standards and the provision of the Companies Act No. 07 of 2007.

2.1.3 Basis of MeasurementThe Consolidated Financial Statements have been prepared on a historical cost basis, except financial investment Available-for-Sale that have been measured at fair value and defined benefit obligations is recognised as the present value of the defined benefit obligation.

2.1.4 Functional and Presentation CurrencyThe Consolidated Financial Statements are presented in Sri Lankan Rupees, which is the Group’s functional currency.

2.1.5 Changes in Accounting PoliciesThere were no changes in accounting policies and the accounting policies adopted are consistent with those of the previous financial year.

NOTES TO THE FINANCIAL STATEMENTS CONTD.


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2.2 Significant Accounting Judgements, Estimation and AssumptionsThe preparation of Consolidated Financial Statements in conformity with Sri Lanka Accounting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the Consolidated Financial Statements is set out below.

2.2.1 Going ConcernAfter considering the financial position, operating conditions, regulatory and other factors and such matters required to be addressed the Directors have a reasonable expectation that the Company possesses adequate resources to continue in operation for the foreseeable future. For this reason, they continue to adopt the Going Concern basis in preparing the financial statements.

2.2.2 Impairment of Available-for-sale InvestmentThe company reviews its investment classified as available for sale investments at each reporting date to assess whether they are impaired. Management’s judgment is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. These estimates are based on assumptions about several factors and actual results may differ.

The company also records impairment charges on Available-for-sale equity investments when there has been a significant or prolonged decline in the fair value below their cost. The determination of what is ‘significant’ or ‘prolonged’ requires judgment.

2.2.3 Defined Benefit ObligationsThe group annually measures the present value of the promised retirement benefits for gratuity, which is a Defined Benefit Plan. The cost of providing benefits under the defined benefits plans is determined using the projected unit credit method. This involves making assumptions on discount rates, future salary increases, mortality rates. All assumptions are reviewed at each reporting date. Due to the long–term nature of these plans, such estimates are subject to significant uncertainty. See Note 15.3 for the assumptions used.

2.2.4 Useful Life time of Property, Plant and EquipmentThe Group reviews the residual values, useful lives and methods of depreciation of Property, Plant and Equipment at each reporting date. Judgment of the management is exercised in the estimation of these values, rates, methods and hence they are subject to uncertainty.

2.2.5 Deferred Tax AssetsDeferred tax assets are recognised for all unused tax losses (except the tax losses accumulated in the Company) to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

2.2.6 Impairment of non-financial assetsImpairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data from binding sales transactions on an arm’s length basis of similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a discounted cash flow model.


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3. Significant Accounting PoliciesThe accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

3.1 Basis of consolidation3.1.1 GeneralThe consolidated Financial Statements comprise the financial statements of the Parent and its subsidiaries in terms of the Sri Lanka Accounting Standard – SLFRS 10 on “Consolidated Financial Statements”. Thus, the consolidated financial statements present financial information about the Group as a single economic entity distinguishing the equity attributable to the parent (Controlling Interest) and attributable to minority shareholders with non-controlling interest.

3.1.2 SubsidiariesBusiness combinations are accounted for using the acquisition method as at the acquisition date – i.e. when control is transferred to the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

I. Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

II. Exposure, or rights, to variable returns from its involvement with the investee

III. The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

I. The contractual arrangement with the other vote holders of the investee

II. Rights arising from other contractual arrangementsIII. The Group’s voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

3.1.3 Business CombinationThe cost of an acquisition is measured as the aggregate of the consideration transferred, measured at the acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects



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whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s fair value or at the proportionate share of the acquiree’s identifiable net assets.

Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration which is deemed to be an asset or liability that is a financial instrument and within the scope of LKAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value either in profit or loss or as a change to other comprehensive income (OCI). If the contingent consideration is not within the scope of LKAS 39, it is measured in accordance with the appropriate SLFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is measured at fair value with changes in fair value either in profit or loss or as a change to the other comprehensive income (OCI).

3.1.4 Goodwill and gain from a Bargain Purchase arising on the Acquisition of SubsidiariesGoodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest over the net identifiable

assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the gain (bargain purchase) is recognised immediately in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units that are expected to benefit from the combination transferred; the gain is recognised in profit or loss.

Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Goodwill is tested for impairment annually as at 31st March and when circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

3.1.5 Non-Controlling InterestNon-Controlling Interests represent the portion of profit or loss and net assets that is not held by the Group and are presented separately in the Consolidated Statement of profit and loss and within equity in the Consolidated Statement of Financial Position separately from parent shareholders’ equity.


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Non-controlling interest are measured at their proportionate share of the acquiree’s identifiable net assets at the acquisition date. The Group elects whether to measure the non-controlling interest in the proportionate share of the acquiree’s fair value or at the proportionate share of the acquiree’s identifiable net assets.

3.1.6 Associates (equity accounted investees) and Joint VenturesAn associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries.

The Group’s investments in its associate and joint venture are accounted for using the equity method. However, the Company does not have any interest in associate and joint ventures during the year under review.

Under the equity method, the investment in an associate and joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment individually.

The Statement of profit or loss reflects the Group’s share of the results of operations of the associate or joint venture. Any change in OCI of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised

directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the Statement of profit and loss and represents profit or loss before tax.

The Financial Statements of the associate and joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss as ‘Share of profit/(loss) of an associate and a joint venture’ in the statement of profit or loss.

Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

3.2 Revenue RecognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being



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made. Revenue is measured at the fair value of the consideration received or receivable net of related taxes.

The following specific recognition criteria must also be met before revenue is recognised:

(a) Electricity SuppliedRevenue from electricity supplied is recognised upon delivery of electricity to Ceylon Electricity Board. Delivery of electrical energy shall be completed when electrical energy meets the specifications as set out in Standardised Power Purchase Agreements (SPPA) is received at the metering point.

(b) Interest IncomeFor all financial instruments measured at amortised cost and interest bearing financial assets classified as Available-for-Sale, interest income or expense is recorded using the Effective Interest Rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability.

Interest income earned by subsidiaries is included under finance income in the Statement of profit or loss and the interest income earned by the Company from its venture capital activities is shown under Revenue.

(c) DividendsDividend income is recognised when the Company’s right to receive the payment is established.

(d) OthersOther income is recognised on an accrual basis when it is probable that future economic benefits will flow to the group.

3.3 Foreign CurrenciesThe Group’s consolidated financial statements are presented in Sri Lankan Rupees, which is also the Group’s functional and presentation currency.

For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and has elected to recycle the gain or loss arising from this method.

(a) Transactions and balancesTransactions in foreign currencies are initially recorded by the Company at the functional currency rates prevailing at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency spot rate of exchange ruling at the reporting date.

All differences are taken to the Statement of profit or loss with the exception of all monetary items that forms part of a net investment in a foreign operation. These are recognised in other comprehensive income until the disposal of the net investment, at which time they are reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

The gain or loss arising on translation of non-monetary items is recognised in line with the gain or loss of the item that gave rise to the translation difference (translation differences on items whose gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss respectively).

(b) Foreign OperationsThe assets and liabilities of foreign operations are translated into Sri Lankan Rupees at the rate of exchange prevailing at


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the reporting date and their Statements of profit or loss are translated at exchange rates prevailing at the dates of the transactions. The exchange differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the Statement of profit or loss.

3.4 Taxation3.4.1 Income TaxThe provision for income tax is based on the elements of income and expenditure as reported in the financial statements and computed in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and the amendments thereto.

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the Commissioner General of Inland Revenue. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted on the reporting date in the country where the Group operates and generates taxable income. Current income tax relating to items recognised directly in equity is recognised in equity and not in the Statement of profit or loss.

Resus Energy PLC - ParentAs per section 23 of Inland Revenue Act No. 10 of 2006, Resus Enery PLC is classified as a venture capital company. Accordingly, the company enjoyed a 5 year tax exemption period from the year of assessment 2003/04 and ended in 2007/08. After expiration of aforesaid tax exemption period, in terms of section 48 of the Inland Revenue (Amendment) Act No. 9 of 2008, the Company is liable for income tax for the first 3 years at 5%, 10% and 15% respectively. After expiration of the above 3 year concessionary tax period, the Company is liable for income tax at 12%.

Giddawa Hydro Power (Private) Limited–fully-owned subsidiaryPursuant to the agreement entered into with the Board of Investments of Sri Lanka (BOI), profits of Giddawa Hydro Power

(Pvt) Ltd is exempted from income tax for a period of five (5) years reckoned from the year of assessment as may be determined by the BOI, in which the company commences to make profits or any year of assessment not later than two (2) years from the date of commencement of commercial operations of the company, whichever is earlier.

After expiration of the aforesaid tax exemption period, the profits of Giddawa Hydro Power (Pvt) Limited shall be charged for income tax at the rate of 10% for a period of two (2) years immediately succeeding the last date of the tax exemption period.

After expiration of the aforesaid two years concessionary tax period at the rate of 10%, the profits of the company shall, for any year of assessment, be charged at the rate of 20%.

Accordingly, the profits of Giddawa Hydro Power (Pvt) Ltd were exempted from income tax up to 2012/2013. For 2013/14 and 2014/15 profits were liable for income tax at the rate of 10%. As per the BOI agreement, the profits of Giddawa Hydro Power (Pvt) Limited for 2016/17 are liable for income tax at the rate of 20%.

However, as per section 59E and the Fifth Schedule of the Inland Revenue Act, profits and income of any person or partnership from operating any project for producing any alternative energy including operating any mini hydropower project (any hydropower project which generates less than 10 Mega Watts electricity), shall be taxable at the rate of 12%. In accordance with section 48C of the Inland Revenue Act, profits of Giddawa Hydro Power (Pvt) Limited were charged for income tax at the rate of 12% for 2016/17, being the less burdensome rate applicable for the company for 2016/17.

Other income of the company was liable for income tax at 28%.

Upper Agra Oya Hydro Power (Pvt) Limited–fully-owned subsidiaryPursuant to the agreement entered with BOI, profits of Upper Agra Oya Hydro Power (Private) Ltd is exempted from income



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tax for a period of five (5) years reckoned from the year of assessment as may be determined by the BOI, in which the company commences to make profits or any year of assessment not later than two (2) years from the date of commencement of commercial operations of the company, whichever is earlier.

After expiration of the aforesaid tax exemption period, the profit of Upper Agra Oya Hydro Power (Pvt) Limited shall be charged for income tax at the rate of 10% for a period of two (2) years immediately succeeding the last date of the tax exemption period.


Accordingly, the profits of Upper Agra Oya Hydro Power (Pvt) Ltd were exempted from income tax up to 2012/13. For 2013/14 and 2014/15 profits were liable for income tax at the rate of 10%. As per the BOI agreement, the profits of Upper Agra Oya Hydro Power (Pvt) Limited for 2016/17 are liable for income tax at the rate of 20%.

However, as per section 59E and the Fifth Schedule of the Inland Revenue Act, profits and income of any person or partnership from operating any project for producing any alternative energy including operating any mini hydro power project (any hydro power project which generates less than 10 Mega Watts electricity), shall be taxable at the rate of 12%. In accordance with section 48C of the Inland Revenue Act, profits of Upper Agra Oya Hydro Power (Pvt) Limited were charged for income tax at the rate of 12% for 2016/17, being the less burdensome rate applicable for the company for 2016/17.

Other income was liable for income tax at 28%.

Okanda Power Grid (Pvt) Limited–fully-owned subsidiaryPursuant to the agreement entered with BOI, profits of Okanda Power Grid (Pvt) Ltd is exempted from income tax for a period of five (5) years reckoned from the year of assessment as may

be determined by the BOI, in which the company commences to make profits or any year of assessment not later than two (2) years from the date of commencement of commercial operations of the company, whichever is earlier.

After expiration of the aforesaid tax exemption period, the profit of Okanda Power Grid (Pvt) Limited shall be charged for income tax at the rate of 10% for a period of two (2) years immediately succeeding the last date of the tax exemption period.

After expiration of the aforesaid two years concessionary tax period at the rate of 10%, the profits of the company shall, for any year of assessment, be charged at the rate of 20%. Accordingly, the profits of Okanda Power Grid (Pvt) Ltd were exempted from income tax up to 2015/16 and the profit of the company was taxed at a rate of 10% for 2016/17.

Other income was liable for income tax at 28%.

Moragaha Oya (Pvt) Limited – fully-owned subsidiaryPursuant to the agreement entered with BOI, profits of Moragaha Oya (Pvt) Ltd is exempted from income tax for a period of five (5) years reckoned from the year of assessment as may be determined by the BOI, in which the company commences to make profits or any year of assessment not later than two (2) years from the date of commencement of commercial operations of the company, whichever is earlier.

After expiration of the aforesaid tax exemption period, the profit of Moragaha Oya (Pvt) Limited shall be charged for income tax at the rate of 10% for a period of two (2) years immediately succeeding the last date of the tax exemption period.


The commercial operation commenced in March 2017.


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Gomale Oya Hydro Power (Pvt) Limited – fully-owned subsidiaryGomale Oya Hydro Power (Pvt) Limited has not been granted any specific tax holidays under the BOI agreement. However, as per section 59E and the Fifth Schedule of the Inland Revenue Act, profits and income of any person or partnership from operating any project for producing any alternative energy including operating any mini hydropower project (any hydropower project which generates less than 10 Mega Watts electricity), shall be taxable at the rate of 12%. Therefore, Income tax of Gomale Oya Hydro Power (Pvt) Limited shall be taxable at the rate of 12%.

Upper Huluganga (Pvt) Limited – fully-owned subsidiaryUpper Huluganga (Pvt) Limited has not been granted any specific tax holidays under the BOI agreement. Therefore, as per section 59E and the Fifth Schedule of the Inland Revenue Act, profits and income of any person or partnership from operating any project for producing any alternative energy including operating any mini hydropower project (any hydropower project which generates less than 10 Mega Watts electricity), shall be taxable at the rate of 12%. However, no commercial operation has been started as of the reporting date.

3.4.2 Deferred TaxationDeferred tax is provided, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences except;

i) Where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

ii) In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:

i) Where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

ii) In respect of deductible temporary differences associated with investments in subsidiaries and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised



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or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted as at the reporting date.

Deferred tax relating to items recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxable entity and the same taxation authority.

3.4.3 Tax on dividendsTax on dividends declared by the Company and its subsidiaries is recognized in equity.

3.4.4 Nation Building Tax (NBT)Supply of electricity was previously exempted under part II (ii), of the National Building Tax Act, No. 09 of 2009. The exemption has been waived off in the subsequent amendment by NBT (Amendment) Act, No. 22 of 2016. Accordingly, hydropower companies are liable to pay National Building Tax (NBT) at the rate of 2% on the liable turnover.

3.5 Property, Plant and EquipmentProperty, plant and equipment are tangible items that are held for use in the production of Hydro Power Electricity and for administrative purposes which is expected to be used during more than one period.

(a) Recognition and MeasurementProperty, Plant and Equipment is stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing component parts of the Property, Plant and Equipment and borrowing costs for long-term construction projects if the recognition criteria are met. When significant parts of Property, Plant and Equipment are required to be replaced at intervals, the Group derecognises net book value of the replaced part, and recognises the new part with

its own associated useful life and depreciation. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the Plant and Equipment as a replacement if the recognition criteria are satisfied.

(b) Subsequent CostSubsequent expenditure is capitalised only when it is probable that the future economic benefits of the expenditure will flow to the Group. Ongoing repair and maintenance costs are recognised in the statement of profit or loss as incurred.

(c) DepreciationDepreciation is calculated to write off the cost of items of property and equipment less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognised in profit or loss. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

(d) DerecognitionThe carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised.

When replacement costs are recognised in the carrying amount of an item of property, plant and equipment, the remaining carrying amount of the replaced part is derecognised.

(e) RevaluationWhen items of Property, Plant and Equipment are subsequently revalued, the entire class of such assets is revalued. Any revaluation surplus is recognised in other comprehensive income and accumulated in equity in the asset revaluation reserve, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the Statement of profit or loss, in which case the increase is recognised in the Statement of


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profit or loss. A revaluation deficit is recognised in the Statement of profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation reserve.

Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to retained earnings.

3.6 LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Finance leases that transfer to the Group substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the Statement of profit or loss.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

Operating lease payments are recognised as an operating expense in the Statement of profit or loss on a straight-line basis over the lease term.

3.7 Borrowing CostsBorrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

3.8 InventoriesInventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

Raw Materials - At weighted average cost basis Consumables and Spares - At weighted average cost basis Goods-in-Transit and Other Stocks - At actual cost

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs to sell.

