TIDMRUR
RNS Number : 9301P
Rurelec PLC
01 June 2018
Rurelec PLC
("Rurelec" or "the Company")
Audited results for the year ended
31(st) December 2017
Rurelec PLC (AIM: RUR), the electricity utility focused on
ownership and operation of power generation plants in Latin
America, announces its audited results for the year ended 31
December 2017. The annual report will be posted to shareholders on
1 June 2018 and will be available from the Company's website
www.rurelec.com from that date.
Highlights
-- Focus of the Company has been to continue reducing costs, to
stabilise the Company, and to seek certain asset disposals.
-- Operating loss more than halved to GBP3.7 million from GBP12.8 million.
-- Loss before tax of GBP5.8 million (2016: GBP9.3 million).
-- Further write downs of assets to values directors believe can
be supported in current market conditions.
-- Substantial reduction in ongoing borrowings, post Peru
disposal, Group borrowings to GBP1.4 million (2016: GBP4.0
million).
-- Total loss per share 1.04p (2016: 1.65p).
-- Net Asset Value per share 4.5p (2016: 5.6p).
-- No qualification of 2017 accounts (2016: qualification in respect of interest on JV loans).
The annual general meeting (the "AGM") of Rurelec PLC will be
held at the offices of W.H. Ireland Group PLC at 24 Martin Lane,
London, EC4R 0DR at 11.00 a.m. on 27 June 2018.
Commenting on the results Simon Morris, Rurelec's Executive
Director, said:
During 2017 the Group has continued to reduce costs, and pursue
asset sales. The Group's interests in the hydro schemes in Peru
were disposed of in December 2017, with completion occurring on 30
January 2018
As in 2016, liquidity was a major issue for the Group during
2017. The major outages suffered in March/April and
September/October at the Group's plant in Argentina put cash
remittances back to the Group in the UK under severe pressure. Cash
received has been utilised in settling legacy debts, some of which
are many years old. Group current liabilities, excluding
liabilities held for sale, at 31 December 2017 (GBP2.4 million)
have more than halved since 31 December 2016 (GBP6.5 million).
The overall loss before tax for the year of GBP5.8 million
(2016: GBP9.3 million) reflects further write downs on a number of
the Group's assets to values that the directors believe can be
supported in current market conditions and given the overall
financial position of the Group. Losses also include GBP2.5 million
of foreign exchange losses (2016: GBP1.2 million gain). Given the
outages suffered at the Group's plant in Argentina, and the
on-going requirement for the plant to operate well below capacity,
liquidity remains a critical issue for the Group.
For further information please contact:
Rurelec PLC W.H.Ireland
Simon Morris, Executive Katy Mitchell and Alex
Director Bond
www.rurelec.com
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Tel: +44 (0)20 7025 Tel: +44(0) 20 7220 1666
8028
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Rurelec PLC is an owner, developer and operator of power
generation capacity internationally.
Rurelec's main business consists of the ownership and
development of power generation facilities on national and regional
grids and in isolated areas, selling wholesale electricity as a
generator on commercial terms, through capacity payments or power
purchase agreements ("PPAs").
Our current business is centred on our share of an operational
plant in Argentina whilst also seeking to complete the development
of our project in Chile, or sell our interests in the project.
Non-Executive Director's Statement
Brian Rowbotham
Dear Shareholder
It is my duty to present the results of Rurelec PLC ("Rurelec")
for the financial year ended 31 December 2017, which has seen
further stabilisation in the Company's financial situation. During
the course of the year, the Company was offered an extension of its
original bridging facility from Bridge Properties (Arena Central)
Limited ("BPAC"). Since the year end these facilities have been
further extended to the end of June 2019. The Group has repaid
GBP0.3 million of principal and GBP0.1 million of interest of the
total bridging facility of GBP1.6 million.
Outlook
After extensive marketing, the Group sold the remaining hydro
portfolio in Peru, completion taking place on 30 January 2018.
Given the continuing liquidity problems faced by the Group, the
capacity to finance this portfolio was severely constrained. The
sale has enabled the Group to cease any further payments to support
this operation.
As you have been made aware, our joint venture Argentinian asset
has suffered a number of problems during 2017. The plant is still
operating at reduced output, with planned maintenance of the
turbine being delayed due to CAMMESA (the organisation
administering and regulating the Argentinian wholesale electricity
market) not being able to provide agreed loan finance for the major
maintenance due to its own shortage of liquidity. The restoration
of the Argentinian plant to full capacity is key in enabling the
outstanding loans from the Group to the Argentinian plant to be
repaid.
The Directors believe that economic reform in Argentina under
the Macri administration has fostered an environment where foreign
investment in utilities has become attractive, incentivised by
strong pricing of power contracts and that the wholesale market
demand for Argentinian produced electricity continues to grow as
the economy develops.
As I reported last year that there had been a downturn in demand
in Chile. It is the Directors belief that the market has seen a
modest improvement during 2017, and as a result the Group is
looking at opportunities to progress the Central Illapa project in
Mejillones. Our liquidity position will be a major factor in
deciding which path we will eventually pursue.
We expect to resolve our position in Chile within the near
future. This will enable us to concentrate our efforts on resolving
the difficulties faced by our Argentinian asset. The difficulties
faced to date have been beyond our control. It is essential that
the Argentinian plant is returned to normal operating output as
soon as possible to enable the cash remittances to the UK to be put
on a more secure footing.
--------------------
Brian Rowbotham
Non-executive Director
31 May 2018
Strategic Report
Strategy
The overall strategy for the Group remains in line with that
adopted in 2016. The Board has continued to stabilise the financial
position of the Group, which will enable as much value to be
realised from the asset portfolio. That value will then be returned
to shareholders.
Liquidity
The above strategy has been determined by the on-going financial
position of the Group. From a position in late 2015, when the Group
was close to insolvency, the financial position has improved
markedly. The main borrowing of the Group remains the BPAC loan,
which, after the year end, has been rescheduled for repayment on 30
June 2019. During 2017 GBP0.4 million, capital and interest, was
repaid on the BPAC loan, in line with the board's strategy to
prioritise the repayment of the most expensive top slice tranche of
debt.
Cash receipts from our plant in Argentina in Comodoro Rivadavia
started well at the beginning of the year. However, as announced,
on 31 March 2017 the plant suffered damage as a result of severe
weather conditions. As a result, the plant did not operate for the
period until 23 May 2017, and cash receipts suffered accordingly.
Normal operations resumed for a period, and cash remittances to the
Group were reinstated. The situation again radically changed when,
as announced on 8 September 2017, the plant had to be shut down
entirely due to certain turbine blades within the steam generator
being damaged.
A temporary modification of the steam turbine was carried out in
October 2017, which enabled the plant to resume operation, albeit
at a reduced output. This temporary fix was expected to remain in
place until the planned maintenance of the steam turbine could be
carried out this year. This led to a material loss in revenue
generated from the plant, and again, this hit the cash remittances
made to the Group by Energia del Sur S.A. ("EdS").
The result of the two material adverse interruptions suffered to
the plant during 2017 led to a shortfall in cash receipts from
Argentina compared to a forecast of GBP1.6 million. The cash
position of the Group remains difficult, with the on-going
uncertainty surrounding the timing of the planned maintenance due
to the agreed loans to fund the maintenance programme from CAMMESA
not being available due to CAMMESA's own liquidity problems.
Alternative funding is actively being sought. Until the maintenance
programme is carried out, the plant will have to continue running
at well below capacity for safety reasons, and as a result cash
generation to fund repayments of the Group loans to Argentina is
severely restricted.
Financial results
The operating loss for the year of GBP3.7 million is an
improvement on that incurred last year (2016: GBP12.8 million).
Continuing strict control over administration expenses resulted in
in costs of GBP2.1 million, compared to 2016: GBP2.4 million.
Write-downs in the carrying value of certain Group assets totalled
GBP1.7 million (2016: GBP10.5 million) has led to a marked impact
on the results when compared to last year. These write downs
reflect the Board's view of the carrying value for the Group's
assets in current market conditions. The overall loss before tax
for the year was GBP5.8 million (2016: GBP9.3 million). This
included foreign exchange losses of GBP2.5 million (2016: GBP1.2
million gain).
The Group concluded the sale of our Peruvian assets. The sale
completed on 30 January 2018, the carrying value in these accounts
reflects the sale and purchase agreement. The Group made a gain in
the year of GBP0.2 million on these discontinued operations. The
majority of the gain, GBP1.3 million, will be recognised in the
accounts of the year ended 31 December 2018.
Unless there is a significant disposal of assets, the Group is
dependent upon joint venture receipts from Argentina in order to
comply with payment arrangements made with its creditors. There
exists uncertainty as to the timing and the quantum of the receipts
from its joint venture in Argentina and for this reason the
Directors are, in the meantime, pursuing alternative sources of
working capital until further significant disposal receipts are
assured, none of which have been secured yet.
Key performance indicators
The Directors use a range of performance indicators to monitor
progress in the delivery of the Group's strategic objectives, to
assess actual performance against targets and to aid management of
the businesses.
Rurelec's key performance indicators ("KPIs") include both
financial and non-financial targets which are set annually.
Financial KPIs
Financial KPIs address operating profitability, net asset value
and earnings per share.
i) Operating profitability
Operating loss excludes all non-operating costs, such as
financing and tax expenses as well as one-off items and non-trading
items such as negative goodwill. The exclusion of these
non-operating items provides an indication of the performance of
the underlying businesses. The Group made an operating loss of
GBP3.7 million in the year (2016 GBP12.8 million loss).
ii) Net asset value
Net asset value is calculated by dividing funds attributable to
Rurelec's shareholders by the number of shares in issue. The net
assets of the Group reduced in the year to 4.5 pence per share
(2016 5.6 pence per share).
iii) Earnings per share
Earnings per share provide a measure of the overall
profitability of the Group. It is defined as the profit or loss
attributable to each Ordinary Share based on the consolidated
profit or loss for the year after deducting tax. Growth in earnings
per share is indicative of the Group's ability to identify and add
value. The Group made a loss of 1.04 pence per share in the year
(2016: loss of 1.65 pence per share) and hence there were no
positive earnings per share.
Non-Financial KPIs
Non-financial KPIs address other important technical aspects of
the business, such as gross capacity, operating efficiency and
availability.
i) Gross capacity
Gross capacity is the total generation capacity owned by Group
companies and is affected by acquisitions, expansion programmes and
disposals. The group continues to own three turbines ready for
deployment in projects.
ii) Operating efficiency
Operating efficiency is the average operating efficiency of the
generating plant owned by Group companies. It can be improved
through the installation of more thermally efficient turbines,
refurbishment activities or through conversion to combined cycle
operation. No change was noted in the operating efficiency of the
Group in the year.
iii) Technical availability
Technical availability measures when a plant is available for
dispatch. The measurement method excludes time allowed for planned
maintenance activities which occur at regular intervals during the
life of the unit plus an allowance for unplanned outages. Unplanned
and forced outages in excess of the annual allowance will cause a
reduction in the technical availability factor. Average
availability through the year for our plant in Argentina was 68.9
per cent. due to unplanned and forced outages (2016: 92.6 per
cent.).
Review of Financial Performance
Group Results
The Group loss after tax for the financial year under review is
GBP5.8 million (2016: GBP9.3 million loss). The largest component
was associated with foreign exchange losses of GBP2.5 million (2016
gain: GBP1.2 million). The impairment losses, totalling GBP1.7
million (2016: GBP10.5 million), were mainly GBP1.3 million (2016:
nil) for Argentinian operations and GBP0.3 million (2016: GBP1.3
million) for Chilean operations, this excludes the foreign exchange
loss on the 701 turbines of GBP0.9 million (2016: impairments and
foreign exchange GBP6.4 million).
Group revenue was nil (2016: GBP0.1 million), Operating and
Administrative expenses amounted to GBP2.1 million (2016: GBP2.4
million). Operating loss was GBP3.7 million (2016: GBP12.8 million
loss). The loss before tax is GBP5.8 million (2016: GBP9.3 million
loss). The basic loss per share is 1.04p (2016: 1.65p loss). In
2017, the total assets of GBP31.1 million (2016: GBP39.1 million)
includes assets of GBP2.3 million (2016: GBP2.2 million), which are
held for sale. Total equity stands at GBP25.2 million (2016:
GBP31.4 million), or a Net Asset Value of 4.5 pence per share
(2016: 5.6 pence per share).
The results for the operations in Argentina, Peru, and Chile are
shown below.
Energia del Sur S.A. Results
At the operating level the plant in Comodoro Rivadavia and
therefore based on 100% of EdS's activities the net operating
profit for the year was AR$ 92.1 million (2016: AR$ 111.0 million)
on revenues of AR$ 372.2 million (2016: AR$ 380.9 million), whilst
the gross operating profit was AR$ 370.1 million (2016: AR$ 333.5
million). The net profit for the year at EdS was AR$ 32.7 million
(2016: profit AR$ 27.6 million) which included foreign exchange
losses of AR$ 30.8 million (2016: AR$ 34.2 million).
As set out in note 24 the Directors have determined that the
relationship with EdS is a joint venture and is therefore equity
accounted.
Rurelec Chile
The development operations in Chile have expensed limited direct
costs in the year of GBP211k (2016: GBP68k). Capitalised
development costs are GBP 0.2 million (2016: GBP0.4 million) on the
Central Illapa project. In 2017 the Arica project/turbine was
impaired by GBP0.3 million (2016: GBP1.0 million). The development
costs associated with the Central Illapa project were not impaired
in 2017 or 2016.
