1.  We have audited the attached Balance Sheet of JSW ENERGY LIMITED as
 at 31st March, 2011, the Profit and Loss Account and also 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.
 
 2.  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 signifcant 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.
 
 3.  As required by the Companies (Auditors Report) Order, 2003 issued
 by the Central Government of India in terms of sub-section (4A) of
 Section 228 of the Companies Act, 1956 (hereinafter referred to as the
 Act), we annex hereto a statement on the matters specifed in
 paragraphs 4 and 5 of the said Order, to the extent applicable.
 
 4.  Further to our comments in the Annexure referred to in paragraph 3
 above, we report that:
 
 a) We have obtained all the information and explanations which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 b) In our opinion, proper books of account as required by law have been
 kept by the Company so far as appears from our examination of the
 books;
 
 c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash
 Flow Statement dealt with by this report comply with the Accounting
 Standards prescribed by Companies (Accounting Standards) Rules, 2006,
 to the extent applicable;
 
 e) On the basis of the written representation received from directors
 as on 31st March, 2011, and taken on record by the Board of Directors,
 we report that none of the Directors is disqualifed as on 31st March,
 2011, from being appointed as a director of the Company in terms of
 clause (g) of sub-section (1) of Section 274 of the Act;
 
 f) In our opinion and to best of our information and according to the
 explanations given to us, the said accounts read together with Note No.
 6 in Schedule P Signifcant Accounting Policies and Notes to
 Accounts regarding overdues of Rs. 5.35 crores from Karnataka Power
 Transmission Corporation Limited, the matter in respect of which is
 pending in Supreme Court and other notes appearing in the said Schedule
 and elsewhere in the accounts, give the information required by the Act
 in the manner so required and give a true and fair view in conformity
 with the accounting principles generally accepted in India:
 
 i) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2011;
 
 ii) in the case of the Profit & Loss Account, of the Profit of the
 Company for the year ended on that date; and
 
 iii) in the case of the Cash Flow Statement, of the cash fows for the
 year ended on that date.
 
 ANNEXURE REFERRED To IN PARAGRAPh 3 oF AUDIToRS REPoRT oF EVEN DATE oN
 ThE FINANCIAL STATEMENTS FoR ThE YEAR ENDED 31ST MARCh, 2011 oF JSW
 ENERGY LIMITED.
 
 On the basis of such checks as were considered appropriate and
 according to the information and explanations given to us during the
 course of audit, we state that:
 
 1.  a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 b) The fixed assets have been verifed in accordance with a phased
 programme designed to cover all assets once in three years. The
 frequency of verifcation is considered reasonable, having regard to the
 size of the Company and nature of its fixed assets. Pursuant to the
 programme, physical verification of certain plant and machinery was
 conducted and no material discrepancies were noticed on such
 verifcation.
 
 c) During the year, no substantial part of fixed assets has been
 disposed off by the Company.
 
 2.  a) The inventory has been physically verified by the management at
 reasonable intervals during the year.
 
 b) The procedures of physical verifcation of the inventories followed
 by the management are reasonable and adequate in relation to the size
 of the Company and the nature of its business.
 
 c) On the basis of examinations of the record of the inventory, we are
 of opinion that the Company is maintaining proper records of inventory.
 The discrepancies noticed on physical verifcation between the physical
 stocks and book records were not material.
 
 3.  The Company has not granted or taken any loans, secured or
 unsecured, to/from companies, frms or other parties covered in the
 register maintained under Section 301 of the Act.
 
 4.  In our opinion and according to the information and explanations
 given to us and having regard to the fact that some of the items
 purchased are of a special nature in respect of which suitable
 alternative sources do not exist for obtaining comparable quotations,
 there are adequate internal control procedures 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 services.  During the
 course of our audit, no major weaknesses have been noticed in the
 aforesaid internal control system.
 
 5.  a) 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 Act have been entered in the register
 required to be maintained under that section.
 
 b) In our opinion, having regard to our comments in para 4 above and
 according to the information and explanations given to us, the
 transactions made in pursuance of such contracts or arrangements
 aggregating during the year to Rs. 5,00,000 or more in respect of each
 party, have been made at prices which are reasonable having regard to
 prevailing market prices at the relevant time.
 
 6.  No deposits within the meaning of Section 58A and Section 58AA of
 the Act and rules framed thereunder have been accepted by the Company.
 
 7.  The Company has an internal audit system commensurate with the size
 of the Company and nature of its business.
 
 8.  We have broadly reviewed the cost records maintained by the Company
 pursuant to the Order of the Central Government under Section 209(1)(d)
 of the Act and are of the opinion that, prima facie, the prescribed
 records have been made and maintained. We are, however, not required to
 make a detailed examination of the records with a view to determine
 whether they are accurate or complete.
 
 9.  a) The Company is generally regular in depositing undisputed
 statutory dues including Provident Fund, Investor Education and
 Protection Fund, Income Tax, Wealth Tax, Service Tax, Sales Tax,
 Customs Duty, Excise Duty, Cess and other statutory dues applicable to
 the Company with appropriate authorities. No undisputed amounts payable
 in respect of the aforesaid statutory dues were outstanding as at the
 last day of the financial year for a period of more than six months from
 the date they became payable.
 
 b) According to the records of the Company, there are no dues of Income
 Tax, Sales Tax, Service Tax, Customs Duty, Wealth Tax, Excise Duty,
 Cess which have not been deposited on account of any dispute except
 disputed income tax demand of Rs. 6.46 lakhs, for the Assessment Year
 2009-10 against which the Companys rectifcation applications are
 pending before Dy. Commissioner of Income Tax (TDS), Mumbai.
 
 10.  The Company has no accumulated losses as at 31st March, 2011 and
 it has not incurred any cash losses in the financial year ended on that
 date or in the immediately preceding financial year.
 
 11.  The Company has not defaulted in repayment of dues to financial
 institutions, banks or debenture holders during the year.
 
 12.  During the year, the Company has not granted loans and advances on
 the basis of security by way of pledge of shares, debentures and other
 securities.
 
 13.  In our opinion, the Company is not a chit fund or a nidhi/ mutual
 beneft fund/ society. Therefore, Clause 4(xiii) of the Companies
 (Auditors Report) Order, 2003 is not applicable to the Company.
 
 14.  In our opinion, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 15.  In our opinion and according to the information and explanations
 given to us, the terms and conditions of the guarantees/securities
 given by the Company for loans taken by others from banks and financial
 institutions are not, prima-facie, prejudicial to the interest of the
 Company.
 
 16.  According to the information and explanations given to us, the
 term loans were applied for the purpose for which they were obtained.
 
 17.  According to the information and explanations given to us and on
 overall examination of the cash fow statements and balance sheet of the
 Company, in our opinion, funds raised on short term basis have,
 prima-facie, not been used for long term investment.
 
 18.  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.
 
 19.  The Company has created securities in respect of debentures
 issued, except in respect of debenture issued during the month of
 December, 2010 aggregating to Rs. 2,400 crores for which the security is
 to be created.
 
 20.  The management has disclosed on the end use of money raised by
 public issues and the same has been verifed by us.
 
 21.  During the course of our examination of the books and records of
 the company, carried out in accordance with the generally accepted
 auditing practices in India and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by the management.
 
                                               For LODHA & Co.  
                                         Chartered Accountants
 
                                               A. M. Hariharan
 
                                                       Partner
 Place: Mumbai                            Membership No. 38323
 
 Date: 28th April, 2011          Firm Registration No. 301051E