3.9 Financial Instruments- Initial Recognition and Subsequent Measurement3.9.1 Financial AssetsInitial Recognition and MeasurementFinancial assets within the scope of LKAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets, as appropriate and determine the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

The financial assets include cash and cash equivalents, trade and other receivables, Investment in Available-for-sale financial assets and other financial assets.



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Subsequent MeasurementThe subsequent measurement of financial assets depends on their classification as follows:

Loans and ReceivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the Effective Interest Rate method (EIR), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of profit or loss. The losses arising from impairment are recognised in the Statement of profit or loss in finance costs.

Loans and Receivables mainly consist of trade and other receivables.

Available-for-Sale Financial AssetsAvailable-for-sale financial assets include equity securities. Equity investments classified as available for-sale are those, which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in the market conditions.

After initial measurement, Available-for-Sale financial assets are subsequently measured at fair value with unrealised gains or losses recognised as other comprehensive income in the available-for-sale reserve until the asset is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or determined to be impaired, at which time the cumulative loss is reclassified to the Statement of profit or loss in finance costs and removed from the Available-for-Sale reserve. Interest income on available-for-sale debt securities is calculated using the effective interest method and is recognised in Statement of profit or loss.

The Group evaluates its Available-for-Sale financial assets to determine whether the ability and intention to sell them in the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Group may elect to reclassify these financial assets in rare circumstances. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Group has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly.

For a financial asset reclassified out of the Available-for-Sale category, any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the asset using the EIR. Any difference between the new amortised cost and the expected cash flows is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the Statement of profit or loss.

DerecognitionA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when,

i) The rights to receive cash flows from the asset have expiredii) The Group has transferred its rights to receive cash flows from

the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either,

- The Group has transferred substantially all the risks and rewards of the asset,

or - The Group has neither transferred nor retained

substantially all the risks and rewards of the asset, but has transferred control of the asset.


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When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the asset nor transferred control of it, the asset is recognised to the extent of the Group’s continuing involvement in it. In that case, the Group also recognises an associated liability. The transferred assets and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of Financial AssetsThe Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial Assets Carried at Amortised CostFor financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually

significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the Statement of profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the Statement of profit or loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the Statement of profit or loss.

Available-for-Sale Financial AssetsFor Available-for-Sale financial assets, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.



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In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the profit or loss, is removed from other comprehensive income and recognised in the Statement of profit or loss. Impairment losses on equity investments are not reversed through the profit or loss; increases in their fair value after impairments are recognised directly in other comprehensive income.

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the profit or loss.

Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the Statement of profit or loss, the impairment loss is reversed through the Statement of profit or loss.

3.9.2 Financial LiabilitiesInitial Recognition and MeasurementFinancial liabilities within the scope of LKAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, other financial liabilities or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, and other financial liabilities carried at amortised cost. This includes directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, other financial liabilities.

Subsequent MeasurementThe measurement of financial liabilities depends on their classification as follows;

Loans and Borrowings/ Other Financial LiabilitiesAfter initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the Statement of profit or loss when the liabilities are derecognised as well as through the effective interest rate method (EIR) amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the Statement of profit or loss.

DerecognitionA financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the Statement of profit or loss.

3.9.3 Offsetting of Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount reported in the Statement of financial position if, and


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only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

3.9.4 Fair Value of Financial InstrumentsThe fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations. (bid price for long position and ask price for short positions), without any deduction for transaction costs.

For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is substantially the same; a discounted cash flow analysis or other valuation models.

3.9.5 Derivative Financial Instruments and Hedge Accounting

Initial Recognition and Subsequent MeasurementDerivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative.

Any gains or losses arising from changes in the fair value of derivatives are taken directly to the Statement of profit or loss, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income.

Cash Flow HedgesThe effective portion of the gain or loss on the hedging instrument is recognised directly as other comprehensive income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in the profit or loss as other operating expenses.

Amounts recognised as other comprehensive income are transferred to the Statement of profit or loss when the hedged transaction affects profit or loss, such as, when the hedged financial income or financial expense is recognised or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognised as other comprehensive income are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in equity is transferred to the Statement of profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remains in other comprehensive income until the forecast transaction or firm commitment affects profit or loss.

3.10 Impairment of Non-Financial AssetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.



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Impairment losses of continuing operations, including impairment on inventories, are recognised in the Statement of profit or loss in those expense categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Statement of profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

3.11 Fair Value measurementThe Group measures financial instruments such as financial assets Available for sale and non-financial assets such as certain classes of Property, Plant and Equipment at fair value at each reporting date. Fair value related disclosures for financial instruments and non-financial assets that are measured at fair value or where fair values are disclosed are summarised under the respective notes. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability Or

In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation at the end of each reporting period.

External valuers are involved for valuation of significant assets, such as properties and significant liabilities, such as defined


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benefit obligations. Involvement of external valuers is decided upon annually after discussion with and approval by the Group’s Board Audit Committee wherever necessary. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Board Audit Committee whenever necessary after discussions with the Group’s external valuers decide which valuation techniques and inputs to use for each case.

At each reporting date the Management analyses the movements in the values of assets and liabilities which are required to be re-measured or re-assessed as per the Group’s accounting policies. For this analysis, the Management verifies the major inputs applied in the latest valuation by agreeing the information in the valuation computation to contracts and other relevant documents. The Management in conjunction with the Group’s external valuers, also compares the change in the fair value of each asset and liability with relevant external sources to determine whether the change is reasonable. This includes a discussion of the major assumptions used in the valuations.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above. An analysis of fair values of financial instruments and further details as to how they are measured are provided in note 26.

3.12 Cash and Cash EquivalentsCash and Cash Equivalents in the Statement of financial position comprise cash at banks and on hand and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

For the purpose of the Group statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

3.13 ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of profit or loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

3.14 Employee benefits(a) Defined Contribution Plans –Employees’ Provident Fund and Employees’ Trust FundA defined contribution plan is a post-employment benefit plan under which an entity pays fixed determinable contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.

Employees are eligible to Employees’ Provident Fund (EPF) contributions and Employees’ Trust Fund (ETF) contributions as per the respective statutes. These obligations come within the scope of a defined contribution plan as per LKAS -19 on ‘Employee Benefits’.

The Company contributes 12% and 3% of gross emoluments of employees to Employees’ Provident Fund and Employees’ Trust Fund respectively. The contributions made are expensed to Profit or Loss as and when the contributions are made.



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(b) Defined Benefit Plan – GratuityIn accordance with the Gratuity Act No. 12 of 1983, a liability arises for a defined benefit obligation to employees. Such defined benefit obligation is a post-employment benefit obligation falling within the scope of Sri Lanka Accounting Standard LKAS -19 on ‘Employee Benefits’.

The liability recognised in the Statement of financial position is the present value of the defined benefit obligation at the reporting date. The calculations performed annually by a qualified actuary using the projected unit credit method (PUC). Any actuarial gains and losses arising are recognised immediately in other comprehensive income. The discount rate has been derived considering the yield of government bonds.

However, as per the payment of Gratuity Act No. 12 of 1983, this liability only arises upon completion of 5 years of continued service.

The gratuity liability is not externally funded.

3.15 Business Segment ReportingAn operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s Managing Director (MD) to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

Segment results that are reported to the MD include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

3.16 Comparative InformationThe accounting policies have been consistently applied by the Group and are consistent with those used in the previous year. Prior year figures and phrases have been restated or reclassified where necessary to conform to the current year presentation.

3.17 New Accounting Standards became effective during the yearThere were no new Sri Lanka Accounting Standards became effective for the periods commencing on or after of 1st January 2016 other than below;

SLFRS 14-Regulatory Deferral AccountSLFRS 14 is an interim standard which provides relief for first time -adopters of SLFRS in relation to the accounting for certain balances that arise from rate-regulated activities (‘regulatory deferral accounts’). The standard permits these entities to continue to apply their previous GAAP accounting policies for the recognition, measurement, impairment and derecognition of regulatory deferral accounts.

The objective of this standard is to specify the financial reporting requirements for regulatory deferral account balances that arise when an entity provides goods or services to customers at a price or rate that is subject to rate regulation. SLFRS 14 was effective from 1st January 2016.

This standard did not have any impact on the financial statements of the Group.

3.18 Effects of Sri Lanka Accounting Standards issued but not yet effectiveCertain new accounting standards and amendments / improvements to existing standards have been published, that are not mandatory for 31st March 2017 reporting periods. None of those have been early adopted by the group.

SLFRS 9-Financial InstrumentsSLFRS 9 replaces the existing guidance in LKAS 39 Financial Instruments: Recognition and Measurement. SLFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from LKAS 39. SLFRS 9 is effective for annual


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reporting periods beginning on or after 1st January 2018, with early adoption permitted.

SLFRS 15-Revenue from Contracts with CustomersSLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including LKAS 18 “Revenue”, LKAS 11 “Construction Contracts” and IFRIC 13 “Customer Loyalty Programmes”.

SLFRS 15 is effective for annual reporting periods beginning on or after 1st January 2018, with early adoption permitted.

The implementation of the SLFRS 15 does not have any material impact on the financial statements of the group.

SLFRS 16-LeasesSLFRS 16 provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value even though lessor’s accounting remains similar to current practice. This supersedes: Sri Lanka Accounting Standard LKAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement Contains a Lease”, SIC 15 “Operating Leases - Incentives”; and SIC 27 “Evaluating the substance of Transactions Involving the Legal form of a Lease”. Earlier application is permitted for entities that apply SLFRS 15 “Revenue from Contracts with Customers”.

SLFRS 16 is effective for annual reporting periods beginning on or after 1st January 2019. The impact on the implementation of the above standard has not been quantified yet by the Group.

Amendments to LKAS 12- Recognition of Deferred Tax Assets for Unrealized LossesThe amendments clarify that an entity needs to consider whether


tax law restricts the sources of taxable profits against which it may make deductions on the reversal of that deductible temporary difference. Furthermore, the amendments provide guidance on how an entity should determine future taxable profits and explain the circumstances in which taxable profit may include the recovery of some assets for more than the carrying amount.

Entities are required to apply the amendments retrospectively. However, on initial application of the amendments, the change in the opening equity of the earliest comparative period may be recognised in opening retained earnings (or in another component of equity, as appropriate), without allocating the change between opening retained earnings and other components of equity. Entities applying this relief must disclose that fact. These amendments are effective for annual periods beginning on or after 1st January 2017 with early application permitted. If an entity applies the amendments for an earlier period, it must disclose that fact.

Amendments to LKAS 7 - Disclosure Initiative “Statement of Cash FlowsThe amendments to LKAS 7 “Statement of Cash Flows” are part of the Institute of Chartered Accountants of Sri Lanka’s Disclosure Initiative and require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. On initial application of the amendment, entities are not required to provide comparative information for preceding periods. These amendments are effective for annual periods beginning on or after 1st January 2017, with early application permitted. Application of amendments will result in additional disclosures to be provided by the Group.


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4 PROPERTY, PLANT AND EQUIPMENT

4.1 Group Balance Additions Transferred Disposals Impairment Balance As at from Capital (Note 4.6) As at 01.04.2016 work-in- 31.03.2017Gross Carrying Amounts progress At Cost/Valuation Rs. Rs. Rs. Rs. Rs. Rs. Freehold Land 63,900,000 - - (44,000,000) - 19,900,000Civil Construction at hydropower plants 577,554,507 7,463,974 305,469,829 - - 890,488,310Office Equipment 8,520,964 507,277 119,393 - - 9,147,634Furniture and Fittings 7,432,928 8,887,984 60,000 - - 16,380,912Plant and Machinery at hydropower plants 556,476,843 685,500 355,415,868 - - 912,578,211Computer Equipment 7,738,967 1,158,662 169,750 - - 9,067,379Motor Vehicles 33,075,161 3,000,000 549,000 (8,892,980) - 27,731,181Generators 1,347,752 - - - - 1,347,752 1,256,047,122 21,703,397 661,783,840 (52,892,980) - 1,886,641,379

Capital Work-in-ProgressHydropower Project Construction Expenses 389,070,302 375,731,866 (661,783,840) - (38,996,905) 64,021,423Total Gross Carrying Value 1,645,117,424 397,435,263 - (52,892,980) (38,996,905) 1,950,662,802

Balance Depreciation Disposals Balance As at Charge As atDepreciation 01.04.2016 for the Year 31.03.2017 Rs. Rs. Rs. Rs.

Civil Construction at hydropower plants 53,440,208 10,305,774 - 63,745,982Office Equipment 2,216,917 1,059,371 - 3,276,288Furniture and Fittings 2,706,990 1,718,431 - 4,425,421Plant and Machinery at hydropower plants 93,895,386 18,945,006 - 112,840,392Computer Equipment 4,017,901 1,763,297 - 5,781,198Motor Vehicles 17,321,213 4,925,473 (5,268,331) 16,978,355Generators 322,128 168,480 - 490,608Total Depreciation 173,920,743 38,885,832 (5,268,331) 207,538,244


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Net Book Values - As at 31st March 2017 2016 Rs. Rs.

Freehold Land 19,900,000 63,900,000Civil Construction at hydropower plants 826,742,328 524,114,299Office Equipment 5,871,346 6,304,047Furniture and Fittings 11,955,491 4,725,938Plant and Machinery at hydropower plants 799,737,819 462,581,457Computer Equipment 3,286,181 3,721,066Motor Vehicles 10,752,826 15,753,948Generators 857,144 1,025,624 1,679,103,135 1,082,126,379 Capital Work-in-Progress Hydropower Project Construction Expenses 64,021,423 389,070,302Total Carrying Value of Property, Plant and Equipment 1,743,124,558 1,471,196,681

4.2 During the year fixed assets additions and cash payments - GroupDuring the financial year, the Group acquired Property, Plant and Equipment to the aggregate value of Rs. 397,435,263/- (2016 - Rs.272,103,113/-). Cash payments amounted to Rs. 377,606,630/- (2016 - Rs. 272,103,113/-) were made during the year for acquisition/construction of Property, Plant and Equipment and the balance was capitalisation of borrowing cost amounted to Rs. 19,828,633 (2016- Rs. Nil).

4.3 Information on Freehold Lands and Buildings of the Group - Extents and LocationsFreehold Lands Freehold Revaluation Name of Subsidiary Company Location Land Extent Amount (Rs.)

Giddawa Hydro Power (Pvt) Limited Giddawa, Digana, Teldeniya 1A - 3R - 30.90P 12,500,000Okanda Power Grid (Pvt) Limited Dikkellakanda, Maliboda, Deraniyagala 0A - 3R - 31.83P 3,500,000 Gomale Oya Hydro Power (Pvt) Limited Magala, Deraniyagala 1A - 0R - 26.91P 3,900,000 2A - 7R - 22.65P 19,900,000

During the year, Ella Dendro Electric (Pvt) Ltd, a Subsidiary of Resus Energy PLC (Company) disposed its 23A - 2R- 29.3P Land in Kurudugahahathapma, Elpitiya. The Land had been recorded at its revalued amount of Rs. 44.0Mn. The net proceeds from the transaction were Rs. 46.25Mn.The resulting gain was recorded under other operating income in profit or loss statement.

Freehold Buildings No. of Sq. ft. ofName of Subsidiary Company Location Buildings Buildings

Giddawa Hydro Power (Pvt) Limited Giddawa, Digana, Teldeniya 2 4,103Upper Agra Oya Hydro Power (Pvt) Limited Lindula, Talawakelle 2 5,078Okanda Power Grid (Pvt) Limited Dikkellakanda, Maliboda, Deraniyagala 2 3,504Gomale Oya Hydro Power (Pvt) Limited Magala, Deraniyagala 2 2,518Moragaha Oya (Pvt) Limited Digana, Teldeniya 1 1,520 9 16,723The carrying value of the above Buildings is reflected under civil construction of hydropower plants.



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4.4 Property, Plant and Equipment pledged as security against long-term bank loansLand, buildings including civil structures and power generating equipment of hydropower projects with a carrying value of Rs. 1,645,804,639/- have been pledged as securities against bank loans obtained by subsidiaries as at the reporting date (2016 - 1,221,035,919/-). Carrying Value as at 31st March 2017 (Rs.) Loan CapitalName of Subsidiary Company Lender Freehold Civil Hydropower Total outstanding Land Structures Plant and As at 31st March Machinery 2017 (Rs.) Giddawa Hydro Power Sampath Bank PLC and

(Pvt) Limited NDB Bank PLC 12,500,000 234,727,964 127,000,054 374,228,018 303,643,415

Okanda Power Grid Sampath Bank PLC and

(Pvt) Limited NDB Bank PLC 3,500,000 187,123,397 201,503,144 392,126,541 289,983,013

Upper Agra Oya Hydro Power Sampath Bank PLC and

(Pvt) Limited NDB Bank PLC - 100,318,965 117,628,926 217,947,891 154,755,189

Gomale Oya Hydro Power Sampath Bank PLC 3,900,000 128,660,651 150,695,537 283,256,188 200,000,000

(Pvt) Limited

Moragaha Oya (Pvt) Limited Sampath Bank PLC - 175,790,850 202,455,151 378,246,001 40,000,000

19,900,000 826,621,827 799,282,812 1,645,804,639 988,381,617

4.5 Fully Depreciated but still in use - GroupThe cost of fully-depreciated property, plant and equipment of the Group which are still in use as at 31st March 2017 amounting to Rs. 4,263,430/- (2016 - Rs. 3,265,270/-).