Cascade Hydro Power (Peru)
As previously mentioned the Peruvian subsidiaries and UK holding
company, Cascade Hydro Limited, have been disposed of, the sale
completed on 30 January 2018. The Group has no further funding
commitments to these entities. In these accounts the assets and
liabilities are recorded as held for sale.
Review of Operations
Argentina
Operations at the power plant were affected by the breakdowns in
April/May 2017 and September/October 2017. Gross energy output was
18.7 per cent. lower at approximately 708 GWh (2016: 871 GWh), this
was due to unplanned and forced outages. The average heat rate of
the plant was 8.76 MMBTU/MWh (2016: 8.39). The average heat rate
for the plant includes fuel consumption on both the gas turbines
and auxiliary firing of the steam turbine.
The following table sets out the Group's 50 per cent. share of
its interest in Patagonia Energy Limited ("PEL") the BVI registered
joint venture holding company of EdS, it's 100 per cent. owned
Argentinian operating subsidiary:
Year ended Year ended
---------------------------
31.12.17 31.12.16
---------------------------
GBP'000 GBP'000
--------------------------- ----------- -----------
Revenue attributable to
the Group 8,552 9,325
Expenses (8,644) (9,198)
Foreign Currency Exchange (729) (895)
Net Loss (821) (768)
Non-current Assets 5,068 5,482
Current Assets 2,594 4,853
Non-current Liabilities (19,196) (19,236)
Current Liabilities (4,035) (7,989)
--------------------------- ----------- -----------
Chile
Arica
Following the reassessment of the project the Board is
considering deploying the Frame 6B turbine acquired for the project
elsewhere. An application has therefore been made to the state
asset bureau for a refund of the purchase price for the land and a
buyer is to be sought for the turbine unless it can be redeployed.
Given the uncertainty of the future sale of the turbine and the
recoverability of the land cost an impairment charge of GBP0.3
million (2016: GBP1.3 million) has been recorded in the year.
Central Illapa
The project, has continued to make some progress in development,
whilst the company pursues various options.
The Group's carrying value for projects is assessed for possible
impairments. In light of current local market conditions, in order
for the project to be attractive to joint venture partners, the
capital value of the 701 Siemens Turbines going into the project
has been assessed at US$12.0 million. The Directors also obtained
an independent valuation produced by a competent person. The report
stated that the price in the turbine market is unchanged from the
prior report in that the fair value of the turbines as being
US$12.0 million. Therefore, no impairment has been charged in the
year (2016: US$13.0 million) and, after exchange rate differences a
reduction in the asset value of GBP0.9 million has been charged in
2017 (2016: GBP6.4 million).
Peru
Exclusive negotiations for the sale of Colca, Chilcay and
Huisicancha project companies commenced in late 2015 and continued
into 2017. Unfortunately, the prospective buyer pulled out just
prior to expected signing. Other alternative prospective purchasers
were approached during 2017. On 30 December 2017 a sale and
purchase agreement was exchanged whereby all of the Group's
interests in Peru were sold to Sloane Renewable Energy Limited, a
company owned and controlled by Peter Earl, the former CEO of the
Rurelec Group. The sale and purchase agreement was completed on 30
January 2018.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group, are
possible changes in demand and pricing for electricity in the
markets in South America in which the Group operates, political
risk, and uncertainties in the financial markets, and unexpected
operational events.
a) Political risk - there exists significant political risks in
areas where the Group operates. These include potential for
unfriendly actions towards foreign investments and the possibility
that domestic economic instability could lead to political unrest
or vice versa. These are significant risks to Rurelec.
b) Financial markets - Whilst project finance may be available
in the markets in which the Group operates, the Group's plans
remain dependent on raising project finance from a combination of
local partners and lending institutions. The Group is seeking to
broaden its base of potential partners and lending
institutions.
c) Exposure to foreign currency - The Group's activities are in
South America and therefore the Group's results will be affected by
exchange rate movements and local inflation rates. Furthermore,
past experience has shown that exchange controls restrictions can
sometimes be applied, and these may have an impact on the Group's
ability to repatriate funds to the parent company. The Group seeks
to limit these risks by raising funds in the currency of the
operating units.
d) Efficient operation - The Group has an effective maintenance
programme and has entered into long term service agreements to
reduce these risks as appropriate.
e) Liquidity - The Group needs to be in a position to meet its
short-term cash requirements. Please see Going Concern in the
Directors Report and note 1b for further details.
The Strategic Report was approved by the Board of Directors on
31 May, 2018 and was signed on its behalf by:
------------------------------------------
Simon Morris (Executive Director).
BOARD OF DIRECTORS
BRIAN ROWBOTHAM
Non-Executive Director
Brian is the Senior Independent Non-Executive Director and
Chairman of the Audit Committee. He worked as a Chartered
Accountant with Deloitte and Touche. He has extensive experience
working in the City of London, joined Teather and Greenwood in 1997
and was involved as partner and then Finance Director in the
company's flotation on AIM and subsequent move to the Official
List. He ran his own consultancy specialising in turnarounds and
start-ups until joining Hitchens, Harrison & Co plc in January
2005. He left Hichens, Harrison & Co plc after its acquisition
by Religare in 2008. Brian is a Fellow of the Institute of
Chartered Accountants in England and Wales.
SIMON MORRIS
Executive Director
Fellow of the Institute of Chartered Accountants in England and
Wales, qualified as a Chartered Accountant in 1980. After obtaining
a degree in Business Studies, spent his career with Grant Thornton
and became a partner in 1988. He specialised in corporate finance
and corporate recovery, principally restructuring work. He was
appointed Chief Operating Officer of Grant Thornton UK in 2008,
retiring in late 2011. Since then he has acted as a business
consultant. He is also an accredited mediator.
ANDY COVENEY
Finance Director
Member of the institute of Chartered Accountants, qualified as
Chartered Accountant in 1990. After obtaining a degree in Geology
from the University of Durham he joined Deloitte Haskins &
Sells, later moving into Corporate Finance advisory work with
Coopers & Lybrand. Andy left the profession in 1993, embarking
on a career as finance director/managing director of several
manufacturing & distribution businesses, specialising in
turn-arounds, cash flow management & profit improvement,
including CP Pharmaceuticals (Holdings) Ltd, Benders Holdings Ltd
and Bernstein Holdings Ltd. He established his own advisory &
consultancy business in 2011 to specialise in and invest in
business turn arounds & growth companies.
DIRECTORS' REPORT
The Directors submit their annual report together with the
audited financial statements for the year ended 31 December
2017.
Principal activities
The Company and the Group's principal activity is the
acquisition, development and operation of power generation assets
in markets in Latin America.
Since the Company's admission to AIM in August 2004, the Company
acquired assets in Argentina and commenced development of new power
generation projects in Peru and Chile since 2012. The power
generation projects in Peru were sold on 30 January 2018.
Results and dividends
The Group results for the year ended 31 December 2017 are set
out in the Consolidated Statement of Total Comprehensive
Income.
No dividend was paid during the year to 31 December 2017 (2016:
nil).
Share capital
Details of the issued share capital are set out in Note 18.
Going concern
The Company has been in negotiations for prospective sales of
Group assets. There exists uncertainty as to the timing of the
sales of assets as well as the quantum of the corresponding
proceeds.
During 2017 the Company reached payment agreements with and
settled certain creditors resulting in an overall reduction in
trade and other payables. Unless there is a significant disposal of
assets, the Group is reliant on repayments of loans from its joint
venture Argentine operations. However, the quantum and timing of
such receipts may be subject to variation and are not guaranteed as
there is no formal agreement in place. Whilst anticipated loan
repayments from the joint venture are expected to be sufficient to
meet the working capital requirements for the Group, the Directors
are considering raising additional facilities to increase
headroom.
The Group's 100% subsidiary Cascade Hydro Ltd has outstanding
third-party loans of GBP2.6 million (2016: GBP2.4 million). These
loans have not been repaid in accordance with their original
payment schedules. Further details are set out in Note 22. After
the sale of Cascade Hydro Limited completed on 30 January 2018 the
Group was no longer responsible for these loans, see note 32 for
further details.
On the basis that the Group receives the joint venture
remittances referred to above or the alternative sources of working
capital, the Directors have assessed that the Group would have
sufficient working capital based on their review of cashflow
forecasts for a period of at least 12 months from the signing of
the financial statements.
Directors
The following Directors served during the year and up to the
date of signature of the financial statements as follows:
Brian Rowbotham - Non-Executive Director
Simon C. Morris - Executive Director
Andy H. Coveney - Executive Director
Directors' interests
The Directors' beneficial interests in the shares of the Company
were on the reference dates as stated below:
29.05.2018 31.12.2017 31.12.2016
Brian Rowbotham 450,000 450,000 450,000
Simon C. Morris - - -
Andrew H. Coveney - - -
Directors' Indemnity
The Company's Articles of Association provide, subject to the
provisions of UK legislation, an indemnity for Directors and
officers of the Company in respect of liabilities they may incur in
the discharge of their duties or in the exercise of their powers,
including any liabilities relating to the defence of any
proceedings brought against them which relate to anything done or
omitted, or alleged to have been done or omitted, by them as
officers or employees of the Company. Appropriate directors' and
officers' liability insurance cover is in place in respect of all
the Directors.
Significant shareholdings in the Company
In addition to the shareholdings shown above, the Company is
aware of the following interests of 3 per cent. or more in the
issued ordinary share capital of the Company notifiable at 29 May
2018, being the last practicable date for reporting this
information.
Number of shares % holding
Sterling Trust Ltd 303,092,303 53.989
YF Finance Ltd 96,565,166 17.201
HSBC Client Holdings Nominees (UK) Limited 20,511,059 3.65
Interactive Investor Services Nominees
Limited 17,971,218 3.20
The percentages shown are based on 561,387,586 shares in
issue.
Risk management and objectives
The financial risk management policies and objectives are set
out in Note 26.
Statement of directors' responsibilities
The Directors are responsible for preparing the Strategic
Report, the Directors' Report, Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have to prepare the financial statements in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
the European Union. Under company law, the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs and profit
or loss of the Company and Group for that period. In preparing
these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Statement as to disclosure of information to auditor
As far as the Directors are aware they have each taken all
necessary steps to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that
information.
As far as the Directors are aware, there is no relevant audit
information of which the Company's auditor is unaware.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the Companies Act
2006.
Auditor
Our auditor's, Moore Stephens LLP, were appointed on 28 February
2018. Pursuant to Section 489 of the Companies Act of the Companies
Act 2006, Moore Stephens LLP has expressed its willingness to
continue in office as auditor and a resolution to reappoint it will
be proposed at the forthcoming Annual General Meeting.
On behalf of the Board
------------------------
Maria J. Bravo Quiterio
Company Secretary
31 May 2018
CORPORATE GOVERNANCE REPORT
for the year ended 31 December 2017
Policy Statement
The Board is committed to applying high standards of corporate
governance and integrity to all our activities. As the Company is
listed on the AIM Market of London Stock Exchange PLC, it is not
required to comply with all aspects of the UK Corporate Governance
Code 2016 (the "Code"). The Group does not comply with the Code.
However, the Board has been briefed on the Code and is accountable
to the Company's shareholders for good corporate governance and
therefore seeks to draw on those aspects of the Code that are
considered to be relevant to the Group.
The Board of Directors
Subject to the Articles of Association, UK legislation and any
directions given by special resolution, the business of the Group
is managed by the Board. The Board is responsible for providing
leadership to the management of the Group, determining strategy and
ensuring that agreed strategy is implemented as well as approving
major capital expenditure items, disposals, annual budgets and
financing matters.
The Board appoints its members and those of its principal
committees following the recommendations of the Nominations and
Remuneration Committees. The Board regularly reviews the
identification, evaluation and management of the principal risks
faced by the Group and the effectiveness of the Board's internal
controls. The Board considers the appropriateness of its accounting
policies on an annual basis. The Board believes that the accounting
policies are appropriate. Financial results with comparison to
budget and forecast results are reported to the Board on a regular
basis, together with commercial reports on operational issues.
Significant variances from budget or strategy are discussed at
Board meetings and actions set in place to address them.
The Board comprises one Non-Executive Director and two Executive
Directors: the Chief Executive Officer and the Finance Director.
All Directors are involved in significant decisions.
Board and committee meetings are scheduled in line with the
financial calendar of the Group. The timing of meetings ensures
that the latest operational detail is available, and that
appropriate time and focus can be given to matters under
consideration. The Board met twenty-six (26) times throughout the
year to discuss a formal schedule of business.
Composition of and Appointments to the Board
The Code requires that there should be a balance of Executive
and Non-Executive Directors and when appointing new directors to
the Board, there should be a formal, rigorous and transparent
process.
The Board comprises one Non-Executive Director, Brian Rowbotham
who is regarded by the Board as independent in character and
judgement and two Executive Directors. The Executive Directors for
the year were Simon Morris and Andrew Coveney, both form the
management team. Short biographies of the Directors are given on
page 7.
The Board is satisfied with the balance between executive and
non-executive directors. The Board considers that its composition
is appropriate in view of the size and requirements of the Group's
business and the need to maintain a practical balance between
executive and non-executive directors.
Each member of the Board brings different experience to the
Board and the Board Committees. The Board is satisfied that there
is sufficient diversity in the Board structure to bring a balance
of skills, experience, independence and knowledge to the Group. It
is noted that the non-executive director holds shares in the
Company, but the Board consider that this does not impact his
independence.
The Code requires that the Board undertakes a formal and
rigorous annual evaluation of its own performance and that of its
Committees and Directors. The Board reviews its composition
annually to ensure there is adequate diversity to allow for its
proper functioning and that the Board works effectively as a
unit.
When a new appointment is made to the Board, consideration is
given to the particular skills, knowledge and experience that a
potential new member could add to the existing Board
composition.
