TIDMEQT
RNS Number : 5283A
EQTEC PLC
27 March 2017
27 March 2017
EQTEC plc
(formerly REACT Energy plc)
("EQTEC", "Company" or the "Group")
Interim results
for the six months ended 31 December 2016
EQTEC plc (formerly REACT Energy plc) (AIM:EQT), 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
2016.
Gerry Madden, Chief Executive Officer commented:
"EQTEC plc enters the second half of the financial year with
renewed optimism. In January shareholders voted to further
strengthen ties between EBIOSS Energy AD and the Group by approving
a debt for equity conversion which resulted in EBIOSS becoming the
Company's majority shareholder.
This clearly demonstrates shareholder support for our strategy,
which in conjunction with EBIOSS, sets out to deploy EBIOSS's
proprietary EGT Gasifier Technology, in the UK Energy from Waste
sector both into existing Group projects and EBIOSS projects, as
well as new projects in the pipeline.
The debt for equity conversion announced in January together
with the recent further conversions that took place as part of
recent placings resulted in approximately EUR6.1million of external
debt being converted into equity adding strength to the Company's
balance sheet.
Thanks to the support of new investors, we successfully raised
new funds of over EUR1million in February and March 2017 to allow
us to further strengthen our balance sheet and to provide the
financial resources and flexibility to advance our portfolio of
projects including Newry and in collaboration with EBIOSS, existing
Energy from Waste projects in the UK using EGT.
We plan to implement in the UK the Framework Agreement signed
between EBIOSS and the state owned China Energy Engineering Group a
Global Fortune 500 company with Revenues in excess of $33 billion.
The agreement involves Energy China being responsible for the
construction of projects through EPC contracts using EQTEC Gasifier
Technology and providing project - level debt and equity.
Key to our future is the continued support of all of our
stakeholders and we look forward to updating the market further as
we continue to develop and consolidate our position in the Energy
from Waste market in the UK."
Financial highlights during period
-- Group revenue of EUR0.105 million (H1 2015: EUR0.13 million)
-- Administrative costs of EUR0.45 million (H1 2015: EUR0.25 million)
-- Loss for the period from continuing operations of EUR0.7
million (H1 2015: Loss for period EUR0.4 million)
Post period end highlights
-- In February 2017, shareholders voted to further strengthen
ties with EBIOSS Energy AD ("EBIOSS") by approving a EUR5.15
million debt-for-equity conversion of amounts owed by the Company's
50.02% subsidiary, Newry Biomass Limited ("NBL"), to EBIOSS, which
resulted in EBIOSS becoming the Company's 51% shareholder
-- Completed two fundraises with external shareholders, raising,
in aggregate, GBP985,000 (before expenses) to enable the Company to
progress Newry and Clay Cross, and in conjunction with EBIOSS,
continued investment in its pipeline of UK Energy from Waste
("EfW") projects
-- EBIOSS converted all of the outstanding debt and accrued
interested of, in aggregate, approximately EUR920,000 drawn under
the EBIOSS loan facility, which was entered into on 8 January 2016
and was amended on 12 December 2016
- Company's balance sheet strengthened as a result and
EUR420,000 still available to be drawn under the EBIOSS loan
facility
- EBIOSS continues to be interested in 50.03% of the Company
-- Following the signature of a conditional heads of agreement
in October 2016 to potentially fund, through a number of third
parties, the repowering of the Newry biomass plant, the parties are
now in the final stages of due diligence. The heads of agreement
envisage a total investment of up to GBP11.2 million into NBL
Outlook
The Company has formed an important strategic partnership with
EBIOSS, which will both provide it with access to a greater range
of financial resources to fund its continuing operations and
development as well as providing a stronger platform to exploit the
significant opportunity currently in the EfW sector using EGT
technology and EBIOSS's existing contacts and pipeline in the UK.
While the economic and political backdrop remain challenging, with
the support of all of our stakeholders we are well placed to
deliver on our plans. We remain both determined and uniquely
positioned to lead the industry in identifying and realising the
significant potential that exists in the Energy from Waste sector
in the UK.
The Chairman and Chief Executive's Statement and the unaudited
interim results for the six months ended 31 December 2016, which
are contained below and form part of this announcement, include
further important information and disclosures. The announcement
should be read in its entirety.
For further information:
EQTEC plc
Gerry Madden / Brendan Halpin +353 (0)21 2409 056
Strand Hanson Limited - Nomad
James Harris / Richard Tulloch
/ Ritchie Balmer +44 (0)20 7409 3494
SVS Securities Plc - Broker +44 (0)20 3700 0093
Tom Curran / Ben Tadd
About EQTEC:
EQTEC plc is committed to developing and operating clean
electricity and heat generation plants in the UK and Ireland. The
Company possesses significant knowledge of energy markets, clean
technologies, fuel sources, project development, project finance
and project delivery.
The Company is quoted on AIM and trades as EQT. Further
information on the Company can be found at www.eqtecplc.com.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR").
