TIDMRUR
RNS Number : 2693B
Rurelec PLC
05 June 2019
Rurelec PLC
("Rurelec" or "the Company")
Audited results for the year ended
31(st) December 2018
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 2018. The annual report will be available from the
Company's website www.rurelec.com from 05 June 2019.
Highlights
-- Operating loss reduced by 22% to GBP2.9 million from GBP 3.7 million.
-- Major improvement in loss before tax, reducing to GBP0.6 million (2017: GBP5.8 million).
-- The main drivers for the major reductions in losses have been
the combined effect of a reduction in Administrative Expenses to
GBP1.5 million (2017: GBP2.1 million), a book gain GBP1.3 million
(2017: GBPnil) on the disposal of our Peruvian operations,
favourable exchange rate gains of GBP1.7 million, mainly associated
with loans to Argentine operations (2017: losses GBP2.5 million)
and a reduction in interest payable to GBP177k (2017: GBP420k).
-- Further write downs of assets by GBP2.7 million (2017: GBP1.7
million) to values the directors believe can be supported in
current market conditions accounting for much of the operating
loss.
-- Major investment in the refurbishment of the Argentinian
plant's steam and gas turbines. Of a total investment programme of
US $8.8 million of capital and maintenance expenditure, US $6.6
million was funded by local debt from CAMMESA in Argentina and the
remaining US $2.2 million was funded by internal resources and
insurance payments.
-- Disposal of Peruvian operations for consideration of US
$250k, generating a one-off book gain of GBP1.3 million (2017:
GBPnil). US $175k of this consideration was received in the
year.
-- Total loss per share 0.11p (2017: 1.04p).
-- Net Asset Value per share 4.4p (2017: 4.5p).
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 2019.
Commenting on the results, Simon Morris and Andy Coveney,
Rurelec's Executive Directors, said:
The Group continued to repay secured and unsecured debt despite
the problems associated with the reduced output and constricted
cash generation of the Group's Argentinian plant, a problem which
persisted from September 2017 until end January 2019.
The overall loss before tax for the year of GBP0.6 million
(2017: GBP5.8 million) reflects further write downs on a number of
the Group's assets, principally GBP2.4 million (2017: GBP1.3
million) for loans to the Joint Venture and GBP0.2 million (2017:
GBP0.3 million) for the turbine acquired for the cancelled Arica
Project, to values that the directors believe can be supported in
current market conditions and given the overall financial position
of the Group. Losses are after GBP1.7 million of foreign exchange
gains (2017: GBP2.5 million losses).
Group current liabilities are GBP2.0 million at 31 December
2018, this compares to GBP2.4 million at 31 December 2017. This
excludes liabilities held for sale of GBP3.5 million at 31 December
2017, the vast majority of which represented borrowings that had
been overdue for over 3 years.
As in the two previous years, Group cash generation was again
hit by intermittent cash remittances from Argentina. However, the
Group has been able to weather this storm due to reductions in
Group operating costs and the disposal of the Group's
cash-absorbing Peruvian operations.
Although there have been improvements in the Group's finances,
liquidity still remains a significant issue for the Group and the
auditors have assessed that there remains a material uncertainty
around the Group's cashflow.
For further information please contact:
Rurelec PLC W.H.Ireland
Simon Morris, Executive Katy Mitchell and Lydia
Director Zychowska
Andy Coveney, Executive
Director
www.rurelec.com
Tel: +44 (0)20 7025 Tel: +44(0) 20 7220 1666
8028
Rurelec PLC is an owner, developer and operator of power
generation capacity internationally.
Rurelec's main business consists of the ownership, operation and
development of power generation facilities on national and regional
grids, selling wholesale electricity as a generator on commercial
terms, through capacity payments and/or power purchase agreements
("PPAs").
Rurelec's current business is centred on Rurelec's share of an
operational plant in Argentina whilst also seeking to complete the
development of its project in Chile or sell its interests in that
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 2018, a year which has
seen some 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 2020. The Group has repaid
GBP0.4 million of interest (2017: GBP0.3 million principal and
GBP0.1 million of interest) of the total bridging facility of
GBP1.2 million at the end of the year (2017: GBP1.6 million).
Outlook
Argentina
As you have been made aware, our joint venture Argentinian asset
continued to operate at reduced output during 2018. The planned
maintenance of the EdS plant was delayed due to CAMMESA not being
able to provide agreed loan finance on time for the major
maintenance of the steam and gas turbines and generators due to its
own shortage of liquidity. Of a total investment programme by EdS,
to which Rurelec has not contributed, of US $8.8 million of capital
and maintenance expenditure US $6.6 million was funded by local
debt in Argentina and the remaining US $2.2 million was funded by
internal resources and insurance payments.
The Directors believe the longevity and cash-generating ability
of Rurelec's interest in these assets has been enhanced by the
overhaul of the EdS plant's steam turbine from October 2018 to
January 2019. This included the complete replacement and upgrading
of the rows of turbine blades removed following the 2017 September
blade failure incident. During this period EdS also installed a
brand-new rotor in one of the two gas turbines and plans to
refurbish the rotor and generator of the other gas turbine in
Quarter 4 2019. Further updates on this will be provided in due
course, as appropriate. The plant has also invested in the
installation of exhaust stacks on both gas turbines which will
allow the plant to run in Open Cycle mode (i.e. the gas turbines
will be able to operate independently of the steam turbine should
full capacity not be required or there are future technical
problems with running in Combined Cycle). When complete, this
investment programme spend will total capex of US $6.6 million,
additionally a further US $ 2.2 million of works will be expensed.
This will be paid for by EdS, and Rurelec will not need to
contribute to this investment programme.
The Directors believe that the carrying out of the refurbishment
works should reduce the operating risk of running the Argentinian
plant and should extend the plant's life. The reinvestment
programme has been largely funded by external debt from CAMMESA
(the organisation administering and regulating the Argentinian
wholesale electricity market). This has occurred against a
background in 2018 of significant problems in the Argentinian
economy and the market for wholesale electricity.
The restoration of the Argentinian plant to full capacity in
early 2019 is key in enabling regular repayments of the outstanding
loans from the Group to the Argentinian plant to resume. The
Directors believe that the considerable investment in the
refurbishment programme of the steam and gas turbines in 2018 and
2019 should stabilise and lengthen the operational life of that
power station.
The Directors believe that, against a background of economic
growth and increasing wholesale market demand for Argentinian
electricity and economic reform in Argentina under the Macri
administration fostered an environment where foreign investment in
utilities had become attractive. However, the Argentinian economy
suffered a major economic crisis and significant economic decline
in 2018 culminating in a US $50 billion IMF bail-out being
announced in June 2018 supplemented by a further increase in the
bailout package to US $57 billion in September 2018. This was the
largest ever IMF bailout. This followed major devaluations in the
Argentinian Peso, particularly in April and August 2018. Inflation
has risen to annual rates exceeding 47%. This year, EdS has had to
produce inflation accounts in Argentina as a result. The benchmark
interest rate hit 60%. At the end of 2014, there had been 8.5
Argentinian Pesos to the US dollar, by the end of 2018 that has
declined to 37.7 Pesos to the US Dollar. It is relevant to note
that EdS benefits from receiving revenue in Pesos at a rate pegged
to the US dollar, which protects revenue but most of its costs are
denominated in Pesos. As a result, hyperinflation measures under
Argentine GAAP have been implemented by EdS and were used in the
preparation of the notes to the accounts relating to EdS included
in these statements. As the results for EdS are treated on an
equity accounted joint venture basis, the directors believe that
they have not had a material impact on Group Results.
Against this background of economic uncertainty and decline, the
Argentinian Secretariat of Energy who regulate the wholesale
electricity market through CAMMESA have imposed austerity measures
that are affecting the wholesale market for electricity. This
includes downward pressure on spot market prices for wholesale
electricity. CAMMESA has experienced its own liquidity shortage and
this resulted in delays in providing the debt for EdS to fund its
major maintenance programme, and has also resulted in extensions to
the credit period taken by CAMMESA to pay generators for the
electricity they have generated.
During 2018, the Rurelec Board have helped guide the direction
of operations in Argentina, guiding and assisting EdS management
through a period of reinvestment at a time when finances have been
stretched by the plant operating at significantly reduced
output.
Chile and the Group's two 701DU Siemens turbines
It is the Director's belief that, given the prioritisation of
sustainable power generation projects in Chile, the opportunities
for new gas thermal generating plants in Chile has become very
limited. The Group's Central Illapa project is understood to be one
of the few consented gas thermal projects still available, albeit
modifications to those consents may be necessary to develop the
project. The Group continues to examine a range of options for the
Central Illapa project in Mejillones and the 701 turbines consented
for that site. This includes the active consideration of realising
the value of the Group's two 701DU 128 MW turbines (currently
stored in Italy) within the Illapa project or by separate sale. The
Group's liquidity position continues to be a major factor in
deciding which path will eventually be pursued.
Peru
After an extensive marketing exercise, the Group sold the
remaining hydro portfolio in Peru, completion taking place on 30
January 2018. Given the continuing liquidity issues faced by the
Group and uncertainties inherent in those projects, the capacity to
finance this portfolio had been severely constrained. The sale has
enabled the Group to reduce cash outflows needed to support this
operation and Group cashflow has benefitted as a result. It also
enabled GBP2.6 million of overdue borrowings to be passsed to the
Purchaser as part of the sale agreement.
Summary
Given the difficulties faced by the Argentinian operation in the
period, the Rurelec Board note that the Group's financial position
has strengthened as remittances from EdS have been received and the
relationship with our JV partner, Basic Energy Limited has
improved. It is also encouraging to note the major investments in
refurbishing the steam and gas turbines and generators at the
Argentinian plant which the Directors believe should maximise the
opportunities for future income generation in Argentina and
remittances to the Group now that plant has resumed normal
operating output.
Overall, although the Group liquidity position remains tight, it
has nevertheless improved but the ongoing working capital position
of the Company depends on EdS continuing to make its loan
repayments on time, and according to its schedule which can not
always be guaranteed.