Re-election
Under the Code, the Directors should offer themselves for
re-election at regular intervals. Additionally, under the Company's
Articles of Association, at least one third of the directors who
are subject to retirement by rotation are required to retire and
may be proposed for re-election at each annual general meeting
("AGM"). New directors who were not appointed at the previous AGM,
automatically retire at their first AGM and, if eligible, can seek
re-appointment.
Internal Controls
The Board takes responsibility for establishing and maintaining
reliable systems of control in all areas of operation. These
systems of control, especially financial control, can only provide
reasonable but not absolute assurance against material misstatement
or loss.
The key matters relating to the systems of internal control are
set out below:
-- the Company operates a comprehensive system for reporting
financial and non-financial information to the Board including
review of strategy and financial budgets.
-- financial performance is reviewed against budget, forecast
and other performance indicators with action dictated according to
each meeting.
-- sufficient resource is focused to maintain and develop
internal control procedures and information systems especially in
financial management.
The Board considers that there have been no substantial
weaknesses in internal financial controls that have resulted in any
material losses, contingencies or uncertainties that have to be
disclosed in the accounts.
Information and Development
The Code requires that the Board should be supplied in a timely
fashion with information in a form and of a quality appropriate to
enable it to discharge its duties.
Updates dealing with changes in legislation and regulation
relevant to the Group's business are provided to the Board by
external advisors, the Finance Director and legal counsel.
Directors may seek independent professional advice at the Company's
expense in furtherance of their duties as Directors.
Investor Relations
The Group values the views of its shareholders and recognises
their interest in the Group's strategy and performance, The
Directors hold meetings with institutional shareholders to discuss
and review the Group's activities and objectives. Communication
with private shareholders is largely through the Annual General
Meeting ("AGM"), where participation is encouraged and where the
Board is available to answer questions.
The AGM is used to communicate with institutional and private
investors with whom dialogue is encouraged. Directors also
undertake consultation with major shareholders from time to time.
Feedback is reported to the Board so that all Directors develop an
understanding of the views of major shareholders. Trading updates
and press releases are issued as appropriate and are available on
the Company's website, where up to date information is maintained
on the investor section at www.rurelec.com.
Every shareholder has access to a full annual report each year
end and an interim report at the half year end. Care is taken to
ensure that any price sensitive information is released to all
shareholders at the same time in accordance with London Stock
Exchange requirements.
AIM Rules Compliance Report
Rurelec is quoted on AIM, London Stock Exchange's market for
small cap companies. Rurelec complies with the AIM Rules, in
particular AIM Rule 31 which requires the following:
-- to have in place sufficient procedures, resources and
controls to enable compliance with the AIM Rules;
-- to seek advice from the Nominated Adviser ("Nomad") regarding
its compliance with the AIM Rules whenever appropriate and to take
that advice into account;
-- to provide the Nomad with any information it reasonably
requests in order for the Nomad to carry out its responsibilities
under the AIM Rules for Nomads, including any proposed changes to
the Board and to provide draft RNS notifications in advance;
-- to ensure that each of the Directors accepts full
responsibility collectively and individually for compliance with
the AIM Rules;
-- to ensure that each Director discloses without delay all
information which the Company needs to disclose in order to comply
with AIM Rule 17 (Disclosure of Miscellaneous Information) insofar
as that information is known to the Director or could with
reasonable diligence be ascertained by the Director.
Audit Committee
The Audit Committee comprises Brian Rowbotham as Chairman of the
Committee and Simon Morris. Mr Rowbotham and Mr Morris are
Chartered Accountants and have recent and relevant financial and
commercial experience.
The Committee's remit is to review financial reporting
practices, internal financial controls and internal and external
audit policy including the appointment of the Company's Auditor.
During the year, the Audit Committee met four (4) times to discuss
appointment of new auditors, review the draft half year and annual
financial statements.
The Audit Committee considered the appointment of new auditors
for the Company after the current auditors, Saffery Champness LLP
resigned. The new auditors for the Company and its group of
companies were appointed under the recommendation of the Audit
Committee. Moore Stephens LLP was appointed as external auditor of
Rurelec PLC and its group of companies.
Remuneration Committee
The Remuneration Committee comprises Brian Rowbotham who reviews
the remuneration policy for the Executive Directors and for key
management personnel. The Executive Directors determine the
remuneration arrangements for the Non-Executive Director. No
Director may participate in decisions regarding his or her own
remuneration. Details of the Directors' remuneration can be found
in Note 7.
Nominations Committee
The Nominations Committee presently comprises Brian Rowbotham.
The Committee is responsible for monitoring the composition of the
Board and makes recommendations to the Board on all new Board
appointments and succession planning. The Board has not used
external consultants in the appointment of Directors. All Directors
are subject to re-election by shareholders in accordance with the
Company's Articles of Association.
Social Media Policy
The Company issued a new Social Media Policy in 2017 in
compliance with its obligations under the AIM Rules. The Social
Media Policy is intended to help staff make appropriate decisions
about the use of social media. It outlines the standards required
from all staff to observe when using social media on behalf of the
Company and the actions to take in respect of breaches of the
policy.
Share Dealing Code
The Company issued a new Share Dealing Code in 2016 in
compliance with its obligations under the Market Abuse Regulations
which covers dealings by Persons Discharging Managerial
Responsibilities ("PDMRs") and certain employees of the Company and
its subsidiaries. The Share Dealing Code restricts dealings in
shares during designated closed periods and at any time when in
possession of unpublished price sensitive information.
Compliance Statement
The Board recognises that the Company is not obliged to and does
not comply with the Code. The board constantly monitors its
compliance and opportunities to improve.
Maria J. Bravo Quiterio
Company Secretary
31 May 2018
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF RURELEC PLC
Our opinion
We have audited the consolidated financial statements for the
year ended 31 December 2017 which comprise:
-- the consolidated statement of comprehensive income;
-- the consolidated and company statements of changes in equity;
-- the consolidated and company balance sheets;
-- the consolidated and company cash flow statements; and
-- the notes to the financial statements, which include a
summary of significant accounting policies and other explanatory
information.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and IFRS
as adopted by the European Union.
In our opinion, Rurelec plc's ("the Company" or "the Parent
Company") consolidated financial statements ("the financial
statements"):
-- give a true and fair view of the state of the group's and of
the parent company's affairs as at 31 December 2017 and of the
group's loss for the year then ended;
-- have been properly prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union and, in respect of the Parent Company, as applied in
accordance with the provisions of the Companies Act 2006; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report below. We are independent of the
Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to listed entities,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Our assessment of key risks of material misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on the overall audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Key Audit Matter How our audit addressed the
Key Audit Matters
Going concern In this area our procedures
The group continues to make included:
a loss, with the only operational * Reviewing budget and cash flow forecasts for at least
part of the business being its 12 months from the date of approval of the financial
investment in a joint venture statements;
which has been loss making for
a number of years with the investment
fully written down. Whilst the * Obtaining support for the management assumptions used
group is in a net assets position, in the forecast;
it is heavily reliant on repayment
of the loans receivable from
the joint venture. * Confirming the actual cash repayments of the loan to
the JV for the few months post year end
* Reviewing board minutes during the year and post year
end to indicate any other issues that may indicate
inability of the group to continue as a going
concern; and
* Reviewing the going concern assessment of
EnergÃa del Sur S.A.
In order to meet trade payables
and borrowings falling due within
one year, the Company is dependent
on the continuing receipt of
loan repayments from EnergÃa
del Sur S.A. There is no formal
agreement in place for the repayment
of the loan resulting in a material
uncertainty that casts doubt
on the Company's ability to
continue as a going concern.
The financial statements do
not include any adjustments
that would result if the group
were unsuccessful in this regard.
-----------------------------------------------------------------
Valuation of assets In this area our procedures
included:
The group holds two Siemens * Reviewing purchase and ownership documentation to
701dus turbines (stored in Italy)- confirm rights and obligations;
these were purchased for $25m
in June 2013 for use in the
Central Illapa Project in Chile. * Physically verifying existence of the assets, their
Due to working capital constraints storage and condition;
and market conditions, investment
has been limited and the turbines
have been heavily impaired. * Reviewing value in use calculations, assessing the
As the group continues to be accuracy of calculations and the reasonableness of
loss making and with operational assumptions;
issues in the joint venture
during the year, there is significant
uncertainty in being able to * Reviewing the valuation report prepared by an
realise the value through the independent expert, confirming the expert's
future project, or through the independence, assessing the conclusions reached and
sale of the turbines in the the competency and qualifications of the expert;
local market as the market continues
to be depressed in the sector.
* Reviewing evidence that the value of the assets is
recoverable either through sale or through future
project offers; and
* Reviewing insurance documentation and
storage/maintenance documentation to assess the risk
of further impairment.
The above procedures have been
completed with no issues being
identified.
-----------------------------------------------------------------
Key Audit Matter How our audit addressed the
Key Audit Matters
Valuation of investment and In this area our procedures
recoverability of intercompany included:
loans, including loans to joint * Obtaining loan confirmations of the balance and any
venture interest accrued;
The repayment of these loans
is dependent on the economic * Reviewing the going concern assessment of
feasibility of the underlying EnergÃa del Sur S.A.;
projects within the group.
* Reviewing signed loan agreements with group companies
and joint venture; and
* Assessing recoverability of the loans through
reviewing financial projections models and net asset
positions of subsidiaries and the joint venture.
The above procedures have been
completed with no issues being
identified.
-------------------------------------------------------------
Our application of materiality
We set certain thresholds for materiality. These help us to
establish transactions and misstatements that are significant to
the financial statements as a whole, to determine the nature,
timing and extent of our audit procedures and to evaluate the
effect of misstatements, both individually on balances and on the
financial statements as a whole.
In establishing the audit strategy, it was determined that the
level of uncorrected misstatements judged to be material for the
financial statements and our audit overall would be GBP142,000,
approximately 5% of loss before tax. This is the threshold above
which missing or incorrect information in financial statements is
considered to have an impact on the decision making of users. For
the Parent Company financial statements, this was judged to be
GBP140,000.
We reported to the Audit Committee all potential adjustments in
excess of GBP7,100 being 5% of the materiality for the financial
statements as a whole.
An overview of the scope of our audit
The group operates through three trading subsidiary undertakings
registered in the UK and one joint venture undertaking registered
in the British Virgin Islands which were considered to be
significant components for the purposes of the financial
statements. The financial statements consolidate these entities
together with a number of non-trading subsidiary undertakings. In
establishing our overall approach to the group audit, we determined
the type of work that needed to be performed in respect of each
subsidiary. This consisted of us carrying out a full audit of all
significant components of the group and specified procedures on the
remaining components. For the audit work required on overseas
entities we worked with component auditors. 100% of group net
assets were covered by full scope audits.
We considered the risk of the financial statements being
misstated or not prepared in accordance with the underlying
legislation or standards. We then directed our work toward areas of
the financial statements which we assessed as having the highest
risk of containing material misstatements.
We tested and examined information using both analytical
procedures and tests of detail, to the extent necessary to provide
us with a reasonable basis to draw conclusions. These procedures,
together with our detailed review of procedures performed by
component auditors, gave us the evidence that we need for our
opinion on the financial statements as a whole and, in particular,
helped mitigate the risks of material misstatement mentioned
above.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in this report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of the other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the Strategic Report and the
Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the Strategic Report and the Directors' Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or
the directors' report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion
-- adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the financial statements are not in agreement with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, set out on page 9, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs(UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council's website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor's report.
Use of our Report
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
.
Michael Simms, Senior Statutory Auditor
For and on behalf of Moore Stephens LLP,
Chartered Accountants and Statutory Auditor
150 Aldersgate Street
London
EC1A 4AB
31 May 2018
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2017
Notes Year ended Year ended
-------------------------------------- ------
31.12.17 31.12.16
-------------------------------------- ------
GBP'000 GBP'000
-------------------------------------- ------ ----------- -----------
Continuing operations
Revenue 4 - 95
Gross Profit - 95
Administrative Expenses 6 (2,070) (2,420)
Other Expense 8b (1,651) (10,500)
Operating Loss (3,721) (12,825)
Share of Joint Venture Profit/(Loss) 24 - -
Foreign Exchange (Losses)/Gains 8a (2,547) 1,243
Finance Income 9 862 2,683
Finance Expense 9 (419) (355)
Loss before Tax (5,825) (9,254)
Tax Expense 10 - (4)
Loss for the year attributable to
owners of the Company (5,825) (9,258)
Earnings per Share - in pence 11
Basic Loss per Share (1.04) (1.65)
Diluted Loss per Share (1.04) (1.65)
-------------------------------------- ------ ----------- -----------
The notes on pages 26 to 53 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2017
Year Ended Year Ended
-------------------------------------------------
31.12.17 31.12.16
-------------------------------------------------
GBP'000 GBP'000
------------------------------------------------- ----------- -----------
Loss for the year (5,825) (9,258)
Other Comprehensive (Loss)/Income for the year:
Items that will be subsequently Reclassified
to Profit & Loss:
Exchange Differences on translation of Foreign
Operations (386) 3,171
Total Other Comprehensive (Loss)/Income (386) 3,171
Total Comprehensive Loss for year attributable
to owners of the Company (6,211) (6,087)
-------------------------------------------------- ----------- -----------
The notes on pages 26 to 53 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2017
Notes 31.12.17 31.12.16
------
GBP'000 GBP'000
-------------------------------------------- ------ --------- ---------
Assets
Non-current Assets
Property, Plant and Equipment 13 9,699 11,176
Intangible Assets 14 - 29
Investment in Joint Venture 24 - -
9,699 11,205
Current Assets
Trade and Other Receivables 15a 18,951 24,761
Cash and Cash Equivalents 17 163 960
Assets classified as held for sale 30 2,265 2,207
21,379 27,928
Total Assets 31,078 39,133
Equity and Liabilities
Shareholders' Equity
Share Capital 18 11,228 11,228
Share Premium Account 19 22,754 22,754
Foreign Currency Reserve 572 958
Special Non-distributable Reserve 19 45,000 45,000
Accumulated Losses (54,345) (48,520)
Total Equity attributable to owners of the
Company 25,209 31,420
Current Liabilities
Trade and Other Payables 20a 899 2,434
Current Tax Liabilities 21 7 12
Borrowings 22 1,448 4,037
Liabilities classified as held for Sale 30 3,515 1,230
5,869 7,713
Total Liabilities 5,869 7,713
Total Equity and Liabilities 31,078 39,133
-------------------------------------------- ------ --------- ---------
The financial statements were approved by the Board of Directors
on 31 May 2018 and were signed on its behalf by Simon Morris
(Executive Director) and Brian Rowbotham (Non-executive
Director).
