TIDMRUR
RNS Number : 9623Y
Rurelec PLC
15 September 2020
15 September 2020
AIM: RUR
Rurelec PLC
("Rurelec" or "the Company")
Interim results for the six months ended 30 June 2020
Rurelec PLC (AIM: RUR), the owner, operator and developer of
power generation capacity internationally, today announces its
unaudited interim results for the six months ended 30 June
2020.
Financial Highlights:
-- Post tax profit / (loss) GBP0.68 million profit (2019:
GBP(0.45) million loss)
-- Profit / (loss) per share 0.12 pence profit (2019: (0.08)
pence loss)
-- Net asset value per share 3.9 pence (2019: 4.3 pence)
-- Net cash balance GBP0.60 million (2019: GBP0.31 million)
Operational and Post Half-Year Highlights:
-- The main factor behind the change in operating profitability
from GBP0.45 million loss for 2019 to a GBP0.68 million profit for
2020 is the movement in the GBP/USD exchange rate which favourably
affected foreign exchange movements on operating items and also
affected the translation of foreign operations, resulting in an
overall comprehensive profit for the period of GBP1.40 million
(2019: GBP0.14 million profit).
-- Further cash was generated by the Group, enabling a
significant reduction in liabilities, including a reduction in
trade payables, halving from GBP0.76 million in 2019 to GBP0.38
million in 2020.
-- Despite reductions in creditors, cash reserves were also
boosted, period-end cash nearly doubling from GBP310k in 2019 to
GBP604 k in 2020.
-- Loans due from joint venture companies were replaced in 2019
with Amended Loan Notes, as previously announced on 21.11.19. As a
result, there has been a reclassification of receivables from
current assets to long term assets (investments and receivables).
In the prior year the loans were due on demand and were shown as
current assets .
-- Group secured borrowings have now been eliminated (2019:
GBP0.15 million) and the Consolidated Statement of Comprehensive
Income consequently shows no interest payable (2019: GBP50k).
-- Reserve movements reflect the first stage of the group
capital reconstruction in the period, being the transfer of the
GBP45 million Other Reserve to Retained Losses. In August 2020 the
second and final stage of this process enables a GBP28.37 million
movement from undistributable to distributable reserves. The
purpose of the Capital Restructure is to create the capacity to pay
dividends in the future, dependent upon the availability of future
cash flows and the Company's working capital requirements at the
time. In addition, as previously announced, the year 2019 saw a
marked improvement in the Group's liquidity position and the
improvements in the performance of the Argentinian asset. The
relationship with the Company's joint venture partner, have also
been encouraging. However, uncertainty around the timing of any
future material asset disposals together with the effect of the
current poor state of the Argentinian economy and the uncertainty
around the renegotiation of the Resolution 220 PPA later this year
do cast a shadow over future performance and therefore there cannot
be any guarantee as to when, or if, the Company will have the funds
to make a dividend
payment or undertake a share buy-back in the future should there be sufficient cash to do so.
-- Chile -The Rurelec Board continues to explore options for the
Chilean operations and the Group's two 128 MW Turbines.
Commenting on the results, Simon Morris and Andy Coveney,
Rurelec's Executive Directors, said:
"The Board continues to pursue measures to restore value to the
Company and its shareholders through prioritisation of receiving
cash receipts from the power generation plant in Argentina, selling
or developing its assets in Chile and reviewing options for its
turbine assets, whilst looking for opportunities to reduce costs
throughout the Group."
For further information please contact :
Rurelec PLC WH Ireland
Simon Morris Katy Mitchell
Executive Director Lydia Zychowska
Andrew Coveney
Executive Director
+44 (0)20 7549 2839 +44 (0)20 7220 1666
Executive Directors' Statement
Review of Operations
Argentina
Following the 2019 US $6 million major overhaul and repair of
its steam turbine and the refurbishment of one gas turbine, EdS
resumed a steady and consistent output which continued throughout
the first 6 months of 2020. This enabled EdS to generate sufficient
cash to make unsecured loan repayments to Patagonia Energy Limited
("PEL"), (the joint venture company which owns EdS and in which
Rurelec has a 50% share), with US $1.82 million being remitted
during the period to PEL, of which Rurelec received US $1.44
million or GBP1.12 million at actual exchange rates, in partial
repayment of the Amended and Restated Loan Notes (the "loan notes")
that were created as part of a new agreement with the joint venture
partner in November 2019. This agreement set out how future cash
receipts in PEL will be allocated between the joint venture
partners and represented a major step forward in our mutual working
relationship.
The rate of cash remittances from EdS was lower than in the same
period last year as a result of continuing uncertainties in the
Argentinian economy and difficulties experienced in the market for
wholesale electricity generation there. In 2020 remittances of
secured and unsecured debt repayments to Rurelec totalled GBP1.12
million (2019: GBP1.63 million).