4.6 ImpairmentElla Dendro Electric (Pvt) Ltd, the Subsidiary of Resus Energy PLC (Company) has recognized an impairment charge for its Assets as per Sri Lanka Accounting Standard - LKAS 36 “Impairment of Assets”. Ella Dendro Electric (Pvt) Ltd is of the view that the Recoverable amount of Assets amounting to Rs. 38,996,905/- is zero and therefore to recognize impairment fully over its Carrying Value of Assets.

Other than the above, there is no permanent fall in the value of property, plant and equipment which requires a provision for impairment.

4.7 Borrowing CostsBorrowing costs amounting to Rs. 19,828,633/- that are directly attributable to the acquisition, construction or production of a qualifying assets have been capitalised as part of the cost of the asset in accordance with Sri Lanka Accounting Standard - LKAS 23 on “Borrowing Costs”.

4.8 There were no restrictions on the title to the property, plant and equipment of the Group/Company as at the reporting date.


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4.9 The useful lives of the assets of the Group are estimated as follows: 2017 2016

Civil Construction at hydropower plants 60 Years 60 YearsOffice Equipment 8 Years 8 YearsFurniture and Fittings 8 Years 8 YearsPlant and Machinery at hydropower plants 33 1/3 Years 33 1/3 YearsComputer Equipment 3 Years 3 YearsMotor Vehicles 6 Years 6 YearsGenerators 8 Years 8 Years

4.10 Company Balance Additions Disposals Balance As at As atGross Carrying Amounts 01.04.2016 31.03.2017At Cost Rs. Rs. Rs. Rs.

Computer Equipment 6,891,077 1,140,662 - 8,031,739Motor Vehicles 31,897,441 3,000,000 (8,689,000) 26,208,441Office Equipment 5,808,324 21,275 - 5,829,599Furniture and Fittings 5,614,765 8,886,586 - 14,501,351Generators 1,293,752 - - 1,293,752Total Gross Carrying Value 51,505,359 13,048,523 (8,689,000) 55,864,882

Balance Charge for Disposals Balance As at the year As atDepreciation 01.04.2016 31.03.2017 Rs. Rs. Rs. Rs.

Computer Equipment 3,313,848 1,648,855 - 4,962,703Motor Vehicles 16,833,553 4,805,773 (5,201,758) 16,437,568Office Equipment 1,013,480 717,838 - 1,731,318Furniture and Fittings 1,817,323 1,494,288 - 3,311,611Generators 315,092 161,724 - 476,816Total Depreciation 23,293,296 8,828,478 (5,201,758) 26,920,016



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Net Book Values - As at 31st March 2017 2016 Rs. Rs.

Computer Equipment 3,069,036 3,577,229Motor Vehicles 9,770,873 15,063,888Office Equipment 4,098,281 4,794,844Furniture and Fittings 11,189,740 3,797,442Generators 816,936 978,660Total Carrying Value of Property, Plant and Equipment 28,944,866 28,212,063

4.11 During the year fixed assets additions and cash payments - CompanyDuring the financial year, the Company acquired Property, Plant and Equipment to the aggregate value of Rs.13,048,523/- for cash (2016 - Rs. 11,525,753/-).

4.12 Fully Depreciated but still in use - CompanyThe cost of fully depreciated assets of the Company which are still in use as at 31st March 2017 amounting to Rs. 3,243,882/- (2016 - Rs.2,436,954/-).

5 INTANGIBLE ASSETS Balance Additions BalanceGroup As at As atGross Carrying Amounts 01.04.2016 31.03.2017 Rs. Rs. Rs.

Goodwill 126,752,566 - 126,752,566 126,752,566 - 126,752,566

Balance Impairment Balance As at Charge As atImpairment 01.04.2016 for the Period 31.03.2017 Rs. Rs. Rs.

Goodwill - - - - - -


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Carrying Value - As at 31st March 2017 2016 Rs. Rs.

Goodwill 126,752,566 126,752,566 126,752,566 126,752,566

The Company and its subsidiaries annually carry out impairment tests on all its Intangible assets. The business acquisition to which the goodwill is attributable is valued based on the earnings growth method. Assumptions applied in such computations are reviewed each year.

Goodwill as at the reporting date has been tested for impairment and no impairment was found for the carrying value. Recoverable values for the above test were estimated based on value in use of the acquired assets on business combination in the normal course of business. The key assumptions used to determine the recoverable amount are as follows;

Discount RateThe discount rate used is the risk free rate, adjusted by the addition of an appropriate risk premium.

Period CoveredPeriod covered was as per the Standard Power Purchase Agreement (SPPA) with Ceylon Electricity Board,

Subsidiary Remaining yearsOkanda Power Grid (Pvt) Ltd 14 yearsUpper Agra Oya Hydro Power (Pvt) Ltd 4 years

However, it is expected that said Standard Power Purchase Agreement (SPPA) will be further extended.

Inflation RateThe basis used to determine the value assigned to the budgeted cost inflation, is the inflation rate, based on projected economic conditions.

Gross MarginsThe basis used to determine the value assigned to the budgeted gross margins is the gross margins achieved in the year preceding the budgeted year adjusted for projected market conditions.

Following business acquisitions resulted in recognition of Goodwill in prior years; Rs.

Okanda Power Grid (Pvt) Ltd 20,405,018Upper Agra Oya Hydro Power (Pvt) Ltd 106,347,548 126,752,566



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6 INVESTMENTS IN SUBSIDIARIES Effective Holding No. of Shares Cost of InvestmentOrdinary Voting Shares 2017 2016 2017 2016 2017 2016 Rs. Rs.

Giddawa Hydro Power (Pvt) Limited 100.0% 100.0% 1,525,003 1,525,003 152,500,268 152,500,268Okanda Power Grid (Pvt) Limited 100.0% 100.0% 29,471,949 29,471,949 305,456,558 305,456,558Upper Agra Oya Hydro Power (Pvt) Limited 100.0% 100.0% 7,166,140 7,166,140 144,010,791 144,010,791Ella Dendro Electric (Pvt) Limited (Note 6.1) 75.0% 75.0% 7,500,000 7,500,000 7,500,000 7,500,000Rawanakanda Hydro Power (Pvt) Ltd 100.0% 100.0% 10 10 100 100Upper Huluganga (Pvt) Ltd 100.0% 100.0% 660,002 2 66,000,020 20Moragaha Oya (Pvt) Ltd 100.0% 100.0% 670,002 2 67,000,020 20Gomale Oya Hydro Power (Pvt) Ltd 100.0% 100.0% 500,001 500,001 50,000,010 50,000,010 792,467,767 659,467,767Impairment Provision on Investment of Ella Dendro Electric (Pvt) Ltd (Note 6.1) (7,500,000) - 784,967,767 659,467,767

6.1 The Company is of the view that recoverable amount of investment in Ella Dendro Electric (Pvt) Ltd is zero and therefore to impair the investment fully in the books of the Company.

6.2 Summarised Financial Information of Subsidiaries As at 31st March 2017 For the year ended 31st March 2017 Assets Liabilities Equity Revenue Operating Profit/(Loss) Profit/(Loss) after tax Rs. Rs. Rs. Rs. Rs. Rs.

Giddawa Hydro Power (Pvt) Limited 847,365,334 651,157,748 196,207,586 67,824,046 35,230,374 (3,322,652)Okanda Power Grid (Pvt) Limited 879,482,408 487,784,339 391,698,069 96,894,350 64,922,712 29,256,257Upper Agra Oya Hydro Power (Pvt) Limited 517,072,017 340,108,918 176,963,099 57,052,290 16,547,304 (2,255,072)Gomale Oya Hydro Power (Pvt) Ltd 286,663,176 250,770,268 35,892,908 13,112,747 (1,431,082) (15,862,353)Moragaha Oya (Pvt) Ltd 421,159,926 357,792,204 63,367,722 2,288,628 (3,204,147) (3,632,298)Upper Hulu Ganga (Pvt) Ltd 80,427,020 14,426,999 66,000,020 Project is under construction


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7 INVESTMENTS IN ASSOCIATESPanasian Power PLC - quoted investment

7.1 Carrying value of Associates under equity method of accounting Group Effective Holding No. of Shares Equity Value of Investment 2017 2016 2017 2016 2017 2016 Rs. Rs.

Balance at the beginning of the year 22.3% 29.3% 111,500,000 146,500,000 365,144,265 504,198,507Share of net profit after tax - - - - 6,140,499 36,089,678Share of other comprehensive income/(expense) - - - - - 34,867Net dividends received during the year - - - - (15,052,500) (59,130,916)Equity value derecognised on disposal during the year (15.0%) (7.0%) (75,000,000) (35,000,000) (239,618,115) (116,047,871)Equity Value transferred to Financial Investment - Available-for-Sale (7.3%) - (36,500,000) - (116,614,149) -Balance at the end of the year - 22.3% - 111,500,000 - 365,144,265

Company Effective Holding No. of Shares Cost of Investment 2017 2016 2017 2016 2017 2016 Rs. Rs.

Balance at the beginning of the year 22.3% 29.3% 111,500,000 146,500,000 313,265,529 411,600,000Disposal made during the year (15.0%) (7%) (75,000,000) (35,000,000) (210,716,724) (98,334,471)Transferred to Financial Investment - Available-for-Sale (7.3%) - (36,500,000) - (102,548,805) -Balance at the end of the year - 22.3% - 111,500,000 - 313,265,529



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7.2 Gain/(loss) on disposal of shares in Panasian Power PLCResus Energy PLC sold 75,000,000 shares of Panasian Power PLC in the month of October 2016 at the price of Rs 3.00 per share. This resulted a reduction of stake in Panasian Power PLC from 22.3% to 7.3%. The resulting gain/(loss) has been recognised in Company and Group financial statements as follows; Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Net disposal proceeds 223,621,875 131,992,525 223,621,875 131,992,525Fair Value of remaining stake transferred to Financial Investment - Available-for-Sale 113,150,000 - 113,150,000 -Less:Equity Accounted value / Carrying value of Investment in Associate (356,232,264) (116,047,871) (313,265,529) (98,334,471)Disposal gain/(loss) (19,460,389) 15,944,654 23,506,346 33,658,054

Remaining stake of Investment in Panasian Power PLC has been considered as an Available-for-Sale Financial Asset in the financial statements with effect from 01st November 2016 as per Sri Lanka Accounting Standard- SLFRS 07 “Financial Instrument: Disclosures”

8. FINANCIAL INVESTMENT - AVAILABLE-FOR-SALE Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Investment in Panasian Power PLC (Note 8.1) 109,500,000 - 109,500,000 -

8.1 Investment in Panasian Power PLC Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Balance at the beginning of the year - - - -Transferred from Equity Accounted Investee (Note No 7.2) 113,150,000 - 113,150,000 -Loss on fair value (3,650,000) - (3,650,000) -Balance at the end of the year 109,500,000 - 109,500,000 -


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9 INVENTORIES Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Spare parts 5,095,893 4,547,468 - -Goods in transit - 1,256,761 - -Consumable items - 551,699 - -Total Inventories at the lower of Cost and Net Realisable Value 5,095,893 6,355,928 - -

10 TRADE AND OTHER RECEIVABLES Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Trade Receivables (Note 10.1) 44,473,577 44,214,730 - -Advances, Deposits and Pre-payments 30,514,438 19,904,418 28,240,791 17,125,602Staff Loans Receivable (Note 10.2) 2,398,956 3,961,280 731,934 1,865,578Other Receivables 2,305,243 1,929,498 1,808,243 922,733Group Balance Receivable (Note 10.3) - - 829,377,393 511,783,164 79,692,214 70,009,926 860,158,361 531,697,077

10.1 Trade ReceivableTrade Receivable represents the amount due from Ceylon Electricity Board which is the sole electricity buyer of all subsidiaries. As at 31st March 2017, the ageing analysis of Group Trade Receivables is as follows;

Subsidiary Total Current < 30 days < 60 days Rs. Rs. Rs. Rs.

Giddawa Hydro Power (Pvt) Limited 28,782,122 13,632,622 7,260,230 7,889,270Okanda Power Grid (Pvt) Limited 5,027,492 2,285,242 485,048 2,257,202Upper Agra Oya Hydro Power (Pvt) Limited 7,570,935 4,443,052 1,211,923 1,915,960Gomale Oya Hydro Power (Pvt) Ltd 804,400 576,303 73,312 154,785Moragaha Oya (Pvt) Ltd 2,288,628 2,288,628 - - 44,473,577 23,225,847 9,030,513 12,217,217



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10.2 Staff Loans Receivable Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Balance at the beginning of the year 3,961,280 1,941,382 1,865,578 1,092,601Loans granted during the year 2,716,442 5,255,032 1,046,074 2,720,298Less: Repayments (4,278,766) (3,235,134) (2,179,718) (1,947,321)Balance at the end of the year 2,398,956 3,961,280 731,934 1,865,578

10.3 Group Balance Receivable Group CompanyCompany Name Relationship 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Giddawa Hydro Power (Pvt) Ltd Subsidiary - - 186,336,518 98,525,345Okanda Power Grid (Pvt) Ltd Subsidiary - - 136,839,970 48,300,859Upper Agra Oya Hydro Power (Pvt) Ltd Subsidiary - - 168,307,825 97,541,224Ella Dendro Electric (Pvt) Ltd (Note No 10.4) Subsidiary - - - 59,897,622Rawanakanda Hydro Power (Pvt) Ltd Subsidiary - - 550,886 386,292Upper Huluganga (Pvt) Ltd Subsidiary - - 14,426,999 25,870,415Moragaha Oya (Pvt) Ltd Subsidiary - - 277,760,627 124,693,505Gomale Oya Hydro Power (Pvt) Ltd Subsidiary - - 45,154,568 56,567,902 - - 829,377,393 511,783,164

10.4 Receivable balance from Ella Dendro Electric (Pvt) Ltd to Resus Energy PLC (Company) amounting to Rs. 14,009,828/- as at 31st March 2017 was impaired fully due to the Company no longer being in operation and its inadequate financial position to settle its financial liabilities.

11 CASH AND CASH EQUIVALENTS Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

11.1 Favourable Cash and Cash Equivalent BalancesCash in hand and at Bank 6,772,739 48,415,135 4,892,449 20,606,153

11.2 Unfavourable Cash and Cash Equivalent BalancesBank Overdrafts (10,393,589) (11,989,475) (5,889,927) -Total Cash and Cash Equivalents for the Purpose of Statement of Cash Flow (3,620,850) 36,425,660 (997,478) 20,606,153


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12 STATED CAPITAL - GROUP/COMPANY12.1 Fully Paid Ordinary Shares 2017 2016 No of Shares Rs. No of Shares Rs.

At the beginning of the year 58,390,263 300,000,000 125,200,002 1,539,882,957Capital Reduction (note 12.1.1) - - - (1,239,882,957)Share Repurchase (note 12.1.2) - - (66,809,739) -Issue of new Shares (note 12.1.3) - - - -At the end of the year 58,390,263 300,000,000 58,390,263 300,000,000


12.1.1 The Board of Directors of Resus Energy PLC, by its resolutions dated 1st April 2015 and 15th July 2015 resolved to recommend to the shareholders of the Company to reduce the stated capital of the Company to Rs. 300,000,000/- in terms of Section 59 of the Companies Act No. 7 of 2007 and repurchase upto a maximum of 71,542,858 ordinary shares from and out of the issued ordinary shares of the Company at a price of Rs. 24/- per ordinary share in accordance with Section 56 of the Companies Act No. 7 of 2007.

