TIDMREAC
RNS Number : 0548D
React Energy PLC
25 March 2014
25 March 2014
REACT Energy plc
("REACT" or the "Group")
Interim results
for the six months ended 31 December 2013
REACT Energy plc (AIM:REAC), the energy infrastructure developer
and operator which focuses on the production of clean energy in the
UK and Ireland, announces its unaudited interim results for the six
months ended 31 December 2013.
Operational Highlights
-- Significant progress made in bringing the 12MW Enfield Biomass
CHP project towards financial close and commencement of construction
anticipated during second half of 2014. Assisted the Foresight
Group in acquiring the site on which the project is located
on behalf of a fund managed by the Foresight Group and signed
a new lease for the project;
-- Successful completion of construction and energisation of
the 800kW Pluckanes wind turbine project and the sale of
electricity to the national grid since October 2013. The
project has operated ahead of management expectations since
being commissioned;
-- Signed a legal option and agreement for lease with the London
& Devonshire Trust ("LDT") regarding a site for a 10MW Biomass
CHP project in Plymouth; and
-- Secured a grid connection offer for the 500kW Altilow 500kW
single wind turbine located in County Donegal, Ireland.
Financial Summary
-- Group revenue of EUR0.1 million (H1 2012: EUR 1.8 million);
-- Administrative costs of EUR0.74 million (H1 2012: EUR0.90
million);
-- Loss for the period from continuing operations of EUR1 million
(H1 2012: Loss for period EUR0.9 million); and
-- Issue of an unsecured EUR2 million Convertible Loan Note
to Farmer Business Developments plc ("Farmers") the Group's
largest shareholder in November 2013
Post-period end events
-- Completed the acquisition of the business of GG Eco Systems
Limited ("GGES"), an operator and developer of Biomass Heat
Energy Plants in the UK;
-- Secured a grid connection offer for the 10MW Biomass CHP
project in Plymouth;
-- Received approval from Ulster Bank Ireland Limited for the
funding of Phase Two of its joint venture Biomass Advanced
Gasification project located in Newry, Northern Ireland;
-- Proposed issue of up to GBP1.5 million of secured loan notes
of which GBP600,000 is already committed by Farmers and shareholders
of GGES;
-- Secured a grid connection for the 500kW Moneygorm single
wind turbine project, located in Co. Cork, Ireland. This
project is now fully consented including the completion of
the wind measurement campaign; and
-- Received planning permission for a further three single wind
turbine projects.
Gerry Madden, CEO of REACT, commented:
"The acquisition of GGES earlier this month has positioned the
Group as the leader in Biomass Electricity and Heat generation in
the UK in the mid market 100kW to 20 MW generation range.
"With the additions to our management team, the Group now has
one of the most highly experienced teams in the sector with the
expertise to put in place the finance structures needed for these
clean energy plants. Our ability to successfully negotiate and
complete long term energy supply contracts with blue chip
counterparties is evident. We will build on the progress we have
made over that last number of months and expect to further
accelerate the growth rate of the enlarged Group."
The Chairman and Chief Executive's Statement and the unaudited
interim results for the six months ended 31 December 2013, which
are contained below and form part of this announcement, include
further important information and disclosures. The announcement
should be read in its entirety.
- Ends -
For further information:
+353 (0)21 483
REACT Energy plc 9104
Gerry Madden, CEO
+44 (0)20 7408
Shore Capital - Nomad & Broker 4090
Pascal Keane / Anita Ghanekar
+44 (0)7747 788
Yellow Jersey PR Limited - Public Relations 221
Dominic Barretto / Anna Legge
About REACT
REACT Energy plc is committed to operating clean electricity and
heat generation plants in the UK and Ireland.
The Group identifies, builds owns and operates plants and
possesses significant knowledge of energy markets, clean
technologies, fuel sources, project development, project finance
and project delivery.
REACT currently has three operational clean energy plants
generating electricity and heat for sale.
The generation of clean electricity and heat from biomass has
the potential to address the key energy challenges of energy
security and carbon commitment and provide strong returns on
capital employed.
The company is listed on AIM and trades as
REAC.www.reactenergyplc.com.
Chairman's and Chief Executive's Report
Overview of the period
At its AGM in December the Group changed its name from Kedco to
REACT Energy plc. The rationale behind the change of name was to
give the business a clearer identity following its strategic shift
towards its core business of Renewable Energy And Clean Technology
("REACT"). The aim of REACT is to identify, develop, build, own and
operate electricity and heat generating plants. During the period
the Group significantly advanced this aim.The Group's operations
are divided between Biomass in the UK and Onshore Wind in
Ireland.
Biomass UK
During the period the Group invested significant resources into
progressing both the Enfield Biomass and Newry Biomass projects, as
well as expanding the portfolio of biomass development
opportunities. A number of key development milestones were reached
in relation to the Enfield Biomass project and progress continues
to be made in bringing the project to financial close and starting
construction. The Group also worked closely with the Foresight
Group, the Group's preferred funding partner for the Enfield
project, in acquiring the site on which the project is located on
behalf of a fund managed by the Foresight Group. On completion of
the acquisition by Foresight the project company Enfield Biomass
Limited signed a new long-term lease for the project.
Approval was received from Ulster Bank Ireland Limited for the
funding of Phase Two of its joint venture Biomass Advanced
Gasification project located in Newry, Northern Ireland after the
period end. This plant has already exported electricity to the
grid.
Biomass power generation of electricity and heat has the
potential to address the UK and Ireland's key energy challenges of
energy security and carbon commitment and to provide investors with
strong returns on capital employed. With this in mind and in line
with the Group's stated objective of acting as a consolidator of
the fragmented UK biomass energy infrastructure market, the Group
acquired the business of GG Eco Systems Limited ("GGES") earlier
this month. In the process, the Group added two further operating
biomass heat generating plants to its portfolio and a strong
pipeline of heat only biomass projects in the UK.