----------------------- ------------------------
Simon Morris Brian Rowbotham
The notes on pages 26 to 53 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF FINANCIAL POSITION company number:
4812855
At 31 December 2017
Notes 31.12.17 31.12.16
------------------------------- ------
GBP'000 GBP'000
------------------------------- ------ ---------- ----------
Assets
Non-current Assets
Investments 23 100 100
100 100
Current Assets
Inventories 16 8,895 9,755
Trade and Other Receivables 15b 20,892 27,989
Cash and Cash Equivalents 17 162 955
29,949 38,699
Total assets 30,049 38,799
Equity and liabilities
Shareholders' equity
Share Capital 18 11,228 11,228
Share Premium Account 19 22,754 22,754
Special Non-distributable
Reserve 19 45,000 45,000
Accumulated Losses (50,989) (43,921)
Total Equity 27,993 35,061
Current Liabilities
Trade and Other Payables 20b 601 2,065
Current tax liabilities 21 7 12
Borrowings 22 1,448 1,661
2,056 3,738
Total Equity and Liabilities 30,049 38,799
------------------------------- ------ ---------- ----------
As permitted by s408 Companies Act 2006, the Company has not
presented its own profit and loss account and related notes. The
Company's loss for the year was GBP7.1 million (2016: loss GBP2.8
million).
The financial statements were approved by the Board of Directors
on 31 May 2018 and were signed on its behalf by Simon Morris
(Executive Director) and Brian Rowbotham (Non-executive
Director).
----------------------- ------------------------
Simon Morris Brian Rowbotham
The notes on pages 26 to 53 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2017
Notes Year ended
Year ended
31.12.17 31.12.16
GBP'000 GBP'000
Cash Flows from Operating Activities
Cash used in Operations 25 (2,471) (2,066)
Net Cash used in Operating Activities (2,471) (2,066)
Cash Flows from Investing Activities
Loan Repayments from Joint Venture company 3,331 2,311
Settlement of Deferred Consideration (1,257) (321)
Net Cash generated from Investing Activities 2,074 1,990
Net Cash Outflow before Financing Activities (397) (76)
Cash Flows from Financing Activities
Loan Drawdowns - 1,500
Loan Principal Repayments 22 (320) (830)
Loan Interest Repayments 22 (80) (20)
Net Cash (Used in)/Generated from Financing
Activities (400) 650
(Decrease)/Increase in Cash and Cash Equivalents (797) 574
Cash and Cash Equivalents at Start of
Year 960 386
Cash and Cash Equivalents at End of Year 163 960
The notes on pages 26 to 53 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2017
Notes
Year ended Year ended
31.12.17 31.12.16
GBP'000 GBP'000
Cash Flows from Operating Activities
Cash Used in Operations 25 (3,164) (1,718)
Net Cash Used in Operations (3,164) (1,718)
Cash Flows from Investing Activities
Investment in and Loans to subsidiaries (573) (673)
Loan Repayment from subsidiary 3,344 2,311
Net Cash Generated from Investing Activities 2,771 1,638
Net Cash Outflow before Financing Activities (393) (80)
Cash Flows from Financing Activities
Loan Drawdowns - 1,500
Loan Principal Repayments 22 (320) (830)
Loan Interest Repayments 22 (80) (21)
Net Cash (Used in)/Generated from Financing
Activities (400) 649
(Decrease)/Increase in Cash and Cash Equivalents (793) 569
Cash and Cash Equivalents at Start of Year 955 386
Cash and Cash Equivalents at End of Year 162 955
The notes on pages 26 to 53 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
Share Share Foreign Currency Accumulated Losses Special Total
Capital Premium Reserve GBP'000 Non-distributable GBP'000
GBP'000 GBP'000 GBP'000 Reserve
GBP'000
Balance at 01.01.16 11,228 22,754 (2,212) (39,262) 45,000 37,508
Loss for year
attributable to
owners of the
parent - - - (9,258) - (9,258)
Exchange
Differences - - 3,171 - - 3,171
Total Comprehensive
Loss - - 3,171 (9,258) - (6,087)
Balance at 31.12.16 11,228 22,754 958 (48,520) 45,000 31,420
Loss for year
attributable to
owners of the
parent - - - (5,825) - (5,825)
Exchange
Differences - - (386) - - (386)
Total Comprehensive
Loss - - (386) (5,825) - (6,211)
Balance at 31.12.17 11,228 22,754 572 (54,345) 45,000 25,209
Notes: 18 19 19
The notes on pages 26 to 53 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
Share Share Accumulated Special Total
Capital Premium Losses Non-distributable GBP'000
GBP'000 GBP'000 GBP'000 Reserve
GBP'000
Balance at 1.1.16 11,228 22,754 (41,146) 45,000 37,836
Loss for the year - - (2,775) - (2,775)
Total Comprehensive
Loss - - (2,775) - (2,775)
Balance at 31.12.16 11,228 22,754 (43,921) 45,000 35,061
Loss for the year - - (7,068) - (7,068)
Total Comprehensive
Loss - - (7,068) - (7,068)
Balance at 31.12.17 11,228 22,754 (50,989) 45,000 27,993
Notes: 18 19 19
The notes on pages 26 to 53 form an integral part of these
Consolidated Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2017
1. General information, basis of preparation and new accounting standards
1a General information
Rurelec PLC is the Group's ultimate parent company. It is
incorporated and domiciled in England and Wales. The address of
Rurelec's registered office is given on the information page.
Rurelec's shares are traded on the AIM market of the London Stock
Exchange PLC.
The nature of the Group's operations and its principal
activities are the generation of electricity in South America.
1b Basis of preparation
The Company and the consolidated financial statements have been
prepared in compliance with International Financial Reporting
Standards ("IFRSs") and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations as adopted by
the European Union and company law applicable to companies
reporting year ended 31 December 2017.
Basis of measurement
The functional currencies of the Group are Pounds sterling,
Chilean Peso, Peruvian Nuevo Sol, Argentinian Peso and the United
States Dollar. The presentation currency is Pounds sterling.
Going Concern
The Directors have continued to adopt the going concern basis
for the preparation of these financial statements. During 2017 the
Group continued to receive funds from its joint venture in
Argentina, EdS, in service of the loans to the joint venture and a
wholly owned subsidiary Rurelec Project Finance Ltd.
The Company has been in negotiations for the prospective sales
of Group assets. There exists uncertainty as to the timing of the
sales of assets as well as the quantum of the corresponding
proceeds.
During 2017 and since the year end the Company has continued to
make payments towards agreements with and settled certain creditors
resulting in an overall reduction in creditors. Until there is a
significant disposal of assets, the Group is reliant on repayments
of loans from its joint venture. However, the quantum and timing of
such receipts are subject to variation and are not guaranteed.
Whilst anticipated loan repayments from the joint venture are
expected to be sufficient to meet the working capital requirements
for the Group, the Directors are considering raising additional
facilities to increase headroom.
Since the year end the Company has further extended the
repayment date on it's GBP1.2 million short term facility from
Bridge (Arena) Properties Limited ("BPAC"). The repayment date is
now 30 June 2019.
The Group's 100% subsidiary Cascade Hydro Ltd has outstanding
third-party loans of GBP2.6 million (2016: GBP2.4 million). These
loans have not been paid in accordance with their original payment
schedules. Following the disposal of the Group's interests in Peru
on 30 January 2018, through the sale of Cascade Hydro Limited,
outstanding third-party loans totaling GBP2.9 million have been
removed from the Group. Further details are set out in Note 23 and
Note 32.
On the basis that the Group receives these joint venture
remittances or the alternative sources of working capital, the
Directors have assessed that the Group would have sufficient
working capital based on their review of cashflow forecasts for a
period of at least 12 months from the signing of the financial
statements.
1c New accounting standards
The Directors consider that no revisions to IFRS standards
implemented in the year have had any significant effect on these
statements.
At the date of authorisation of these financial statements
certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective. The Group
has not early adopted any of these pronouncements. The new
Standards, amendments and Interpretations that are expected to be
relevant to the Group's financial statements are as follows:
Applicable for financial years
Standard/interpretation Content beginning on/after
IFRS 9 (2014) Financial instruments: 01/01/2018
IFRS 15 Revenue from contracts with customers 01/01/2018
IFRS 16 Leases 01/01/2019
IFRS 9, 'Financial instruments: Classification and
Measurement'
The Directors do not anticipate that the adoption of these
standards and interpretations in future periods will have any
material impact on the financial statements of the Group.
IFRS 15 and 16 'Revenue from contracts with customers' and
'Leases'
The Directors have completed their assessment of the impact of
the adoption of these standards and consider that there will be no
material impact to future reporting, based on current
conditions.
2. Summary of significant accounting policies
2.1 Basis of Consolidation
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at 31 December
2017. 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. Generally, there is a presumption that a majority of
voting rights result in control. To support this presumption and
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.
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.
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.
The Group reports its interests in joint venture using the
equity method of accounting, except when the investment is
classified as held for sale.
A joint venture is a joint arrangement whereby the Group and
other parties that have joint control of the arrangement have
rights to the net assets of the arrangement (IFRS 11).
Under the equity method, investments in joint ventures are
carried in the consolidated statement of financial position at cost
as adjusted for post-acquisition changes in the Group's share of
the net assets of the joint venture, less any impairment in the
value of individual investments. Losses of a joint venture in
excess of the Group's investment in that joint venture are not
recognised, unless the Group has incurred legal or constructive
obligations or made payments on behalf of the joint venture.
Any excess of the cost of acquisition over the Group's share of
the net fair value of the identifiable assets, liabilities and
contingent liabilities of the joint venture recognised at the date
of acquisition is recognised as goodwill.
The goodwill, if any is included within the carrying amount of
the investment and is assessed annually for impairment as part of
the investment. Any excess of the Group's share of the net fair
value of the identifiable assets, liabilities and contingent
liabilities over the cost of acquisition, after reassessment, is
recognised immediately as a profit or loss.
Unrealised gains on transactions between the Group and its joint
venture are eliminated to the extent of the Group's interest in the
joint venture. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Unrealised gains on transactions between the Group and
subsidiary entities are eliminated. Amounts reported in the
financial statements of subsidiary and joint venture entities have
been adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the acquisition
method. This method involves the recognition at fair value of all
identifiable assets and liabilities, including contingent
liabilities of the acquired company, at the acquisition date,
regardless of whether or not they were recorded in the financial
statements of the entity prior to acquisition. On initial
recognition, the assets and liabilities of the acquired entity are
included in the consolidated statement of financial position at
their fair values, which are also used as the bases for subsequent
measurement in accordance with the Group's accounting policies.
Investments in subsidiaries are stated at cost less impairment in
the statement of financial position of the Company.
2.2 Goodwill
Goodwill representing the excess of the cost of acquisition over
the fair value of the Group's share of the identifiable net assets
acquired is capitalised and reviewed annually for impairment.
Goodwill is stated after separating out identifiable assets and
liabilities. Goodwill is carried at cost less accumulated
impairment losses. Any excess of interest in acquired assets,
liabilities and contingent liabilities over fair value is
recognised immediately after acquisition through the income
statement.
2.3 Foreign Currency Translation
The financial information is presented in pounds sterling, which
is also the functional currency of the parent company.
In the separate financial statements of the consolidated
entities, foreign currency transactions are translated into the
functional currency of the individual entity using the exchange
rates prevailing at the dates of the transactions ("spot exchange
rate"). Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation of
remaining balances at year-end exchange rates are recognised in the
income statement within 'Foreign Exchange (Losses)/Gains'.
In the consolidated financial statements, all separate financial
statements of subsidiaries and joint ventures, originally presented
in a currency different from the Group's presentation currency,
have been converted into sterling. Assets and liabilities have been
translated into sterling at the closing rate at the reporting date.
Income and expenses have been converted into sterling at the
average rates over the reporting period. It is the Directors
judgement that the average rate conversion is appropriate for 2017
and 2016 currency conversions, as they do not consider that there
was hyperinflation in the countries where the Group operates.
Argentina had the largest falls in 2017 with the average rate for
2017 being 8.5 per cent. lower than 2016, whilst the closing rate
was 29.7 per cent. lower. This will be reviewed for 2018,
especially with reference to economic conditions in Argentina which
have deteriorated since the end of last year. Any differences
arising from this procedure have been recognised in other
comprehensive income and accumulated in the Foreign Currency
Reserve.
2.4 Income and expense recognition
Revenue represents amounts receivable for goods or services
provided in the normal course of business, net of trade discounts,
VAT and other sales-related taxes, and excluding transactions with
or between Group companies. Revenues from the sale of electricity
are recorded based upon output delivered at rates specified under
contract terms or prevailing market rates as applicable. Revenue is
recognised on the supply of electricity when a contract exists and
supply has taken place. Revenue received for keeping power plants
operating and available for despatch into the grid as required is
recognised on a straight-line basis over the contractual period.