Chairman's and Chief Executive's Report
The Company presents the 2016 Interim Report, which gives an
update on the activities of the Company over the six month
financial period to 31 December 2016 as well as updating on recent
activities, including the major debt-for-equity conversion of
amounts owed to EBIOSS Energy AD ("EBIOSS") by Newry Biomass
Limited ("NBL"), the Company's 50.02% subsidiary, which was
approved by shareholders on 6 February 2017.
EBIOSS is an industrial engineering group and is involved in the
engineering, construction, project development and operation of
waste-to-synthesis gas plants. It operates at an international
level and owns a state of the art technology through its subsidiary
EQTEC Iberia SL and differential positioning in designing and
construction of waste gasification power plants with power capacity
from 500 kilowatts ("kWs") to 20 megawatts ("MWs"). EBIOSS has
developed its own technology, the EQTEC Gasifier Technology ("EGT")
by which different types of waste are transformed into synthesis
gas. This leading technology on waste gasification has made
possible the design construction and/or operation of waste
gasification plants in Spain, France, Germany, India, Italy and
Bulgaria among other countries, for third party international
energy groups and for use by EBIOSS itself. EBIOSS is quoted on
Mercado Alternativo Bursátil ("MAB"), the alternative market of the
Spanish Stock Exchanges.
During the financial period in question the Company:
-- Signed conditional heads of agreement to potentially fund,
through a number of third parties, the repowering of the Newry
Gasification plant. The heads of agreement envisage a total
investment of up to GBP11.2 million into NBL;
-- Continued to operate its wind turbine at Pluckanes and three
biomass heat projects in the UK, generating revenue of
approximately EUR0.105 million; and
-- Incurred administrative costs of EUR0.45 million and reported
a loss for the period from continuing operations of EUR0.7
million.
Post period end:
-- In January 2017, shareholders voted to further strengthen
ties with EBIOSS Energy AD ("EBIOSS") by approving a EUR5.15
million debt-for-equity conversion of amounts owed by the Company's
50.02% subsidiary, Newry Biomass Limited ("NBL"), to EBIOSS, which
resulted in EBIOSS becoming the Company's 51% shareholder;
-- Completed two fundraises with external shareholders, raising,
in aggregate, GBP985,000 (before expenses) to enable the Company to
progress Newry and Clay Cross, and in conjunction with EBIOSS,
continued investing in its pipeline UK EfW projects;
-- As part of the recent fundraises, EBIOSS converted all of the
outstanding debt and accrued interested of, in aggregate,
approximately EUR920,000 drawn under the EBIOSS loan facility,
which was entered into on 8 January 2016 and was amended on 12
December 2016;
- Company's balance sheet strengthened as a result and
EUR420,000 still available to be drawn under the EBIOSS loan
facility;
- EBIOSS continues to be interested in 50.03% of the Company;
and
-- Following the signature of a conditional heads of agreement
in October 2016 to potentially fund through a proposed combination
of third parties the repowering of Newry, the parties are now in
the final stages of due diligence. The heads of agreement envisage
a total investment of up to GBP11.2 million into NBL
Current Trading and Prospects
The Company is a clean energy project developer and operator.
The Company seeks to take projects from "Greenfield" (greenfield
land) stage to "Shovel Ready" stage (projects where planning and
development is advanced enough that, given sufficient funding,
construction can begin within a very short time frame) with turnkey
construction contracts and financial packages in place. Debt and
equity partners are then sought to fund the construction phase in
return for a share of the project equity.
The Company develops and builds projects currently using wood
and waste wood as the sustainable fuel source. The core focus has
been on converting biomass or wood into clean electricity and heat.
This was based primarily on the technology available to convert the
fuel into power and the level of government subsides available
specifically for biomass fuel and the relevant conversion
technology.
The Company has continuously reviewed its strategy, cost base
and financing structures to ensure it is well positioned and
appropriately capitalised to take advantage of opportunities that
present in the sector in which it operates.
The following factors have influenced the formation of the
business strategy which has been decided upon, in conjunction with
its majority shareholder, EBIOSS.
-- The political and regulatory environment within the UK
continues to be challenging, with a lack of direction and continued
changes to the long-term support mechanisms available for renewable
energy projects developed under the Electricity Market Review
(EMR).
-- The introduction of Contracts for Difference (CfD) in place
of the Renewables Obligation (RO) regime.
-- The transformation in the UK of the management of household
waste leading to the transition from landfill to recycling /
composting and energy recovery.
-- The need to meet 2020 landfill diversion targets for
biodegradable waste being a major driver for waste policy and
infrastructure development in the UK over the last ten years.
-- The movement of the waste market towards what is termed
'merchant' projects utilising private, specialist fuel supply such
as refuse derived fuel (RDF), municipal solid waste (MSW),
commercial and industrial waste and waste wood.
-- The increased use of new advanced conversion technologies
that include specialist sub sectors, like advanced gasification.
EGT is currently capable of gasifying urban solid waste through the
use of pre-treatment and pelletisation, which involves a process of
compressing or moulding the waste into the shape of a pellet.
-- The potential of Energy from Waste (commonly abbreviated to
EfW) in particular to deliver low carbon energy in a cost-effective
way and as a non-intermittent source that helps provide energy
security.