The Group identified further opportunities in the Biomass sector
in the UK and signed a legal option and agreement for a lease with
the London & Devonshire Trust regarding a site for a 10MW
Biomass CHP project in Plymouth. A grid connection for this project
was also secured in the last number of weeks; the Group aims to
have this project fully consented by the end of 2014.
REACT now believes that it is positioned as the leader in the
mid-market (150kW - 20MW) biomass power generation sector in the
UK.
Onshore Wind
REACT had a number of key achievements in the build out of its
onshore wind portfolio during the period. Of particular note was
the successful financing and commissioning of the 800kW Pluckanes
wind turbine project in County Cork. The project has exceeded
management expectations since commissioning and continues to
perform well.
The Group also secured grid connections for both the Altilow
500kW wind turbine project in County Donegal and post period for
the Moneygorm 500kW wind turbine project in County Cork. In
addition to this, the wind measurement campaign on both sites has
also been completed. These projects are now fully consented and can
move to construction during 2014. Further planning permissions have
also been received for two further single wind turbine projects in
Ireland during the period and another three planning permissions
have been received since the period end.
The planning application for the 12.5MW Altilow wind project,
part of a 52MW wind farm co-development agreement, has been
completed and submitted. Additional survey work continues on the
other wind farms in the co-development agreement.
Portfolio Overview
The Group has a total operating and development portfolio of 166
MW. The key projects and status as at 24 March 2014 are detailed in
the following table:
REACT Equity
Project Name Sub-Sector Size MW's Status %
Culford School Biomass 1 Operational 30%
Kimbolton School Biomass 0.2 Operational 100%
Onshore
Pluckanes Windfarm wind 0.8 Operational 100%
50% with 92%
Newry Biomass Biomass 4 Under construction economic interest
Old Buckenham Fully consented
Hall School Biomass 0.4 / ready to construct 30%
Fully consented
Enfield Biomass Biomass 12 / ready to construct 100%
Onshore Fully consented
Altilow Wind wind 0.5 / ready to construct 100%
Staffordshire Fully consented
County Council Biomass 0.4 / ready to construct 30%
Onshore Fully consented
Moneygorm wind 0.5 / ready to construct 100%
Onshore
Knocksaxon Wind wind 0.5 Planning approved 100%
Onshore
Killuagh Wind wind 0.5 Planning approved 100%
Onshore
Knockavadra Wind wind 0.5 Planning approved 100%
Knockafreaghaun Onshore
Wind wind 0.5 Planning approved 100%
Claycross Biomass Biomass 10 In planning 90%
Plymouth Biomass Biomass 10 In planning 100%
Altilow Large Onshore
Windfarm wind 12.5 In planning 50%
Onshore
Runnaboll Wind wind 0.5 In planning 100%
Operating projects
GGES is operating the Culford School Heating plant in Suffolk,
which has a 15 year Heat Supply Agreement ("HSA"). The plant has
been in operation for almost two years. It has also recently
brought into operation the Kimbolton School Heating plant in
Cambridgeshire, which also has a 15 year HSA.
As previously mentioned, in Ireland the Group is currently
operating an 800kW wind turbine in County Cork. This plant was part
financed by AIB Bank plc and has a 15 year Power Purchase Agreement
("PPA") with Viridian Energy Limited.
Under construction
REACT, in conjunction with its partner and major shareholder,
Farmers, has completed phase 1 of a GBP15 million 4MW advanced
gasification Biomass CHP power plant in Newry, Northern Ireland.
Having completed phase 1, the Group recently received approval from
its funding partner Ulster Bank Limited to proceed to phase 2 of
the development. The operating company, Newry Biomass Limited, has
signed a seven year PPA with Bord Gais Eireann, an all island
utility company owned by the state.
Fully consented and ready to construct
The Group is in the final stages of completing financial close
on a 12MW biomass CHP gasification plant in Enfield in London with
its funding partner Foresight Group.
In November 2013, GGES signed a 20-year HSA with Old Buckenham
Hall School in Suffolk, with the heating plant expected to be
commissioned during Q2 2014.
Both the Altilow and Moneygorm 500kW single wind turbine
projects are now fully consented and expected to start construction
during 2014.
Planning approved
The Group has received planning permission to construct six
additional single wind turbine projects in Ireland. These will
continue to be brought forward and are expected to be fully
consented and ready to construct during 2015.
In planning for approval
In Derbyshire, the Group, together with its partner Larkfleet
Energy, is seeking approval to construct and operate a 10MW biomass
conversion power plant, which will cost approximately GBP40
million.
The Group, in conjunction with the London and Devonshire Trust,
is also seeking approval to construct and operate a 10MW biomass
conversion power plant in Plymouth, which will also cost in the
region of GBP40 million.
The funding structure for both of these projects is intended to
be similar to that currently being finalized for the Enfield
Biomass Plant.
GGES also has five other Biomass Heat projects in development,
which are expected to be built and operational over the next 12
months.
In conjunction with its co-development partner, REACT is
currently seeking approval to construct a number of wind farms
totalling over 50MW in north west Ireland. The Group is in ongoing
discussion with a select number of landowners in the UK and Ireland
regarding sites for the future development of energy infrastructure
projects.
Financial Review
Revenue in the period amounted to EUR0.1 million (H1 2012:
EUR1.8million). Turnover in the period related to the commencement
of the sale of electricity from the Pluckanes wind turbine. The
turnover from the sale of electricity from Newry Biomass is not
consolidated as it is accounted for as a joint venture. Turnover in
the comparative period related to the sale of equipment to complete
Phase One of the Newry joint venture project.
The Group reported a loss for the period of EUR1 million (H1
2012: EUR0.9 million).