Despite the plant performing well, the economic situation in
Argentina remained in crisis:
1 .High inflation and a decline in the value of the Argentinian
peso against the US Dollar led to the Argentinian Central Bank
tightening exchange controls in September 2019. The exchange
controls on US Dollars have a direct effect on the cash remittances
by EdS to PEL, the latter not being resident in Argentina. The cost
of transferring money out of Argentina has increased dramatically
since February 2020. In Q2 2020 the loss suffered on transferring
US Dollars out of Argentina rose to over 40 per cent. of the
underlying face value. The duration and severity of these controls
remains uncertain.
2 . Delays have been experienced by EdS along with other
generators in Argentina in receiving payments of revenue from
CAMMESA (the wholesale electricity market regulator and
administrator).
3 . In March 2020, the Argentinian Government announced a policy
change whereby energy spot prices will no longer be linked to US
Dollars but to Argentinian Pesos retroactively to February 2020 and
will be updated monthly from March 2020. This increased the foreign
exchange risk of operating in Argentina.
4 . The above policy change will not affect the revenue derived
from EdS's Resolution 220 Power Purchase Agreement ("PPA"), which
will remain linked to the US Dollar. However, this PPA expires in
September 2020, and may be superseded by a new tariff or, at worst,
the output will be sold on the energy spot market. The discussions
with the Argentinian authorities have commenced regarding what rate
will be put in place from September 2020, but the situation remains
highly uncertain. The response to this situation includes an
extensive review of the operating cost base of the EdS plant and
its administrative headquarters.
The balance outstanding on the loan notes at 30 June 2020 is US
$15.48 million, with the first US $5 million of repayment shared
80/20 between Rurelec and Basic Energy Limited ("Basic"), the
ultimate shareholders of PEL, and the balance paid 72:28 thereafter
(Rurelec:Basic).
Chile
In Chile, the necessary environmental consents and land leases
were maintained in order to extend the project and the Board
continues to review options in the light of the risks versus
rewards of undertaking this project.
Head office
A tight rein continues to be maintained on overheads in the UK
and administration costs for the period fell slightly to GBP501k
(2019: GBP515k).
Debt repayments and Cash flow
As expected, Rurelec was able to pay off the last remaining
balance of BPAC debt in December 2019 and during the first six
months of 2020 has remained free of any secured debt and was
consequently in the position of not having to pay any interest.
Rurelec was able to reduce unsecured trade creditors
significantly - trade payables fell from GBP0.76 million to GBP0.38
million. Despite this, Rurelec was able to nearly double its cash
reserves compared to the previous year such that at the end of the
period the balance was GBP604k (2019: GBP310k).
Although there were improvements in the Group's finances in the
period, liquidity remains a significant issue for the Group. The
Group has been able to cope with variability in the timing and
quantum of cash receipts from Argentina due to long term reductions
in Group operating costs which in 2019 and 2020 have stabilised at
lower levels than in previous years. The cash position is expected
to recover further in line with expected remittances from EdS and
PEL and when sales of remaining assets are achieved by the Group.
However, there can be no guarantee as to the timing of any such
asset sales, nor regarding when any further cash will be received
from Argentina owing to the multiple uncertainties outlined above.
In particular there is no guarantee that the remuneration level of
the tariff/PPA/spot prices after September 2020 will be favourable
to EdS or that EdS will remain economical. The Directors however
remain optimistic as to a sensible resolution.
Given the cash balances held by the Group and expected cash
remittances from our Argentine operation, the directors continue to
adopt the going concern basis of accounting.
Review of future strategy
The strategy of the Group continues to be focussed on
stabilising the financial position, keeping costs under tight
control, whilst certain assets are sold. The underlying strategy is
to preserve the value of the Group assets and to generate cash.
Given the Group is approaching the point where it becomes largely
debt-free, this will in turn enable Rurelec to maximise returns to
its shareholders.
COVID-19
In terms of operational risk, to date the COVID-19 pandemic has
had little direct impact on the Group's ability to operate
effectively. The Group's Head Office in London and the EdS head
office in Buenos Aires have operated on a remote basis and the EdS
plant in Argentina is situated in a region which has to 13
September 2020 had relatively low incidence of the virus with 2,084
positive cases, of which 831 are active cases, 42 are in Comodoro
Rivadavia and only 18 deaths. Rurelec directors have not been able
to travel to Argentina in this period but regular communication has
taken place remotely with EdS and Rurelec's Joint Venture partner
in PEL in order to make decisions and monitor progress. EdS's power
generation is considered part of an essential industry, and it has
implemented procedures and protocols to allow as near to normal
safe working practices. Notwithstanding the above, the COVID-19
pandemic does represent a potential business and financial risk as
it is not considered possible to estimate the long-term financial
impact of COVID-19 on the already-weak Argentinian economy at the
present time, nor to anticipate the economic and fiscal measures
that the Argentinian Government will impose or the level to which
the further weakening of an already weak economy will influence the
Government's decisions to drive down the market prices which it is
prepared to pay for electricity after September 2020.
