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«TABLE OF CONTENTS DEFINITION, TECHNICAL GLOSSARY AND ABBREVIATIONS FORWARD-LOOKING STATEMENTS RISK FACTORS SUMMARY SUMMARY OPERATING AND FINANCIAL ...»

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• Depreciation admissible from HPSEB as part of tariff Depreciation of up to 90% of AFP is admissible from HPSEB as part of tariff upto 21 years under the PPA.

After the debt is fully repaid, the depreciation amount would be available for cash flow of the Company.

• Assured Return on Equity Our PPA also provides for a fixed return of 16% p.a. on the equity capital as approved in the AFP. The return on equity is calculated on a proportionate basis for the actual number of days for which such return on equity is to be determined. In addition, the Company is entitled to receive incentives for higher Plant Availability and generation of Secondary Energy up to specified limits. We believe that we benefit from financial stability due to such fixed returns on equity.

• Payment Guarantee The PPA provides that HPSEB’s realizations from sale of power in allocated circles shall be deposited in a designated escrow account. Pursuant to the PPA, we have entered into an escrow agreement with HPSEB and the escrow agent monitors this account. Further, there is an irrevocable revolving Letter of Credit (“LC”) established by HPSEB in favour of JHPL. through which the payments are to be made to us. Under this arrangement, HPSEB is required to ensure that the LC is restored, after we receive payments, as per the terms of the PPA. In the event of any shortfall in payment through the LC, or in the event HPSEB fails to restore the LC, we can direct the Escrow Agent not to honour HPSEB’s other withdrawals until the shortfall has been made good, or until the LC is restored, as the case may be.

• Deemed generation benefit The PPA provides the Company insulation from risks associated with non availability of sufficient water for the first seven years from COD, that is, up to the year 2010. In the event that water availability is lower than that envisaged under the PPA in any year, Design Energy is deemed to have been generated by the Company, and HPSEB is obligated to make payments to us on this basis. Also, in case HPSEB fails to evacuate the power from the Interconnection Point for any reason or instructs us not to generate power partially or completely, such deemed generation benefit shall be made available to us under the PPA.

For further details of PPA, please refer to the sections titled “Business Overview -- Power Purchase Agreement” and “Management Discussions and Analysis of Operations and Financial Conditions” on page 55 of this Draft Red Herring Prospectus.

No vagaries with respect to raw material costs Since we operate a hydro-electric power plant which converts the energy of river flow into electrical energy, there are no specific raw material costs involved, except to the extent of the free power being provided to HPSEB.

Accordingly, we are insulated from changes in raw material prices.

Promoter Lineage Our Promoter, JAL, has over four decades of experience in undertaking EPC and turnkey contracts in the field of hydropower, as a leading construction company or as leader of consortia / joint ventures, involving generation of over 8,000 MW of power across the country. It is also in the process of executing several contracts for projects involving further generation of over 8,000 MW of power in the country and abroad, including the 400 MW Vishnuprayag and the 1,000 MW Karcham Wangtoo hydroelectric projects on BOO basis through its wholly owned subsidiaries. With the commissioning of these hydro-electric projects, it is expected that by the year 2010, the Jaypee group will have a total capacity of 1,700 MW under its fold on BOO basis. JAL has also been awarded the highest grading of CR1 (pronounced as C R one) by ICRA, indicating very strong contract execution capacity. This grading indicates the relative contract execution capacity with resepect to Hydropwer (EPC) contracts with average values of upto Rs. 20,000 million with permissible variation of +/- 10% in each case. For further details, please refer to section titled “Our Promoters and Group Companies” on page 88 of this Draft Red Herring Prospectus.

Protection from Competition As mentioned above, HPSEB is required to purchase 88% of the power delivered at the Interconnection Point from the Company under the PPA at the approved tariff. Accordingly, during the currency of the PPA, our revenues shall not be affected due to competition.

Experienced Management We have recruited managerial and technical personnel with experience in the operation and management of hydroelectric power plants. For details of our key managerial personnel, please refer to the section titled “Our Management - Key Managerial Personnel” on page 108 of this Draft Red Herring Prospectus.