Administrative costs decreased to EUR0.7 million (H1 2012:
EUR0.9 million) primarily as a result of a a slight gain on foreign
exchange in the period versus a loss in the previous period.
The financial information is prepared on a going concern basis,
as discussed in more detail in Note 2 to those financial
statements. The validity of the going concern concept is dependent
upon additional finance being available for the Group's working
capital and planned development program. In the absence of new
funds being raised from new investors, the Group will be reliant on
the financial support of its existing shareholders and creditors to
enable it to continue to trade.
The Group announced in August 2013 that its wholly owned
subsidiary, Reforce Energy Limited, had raised EUR215,000 in loan
notes from private investors and that Ulster Bank Ireland Limited
had made available working capital and other facilities totaling
GBP750,000 to be used to fund working capital requirements and the
continued build out of the Newry Biomass Limited Biomass
Gasification project located in Newry, Northern Ireland.
In November 2013, the Group announced that it had issued an
unsecured EUR2 million Convertible Loan Note ("Loan Note") to fund
its ongoing development and working capital requirements. The Loan
Note was issued to its 26.79% shareholder, Farmers. Previous
amounts owing under previous facilities including capital and
interest of EUR1,016,250 formed the consideration for the initial
subscription for the new loan note. The balance being subscribed
for on a monthly basis with a minimum cash subscription of
EUR150,000.As at 31 December 2013 EUR1,329,541 has been utilised
(30 June 2013: EUR479,772).
As part of the acquisition of GGES the Group also announced on 6
March 2014 that it proposed to raise up to GBP1.5 million (before
expenses) through the issue of secured loan notes ("SLNs"). The
SLNs are intended to fund the ongoing development of the enlarged
Group through organic and acquisitive growth, which includes GGES.
It is the intention that the issue of the SLNs will be by way of
subscription for an initial tranche of GBP600,000 already committed
by Farmers and shareholders of GGES followed by subscription for a
further tranche of GBP900,000.
Outlook
The Group will continue to develop and review its project
pipeline and focus on its funding requirements including raising
additional project debt and project equity in 2014 as well as
securing additional funds to continue with its activities and its
planned development program. The Group has strong relationships
with its funding partners and will use these relationships to
further its development programme and add further operating
electricity and heat generating plants to its portfolio.
Looking ahead, the Board is focused on consolidating REACT's
position as the leader in the mid-market Biomass power generation
sector in the UK.
Dermot O' Connell Gerry Madden
Chairman CEO
REACT Energy plc (formerly Kedco plc)
Condensed Consolidated Income Statement
for the six months ended 31 December 2013
6 months ended 6 months
ended
Notes 31 Dec 2013 31 Dec 2012
Continuing operations: EUR EUR
Revenue 5 142,241 1,764,791
Cost of sales (105,974) (1,764,791)
--------------- --------------
Gross profit 36,267 -
Operating expenses
Administrative expenses (775,674) (760,313)
Gains/(losses) on foreign exchange 18,505 (144,728)
Other operating income 11,500 9,000
--------------- --------------
Operating (loss)/profit (709,402) (896,041)
Finance costs (132,784) (125,933)
Share of losses on joint ventures
after tax 9 (168,526) (20,208)
Finance income - -
--------------- --------------
Loss before taxation 5 (1,010,712) (1,042,182)
Income tax expense 6 - -
--------------- --------------
Loss for the period from continuing
operations (1,010,712) (1,042,182)
--------------- --------------
Discontinued operations
Profit for the period from discontinued
operations 14 - 164,322
Loss recognised on disposal
of subsidiary 14 - (8,866)
--------------- --------------
- 155,456
--------------- --------------
Loss for the period (1,010,712) (886,726)
=============== ==============
(Loss)/Profit attributable to:
Owners of the Company (1,010,712) (919,591)
Non-controlling interest - 32,865
--------------- --------------
(1,010,712) (886,726)
=============== ==============
6 months 6 months ended
ended
31 Dec 2013 31 Dec 2012
(restated)
EUR EUR
Euro per Euro per share
share
Basic loss per share:
From continuing and discontinued
operations 7 (0.045) (0.080)
From continuing operations 7 (0.045) (0.094)
Diluted loss per share:
From continuing and discontinued
operations 7 (0.045) (0.080)
From continuing operations 7 (0.045) (0.094)
REACT Energy plc (formerly Kedco plc)
Condensed Consolidated Statement of Comprehensive Income
for the six months ended 31 December 2013
(Restated)
6 months ended 6 months ended
31 Dec 2013 31 Dec 2012
EUR EUR
Loss for the financial period (1,010,712) (886,726)
Other comprehensive income
and expense
Exchange differences arising
on retranslation
of foreign operations (74,913) 51,185
--------------- ---------------
Total comprehensive income
and expense
for the period (1,085,625) (835,541)
=============== ===============
Attributable to:
Owners of the company (1,085,625) (868,406)
Non-controlling interests - 32,865
--------------- ---------------
(1,085,625) (835,541)
=============== ===============
REACT Energy plc (formerly Kedco plc)
Condensed Consolidated Statement of Financial Position
As at 31 December 2013
As at As at
Notes 31 Dec 2013 30 June
2013
ASSETS EUR EUR
Non-current assets
Goodwill 10 2,249,200 2,249,200
Property, plant and equipment 11 3,145,535 1,638,352
Share of net assets of jointly controlled
entities 9 23,090 187,068
Financial assets 8 6,384,826 6,233,268
Total non-current assets 11,802,651 10,307,888
------------- -------------
Current assets
