Jaiprakash Hydro-Power

We have audited the attached Balance Sheet of JAIPRAKASH HYDRO-POWER
 LIMITED as at 31st March 2009 and also the Profit and Loss Account and
 the Cash Flow Statement for the year ended on that date annexed
 thereto. These financial statements are the responsibility of the
 Companys management. Our responsibility is to express an opinion on
 these financial statements based on our audit.
 
 We conducted our audit in accordance with auditing standards generally
 accepted in India. Those Standards require that we plan and perform the
 audit to obtain reasonable assurance about whether the Financial
 Statements are free of material misstatement. An audit includes
 examining, on a test basis, evidence supporting the amounts and
 disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 We report that:
 
 (1) As required by the Companies (Auditors Report) Order 2003, as
 amended by the Companies (Auditors Report) (Amendment) Order 2004
 (together the Order) issued by the Central Government of India, in
 terms of Section 227(4-A) of the Companies Act, 1956, we give in the
 Annexure a statement on the matters specified in paragraphs 4 and 5 of
 the said Order.
 
 (2) Further to our comments in the Annexure referred to in paragraph 1
 above:
 
 (a) We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purpose of our
 audit;
 
 (b) In our opinion, proper books of account have been kept by the
 Company as required by law so far as appears from our examination of
 those books;
 
 (c) The Balance Sheet, Profit & Loss Account and Cash Flow Statement
 referred to in this report, are in agreement with the books of account;
 
 (d) In our opinion, the Balance Sheet, Profit & Loss Account and Cash
 Flow Statement referred to in this report, comply with the accounting
 standards referred to in sub-section (3C) of Section 211 of the
 Companies Act, 1956;
 
 (e) On the basis of written representations received from the
 directors, as on 31st March, 2009, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31st March 2009 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956;
 
 (f) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts, read together with
 significant accounting policies and other notes thereon, give the
 information required by the Companies Act, 1956, in the manner so
 required and give a true and fair view:
 
 i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March 2009,
 
 ii) in the case of the Profit & Loss Account, of the profit of the
 Company for the year ended 31st March 2009.
 
 iii) in the case of the Cash Flow Statement, of the cash flows of the
 company for the year ended 31 st March 2009.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 Referred to in paragraph 1 of our report of even date on the accounts
 for the year ended 31st March, 2009 of JAIPRAKASH HYDRO- POWER LIMITED
 
 (i) (a) The Company is maintaining proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) A substantial portion of the Fixed Assets have been physically
 verified by the management during the year and to the best of our
 knowledge and information given to us, no material discrepancies have
 been noticed on such physical verification.
 
 (c) Fixed assets disposed off during the year, are negligible so as to
 affect the Company as a going concern.
 
 (ii) (a) The Inventory has been physically verified by the management
 at reasonable intervals during the year.
 
 (b) In our opinion the procedures of physical verification of
 inventories followed by the management are reasonable and adequate in
 relation to the size of the company and the nature of its business.
 
 (c) The company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification of inventory as compared
 to book records were not material.
 
 (iii) The Company has not granted nor taken any loans, secured or
 unsecured to/from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 
 (iv) In our opinion, there is an adequate internal control system
 commensurate with the size of the Company and the nature of its
 business for the purchase of inventory and fixed assets and for the
 sale of electrical energy. During the course of our audit we have not
 observed any continuing failure to correct major weaknesses in internal
 control system.
 
 (v) Based on the audit procedures applied by us and according to the
 information and explanations given to us we are of the opinion that the
 particulars of contracts or arrangements referred to in section 301 of
 the Companies Act, 1956 have been entered into the register required to
 be maintained under that section.  The transactions made in pursuance
 of such contracts or arrangements have been made at prices which are
 reasonable having regard to prevailing market prices at the relevant
 time.
 
 (vi) The Company has not accepted any deposit from the public during
 the year.
 
 (vii) The Company has an internal audit system commensurate with its
 size and nature of its business.
 
 (viii) We have broadly reviewed the books of account relating to
 material, labour and other items of cost maintained by the company
 pursuant to the rules made by the Central Government for the
 maintenance of cost records under section 209 (1) (d) of the Companies
 Act, 1956 and we are of the opinion that prima facie the prescribed
 accounts and records have been made and maintained.
 
 (ix) (a) As per records produced before us and according to the
 information and explanations given to us the Company is generally
 regular in depositing undisputed statutory dues applicable to it like
 Provident fund, Income-tax, Customs duty, Cess etc. with the
 appropriate authorities, and there were no arrears of such dues at the
 year-end which have remained outstanding for a period of more than six
 months from the date they became payable.
 
 (b)As per records produced before us and according to the information
 and explanations given to us there are no dues of Income-tax,
 Sales-tax, Customs Duty, Wealth tax, Service Tax, Excise Duty or Cess
 which have not been deposited on account of any dispute.
 
 (x) The company does not have any accumulated losses at the end of the
 financial year, and has not incurred any cash losses during the
 financial year covered by our audit and in the immediately preceding
 financial year.
 
 (xi) Based on our audit procedures and on the information and
 explanations given by the management, we are of the opinion that the
 company has not defaulted in repayment of dues to any financial
 institution, bank or debenture holder.
 
 (xii) The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 (xiii) In our opinion the Company is not a chit fund or a nidhi/mutual
 benefit fund/society. Hence, Clause (xiii) of Para 4 of the Order is
 not applicable.
 
 (xiv) In our opinion the Company is not dealing in or trading in
 shares, debentures or other investments. Accordingly, Clause (xiv) of
 Para 4 of the Order is not applicable.
 
 (xv) Where the Company has pledged its shares as collateral security
 for the financial assistance granted by lenders to Jaypee Powergrid
 Ltd-Subsidiary Company, the terms and conditions are not prejudicial to
 the interest of the company.
 
 (xvi) In our opinion & according to the information & explanation given
 to us , the term loans have been applied for the purpose for which they
 were raised.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we find
 that no funds raised on short term basis have been used for long term
 investment.
 
 (xviii)According to the information and explanations given to us, we
 are of the opinion that during the year the Company has not made any
 preferential allotment of shares to parties and companies covered in
 the Register maintained under section 301 of the Companies Act, 1956.
 
 (xix) According to the information and explanations given to us, the
 company has created security/charge in respect of secured debentures
 issued and outstanding at the year end.
 
 (xx) During the year the Company has not raised any money by way of
 public issues. Hence, Clause (xx) of Para 4 of the Order is not
 applicable.
 
 (xxi) According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 year.
 
                                            For R. NAGPAL ASSOCIATES
                                               Chartered Accountants
                                                         (R. Nagpal)
 Place : New Delhi                                           Partner
 Dated : 7th May 2009                                     M.No.81594