--------------------
Brian Rowbotham
Non-executive Director
5 June 2019
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 gradually
improved. The main borrowing of the Group remains the secured BPAC
loan, which, after the year end, has been rescheduled for repayment
on 30 June 2020. During 2018 GBP0.4 million interest was repaid on
the BPAC loan, in line with the board's strategy to prioritise the
repayment of the most expensive debt. The Group also made inroads
in paying other creditor arrears with trade and other creditors
falling by GBP132k in the year. The Board is working to a
projection that, so long as funds continue to be received from the
Argentinian operations in line with the level that EdS has
forecast, will result in the Group becoming free of secured debt in
2019.
In September 2017 there was a shut-down of the EdS plant
resulting from a steam turbine blade failure and temporary
modification took place to that turbine in October 2017. From
October 2017 to the end of January 2019, with the consent of
CAMMESA, the output and resulting capacity payment revenue of the
steam turbine was restricted to 20 MW, without the usually
associated penalties, compared to its normal contracted capacity of
43.7 MW. This had the effect of reducing monthly income received by
EdS by at least US $650k per month.
The operation of the EdS plant at reduced output remained in
place until the major maintenance of the steam turbine could be
carried out from October 2018 to January 2019. During that
maintenance the Steam turbine was completely overhauled, and the
rotor and missing turbine blades were replaced. At the same time
the steam turbine generator was overhauled and one of the gas
turbines also underwent a rotor replacement and overhaul. Whilst
this had been planned for Quarter 2 2018, it was delayed until Q4
2018 due to delays in the advancing of funds by CAMMESA as a result
of the financial problems being experienced by the Argentinian
economy. The material loss of revenue of EdS resulting from
extended period of reduced power output resulted in significant
cash pressure being placed on the Argentinian operation and debt
repayments to the Group became intermittent as a result.
Despite the loss in revenue, EdS was able to remit debt
repayments totalling GBP2.0 million to the Group in 2018. This
compares to GBP3.3 million in 2017 (which had been affected by two
outage events). EdS's ability to do this was assisted by an
insurance settlement agreement relating to the claim concerning the
September 2017 turbine blade failure. EdS received insurance
proceeds of US $2.3 million in May 2018. In 2017 US $1.6 million
was received from EdS's insurers in September relating to a
separate previously reported incident.
EdS's existing Power Purchase Agreement (PPA) "Resolution 220",
which has governed the remuneration of capacity and generation
payments on the steam turbine since October 2010 is due to expire
in October 2020. The level of the replacement tariff will have a
significant effect on EdS's revenue generation from October 2020
onwards. Although it has no clear indication of what will happen,
it is the Board's belief (based on informal information gathered by
the local management team in Argentina) that the revised pricing
structure will be lower than current contract levels.
Financial results
The operating loss for the year of GBP2.9 million is an
improvement on that incurred last year (2017: GBP3.7 million).
Continuing strict control over administration expenses resulted in
costs of GBP1.5 million, compared to 2017: GBP2.1 million.
Write-downs in the carrying value of certain Group assets totalled
GBP2.7 million (2017: GBP1.7 million) which 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 GBP0.6 million (2016: GBP5.8 million). This
included foreign exchange gains of GBP1.7 million (2017: GBP2.5
million loss).
The Group concluded the sale of our Peruvian assets. The sale
completed on 30 January 2018, the carrying value in these accounts
is a debtor of US $75k, this reflects the amount outstanding at the
year end from the sale and purchase agreement. The cash
consideration for the sale was US $250k. The Group made a one-off
GBP1.3 million gain in the year on the disposal.
Unless there is a significant disposal of assets, the Group is
dependent upon debt repayments from Argentina in order to comply
with payment arrangements made with its creditors. There still
exists some uncertainty as to the timing and the quantum of those
receipts. The Directors believe this uncertainty is now partly
driven by the effects on EdS of austerity measures imposed by the
Argentinian Secretariat of Energy and CAMMESA.
In previous year's accounts, the Director's have reported that
because of uncertainty over the timing of receipts, they have had
to pursue alternative sources of working capital. However, as at 31
December 2018, having considered the cash forecasts from the
Argentinian operation the Directors believe that so long as the
Argentinian operation adheres to their forecasts, and makes all
payments, bearing in mind the reduced outgoings of the Group, there
is currently sufficient headroom in existing working capital
facilities to avoid the need to seek further sources of working
capital.
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
GBP2.9 million in the year (2017 GBP3.7 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 4.4 pence per share
(2017 4.5 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 0.11 pence per share in the year
(2017: loss of 1.04 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. EdS in which the Group has a 50% interest has an
installed nominal capacity output of 138 MW. No additional capacity
was added in the period. The group continues to own three turbines
ready for deployment in projects or onward sales. Two of these have
a nominal capacity of 125MW, the other 38MW.
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. Due to the period, from October 2017 until the return to
full production in January 2019, where a single turbine was running
in open cycle the annual heat rate rose to 9.78 BTU/kWh (2017: 8.76
BTU/kWh).
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 reduced to
64.4 per cent. due to the continued effect of operating at reduced
output following the September 2017 steam turbine blade failure
(2017: 68.9 per cent.).
Review of Financial Performance
Group Results
The Group loss after tax for the financial year under review is
GBP0.6 million (2017: GBP5.8 million loss). This included foreign
exchange gains of GBP1.7 million (2017: GBP2.5 million loss). The
impairment losses, totalling GBP2.7 million (2017: GBP1.7 million),
were GBP2.4 million (2017: GBP1.3 million) for Argentinian
operations and GBP0.2 million (2017: GBP0.3 million) for Chilean
operations. This excludes the foreign exchange gain on the 701
turbines of GBP0.6 million (2017: foreign exchange loss GBP0.9
million).
Group revenue was nil (2017: nil), Operating and Administrative
expenses amounted to GBP1.5 million (2017: GBP2.1 million).
Operating loss was GBP2.9 million (2017 GBP3.7 million loss). The
loss before tax is GBP0.6 million (2017: GBP5.8 million loss). The
basic loss per share is 0.11p (2017: 1.04p loss). Total assets are
GBP26.8 million (2017: GBP31.1 million this included assets of
GBP2.3 million which were held for sale in 2017). Total equity
stands at GBP24.8 million (2017: GBP25.2 million), or a Net Asset
Value of 4.4 pence per share (2017: 4.5 pence per share).
The results for the operations in Argentina, Peru, and Chile are
shown below.
Energia del Sur S.A. Results
After the application of Argentine GAAP accounting treatments to
recognise the effects of hyperinflation, 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$ 158.3
million (2017: AR$ 89.7 million) on revenues of AR$ 672.3 million
(2017: AR$ 379.6 million), whilst the gross operating profit was
AR$ 670.3 million (2017: AR$ 369.9 million). The net pre-tax loss
for the year at EdS was AR$ 20.4 million (2017: profit AR$ 47.2
million) which included foreign exchange losses of AR$ 172.7
million (2017: AR$ 30.8 million).
As set out in note 22 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 GBP167k (2017: GBP211k). Capitalised
development costs are GBP 0.2 million (2017: GBP0.2 million) on the
Central Illapa project. In 2018 the Arica project/turbine was
impaired by GBP0.2 million (2017: GBP0.3 million). The development
costs associated with the Central Illapa project were not impaired
in 2018 or 2017.
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 the prior year accounts the
assets and liabilities are recorded as held for sale. The sale
proceeds are US $250k, of which US $175k had been received by the
date of this report.
Review of Operations
Argentina
Operations at the power plant were affected by the breakdowns
September/October 2017. Gross energy output was 15.0 per cent.
lower at approximately 602 GWh (2017: 708 GWh), this was due to
unplanned and forced outages. The average heat rate of the plant
was 9.78 MMBTU/kWh (2017: 8.76). 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:
Restated
Year ended Year ended
---------------------------
31.12.18 31.12.17
---------------------------
note 1
GBP'000 GBP'000
--------------------------- ----------- -----------
Revenue attributable to
the Group 8,715 8,710
Expenses (8,837) (8,803)
Foreign Currency Exchange (2,225) (728)
Net Loss (2,347) (821)
Non-current Assets 14,327 24,046
Current Assets 2,523 4,853
Non-current Liabilities (26,548) (26,635)
Current Liabilities (3,714) (5,260)
--------------------------- ----------- -----------
note 1 restatement to take into account the effects of
hyperinflation, see note 22
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. Given the uncertainty of the
future sale of the turbine and the recoverability of the land cost
an impairment charge of GBP0.2 million (2017: GBP0.3 million) has
been recorded in the year.
Central Illapa
The project, has continued to make some progress in development
(which has involved the obtaining of a renewal of the necessary
environmental consents granted for the project and an application
has been made for a new construction period for the project from
Ministerio de Bienes Nacionales, the Chilean Ministry of National
Assets), which had expired,whilst the company pursues various
options. The company expects the application for the new
construction period to be successful as there are a limited and
diminishing number of unbuilt gas thermal plants which have a
consented site (and the Directors believe these are needed to
provide electricity in the periods where sustainable sources cannot
operate effectively).
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 (2017: nil) and, after exchange rate differences an increase
in the asset value of GBP0.6 million has been recorded in 2018
(2017: exchange loss GBP0.9 million).
Future developments have been considered in the non-executive's
Director's statement.
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
05 June 2019 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
turnarounds, cash flow management and profit improvement, including
CP Pharmaceuticals (Holdings) Ltd, Benders Holdings Ltd and
Bernstein Holdings Ltd. He established his own advisory and
consultancy business in 2011 to specialise in, and invest in,
business turn arounds and growth companies.
DIRECTORS' REPORT
The Directors submit their annual report together with the
audited financial statements for the year ended 31 December
2018.
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 2018 are set
out in the Consolidated Statement of Total Comprehensive
Income.
No dividend was paid during the year to 31 December 2018 (2017:
nil).
Share capital
Details of the issued share capital are set out in Note 16.