Amounts due from customers under construction
contracts 390,785 293,637
Trade and other receivables 1,873,463 2,219,305
Cash and cash equivalents 139,734 22,150
------------- -------------
Total current assets 2,403,982 2,535,092
------------- -------------
Total assets 14,206,633 12,842,980
============= =============
EQUITY AND LIABILITIES
Equity
Share capital 12 12,176,200 12,176,200
Share premium 19,090,865 19,090,865
Deferred consideration 600,000 600,000
Retained earnings - deficit (28,968,826) (27,883,201)
------------- -------------
Total equity attributable to equity
holders of the parent 2,898,239 3,983,864
------------- -------------
Non-current liabilities
Borrowings 13 2,098,753 1,344,523
Total non-current liabilities 2,098,753 1,344,523
------------- -------------
Current liabilities
Amounts due to customers under construction
contracts 938,117 1,019,307
Trade and other payables 3,458,312 3,228,557
Borrowings 13 4,813,212 3,266,729
Total current liabilities 9,209,641 7,514,593
------------- -------------
Total equity and liabilities 14,206,633 12,842,980
============= =============
REACT Energy plc (formerly Kedco plc)
Condensed Consolidated Statement of Changes in Equity
for the six months ended 31 December 2013 and the six months
ended 31 December 2012
Attributable Non-controlling
Share Retained Contingent to equity interest
Share premium earnings equity holders Total
capital consideration of the
parent
EUR EUR EUR EUR EUR EUR EUR
Balance at 1
July 2012 4,106,808 19,375,525 (25,207,673) - (1,725,340) 898,010 (827,330)
Issue of
ordinary shares
in Kedco
plc 951,296 4,959 - - 956,255 - 956,255
Conversion of
debt into
equity 5,724,229 44,046 - - 5,768,275 - 5,768,275
Issue of
ordinary shares
and contingent
equity
consideration
on acquisition
of subsidiary 1,393,867 6,133 - 600,000 2,000,000 - 2,000,000
Share issue
costs - (333,191) - - (333,191) - (333,191)
(Loss)/Profit
for the
financial
period - - (919,591) - (919,591) 32,865 (886,726)
Disposal of
non-controlling
interest
in subsidiary - - - - - (930,875) (930,875)
Unrealised
foreign
exchange gain - - 51,185 - 51,185 - 51,185
Balance at 31
December 2012
(restated) 12,176,200 19,097,472 (26,076,079) 600,000 5,797,593 - 5,797,593
============ =========== ============= =============== ============== ================= ============
Balance at 1
July 2013 12,176,200 19,090,865 (27,883,201) 600,000 3,983,864 - 3,983,864
(Loss) for the
financial
period - - (1,010,712) - (1,010,712) - (1,010,712)
Unrealised
foreign
exchange loss - - (74,913) - (74,913) - (74,913)
------------ ----------- ------------- --------------- -------------- ----------------- ------------
Balance at 31
December 2013 12,176,200 19,090,865 (28,968,826) 600,000 2,898,239 - 2,898,239
REACT Energy plc (formerly Kedco plc)
Condensed Consolidated Statement of Cash Flows
for the six months ended 31 December 2013
Notes 6 months 6 months
ended ended
31 Dec 31 Dec
2013 2012
Cash flows from operating activities EUR EUR
Loss before taxation (1,010,712) (886,726)
Adjustments for:
Depreciation of property, plant and equipment 9,650 256,890
Impairment of amounts due from customers
under construction contracts 11,665 -
Profit on disposal of property, plant
and equipment - (83,537)
Loss on disposal of subsidiary - 8,866
Unrealised foreign exchange (loss)/gain (252,273) 146,260
Share of losses of jointly controlled
entities after tax 168,526 20,208
Increase in impairment of inventories - (177,571)
Decrease in deferred income - (4,293)
Interest expense 132,784 183,820
Operating cash flows before working capital
changes (940,360) (536,083)
Decrease/(increase) in:
Amounts due from customers under construction
contracts (108,813) 843,212
Trade and other receivables 345,842 (801,606)
Inventories - 656,403
(Decrease)/increase in:
Amounts due to customers under construction
contracts (81,190) (110,090)
Trade and other payables 232,737 (426,694)
(551,784) (374,858)
Income taxes paid - -
------------ ----------
Net cash (used in)/from operating activities (551,784) (374,858)
------------ ----------
Cash flows from investing activities
Payments for property, plant and equipment (1,474,499) (146,701)
Proceeds from sale of property, plant
and equipment - 109,584
Net cash inflow on acquisition of subsidiaries 15 - 156,781
Net cash inflow on disposal of subsidiary 14 - 226,094
Net cash from/(used in) investing activities (1,474,499) 345,758
------------ ----------
Cash flows from financing activities
Proceeds from borrowings 2,208,822 292,308
Repayments of borrowings - (182,925)
Proceeds from issue of equity - 902,993
Payments for share issue costs (500) (178,916)
Payments of finance leases - (31,424)
Interest paid (72,141) (149,488)
------------ ----------
Net cash from financing activities 2,136,181 652,548
------------ ----------
Net increase in cash and cash equivalents 109,898 623,448
Cash and cash equivalents at the beginning
of the financial period (144,223) (344,095)
------------ ----------
Cash and cash equivalents at the end
of the financial period (34,325) 279,353
============ ==========
REACT Energy plc (formerly Kedco plc)
Notes to the Condensed Consolidated Financial Statements
for the six months ended 31 December 2013
1. GENERAL INFORMATION
REACT Energy plc (formerly Kedco plc) ("the Group") was
incorporated in Ireland on 2 October 2008. The address of its
registered office and principal place of business is Building 4600,
Cork Airport Business Park, Kinsale Road, Cork, Ireland. The
Group's shares are listed on the London stock Exchange's AIM
market.
The principal activity of the Group is to identify, develop,
build, own and operate renewable energy electricity and heat
generating power plants in the UK and Ireland. The Group focuses on
both large and small scale projects, providing flexibility to
maximise existing land positions while diversifying development and
technology risks.