Environment friendly plant The Power Plant is a run-of-the-river, environment friendly project harnessing the renewable natural resources.

Operations of the Power Plant do not involve release of harmful emission or pollutants.

Successfully commissioned the largest private hydro-electric power project in the country We, along with the Jaypee group, have engineered and executed the Power Project from concept to commissioning, except for electro-mechanical and hydro-mechanical equipment, which were outsourced. The implementation of the Power Plant used construction technology such as full periphery continuous lining of head race tunnel. Moreover, our barrage is constructed at an elevation of 2,520.50 metres and is one of the highest in the country. The 56.70 km, double circuit 400 KV transmission line laid for the project passes through an elevation ranging from 1,500 metres to 2,800 metres in a difficult terrain and crosses the valley thirteen times and river Satluj twice.





Restructuring of high cost debt Immediately after commissioning of the plant in June 2003, we initiated a debt restructuring programme in July 2003, and have received in-principle approvals from all the lenders to realign the interest rates on Rupee term loans from the prevailing weighted average of 16.65% p.a. in FY2004 to approximately 10.50% p.a. and have also obtained refixation of the repayment of loans in 44 installments commencing from July 15, 2005. Our lenders have already approved the restructuring package. Such reduction in interest rates shall have a positive impact on our cash flows and liquidity. For more details, please refer to section titled “Management Discussions and Analysis of Operations and Financial Conditions – Indebtedness” on page 67 of Draft Red Herring Prospectus For a detailed discussion of our business strategy, please refer to the section titled “Our Business” on page 31 of this Draft Red Herring Prospectus.

–  –  –

The following summary operating and financial data have been prepared in accordance with Indian GAAP, in conjunction with our audited financial statements (as restated) for each of financial year 2002, 2003 and 2004 and six months ended September 30, 2004 including the notes thereto and the reports thereon, which appear in section title “Management’s Discussion And Analysis of Financial Condition and Results of Operations” on page 55 of this Draft Red Herring Prospectus, and.

Our financial year ends on March 31 of each year. We commenced our commercial operation on May 24, 2003, and thus our operating and financial performance for FY 2004 pertains to the period May 24, 2003 to March 31, 2004. For the year 2005, our operating and financial performance is for the six-month period between April 1, 2004 and September 30,

2004. We have no operating and financial figures for the financial years ended March 31, 2003 and March 31, 2002.

–  –  –

Under subscription if any, in any of the three categories would be allowed to be met with the spillover from the other categories, at the sole discretion of the Selling Shareholder, Company, BRLMs and Lead Manager.

Any short fall in the reserved category for a) the Shareholders of the Group Companies that is JAL and Jaypee Hotels Limited and b) Permanent Employees and Directors of the Company and JAL shall be considered for allotment in the Net Offer to Public portion only on proportionate basis.

–  –  –

* The shareholders of JAL as on [•] and Jaypee Hotels Limited as on [•] have been identified by our Company as being eligible to participate in the reservation for Shareholders of Group Companies on competitive basis.

–  –  –

Authority for the Offer The Selling Shareholder has decided to make the Offer to the public for sale of Equity Shares. Accordingly, this Offer is approved by JAL vide its Board Resolution dated January 22, 2005. The Company has consented to the Offer through the Board Resolution dated January 23, 2005.

Prohibition by SEBI

Our Company, our Directors, our Promoter, other companies/entities promoted by our Promoters, and companies/entities with which our Directors are associated as directors and the Selling Shareholder, have not been prohibited from accessing the capital markets under any order or direction passed by SEBI. None of our Directors or the persons in control of our Promoter companies have been prohibited from accessing the capital markets or restrained from buying/selling/dealing in securities under any order or direction passed by SEBI.