Additionally, COVID-19 is causing a potential slowdown to the
market for turbines, at this point in time the impact on timing and
possible sales value is not known.
The Directors performed stress testing of Rurelec's cashflow in
the Going Concern section of the Audited results for the year ended
31 December 2019, following which it concluded that any impact of
the COVID-19 pandemic would have little adverse effect on the
Directors' view on the going concern of the Group. As the economic
consequences of the pandemic continue into the second half of 2020,
the financial effects of the COVID-19 pandemic in Argentina are
still subject to future uncertainty and the Directors cannot rule
out the risk of liquidity issues impacting on the Group in future
periods if the Argentinian government loses control of the disease
to the extent where it does have a material adverse impact on the
operations of EdS or demands for electricity.
Simon Morris and Andy Coveney
Executive Directors
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
for the half year ended 30 June 2020
(expressed in thousands of pounds)
__________________
Audited
Notes 6 months 6 months 12 months
to to to
30/06/20 30/06/19 31/12/19
GBP'000 GBP'000 GBP'000
------------------------------------- ------ --------- --------- ----------
Administrative expenses (583) (541) (1,168)
Other income - 107 130
Other expense - - (2,029)
Operating loss (583) (434) (3,067)
Foreign exchange gains 1,259 30 (1,287)
Finance income - - 6
Finance expense - (50) (70)
------------------------------------- ------ --------- --------- ----------
Profit / (Loss) before tax 676 (454) (4,418)
Tax expense - - -
------------------------------------- ------ --------- --------- ----------
Profit / (Loss) for the period 676 (454) (4,418)
Profit / (Loss) per share 3 0.12p (0.08p) (0.79p)
------------------------------------- ------ --------- --------- ----------
Other comprehensive income
Items that will be subsequently
reclassified to Profit & Loss:
Exchange differences on translation
of foreign operations 722 595 136
Total other comprehensive
income 722 595 136
Total comprehensive profit
/ (loss) for the period 1,398 141 (4,282)
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(unaudited)
at 30 June 2020
(expressed in thousands of pounds)
___________
Audited
30/6/20 30/6/19 31/12/19
Notes GBP'000 GBP'000 GBP'000
------------------------------- -------- ------------------------ ------------------------------ ---------
Assets
Non-current assets
Property, plant and equipment 8,229 10,048 7,685
Investment in Joint Venture 3,474 - 3,474
Trade and Other Receivables 6,665 - 6,424
18,368 10,048 17,582
------------------------------- -------- ------------------------ ------------------------------ ---------
Current assets
Trade and other receivables 3,333 15,503 3,272
Cash and cash equivalents 604 310 137
3,937 15,813 3,409
------------------------------- -------- ------------------------ ------------------------------ ---------
Total assets 22,305 25,861 20,991
------------------------------- -------- ------------------------ ------------------------------ ---------
Equity and liabilities
Shareholders' equity
Share capital 11,228 11,228 11,228
Share premium account 22,754 22,754 22,754
Foreign currency reserve 1,645 1,382 923
Other reserve 4 - 45,000 45,000
Profit and loss reserve (13,709) (55,421) (59,385)
------------------------------- -------- ------------------------ ------------------------------ ---------
Total equity 21,918 24,943 20,520
Current liabilities
Trade and other payables 382 762 465
Current tax liabilities 5 5 6
Borrowings - 151 -
387 918 471
------------------------------- -------- ------------------------ ------------------------------ ---------
Total liabilities 387 918 471
------------------------------- -------- ------------------------ ------------------------------ ---------
Total equity and liabilities 22,305 25,861 20,991
------------------------------- -------- ------------------------ ------------------------------ ---------
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
for the half year ended 30 June 2020
(expressed in thousands of pounds)
___
Share Share Foreign Retained Other Total
capital premium currency earnings reserve equity
GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
GBP'000
Balance at 01.01.19 11,228 22,754 787 (54,967) 45,000 24,802
Loss for the first 6
months - - - (454) - (454)
Exchange differences
on translation - - 595 - - 595
----------------------------- ----------- ------------ ------------ ----------- ----------- ------------
Total comprehensive loss - - 595 (454) - 141
----------------------------- ----------- ------------ ------------ ----------- ----------- ------------
Balance at 30.06.19 11,228 22,754 1,382 (55,421) 45,000 24,943
Loss for the Period - - - (3,964) - (3,964)
Exchange differences
on translation - - (459) - - (459)
----------------------------- ----------- ------------ ------------ ----------- ----------- ------------