2. BASIS OF PREPARATION
The interim condensed consolidated financial statements are for
the six months ended 31 December 2013 and are presented in Euro,
which is the functional currency of the parent company. They have
been prepared in accordance International Accounting Standard (IAS)
34 Interim Financial Reporting. They do not include all the
information and disclosures required in the annual financial
statements in accordance with International Financial Reporting
Standards (IFRSs), and should be read in conjunction with the
Group's annual financial statements for the year ended 30 June
2013.
The preparation of the interim condensed consolidated financial
statements requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of certain assets, liabilities, revenues and expenses
together with disclosure of contingent assets and liabilities.
Estimates and underlying assumptions are reviewed on an on-going
basis. Revisions of accounting estimates are recognised in the
period in which the estimate is revised.
The Group continues to invest capital in developing and
expanding its portfolio of renewable energy projects. The nature of
the Group's development programme means that the timing of funds
generated from developments is difficult to predict. Management
have prepared financial forecasts to estimate the likely cash
requirements of the Group over the next eighteen months. The
forecasts include certain assumptions with regard to the costs of
ongoing development projects, overheads and the timing and amount
of any funds generated from developments. The forecasts indicate
that the Group will require additional funds to continue with its
activities and its planned development program.
The interim financial statements have been prepared on a going
concern basis. The Directors have given careful consideration to
the appropriateness of the going concern concept in the preparation
of the interim financial statements. The validity of the going
concern concept is dependent upon finance being available for the
Group's working capital requirements and for the continued
investment in the Group's strategy of identifying, developing,
building and operating power generating plants so that the Group
can continue to realise its assets and discharge its liabilities in
the normal course of business.
After making enquiries and considering the items referred to
above, the Directors believe that progress towards securing finance
has being made. The Directors have a reasonable expectation that
the Group will have adequate resources to continue in operational
existence for the foreseeable future. For these reasons the
Directors continue to adopt the going concern basis of accounting
in preparing the interim financial statements. The interim
financial statements do not include any adjustments that would
result if the Group was unable to continue as a going concern.
2. BASIS OF PREPARATION
The interim financial information for both the six months ended
31 December 2013 and the comparative six months ended 31 December
2012 are unaudited and have not been reviewed by the auditors. The
financial information for the year ended 30 June 2013 represents an
abbreviated version of the Group's financial statements for that
year. Those financial statements contained an unqualified audit
report and have been filed with the Registrar of Companies. The
interim condensed consolidated financial statements has neither
been audited nor reviewed pursuant to guidance issued by the
Auditing Practices Board.
3. BASIS OF CONSOLIDATION
The interim condensed consolidated financial statements include
the financial statements of the Group and all subsidiaries. The
financial period ends of all entities in the Group are
coterminous.
4. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies used in preparing the interim
condensed consolidated financial information are unchanged from
those disclosed in the Annual Report and Accounts of REACT Energy
plc (formerly Kedco plc) for the year ended 30 June 2013.
5. SEGMENT REPORTING
Information reported to the chief operating decision maker for
the purposes of resource allocation and assessment of segment
performance focuses on the products sold to customers. The Group's
reportable segments under IFRS8 Operating Segments are as
follows:
Power Generation: Being the development and operation of
renewable energy electricity and heat generation plants; and
Renewable Energy Solutions: Being the supply of domestic
boilers, solar panels and other related products. The Group is no
longer acting in this segment.
The Chief Operating Decision maker is defined as the Board of
Directors.
Information regarding the Group's reportable segments is
presented below.
The following is an analysis of the Group's revenue and results
from continuing operations by reportable segment:
5. SEGMENT REPORTING
Segment Revenue Segment (Loss)/Profit
6 Months 6 Months 6 Months ended 6 Months ended
ended ended
31 Dec 31 Dec 31 Dec 31 Dec
2013 2012 2013 2012
EUR EUR EUR EUR
Power Generation 142,241 1,764,791 (298,779) (496,919)
Renewable Energy
Solutions - - (8,192) (10,051)
Total from continuing
operations 142,241 1,764,791 (306,971) (506,970)
Central administration
costs and directors'
salaries (413,931) (398,071)
Other operating income 11,500 9,000
Share of losses on
joint ventures (168,526) (20,208)
Interest costs (132,784) (125,933)
Loss before taxation
(continuing operations) (1,010,712) (1,042,182)
Revenue reported above represents revenue generated from
external customers. Inter-segment sales for the six months ended 31
December 2013 amounted to EUR Nil (2012: EURNil). Included in
revenues arising from sales in the Power Generation segment is
EUR105,974 (2012: EUR1,764,791) arising from the sale to a jointly
controlled entity, Newry Biomass Limited and EUR36,267 (2012:
EURnil) arising from the sale of electricity to Viridian Energy
Limited.
Segment profit or loss represents the profit or loss earned by
each segment without allocation of central administration costs and
directors' salaries, other operating income, share of losses of
jointly controlled entities, investment revenue and finance costs.
This is the measure reported to the chief operating decision maker
for the purposes of resource allocation and assessment of segment
performance.
Other segment information: Depreciation and amortisation Additions to non-current
assets
6 months 6 months 6 months 6 months
ended ended ended ended
31 Dec 2013 31 Dec 2012 31 Dec 2013 31 Dec
2012
EUR EUR EUR EUR
Power Generation 5,302 7,666 1,474,499 2,338,391
Renewable energy solutions 4,348 7,812 - -
9,650 15,478 1,474,499 2,338,391
5. SEGMENT REPORTING
The Group operates in two principal geographical areas: Republic
of Ireland (country of domicile), and the United Kingdom. The
Group's revenue from continuing operations from external customers
and information about its non-current assets* by geographical
location are detailed below:
Revenue from Jointly Non-current assets*
Controlled Entities
and External Customers
6 Months 6 Months As at As at
to to
31 Dec 2013 31 Dec 2012 31 Dec 2013 30 Jun
2013
EUR EUR EUR EUR
Republic of Ireland 36,267 - 1,841,437 623,345
United Kingdom 105,974 1,764,791 1,304,098 1,015,007
142,241 1,764,791 3,145,535 1,638,352
* Non-current assets excluding financial instruments and
investment in jointly controlled entities.