During the year under review and the prior year, no revenues were
derived from the sale of equipment purchased with a view to
subsequent resale.
Operating expenses are recognised in the income statement upon
utilisation of the service or at the date of their origin. All
other income and expenses are reported on an accrual basis.
2.5 Dividends
Dividends, other than those from investments in associates and
joint ventures, are recognised at the time the right to receive
payment is established. No dividends were paid or received during
the year (2016: nil).
2.6 Borrowing Costs
All borrowing costs are expensed as incurred except where the
costs are directly attributable to specific construction projects,
in which case the interest cost is capitalised as part of those
assets.
2.7 Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of
depreciation and any provision for impairment. No depreciation is
charged during the period of construction.
All operational buildings and plant and equipment in the course
of construction are recorded as plant under construction until such
time as they are brought into use by the Group. Plant under
construction includes all direct expenditure and may include
capitalised interest in accordance with the accounting policy on
that subject. On completion, such assets are transferred to the
appropriate asset category.
Repairs and maintenance are charged to the income statement
during the financial period in which they are incurred. The cost of
major renovations and overhauls is included in the carrying amount
of the assets where it is probable that the economic life of the
asset is significantly enhanced as a consequence of the work. Major
renovations and overhauls are depreciated over the expected
remaining useful life of the work.
Depreciation is calculated to write down the cost less estimated
residual value of all property, plant and equipment other than
freehold land which is not depreciated by equal annual instalments
over their estimated useful economic lives. The periods generally
applicable are:
Plant and equipment 3 to 15 years
Material residual values are updated as required, but at least
annually. Where the carrying amount of an asset is greater than its
estimated recoverable amount, it is written down immediately to its
recoverable amount.
2.8 Impairment of Tangible and Intangible Assets
At each reporting date, the Group reviews the carrying amount of
its property, plant and equipment and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset,
the Group estimates the recoverable amount of the cash-generating
unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. 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.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
the income statement. The Group recognises a cash-generating unit
by its ability to independently earn income. The Group carries each
cash-generating unit in an individual special purpose company, so
they are easily recognised.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but only to the extent
that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been
recognised for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised immediately in the
income statement.
2.9 Non-current Assets Held for Sale and Discontinued
Operations
In general IFRS 5 outlines how to account for non-current assets
held for sale such as these assets (or disposal groups) held for
sale are not depreciated, are measured at the lower of carrying
amount and fair value less costs to sell, and are presented
separately in the statement of financial position.
The following conditions must be met for an asset (or 'disposal
group') to be classified as held for sale: IFRS 5.6-8
-- management is committed to a plan to sell
-- the asset is available for immediate sale
-- an active program to locate a buyer is initiated
-- the sale is highly probable, within 12 months of
classification as held for sale (subject to limited exceptions)
-- the asset is being actively marketed for sale at a sales
price reasonable in relation to its fair value
-- actions required to complete the plan indicate that it is
unlikely that plan will be significantly changed or withdrawn
The carrying value of the assets need to be recovered
principally through sale. When the Group is committed to a sale
involving loss of control of a subsidiary that qualifies for
held-for-sale classification under IFRS 5 the Group classifies all
of the assets and liabilities of that subsidiary as held for sale,
even if the entity will retain a non-controlling interest in its
former subsidiary after the sale. Non-current assets or disposal
groups that are classified as held for sale are measured at the
lower of carrying amount and fair value less costs to sell. Assets
classified as held for sale, and the assets and liabilities
included within a disposal group classified as held for sale, are
presented separately on the face of the statement of financial
position. The sum of the post-tax profit or loss of the
discontinued operation and the post-tax gain or loss recognised on
the measurement to fair value less cost to sell or fair value
adjustments on the disposal of the assets (or disposal group) is
presented as a single amount on the face of the statement of
comprehensive income.
2.10 Taxation
Current income tax assets and liabilities comprise those
obligations to, or claims from, fiscal authorities relating to the
current or prior reporting period, that are unpaid at the reporting
date. They are calculated according to the tax rates and tax laws
applicable to the fiscal periods to which they relate, based on the
taxable profit for the period. All changes to current tax assets or
liabilities are recognised as a component of tax expense in the
income statement or through the statement of changes in equity.
Deferred income taxes are calculated using the liability method
on temporary differences. This involves the comparison of the
carrying amounts of assets and liabilities in the consolidated
financial statements with their respective tax bases. However, in
accordance with the rules set out in IAS 12, no deferred taxes are
recognised in respect of non-tax-deductible goodwill. In addition,
tax losses available to be carried forward as well as other income
tax credits to the Group are assessed for recognition as deferred
tax assets.
Deferred tax liabilities are provided for in full with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of
realisation, provided that they are enacted or substantially
enacted at the reporting date.
Deferred tax is provided on differences between the fair value
of assets and liabilities acquired in an acquisition and the
carrying value of the assets and liabilities of the acquired entity
and on the differences relating to investments in subsidiary and
joint venture companies if the difference is a temporary difference
and is expected to reverse in the foreseeable future.
Changes in deferred tax assets and liabilities are recognised as
a component of tax expense in the income statement, except where
they relate to items that are accounted for through other
comprehensive income or charged or credited directly to equity in
which case the related deferred tax is also charged or credited
directly to equity, or other comprehensive income.
2.11 Financial Assets
The Group's financial assets include cash and cash equivalents,
loans and receivables.
Cash and cash equivalents include cash at bank and in hand as
well as short term highly liquid investments such as bank
deposits.
Loans and receivables are non-derivative financial assets with
fixed or determinable payment dates that are not quoted in an
active market. They arise when the Group provides money, goods or
services directly to a debtor with no intention of trading the
receivable. Receivables are measured initially at fair value and
subsequently re-measured at amortised cost using the effective
interest method, less provision for impairment. Any impairment is
recognised in the income statement.
Trade receivables are provided against when objective evidence
is received that the Group will not be able to collect all amounts
due to it in accordance with the original terms of the receivables.
The amount of the write-down is determined as the difference
between the assets carrying amount and the present value of
estimated cash flows.
2.12 Financial Liabilities
Financial liabilities are obligations to pay cash or other
financial instruments and are recognised when the Group becomes a
party to the contractual provisions of the instrument. All
transaction costs are recognised immediately in the income
statement.
A financial liability is derecognised only when the obligation
is extinguished, that is when the obligation is discharged,
cancelled or expires.
Bank and other loans are raised for support of short-term
funding of the Group's operations. They are recognised initially at
fair value, net of transaction costs and are subsequently measured
at amortised cost using the effective interest method. Finance
charges, including premiums payable on settlement or redemption,
and direct issue costs are charged to the income statement on an
accruals basis using the effective interest method and are added to
the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
2.13 Operating leases
Leases where substantially all the risks and rewards of
ownership remain with the lessor are accounted for as operating
leases and are accounted for on a straight-line basis over the term
of the lease and charged to the income statement.
2.14 Inventories
Inventories in the Company comprise turbines and associated
spare parts and similar items for use in the Group's plant and
equipment. Inventories are carried at the lower of cost and net
realisable value.
2.15 Shareholders' Equity
Equity attributable to the shareholders of the parent company
comprises the following:
"Share capital" represents the nominal value of equity
shares.
"Share premium account" represents the excess over nominal value
of the fair value of consideration received for equity shares, net
of expenses of the share issue.
"Foreign currency reserve" represents the differences arising
from translation of investments in overseas subsidiaries.
"Accumulated Losses" represents losses to date.
"Special Non-distributable reserves" comprises the reduction of
the share premium account.
2.16 Pensions
During the year under review, the Group did commence
contributions to the Nest Pensions scheme.
2.17 Segment Reporting
In identifying its operating segments, management follows the
Group's geographic locations and are reported in a manner
consistent with the Chief Operating Decision Maker. The activities
undertaken by segments are the generation of electricity in their
country of incorporation within South America.
Each of the operating segments is managed separately as the
rules and regulations vary from country to country.
The measurement policies used by the Group for segment reporting
under IFRS 8 are the same as those used in the financial
statements.
3. Key assumptions and estimates
When preparing the financial statement, management make a number
of judgements, estimates and assumptions about the recognition and
measurement of assets, liabilities, income and expenses. The actual
results may differ from the judgements, estimates and assumptions
made and will seldom equal the estimated results. The areas which
management consider are likely to be most affected by the
significant judgements, estimates and assumptions on recognition
and measurement of assets, liabilities, income and expenses
are:
a) Useful lives of depreciable assets - management review, with
the assistance of external expert valuers, the estimated useful
lives of depreciable assets at each reporting date. Actual results,
however, may vary due to changes in technology and industry
practices.
b) Impairment - management review tangible and intangible
assets, including intra group and Joint Venture loans, at each
balance sheet date to determine whether there is in their judgement
any indication that those assets have suffered an impairment loss.
This review process includes making assumptions about future
events, circumstances and operating results. The actual results may
vary from those expected and could therefore cause significant
adjustments to the carrying value of the Group's assets. Details of
the assumptions underlying management's forecasts for the Group's
main Cash Generating Unit ("CGU") are set out in Note 14.
c) Management have assessed that the Company does not control
the Argentine Joint Venture and therefore, as a result of this
judgement have treated the joint venture in accordance with IAS 28
(see Note 24). This assessment is based on the lack of sole control
over the investee and due to the exposure to variable returns from
its involvement with the investee.
4. SEGMENT ANALYSIS
Management currently identifies the Group's four geographic
operating segments; Argentina, Chile, Peru and the head office in
the UK, as operating segments as further described in the
accounting policy note. These operating segments are monitored and
strategic decisions are made on the basis of segment operating
results. The Groups joint venture operations in Argentina have been
excluded, see note 24 for more detail.
The following tables provide an analysis of the operating
results, total assets and liabilities, capital expenditure and
depreciation for 2017 and 2016 for each geographic segment.
a) 12 months to 31.12.2017 Chile Peru UK Consolidation Total
Adjustments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------------- --------
Administrative Expenses (211) (289) (1,549) (20) (2,070)
Loss from Operations (211) (289) (1,549) (20) (2,070)
Other Expense (324) - - (1,327) (1,651)
Foreign Exchange (Losses)/Gains (118) 698 (3,126) (1) (2,547)
Finance Income - - 1,386 (524) 862
Finance Expense (524) (233) (188) 526 (419)
(Loss)/Profit before Tax
from Operations (1,177) 176 (3,477) (1,347) (5,825)
Tax Expense - - - - -
Total (Loss)/Profit (1,177) 176 (3,477) (1,347) (5,825)
Total Assets 2,215 2,265 30,049 (3,451) 31,078
Total Liabilities 11,421 3,515 2,056 (11,123) 5,869
b) 12 months to 31.12.2016 Chile Peru UK Consolidation Total
Adjustments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------------- ---------
Revenue - - 95 - 95
Gross Profit - - 95 - 95
Administrative Expenses (130) (683) (1,644) 37 (2,420)
Loss from Continuing
Operations (130) (683) (1,549) 37 (2,325)
Other Expense (7,745) (2,714) - (41) (10,500)
Foreign Exchange Gains/(Losses) 374 (1,847) 2,718 (2) 1,243
Finance Income - - 3,845 (1,162) 2,683
Finance Expense (572) (820) (117) 1,154 (355)
Loss before Tax from
Operations (8,073) (6,065) 4,897 (13) (9,254)
Tax Expense (4) - - - (4)
Total Loss (8,077) (6,065) 4,897 (13) (9,258)
Total Assets 2,193 2,207 38,799 (4,066) 39,133
Total Liabilities 10,096 3,619 3,738 (9,740) 7,713
Depreciation - 26 - - 26
5. Exchange rate sensitivity analysis
The key exchange rates applicable to the results were as
follows:
Year Ended Year Ended
31.12.17 31.12.16
i) Closing rate
AR $ (Argentine Peso) to
GBP 25.57 19.71
US $ to GBP 1.3491 1.2302
CLP (Chilean Peso) to GBP 829.0 795.4
PEN (Peruvian Sol) to GBP 4.36 3.38
ii) Average rate
AR $ (Argentine Peso) to
GBP 21.79 20.08
US $ to GBP 1.2974 1.3448
CLP (Chilean Peso) to GBP 836.4 902.1
PEN (Peruvian Sol) to GBP 4.19 3.38
If the exchange rate of sterling at 31 December 2017 had been
stronger or weaker by 10 per cent. from the above. with all other
variables held constant, shareholder equity at 31 December 2017
would have been GBP2.5 million (2016: GBP3.1 million) lower or
higher than reported.
If the average exchange rate of sterling during 2017 had been
stronger or weaker by 10% per cent. with all other variables held
constant, the effect on total comprehensive income for the year
would have been GBP0.6 million (2016: GBP0.6 million) higher or
lower than reported.
6. Administrative expenses
Year ended Year ended
-------------------------------------------------
31.12.17 31.12.16
-------------------------------------------------
GBP'000 GBP'000
Expenditure incurred in administrative expenses
is as follows:
Payroll and social security 960 1,090
Services, legal and professional 630 679
Office costs and general overheads 421 611
Audit services(1) 59 40
------------------------------------------------- ----------- -----------
2,070 2,420
----------- -----------
(1) Audit services include GBP59k (2016: GBP40k) paid to the
auditors for the audit of the Company and the Group financial
statements. Fees paid to other auditors, in respect of the audit of
joint venture companies, amounted to GBP24.4k (2016: GBP21.5k). The
auditors also provided tax advice for the Group in the year, the
costs were GBP12.4k. (2016: GBP6.6k).