Going concern
In previous years accounts, the Directors have reported that
because of uncertainty over the timing of receipts, they have had
to pursue alternative sources of working capital. However, as at 31
December 2018, having considered the cash forecasts from the
Argentinian operation the Directors believe that so long as the
Argentinian operation adheres to those forecasts, bearing in mind
the reduced outgoings of the Group, there is sufficient headroom in
existing working capital facilities to avoid the need to seek
further sources of working capital.
Since the year end the Company has been in negotiations for
prospective sales of Group assets. There exists uncertainty as to
if and when these sales complete, in addition to the timing of the
sales of assets as well as the quantum of the corresponding
proceeds.
Unless there is a significant disposal of assets, the Group
remains reliant on repayments of loans from its joint venture
Argentine operations. This in itself has led the Auditors to
conclude that a material uncertainty surrounds the future of the
Group, further details are in the Audit Report as the quantum and
timing of such receipts may be subject to variation and are not
guaranteed as there is no formal agreement in place. Loan
repayments from the joint venture are expected to be sufficient to
meet the working capital requirements for the Group as full
generating capacity is expected to be restored following the major
maintenance of the plant in later 2019.
On the basis that the Group receives the joint venture
remittances referred to above, 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:
03.06.2019 31.12.2018 31.12.2017
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 03 June
2019, 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
Mr & Mrs Scott 16,841,500 3.00
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 24.
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
Group, 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
Moore Stephens LLP were re-appointed as auditors during the
year. In February 2019, Moore Stephens LLP merged with BDO LLP. As
part of this process Moore Stephens LLP resigned and BDO LLP were
engaged.
Pursuant to Section 489 of the Companies Act of the Companies
Act 2006, BDO 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
05 June 2019
CORPORATE GOVERNANCE REPORT
for the year ended 31 December 2018
Introduction
Statement from the Board of Directors
Until this year, Rurelec PLC (the "Company") has modelled its
corporate governance, as far as practicable, on the UK Corporate
Governance Code 2016, although as a listed AIM company under AIM
Rules it was not formally required to do so.
On 8 March 2018, the London Stock Exchange issued revised rules
for AIM-listed companies, within which there is a requirement under
the AIM rules for AIM listed companies to apply a recognised
corporate governance code from September 2018.
The Company has chosen to apply the QCA Corporate Governance
Code (the "QCA Code") published in April 2018 and this Corporate
Governance report for the year ended 31 December 2018 is based upon
the QCA Code.
The principal means of communicating our application of the QCA
Code are this Annual Report (pages 11-15) and our Corporate
Governance section on our website (www.rurelec.com).
This statement has been collectively prepared by the board of
directors of the Company (the "Board"). The Board welcomes the new
QCA Corporate Governance Code as a useful guide to assist in
articulating how the Company approaches and applies good corporate
governance.
The members of the Board work closely together to manage the
Company's activities and to chart the Company's long-term
strategy.
This report sets out the Group's application of the Code, by the
Board, and where appropriate, cross reference to other sections of
the Annual Report.
Where our practices depart from the expectations of the Code,
the Board has given an explanation as to why, at this time, it is
appropriate for the Group to depart from the Code.
The QCA Code is constructed around ten broad principles and a
set of disclosures which notes appropriate arrangements for growing
companies and requires companies who have adopted the QCA Code to
provide an explanation about how they are meeting those principles
through the prescribed disclosures. In the paragraphs below, the
Board explains how it has applied them.
The Board of Directors
Rurelec Plc
Principle 1. Establish a strategy and business model which
promotes long-term value for shareholders.
The Board is committed to strengthening the Group's underlying
financial position before seeking opportunities to consolidate or
expand its business. The Board sets out to deliver long-term value
to shareholders in the following ways:
-- Stabilising the Group's position by reducing cash outflows;
-- Reducing the Company's vulnerability to fluctuations in the
timing of debt repayments receivable from subsidiaries and joint
ventures;
-- Working with joint venture partners to ensure that debts from
those entities are repaid to the fullest extent possible;
-- Paying off debts and creditor arrears to restore the business to financial stability;
-- Using that financial stability to permit an orderly
realisation of assets and investments in a timescale that allows
maximisation of the proceeds of such sales;
-- Where asset realisations are not possible in the short term
due to market conditions, preserving the value of those assets
and/or maximising the cashflow generated by those assets;
-- Undertaking development of projects only where to do so
involves low risk and where appropriate funding for the project has
already been secured.
The execution of this strategy presents key challenges in the
maximisation of returns on assets given market conditions. Those
challenges are addressed by ensuring that the Company is stable
enough to be able to avoid having to offload such assets when to do
so would minimise value, instead choosing to seek opportunities to
maximise the long term returns that will optimise value for
shareholders.
The business model as to how the Company plans to make money for
its investors revolves around maximising the long term collection
of debts owed in connection with the joint venture formed to
develop the Energia del Sur, S.A. ("EdS") business in Argentina,
whilst repaying Rurelec's own creditors and continually assessing
the value and saleability of its assets with a view to developing
and/or realising those assets in such a way as to maximise the
returns to all shareholders.
Principle 2. Seek to understand and meet shareholder needs and expectations.
The Board attaches great importance to providing shareholders
with clear and transparent information on the Group's activities,
strategy and financial position. Details of all shareholder
communications are provided on the Group's website.
The Board regards the annual general meeting as a good
opportunity to communicate directly with shareholders via an open
question and answer session.
The Company lists contact details on its website and on all
announcements released via RNS, should shareholders wish to
communicate with the Board.
The resolutions put to a vote at past AGMs can be found in
www.rurelec.com/investors/circulars
The Board seeks to engage with all shareholders as and when
relevant information needs to be disclosed. The Board is cognisant
or is aware of the fact that different shareholders may have
different priorities regarding when those shareholders wish to
realise their shareholdings and are mindful of the need to consider
the interests of shareholders as a whole in this regard.
Shareholders can communicate with the Company through the email
address in its website. The Board is responsible for reviewing all
communications received from members and determining the most
appropriate response.
Principle 3. Take into account wider stakeholder and social
responsibilities and their implications for long-term success.
The contraction of the Group and the focus on stabilisation of
the financial position of the Company and Group has led to frequent
communication at Board level within the Company and regular
communication with suppliers/funders to maintain their confidence
in the business model and strategy being pursued by the Board. The
long-term success of the Group relies on maintaining open
communication and good relationships with its stakeholders.
Communication also extends to the Board receiving regular
updates and feedback within the small London-based workforce within
the Company and there are also regular communications from the
Executive Directors of the Group's joint venture partner in the
British Virgin Islands. The Group's main trading asset is the joint
venture operation in Argentina. This operation is run by a
full-time local management team that maintains good relations with
all key stakeholders to the business in Argentina, and which
provides a close point of contact for the Board's overseas
operations.
The Executive directors travel regularly to Argentina to meet
and grow its existing key stakeholders.
Principle 4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation
Given past changes in the Company's financial position, the
current Board consider risk management to be of paramount
importance and this has driven its strategy of pursuing financial
stability rather than risky expansion in order that shareholder
value can be maximised through an orderly realisation of the
Group's assets. The risk position of the Group is considered on a
very regular basis by the Board given the cash constraints that the
Group has had to work within. The feedback on its strategy of
pursuing a low-risk approach is received clearly in terms of
reductions in cash outflow as measured by weekly reviews of cash
forecasting models, and in terms of reduced exposure to
fluctuations in cash inflow.
Although the Company does not undertake specific risk
assessments, the Board as a whole undertakes regular views of the
principal risks and uncertainties facing the Group as reported in
page 6 of the Strategic Report. The Company is in the process of
implementing a risk register which should be under the Audit
Committee reporting to be compliant with the QCA Code.
Principle 5. Maintain the Board as a well-functioning, balanced team led by the chair.
Due to the size of the company, the Board believes that it can
collectively and competency execute a clear leadership function
without the appointment of a Chairman.
The Board takes collective responsibility for the quality of,
and approach to corporate governance by the Company, governance and
the systems and procedures by which the Company is directed and
controlled. A prescribed set of rules does not itself determine
good governance or stewardship of a company and, in fulfilling
their responsibilities, the Directors believe that they govern the
Company in the best interests of the shareholders, whilst having
due regard to the interests of other 'stakeholders' in the Group
including, in particular, customers, employees and creditors.
The Board is responsible for running the Company, including all
major business and financial risks and taking strategic
decisions.
The Directors communicate at least weekly on significant
matters, in particular on matters affecting cashflow and on matters
concerning the joint venture in Argentina.
Brian Rowbotham is considered to be independent since his
appointment in October 2013. The board has evaluated the
independence requirements of the QCA Code and considers that Brian
Rowbotham continues to be independent.
The number of times the Board met during the year to 31 December
2018 was 20. All directors were present at all the Board
meetings.
The three principal standing committees of the Board are the
Audit, Nominations and Remuneration Committees.
Audit Committee
The Audit Committee comprises Brian Rowbotham and Simon Morris
and is chaired by Brian Rowbotham. The Company's Auditors are
normally in attendance. The Company is not compliant with its terms
of reference or the requirements under the QCA Code, which requires
that only independent Non-Executive Directors should sit on it.
Instead the Audit Committee is comprised of the Boards
Non-Executive Director and an Executive Director.
Remuneration and Nominations Committees
Currently only Brian Rowbotham is a member of these committees
and therefore the Company is not compliant with its terms of
reference or the requirements under the QCA Code, which requires
that only independent Non-Executive Directors should sit on
them.
The executive directors are part time directors of the Company
although all directors are expected to commit sufficient time to
the Company in addition to attending the Board meetings.
The Board minutes and papers are circulated to directors in good
time and ahead of the relevant Board meeting.