Consequently, shareholders of Resus Energy PLC at the Extra Ordinary General Meeting (EGM) held on 14th August 2015 approved the following two special resolutions;

a. Reduction of Stated CapitalThe stated capital of the Company is reduced to Rs. 300,000,000/-. Accordingly, the stated capital as recorded in Companies’ Form 6 dated 23rd September 2010 filed by the Company with the Registrar General of Companies was Rs. 1,674,882,957/- be reduced by Rs. 1,374,882,957/- to Rs. 300,000,000/-. However, prior to the said capital reduction, the stated capital shown in the financial statements of the Company was Rs. 1,539,882,957/-, excludes the redeemable preference shares issued by the Company. Consequently, the reduction in the stated capital in the books of account of the Company is Rs. 1,239,882,957/- to reflect Rs. 300,000,000/- stated capital after the said capital reduction represented by 125,200,002 ordinary shares. There is no change to the number of shares in issue before and after the capital reduction.

b. Payment of consideration for repurchase of sharesThe payment by the Company of the consideration for the repurchase of upto a maximum of 71,542,858 ordinary shares in the Company from its shareholders on the basis of four (04) ordinary shares for every seven (07) ordinary shares held by such shareholders at a price per share of Rs.24/- amounting to a total sum of Rs. 1,717,028,592/-, being (a) a distribution by the Company in terms of Section 56 of the Companies Act No. 7 of 2007 and (b) a major transaction of the Company in terms of Section 185 of the Companies Act No. 7 of 2007.

12.1.2 Share Repurchase by Resus Energy PLCOut of 71,542,858 ordinary shares offered for repurchase by the Company after the approval of the shareholders at the EGM, the Board of Directors resolved at its meeting on 15th September 2015 to repurchase a total of 66,809,739 ordinary shares based on the applications received from the shareholders for the acceptance of the repurchase offer. Accordingly, the Company distributed a sum of Rs 1,603,433,736/- on 18th September 2015 to the shareholders who accepted the repurchase offer at a fair and reasonable basis determined by the Board. The remaining number of ordinary shares in Resus Energy PLC subsequent to the repurchase and cancellation of those repurchased shares amounts to 58,390,263 with effect from 9th November 2015.

The repurchase of shares by Resus Energy PLC was carried out in accordance with the applicable provisions set out in the Companies Act No. 7 of 2007, the Listing Rules of the Colombo Stock Exchange (CSE) and the Articles of Association


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13 NON-CURRENT FINANCIAL LIABILITIES Group CompanyFinancial Liabilities 2017 2016 2017 2016At amortised cost Rs. Rs. Rs. Rs.

Other Payables 764,092 2,885,630 - -Preference Shares 83,978,010 83,978,010 - -Total Non-Current Financial Liabilities 84,742,102 86,863,640 - -

Preference share liability of Rs. 83.98Mn includes redeemable preference shares issued by Giddawa Hydro Power (Pvt) Ltd to Hemas Holdings PLC and Hemas Pharmaceuticals (Pvt) Ltd amounting to Rs. 81.0Mn and preference shares issued by Upper Agra Oya Hydro Power (Pvt) Ltd to Watawala Plantations PLC amounting to Rs. 2.98Mn.

14 INTEREST BEARING LOANS AND BORROWINGS14.1 Movement Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

At the beginning of the year 983,033,249 - - -Loans obtained during the year 314,983,000 1,060,017,000 185,000,000 -Transaction costs - (13,355,504) - -Interest charged to Profit or Loss 97,482,012 44,980,882 7,447,397 -Borrowing Cost Capitalised 19,828,633 - - -Interest payments (108,955,277) (38,464,129) (7,447,397) -Capital repayments during the year (232,990,000) (70,145,000) (100,000,000) -At the end of the year at amortised cost 1,073,381,617 983,033,249 85,000,000 -

Classified as current liabilities (repayable within one year) 213,581,782 124,634,707 85,000,000 -Classified as non-current liabilities (repayable after one year) 859,799,835 858,398,542 - -

of the Company. The Board is satisfied that, the Company will immediately after the repurchase of shares satisfy the solvency test as defined in Section 57 of the Companies Act No. 7 of 2007. A certificate of solvency has been obtained from the Auditors certifying that the Company will satisfy the solvency test immediately upon the payment of consideration for the repurchase of shares along with an opinion from the Auditors that in their opinion the repurchase price is a fair value as required in terms of Section 64 of the Companies Act No. 7 of 2007.

12.1.3 There were no new shares issued during the financial year.

12.2 Rights, Preferences and Restrictions of Classes of CapitalThe holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share on a poll at a meeting of the Company.


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14.2 Details of Loans - As at 31st March 2017Company Facility Lender Principal

Amount Amount

OutstandingRepayment terms Interest Rate Security

Offered

Giddawa Hydro Power (Pvt) Ltd

Syndicated Loan facility

NDB Bank PLC 178,000,000 143,673,137 Repayable in 32 quarterly installments commenced from December 2015

Fixed for each year in the range of 8.25% to 10.75%

Note 14.3Sampath Bank PLC 198,000,000 159,970,278

Okanda Power Grid (Pvt) Ltd





Upper Agra Oya Hydro Power (Pvt) Ltd






Project Financing loan facility

Sampath Bank PLC 200,000,000 200,000,000

Repayable in 71 monthly installments commencing from October 2017 after the grace period of two years

AWPLR + 0.75% Note 14.4


Project Financing loan facility

Sampath Bank PLC 40,000,000 40,000,000

Repayable in 72 monthly installments commencing from March 2019 after the grace period of two years

AWPLR + 2% Note 14.4

Resus Energy PLC - Company

Bridging Facility

Commercial Bank of Ceylon PLC

85,000,000 85,000,000 Bullet repayment at maturity as at June 2017.

12.75% N/A

Sampath Bank PLC 100,000,000 Fully Paid Repayable within 6 months commencing from August 2016.

AWPLR + 2.5% N/A

1,073,381,617


14.3 Security offered for Syndicated loan facilitiesPrimary concurrent mortgage over immovable project assets, movable project assets including project documents (licenses, approvals, agreements, contracts, bonds), book debts, insurance proceeds, receivables of Giddawa Hydro Power (Pvt) Limited, Okanda Power Grid (Pvt) Limited, and Upper Agra Oya Hydro Power (Pvt) Limited in covering 100% of the syndicated loan balance.

A separate primary concurrent mortgage over the shares of Giddawa Hydro Power (Pvt) Limited, Okanda Power Grid (Pvt) Limited and Upper Agra Oya Hydro Power (Pvt) Limited held by Resus Energy PLC in covering additional 5% of the syndicated loan balances with a Power of Attorney.

Conditional corporate guarantees issued by Resus Energy PLC on behalf of above subsidiaries which shall be enforceable if the Syndicate Loan dues cannot be recovered by the lenders due to title related issues. However, for Upper Agra Oya Hydro Power (Pvt) Limited, this corporate guarantee is unconditional.

14.4 Securities offered for project financing loan facilityGomale Oya Hydro Power (Pvt) LtdPrimary mortgage over immovable and movable project assets including project approvals of Gomale Oya Hydro Power (Pvt) Limited for Rs 170Mn.

Primary mortgage bond for Rs 30Mn. over entirety of shares issued by Gomale Oya Hydro Power (Pvt) Limited to Resus Energy PLC supported by a Power of Attorney from Resus Energy PLC.

Corporate Gurantee issued by Resus Energy PLC for Rs. 200Mn.

Moragaha Oya (Pvt) LtdPrimary mortgage over immovable and movable project assets including project approvals of Moragaha Oya (Pvt) Limited for Rs 146Mn.

Primary mortgage bond for Rs. 100Mn over entirety of shares issued by Moragaha Oya (Pvt) Limited to Resus Energy PLC supported by a Power of Attorney from Resus Energy PLC.

Corporate Gurantee issued by Resus Energy PLC for Rs. 246Mn.


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15 EMPLOYEE BENEFITS OBLIGATIONS - GRATUITY Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

At the beginning of the year 9,874,380 8,999,723 8,077,425 6,907,985Current Service Cost 1,255,973 1,212,509 931,219 871,290Interest Cost on Benefit Obligation 1,086,181 899,973 888,517 690,799Actuarial (Gain)/Loss on Obligation (748,399) (1,032,480) (329,009) (187,304)Benefits Paid during the year (1,709,210) (205,345) (1,709,210) (205,345)At the end of the year 9,758,925 9,874,380 7,858,942 8,077,425

15.1 Total amount charged to Statement of Profit or LossCurrent Service Cost 1,255,973 1,212,509 931,219 871,290Interest Cost on Benefit Obligation 1,086,181 899,973 888,517 690,799 2,342,154 2,112,482 1,819,736 1,562,089

15.2 Total amount charged to Statement of Other Comprehensive IncomeActuarial changes arising from changes in Demographic Assumptions - 1,885 - 918 Financial Assumptions (657,590) (835,070) (419,398) (600,175) Experience Adjustments (90,809) (199,295) 90,389 411,953 (748,399) (1,032,480) (329,009) (187,304)

15.3 Messrs. K A Pandit Consultants and Actuaries, carried out an actuarial valuation of the defined benefit plan - gratuity as at 31st March 2017. Appropriate and compatible assumptions were used in determining the cost of retirement benefits. The principal assumptions used as at 31st March 2017 are as follows: 2017 2016

Method of Actuarial Valuation Projected Unit Projected Unit Credit Method Credit Method

Financial assumptions Expected return on Plan Asset N/A N/ADiscount Rate 12% 11%Salary Increment Rate 9% 9%Staff Turnover Ratio 1% p.a. for all service groups 1% p.a. for all service groups Demographic assumptionsMortality Rate During Employment Indian Assured Lives Indian Assured Lives Mortality (2006-08) Ultimate Mortality (2006-08) Ultimate

Retirement Age 55 Years 55 Years


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15.4 Sensitivity of Assumptions Employed in Actuarial ValuationThe following table demonstrates the sensitivity to a reasonable possible change in the key assumptions employed with all other variables held constant in the employee benefit liability measurement, in respect of the year 2017.

The sensitivity of the Statement of Profit or Loss and Statement of Financial Position is the effect of the assumed changes in discount rate and salary increment rate on the Total Comprehensive Income and Employee Benefit Obligation for the year is as follows.

Group Company 2017 2017 Increase/(Decrease) Effect on Effect on Present Value Effect on Effect on Present Value in in Rate Total Statement of Defined Total Statement of Defined Discount of Salary Comprehensive of Financial Benefit Comprehensive of Financial Benefit Rate Increment Income Position Obligation Income Position Obligation (Reduction)/ (Reduction)/ (Reduction)/ (Reduction)/ Increase Increase in the Increase Increase in the for the year Liability as at for the year Liability as at the year end the year end Rs. Rs. Rs. Rs. Rs. Rs.

+1% - 1,360,349 (1,360,349) 8,398,576 1,158,319 (1,158,319) 6,700,623 -1% - (2,205,646) 2,205,646 11,964,571 (1,964,268) 1,964,268 9,823,210 - +1% (2,218,417) 2,218,417 11,977,342 (1,972,231) 1,972,231 9,831,173 - -1% 1,353,431 (1,353,431) 8,405,494 1,144,576 (1,144,576) 6,714,366

Sensitivity analysis is an analysis which will give the movement in liability if the assumptions were not proved to be true on different count.This only signifies the change in the liability if the difference between the assumed and the actual is not following the parameters of the sensitivity analysis.

15.5 Projected Benefits Payable in Future Years from the Date of Reporting Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Within the next 2 Years 717,465 1,078,647 442,964 568,799Between 3 and 5 Years 666,164 829,192 548,581 685,707Between 6 and 10 Years 13,984,284 19,676,422 13,003,469 18,350,924

Employee Benefit Liability has not been externally funded.



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16 DEFERRED TAX Group Deferred Tax Asset Deferred Tax Liability16.1 Movement 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Balance at beginning of the year 988,791 601,721 6,146,157 885,646Charge and release arising during the year recognised in the Statement of Profit or Loss 1,004,069 389,716 2,929,355 5,162,265Deferred Tax effect on Acturial gain/loss recognised in the OCI - (2,646) 46,890 98,246Balance at end of the year 1,992,860 988,791 9,122,402 6,146,157

16.2 Deferred Tax Assets /(Liability) and its Income Tax Implication as follows; Statement of Financial Statement of Other Comprehensive Position Profit or Loss Income 2017 2016 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs.

Accelerated depreciation for tax purposes (16,773,991) (5,364,279) (11,409,711) (4,835,711) - -Employee benefits obligations 219,565 206,914 59,542 63,162 (46,890) (100,892)Unutilised tax losses 9,424,884 - 9,424,884 - - -Deferred tax (Charge)/Release (1,925,285) (4,772,549) (46,890) (100,892)Net deferred tax assets/(liabilities) (7,129,542) (5,157,365)

16.3 The Company has not recognised deferred tax asset on its carried forward unused tax losses of Rs. 236,472,488/- as at 31st March 2017 (2016 - Rs. 209,293,584/-) as it is not probable that temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying value of the unrecognised deferred tax asset on the unused carried forward tax losses of the Company is estimated to Rs. 28,376,699/- (2016 - Rs. 25,115,230/-) at the rate of 12%, the income tax rate applicable to venture capital companies.

Unrecognised deferred tax assets are reassessed by the Company at each reporting date with the view of recognising to the extent that it has become probable that future taxable profits will allow the deferred tax assets to be recovered.


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17 TRADE AND OTHER PAYABLES Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Trade and Other Payables 14,145,694 13,662,512 2,058,457 6,217,460Group Balance Payable (Note 17.1) - - 1,097,144,010 930,055,068Dividends Payable 2,180,187 2,180,187 2,180,186 2,180,187Sundry Creditors including Accrued Expenses 20,533,009 19,879,145 8,085,065 4,229,919 36,858,890 35,721,844 1,109,467,718 942,682,634

17.1 Group Balance Payable Group CompanyCompany Name Relationship 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Upper Agra Oya Hydro Power (Pvt) Ltd Subsidiary - - 251,624,002 223,867,447Giddawa Hydro Power (Pvt) Ltd Subsidiary - - 386,061,100 351,925,669Okanda Power Grid (Pvt) Ltd Subsidiary - - 442,861,951 354,261,952Upper Huluganga (Pvt) Ltd Subsidiary - - 16,596,957 - - - 1,097,144,010 930,055,068

18 REVENUE Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Supply of Electricity 237,172,061 371,104,339 - -Dividend Income (Note 18.1) - - 20,595,946 59,130,918Interest Income from Investments 2,870,547 21,945,299 10,317,944 21,945,299 240,042,608 393,049,638 30,913,890 81,076,217

18.1 Dividend income comprises of dividend received from Panasian Power PLC amounting to Rs. 15,052,500/- and Upper Agra Oya Hydro Power (Pvt) Ltd amounting to Rs. 5,543,446/-.



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19 OTHER OPERATING INCOME/EXPENSE Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Profit / (Loss) on Sale of Fixed Assets 4,016,055 (49,043) 1,762,715 (136,914) 4,016,055 (49,043) 1,762,715 (136,914)

20 IMPAIRMENT CHARGE Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Investment in Ella Dendro Electric (Pvt) Limited (Note No 6.1) - - 7,500,000 -Impairment of Intercompany receivable from Ella Dendro Electric (Pvt) Limited (Note No 10.4) - - 14,009,828 -Impairment of Property Plant and Equipment (Note No 4.6) 38,996,905 - - -Impairment of Other Receivable during the year 566,102 - - - 39,563,007 - 21,509,828 -

21 NET FINANCE COST21.1 Finance Cost Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Interest Expense on Overdrafts 2,604,758 1,500,869 1,345,549 563,919Term Loan Interest 97,482,012 47,426,867 7,447,397 -Preference Share Dividends 6,550,000 11,713,949 - 5,146,004Bank Guarantee Charges 77,661 75,030 77,661 75,030Other Interest Expense - 297,621 - - 106,714,431 61,014,336 8,870,607 5,784,953


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21.2 Finance Income Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Interest Income on Staff Loans 316,095 275,357 108,444 101,600Interest Income-Others 452,212 617,280 - 5,300 768,307 892,637 108,444 106,900

Net Finance Cost 105,946,124 60,121,699 8,762,163 5,678,053

22 PROFIT BEFORE TAX Group CompanyStated After Charging all expenses including the following : 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Depreciation (note 4) 38,885,832 34,291,284 8,828,478 7,714,743Directors’ Fees and Emoluments - Short-term employment benefits (note 30.3) 17,414,610 19,251,560 17,414,610 19,251,560 - Post-employment benefits 2,542,208 2,255,973 2,542,208 2,255,973Donations 839,533 180,795 45,662 47,950Auditors’ Remuneration - Auditors’ Fees 1,158,232 1,077,551 528,652 489,493 - Non-Audit Services 1,091,170 720,181 729,772 425,463Staff Costs; - Defined Contribution Plan Costs - MSPS, EPF and ETF 4,282,098 3,384,560 2,157,752 1,176,720 - Defined Benefit Plan Costs - Gratuity (note 15.1) 2,342,154 2,112,482 1,819,736 1,562,089 - Other Staff Costs 50,806,608 42,127,106 27,486,510 18,553,213

23 TAX EXPENSE Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Current Tax Expense (note 23.1) 3,000,088 19,538,442 - -Under/(Over) Provision of Current Taxes in respect of Prior Year (1,675,450) (720,990) - -Deferred Tax Charge/(Reversal) (note 16.2) 1,925,286 4,772,549 - -Share of Tax Expense of Equity Accounted Investees - Associate - 4,060,540 - -Unclaimable Economic Service Charge (ESC) - 3,125,166 - 3,125,166Total Tax Expense included in Statement of Profit or Loss 3,249,924 30,775,707 - 3,125,166



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23.1 Reconciliation of Accounting Profit to Current Tax Expense Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Profit/(Loss) before taxation (85,295,701) 231,092,451 (18,920,683) 59,364,586Income not subject to tax (30,913,890) (136,556,163) (30,913,890) (81,235,661)Other sources of income (696,299) (628,783) - -Consolidated adjustments 35,912,353 35,336,983 - -Aggregate allowable expenses (110,000,333) (19,754,169) (9,753,903) (6,916,630)Aggregate disallowed items 118,306,315 51,862,871 38,067,292 26,470,876Taxable Profit/(Loss) from Business (72,687,555) 161,353,190 (21,521,184) (2,316,829)

Other sources of income 696,299 628,783 -Total Statutory Income (TSI) (71,991,256) 161,981,973 (21,521,184) (2,316,829)

Net of Tax losses generated and utilized during the year (Note 23.2) 100,364,167 - - -Taxable Income 28,372,911 161,981,973 (21,521,184) (2,316,829)

Income Tax @ 10% 2,523,595 - - -Income Tax @ 12% 301,392 19,362,383 - -Income Tax @ 28% 175,100 176,059 - -Current Income Tax Expense in the Statement of Profit or Loss 3,000,088 19,538,442 - -

23.2 Tax Losses Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Tax Losses Brought Forward (209,293,584) (210,917,583) (209,293,584) (210,917,583)Prior year adjustment (5,657,720) 3,940,828 (5,657,720) 3,940,828Tax Losses generated during the year (100,435,107) (2,316,829) (21,521,184) (2,316,829)Tax Losses utilised during the year 70,940 - - -Tax Losses Carried Forward (315,315,471) (209,293,584) (236,472,488) (209,293,584)

23.3 The Company has not recognised deferred tax asset on its carried forward unused tax losses as it is not probable that thetemporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The details of which are disclosed in note 16.3 to the Financial Statements.


