cpec ltd Management discussions

Renewable Energy Industry In India:

As the shareholders must be aware, CPEC is establishing its presence in the renewable energy industry, and focusing on developing solar power projects. The Industry has been presented with favorable initiatives and policies from the Government ofIndia in theyear 2014-15, focused towards making India self sustained in its power requirements and the vision of moving from "megawatt to gigawatt" scale, and the Company is hopeful to expand its current line of business by investing into more solar projects. There has been a visible impact of renewable energy in the Indian energy scenario during the last five years.Apart from contribut in gab out 12.96 per cent in the national electricity installed capacity, renewable energy based decentralized and distributed applications have benefited thousands of people in Indian villages by meeting their cooking, lighting and other energy needs in an environment friendly manner, and this isonlythe beginning.

The core drivers for development and deployment of newand renewable energy in India have been:

a. Energy security: At present around 60 per cent of Indias power generation capacity is based on coal. Net coal import dependency has risen from a negligible percentage in 1990 to nearly 23 per cent in 2014-2015. This, in addition to Indias increasing dependence on imported oil, is leading to imports of around 28 per cent of Indiastotal energy needs.

b. Electricity shortages: Despite increase in installed capacity by more than 110 times in 67 years, India is still not in a position to meet its peak electricity demand as well asenergy requirement.

c. EnergyAccess: India faces a challenge to ensure availability of reliable and modern forms of energy for all its citizens. Almost 85 per cent of rural households depend on solid fuel for their cooking needs and only 55 per cent of all rural households have access to electricity. However, even with this low access, most rural households face issues with quality and consistency of energy supply. Lack of rural lighting is leading to large-scale use of kerosene. This usage needs to be reduced, as it is leads to increased subsidies and import dependence, and consequent pressure on foreign exchange reserves.

d. Climatechange: India hastaken a voluntary commitment of reducing emission intensity of its GDP by 20-25 per centfrom 2005 levels by 2020. The increased share of renewable energy in the coming years will contribute towards achieving this goal.

Renewable Energy potential in India

India has an estimated renewable energy potential of about 900 GW from commercially exploitable sources viz. 100 GW from Wind power (at 80 meter mast height); 20 GW from Small Hydro power; 25 GW from Bio-energy; and 750 GW from solar power, assuming approx. 3% waste land is made available. Further, in a decentralized or standalone mode, renewable energy is an appropriate, scalable and viable solution for providing powerto non-electrified or power deficient villagesand hamlets in the country-side.

Business Overview:

The main object of the company is solar power generation. Solar is a nascent and capital-intensive industry, with favorable long-term returns. The management has been patient in building the expertise within the company, and exploring opportunities across India to develop solar projects and optimize shareholder returns. This year has witnessed renewed enthusiasm for renewables in February 2015, with Honble Prime Ministers visionary plan to achieve 100GW by 2022. CPEC is committed to support the initiative, and optimistic, as the PMs vision lays the foundation for developing and executing large-scale solar power projects from this year onwards.

The Company will focus on development of solar power projects, and evolve into an integrated player, offering turnkey end-end solutions including O&M services, using cutting edgetechnologies.

In keeping with objectives, CPEC is progressing on joint ventures with leading global specialists in the solar industry, with expertise and experience in project design, engineering and construction; project development and financing; with access to evolving technologies in the PV and CSPSolarsegments, thatare proven and successfully operating in other regions around the world.

Risk Management:

The objective of risk management is to ensure that it is adequately estimated and controlled to enhance shareholder as well as stakeholders values. Risk is pertinent to virtually all business activities though in varying degrees and forms. It is the constant endeavor of the Company to identify, assess, prioritize and manage existing as well as emerging risks in a planned and cohesive manner.

Internal Control System & Adequacy:

The Company has an adequate Internal control System that promotes reliable financial reporting, safeguards assets, encourages adherence to fair management and ethical conduct. The strong Internal Control Systems have been designed in a way that, they not only prevent fraud and misuse of the Companys resources but also protect shareholders interest. The Audit Committee of Board of Directors, on regular intervals and in co-ordination with Statutory Auditors, reviews the adequacy of Internal Control Systems within the Company. Due to nil operations during the year gone by, there was no requirement of Internal Auditors, hence the same were not appointed.

Cautionary Statement:

"Statements in Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations are "forward looking" within the meaning of applicable laws and regulations. Actual results might differ materially from those expressed or implied."