The Board has established audit, remuneration and nominations
committees which meet regularly. Details of the Audit, Remuneration
and Nominations Committees:
Director Role at Date of Board Committee
31 December 2018 (re-) appointment
Brian Rowbotham Senior Independent 27.06.2018 N R A
Non-Executive
Simon C. Morris Executive Director 20.07.2017 - - A
Andrew H. Coveney Executive Director 20.07.2017 - - -
N = Nomination Committee
R = Remuneration Committee
A = Audit Committee
The Audit Committee met 3 times during the year to 31 December
2018. All the committee members were present at the meetings.
Due to the size of the Company the Board does not comply with
the principle that the Board should at least have two independent
directors and therefore its committees' membership is also not
compliant with their terms of reference. Given the current level of
transactions within the Company, the Board considers that adequate
resources are available at Board level.
Principle 6. Ensure that between them, the directors have the
necessary up to date experience, skills and capabilities
The Company has three directors, Brian Rowbotham, Senior
Independent Non-Executive Director, Simon Morris, Executive
Director and Andrew Coveney, Executive Director. Biographical
details of the Directors can be obtained in
www.rurelec.com/about-us/board-of-directors-and-senior-management
As the financial position of the Group evolved, so have the
skills required of its directors. The current directors have been
chosen for their skills in maintaining, preserving and realising
shareholder value by pursuing financial stability rather than by
pursuing the aggressive expansion of the past. The two Executive
Directors have a wealth of experience of dealing with the
consequence of deterioration in the financial positions of
businesses and in implementing the change necessary to restore such
businesses back to stability. Those skills have been honed within
financial and restructuring backgrounds. It is important that the
directors are seen to be professional, reliable, trustworthy and
represent a safe pair of hands. All three directors are Chartered
Accountants and have a variety of experience gained through long
careers as directors in industry and commerce, and/or at partner
level in professional firms. This experience has involved regular
and frequent acquisition of enhanced skills in response to a series
of challenges and situations encountered in different businesses
and industries to supplement the updating of skills obtained
through the membership of professional organisations.
The Board understands the challenges in regard to gender
diversity and understands that more can be done to improve the
gender balance as part of the composition of the Board.
The directors keep their skills up to date by attending regular
professional briefings.
The directors receive briefings covering regulations that are
relevant to their role as directors of an AIM-quoted Company from
our Nominated Adviser ("Nomad") and lawyers. For example, the Board
has consulted the Company's lawyers and Nomad on various
disclosures and Market Abuse Regulation issues, amongst other
corporate governance issues.
The Board is grateful for the regular, thorough and diligent
input of a qualified professional Company Secretary who inputs into
and is central to everything that goes on in the Company. As such
the Company Secretary provides frequent advice to the Board. On
legal matters, the Company Secretary is ably supported by external
part-time counsel and the Company's solicitors. The Independent
Non-Executive Director provides guidance and support on relevant
matters on a regular basis.
Principle 7. Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement.
The Board evaluates its own performance on a monthly basis and
also regularly considers any feedback from external parties as and
when that feedback is received.
Board performance is evaluated in the light of its own strategic
objectives and tactical plans, in particular in relation to cash
management and other financial forecasts. Any Board appointments
are considered closely in relation to the ability of the proposed
Director to make an active contribution to delivering value to
shareholders though the achievement of the strategies and plans
balanced against the cost of such an appointment.
The Company has not previously engaged any external evaluation
for the performance of the Board members or external advisors for
succession planning. Candidates to the Board have been proposed by
the Board members based on their skills and experience and the
requirements of the Company at the time of the appointment.
There are currently no formal evaluations of the Board.
Principle 8. Promote a corporate culture that is based on ethical values and behaviours.
The Group's corporate culture is based on creating an atmosphere
of trust, openness, communication and professionalism. Due to the
size of the Company, the Board is in very close contact with its
employees and is able to engender professional development through
teamwork in its day to day and strategic activities.
The Company currently has 6 employees (including the directors).
The Board seeks to ensure that all of its employees are aware of
its ethical values communicating on a personal basis with its
employees and encourages the adoption of these values through the
appraisal and recruitment process.
Principle 9. Maintain governance structures and processes that
are fit for purpose and support good decision making by the
Board.
In addition to the high level of explanation of the application
of the QCA Code set out in the Chair's corporate governance
statement:
-- The Board of Directors (the Board) is responsible for
approving Company policy and strategy. The Board meets regularly
throughout the year. To enable the Board to perform its duties,
each director has access to advice from the Company Secretary and
independent professionals at the Company's expense.
-- The Board comprises of 2 Executive Directors and 1 Non-Executive Director.
-- Biographical details of the Board of Directors can be obtained in www.rurelec.com/about-us/board-of-directors-and-senior-management
-- All matters are reserved for the Board although the Board has
chosen to delegate some of them to the Audit, Remuneration and
Nominations Committees which will issue advice to the Board on
those matters. Some of the matters reserved for the Board
include:
o Reviewing, approving and guiding group strategy, annual
budgets and business plans; setting performance objectives;
monitoring and implementing corporate performance; and overseeing
major capital expenditures and disposals;
o Monitoring the effectiveness of the Company's governance
arrangements and practices, making changes as needed to ensure the
Company's governance framework complies with current best practices
in accordance with the size of the Company;
o Monitoring and managing potential conflicts of interest that
may arise with Board members, shareholders and external
advisors;
o Overseeing the process of external disclosure and communications.
-- The Board is also responsible for all other matters which are
considered to be of importance to the Group as a whole because of
their strategic, financial or reputational implications or
consequences.
-- The Board has established audit, remuneration and nominations
committees which meet regularly. Details of these committees are
set out in Principle 5 above.
-- 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.
-- There are no plans to change the current governance framework.
-- The Role of the Chair, includes:
o to take the chair at general meetings and Board meetings;
o providing leadership to the Board;
o ensuring proper information for the Board;
o planning and conducting Board meetings effectively;
o getting all directors involved in the Board's work;
o ensuring the Board focuses on its key tasks
o supporting the chief executive;
o determination of the order of the agenda;
o ensuring that the Board receives accurate, timely and clear information;
o keeping track of the contribution of individual directors and
ensuring that they are all involved in discussions and
decision-making;
o to ensure effective communication with shareholders and, where appropriate, the stakeholders.
-- The Role of CEO includes:
o Advice to the Board;
o Supporting operations and administration of the Board;
o Leading the development of the Company's short- and long-term strategy;
o Ensuring that the staff and the Board have sufficient up to date information;
o Recommending the yearly budget for the Board's approval and
managing the organisation's resources within those budget
guidelines according to current laws and regulations;
o Assessing risks to the Company and ensuring they are monitored and minimised;
o Setting strategic goals and making sure they are measurable and describable;
o Leading the Company and ensuring all employees buy into the Company's vision;
o Setting the overall strategic direction of the Company alongside the Board;
o Meeting with the Finance Director on a regular basis to review
the Company's financial performance;
o Managing the direction of the Company and guiding senior members of the Company;
o Setting Company-wide KPI's to gauge the Company's performance in all areas;
o Setting Company budgets and forecasts alongside the Finance director;
o Reporting results to the shareholders on a half-year and annual basis.
Principle 10. Communicate how the Company is governed and is
performing by maintaining a dialogue
Disclosure of the outcomes of all votes are in
www.rurelec.com/investors/proxy-results
Historical annual reports and other governance-related material,
including notices of all general meetings over the last five years
can be obtained in www.rurelec.com/investors/circulars
Further disclosure required under QCA Principle 10 can be found
in Principles 5 and 9 above.
------------------------
Maria J. Bravo Quiterio
Company Secretary
05 June 2019
Independent auditor's report to the members of Rurelec Plc
Opinion
We have audited the financial statements of Rurelec Plc (the
'Parent Company') and its subsidiaries (the 'Group') for the year
ended 31 December 2018 which comprise the consolidated income
statement, the consolidated statement of comprehensive income, the
consolidated statement of financial position, the company statement
of financial position, the consolidated statement of cash flows,
the company statement of cash flows, the consolidated statement of
changes in equity, the company statement of changes in equity and
the notes to the financial statements, including a summary of
significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and, as regards the Parent Company financial
statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion:
-- 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 2018 and of the Group's loss for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union ;
-- the Parent Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements 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. We are independent of the Group
and the Parent 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.
Material uncertainty related to going concern
We draw attention to Note 1 of the financial statements
concerning the Group and the Parent Company's ability to continue
as a going concern. The Group continues to make a loss, with the
only operational part of the business being its investment in a
joint venture which has been loss making for a number of years with
the investment fully written down. The Group is heavily reliant on
repayment of the loans receivable from the joint venture in order
to meet the repayments of the BPAC loan and to provide working
capital. Without these funds, the Group would not be able to make
the repayments on the BPAC loan and would have to negotiate a
further extension. After the year end, the BPAC loan facility
repayment date was extended to 30 June 2020. These matters, along
with the other matters explained in Note 1, indicate the existence
of a material uncertainty which may cast significant doubt over the
Group and Parent Company's ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
We highlighted going concern as a key audit matter based on our
assessment of the significance of the risk and the effect on our
audit strategy. The procedures included:
-- Reviewing budget and cash flow forecasts for at least 12
months from the date of approval of the financial statements
-- Obtaining support for the management assumptions used in the forecast
-- Confirming the actual cash repayments of the loan to the
joint venture for the months post year end
-- Obtaining the signed confirmation letter from BPAC in respect
of extending the loan facility repayment date to 30 June 2020.
-- 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 the joint venture Energía del Sur S.A
Key audit matters
In addition to the matter described in the material uncertainty
related to going concern section, key audit matters are those
matters that, in our professional judgment, 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
Valuation of assets (Note In this area our procedures
12) included:
* Physically verifying existence of the assets, their
The Group holds two Siemens storage and condition;
701 turbines - these were
purchased for $25m in June
2013 for use in the Central * Reviewing the valuation report prepared by an
Illapa Project in Chile. Due independent expert, confirming the expert's
to working capital constraints independence, assessing the conclusions reached and
and market conditions, investment the competency and qualifications of the expert;
has been limited and the turbines
have been partially impaired.
As the Group continues to * Reviewing evidence that the value of the assets is
be loss making and with operational recoverable through sale; and
issues in the joint venture
during the year, there is
significant uncertainty in * Reviewing insurance documentation and
being able to realise the storage/maintenance documentation to assess the risk
value through the future project, of further impairment.
or through the sale of the
turbines in the local market
as the market continues to
be depressed in the sector.