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23.4 Super Gain Tax In accordance with the Finance Bill passed in Parliament on 20th October 2015, the Super Gain Tax (SGT) was levied on each company of a group of companies, of which the aggregate of the profits before income tax of all subsidiaries and the holding company in that group of companies, exceeds Rs.2.0Bn as per the audited financial statements, for the year of assessment commenced on 1st April 2013, at the rate of 25 per centum, on the taxable income of each such company, for such year of assessment, notwithstanding that the profit before income tax of any such company does not exceed Rs.2.0Bn. However, for the purpose of taxable income in relation to a company which has entered into an agreement with the Board of Investments of Sri Lanka (BOI) under section 17 of the Board of Investments of Sri Lanka Law, No. 4 of 1978 and has become liable to income tax after expiration of its period of tax exemption as per such agreement, means the before income tax profit of such company, as per the audited financial statements.


Resus Energy PLC (formerly known as Hemas Power PLC) and its subsidiaries being in the Hemas Group during 2013/14 financial year where Hemas Group had earned an aggregate of Group profit before income tax exceeding Rs.2.0Bn were liable for Super Gain Tax. However, the Company, Resus Energy PLC, was not liable for SGT as it reported a tax loss for the year under concern. The subsidiary companies of Resus Energy PLC which have entered into BOI agreements but already expired their tax exemption regimes as per such agreements were liable for SGT on their accounting profit before income tax as per the audited financial statements for the financial year ended 31st March 2014. Accordingly, the Resus Energy Group’s SGT exposure as calculated in accordance with above provisions amounted to Rs.30.1Mn. The said SGT liability was fully paid by those respective companies in three equal monthly installments commenced from 31st October 2015.

24. EARNINGS / (LOSS) PER SHARE24.1 Basic Earnings/(Loss) per shareBasic Earnings/(Loss) Per Share is calculated by dividing the net profit/(loss) for the year attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.

Group Company 2017 2016 2017 2016

Amount used as the numeratorProfit/(Loss) attributable to equity holders of the parent (Rs) (79,112,656) 200,455,751 (18,920,683) 56,239,420

Number of Ordinary Shares Used as the DenominatorWeighted average number of ordinary shares in issue 58,390,263 89,604,649 58,390,263 89,604,649

Earnings/(Loss) Per ordinary share (1.35) 2.24 (0.32) 0.63

24.2 There were no potentially dilutive ordinary shares outstanding at any time during the year ended 31 March 2017. Therefore Diluted earnings per share is same as Basic earnings per share.


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25. DIVIDEND PER SHAREThe Board of Directors of the Company neither paid any interim dividend nor recommended a final dividend for the year and the previous year.

26. ANALYSIS OF FINANCIAL INSTRUMENTS BY MEASUREMENT BASIS

Group Financial Loans and Available- Held to Total Fair Value As at 31st March 2017 Instruments Receivables/ for-Sale maturity carrying at fair value Borrowings at fair value at amortised amount through at amortised cost Profit/Loss cost Rs. Rs. Rs. Rs. Rs. Rs.

Financial Assets measured at fair valueFinancial Investments - Available-for-Sale - - 109,500,000 - 109,500,000 109,500,000

Financial Assets not measured at fair valueCash and Cash Equivalents - 6,772,739 - - 6,772,739 6,772,739Trade and Other Receivables - 79,692,214 - - 79,692,214 79,692,214Total Financial Assets - 86,464,953 109,500,000 - 195,964,953 195,964,953

Financial Liabilities not measured at fair valueInterest Bearing Loans and Borrowings - 1,073,381,617 - - 1,073,381,617 1,073,381,617Trade and Other Payables - 36,858,890 - - 36,858,890 36,858,890Non-Current Financial Liabilities - 84,742,102 - - 84,742,102 84,742,102Bank Overdrafts - 10,393,589 - - 10,393,589 10,393,589Total Financial Liabilities - 1,205,376,198 - - 1,205,376,198 1,205,376,198


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26 Analysis Of Financial Instruments By Measurement Basis Contd.

Group Financial Loans and Available- Held to Total Fair Value As at 31st March 2016 Instruments Receivables/ for-Sale maturity carrying at fair value Borrowings at fair value at amortised amount through at amortised cost Profit/Loss cost Rs. Rs. Rs. Rs. Rs. Rs.

Financial Assets not measured at fair valueCash and Cash Equivalents - 48,415,135 - - 48,415,135 48,415,135Trade and Other Receivables - 70,009,926 - - 70,009,926 70,009,926Total Financial Assets - 118,425,061 - - 118,425,061 118,425,061

Financial Liabilities not measured at fair valueInterest Bearing Loans and Borrowings - 983,033,249 - - 983,033,249 983,033,249Trade and Other Payables - 35,721,844 - - 35,721,844 35,721,844Bank Overdrafts - 11,989,475 - - 11,989,475 11,989,475Non-Current Financial Liabilities - 86,863,640 - - 86,863,640 86,863,640Total Financial Liabilities - 1,117,608,208 - - 1,117,608,208 1,117,608,208

Company Financial Loans and Available- Held to Total Fair Value As at 31st March 2017 Instruments Receivables/ for-Sale maturity carrying at fair value Borrowings at fair value at amortised amount through at amortised cost Profit/Loss cost Rs. Rs. Rs. Rs. Rs. Rs.

Financial Assets measured at fair valueFinancial Investments - Available-for-Sale - - 109,500,000 - 109,500,000 109,500,000

Financial Assets not measured at fair valueCash and Cash Equivalents - 4,892,449 - - 4,892,449 4,892,449Trade and Other Receivables - 860,158,361 - - 860,158,361 860,158,361Total Financial Assets - 865,050,810 109,500,000 - 974,550,810 974,550,810

Financial Liabilities not measured at fair valueInterest Bearing Loans and Borrowings - 85,000,000 - - 85,000,000 85,000,000Trade and Other Payables - 1,109,467,718 - - 1,109,467,718 1,109,467,718Bank Overdraft - 5,889,927 - - 5,889,927 5,889,927Total Financial Liabilities - 1,200,357,645 - - 1,200,357,645 1,200,357,645



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Company Financial Loans and Available- Held to Total Fair Value As at 31st March 2016 Instruments Receivables/ for-Sale maturity carrying at fair value Borrowings at fair value at amortised amount through at amortised cost Profit/Loss cost Rs. Rs. Rs. Rs. Rs. Rs.

Financial Assets not measured at fair valueCash and Cash Equivalents - 20,606,153 - - 20,606,153 20,606,153Trade and Other Receivables - 531,697,077 - - 531,697,077 531,697,077Total Financial Assets - 552,303,230 - - 552,303,230 552,303,230

Financial Liabilities not measured at fair valueTrade and Other Payables - 942,682,634 - - 942,682,634 942,682,634Total Financial Liabilities - 942,682,634 - - 942,682,634 942,682,634

There is no difference between carrying amounts and fair values of the Group’s and Company’s financial assets and liabilities.

“The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.”

The following methods and assumptions were used to estimate the fair valuesCash and short-term deposits, trade receivables and trade payables approximate their carrying amounts largely due to the short-term maturities of these instruments.

Long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the Group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the expected losses of these receivables. As at 31st March 2017,

the carrying amounts of such receivables, net of allowances, are not materially different from their calculated fair values.

The fair value of loans from banks and other financial liabilities were estimated by discounting future cash flows using rates currently available for debts on similar terms, credit risk and remaining maturities.

26.1 Fair value hierarchyThe Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation techniques.

Level 1: quoted (unadjusted ) prices in active markets for identical assets or liabilities

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data


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As at 31st March 2017, the Group held the following financial and non-financial assets carried at fair value on the statement of financial position:

GroupAssets measured at fair value 31.03.2017 Level 1 Level 2 Level 3

Freehold Lands - non-financial asset 19,900,000 - 19,900,000 -Available-for-Sale financial assets 109,500,000 109,500,000 - - 129,400,000 109,500,000 19,900,000 -

CompanyAssets measured at fair value 31.03.2017 Level 1 Level 2 Level 3

Available-for-Sale financial assets 109,500,000 109,500,000 - - 109,500,000 109,500,000 - -

During the reporting period ending 31st March 2017, there were no transfers between Level 1 and Level 2 fair value measurements

Financial liabilities are not measured at fair value.

27. EVENTS AFTER THE REPORTING PERIODThere have been no material events occurring after the reporting period that require adjustments to or disclosure in the financial statements. Other than disclosed below:

The Company acquired the entirety of JB Power (Pvt) Ltd, a company owning the approvals to develop a 700KW small hydropower project in Kegalle District, for a purchase consideration of Rs. 20.3Mn during the beginning of April, 2017.

28. COMMITMENTS AND CONTINGENCIES28.1 Capital Expenditure CommitmentsGroupThe Group’s commitments for acquisition/construction of property, plant and equipment incidental to the ordinary course of business as at 31st March 2017 are as follows: Capital Expenditure Commitment Capital Incurred as at as at Expenditure as at 31st March 31st March Budget reporting date 2017 2016 Rs. Mn Rs. Mn Rs. Mn Rs. Mn

Construction of Upper Huluganga mini hydropower plant 325 64 261 299



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28.2 Lease CommitmentsThe Company has leased out office premises (No. 250/1, Torrington Avenue, Colombo 7) under an operating lease agreement.The lease agreement includes clauses to enable upward revision of the rental payments on a periodic basis to reflect market conditions. There are no restrictions placed upon the Group by entering into this lease.

Future minimum rentals payable under operating leases are as follows: Company/Group 2017 2016 Rs. Rs.

Within One Year 3,307,500 3,150,000Between One and Five Years 3,472,875 6,780,375After Five Years - -Total 6,780,375 9,930,375

Following operating lease charges have been recognised in the Statement of Profit or Loss on straight-line basis over the lease term.

Company/Group 2017 2016 Rs. Rs.

Operating lease expense under Administrative Expenses 3,126,075 3,126,075

There are no contingent rent provisions in the lease agreement nor any material provisions that have impact on dividends and borrowings of the Company.

Upper Huluganga (Pvt) Limited, a subsidiary of Resus Energy PLC has established a Letter of Credit (LC) in favour of an Italian based equipment supplier (Zeco) to import electromechanical equipment for the 1.9MW mini hydropower plant which was under construction as at the reporting date.

The value of the electromechanical equipment committed for acquisition under the said LC by Upper Huluganga (Pvt) Limited amounts to Euro 500,000 (Rs. 83Mn approximately), of which Euro 100,000 (equivalent of Rs. 16Mn) has already been paid as an advance payment against an irrevocable unconditional advance payment bank guarantee. However, the balance payment of Euro 400,000 (Rs.67Mn approximately) due to the

supplier has not been provided for in the financial statements as equipment has not been delivered to Upper Huluganga (Pvt) Limited as at 31st March 2017.

The Group intends to incur the above stated capital commitments in the ensuing financial year ending 31st March 2018.

CompanyThe Company has no commitment to acquire property, plant and equipment as at 31st March 2017.


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28.3 ContingenciesThe Department of Inland Revenue have raised income tax assessments by disputing the venture capital status of Resus Energy PLC and the treatment of interest income in tax returns for the years of assessment 2008/2009 to 2014/2015. For the years of assessment 2008/2009 and 2009/2010, the Tax Appeal Commission resolved that assessments are without legal effect as the assessor has failed to give valid notice of assessment to the Appellant (Resus Energy PLC) as required by Section 164 of the Inland Revenue Act.

The aggregate value of the assessed income tax for the years of assessment 2010/2011 to 2014/15 amounts to Rs. 35.2Mn for which no provision has been made in these financial statements. The Company has filed appeals against the assessments.

The Bank Guarantees given by Resus Energy PLC as at 31st March 2017 in respect of above assessments are amounting to Rs. 8,344,167/- (2016 - Rs. 4,386,167/-).

28.4 LitigationsThere were no material litigations against the Group as at reporting date which require adjustments to or disclosure in the financial statements.

29 COMPARATIVE INFORMATIONTo facilitate the comparison and better presentation where relevant, balances pertaining to the previous year (2015/16) have been reclassified, as follows, Group Company As per the Classification As As per the Classification As Published Change per the Published Change per the Financial Financial Financial Financial Statements Statements Statements Statements of 2016 of 2017 of 2016 of 2017 Rs. Rs. Rs. Rs. Rs. Rs.

(a)Other Operating Income/(Expense) 15,895,611 (15,944,654) (49,043) 33,521,140 (33,658,054) (136,914)Net Gain/(Loss) on sale of Equity Accounted Investee - Associate - 15,944,654 15,944,654 - 33,658,054 33,658,054

(b)Other Current Financial Assets 3,961,280 (3,961,280) - 1,865,578 (1,865,578) -Trade and Other Receivables 66,048,646 3,961,280 70,009,926 529,831,499 1,865,578 531,697,077

(a) Disposal Gain/(Loss) on sale of equity accounted investees-associate which was shown under Results from operating activities was reclassified under Profit before tax. (Note No 7.2)

(b) Other Current Financial Assets which were under separate line item in previous year has been merged with Trade and Other Receivables. (Note No 10.2)



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30. RELATED PARTY DISCLOSURES30.1 Transactions with Key Management PersonnelAccording to Sri Lanka Accounting Standard - LKAS 24 on ‘Related Party Disclosures’, Key Management Personnel (KMP) are those having authority and responsibility for planning, directing and controlling the activities of the entity directly or indirectly. Accordingly, the Board of Directors of the Company (Executive and Non-Executive Directors) have been classified as KMPs. As the Company is the ultimate parent of the subsidiaries, the Board of Directors of the Company has the authority and responsibility for planning or controlling the activities of the Group directly or indirectly. Accordingly, the Board of Directors of the Company (Executive and Non-Executive) are KMPs of the Group.

a. Key Management Personnel (KMP) compensationGroup/ Company 2017 2016 Rs. Rs.

Short-term employment benefits 17,414,610 19,251,560Post-employment benefits 2,542,208 2,255,973 19,956,818 21,507,533

The Company also has an obligation towards a post-employment benefit plan for the Executive Directors. The liability arising from the post-employment obligation has been provided for, based on an actuarial valuation and is disclosed under Employee Benefits Obligations in note 15 to the Financial Statements.

The Executive Directors are entitled to a structured incentive scheme which is linked to performance. The Company contributes towards a post-employment contribution plan for the Executive Directors. In addition to their salaries, the Company provides non-cash benefits to KMPs.

b. Transactions with close family members of KMPsClose family members are defined as spouse or dependent. Dependent is defined as any one who depends on the respective Director for more than 50% of his/her financial needs. There were no transactions with the close family members of KMPs during the year

c. Transactions with Companies on which Key Management Personnel (KMP) have Control or Significant Influence overThe transactions with companies on which KMPs have significant influence are disclosed in ‘Directors’ Interest in Contract’ on page 133.