The management information provided to the chief operating
decision maker does not include an analysis by reportable segment
of assets and liabilities and accordingly no analysis by reportable
segment of total assets or total liabilities is disclosed.
6 months 6 months
ended ended
6. INCOME TAX EXPENSE 31 Dec 2013 31 Dec
2012
Income tax expense comprises: EUR EUR
Current tax - -
Deferred tax - -
Income tax expense recognised in profit - -
or loss
An income tax charge does not arise for the six months ended 31
December 2013 or 31 December 2012 as the effective tax rate
applicable to expected total annual earnings is Nil as the Group
has sufficient tax losses coming forward to offset against any
taxable profits. A deferred tax asset has not been recognised for
the losses coming forward.
(Restated)
7. LOSS PER SHARE 6 months 6 months
ended ended
31 Dec 2013 31 Dec 2012
EUR EUR
Basic and diluted (loss)/earnings per
share
From continuing operations (0.045) (0.094)
From discontinued operations - 0.014
Total basic loss per share (0.045) (0.080)
The loss and weighted average number of ordinary shares used in
the calculation of the basic and diluted (loss)/earnings per share
are as follows:
6 months 6 months
ended ended
31 Dec 2013 31 Dec 2012
EUR EUR
Loss for period attributable to equity
holders of the parent (1,010,712) (886,726)
Profit for period from discontinued operations
used in the calculation of basic earnings
per share from discontinued operations - 155,456
Losses used in the calculation of basic
loss per share from continuing operations (1,010,712) (1,042,182)
Restated
Weighted average number of ordinary shares
for
the purposes of basic loss per share 22,370,041 11,038,387
The calculation of the weighted average number of shares has
been restated in 2012 to reflect the share consolidation that took
place in December 2013. Further details of this consolidation are
set out in note 12.
Anti-dilutive Potential Ordinary Shares
The following potential ordinary shares are anti-dilutive and
are therefore excluded from the weighted average number of ordinary
shares for the purpose of diluted loss per share:
6 months 6 months
ended ended
31 Dec 31 Dec 2012
2013
Restated
Ordinary shares to be issued as part of
the purchase of
Reforce Energy Limited on the satisfaction
of certain
conditions. 1,194,743 199,124
Share warrants in issue 1,582,106 750,233
Convertible preference shares in issue 62,500 62,500
Convertible loans in issue 3,813,043 -
7. LOSS PER SHARE
As noted in note 14 below, 6,052,632 ordinary shares were issued
after the period end. If these shares were in issue prior to 31
December 2013, they would have affected the calculation of the
weighted average number of shares in issue for the purposes of
calculating both the basic loss per share and diluted loss per
share by 1,008,772 (assuming the shares were issued in December
2013)
8. FINANCIAL ASSETS
31 Dec 2013 30 June
2013
EUR EUR
Loans advanced to Jointly Controlled
Entities
Balance at start of period 6,233,268 6,517,534
Foreign currency exchange movement 151,558 (284,266)
Balance at end of period 6,384,826 6,233,268
9. INVESTMENT IN JOINTLY CONTROLLED ENTITIES
Details of the Group's interests in jointly controlled entities
at 31 December 2013 are as follows:
Name of jointly Country of Shareholding Principal activity
controlled entity incorporation
Newry Biomass Limited Northern Ireland 50%* Energy utility
company
Asdee Renewables Republic of 50% Energy utility
Limited Ireland company
Bridegreen Energy Republic of 50% Energy utility
Limited Ireland company
* Under the terms of the joint venture agreement for Newry
Biomass Limited, the split of the share of profits in the company
are on the basis of (1) the aggregate amount of called up share
capital in the company and (2) the nominal holdings of loan notes
issued by the company. As a result of the loan notes issued by
Newry Biomass Limited in the period ended 31 December 2011, the
share of the profits/losses to which the Group is entitled to is
92%.
Summarised financial information in respect of the group's
interests in jointly controlled entities is as follows:
31 Dec 30 Jun
2013 2013
EUR EUR
Non-current assets 14,957,858 14,347,412
Current Assets 42,455 71,142
Non-current liabilities (6,649,204) (6,491,371)
Current liabilities (8,052,076) (7,456,417)
Net assets/(liabilities) 299,033 470,766
Group's share of net assets/liabilities of
jointly controlled entities 23,090 187,068
9. INVESTMENT IN JOINTLY CONTROLLED ENTITIES
- continued
6 months 6 months
ended ended
31 Dec 2013 31 Dec 2012
EUR EUR
Total revenue 18,855 6,513
Total expenses (202,035) (97,414)
Total loss for the period (183,180) (90,901)
Group's share of losses of jointly controlled
entities (168,526) (20,208)
10. GOODWILL
6 months Year ended
ended 31 30 June
Dec 2013 2012
Gross EUR EUR
At start of period 2,249,200 -
Additional amounts recognised from business
combinations occurring during the period - 2,249,200
At end of period 2,249,200 2,249,200
Accumulated impairment losses
At start and at end of period - -
Net book value 2,249,200 2,249,200
11. PROPERTY, PLANT AND EQUIPMENT
During the six month period ended 31 December 2013, the group's
wholly owned subsidiary, Pluckanes Windfarm Limited, incurred
expenditure totalling EUR1,225,221 with respect to the construction
of an 800kW wind turbine project in Co. Cork. At 31 December 2013,
the total cost of the wind turbine project amounted to EUR1,442,999
(30 June 2013: EUR217,778).