At the year end the directors
obtained independent valuations
to confirm that the assets
were not overstated in the
financial statements and to
calculate the carrying value.
------------------------------------------------------------
Valuation of investment and In this area our procedures
recoverability of intercompany included:
loans, including loans to * Obtaining loan confirmations of the balance and any
joint venture (Note 13 and interest accrued;
22)
The repayment of these loans * Reviewing the going concern assessment of
is dependent on the economic Energía del Sur S.A.; and
feasibility of the underlying
projects within the Group.
The recoverability of these * Assessing recoverability of the loans through
loans is judgemental and hence reviewing financial projections models and net asset
there is a risk that the loans positions of subsidiaries and the joint venture.
are overstated. The loans
to the joint venture and the
intercompany loans due to
the Parent Company were reviewed
by the directors and it was
deemed that impairment was
required based on the cash
flow models in respect of
the joint venture.
------------------------------------------------------------
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 materiality would be
GBP744,000 (2017: GBP142,000), which is 3% of net assets. 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. Performance materiality for the group was
calculated at 70% of overall materiality, being GBP521,000 (2017:
GBP225,000), this is considered reasonable keeping in view the low
history of adjustable misstatements and strong control environment
maintained by management. For the Parent Company financial
statements, materiality was calculated to be GBP520,000 (2017:
GBP140,000) using a net asset basis.
For the component entities, the materiality for Cochrane Power
Limited was GBP278,000 (2017: GBP66,000) and was calculated on a
net assets basis. The materiality for Rurelec Project Finance
Limited was GBP6,000 (2017: GBP59,000) and calculated on a gross
assets basis. The materiality for Energia Del Sur S.A. was
GBP71,000 (2017: GBP120,000) and was calculated on a loss before
tax basis.
We report to the Audit Committee all potential adjustments in
excess of GBP39,750 being 5% of the materiality for the financial
statements as a whole.
An overview of the scope of our audit
The Group operates through two 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 audit. 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 component. 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 Energia Del Sur S.A. we worked with non
BDO component auditors. We provided them with group instructions
and directed the component materiality and procedures that needed
to be undertaken. 100% of group net assets were covered by full
scope audits.
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.
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 our 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 this 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 Group and
the Parent 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 by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the Parent Company 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 and the Parent Company'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
Group or the Parent 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 Parent 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 Parent 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 Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Laura Pingree (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
150 Aldersgate Street
London
EC1A 4AB
05 June 2019
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2018
Notes Year ended Year ended
-------------------------------------- ------
31.12.18 31.12.17
-------------------------------------- ------
GBP'000 GBP'000
-------------------------------------- ------ ----------- -----------
Revenue 4 - -
Gross Profit - -
Administrative Expenses 6 (1,510) (2,070)
Other Income 8b 1,250 -
Other Expense 8b (2,665) (1,651)
Operating Loss (2,925) (3,721)
Share of Joint Venture Profit/(Loss) 22 - -
Foreign Exchange Gains/(Losses) 8a 1,724 (2,547)
Finance Income 9 756 862
Finance Expense 9 (177) (419)
Loss before Tax (622) (5,825)
Tax Expense 10 - -
Loss for the year attributable to
owners of the Company (622) (5,825)
Earnings per Share - in pence 11
Basic Loss per Share (0.11) (1.04)
Diluted Loss per Share (0.11) (1.04)
-------------------------------------- ------ ----------- -----------
The notes on pages 29 to 53 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2018
Year Ended Year Ended
-------------------------------------------------
31.12.18 31.12.17
-------------------------------------------------
GBP'000 GBP'000
------------------------------------------------- ----------- -----------
Loss for the year (622) (5,825)
Other Comprehensive (Loss)/Income for the year:
Items that will be subsequently Reclassified
to Profit & Loss:
Exchange Differences on translation of Foreign
Operations 215 (386)
Total Other Comprehensive (Loss)/Income 215 (386)
Total Comprehensive Loss for year attributable
to owners of the Company (407) (6,211)
-------------------------------------------------- ----------- -----------
The notes on pages 29 to 53 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2018
Notes 31.12.18 31.12.17
------
GBP'000 GBP'000
----------------------------------------- ------ --------- ---------
Assets
Non-current Assets
Property, Plant and Equipment 12 10,038 9,699
Investment in Joint Venture 22 - -
10,038 9,699
Current Assets
Trade and Other Receivables 13a 16,394 18,951
Cash and Cash Equivalents 15 351 163
Assets classified as held for sale 27 - 2,265
16,745 21,379
Total Assets 26,783 31,078
Equity and Liabilities
Shareholders' Equity
Share Capital 16 11,228 11,228
Share Premium Account 17 22,754 22,754
Foreign Currency Reserve 787 572
Special Non-distributable Reserve 17 45,000 45,000
Accumulated Losses (54,967) (54,345)
Total Equity attributable to owners
of the Company 24,802 25,209
Current Liabilities
Trade and Other Payables 18a 774 899
Current Tax Liabilities 19 7 7
Borrowings 20 1,200 1,448
Liabilities classified as held for Sale 27 - 3,515
1,981 5,869
Total Liabilities 1,981 5,869
Total Equity and Liabilities 26,783 31,078
----------------------------------------- ------ --------- ---------
The financial statements were approved by the Board of Directors
on 05 June 2019 and were signed on its behalf by Andrew Coveney
(Executive Director) and Brian Rowbotham (Non-executive
Director).
----------------------- ------------------------
Andrew Coveney Brian Rowbotham
The notes on pages 29 to 53 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF FINANCIAL POSITION company number:
4812855
At 31 December 2018
Notes 31.12.18 31.12.17
----------------------------------- ------
GBP'000 GBP'000
----------------------------------- ------ ---------- ----------
Assets
Non-current Assets
Investments 21 - 100
- 100
Current Assets
Inventories 14 9,456 8,895
Trade and Other Receivables 13b 16,613 20,892
Cash and Cash Equivalents 15 350 162
26,419 29,949
Total assets 26,419 30,049
Equity and liabilities
Shareholders' equity
Share Capital 16 11,228 11,228
Share Premium Account 17 22,754 22,754
Special Non-distributable Reserve 17 45,000 45,000
Accumulated Losses (54,239) (50,989)
Total Equity 24,743 27,993
Current Liabilities
Trade and Other Payables 18b 469 601
Current tax liabilities 19 7 7
Borrowings 20 1,200 1,448
1,676 2,056
Total Equity and Liabilities 26,419 30,049
----------------------------------- ------ ---------- ----------
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 GBP3.2 million (2017: loss GBP7.1
million).
The financial statements were approved by the Board of Directors
on 05 June 2019 and were signed on its behalf by Andrew Coveney
(Executive Director) and Brian Rowbotham (Non-executive
Director).
----------------------- ------------------------
Andrew Coveney Brian Rowbotham
The notes on pages 29 to 53 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2018
Notes
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
Cash Flows from Operating Activities
Cash used in Operations 23 (1,341) (2,471)
Net Cash used in Operating Activities (1,341) (2,471)
Cash Flows from Investing Activities
Proceeds from sale of subsidiary 132 -
Loan Repayments from Joint Venture
company 2,029 3,331
Settlement of Deferred Consideration (232) (1,257)
Net Cash generated from Investing Activities 1,929 2,074
Net Cash Inflow/(Outflow) before Financing
Activities 588 (397)
Cash Flows from Financing Activities
Loan Principal Repayments 20 - (320)
Loan Interest Repayments 20 (400) (80)
Net Cash Used in Financing Activities (400) (400)
(Decrease)/Increase in Cash and Cash
Equivalents 188 (797)
Cash and Cash Equivalents at Start
of Year 163 960
Cash and Cash Equivalents at End of
Year 351 163
The notes on pages 29 to 53 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2018
Notes
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
Cash Flows from Operating Activities
Cash Used in Operations 23 (1,230) (3,164)
Net Cash Used in Operations (1,230) (3,164)
Cash Flows from Investing Activities
Proceeds from Sale of Subsidiary 132 -
Investment in and Loans to subsidiaries (112) (573)
Loan Repayment from subsidiary 2,030 3,344
Settlement of Deferred Consideration (232) -
Net Cash Generated from Investing Activities 1,818 2,771
Net Cash Inflow/(Outflow) before Financing
Activities 588 (393)
Cash Flows from Financing Activities
Loan Principal Repayments 20 - (320)
Loan Interest Repayments 20 (400) (80)
Net Cash (Used in)/Generated from Financing
Activities (400) (400)
(Decrease)/Increase in Cash and Cash
Equivalents 188 (793)
Cash and Cash Equivalents at Start
of Year 162 955
Cash and Cash Equivalents at End of
Year 350 162
The notes on pages 29 to 53 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2018
Special
Share Share Foreign Currency Non-distributable
Capital Premium Reserve Accumulated Losses Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 01.01.17 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
Loss for year
attributable to
owners of the
parent - - - (622) - (622)
Exchange
Differences - - 215 - - 215
Total Comprehensive
Loss - - 215 (622) - (407)
Balance at 31.12.18 11,228 22,754 787 (54,967) 45,000 24,802
Notes: 16 17 17
The notes on pages 29 to 53 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2018
Share Share Accumulated Special Non-distributable
Capital Premium Losses Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1.1.17 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
Loss for the year - - (3,250) - (3,250)
Total Comprehensive Loss - - (3,250) - (3,250)
Balance at 31.12.18 11,228 22,754 (54,239) 45,000 24,743
Notes: 16 17 17
The notes on pages 29 to 53 form an integral part of these
Consolidated Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2018
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 2018.
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 2018 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 material uncertainty as to the timing
of the sales of assets as well as the quantum of the corresponding
proceeds. Unless there is a significant disposal of assets, the
Group remains reliant on repayments of loans from its joint venture
Argentine operations. This in itself has led the Auditors to
conclude that a material uncertainty surrounds the future of the
Group, further details are in the Audit Report, as the quantum and
timing of such receipts may be subject to variation and are not
guaranteed as there is no formal agreement in place. Loan
repayments from the joint venture are expected to be sufficient to
meet the working capital requirements for the Group as full
generating capacity is expected to be restored following the major
maintenance of the plant in later 2019.