7. Employee costs
Year ended Year ended
31.12.17 31.12.16
GBP'000 GBP'000
a) Group
Aggregate remuneration of all employees and Directors 902 1,009
Social security costs 47 68
Pension costs 11 13
------------------------------------------------------- ----------- -----------
Total 960 1,090
------------------------------------------------------- ----------- -----------
The average number of employees in the Group, including Directors, during
the year was as follows:
Year ended Year ended
31.12.17 31.12.16
------------------------------------------------------- ----------- -----------
Management 3 3
Development 2 2
Administration 6 6
------------------------------------------------------- ----------- -----------
Total 11 11
------------------------------------------------------- ----------- -----------
Year ended Year ended
31.12.17 31.12.16
GBP'000 GBP'000
b) Company
Aggregate remuneration of all employees and Directors 750 751
Social Security 38 51
Pension Costs 3 -
------------------------------------------------------- ----------- -----------
Total 791 802
------------------------------------------------------- ----------- -----------
The average number of employees in the Company, including Directors,
during year was as follows:
Number Number
------------------------------------------------------- ----------- -----------
Management 2 2
Administration 5 5
------------------------------------------------------- ----------- -----------
Total 7 7
------------------------------------------------------- ----------- -----------
c) Directors' remuneration, including social security costs
The total remuneration paid to the Directors and former
Directors was GBP489k (2016: GBP400k). The total remuneration of
the highest paid Director was GBP199k (2016: GBP226k). There were
no health insurance costs, bonuses, pension costs or share based
payments paid during the year (2016: Nil)
Year ended Year ended Year ended
31.12.17 31.12.17 31.12.16
GBP'000 GBP'000 GBP'000
Base Salary/Fee Total Total
E. Shaw - - 90
A. Morris 67 67 21
B Rowbotham 30 30 30
M Keegan - - 17
S Morris 193 193 226
A Coveney 199 199 16
Total 489 489 400
E. Shaw resigned 14 July 2015, she received payments in 2016
according to her contract. These payments ceased in July 2016.
A. Morris resigned 14 July 2015, he received payments for
consultancy services under a service agreement contract with Setley
Consultants Ltd.
B. Rowbotham provided services under a service agreement
contract with Mountbeach Associates Ltd until June 2017, since then
he has been on payroll.
M. Keegan resigned 14 December 2015, he received payments in
2016 according to a service contract with Ashton Agricultural &
General Ltd. These payments ceased in January 2016.
S. Morris provided services under a service agreement contract
with S.C.Morris Ltd.
A. Coveney provided services under a service agreement contract
with Coveney Associates Consulting Ltd
8. (a) FOREIGN EXCHANGE
Year ended Year ended
31.12.17 31.12.16
GBP'000 GBP'000
Foreign exchange (Losses)/Gains (2,547) 1,243
--------------------------------- ----------- -----------
Total (2,547) 1,243
----------- -----------
(b) OTHER EXPENSE
Year ended Year ended
31.12.17 31.12.16
GBP'000 GBP'000
Realised loss on disposal
Independent Power Corporation PLC - costs
relating to 2015 disposal - 41
Asset impairment
Turbines for Central Illapa - 6,440
Turbine for Arica Project 296 980
Impairment provisions
Argentina 1,327 -
Peru - 2,714
Chile development costs - 325
Chile write off of goodwill re Central 28 -
Illapa acquisition
------------------------------------------- ------------ ------------
Total 1,651 10,500
------------------------------------------- ------------ ------------
During the year the directors tested all major assets for
indication of impairment the results of these were:
Turbines for Central Illapa (CHILE):
Carrying Value b/fwd GBP9.8m
Exchange adjustment GBP(0.9)m
Recoverable amount GBP 8.9m
Impairment in year GBP -
Carrying value c/fwd GBP 8.9m
The prior year impairment resulted from the deterioration of
market conditions in Chile for the generation market. The carrying
value of the turbines is based on the higher of fair value less
costs to sell and value in use. The Directors obtained an
independent valuation to determine an achievable market valuation,
less costs to sell. As a result, the Directors determined a
recoverable amount of GBP8.9 million (US$12.0 million) (2016:
GBP9.8 million (US$12.0 million)). The realisation of the asset is
dependent on a successful future sale or successful development of
the Illapa Project, both of which are uncertain.
The Illapa turbines are included within Property, Plant and
Equipment.
HELD FOR SALE ASSET (Peru)
Net assets held for sale b/fwd GBP1.0m
Net liabilities held for sale c/fwd GBP(1.3)m
Movement GBP(2.3)m
After the year end the Company entered into an arrangement to
dispose of Cascade Hydro Limited. The sale completed on 30 January
2018, proceeds were US$ 250k.
These assets are presented as a Held for Sale asset on the
Statement of Financial Position.
TURBINE - ARICA (Chile)
Carrying value of Arica turbine b/fwd GBP1.0m
Foreign exchange revaluation GBP(0.1)m
Impairment in year GBP(0.3)m
Carrying value of Arica turbine c/fwd GBP0.6m
The impairment was determined by the diminution of expected net
realisable proceeds from sale of the turbine. The carrying value is
assessed as fair value less costs to sell, based on historic offers
and an independent valuation report. The above asset is included in
Property, Plant and Equipment.
9. FINANCE INCOME & expense
Year ended Year ended
31.12.17 31.12.16
GBP'000 GBP'000
Joint Venture interest received/receivable(1) 862 2,673
Total interest income 862 2,673
------------ ------------
Interest expense paid/payable on bank borrowings
and loans(2) (419) (355)
-------------------------------------------------- ------------ ------------
(1) Joint Venture interest arises on loans by the Company to its
50 per cent. owned joint venture companies (PEL and EdS). Interest
on loans has been charged at rates of between 0 per cent. and 5.5
per cent. (2016: 11.1 per cent.) Interest is charged on impaired
loan values (2016: Gross loan values).
(2) Interest paid/payable includes interest on bank borrowings
and other loans in Peru. The details of the amounts due under the
loans are shown in Note 22.
Sensitivity analysis arising from changes in borrowing costs is
set out in Note 22.
10. Tax expense
The relationship between the expected tax expense at basic rate
of 19.25 per cent. (2016: 20 per cent.) and the tax expense
actually recognised in the income statement can be reconciled as
follows:
Year ended Year ended
----------------------------------------
31.12.17 31.12.16
----------------------------------------
GBP'000 GBP'000
Result for the year before tax (5,825) (9,254)
Standard rate of corporation tax in UK 19.25% 20.00%
Expected tax credit (1,121) (1,851)
Permanent differences 323 -
Unrecognised loss carried forward 798 1,855
Actual tax expense - (4)
Comprising:
Current tax expense - (4)
Deferred tax / (net credit) - -
----------- -----------
Total credit (expense) - (4)
---------------------------------------- ----------- -----------
A deferred tax asset for the year of GBP0.9 million is not
recognised as an asset due to the uncertainty and unknown timing of
its realisation against future profits. The estimated accumulated
unrecognised deferred tax asset is GBP1.0 million, based on
cumulative tax losses of GBP5.8 million.
11. Earnings per share
Basic loss per share is calculated by dividing the loss for the
period attributable to shareholders by the weighted average number
of shares in issue during the period.
Year ended Year ended
31.12.17 31.12.16
Average number of shares in issue 561,387,586 561,387,586
Result for the year
Total Loss attributable to equity holders GBP5.8m GBP9.3m
of the parent
Basic loss per share 1.04p 1.65p
Diluted loss per share 1.04p 1.65p
------------------------------------------- ------------ ------------
There is no difference between the Basic and Diluted loss per
share.
12. Holding company's result for the year
As permitted by Section 408 of the Companies Act 2006, the
holding company's income statement is not shown separately in the
financial statements. The loss for the year was GBP7.2 million
(2016: loss GBP2.8 million).
13. Property, plant and equipment
Plant and Plant under Total
Equipment Construction
GBP'000 GBP'000 GBP'000
a) Group
Cost at 1.1.16 16,195 3,091 19,286
Exchange adjustments - (606) (606)
Transfer of Assets Held for Sale
Cost at 31.12.16 16,195 2,485 18,680
Exchange adjustments (861) (328) (1,189)
Cost at 31.12.17 15,334 2,157 17,491
Accumulated Depreciation and Impairment
at 1.1.16 69 - 69
Charge for the year 26 - 26
Charge for impairment for the year 6,440 969 7,409
Accumulated Impairment and Depreciation
at 31.12.16 6,535 969 7,504
Exchange adjustments - 87 87
Charge for the year - - -
Charge for impairment for the year - 296 296
Transfer of Assets Held for Sale (95) - (95)
Accumulated Impairment and Depreciation
at 31.12.17 6,440 1,352 7,792
Net book value - 31.12.17 8,894 805 9,699
Net book value - 31.12.16 9,660 1,516 11,176
The plant and equipment of GBP8.9 million relates to two Siemens
turbines, stored in Venice for use in Central Illapa purchased for
US$25.0 million, at the year-end deferred consideration of GBP0.3
million (2016: GBP1.5 million) remains outstanding. The turbines
are held as inventory in the Company. Please see note 8b for
details of impairments charged in the year.
Plant under construction comprises of a turbine plant in Chile
GBP0.6 million and Central Illapa development costs of GBP0.2
million.
b) Company - The Company had no property, plant and
equipment.
As set out in note 22 the Company has outstanding loans from
BPAC. Security on these loans include a pledge over all assets of
the Group.
14. Intangible assets
Goodwill
GBP'000
At 1 January 2017 29
Impairment (29)
At 31 December 2017 -
At 1 January 2016 23
Addition 6
At 31 December 2016 29
The Group tests goodwill annually or more frequently if there
are indications that the intangible asset might be impaired. The
recoverable amounts are determined from value in use calculations.
The key assumptions for the value in use calculations are those
regarding the future cash flows (for a period of 5 years) which are
based on the most recent financial projections prepared for each
Cash Generating Unit ("CGU"). The projections incorporate
management's assumptions regarding revenue volumes, revenue prices,
operating costs, including gas and forecast growth and are based on
historical experience and current information. A long-term discount
rate, derived from market data on comparable interest rates in the
local markets in which the Group operates, is then applied to the
projected future cash flows. The equity discount rate applied is 13
per cent. (2016 - 13 per cent.).
Central Illapa SA is a wholly owned indirect subsidiary of
Rurelec, the goodwill on acquisition was GBP23k. During the year an
impairment review was conducted, the Directors consider that the
asset should be fully impaired. The charge of GBP29k (2016: nil) is
included in Other Expense.
15. Trade and other receivables
Year Ended Year Ended
---------------------------------------------
31.12.17 31.12.16
---------------------------------------------
GBP'000 GBP'000
a) Group - current
Trade Receivables - 119
Amounts due from joint venture companies(1) 18,532 24,345
Tax receivable - VAT 37 46
Other Receivables and Prepayments 382 251
----------- -----------
18,951 24,761
--------------------------------------------- ----------- -----------
(1) Amounts due from joint venture companies represent the
amounts lent by the Company, net of impairments, to PEL and EdS,
including credit support provided to suppliers of EdS. Interest on
these amounts has been accrued at rates of between 5.5 per cent.
(2016: 11.1 per cent.) and 0 per cent. per annum.
Year Ended Year Ended
-----------------------------------
31.12.17 31.12.16
-----------------------------------
GBP'000 GBP'000
----------------------------------- ----------- -----------
b) Company - current
Loans to Joint Ventures(2) 17,044 17,551
Loans to Subsidiaries(1) 3,772 10,343
Other receivables and prepayments 76 95
----------- -----------
20,892 27,989
----------------------------------- ----------- -----------
The amounts owed by subsidiary companies include:
(1) Loans to subsidiaries in Chile GBP9.2 million and Rurelec
Project Finance Limited GBP3.0 million are repayable on demand.
These loans have been impaired to GBP0.8 million in Chile. The
loans to Chile and Rurelec Project Finance limited bear zero per
cent interest rates. During the year the Group received US $4.3
million (2016: US$3.0 million) from EdS in service of the amounts
due to Rurelec Project Finance Limited of GBP3.1 million (2016:
GBP6.8 million).
(2) The amounts owed by joint venture companies are interest
bearing at rates of between 0 per cent. and 11 per cent. and are
repayable on demand.
All trade and other receivables are unsecured and are not past
their due by dates. The fair values of receivables are not
materially different to the carrying values shown above.
As set out in note 22 the Company has outstanding loans from
BPAC. Security on these loans includes a pledge over all assets of
the Group.
16. Inventories
Company - Inventories Year Ended Year Ended
31.12.17 31.12.16
GBP'000 GBP'000
Inventories 8,895 9,755
Inventories comprises of two Siemens 701DU Turbines acquired
from IPSA in June 2013. Further details of which are set out in
note 14. An impairment was recognised in the prior year, see note
8b. Storage and insurance costs for the Turbines in the year
totalled GBP117k (2016: GBP183k).
As set out in note 22 the Company has outstanding loans from
BPAC. Security on these loans includes a pledge over all the assets
of the Group.
17. CASH AND CASH EQUIVALENTS
Year Ended Year Ended
31.12.17 31.12.16
GBP'000 GBP'000
a) Group
Cash and short-term bank deposits 163 960
b) Company
Cash and short-term bank deposits 162 955
----------------------------------- ----------- -----------
Cash and short-term bank deposits are held, where the balance is
material, in interest bearing bank accounts, accessible at between
1 and 30 days' notice. The effective average interest rate is less
than 1 per cent. The Group holds cash balances to meet its
day-to-day requirements.