12. SHARE CAPITAL
On 20 December 2013, shareholders passed a resolution to
reorganise REACT Energy plc's ("the Company") share capital. Under
this re-organisation, the Existing Ordinary Shares of EUR0.01 each
were consolidated into New Consolidated Ordinary Shares of EUR0.50
each on the basis of 1 New Consolidated Ordinary Share for each 50
Existing Ordinary Shares. To facilitate the proposals and avoid the
creation of a fraction of a consolidated share on consolidation, it
was necessary to allot a further 42 Ordinary Shares of EUR0.01
prior to the Consolidation taking effect. These Ordinary Shares are
being allotted to the Company Secretary for cash at par. Each New
Consolidated Ordinary Share was then sub-divided into 1 New
Ordinary Share of EUR0.10 each and 1 Deferred Share of EUR0.40
each.
12. SHARE CAPITAL
Following the reorganisation, the Company's issued share capital
comprises 22,370,042 Ordinary Shares of EUR0.10 each, 22,370,042
Deferred Shares of EUR0.40 each and 99,117,952 "A" Shares of
EUR0.01 each. The Ordinary shares have equal voting rights. The
Deferred shares and "A" Shares have no voting rights and are not
entitled to any dividends and have no other right or participation
in the profits of the Company.
13. BORROWINGS
On 20 August 2013, the Group entered into a rolling, monthly
working capital facility with Farmer Business Developments plc
("FBD"), who holds 26.79% of the ordinary share capital of the
Company. The facility, which has no maturity date and is repayable
on demand, is unsecured and any drawdowns will accrue interest at a
rate of 5% per annum. The facility is capped at EUR500,000 but may
be increased by agreement between the parties. The full facility
had been drawn down by 27 November 2013.
On 20 August 2013, the Group announced that its wholly owned
subsidiary, Reforce Energy Limited, had raised loan notes from
private investors. The proceeds from these loan notes was used to
fund development costs and equity related to single wing turbine
projects. The first tranche of loan notes, totaling EUR135,000 has
no maturity date and is repayable on demand. The loan notes will
accrue interest at a rate of 15% per annum and is unsecured. The
second tranche of loan notes, totaling EUR83,000 are repayable five
years from the granting of the loan notes i.e. 7 August 2013. These
loans are secured over a loan Reforce Energy Limited has given to
its subsidiary, Pluckanes Windfarm Limited, and accrue interest at
a rate of 12% per annum.
On 20 August 2013, the Group announced that its wholly owned
subsidiary, Pluckanes Windfarm Limited, reached financial close
with Allied Irish Banks plc for the funding of the 800kW Pluckanes
Windfarm Project, totaling EUR1.15m in senior term loans. As of 31
December 2013, EUR1,118,735 was drawn down with respect to this
facility. The loan is secured over the property, assets and
undertaking of Pluckanes Windfarm Limited. The loan is repayable in
60 quarterly instalments, the first instalment payable three months
after the later of the date of the Purchase Power Agreement ("PPA")
entered between Pluckanes Windfarm Limited and Viridian Energy and
the date when the conditions precedent contained in the PPA have
been satisfied or waived, as the case may be. The interest rate on
the loan is the Bank's market related rate plus a margin of 3.95%
per annum.
On 29 November 2013, the Group announced that it had issued an
unsecured EUR2 million Convertible Loan Note to fund its ongoing
development and working capital requirements. This loan note was
issued to FBD. As part of this issue, the above working capital
facility and an existing GBP400,000 unsecured three year loan was
transferred into the loan note to form the initial subscription of
EUR1,016,250 into the loan note. The loan note, which has no
maturity date and is repayable on demand, is unsecured and any
drawdowns will accrue interest at a rate of 5% per annum. The loan
is convertible at the discretion of the holder at any time after 1
January 2014, with the conversion price being the average of the
closing mid-market price of the ten working days prior to
conversion or the placing price achieved under any future equity
fundraising.
14. DISPOSAL OF SUBSIDIARIES
Disposal of subsidiaries (discontinued operation)
On 27 November 2012, the group disposed of Kedco Block Limited,
a holding company registered in England and Wales; and SIA
Vudlande, a company registered in Latvia and a 100% subsidiary of
Kedco Block Limited, which carried out all of its Wood Products
operations, being the production of sawn timber, realisation of
wood and the supply of wood chips. The proceeds on disposal of
EUR3,000,000 were satisfied by the settlement of borrowings. The
profit for the period from the discontinued operation is analysed
as follows:
6 months 6 months
ended ended
31 Dec 2013 31 Dec 2012
EUR EUR
Profit of Wood Products operation for
the period - 164,322
Loss on disposal of Wood Products operation - (8,866)
Total profit for the period - 155,456
The results of the Wood Products operation for the relevant
periods were as follows:
6 months 6 months
ended ended
31 Dec 2013 31 Dec 2012
EUR EUR
Revenue - 4,554,862
Operating costs - (4,332,653)
Finance costs - (57,887)
Profit before tax - 164,322
Income tax charge - -
Profit after tax - 164,322
Further details of the disposal of Vudlande are disclosed in the
Group's financial statements for the year ended 30 June 2013.
There was no other disposal of subsidiaries in the six months to
31 December 2013.
15. ACQUISITION OF SUBSIDIARIES
On 27 November 2012, as part of the restructuring process
undertaken by Kedco plc, the Group acquired the remaining 50% of
the share capital of Enfield Biomass Limited (Enfield), which
previously was accounted for as a jointly controlled entity.
Enfield is the special purpose vehicle for developing the 12MW CHP
project in Enfield, London.