During 2018 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.
Anticipated loan repayments from the joint venture are expected to
be sufficient to meet the working capital requirements for the
Group.
Since the year end the Company has further extended the
repayment date on its outstanding loan, at the year-end of GBP1.2
million, short term facility from Bridge (Arena) Properties Limited
("BPAC"). The repayment date has been extended to 30 June 2020.
On the basis that the Group receives these joint venture
remittances, 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.
a) New standards, interpretations and amendments effective from
1 January 2018
New standards impacting the Group that have been adopted in the
annual financial statements for the year ended 31 December 2018,
and which have given rise to changes in the Group's accounting
policies are:
-- IFRS 9 Financial Instruments (IFRS 9); and
-- IFRS 15 Revenue from Contracts with Customers (IFRS 15)
As the Group has no revenue IFRS 15 has no effect. Other new and
amended standards and Interpretations issued by the IASB that have
been applied for the first time in the next annual financial
statements are not expected to impact the Group as they are either
not relevant to the Group's activities or require accounting which
is consistent with the Group's current accounting policies.
b) New standards, interpretations and amendments not yet
effective
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the group has decided
not to adopt early. The most significant of these is:
IFRS 16 Leases (mandatorily effective for periods beginning on
or after 1 January 2019)
IFRIC 23 Uncertainty over Income Tax Positions (effective 1
January 2019).
The Directors consider that no revisions to IFRS standards to be
implemented in the following year will have any significant effect
on those 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:
IFRS 16 'Leases'
The Directors have completed their assessment of the impact of
the adoption of this standard 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
2018. 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 ventures 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 Director's
judgement that the Argentine GAAP hyperinflation adjustments to the
accounts of the Group's Joint Venture operations in Argentina give
an approximate fair value of these operations. Additionally, as the
Argentine operations are indirectly held by the Group the
provisions of IAS 29 for hyperinflation do not apply.
Non-monetary assets are valued at historic rates.
2.4 Expense recognition
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 (2017: 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 to test for impairment, the carrying value
is less provision for impairment. Any impairment is recognised in
the income statement.
The majority of loans are due the Joint Venture on demand and
are shown as current assets, the board are expecting repayments to
commence 2019. As An impairment review was conducted, the resulting
impairment of GBP2,5 million has been charged to the Income
Statement, consequently there are no expected credit losses. The
board consider these stage 1 impaired under IFRS 7.
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.
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
Under the Pensions Act 2008, every employer in the UK must put
certain staff into a workplace pension scheme and contribute
towards it. This is called 'automatic enrolment'. Rurelec staging
date was 1 October 2017. Rurelec choose to set up its auto
enrolment pension scheme with NEST which ensures access to
suitable, low-charge pension provision to meet the new duty to
enrol all eligible workers into a workplace pension automatically.
Rurelec also offers a Salary Sacrifice Scheme within NEST by which
employees sacrifice part of their salary in exchange for the
company to make an employer contribution on their behalf to the
pension scheme and also to contribute their national insurance
savings on the amount sacrificed by the employee.
During the year under review, the Company continued its
contributions to the NEST Pension 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 statements, management makes 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) 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 8b.
b) Management has assessed that the Company does not control the
Argentine operations and therefore, as a result of this judgement
have treated the assets, liabilities and share of operating results
as a Joint Venture, and consequently are using the equity
accounting basis of preparation in accordance with IAS 28 (see Note
2.1 and 22). 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 22 for more detail.
The following tables provide an analysis of the operating
results, total assets and liabilities, in 2018 and 2017 for each
geographic segment.
a) 12 months to 31.12.2018 Chile Peru UK Consolidation Total
Adjustments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------------- --------
Administrative Expenses (120) - (1,407) 17 (1,510)
Loss from Operations (120) - (1,407) 17 (1,510)
Other Income - 1,250 - - 1,250
Other Expense (236) - - (2,429) (2,665)
Foreign Exchange (Losses)/Gains (10) - 1,734 - 1,724
Finance Income - - 568 188 756
Finance Expense (568) - (177) 568 (177)
(Loss)/Profit before Tax
from Operations (934) 1,250 (954) 16 (622)
Tax Expense - - - - -
Total (Loss)/Profit (934) 1,250 (954) 16 (622)
Total Assets 1,922 - 26,419 (1,558) 26,783
Total Liabilities 12,289 - 1,676 (11,984) 1,981
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) (21) (2,070)
Loss from Operations (211) (289) (1,549) (21) (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
5. Exchange rate sensitivity analysis
The key exchange rates applicable to the results were as
follows:
Year Ended Year Ended
31.12.18 31.12.17
i) Closing rate
US $ to GBP 1.2690 1.3491
CLP (Chilean Peso) to GBP 879.8 829.0
PEN (Peruvian Sol) to GBP n/a 4.36
ii) Average rate
US $ to GBP 1.3306 1.2974
CLP (Chilean Peso) to GBP 853.0 836.4
PEN (Peruvian Sol) to GBP n/a 4.19
If the exchange rate of sterling at 31 December 2018 had been
stronger or weaker by 10 per cent. from the above, with all other
variables held constant, shareholder equity at 31 December 2018
would have been GBP2.5 million (2017: GBP2.5 million) lower or
higher than reported.
If the average exchange rate of sterling during 2018 had been
stronger or weaker by 10% per cent. with all other variables held
constant, the effect on the loss for the year would have been
GBP0.1 million (2017: GBP0.6 million) higher or lower than
reported.
If the average exchange rate of sterling during 2018 had been
stronger or weaker by 10% per cent. with all other variables held
constant, the effect on the total other comprehensive loss for the
year would have been GBP0.02 million (2017: GBP0.04 million) higher
or lower than reported.
6. Administrative expenses
Year ended Year ended
----------------------------------------
31.12.18 31.12.17
----------------------------------------
GBP'000 GBP'000
Expenditure incurred in administrative
expenses is as follows:
Payroll and social security 632 960
Services, legal and professional 484 630
Office costs and general overheads 328 421
Audit services(1) 66 59
---------------------------------------- ----------- -----------
1,510 2,070
----------- -----------
(1) Audit services include GBP54k (2017: GBP59k) paid to the
auditors for the audit of the Company and Group's financial
statements. GBP10k for the audit of the Group's subsidiaries. Fees
paid to other auditors, in respect of the audit of joint venture
companies, amounted to GBP17.6k (2017: GBP24.5k). The group
auditors also provided taxation services for the Group in the year,
the costs were GBP13.0k. (2017: GBP12.4k).
7. Employee costs
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
a) Group
Aggregate remuneration of all employees
and Directors 592 902
Social security costs 28 47
Pension costs 12 11
----------------------------------------- ----------- -----------
Total 632 960
----------------------------------------- ----------- -----------
The average number of employees in the Group, including
Directors, during the year was as follows:
Year ended Year ended
31.12.18 31.12.17
----------------------------------------- ----------- -----------
Management 3 3
Administration and development 4 8
----------------------------------------- ----------- -----------
Total 7 11
----------------------------------------- ----------- -----------
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
b) Company
Aggregate remuneration of all employees
and Directors 572 750
Social Security 28 38
Pension Costs 11 3
----------------------------------------- ----------- -----------
Total 611 791
----------------------------------------- ----------- -----------
The average number of employees in the Company, including
Directors, during year was as follows:
Number Number
Management 3 3
Administration and development 4 5
----------------------------------------- ----------- -----------
Total 7 8
----------------------------------------- ----------- -----------
c) Directors' remuneration, including social security costs
The total remuneration paid to the Directors and former
Directors was GBP322k (2017: GBP489k). The total remuneration of
the highest paid Director was GBP201k (2017: GBP199k). There were
no health insurance costs, bonuses, pension costs or share based
payments paid during the year (2017: Nil)
Year ended Year ended Year ended
31.12.18 31.12.18 31.12.17
GBP'000 GBP'000 GBP'000
Base Salary/Fee Total Total
A Morris - - 67
B Rowbotham 30 30 30
S Morris 91 91 193
A Coveney 201 201 199
Total 322 322 489
B Rowbotham provided services under a service agreement contract
with Mountbeach Associates Ltd until June 2017, since then he has
been on payroll.
S Morris provided services under a service agreement contract
with SC Morris Ltd.
A Coveney provided services under a service agreement contract
with Coveney Associates Consulting Ltd.
8. (a) FOREIGN EXCHANGE
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
Foreign exchange Gains/(Losses) 1,724 (2,547)
--------------------------------- ----------- -----------
Total 1,724 (2,547)
----------- -----------
(b) OTHER INCOME/EXPENSE
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
Realised gain on disposal
Sale of Cascade Hydro Ltd (see note
29) (1,250) -
Asset impairment
Turbine for Arica Project 236 296
Impairment provisions
Loans to Joint Venture Companies note
22 2,429 1,327
Chile write-off of goodwill re Central
Illapa acquisition - 28
---------------------------------------- ----------- ----------
Total 1,415 1,651
---------------------------------------- ----------- ----------
During the year the directors tested all major assets for
indication of impairment the results of these were:
Loans to Joint Venture Companies:
Carrying Value b/fwd GBP 18.5m
Exchange adjustment GBP 1.1m
Interest charged GBP 0.8m
New loans GBP -
Repayments GBP (2.0m)
Impairment in year GBP (2.4m)
Recoverable amount/Carrying value c/fwd GBP 16.0m
The carrying value of the loans is based on the value in use.
This is determined by management assessments being the base for a
discounted cash flow model, the discount rate used was 11.49%. The
results from the model are then compared to the carrying value of
the loans, any impairment is recognised through profit and loss and
included in other expense.