As set out in note 22 the Company has outstanding loans from
BPAC. Security on these loans includes a pledge over all the assets
of the Group.
18. SHARE Capital
Year Ended Year Ended
31.12.17 31.12.16
GBP'000 GBP'000
In issue, called up and fully paid
561,387,586 ordinary shares of 2p each
(2016: 561,387,586) 11,228 11,228
---------------------------------------- ---------- ----------
Ordinary shares have no redemption rights and are entitled to
full rights to dividends and excess capital on winding up.
19. SPECIAL NON-DISTRIBUTABLE RESERVE
On 17 December 2014 The High Court approved the reduction in the
share premium account of the company of GBP45,000,000 and the
creation of a special reserve in the accounts of the Group. The
Group had accumulated losses on its profit and loss account of
GBP7,371,683. The existence of these losses prevents the Company
from paying dividends to its shareholders out of future profits
until these losses have been eliminated. The Board considered that
the accumulated losses represented a permanent loss and given the
size of the accumulated losses, there was in the opinion of the
Board no reasonable prospect of the losses being eliminated in the
short term. It was proposed that the permanent loss should be
recognised by eliminating the deficit on the profit and loss
account. This would be achieved by the reduction in the balance on
the Share Premium Account of the Company.
The Company had built up a substantial Share Premium Account
through the issue of shares for cash at values in excess of the
nominal value of those shares. At the time of the High Court
hearing, the balance standing to the credit of the share premium
account was GBP67,835,921. A resolution was proposed and
successfully passed at a General Meeting on 25 November 2014 to
reduce the amount standing to the credit of the share premium
account of the Company by GBP45,000,000 from GBP67,835,921 to
GBP22,835,921.
The resolution was subsequently confirmed by the High Court in
the terms proposed at the time by your Board, the effect of the
Capital Reduction was to release part of the amount standing to the
credit of the Share Premium Account of the Company so that after
certain creditors are repaid GBP45,000,000 (i) may be used by the
Company to eliminate the deficit on the profit and loss account and
(ii) the balance credited to the distributable reserves of the
Company to allow the Company to pay dividends in due course. Until
the creditors are repaid the balance is to be held in a Special
Non-distributable Reserve. The balance of unpaid creditors in these
accounts is GBP254k (2016: GBP1.5 million).
Share issue costs of GBP82,233 have been offset against the
Share Premium account, which is now shown at GBP22,753,689.
The implementation of the Capital Reduction is subject to a
number of criteria which are explained further below.
Capital Reduction - Share Premium Account
Share premium is treated as part of the capital of the Company
and arises on the issue by the Company of shares at a premium to
their nominal value. The premium element is credited to the Share
Premium Account. The Company is generally precluded from the
payment of any dividends or other distributions or the redemption
or buy back of its issued shares in the absence of sufficient
distributable reserves, and the Share Premium Account can be
applied by the Company only for limited purposes.
In particular, the Share Premium Account is a non-distributable
capital reserve and the Company's ability to use any amount
credited to that reserve is limited by the Companies Act. However,
with the confirmed approval of our shareholders by way of a special
resolution and subsequent confirmation by the High Court, the
Company has reduced our Company's share premium account and
credited it to a Special Non-distributable reserve pending the
settlement of certain creditors (please see above). Once these
creditors are settled the Special Non-distributable reserve will be
credited to the profit and loss account.
To the extent that the release of such a sum from the Share
Premium Account creates or increases a credit on the profit and
loss account, that sum represents distributable reserves of the
Company subject to the restrictions set out below.
Capital Reduction - Procedure
In order to approve the Capital Reduction, the High Court was
required to be satisfied that the interests of the Company's
creditors will not be prejudiced by the Capital Reduction. The
Company was not required to seek written consent to the Capital
Reduction from its creditors. However, for the benefit of those of
its creditors from whom consent is not required, the Company will
not be capable of making a distribution to shareholders until any
such outstanding obligations have been discharged, and the Company
has given an undertaking to that effect to the High Court. At the
date of the audit report there are some GBP 0.3 million (2016:
GBP1.5 million) of creditors to be settled. The Board of Directors
consider that these amounts will be settled in the short term and
therefore the GBP45 million remains within a Special Reserve which
is non-distributable until these settlements have occurred.
The Capital Reduction does not affect the number of Shares in
issue, the nominal value per Share or the voting or dividend rights
of any Shareholder.
20. Trade and other payables
Year Ended Year Ended
----------------------
31.12.17 31.12.16
----------------------
GBP'000 GBP'000
a) Group - current
Trade payables 815 2,434
Accruals 84 -
899 2,434
b) Company - current
Trade payables 517 2,065
Accruals 84 -
601 2,065
---------------------- ----------- -----------
During the year, the directors agreed formal settlement terms
with IPSA, repayments of GBP1,256k were made during the year. The
balance at the year end was GBP254k (2016: GBP1,510k).
21. Tax liabilities
Year Ended Year Ended
-------------------------
31.12.17 31.12.16
-------------------------
GBP'000 GBP'000
Group/Company - current
P.A.Y.E. 7 12
7 12
------------------------- ----------- -----------
22. Borrowings
Year Ended Year Ended
31.12.17 31.12.16
--------------------------------------
GBP'000 GBP'000
--------------------------------------
Group - Current
Other Loans 1,448 4,037
1,448 4,037
Group -Total Borrowings 1,448 4,037
The Group's borrowings are repayable
as follows:
Within 1 year 1,448 4,037
In more than 1 year, but less than - -
2 years
In more than 2 years, but less than - -
3 years
In more than 3 years - -
1,448 4,037
-------------------------------------- ----------- -----------
Company - Current
Other Loans 1,448 1,661
1,448 1,661
Company -Total Borrowings 1,448 1,661
The Group's borrowings are repayable
as follows:
Within 1 year 1,448 1,661
In more than 1 year, but less than - -
2 years
In more than 2 years, but less than - -
3 years
In more than 3 years - -
1,448 1,661
-------------------------------------- ----------- -----------
Group
Other loans of GBP1.4 million (2016: GBP4.0 million) including
accrued interest are made up of GBP nil (2016: GBP2.3 million) from
Technology Finance Ltd, these loans were past their due dates in
prior years. The Group entered into an SPA on 30 December 2017
whereby Cascade Hydro Ltd, the borrower from Technology Finance Ltd
was sold to Sloane Renewable Energy Ltd. These loans formed part of
the sale and consequently have been transferred to Liabilities Held
for Sale.
GBP1.4 million (2016: GBP1.7 million) from BPAC, this loan is
secured by a pledge against the Group's assets. At the year end the
loan repayment was due on 30 June 2018. Since the year end the loan
has been further extended and is now due on 30 June 2019, or upon
any significant asset sales.
Company
Other loans of GBP1.4 million (2016: GBP1.7 million) including
accrued interest are from BPAC. This loan is secured by a pledge
against the Group's assets. At the year end the loan repayment was
due on 30 June 2018. Since the year end the loan has been further
extended and is now due on 30 June 2019, or upon any significant
asset sales.
Net Debt Reconciliation
Year ended Year ended
31.12.17 31.12.16
GBP'000 GBP'000
a) Group
Balance at start of year 4,037 3,054
Non-Cash flow transactions -
Transfer to liabilities held for sale (2,608) -
Interest charge 419 355
Cash flow transactions - -
Loan drawdowns - 1,500
Interest paid (80) (20)
Principal repayment (320) (830)
Settlement discounts - (22)
Balance at end of year 1,448 4,037
b) Company
Balance at start of year 1,661 910
Non-Cash flow transactions
Interest charge 187 123
Cash flow transactions
Loan drawdowns - 1,500
Interest paid (80) (20)
Principal repayment (320) (830)
Settlement discounts - (22)
Balance at end of year 1,448 1,661
.
Sensitivity analysis to changes in interest rates:
If interest rates on the Group's borrowings during the year had
been 0.5 per cent. higher or lower with all other variables held
constant, the interest expense and pre-tax losses would have had a
nominal impact on earnings.
Sensitivity analysis to changes in exchange rates:
Only US $510k (2016: US $480k) of these loans are denominated in
US $. These are included in liabilities held for sale. As a result,
the liability to the Group's lenders will change as exchange rates
change. The overall effect on the Group's net equity which would
arise from changes in exchange rates is set out in Note 5
above.
The effect on borrowings alone if exchange rates weakened or
strengthened by 10 per cent. with all other variables held constant
would be to reduce or increase the value of the Group's borrowings
and equity by GBP38k (2016: GBP20k).
The Group's Joint Venture borrowings are denominated in AR $ and
US $ and are substantially related to specific electricity
generating assets and therefore the effect on the net equity of the
Group is limited.
23. Investments
Year Ended
31.12.16
GBP'000
Cost at 1 January 2016 100
Additions during the year -
Balance at 31 December 2016 100
Year Ended
31.12.17
GBP'000
Cost at 1 January 2017 100
Additions during the year -
Balance at 31 December 2017 100
----------------------------- -----------
At the year end the Company held the following investments:
Direct investments:
1. 50 per cent. (2016: 50 per cent.) of the issued share capital
of Patagonia Energy Limited ("PEL"), a company registered in the
British Virgin Islands under registration number 620522. PEL owns
100 per cent. of the issued share capital of EdS, a company
registered in Argentina. EdS is a generator and supplier of
electricity to the national grid in Argentina.
2. Nil per cent. (2016: 100 per cent.) of the issued share
capital of Birdsong Overseas Ltd ("BOL"), a company registered in
the British Virgin Islands, under registration number 688032. There
was a voluntary strike off in 2017.
3. 100 per cent. (2016: 100 per cent.) of the issued share
capital of Cascade Hydro Limited ("CHL"), a company registered in
England and Wales under registration number 7640689. CHL owns,
through intermediate holding companies, 100 per cent. interest in
Electricidad Andina, S.A. and 99.9 per cent. of Empresa de
Generacion Electrica Colca, S.A.C., both being companies registered
in Peru. On 30 December 2017 the Company entered into an SPA to
dispose of CHL, and it's subsidiaries, the sale completed on 30
January 2018, please see note 30 for further details.
4. 100 per cent. (2016: 100 per cent.) of the issued share
capital of Cochrane Power Limited, a company registered in England
and Wales under registration number 8220905. Cochrane Power Limited
owned at the year-end, through intermediate holding companies, 100
per cent. interest in Central Illapa, S.A. and 100 per cent.
interest in Termoelectrica del Norte, S.A., both being companies
registered in Chile.
5. 100 per cent. (2016: 100 per cent.) of the issued share
capital of Rurelec Project Finance Limited a company registered in
England and Wales under registration number 7523554.
Indirect investments:
Name Trading address/registered Interest held
address
----------------------------- ---------------------------- --------------
Arroyo 880, Piso 2
C1007AAB
Ciudad Autonoma de Buenos
Aires
Energia del Sur SA* Argentina 50%
---------------------------- --------------
Arroyo 880, Piso 2
C1007AAB
Ciudad Autonoma de Buenos
Aires
Electrica del Sur SA* Argentina 50%
---------------------------- --------------
Arroyo 880, Piso 2
C1007AAB
Ciudad Autonoma de Buenos
Aires
SEA Energy SA** Argentina 100%
---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago de Chile
Santiago
Rurelec Chile SpA**** Chile 100%
---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago de Chile
Santiago
Rurelec Chile Limitata**** Chile 99.99%
---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago de Chile
Termoelectrica del Norte Santiago
SA**** Chile 100%
---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago de Chile
Santiago
Central Illapa SA**** Chile 100%
---------------------------- --------------
Av. Canaval y Moreyra
452
Pisos 15 - 17
Cascade Hydro Power Lima 27
SAC***** Peru 99.99%
---------------------------- --------------
Av. Canaval y Moreyra
452
Pisos 15 - 17
Lima 27
CHP Construcciones SAC***** Peru 99.99%
---------------------------- --------------
Av. Canaval y Moreyra
452
Pisos 15 - 17
Electricidad Andina Lima 27
SA***** Peru 99.99%
---------------------------- --------------
Av. Canaval y Moreyra
452
Empresa de Generacion Pisos 15 - 17
Electrica Huasicancha Lima 27
SAC***** Peru 99.99%
---------------------------- --------------
Av. Canaval y Moreyra
452
Pisos 15 - 17
Empresa de Generacion Lima 27
Electrica Colca SAC***** Peru 99.99%
---------------------------- --------------
Av. Canaval y Moreyra
452
Pisos 15 - 17
Empresa de Generacion Lima 27
Electrica Chilcay SAC***** Peru 99.99%
---------------------------- --------------
*Held via Patagonia Energy Limited and equity accounted as a
joint venture, see Note 24
**Held via Rurelec Project Finance Limited
****Held via Cochrane Power Limited
*****Held via Cascade Hydro Limited
The results of all of the above directly and indirectly held
subsidiaries have been included in the consolidated group accounts
except where joint ventures are equity accounted as indicated.
24. JOINT VENTURE
The Group's only joint arrangement within the scope of IFRS 11
is its 50 per cent. investment in Patagonia Energy Limited ("PEL"),
which owns100 per cent. of EdS in Argentina. Management has
reviewed the classification of PEL in accordance with IFRS 11 and
has concluded that it is a joint venture and therefore it has been
accounted for using the equity accounting method as set out in IAS
28.
The Group does not participate in losses of the joint venture.
In prior years the losses had exceeded the investment in the joint
venture and therefore the Group has not recognised its share of
losses in the joint venture. During 2017 the joint venture made a
loss. Total loss position at the year-end was GBP36.7 million
(2016: GBP38.3 million).