Trydan Partners (Pvt) Ltd in which Mr. G. A. K Nanayakkara, the Managing Director of Resus Energy PLC holds more than 50% of voting rights and functions as a Director of Trydan Partners (Pvt) Ltd has purchased 998,223 shares of Resus Energy PLC time to time during the year from the market in the ordinary course of its business. Timely announcements of these transactions have been notified to the Exchange.

Trydan Partners (Pvt) Ltd held 12.47% stake in Resus Energy PLC as at 31st March 2017. (2016-10.77%)

d. Terms and Conditions of Transactions with the Companies on which KMPs have Control or Significant Influence overOutstanding balances at the year-end relating to the companies on which KMPs have control or significant influence over are set out in note 10.3 and 17.1 to the financial statements. These balances are unsecured and settlements are on demand. There have been no guarantees provided or received for any related party receivables or payables for the year ended 31st March 2017.

e. Transactions with Group entitiesThe Company has carried out transactions with Group entities in the ordinary course of business. The details are set out in note 30.2 to the financial statements.

No other significant transactions had been taken place during the year with the parties/entities in which key management personnel or their close family members were involved.


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30.2 Details of significant related party disclosures:The Company carried out transactions in the ordinary course of its business with parties who are defined as related parties as per Sri Lanka Accounting Standard - LKAS 24 on ‘Related Party Disclosures’, the details of which are reported below:

The Company is in compliance with disclosure requirements in accordance with section 9.3.2 of the CSE Listing Rules on Related Party Transactions.

Nature of Transaction Terms and Conditions Recurrent/Non-recurrent

Giddawa Hydro Power (Pvt) Ltd

Okanda Power Grid (Pvt) Ltd

2017 2016 2017 2016

Rs. Rs. Rs. Rs.

Fund Transferred Settlement of current accounts Recurrent 78,754,292 35,322,377 79,488,930 28,338,754

Funds Received Settlement of current accounts Recurrent (33,000,000) (370,754,191) (88,600,000) ( 213,921,170)

Dividend Income Preference/Ordinary As per Agreement Recurrent - 39,150,000 - -

Provision for impairment As per Accounting Policies Non-recurrent - - - -

Investment in Subsidiaries As per Agreement Recurrent - - - -

Reimbursement of Expenses Payable on demand Recurrent 7,921,450 17,071,230 9,050,181 7,908,397

Share Repurchases Group Capital Restructuring Non-recurrent - 155,599,632 - 147,156,152

Preference share conversion Group Capital Restructuring Non-recurrent - 145,000,000 - -

Net Aggregate Value of Related Party Transactions 53,675,742 21,389,048 (60,889) (30,517,867)

Net Aggregate Value of Related Party Transactions - Recurrent 53,675,742 (279,210,584) (60,889) (177,674,019)

As a % of Group Revenue 22% 116% 0% 74%

Net Aggregate Value of Related Party Transactions - Non-recurrent - 300,599,632 - 147,156,152

As a % of Equity 0% 51% 0% 25%

As a % of Total Assets 0% 17% 0% 8%

30.3 Transactions with other group of CompaniesTransaction with other group of companies solely comprises of NDB group which hold 18.43% stake in Resus Energy PLC.

Group Company 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Interest Income from NDB Wealth Money Plus Fund 2,604,738 21,945,299 2,604,738 21,945,299Loans Received from NDB Bank PLC* - 445,000,000 - -Capital repayments on term loans to NDB Bank PLC* (104,953,264) (32,700,000) - -Interest paid on term loans to NDB Bank PLC* (33,887,297) (18,019,031) - -Consultancy Fees paid to NDB Investment Bank (293,250) (10,404,918) - -Preference Share Redemption - (67,500,000) - (67,500,000)Preference Share Dividend received/(paid) - (3,870,617) - (3,870,617) (136,529,073) 334,450,733 2,604,738 (49,425,318)


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Upper Agra Oya Hydro Power (Pvt) Ltd

Ella Dendro Electric (Pvt) Ltd


Upper Huluganga (Pvt) Ltd


2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

50,639,808 49,431,132 - - 252,049,358 105,211,020 29,941,863 9,091,598 61,310,961 87,475,284

(22,213,109) (135,626,711) (46,310,000) - (40,000,000) - - - (80,742,059) (60,100,000)

5,543,446 - - - - - - - - -

- - (14,009,828) - - - - - - -

- - - - (67,000,000) - (66,000,000) - - (50,000,000)

9,039,901 14,820,770 422,206 526,029 8,017,764 3,864,011 8,017,764 3,864,011 8,017,764 4,917,833

- 64,873,297 - - - - - - - -

- - - - - - - - -

43,010,046 (6,501,512) (59,897,622) 526,029 153,067,122 109,075,031 (28,040,373) 12,955,609 (11,413,334) (17,706,880)

43,010,046 (71,374,809) (45,887,794) 526,029 153,067,122 109,075,031 (28,040,373) 12,955,609 (11,413,334) (17,706,880)

18% 30% 19% 0% 64% 45% 12% 5% 5% 7%

- 64,873,297 (14,009,828) - - - - - - -

0% 11% 2% 0% 0% 0% 0% 0% 0% 0%

0% 4% 1% 0% 0% 0% 0% 0% 0% 0%

*These transactions occurred between NDB Bank PLC and fully-owned subsidiaries of Resus Energy PLC, namely, Giddawa Hydro Power (Pvt) Limited, Upper Agra Oya Hydro Power (Pvt) Limited and Okanda Power Grid (Pvt) Limited.

Terms and Conditions :Sales and Purchases of goods and/or services to related parties were made at on the basis of the price lists in force with non-related parties, but subject to approved discounts. Fees relating to rendering of services were made at agreed prices.


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31 SEGMENTAL INFORMATIONInformation based on the primary segments ( Business Segments) Hydro Power Others Group 2017 2016 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs.

RevenueSegmental Revenue 237,172,061 371,104,337 30,913,890 81,076,217 268,085,951 452,180,554Intra Segmental Revenue - (28,043,343) (59,130,916) (28,043,343) (59,130,916)Total Revenue 237,172,061 371,104,337 2,870,547 21,945,301 240,042,608 393,049,638

Results from Continuing OperationsOperating Profit/(Loss) 118,205,660 299,084,971 (38,531,841) (23,815,475) 79,673,819 275,269,496Net Finance Cost (104,631,358) (54,443,646) (1,314,766) (5,678,053) (105,946,124) (60,121,699)Impairment Charges - - (39,563,007) - (39,563,007) -Net Gain/(Loss) on sale of equity accounted investees - Associate - - 23,506,346 33,658,054 23,506,346 33,658,054Eliminations/Adjustments - - (42,966,735) (17,713,400) (42,966,735) (17,713,400)Profit/(Loss) before Tax 13,574,302 244,641,325 (98,870,003) (13,548,874) (85,295,701) 231,092,451Tax Expense (3,249,924) (27,650,541) - (3,125,166) (3,249,924) (30,775,707)Profit/(Loss) for the Year 10,324,378 216,990,784 (98,870,003) (16,674,040) (88,545,625) 200,316,744

Attributable to:Equity Holders of the Parent 10,324,378 216,990,784 (89,437,034) (16,535,033) (79,112,656) 200,455,751Non-Controlling Interest - - (9,432,969) (139,007) (9,432,969) (139,007) 10,324,378 216,990,784 (98,870,003) (16,674,040) (88,545,625) 200,316,744 Assets and Liabilities Non-Current Assets Property Plant and Equipment 1,714,179,692 1,359,931,053 28,944,866 111,265,628 1,743,124,558 1,471,196,681Investments in associate - 365,144,265 - - - 365,144,265Financial Investments - Available-for-Sale - - 109,500,000 - 109,500,000 -Other Non-Current Assets 1,992,860 988,791 784,967,767 972,733,296 786,960,627 973,722,088Segmental Non-Current Assets 1,716,172,552 1,726,064,109 923,412,633 1,083,998,924 2,639,585,185 2,810,063,033Eliminations/Adjustments - - - - (658,215,201) (845,980,730)Total Non-Current Assets 1,716,172,552 1,726,064,109 923,412,633 1,083,998,924 1,981,369,984 1,964,082,303



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Hydro Power Others Group 2017 2016 2017 2016 2017 2016 Rs. Rs. Rs. Rs. Rs. Rs.

Segmental Current AssetsCurrent Assets 1,316,383,720 1,055,801,425 873,634,852 561,453,373 2,190,018,572 1,617,254,798Eliminations/Adjustments - - - - (2,080,035,880) (1,483,888,671)Total Current Assets 1,316,383,720 1,055,801,425 873,634,852 561,453,373 109,982,692 133,366,127Total Assets 3,032,556,272 2,781,865,534 1,797,047,485 1,645,452,297 2,091,352,676 2,097,448,430

Non-Current LiabilitiesSegmental Non-Current Liabilities 955,564,322 953,205,292 7,858,942 8,077,425 963,423,264 961,282,717Total Non-Current Liabilities 955,564,322 953,205,292 7,858,942 8,077,425 963,423,264 961,282,717

Current LiabilitiesSegmental Current Liabilities 1,144,482,843 657,128,826 1,214,828,711 1,002,921,497 2,359,311,554 1,660,050,323Income Tax Liabilities 2,544,209 7,158,688 - - 2,544,209 7,158,688Eliminations/Adjustments - - - - (2,098,477,293) (1,487,704,297)Total Current Liabilities 1,147,027,052 664,287,514 1,214,828,711 1,002,921,497 263,378,470 179,504,714Total Liabilities 2,102,591,374 1,617,492,806 1,222,687,653 1,010,998,922 1,226,801,734 1,140,787,431

Other Segmental InformationAcquisition of Property, Plant and Equipment 384,386,740 260,577,360 13,048,523 11,525,753 397,435,263 272,103,113Revaluation of Lands - 5,153,120 - 4,500,000 - 9,653,120Depreciation of Segmental Assets 30,057,354 26,576,541 8,828,478 7,714,743 38,885,832 34,291,284

Other Non-Cash ExpensesDefined Benefit Plan - Gratuity 522,418 550,393 1,819,736 1,562,089 2,342,154 2,112,482

For management purposes, the Group is organised into business units and two reportable segments were identified.

Hydro PowerRepresents the Group’s major continuing line of business. This includes five fully-owned operational hydropower plants with an aggregate capacity of 9.9MW.Aggregate operational results, assets and liabilities of hydropower segment are presented under this segment.In addition to operational plants, capital work in progress of Group’s fully-owned hydropower plants under construction and their liabilities are aggregated under this segment.

OthersThis segment represents venture capital activities of the holding company, Resus Energy PLC, its related assets and liabilities and the Group’s interest in assets and liabilities of Ella Dendro Electric (Pvt) Limited, the company formed to develop a biomass project.


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32 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe Group’s principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations and to provide guarantees to support its operations. The Group has Trade and other receivables and cash and cash equivalents that arrive directly from its operations.

The Group is exposed to market risk, credit risk and liquidity risk.

The Group’s senior management oversees the management of these risks. The Group’s senior management is supported by the Board of Directors (BOD) that advises on financial risks and the appropriate financial risk governance framework for the Group. BOD provides assurance to the Group’s senior management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with Group policies and Group risk appetite. It is the Group’s policy that all derivative activities for risk management purposes are required to be approved by Board of Directors of the parent company, Resus Energy PLC.

The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.

1. Market riskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk of the Group primarily comprise of three types of risks: interest rate risk, currency risk, and other price risk, such as equity price risk. The Group’s exposure to commodity price risk is insignificant. Financial instruments affected by market risk include loans and borrowings, deposits, and available-for-sale investments.


The overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the entity’s financial performance, while optimising the returns to shareholders.

Financial risk management is carried out by finance division of the Group under risk management policies approved by the Board which set out the principles and procedures with respect to risk tolerance, delegated authority levels, internal controls, and management of foreign currency, interest rate and counterparty credit exposures and the reporting of exposures.

1.1 Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates.

The Group manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings. As end of the reporting year, 31st March 2017, the Group did not have significant portion of loans and borrowings at variable interest rates as it has fixed the interest rate on a significant portion of long-term debt.


197

GroupAs at 31st March 2017 2016 Rs. % Rs. %

Long-term Loans at variable interest rates 240,000,000 22% 110,017,000 11%Long-term Loans at fixed interest rates 833,381,617 78% 873,016,249 89%Total 1,073,381,617 100% 983,033,249 100%

Company did not have any long-term borrowings as at reporting date.Changes in market interest rate (Average Weighted Prime Lending Rate - AWPLR) will have following sensitivity on Group’s finance cost.

Increase/(decrease) in AWPLR, ceteris paribusEffect on profit before tax - 2017 Group Companychange in basis points: Rs. Rs.

+100 (1,166,667) --100 1,166,667 -

Changes in deposit interest rate will have following sensitivity on interest income from investing excess cash.

Increase/(decrease) in deposit interest rate, ceteris paribusEffect on profit before tax - 2017 Group Companychange in basis points: Rs. Rs.

+100 164,024 98,043-100 (164,024) (98,043)

1.2 Equity price riskThe Company’s listed equity securities are susceptible to market price risk arising from uncertainties about future market values of the securities. The Company’s Board of Directors reviews and approves all equity investment decisions.

The Company holds 36.5Mn shares in Panasian Power PLC as at the reporting date. The market value of this investment as at 31st March 2017 at the price of Rs. 3.00/- per share amounted Rs. 109.5Mn. The Group has classified the investment as Available-for-Sale, therefore sensitivity on fair value gain/loss from investment as follows;

Increase/(decrease) in Market Price, ceteris paribusEffect on total comprehensive income - 2017 Group CompanyChange in Rs. Rs.

+10 Cents 3,650,000 3,650,000-10 Cents (3,650,000) (3,650,000)

1.3 Foreign Exchange RiskForeign exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to foreign exchange rate changes is minimised by positive negotiations with banks and application of financial risk management techniques. The Group’s exposure to foreign exchange risk derives from electromechanical equipment imports to its hydropower projects. The sensitivity of financial statement implications on assumed fluctuations in exchange rates are not reasonably estimatable due to unknown prices of future equipment orders as at the reporting date. Therefore, a sensitivity analysis is not shown as the Group is not aware of future equipment prices as at the reporting date.


198

2. Credit riskCredit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks. The credit risk arising on trade receivables primarily relates to the financial health of Ceylon Electricity Board being the sole customer of the Group.

Group CompanyAs at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Trade and other receivables 79,692,214 70,009,926 30,780,968 19,913,913Amounts due from related parties - 568,281 829,377,393 511,783,164Income Tax Recoverable 18,421,846 8,585,138 8,584,042 8,584,042Cash and cash equivalents 6,772,739 48,415,135 4,892,449 20,606,153Total credit risk exposure 104,886,799 127,578,480 873,634,852 560,887,272

2.1 Cash deposit instrumentsInvestment of surplus funds is made only with approved counterparties by the Board of Directors of Resus Energy PLC. Counterparty exposures are reviewed by the Board of Directors on an annual basis, and updated throughout the year. The limits are set to minimise the concentration of risks and therefore mitigate financial losses from potential counterparty’s failure.

Group CompanyAs at 31st March 2017 2016 2017 2016 Rs. Rs. Rs. Rs.

Unit Trust - NDB Eagle Money Plus Fund - 18,724,312 - 18,724,312Banks - savings deposits 3,310,818 29,690,823 3,310,818 1,881,842 3,310,818 48,415,135 3,310,818 20,606,154

Bank deposits above represent cash held in savings account at Sampath Bank PLC.

2.2 Trade receivablesCustomer credit risk is managed by the Group within Group’s established policy, procedures and control relating to customer credit risk management. Outstanding receivables from Ceylon Electricity Board are regularly monitored.

Large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in note 26 to the financial statements. The Group does not hold collateral as security.



199

3. Liquidity riskThis is the risk that the Group will encounter in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be either settled or rolled over with existing lenders.

The table below summarises the maturity profile of the Group’s financial liabilities based on contractual discounted payments.

As at 31st March 2017 - Group On demand Less than 3 to 12 1 to 5 > 5 years Total 3 months months years Rs. Rs. Rs. Rs. Rs. Rs.

Interest-bearing loans and borrowings - - 213,581,782 708,992,359 150,807,476 1,073,381,617Non-Current financial liabilities - - 764,092 83,978,010 - 84,742,102Trade and other payables - - 36,858,890 - - 36,858,890Income tax liabilities - - 2,544,209 - - 2,544,209Bank Overdraft 10,393,589 - - - - 10,393,589 10,393,589 - 253,748,973 792,970,369 150,807,476 1,207,920,407

As at 31st March 2016 - Group On demand Less than 3 to 12 1 to 5 > 5 years Total 3 months months years Rs. Rs. Rs. Rs. Rs. Rs.