Turbines for Central Illapa (CHILE):
Carrying Value b/fwd GBP 8.9m
Exchange adjustment GBP 0.6m
Recoverable amount GBP 9.5m
Impairment in year GBP -
Carrying value c/fwd GBP 9.5m
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 GBP9.5 million (US $12.0
million) (2017: GBP8.9 million (US $12.0 million)). The realisation
of the asset is dependent on a successful future sale or successful
development of the Central Illapa Project, both of which are
uncertain.
The Illapa turbines are included within Property, Plant and
Equipment in the Group and in the Company, they are included in
Inventories.
HELD FOR SALE ASSET (Peru)
Net assets held for sale b/fwd GBP 1.3m
Disposal in period GBP(1.3)m
During the year the Company entered into an arrangement to
dispose of Cascade Hydro Limited. The sale completed on 30 January
2018, proceeds were US $ 250k, of which US $175k were received
before the year-end.
TURBINE - ARICA (Chile)
Carrying value of Arica turbine b/fwd GBP 0.6m
Foreign exchange revaluation GBP -
Impairment in year GBP(0.2)m
Carrying value of Arica turbine c/fwd GBP 0.4m
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
31.12.18 31.12.17
GBP'000 GBP'000
Joint Venture interest received/receivable(1) 756 862
Interest expense paid/payable on bank
borrowings and loans(2) (177) (419)
----------------------------------------------- ---------- ----------
(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. (2017: 5.5 per cent.).
(2) Interest paid/payable includes interest on the BPAC loan and
to Ethos in accordance with the terms of the payment plan following
a settlement agreement, the last payment was made in December 2018.
The details of the amounts due under the loans are shown in Note
20.
Sensitivity analysis arising from changes in borrowing costs is
set out in Note 20.
10. Tax expense
The relationship between the expected tax expense at basic rate
of 19.00 per cent. (2017: 19.25 per cent.) and the tax expense
actually recognised in the income statement can be reconciled as
follows:
Year ended Year ended
-------------------------------------
31.12.18 31.12.17
-------------------------------------
GBP'000 GBP'000
Result for the year before tax (622) (5,825)
Standard rate of corporation tax in
UK 19.00% 19.25%
Expected tax credit (118) (1,121)
Permanent differences 345 323
Unrecognised loss carried forward 204 798
Actual tax expense - -
Comprising:
Current tax expense - -
Deferred tax / (net credit) - -
----------- -----------
Total credit (expense) - -
------------------------------------- ----------- -----------
A deferred tax asset for the year of GBP0.2 million (2017:
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 GBP0.7 million (2017: GBP1.0 million), based on cumulative tax
losses of GBP4.6 million (2017: 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
31.12.18 31.12.17
Average number of shares in issue 561,387,586 561,387,586
Result for the year
Total Loss attributable to equity holders GBP0.6m GBP5.8m
of the parent
Basic loss per share 0.11p 1.04p
Diluted loss per share 0.11p 1.04p
------------------------------------------- ------------ ------------
There is no difference between the Basic and Diluted loss per
share.
12. Property, plant and equipment
Plant and Plant under Total
Equipment Construction
GBP'000 GBP'000 GBP'000
a) Group
Cost at 1.1.17 16,195 2,485 18,680
Exchange adjustments (860) (328) (1,189)
Cost at 31.12.17 15,335 2,157 17,491
Exchange adjustments 55 55 110
Cost at 31.12.18 15,389 2,212 17,601
Accumulated Depreciation and Impairment
at 1.1.17 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
Exchange adjustments (507) 42 (465)
Charge for the year - - -
Charge for impairment for the year - 236 236
Accumulated Impairment and Depreciation
at 31.12.18 5,933 1,630 7,563
Net book value - 31.12.18 9,456 582 10,038
Net book value - 31.12.17 8,895 805 9,699
The plant and equipment of GBP9.5 million relates to two Siemens
turbines, stored in Venice for use in the Central Illapa project
purchased for US $25.0 million, at the year-end deferred
consideration of GBP0.1 million (2017: GBP0.3 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
GBP0.4 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 20 the Company has outstanding loans from
BPAC. Security on these loans include a pledge over all assets of
the Group.
13. Trade and other receivables
Year Ended Year Ended
---------------------------------------------
31.12.18 31.12.17
---------------------------------------------
GBP'000 GBP'000
a) Group - current
Amounts due from joint venture companies(1) 16,012 18,532
Tax receivable - VAT 13 37
Other Receivables and Prepayments 369 382
----------- -----------
16,394 18,951
--------------------------------------------- ----------- -----------
(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 5.5 per cent. (2017: 5.5
per cent.). The receivable is comprised of GBP1.1 million due from
EdS and GBP14.9 million due from PEL. The loans are due on demand
and are shown as current assets, the board are expecting repayments
to commence 2019. An impairment review has been carried out, based
on cashflow model, consequently there are no expected credit
losses.
Year Ended Year Ended
-----------------------------------
31.12.18 31.12.17
-----------------------------------
GBP'000 GBP'000
----------------------------------- ----------- -----------
b) Company - current
Loans to Joint Ventures(2) 14,879 17,044
Loans to Subsidiaries(1) 1,590 3,772
Other receivables and prepayments 144 76
----------- -----------
16,613 20,892
----------------------------------- ----------- -----------
The amounts owed by subsidiary companies include:
(1) Loans to subsidiaries in Cochrane Power Limited GBP9.9
million and Rurelec Project Finance Limited GBP1.0 million are
repayable on demand. These loans have been impaired to GBP0.6
million in Cochrane Power Limited, the UK holding company for
assets in Chile. The loans to Chile and Rurelec Project Finance
Limited bear zero per cent interest rates. During the year the
Group received GBP2.0 million/US $2.7 million (2017: GBP3.3
million/US $ 4.3 million) from EdS in service of the amounts due to
Rurelec Project Finance Limited. The total outstanding at the
year-end was GBP1.0 million (2017: GBP3.1 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. The receivable is comprised of GBP14.9 million
due from PEL. The loans are due on demand and are shown as current
assets, the board are expecting repayments commence 2019. An
impairment review has been carried out, based on discounted value
in use with a discount rate of 11.49%, consequently there are no
expected credit losses.
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 20 the Company has outstanding loans from
BPAC. Security on these loans includes a pledge over all assets of
the Group.
14. Inventories
Company - Inventories Year Ended Year Ended
31.12.18 31.12.17
GBP'000 GBP'000
Inventories 9,456 8,895
Inventories comprises of two Siemens 701DU turbines acquired
from IPSA in June 2013. Further details of which are set out in
note 12. Storage and insurance costs for the turbines in the year
totalled GBP102k (2017: GBP117k).
As set out in note 20 the Company has outstanding loans from
BPAC. Security on these loans includes a pledge over all the assets
of the Group.
15. CASH AND CASH EQUIVALENTS
Year Ended Year Ended
31.12.18 31.12.17
GBP'000 GBP'000
a) Group
Cash and short-term bank deposits 351 163
b) Company
Cash and short-term bank deposits 350 162
----------------------------------- ----------- -----------
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 20 the Company has outstanding loans from
BPAC. Security on these loans includes a pledge over all the assets
of the Group.
16. SHARE Capital
Year Ended Year Ended
31.12.18 31.12.17
GBP'000 GBP'000
In issue, called up and fully paid
561,387,586 ordinary shares of 2p each
(2017: 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.
17. 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 the 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 GBP88k (2017: GBP254k).
Share Premium account, after the deduction of GBP45,000,000 is
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 0.1 million (2017:
GBP0.3 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.
18. Trade and other payables
Year Ended Year Ended
----------------------
31.12.18 31.12.17
----------------------
GBP'000 GBP'000
a) Group - current
Trade payables 677 815
Accruals 97 84
774 899
b) Company - current
Trade payables 372 517
Accruals 97 84
469 601
---------------------- ----------- -----------
19. Tax liabilities
Year Ended Year Ended
31.12.18 31.12.17
GBP'000 GBP'000
Group/Company - current
P.A.Y.E. 7 7
7 7
------------------------- ----------- -----------
20. Borrowings
Year Ended Year Ended
31.12.18 31.12.17
GBP'000 GBP'000
Group/Company - Current
Other Loans 1,200 1,448
1,200 1,448
Group/Company -Total Borrowings 1,200 1,448
The Group's borrowings are repayable
as follows:
Within 1 year 1,200 1,448
1,200 1,448
Group and Company
GBP1.2 million (2017: GBP1.4 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 2019. The interest rate from 1
January 2018 until 31 December 2018 was 12.5%, from 1 July 2019 the
rate will be 13.5%. Since the year end the loan has been further
extended and is now due on 30 June 2020, or upon any significant
asset sales.
Net Debt Reconciliation
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
a) Group
Balance at start of year 1,448 4,037
Non-Cash flow transactions
Transfer to liabilities held for sale - (2,608)
Interest charge 152 419
Cash flow transactions
Interest paid (400) (80)
Principal repayment - (320)
Balance at end of year 1,200 1,448
b) Company
Balance at start of year 1,448 1,661
Non-Cash flow transactions
Interest charge 152 187
Cash flow transactions
Interest paid (400) (80)
Principal repayment - (320)
Balance at end of year 1,200 1,448
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:
None (2017: US $510k) of these loans are denominated in US $. In
2017 these were 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 GBPnil (2017: GBP38k).
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.
21. Investments
Year Ended
31.12.18
GBP'000
Cost at 1 January 2018 100
Disposal during the year 100
Balance at 31 December 2018 -
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. (2017: 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. (2017: 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 company, Cascade Hydro Power S.A.C.,
100 per cent. interest in Electricidad Andina, S.A. and 99.9 per
cent. of Empresa de Generacion Electrica Colca, S.A.C.,all of them
being companies registered in Peru. On 30 December 2017 the Company
entered into a SPA to dispose of CHL, and its subsidiaries, the
sale completed on 30 January 2018, please see note 27 for further
details.
3. 100 per cent. (2017: 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.