15. ACQUISITION OF SUBSIDIARIES - continued
On 21 December 2012, the Group acquired a 100% interest in
Reforce Energy Limited and its subsidiaries, Pluckanes Windfarm
Limited and Reforce Energy West Limited ("Reforce"). Reforce is a
renewable energy development company focussed on small-scale
renewable projects across various technologies and was acquired
with the objective to increase the Group's pipeline of projects
under development and to add depth to the management team.
Further details of the acquisitions of Enfield Biomass Limited
and Reforce Energy Limited are disclosed in the Group's financial
statements for the year ended 30 June 2013.
There was no other acquisition of subsidiaries in the six months
to 31 December 2013.
16. COMMITMENTS AND CONTINGENCIES
There have been no other changes in contingent liabilities since
the end of the previous reporting period, 30 June 2013.
17. RELATED PARTY TRANSACTIONS
During the period ended 31 December 2013, the Group realised
EUR105,974 (2012: EUR1,764,791) from its jointly controlled entity,
Newry Biomass Limited, on the sale of the construction of a 4MW
gasification plant in Newry, Northern Ireland. Included in trade
and other receivables at 31 December 2013 is EUR1,556,071 due from
Newry Biomass Limited (2012: EUR238,871).
During the period ended 31 December 2013, the group received
funding totalling EUR810,066 from Farmer Business Developments plc
("FBD"), who holds 26.79% of the ordinary share capital of the
Company, through various facilities as laid out in Note 13 to these
financial statements. Total interest accruing on these facilities
totalled EUR30,193 for the six months ended 31 December 2013. At 31
December 2013, the balances due to FBD with respect to the loan
facilities, including rolled up interest, totalled EUR1,335,044 (30
June 2013: EUR479,772).
18. EVENTS AFTER THE REPORTING DATE
On 27 January 2014, the Group announced that its joint venture
company, Newry Biomass Limited, had received approval from Ulster
Bank Ireland Limited for the funding of Phase Two of its Biomass
Gasification project located in Newry, Northern Ireland. Drawdown
of funds can commence once certain conditions are satisfied
including the finalising and signing of the various contracts
required for the installation of Phase Two of the Project and, if
required, the investment of additional equity funding in Newry
Biomass Limited.
18. EVENTS AFTER THE REPORTING DATE - continued
On 6 March 2014, the Group announced the acquisition, through a
newly incorporated wholly owned UK subsidiary Grass Door Limited,
of certain assets and business of GG Eco Solutions Limited
("GGES"), a developer and operator of biomass heat generation
projects in the UK. The acquisition will comprise an initial
consideration of GBP2 million for certain of the assets and
business of GGES. This consideration is being satisfied through the
issue of 5,263,158 ordinary shares of EUR0.10 each in the capital
of REACT Energy plc ("REACT"), to be issued at an effective price
of GBP0.38p per share. An additional maximum deferred consideration
of GBP1.7 million (also to be satisfied through the issue of
ordinary shares in REACT), may become payable subject to certain
performance criteria being achieved, namely construction and
installation of additional biomass heat projects with an
approximate Internal Rate of Return of 15%. The deferred
consideration amount is linked to projects funded under the Equitix
funding line, which GGES already has in place.
As part of the transaction REACT will also issue 789,474 new
ordinary shares of EUR0.10 each to Pinfold Investments Limited
('Pinfold") a company controlled by Lyndon Dodd, a shareholder in
GGES, which is converting a loan note amounting to GBP225,000
issued by GGES to Pinfold in relation to the Kimbolton School
Heating Plant. The total initial transaction cost for the
Acquisition, including the conversion of the Pinfold loan, is
GBP2.3 million. GGES and Pinfold will be subject to a Lock-In
agreement in relation to the ordinary shares that it will receive
in consideration for the Acquisition or will acquire for a
period of twelve months from the date of issue. The assets being
acquired include the Kimbolton School Heating Plant, the Old
Buckenham Hall School Heating Plant that is in commissioning and
GGES's investment in GG Eco Energy Limited ("GGEco") a company that
is 30% owned by GGES and 70% owned by Equitix. The book value of
assets acquired totals approximately GBP855,000. As at 31 March
2013 turnover in relation to the acquired assets was c.GBP290,000.
Although the assets acquired are currently loss making, the
Directors expect the acquired business to breakeven in the next 12
months..
The Board of REACT also announced on 6 March 2014 that it is
proposing to raise up to GBP1.5 million (before expenses) through
the issue of secured loan notes ("SLNs"). The SLNs are intended to
fund the ongoing development of the enlarged Group through organic
and acquisitive growth, which includes GGES. It is the intention
that the issue of the SLNs will be by way of subscription for an
initial tranche of GBP600,000 (the "Initial Tranche") followed by
subscription for a further tranche of GBP900,000 (the "Additional
Tranche"). The Group has received commitments for the Initial
Tranche from Farmer Business Developments plc ("Farmers"), REACT's
largest shareholder, for the total sum of GBP300,000 and certain
shareholders of GGES, including Mr. Goran Nylin and Mr.Lyndon Dodd
for the total sum of GBP300,000. Following subscription for the
Initial Tranche by Farmers and GGES shareholders, the Group intends
to market the Additional Tranche to independent qualified
investors.
The SLNs will be issued at a fixed rate of 10% per annum, the
interest on which will be rolled up quarterly in arrears and
included as principal to be repaid. The SLN's will be for a fixed
three-year term and together with rolled up interest will be
repayable at the end of the term. The SLNs will be secured by a
first charge over the shares held by REACT in its project operating
and development companies.
19. APPROVAL OF FINANCIAL STATEMENTS
The condensed consolidated financial statements for the six
months ended 31 December 2013, which comply with IAS 34, were
approved by the Board of Directors on 24 March 2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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