Interest-bearing loans and borrowings - - 124,634,707 575,785,949 282,612,591 983,033,247Non-Current financial liabilities - - - 83,978,010 2,978,010 86,956,020Trade and other payables - - 35,721,844 - - 35,721,844Income tax liabilities - - 7,158,688 - - 7,158,688Bank Overdraft 11,989,475 - - - - 11,989,475 11,989,475 - 167,515,239 659,763,959 285,590,601 1,124,859,274

As at 31st March 2017 - Company On demand Less than 3 to 12 1 to 5 > 5 years Total 3 months months years Rs. Rs. Rs. Rs. Rs. Rs.

Interest-bearing loans and borrowings - 85,000,000 - - - 85,000,000Trade and other payables - - 1,109,467,718 - - 1,109,467,718Bank Overdraft 5,889,927 - - - - 5,889,927 5,889,927 85,000,000 1,109,467,718 - - 1,200,357,645


200

As at 31st March 2016 - Company On demand Less than 3 to 12 1 to 5 > 5 years Total 3 months months years Rs. Rs. Rs. Rs. Rs. Rs.

Trade and other payable - - 942,682,634 - - 942,682,634 - - 942,682,634 - - 942,682,634


Capital managementThe primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximize shareholder value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue

new shares. No changes were made in the objectives, policies or processes managing capital during the years ended 31st March 2017 and 31st March 2016.

The Group monitors capital using a gearing ratio, which is debt divided by total capital employed. The Group’s policy is to maintain an optimal capital structure at appropriate gearing level to attribute the maximum benefits on debt tax shields to the equity holders of the Group whilst cautiously managing the level of distress on debt.

A summary of Group’s capital structure is depicted below.

As at 31st March 2017 2016 Rs. Rs.

Interest bearing long-term borrowings and financial liabilities 1,168,517,308 1,081,886,364Equity 864,550,942 956,660,997Total Equity and long-term borrowings 2,033,068,250 2,038,547,361Gearing ratio 57.5% 53.1%


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FIVE YEAR SUMMARY

Restated RestatedYear Ended 31st March 2017 2016 2015 2014 2013 Rs. Rs. Rs. Rs. Rs.

A) Summary of OperationsRevenue 240,042,608 393,049,638 575,575,817 543,675,974 230,334,030Gross Profit 167,217,392 319,603,820 485,151,672 455,829,384 173,191,649Share of results of equity accounted investees - Associates 6,140,499 40,150,218 - -Profit from Operating Activities 79,673,819 275,269,496 391,432,344 373,455,365 101,680,584Profit before Taxation (85,295,701) 231,092,451 340,393,565 332,192,175 87,653,564Tax Expenses (3,249,924) (30,775,707) (35,841,210) (16,070,196) 1,102,253Profit after tax from Continuing Operations (88,545,625) 200,316,744 304,552,355 316,121,979 88,755,817Profit/(Loss) after tax from Discontinued Operation - - (280,501,536) (478,711,058) 193,696,028Profit/(Loss) after Tax (88,545,625) 200,316,744 24,050,819 (162,589,079) 282,451,844

Profit attributable to Equity Holders of the Parent (79,112,656) 200,455,751 (60,253,848) (259,130,805) 282,451,844Profit attributable to Non-Controlling Interest (9,432,969) (139,007) 84,304,667 96,541,726 - (88,545,625) 200,316,744 24,050,819 (162,589,079) 282,451,844

B) Summary of Financial PositionCapital and ReservesStated Capital 300,000,000 300,000,000 1,539,882,957 1,539,882,957 1,539,882,957 Other Components of Equity 3,299,461 18,169,390 12,256,245 8,452,677 3,878,256Retained Earnings 564,839,248 632,646,405 834,845,150 960,777,707 1,313,716,489Equity Attributable to Equity Holders of the Parent 868,138,709 950,815,795 2,386,984,352 2,509,113,341 2,857,477,702Non-Controlling Interest (3,587,767) 5,845,202 2,500,000 737,916,000 2,500,846Total Equity 864,550,942 956,660,997 2,389,484,352 3,247,029,341 2,859,978,548

LiabilitiesNon-Current Liabilities 963,423,264 961,282,719 96,451,388 184,156,655 220,740,297Current Liabilities 263,378,470 179,504,714 181,909,322 205,853,090 19,460,522Total Liabilities 1,226,801,734 1,140,787,433 278,360,710 390,009,745 240,200,819

Total Equity and Liabilities 2,091,352,676 2,097,448,430 2,667,845,062 3,637,039,086 3,100,179,367

AssetsProperty, Plant and Equipment 1,743,124,558 1,471,196,681 1,229,091,757 1,693,441,460 1,189,134,688Investments in Associate - 365,144,265 504,198,507 - -Investments in Joint Venture - - - 808,451,750 1,373,716,684Other Non-Current Assets 128,745,426 127,741,357 127,354,287 885,611,428 295,850,946Financial Investments - Available -for-Sale 109,500,000 - - - -Current Assets 109,982,692 133,366,127 807,200,511 249,534,448 241,477,049Total Assets 2,091,352,676 2,097,448,430 2,667,845,062 3,637,039,086 3,100,179,367


202

Restated RestatedYear Ended 31st March 2017 2016 2015 2014 2013 Rs. Rs. Rs. Rs .Rs.

C) Key IndicatorsEarnings/(Loss) per Share From Profit/(Loss) for the Year (Rs) (1.35) 2.24 (0.48) (2.07) 2.26 From Continuing Operations (Rs) (1.35) 2.24 1.76 1.75 0.71 From Discontinued Operations (Rs) - - (2.24) (3.82) 1.55Net Profit/(Loss) Margin (%) (36.9%) 51.0% 4.2% (29.9%) 122.6%Net Assets per Share (Rs) 14.87 16.28 19.07 20.04 22.82Dividend per Share (Rs) - - - 0.75 1.40Dividend Payout (%) - - - 33% 70%Dividend Cover (Times) - - - 3.01 1.43Interest Cover (Times) 0.8 4.6 8.1 10.6 7.2Current Ratio (Times) 0.4 0.7 4.4 1.2 12.4Gearing (%) 57.5% 53.1% 6.1% 8.9% 7.1%Return on Equity (%) (8.7%) 12.0% (2.5%) (9.7%) 10.2%

FIVE YEAR SUMMARY CONTD.


203

SUPPLEMENTARY INFORMATION

Share Information 204Global Reporting Initiative (GRI) Index 207Independent Assurance Report on Sustainability Reporting 214Notice of Meeting 218Form of Proxy 219Corporate Information Inner Back Cover


204

SHARE INFORMATION

Twenty Major Shareholders

As at 31st March 2017 2016

Name of the Shareholder No. of Shares % No. of Shares

1 ACL Cables PLC 18,515,403 31.71 18,515,403

2 NDB Capital Holdings PLC 10,764,220 18.43 10,764,220

3 Trydan Partners (Pvt) Ltd A/C No.1 3,862,433 6.61 2,864,210

4 Trydan Partners (Pvt) Ltd A/C No.2 3,423,784 5.86 3,423,784

5 Global Rubber Industries (Pvt) Ltd 5,727,017 9.81 1,845,288

6 Employees Trust Fund 1,586,400 2.72 1,586,400

7 Bank of Ceylon Account No 1 1,117,700 1.91 1,117,700

8 People’s Leasing & Finance PLC / C. D. Kohombanwickramage 1,098,405 1.88 1,094,525

9 Waldock Mackenzie Ltd / S. R. Fernando 442,107 0.76 409,156

10 Mr. H. Beruwalage 419,200 0.72 419,200

11 Ayenka Holdings (Pvt) Ltd 282,555 0.48 -

12 Tangerine Tours 278,200 0.48 278,200

13 Miss. D. Sithampalam 232,000 0.40 232,000

14 Mr. D. T. Beruwalage 227,600 0.39 227,600

15 National Savings Bank 203,341 0.35 203,341

16 Mrs. B. R. Gamlath 193,370 0.33 -

17 Mr. D.H. N. Kandamudali 183,995 0.32 -

18 Hallsville Trading Group Inc. 177,096 0.30 -

19 MBSL Insurance Company Limited 172,737 0.30 -

20 Mr. K. C. Vignarajah 172,000 0.29 -

49,079,563 84.05

Shares held by the balance shareholders 9,310,700 15.95

Total Issued Shares 58,390,263 100.00


205

Analysis of shareholders according to the number of shares as at 31st March 2017

Shareholdings Resident Non Resident Total

No. ofShareholders

No. ofShares

Percentage(%)

No. ofShareholders

No. ofShares

Percentage(%)

No. ofShareholders

No. ofShares

Percentage(%)

1 to 1,000 1,931 824,500 1.41 9 5,928 0.01 1,940 830,428 1.42

1001 to 10,000 699 2,364,204 4.05 9 48,284 0.08 708 2,412,488 4.13

10,001 to 100,000 148 4,294,650 7.36 10 394,151 0.68 158 4,688,801 8.04

100,001 to 1,000,000 22 4,186,088 7.17 1 177,096 0.30 23 4,363,184 7.47

over 1,000,000 8 46,095,362 78.94 - - - 8 46,095,362 78.94

2,808 57,764,804 98.93 29 625,459 1.07 2,837 58,390,263 100.00

Categories of Shareholders No ofShareholders

No of Shares

Individual 2,707 8,269,648

Institutional 130 50,120,615

2,837 58,390,263

Computation of % of Public Shareholding

As at 31st March 2017 2016 No. of Shares No. of Shares

Over 10% HoldingACL Cables PLC 18,515,403 18,515,403NDB Capital Holdings Limited 10,764,220 10,764,220Trydan Partners (Pvt) Limited 7,286,217 6,287,994 36,565,840 35,567,617

Directors’ Direct ShareholdingH A S Madanayake (Non-Executive Chairman) - -G A K Nanayakkara (Managing Director) 112,000 112,000U G Madanayake (Non-Executive Director) - -I S Somaratne (Non-Executive Director) 1,000 1,000Prof. K A M K Ranasinghe (Independent Non-Executive Director) - -U P Egalahewa PC (Independent Non-Executive Director) - -C D Coomasaru (Alternative Director to Mr. U G Madanayake) - - 113,000 113,000


206

As at 31st March 2017 2016 No. of Shares No. of Shares

Directors’ Indirect ShareholdingH A S Madanayake (Non-Executive Chairman) - -G A K Nanayakkara (Managing Director) 5,897 5,897U G Madanayake (Non-Executive Director) - -I S Somaratne (Non-Executive Director) 900 900Prof. K A M K Ranasinghe (Independent Non-Executive Director) - -U P Egalahewa PC (Independent Non-Executive Director) - -C D Coomasaru (Alternative Director to Mr. U G Madanayake) - - 6,797 6,797

lssued Ordinary Shares as at 31st March 58,390,263 58,390,263LessOver 10% Shareholding 36,565,840 35,567,617Directors’ direct and indirect Shareholding 119,797 119,797Shareholding of other partner in consortium-Trydan Partners (Pvt) Limited - -Public Holding 21,704,626 22,702,849Public Holding as a % of lssued Share Capital 37.17% 38.88%

Share Trading Information 2017 2016

Market Price Highest (Rs.) 20.90 27.40 Lowest (Rs.) 18.00 18.10 As at Year ended (Rs.) 19.00 22.20No. of Trades 976 4,807No. of Shares Traded 6,064,055 17,652,736Value of Shares Traded (Rs.) 139,733,068 426,985,520Market Capitalisation (Rs.) 1,109,414,997 1,296,263,839Price Earnings Ratio (Times) (14.07) 9.91

SHARE INFORMATION CONTD.


207

GLOBAL REPORTING INITIATIVE (GRI) INDEX

GENERAL STANDARD DISCLOSURES Page Number External Assurance (Page

214 to 215) Strategy and AnalysisG4-1 Statement from the Managing Director 14 -17 Yes

G4-2 Key impacts, risks and opportunities 14-17, 120-126 Yes

Organisation ProfileG4-3 Name of the organisation Inner Back Cover Yes

G4-4 Primary brands, products and/or services 54-59 Yes

G4-5 Location of organisation’s headquarters Inner Back Cover Yes

G4-6 Countries of operation 8 Yes

G4-7 Nature of ownership and legal form 8, Inner Back Cover Yes

G4-8 Markets served 43, 54-59 Yes

G4-9 Scale of the reporting organisation 8, 10, 47, 54-59 Yes

G4-10 Total workforce by employment type, employment contract and region, broken down by gender 47, 48

Yes

G4-11 Percentage of employees covered by collective bargaining agreements 52 Yes

G4-12 Organisation’s supply chain 44 Yes

G4-13 Significant changes during the reporting period regarding size, structure or ownership 6-7

Yes

G4-14 Explanation of whether and how the precautionary approach or principle is addressed by the organisation 65

Yes

G4-15 Externally developed economic, environmental and social charters and principles, or other initiatives to which the organisation subscribes or endorses 3

Yes

G4-16 Memberships in associations and/or national/international advocacy organisations Inner Back Cover

Yes

Identified material aspect and boundariesG4-17 Organisation entities covered by the report 8, 128-132, 143-200 Yes

G4-18 Process for defining report content 3, 25 Yes

G4-19 Material aspects identified for report content 25-27 Yes

G4-20 Aspect boundary for identified material aspects within the organisation 25-27 Yes

G4-21 Aspect boundary for identified material aspects outside the organisation 25-27 Yes

G4-22 Explanation of the effect of any restatement of information provided in earlier reports and the reason for such restatement 3, 25

Yes

GRI Content Index for ‘In accordance’ – Core


208


214 to 215)

G4-23 Significant changes from previous reporting periods in the Scope and Aspect Boundaries

3 Yes

Stakeholder EngagementG4-24 List of stakeholder groups engaged by the organisation 28-33 Yes

G4-25 Basis for identification and selection of stakeholders with whom to engage 25 Yes

G4-26 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group

29-33 Yes

G4-27 Key topics and concerns raised through stakeholder engagement and how the organisation has responded to them 29-33

Yes

Report ProfileG4-28 Reporting period 3 Yes

G4-29 Date of most recent previous report 3 Yes

G4-30 Reporting cycle 3 Yes

G4-31 Contact point for questions regarding the report or its contents 3 Yes

G4-32 Compliance with GRI G4 guidelines, GRI Content Index and the External Assurance Report

3, 207-213, 214 Yes

G4-33 Policy and current practice with regard to seeking external assurance for the Report

3, 214 Yes

GovernanceG4-34 Governance structure of the organisation, including committees under the

highest governance body responsible for decision-making on economic, environment and social impacts

74 Yes

G4-38 Composition of the highest governance body and its Committees 18-21, 85, 92, 94 Yes

G4-39 Indicate whether the Chair of the highest governance body is also an Executive Officer

78 Yes

G4-41 Processes in place for the highest governing body to ensure conflicts of interests are avoided and managed

80, 81 Yes

G4-48 Highest Committee which formally reviews and approves the Sustainability Report ensuring all material aspects are covered

3 Yes

GLOBAL REPORTING INITIATIVE (GRI) INDEX CONTD.