Total comprehensive loss - - (459) (4,144) - (4,423)
----------------------------- ----------- ------------ ------------ ----------- ----------- ------------
Balance at 31.12.19 11,228 22,754 923 (59,385) 45,000 20,520
Profit for the first
6 months - - - 676 - 676
Transfer from Other Reserve - - - 45,000 (45,000) -
Exchange differences
on translation - - 722 - - 722
----------------------------- ----------- ------------ ------------ ----------- ----------- ------------
Total comprehensive loss - - 722 45,676 - 1,398
----------------------------- ----------- ------------ ------------ ----------- ----------- ------------
Balance at 30.06.20 11,228 22,754 1,645 (13,709) - 21,918
----------------------------- ----------- ------------ ------------ ----------- ----------- ------------
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
for the half year ended 30 June 2020
(expressed in thousands of pounds)
__
Audited
6 months 6 months 12 months
to to to
30/06/20 30/06/19 31/12/19
----------------------------------- --------- --------- ----------
Result for the period before
tax 676 (454) (4,418)
from operations
Net finance (expense) / income - (50) 64
Adjustments for:
Unrealised exchange (gains)
/ losses (1,259) (30) 1,287
Write down of loans - - 235
Impairment of Arica Turbine - - 236
Impairment of Illapa Turbine - - 1,982
Write down of investment in
SEA Energy (reversal) - - (188)
Change in trade and other
receivables 19 78 88
Change in trade and other
payables (84) (118) (308)
----------------------------------- --------- --------- ----------
Cash used in operating activities (648) (574) (1,260)
----------------------------------- --------- --------- ----------
Taxation paid - - -
----------------------------------- --------- --------- ----------
Net cash used in operating
activities (648) (574) (1,260)
----------------------------------- --------- --------- ----------
Cash flows from investing
activities
Proceeds from sale of subsidiary - - 60
Repayments from joint venture
company 1,115 1,633 2,246
Net cash generated from investing
activities 1,115 1,633 2,306
----------------------------------- --------- --------- ----------
Net cash inflow before
financing activities 467 1,059 1,046
----------------------------------- --------- --------- ----------
Cash flows from financing
activities
Loan Principal Repayments - (1,050) (1,200)
Loan Interest Repayments - (50) (60)
----------------------------------- --------- --------- ----------
Net cash used in financing
activities - (1,100) (1,260)
----------------------------------- --------- --------- ----------
Increase / (Decrease) in cash
and cash equivalents 467 (41) (214)
-----------------------------------
Cash and cash equivalents
at start of period 137 351 351
----------------------------------- --------- --------- ----------
Cash and cash equivalents
at end of period 604 310 137
RURELEC PLC
Notes to the Interim Statement
for the six months ended 30 June 2020
1. Basis of preparation
These condensed consolidated interim financial statements do not
constitute statutory accounts within the meaning of Section 435 of
the Companies Act 2006. The comparative figures for the year ended
31 December 2019 were derived from the statutory accounts for that
year which have been delivered to the Registrar of Companies. The
financial information contained in this interim statement has been
prepared in accordance with all relevant International Reporting
Standards as adopted by the European Union and expected to apply to
the Group's results for the year ending 31 December 2020 and on
interpretations of those Standards released to date.
2. Accounting policies
These condensed consolidated interim financial statements have
been prepared in accordance with the accounting policies set out in
the Group's financial statements for the year ended 31 December
2019.
3. Earnings per share 6 months 6 months 12 months
to to to
30/6/20 30/6/19 31/12/19
--------- ------------------- -----------
Basic and diluted
Average number of shares 561m 561m 561m
in issue during the period
Profit / (Loss) attributable GBP0.68m GBP(0.45m) GBP(4.42m)
to equity holders of the parent
from continuing operations
Basic and diluted profit /
(loss) per share on continuing
operations 0.12p (0.08p) (0.79p)
--------- ------------------- -----------
4. Other Reserve
The Capital Reduction that took place during December 2014
resulted in the creation of a non-distributable reserve. The
condition for this reserve to become distributable is for the
outstanding creditors in December 2014 to be settled. The Board of
Directors consider that these amounts have been settled and
therefore the GBP45 million has been transferred from the Other
Reserve to Retained Losses.
5. The Board of Directors approved this interim statement on 15
September 2020. This interim statement has not been audited.
6 . Copies of this statement are available at the Company's
website www.rurelec.com
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