Eligibility For The Offer

The Company is exempt from the eligibility norms vide Regulation 2.4.1 (iii) of SEBI (DIP) Guidelines, being an eligible infrastructure company engaged in the generation of 300 MW Hydro-electric power project, which is categorised as infrastructure sector under section 10(23G) of the Income Tax Act, 1961. The Company has also received approval from Ministry of Finance under section 10(23G) of Income Tax Act, 1961 vide circular No.F.No.205/77/99/ITA-II) Vol-I dated September 12, 2003 valid upto March 31, 2004. Application for renewal of the approval under section 10 (23G) of the Income Tax Act, 1961 has been submitted, the approval for which is awaited.

The Company’s Power Project, which was originally appraised by IFCI Limited, a public financial institution, was, thereafter, appraised by ICICI Limited (now known as ICICI Bank Limited).

The completion cost of the Power Project was Rs. 16,247.20 million (excluding liabilities on account of payment to SJVNL for Interconnection Facilities and implementation of Catchment Area Treatment Plan together amounting to Rs.

426.16 million) which, inter-alia, was financed by the consortium of Lenders led by ICIC Bank Limited, comprising of Power Finance Corporation Limited, IFCI Limited, Life Insurance Corporation of India, Industrial Development Bank of India Limited, Industrial Investment Bank of India Limited, Punjab National Bank, Bank of Baroda, Indian Overseas Bank, State Bank of Indore, State Bank of Patiala, State Bank of Travancore, State Bank of Mysore, State Bank of Hyderabad and Central Bank of India. Further, the Company has prepaid the entire loan amount advanced by IFCI Limited on August 12, 2004 out of refinance assistance of Rs. 1740 million from UTI Bank Limited, which has now become a part of the consortium of Lenders. Details of financing is as under:

–  –  –

*Total Foreign Currency Loan (in equivalent Rupees based on a USD to Rupee conversion rate of Rs. 47.09 as on COD) The Company is an infrastructure company within the meaning of Regulation 2.4.1(iii)(b) of the SEBI (DIP) Guidelines as the project has been appraised by a public financial institution and the funding of the Project Cost by the financial institutions is more than 5% of the Project Cost.

Disclaimer Clause

AS REQUIRED, A COPY OF THE DRAFT RED HERRING PROSPECTUS HAS BEEN SUBMITTED TO

SEBI. IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED HERRING

PROSPECTUS TO SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED THAT THE SAME

HAS BEEN CLEARED OR APPROVED BY THE SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY

EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE

OFFER IS PROPOSED TO BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR

OPINIONS EXPRESSED IN THE DRAFT RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD

MANAGERS VIZ., UTI BANK LIMITED, JM MORGAN STANLEY PRIVATE LIMITED, AND ICICI

SECURITES LIMITED HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT RED

HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI

(DISCLOSURE AND INVESTOR PROTECTION) GUIDELINES, 2000 IN FORCE FOR THE TIME BEING.

THIS REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR

MAKING AN INVESTMENT IN THE PROPOSED OFFER. IT SHOULD ALSO BE CLEARLY

UNDERSTOOD THAT WHILE THE COMPANY IS PRIMARILY RESPONSIBLE FOR THE

CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE DRAFT

RED HERRING PROSPECTUS, THE BOOK RUNNING LEAD MANAGERS AND THE LEAD MANAGER

ARE EXPECTED TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE COMPANY DISCHARGES

ITS RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE, THE BOOK

RUNNING LEAD MANAGERS VIZ., UTI BANK LIMITED, JM MORGAN STANLEY PRIVATE LIMITED

AND ICICI SECURITIES LIMITED HAVE FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE

DATED FEBRUARY 7, 2005 IN ACCORDANCE WITH THE SEBI (MERCHANT BANKERS)

REGULATIONS, 1992 WHICH READS AS FOLLOWS:

“1. WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO LITIGATION

LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH COLLABORATORS ETC. AND

OTHER MATERIALS IN CONNECTION WITH THE FINALISATION OF THE DRAFT RED HERRING

PROSPECTUS PERTAINING TO THE SAID OFFER.

2. ON THE BASIS OF SUCH EXAMINATION AND DISCUSSIONS WITH THE COMPANY, ITS



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