209


214 to 215)

Ethics and IntegrityG4-56 The values, principles, standards and norms of behavior 4, 72 Yes

Specific Standard Disclosures

Category: EconomicMaterial Aspect: Economic Performance

G4-DMA Economic Impact Management 60-64 Yes

G4-EC1 Direct economic value generated, distributed and retained 61 Yes

G4-EC2 Financial implications and other risks and opportunities due to climate change

14-17 Yes

G4-EC3 Coverage of the organisation’s defined benefit plan obligations 177 Yes

G4-EC4 Financial assistance received from government 38, 43 Yes

Material Aspect: Indirect Economic Impacts

G4-DMA Economic Impact Management 60-64

G4-EC7 Development and impact of infrastructure investments and services supported

43 Yes

G4-EC8 Significant economic impact 60-64 Yes

Material Aspect: Procurement Practices

G4-DMA Social and Relationship Capital 43-46

G4-EC9 Proportion of spending on local suppliers 45 Yes

Category: EnvironmentalMaterial Aspect: Materials

G4-DMA Environmental Impact Management 67

G4-EN1 Materials used by weight or volume 67 Yes

Material Aspect: Energy

G4-DMA Environmental Impact Management 66 Yes

G4-EN3 Energy consumption within the organisation 66 Yes

Material Aspect: Water


G4-EN8 Total water withdrawal by source 66 Yes

G4-EN9 Water sources significantly affected by withdrawal of water 66 Yes

G4-EN10 Percentage and total volume of water recycled and reused 66 Yes


210



214 to 215)

Material Aspect: Biodiversity

G4-EN11 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas

69-70 Yes

G4-EN12 Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas

69-70 Yes

G4-EN13 Habitats protected or restored 69-70 Ye

G4-EN14 Total number of IUCN red list species and national conservation list species with habitats in areas affected by operations, by level of extinction risk

69-70 Yes

Material Aspect: Emission


G4-EN15 Direct greenhouse gas emissions (Scope 1) 69 Yes

G4-EN16 Energy indirect greenhouse gas emissions (Scope 2) 69 Yes

G4-EN17 Other indirect greenhouse gas emissions (Scope 3) 69 Yes

G4-EN19 Reduction of greenhouse gas emissions 69 Yes

G4-EN20 Emissions of ozone-depleting substances (ODS) 69 Yes

G4-EN21 NOx, SOx, and other significant air emissions 69 Yes

Material Aspect: Effluent and Waste


G4-EN22 Total water discharge by quality and destination 66 Yes

G4-EN23 Total weight of waste by type and disposal method 68 Yes

Material Aspect: Compliance


G4-EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

71 Yes

Material Aspect: Overall


G4-EN31 Total environmental protection expenditures and investments by type 71

Material Aspect: Supplier Environment Assessment

G4-DMA Social and Relationship Capital 45

G4-EN32 Percentage of new suppliers that were screened using environmental criteria

45


211


214 to 215)

G4-EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken

45

Material Aspect: Environmental Grievances Mechanism


G4-EN34 Number of grievances about environmental impacts filed, addressed, and resolved through formal grievance mechanisms

71 Yes

Category: SocialSub Category: Labour Practices and Decent Work

G4-DMA Human Capital 47-52 Yes

G4-LA1 Total number and rate of new employee hires and employee turnover by age group, gender, and region

47-48 Yes

G4-LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by significant locations of operation

52 Yes

G4-LA3 Return to work and retention rates after parental leave, by gender 52 Yes

Material Aspect: Occupational Health and Safety


G4-LA6 Type of injury and rates of injury, occupational diseases, lost days, and absenteeism and total number of work-related fatalities, by region and by gender

51 Yes

Material Aspect: Training and Education


G4-LA9 Average hours of training per year per employee by gender and by employee category

49 Yes

G4-LA10 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

49 Yes

G4-LA11 Percentage of employees receiving regular performance and career development reviews by gender and employee category

51 Yes

Material Aspect: Diversity and Equal Opportunity

G4-DMA Human Capital 47-52

G4-LA12 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity

47


212



214 to 215)

Material Aspect: Supplier Assessment of Labour Practices

G4-DMA Social and Relationship Capital 45

G4-LA14 Percentage of new suppliers that were screened using labour practices criteria

45

G4-LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken

45

Material Aspect: Labour Practices and Grievance Mechanism


G4-LA16 Number of grievances about labour practices filed, addressed and resolved through formal grievance mechanisms

50 Yes

Sub Category: Human RightsMaterial Aspect: Non-discrimination

G4-DMA Human Capital 47-52

G4-HR3 Total number of incidents of discrimination and corrective actions taken 51 Yes

G4-HR4 Operations and suppliers identified, in which the right to exercise freedom of association and collective bargaining may be violated or at significant risk, and measures taken to support these rights

52 Yes

G4-HR5 Operations and suppliers identified as having significant risk for incidents of child labour, and measures taken to contribute to the effective abolition of child labour

45, 51 Yes

G4-HR6 Operations and suppliers identified as having significant risk for incidents of forced or compulsory labor, and measures to contribute to the elimination of all forms of forced or compulsory labour

45, 51 Yes

Material Aspect: Human Right Grievance Mechanism

G4-DMA Human Capital 52 Yes

G4-HR12 Number of grievances about Human Rights impacts filed, addressed and resolved through formal grievance mechanisms

52 Yes

Sub Category: SocietyMaterial Aspect: Local Communities

G4-DMA Social and Relationship Capital 43-46

G4-SO1 Percentage of operations with implemented local community engagement, impact assessments and development programmes

46 Yes


213


214 to 215)

G4-SO2 Operations with significant actual and potential negative impacts on local communities

72 Yes

Material Aspect: Anti-corruption

G4-DMA Social Impact Management 72

G4-SO5 Confirmed incidents of corruption and actions taken 72 Yes


G4-DMA Social Impact Management 72 Yes

G4-SO8 Monetary value of significant fines and total number of nonmonetary sanctions for non-compliance with laws and regulations

72 Yes

G4-SO9 Percentage of new suppliers that were screened using criteria for impacts on society

45 Yes

G4-SO10 Significant actual and potential negative impacts on society in the supply chain and actions taken

45 Yes

Material Aspect: Grievance Mechanisms for Impacts on Society

G4-DMA Social Impact Management 72 Yes

G4-SO11 Number of grievances about impacts on society filed, addressed, and resolved through formal grievance mechanisms

72 Yes

Sub Category: Product ResponsibilityMaterial Aspect: Customer Health and Safety

G4-DMA Social and Relationship Capital 43, 46 Yes

G4-PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle, by type of outcomes

43-45 Yes

Material Aspect: Customer Privacy

G4-DMA Social and Relationship Capital 43-46 Yes

G4-PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

43 Yes


G4-DMA Social and Relationship Capital 43-46 Yes

G4-PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services

43 Yes


214

INDEPENDENT ASSURANCE REPORT ON SUSTAINABILITY REPORTING

Independent Assurance Report to Resus Energy PLC on the Sustainability Reporting Criteria Presented in the Annual Report- 2016/17

Introduction and scope of the engagementThe management of Resus Energy PLC (“the Company”) engaged us to provide an independent assurance on the following elements of the sustainability reporting indicators in the annual report- 2016/17 (“the Report”).

Reasonable assurance on the information on financial performance as specified on page 61 of the Report.Limited assurance on other information presented in the Report (General Standard Disclosures and Specific Standard Disclosures of the GRI Index page 207 to page 213), prepared in accordance with the requirements of the Global Reporting Initiative G4 ‘In accordance’ - Core guidelines.

Basis of our work and level of assuranceWe performed our procedures to provide limited assurance in accordance with Sri Lanka Standard on Assurance Engagements (SLSAE 3000): ‘Assurance Engagements Other than Audits or Reviews of Historical Financial Information’, issued by the Institute of Chartered Accountants of Sri Lanka (“CASL”).

The evaluation criteria used for this limited assurance engagement are based on the Sustainability Reporting Guidelines (“GRI Guidelines”) and related information in particular, the

requirements to achieve GRI G4 ‘In accordance’ - Core guideline publication, publicly available at GRI’s global website at “www.globalreporting.org”.

Our engagement provides limited assurance as well as reasonable assurance. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement conducted in accordance with SLSAE-3000 and consequently does not enable to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly, we do not express an opinion providing reasonable assurance.

Management of the Company’s responsibility for the ReportThe management of the Company is responsible for the preparation of the self-declaration, the information and statements contained within the Report, and for maintaining adequate records and internal controls that are designed to support the sustaining reporting process in line with the GRI Sustainability Reporting Guidelines.

Ernst & Young’s responsibilityOur responsibility is to express a conclusion as to whether we have become aware of any matter that causes us to believe that the Report is not prepared in accordance with the requirements of the Global Reporting Initiative G4 ‘In accordance’ - Core guidelines. This report is made solely to the Company in accordance with our engagement letter dated 07th April 2017.


215

We disclaim any assumption of responsibility for any reliance on this report to any person other than the Company or for any purpose other than that for which it was prepared. In conducting our engagement, we have complied with the independence requirements of the Code for Ethics for Professional Accountants issued by the CASL.

Key assurance proceduresWe planned and performed our procedures to obtain the information and explanations considered necessary to provide sufficient evidence to support our limited assurance conclusions. Key assurance procedures included:

Interviewing relevant the Company’s personnel to understand the process for collection, analysis, aggregation and presentation of data. Reviewing and validation of the information contained in the Report. Checking the calculations performed by the Company on a sample basis through recalculation. Reconciling and agreeing the data on financial performance are properly derived from the Company’s audited financial statements for the year ended 31st March 2017. Comparison of the content of the Report against the criteria for a Global Reporting Initiative G4 ‘In accordance’ - Core guidelines.

Our procedures did not include testing electronic systems used to collect and aggregate the information.

Limitations and considerationsEnvironmental and social performance data are subject to inherent limitations given their nature and the methods used for determining, calculating and estimating such data.

ConclusionBased on the procedures performed, as described above, we conclude that;

The information on financial performance as specified on page 61 of the Report are properly derived from the audited financial statements of the Company for the year ended 31st March 2017.

Nothing has come to our attention that causes us to believe that other information presented in the Report are not fairly presented, in all material respects, in accordance with the Company’s sustainability practices and policies some of which are derived from GRI-G4-‘In accordance’ Core Sustainability Reporting Guidelines.

Chartered Accountants15th May 2017Colombo


216

NOTES


217


218

NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that the Fourteenth Annual General Meeting of RESUS Energy PLC will be held at the Auditorium of the Development Holdings Private Limited, 3rd Floor, No. 42, Navam Mawatha, Colombo 02 on Thursday, the 29th day of June 2017 at 9.00 a.m. for the following purpose: -

AGENDA1. To receive and consider Reports of the Directors, the

Statements of Accounts of the Company and the Group for the year ended 31st March 2017, together with the report of the Auditors thereon.

2. To re-elect Mr. G A K Nanayakkara, Director, retiring by rotation in terms of Article 24(6) of the Articles of Association of the Company.

3. To re-elect Professor K A M K Ranasinghe, Director, retiring by rotation in terms of Article 24(6) of the Articles of Association of the Company.

4. To re-elect Mr. U P Egalahewa PC Director, retiring by rotation in terms of Article 24(6) of the Articles of Association of the Company.

5. To pass the ordinary resolution set out below to re-appoint Mr. U G Madanayake, who is 81 years of age, as a Director of the Company:

“IT IS HEREBY RESOLVED THAT the age limit stipulated in Section 210 of the Companies Act No.7 of 2007 shall not apply to Mr. U.G. Madanayake, who is 81 years of age and that he be and is hereby re-appointed a Director of the Company in terms of Section 211 of the Companies Act No.7 of 2007.”

6. To re-appoint Messrs Ernst & Young, Chartered Accountants as Auditors of the Company for the ensuing year and to authorize the Directors to determine their remuneration.

7. To authorize the Directors to determine and make donations to Charity.

By order of the Board ofRESUS Energy PLC

Nexia Corporate Consultants (Pvt) LtdSecretaries


Note:A member entitled to attend and vote is entitled to appoint a Proxy to attend and vote in his/her place.A Proxy need not be a Member of the Company.A Form of Proxy accompanies this NoticeThe instrument appointing a proxy must be deposited at the Registered Office, No. 250/1, Torrington Avenue, Colombo 7, not less than forty-eight hours before the time fixed for the meeting.


219

FORM OF PROXY

I/We …………………………………………………………...………………………………………………….……………………………………

of …………………………………………………………………………………………………………………………………………………………

being a Member/s of RESUS ENERGY PLC do hereby appoint …………………………………………………………………………………....

…………….......................of …………………………………………………. ………………………………………………………………………..

………………………………………………………………………………………………………………..or failing him/her

Mr. H A S Madanayake or failing himMr. G A K Nanayakkara or failing himMr. U G Madanayake or failing himProfessor K A M K Ranasinghe or failing himMr. C V Kulatilaka or failing himMr. U P Egalahewa PC or failing himMr. I S Somaratne

as my/our Proxy to vote and speak for *me/us on *my/our behalf at the Fourteenth Annual General Meeting of RESUS Energy PLC to be held at 9.00 a.m. on Thursday, 29th June 2017 at the Auditorium of the Development Holdings Private Limited, 3rd Floor, No. 42, Navam Mawatha, Colombo 02 and at any adjournment thereof. For Against

1. To receive and consider Reports of the Directors, the Statements of Accounts of the Company and the Group for the year ended 31st March 2017, together with the Reports of the Auditors thereon

2. To re-elect Mr. G A K Nanayakkara, Director, retiring by rotation in terms of Article 24(6) of the Articles of Association of the Company.

3. To re-elect Professor K A M K Ranasinghe, Director, retiring by rotation in terms of Article 24(6) of the Articles of Association of the Company.

4. To re-elect Mr. U P Egalahewa PC, Director, retiring by rotation in terms of Article 24(6) of the Articles of Association of the Company.

5. To re-appoint as a Director Mr. U G Madanayake in terms of Section 210 of the Companies Act No. 7 of 2007

6. To re-appoint Messrs Ernst & Young, Chartered Accountants, as Auditors of the Company and to authorize the Directors to determine their remuneration

7. To authorize the Directors to determine and make donations to Charity.

………………………………………… …………………………………………Signature of the shareholder/s NIC/Passport No.

Dated this ……………………… day of ……………………………… 2017

Note:1. Please delete the inappropriate words.2. Instructions as to completion are noted on the reverse hereof.


220

INSTRUCTIONS FOR COMPLETION

1. Kindly perfect the Form of Proxy after filling in legibly your name in full, address and by signing in the space provided. Please fill in the date of signature.

2. A member entitled to attend and vote at the meeting is entitled to appoint a Proxy to attend and vote instead of him/her.

3. Please indicate with a ‘X’ in the spaces provided how your proxy is to vote on each resolution. If no indication is given the proxy in his/her discretion will vote as he/she thinks fit.

4. In the case of Corporate Members, the Form of Proxy must be completed under the Common Seal, which should be affixed and attested in the manner prescribed by its Articles of Association.

5. If the Form of Proxy is signed by an Attorney, the relevant Power of Attorney should also accompany the completed Form of Proxy.

6. The completed Form of Proxy should be addressed to the Secretaries and deposited at the Registered Office of the Company at No. 250/1, Torrington Avenue, Colombo 7 not less than Forty Eight (48) hours before the time appointed for the meeting.

FORM OF PROXY CONTD.

Name of the CompanyResus Energy PLC

Legal FormQuoted Public Company with limited liability, the ordinary shares of the Company were listed on the Colombo Stock Exchange on 8th October 2009

Date of Incorporation11th June 2003

Date of Re-Registration under the Com-panies Act No. 7 of 200711th September 2007

Company Registration NumberPV 415 PB PQ

Accounting Year End31st March

Registered OfficeNo. 250/1,Torrington Avenue, Colombo 7,Sri Lanka.Telephone: +94-11-7731731Facsimile: +94-11-7731555

Tax payer Identification Number (TIN)114340405

DirectorsMr. H A S Madanayake - Non-Executive ChairmanMr. G A K Nanayakkara - Managing DirectorMr. C V Kulatilaka - Non-Executive DirectorMr. U G Madanayake - Non-Executive Director

Mr. I S Somaratne - Non-Executive DirectorProfessor K A M K Ranasinghe - Independent Non-Executive DirectorMr. U P Egalahewa PC - Independent Non-Executive DirectorMr. C D Coomasaru - Alternate Director to Mr. U G Madanayake (appointed w.e.f. 1st November 2016)

Audit CommitteeProfessor K A M K Ranasinghe - ChairmanMr. U P Egalahewa PCMr. I S Somaratne

Remuneration CommitteeMr. U P Egalahewa PC - ChairmanProfessor K A M K RanasingheMr. H A S Madanayake

Related Party Transactions Review CommitteeMr. U P Egalahewa PC - ChairmanProfessor K A M K RanasingheMr. G A K NanayakkaraMr. I S Somaratne

Company SecretariesNexia Corporate Consultants (Pvt) LimitedNo. 181, Nawala Road, Narahenpita, Colombo 5, Sri Lanka.Tel : +94-11-2368154Fax : +94-11-2368621

Company RegistrarsS S P Corporate Services (Pvt) LimitedNo. 101, Inner Flower Road, Colombo 3, Sri Lanka.Tel : +94-11-2573894

AuditorsErnst & YoungChartered AccountantsNo. 201, De Saram Place, Colombo 10, Sri Lanka.

BankersSampath Bank PLCNational Development Bank PLCCommercial Bank of Ceylon PLCHatton National Bank PLC

Membership of AssociatesSmall Hydro Power Developers’ Association

Investor RelationsRESUS Energy PLCNo. 250/1,Torrington Avenue,Colombo 7,Sri Lanka.Telephone: +94-11-7731731Facsimile: +94-11-7731555

CORPORATE INFORMATION

G4 - 3, 5, 7

No. 250/1, Torrington Avenue, Colombo 7, Sri Lanka.Telephone: +94-11-7731731 Facsimile: +94-11-7731555

resus energy plc annual report 2016/17c v kulatilaka, i s somaratne, prof. k a m k ranasinghe, u p...

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