The following table sets out the results of the joint venture in
Argentina of which the Group has a 50 per cent. share:
Year ended Year ended
31.12.17 31.12.16
GBP'000 GBP'000
----------- -----------
Revenue 17,104 18,650
Expenses (18,746) (20,184)
Non-current Assets 10,136 10,963
Current Assets 5,188 9,705
Non-current Liabilities (39,831) (38,471)
Current Liabilities (8,070) (15,978)
------------------------- ----------- -----------
Revenue is derived from one principal customer, which the
directors consider is of a high quality.
25. Reconciliation of profit before tax to cash generated from
operations
a) Group Year ended Year ended
---------------------------------------
31.12.17 31.12.16
---------------------------------------
GBP'000 GBP'000
Loss for the year before tax (5,825) (9,254)
Net Finance Income (1,096) (2,328)
Adjustments for: Depreciation - 26
Unrealised exchange losses/(gains) 2,570 (1,241)
Write down of loans 1,329 2,662
Write down of Turbine 296 6,440
Impairment/(increase) of Goodwill 29 (6)
Movement in Working Capital:
Change in Trade and Other Receivables 103 1,094
Change in Trade and Other Payables 123 541
Cash Used in Operations (2,471) (2,066)
--------------------------------------- ----------- -----------
b) Company Year ended Year ended
Restated
---------------------------------------
31.12.17 31.12.16
---------------------------------------
GBP'000 GBP'000
Loss for the year before tax (7,068) (2,775)
Net Finance Income (1,198) (4,023)
Adjustments for:
Unrealised exchange losses/(gains) on
loans 3,138 (4,137)
Write down of investments - 2,662
Write down of loans 3,580 -
Stock write down - 6,440
Movement in working capital:
Change in trade and other receivables (148) 481
Change in trade and other payables (1,468) (366)
Cash used in operations (3,164) (1,718)
--------------------------------------- ----------- -----------
26. Financial risk management
The Group is exposed to a variety of financial risks which
result from both its operating and investing activities. The
Group's risk management is coordinated to secure the Group's short
to medium-term cash flows by minimising its exposure to financial
markets. The Group does not actively engage in the trading of
financial assets for speculative purposes nor does it write
options. The most significant risks to which the Group is exposed
are described below:
a) Foreign currency risk
The Group is exposed to translation and transaction foreign
exchange risk. Foreign exchange differences on retranslation of
these assets and liabilities are taken to the income statement of
the Group. The Group's principal trading operations are based in
South America and as a result the Group has exposure to currency
exchange rate fluctuations in the principal currencies used in
South America. The Group also had exposure to the US $ as a result
of borrowings denominated in this currency.
b) Interest rate risk
Group funds are invested in short-term deposit accounts, with a
maturity of less than three months, with the objective of
maintaining a balance between accessibility of funds and
competitive rates of return.
c) Capital management policies and liquidity risk
The Group considers its capital to comprise its ordinary share
capital, share premium, accumulated retained earnings and other
reserves.
The Group's objective when maintaining capital is to safeguard
the entity's ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other
stakeholders.
The Company meets its capital needs primarily by equity
financing. The Group sets the amount of capital it requires to fund
the Group's project evaluation costs and administration expenses.
The Group manages its capital structure and makes adjustments to it
in the light of changes in economic conditions and the risk
characteristics of the underlying assets.
The Company and Group do not have any derivative instruments or
hedging instruments. It has been determined that a sensitivity
analysis will not be representative of the Company's and Group's
position in relation to market risk and therefore no such analysis
has been undertaken.
As set out in Note 22, the Group has GBP1.4 million of loans
falling due within 12 months. The directors consider that the Group
will be able to raise sufficient funds from the sale of assets and
from other sources to discharge the loans.
The following table sets out when the Group's financial
obligations fall due:
Year ended Year ended
31.12.17 31.12.16
GBP'000 GBP'000
Current - due within 1 year:
Trade payables 899 2,434
Tax liabilities 7 12
Borrowings 1,448 4,037
Total due within 1 year: 2,354 6,483
d) Credit risk
Generally, the maximum credit risk exposure of financial assets
is the carrying amount of the financial assets as shown on the face
of the balance sheet (or in the detailed analysis provided in the
notes to the financial statements). Credit risk, therefore, is only
disclosed in circumstances where the maximum potential loss differs
significantly from the financial asset's carrying value. The
Group's trade and other receivables are actively monitored to avoid
significant concentrations of credit risk.
e) Fair values
In the opinion of the Directors, there is no significant
difference between the fair values of the Group's and the Company's
assets and liabilities and their carrying values and none of
Group's and the Company's trade and other receivables are
considered to be impaired.
The financial assets and liabilities of the Group and the
Company are classified as follows:
31 December 2017 Company Company Group Loans Group Borrowings
Loans Borrowings
and and Payables and and Payables
Receivables at Amortised Receivables at Amortised
Cost Cost
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------- ------------ -----------------
Trade and Other Receivables
< 1 year 19,412 - 18,952
Cash and Cash Equivalents 162 - 163 -
Trade and Other Payables
< 1 year - (609) - (906)
Borrowings < 1 year - (1,448) - (1,448)
Total 19,574 (2,057) 19,115 (2,354)
Company Company Group Loans Group Borrowings
Loans Borrowings
and and Payables and and Payables
Receivables at Amortised Receivables at Amortised
Cost Cost
31 December 2016 GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------- ------------ -----------------
Trade and Other Receivables
< 1 year 27,989 - 24,761
Cash and Cash Equivalents 955 - 960 -
Trade and Other Payables
< 1 year - (2,077) - (2,446)
Borrowings < 1 year - (1,661) - (4,037)
Total 28,944 (3,738) 25,721 (6,483)
27. Capital commitments
The Group had outstanding capital commitments of GBPNil (2016:
Nil) in respect of plant ordered but not delivered at the
year-end.
28. OPERATING LEASE COMMITMENTS
At the year end the Group had the following outstanding lease
commitments:
Office Equipment
2017 2016
GBP'000 GBP'000
Up to 1 year - 50
More than
1 year less
than 5 years - 59
--------- --------
- 109
During the year the office equipment leases were novated to
Independent Power Corporation PLC, the Group has no responsibility
for the assets covered or liability for future repayments.
Office premises
Less than one year GBP22k (2016: GBP26k).
Office premises relates to the Company's offices.
29. Related party transactions
During the year the Company and the Group entered into material
transactions with related parties as follows
a) Company
i) Paid salaries to directors, who are considered Key Management
Personnel which amounted to GBP0.4 million (2016: GBP0.4
million).
ii) Received from its former 100 per cent. subsidiary
Independent Power Corporation PLC ("IPC") a credit note of GBP20k
relating to the prior period.
2017 GBP'000s 2016 GBP'000s
Sales - 40
Purchases (20) 125
Y/E debtor - -
Y/E creditor - 160
iii) Charged negative interest on loans to its 100% subsidiary
Rurelec Project Finance Ltd ("RPFL") totalling GBP0.4 million
(2016: GBP1.4 million). The loan balance outstanding at the
year-end was GBP3.0 million (2016: GBP6.7 million). In 2015 an
impairment of GBP6.8 million was made, this was reversed in
2016.
2017 GBP'000s 2016 GBP'000s
Y/E debtor 2,965 6,693
Interest charged (432) 1,367
iv) Charged interest on loans to its 50% owned joint venture
company, Patagonia Energy Ltd ("PEL") amounting to GBP 0.9 million
(2016: GBP2.8 million). Received loan repayments of GBP nil (2016:
GBP1.2 million). The Directors have assessed the recoverability of
the loans and consider that it is prudent to recognise an
impairment of GBP1.3 million in the year (2016: nil). After
impairment reviews the loan balances at the year-end totalled
GBP15.6 million (2016: GBP17.6 million). Interest on these loans
has been accrued at 5.5% (2016: 11.1%). The total outstanding
before impairment is GBP34.5 million (2016: GBP38.3 million).
2017 GBP'000s 2016 GBP'000s
Y/E debtor 15,666 17,551
Repayment - 1,238
Interest charged 862 2,820
v) Received from its joint venture company Energia del Sur S.A.
("EdS") repayments totalling GBPnil (2016: GBPnil) of support
previously given to creditors of EdS. GBP0.5 million (2016: GBP0.5
million) of credit support remains outstanding at the year end.
vi) Repaid GBP1.3 million (2016: GBP0.1 million) of deferred
consideration on the 2013 turbine purchase, GBP0.3 million (2016:
GBP1.5 million) remains outstanding at the year end. P.R.S. Earl
and S Laker were Directors of IPSA during part of 2017.
2017 GBP'000s 2016 GBP'000s
Sales - 55
Purchases - -
Y/E debtor - -
Y/E creditor 254 1,510
vii) Provided loans and charged interest of 0.5% per month to
its 100 per cent. subsidiary Cochrane Power Ltd of GBP0.2 million
(2016: GBP0.2 million). The total outstanding at the year-end was
GBP9.2 million (2016: GBP8.5 million). These loans have been
impaired to GBP0.8 million (2016: GBP2.4 million).
2017 GBP'000s 2016 GBP'000s
Y/E debtor 805 2,374
Further loans
made 196 174
Interest charged 522 482
viii) Provided loans to its 100 per cent. subsidiary Cascade
Hydro Ltd ("CHL") of GBP0.4 million (2016: GBP0.5 million) and
charged CHL interest of GBPnil (2016: GBP0.6 million). The interest
rate was 0.5 per cent. per month. The total outstanding at the
year-end was GBP11.5 million. These loans have been impaired to
GBPnil (2016: GBP1.3 million). The sale of CHL completed on 30
January 2018 for US$250k.
2017 GBP'000s 2016 GBP'000s
Y/E debtor - 1,276
Further loans
made 386 547
Interest charged - 606
b) Group
RPFL received GBP3.3 million (2016: GBP1.2 million) in
repayments from EdS the interest rate on the principal was 18.5 per
cent. The interest rate on accrued interest was zero, the effective
interest rate (on principal and accrued interest) was zero (2016:
zero). The total outstanding at the year-end was GBP3.1 million
(2016: GBP6.8 million).
30. ASSETS HELD FOR SALE
Assets held for sale relate to three project companies within
Peru. These business segments were reclassified to assets held for
sale following the commitment of the Group's management on 16
September 2014 to restructure its Peruvian operations by means of
sale. Two disposal groups were identified, one of which comprised
the Canchayllo run of the river plant, sold in July 2015, with the
rest of the project companies included in the second group. Since
the year end the project companies along with their UK holding
company Cascade Hydro Limited have been disposed of. The
transaction completed on 30 January 2018, the consideration was
US$250k.
Year Ended Year Ended
Assets Classified as Held for 31.12.17 31.12.16
Sale
GBP'000 GBP'000
----------- -----------
Trade and Other Receivables 2,265 2,207
2,265 2,207
----------- -----------
Year Ended Year Ended
Liabilities Classified as Held 31.12.17 31.12.16
for Sale
GBP'000 GBP'000
----------- -----------
Trade and Other Payables 3,515 1,230
3,515 1,230
----------- -----------
31. Control
The Directors consider that the controlling party is Sterling
Trust Limited on the basis of their 53% shareholding in the
Company.
32. Post balance sheet date events
Since the year end:
- Completed the sale of Cascade Hydro Limited ("CHL") and it's
subsidiaries on 30 January 2018. Total consideration was US$250k
(GBP185k). The proforma Consolidated Statement of Financial
Position below shows the effect of the transaction, once
completed:
As reported Proforma
31.12.17 CHL Sale 31.12.17
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ --------- ---------
Assets
Non-current Assets
Property, Plant and Equipment 9,699 - 9,699
Intangible Assets - - -
Investment in Joint Venture - - -
9,699 - 9,699
Current Assets
Trade and Other Receivables 18,951 - 18,951
Cash and Cash Equivalents 163 - 163
Assets classified as held for sale 2,265 (2,265) -
21,379 (2,265) 19,114
Total Assets 31,078 (2,265) 28,813
Equity and Liabilities
Shareholders' Equity
Share Capital 11,228 - 11,228
Share Premium Account 22,754 - 22,754
Foreign Currency Reserve 572 - 572
Special Non-distributable Reserve 45,000 - 45,000
Accumulated Losses (54,345) 1,250 (53,095)
Total Equity attributable to owners
of the Company 25,209 1,250 26,459
Current Liabilities
Trade and Other Payables 899 - 899
Current Tax Liabilities 7 - 7
Borrowings 1,448 - 1,448
---------
Liabilities classified as held for
Sale 3,515 (3,515) -
5,869 (3,515) 2,354
Total Liabilities 5,869 (3,515) 2,354
Total Equity and Liabilities 31,078 (2,265) 28,813
------------------------------------- ------------ --------- ---------
- In April 2018 the Company further extended its working capital
facility arrangement with BPAC with the principal amount of GBP1.2
million. The repayment date is now 30 June 2019.
- As previously announced the plant owned by Energia del Sur
S.A., in which Rurelec has a 50% interest, suffered mechanical
damage due to a failure of some turbine blades in September. The
plant recommenced generation in October, but at a reduced level of
output. At the time of this report it is not yet clear when full
output can be achieved.
The Chairman's statement and the Strategic Report with a review
of operations contains further details.
COMPANY INFORMATION
Directors
S.C. Morris (Executive)
A.H. Coveney (Executive)
B. Rowbotham (Non-Executive)
Secretary
M Bravo
Company number
4812855
Registered office and business address
18 Soho Square
London
W1D 3QL
Auditor
Moore Stephens LLP
150 Aldersgate Street
London
EC1A 4AB
Bankers
Coutts & Co
440 Strand
London
WC2R 0QS
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAXSFDENPEFF
(END) Dow Jones Newswires
June 01, 2018 02:00 ET (06:00 GMT)
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