4. 100 per cent. (2017: 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 S.A.* Argentina 50%
---------------------------- --------------
Arroyo 880, Piso 2
C1007AAB
Ciudad Autonoma de Buenos
Electrica del Sur Aires
S.A.* Argentina 50%
---------------------------- --------------
Arroyo 880, Piso 2
C1007AAB
Ciudad Autonoma de Buenos
Aires
SEA Energy S.A.** Argentina 100%
---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago
Rurelec Chile SpA**** Chile 100%
---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago
Rurelec Chile Limitada**** Chile 99.99%
---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Termoelectrica del Santiago
Norte S.A.**** Chile 100%
---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago
Central Illapa S.A.**** Chile 100%
---------------------------- --------------
*Held via Patagonia Energy Limited and equity accounted as a
joint venture, see Note 23
**Held via Rurelec Project Finance Limited, in liquidation
****Held via Cochrane Power 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.
22. 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 owns 100 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 GBP45.6 million (2017
restated: GBP38.1 million).
The following table sets out the results of the joint venture in
Argentina of which the Group has a 50 per cent. share:
*Restated
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
----------- -----------
Revenue 17,432 17,420
Expenses (21,267) (18,396)
Non-current Assets 28,653 48,092
Current Assets 5,045 7,660
Non-current Liabilities (52,916) (53,269)
Current Liabilities (7,428) (10,519)
------------------------- ----------- -----------
*Restatement due to hyperinflation accounting in the Joint
Venture
Revenue is derived from one principal customer, which the
directors consider is of a good quality.
23. Reconciliation of profit before tax to cash generated from operations
a) Group Year ended Year ended
---------------------------------------
31.12.18 31.12.17
---------------------------------------
GBP'000 GBP'000
Loss for the year before tax (622) (5,825)
Net Finance Income (579) (1,096)
Adjustments for:
Unrealised exchange (gains)/losses (1,735) 2,570
Write down of loans 2,429 1,329
Gain on disposal (1,250) -
Write down of Turbine 236 296
Impairment/(increase) of Goodwill - 29
Movement in Working Capital:
Change in Trade and Other Receivables 23 103
Change in Trade and Other Payables 157 123
Cash Used in Operations (1,341) (2,471)
--------------------------------------- ----------- -----------
b) Company Year ended Year ended
---------------------------------------
31.12.18 31.12.17
---------------------------------------
GBP'000 GBP'000
Loss for the year before tax (3,250) (7,068)
Net Finance Income (1,147) (1,198)
Adjustments for:
Unrealised exchange (gains)/losses
on loans (1,741) 3,138
Loss on disposal 1,398 -
Write down of loans 2,249 3,580
Movement in working capital:
Change in trade and other receivables 785 (148)
Change in trade and other payables 476 (1,468)
Cash used in operations (1,230) (3,164)
--------------------------------------- ----------- -----------
24. 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. 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. As a result of recent inflation, Argentine GAAP
measures for hyperinflation have come into force. The EdS
financials included in this report, along with restatement of prior
year have been prepared with these measures. The Directors are of
the view that these accounts require no further adjustment.
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 20, the Group has GBP1.2 million (2017:
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 financial obligations fall
due:
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
a) Group
------------------------------ ---------- ----------
Current - due within 1 year:
Trade payables 774 899
Tax liabilities 7 7
Borrowings 1,200 1,448
Total due within 1 year: 1,981 2,354
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
b) Company
------------------------------ ---------- ----------
Current - due within 1 year:
Trade payables 469 601
Tax liabilities 7 7
Borrowings 1,200 1,448
Total due within 1 year: 1,676 2,056
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.
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 2018 Company Financial Company Group Financial Group
Borrowings Borrowings
Assets at and Payables Assets at and Payables
Amortised at Amortised Amortised at Amortised
Cost Cost Cost Cost
GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------------- ---------------- -------------
Trade and Other Receivables
< 1 year 16,613 - 16,394
Cash and Cash Equivalents 350 - 351 -
Trade and Other Payables
< 1 year - (476) - (781)
Borrowings < 1 year - (1,200) - (1,200)
Total 16,963 (1,676) 16,745 (1,981)
Company Loans Company Group Loans Group
Borrowings Borrowings
and and Payables and and Payables
Receivables at Amortised Receivables at Amortised
Cost Cost
31 December 2017 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------------- ---------------- -------------
Trade and Other Receivables
< 1 year 20,892 - 18,951
Cash and Cash Equivalents 162 - 163 -
Trade and Other Payables
< 1 year - (609) - (906)
Borrowings < 1 year - (1,448) - (1,448)
Total 21,054 (2,057) 19,114 (2,354)
25. OPERATING LEASE commitments
Office premises
Less than one year GBP26k (2017: GBP22k).
Office premises relates to the Company's offices.
26. 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 GBP0.3 million (2017: GBP0.5
million).
Year ended Year ended Year ended
31.12.18 31.12.18 31.12.17
GBP'000 GBP'000 GBP'000
Base Salary/Fee Total Total
A Morris - - 67
B Rowbotham 30 30 30
S Morris 91 91 193
A Coveney 201 201 199
Total 322 322 489
B Rowbotham provided services under a service agreement contract
with Mountbeach Associates Ltd until June 2017, since then he has
been on payroll.
S Morris provided services under a service agreement contract
with SC Morris Ltd.
A Coveney provided services under a service agreement contract
with Coveney Associates Consulting Ltd. Coveney Associates
Consulting Ltd provided short term working capital loan of
GBP50,000 on 14 February 2018. This loan was repaid on 16 February
with an arrangement fee of GBP1,000.
(ii) In the prior period, received from its former 100 per cent.
subsidiary Independent Power Corporation PLC ("IPC") a credit note
of GBP20k relating to the prior period.
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
Sales - -
Purchases - (20)
Y/E debtor - -
Y/E creditor - -
(iii) Charged negative interest on loans to its 100% subsidiary
Rurelec Project Finance Ltd ("RPFL") totalling GBP0.1 million
(2017: GBP0.4 million). The loan balance outstanding at the
year-end was GBP1.0 million (2017: GBP3.0 million).
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
Y/E debtor 1,008 2,965
Interest charged (81) (432)
(iv) Charged interest on loans to its 50% owned joint venture
company, Patagonia Energy Ltd ("PEL") amounting to GBP0.8 million
(2017: GBP0.9 million). Received loan repayments of GBP nil (2017:
GBP nil). The Directors have assessed the recoverability of the
loans and consider that it is appropriate to recognise an
impairment of GBP2.5 million in the year (2017: GBP1.3 million).
After impairment reviews the loan balances at the year-end totalled
GBP14.8 million (2017: GBP15.6 million). Interest on these loans
has been accrued at an effective rate of 5.5 % (2017: 5.5%). The
total outstanding before impairment is GBP39.3 million (2017:
GBP34.5 million).
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
Y/E debtor 14,794 15,666
Repayment - -
Interest charged 840 862
(v) Received from its joint venture company Energia del Sur S.A.
("EdS") repayments totalling GBPnil (2017: GBPnil) of support
previously given to creditors of EdS. GBP0.5 million (2017: GBP0.5
million) of credit support remains outstanding at the year end. In
the prior year the loan was considered to be fully impaired due to
Argentine restrictions on its repayment, these matters were
resolved in 2018 with repayment expected in 2019.
(vi) Provided loans and charged interest of 0.5% per month to
its 100 per cent. subsidiary Cochrane Power Ltd. New loans in the
year totalling GBP0.1 million (2017: GBP0.2 million). The total
outstanding at the year-end was GBP9.9 million (2017: GBP9.2
million). These loans have been impaired to GBP1.2 million (2017:
GBP0.8 million).
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
Y/E debtor 1,248 805
Further loans made 112 196
Interest charged 568 522
(vii) In the prior year provided loans to its former 100 per
cent. subsidiary Cascade Hydro Ltd ("CHL") of GBP0.4 million and
charged CHL interest of GBPnil. The sale of CHL completed on 30
January 2018 for US$250k of which US$175k has been received.
Year ended Year ended
31.12.18 31.12.17
GBP'000 GBP'000
Y/E debtor - -
Further loans made - 386
Interest charged - -
b) Group
RPFL received GBP2.0 million (2017: GBP3.3 million) in
repayments from EdS. The interest rate on accrued interest was
zero, the effective interest rate (on principal and accrued
interest) was nil (2017: nil). The total outstanding at the
year-end was GBP1.1 million (2017: GBP3.1 million).
27. ASSETS HELD FOR SALE
Prior year 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. The second group, 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, of which US $175k has been received.
Year Ended Year Ended
31.12.18 31.12.17
Assets Classified as Held for Sale GBP'000 GBP'000
------------ -----------
Trade and Other Receivables - 2,265
- 2,265
------------------------------------------------- -----------
Year Ended Year Ended
31.12.18 31.12.17
Liabilities Classified as Held for GBP'000 GBP'000
Sale
------------ -----------
Trade and Other Payables - 3,515
- 3,515
------------------------------------------------- -----------
28. Control
The Directors consider that the ultimate controlling party is
Sterling Trust Limited on the basis of their 53.9% shareholding in
the Company.
29. Post balance sheet date events
Since the year end:
RPFL has received final payment from EdS for the former Standard
Bank loan and associated fees on 29 May 2019.
Rurelec has repaid BPAC GBP850k of interest and principal of the
extended GBP1.2 million loan.
.
COMPANY INFORMATION
Directors
S.C. Morris (Executive)
A.H. Coveney (Executive)
B. Rowbotham (Non-Executive)
Secretary
M J. Bravo Quiterio
Company number
4812855
Registered office and business address
18 Soho Square
London
W1D 3QL
Auditor
BDO LLP
150 Aldersgate Street
London
EC1A 4AB
Bankers
Barclays Bank plc
1 Churchill Place
London
E14 5HP
[1]
https://www.thebanker.com/Banking-Regulation-Risk/Rescuing-Argentina-will-the-rope-snap-after-IMF-bailout
[2]
https://www.reuters.com/article/argentina-inflation/update-1-argentine-annual-inflation-hit-27-year-high-in-2018-idUSL1N1ZF1QU
[3]
https://www.xe.com/currencycharts/?from=USD&to=ARS&view=1Y
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 UGUCUQUPBGCA
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