-- Waste derived renewable electricity from thermal combustion
in England is forecast to grow from the current 1.2 terrawatt hours
("TWh") to between 3.1TWh and 3.6TWh by 2020.
-- Due to the saturation of landfills in the UK, approximately 3
million tonnes of RDF are currently exported to other countries
such as Germany, Sweden and the Netherlands for disposal by
incineration. The cost associated with this export strategy could
be significantly reduced with the construction of gasification
plants using EGT.
Business Strategy
Following the investment by EBIOSS into EQTEC through the
debt-for-equity conversion as announced on 10 January 2017, the
combined business strategy of EQTEC and EBIOSS, as its majority
shareholder, is as follows:
-- To focus on taking advantage of the significant opportunities
in the EfW sector, involving Refuse Derived Fuel ("RDF"), MSW and
wood, in the UK market.
-- EQTEC will deploy EGT in its existing projects and future projects in the UK.
- Includes completing the repowering of Newry as one of the last
remaining RO projects in the UK.
-- EBIOSS to use all reasonable efforts to provide opportunities
for EQTEC to participate in gasification projects which EBIOSS is
currently involved in, or will be involved in, throughout the
UK.
-- Implement the Framework Agreement signed in May 2016 between
EBIOSS and the Chinese state-owned company, China Energy
Engineering Group ("Energy China") which sets out objectives and
parameters surrounding the completion of EfW projects in the UK.
The Framework Agreement sets out that Energy China, a Global
Fortune 500 company with Revenues in excess of $33 billion, would
be responsible for the construction and funding of projects in the
UK that use EGT through Engineer, Procure and Construct ("EPC")
contracts.
-- Use combined resources of EQTEC and EBIOSS who both have
significant experience in the EfW sector and who both possess
significant knowledge of energy markets, clean technologies, fuel
sources, project development, project finance and project
delivery.
EQTEC together with EBIOSS have agreed on of a business model
which aims to develop merchant projects based on the conversion of
MSW in the UK.
The projects identified will have the following positive
attributes:
-- Do not depend on the government subsidy in the form of RO, CfDs or tariffs
-- Have no risk to fuel supply
-- Enjoy a high potential return for investors
The EfW plant business model assumes two sources of revenue:
-- Revenue from the sale of energy at an unsubsidized market price
-- Revenue from accepting waste know as a "Gate Fee"
Current project portfolio
Newry
Using proceeds from the recent fundraises in February and March
2017, the Company has further progressed the development of the
Newry project with tenders issued for Civil Works and Mechanical
and Electrical Works. A Purchase Order for Civil Works is expected
to be issued shortly.
The Group is currently in the final stages of a due diligence
process relating to a proposed investment of up to GBP11.2 million
into NBL, pursuant to the heads of agreement announced on 11
October 2016, which will be used to repower the plant to 4MW using
EGT. The Company is confident that the plant will be able to again
export electricity to the grid by the revised deadline of 31 March
2018 agreed with Ofgem.
If, however, it is not possible to conclude agreement with the
parties on this GBP11.2 million investment, the Company, in
partnership with EBIOSS and using their combined resources, would
seek to commission the project such that it is capable of
commercial operation to ensure that the ROCs are registered for the
plant by 31 March 2018. In this scenario, the plant having been
commissioned to such standards, would be refinanced with third
party funders and completed in full.
Enfield, London
The Enfield Biomass project is a 12MW biomass gasification
project located in Enfield, London. The project has secured full
planning and permitting approval and is ready to construct. The
Company obtained an updated planning permission for converting
60,000 tonnes per annum of Grade C wood waste in January 2014. An
environmental permit was received April 2012.
The Company has opened discussions with a new owner in relation
to the future of this site and further updates will be made as and
when appropriate.
Clay Cross
The Company has received approval for the construction and
operation of an energy recovery facility at Clay Cross Facility in
Derbyshire (the "Clay Cross Facility") by Clay Cross Biomass
Limited ("Clay Cross Biomass"), a company in which EQTEC has a 90%
interest, subject to finalising an agreement under Section 106 of
the Town and Country Planning Act 1990 pursuant to the conditions
set out in the report to the Committee.
Clay Cross Biomass will use EGT to power the plant as part of
the EPC contract for the construction of the Clay Cross
Facility.
The Company is currently in preliminary discussions to secure
finance for the construction of the Clay Cross Facility and
estimates that it will take approximately 18 months from obtaining
finance to the final commissioning of the plant. The expected cost
to develop the Clay Cross Facility is approximately GBP50
million.
UK Energy from Waste Project Pipeline
EBIOSS intends to use all reasonable efforts to provide
opportunities for EQTEC to participate in gasification projects
which EBIOSS is currently involved in or will be involved in
throughout the UK. The Company is currently assisting EBIOSS to
progress its EfW project pipeline in the UK which form part of the
Framework Agreement with Energy China.
Biomass Heat
The Company owns 30% of a special purpose vehicle ("SPV") set up
with Equitix ESI Finance Limited ("Equitix") and receives
development and on-going management fees from it. The SPV currently
operates three biomass heat projects in the UK.
Renewable Heat Incentive (RHI) is the primary incentive scheme
in operation for these projects. The digression in RHI tariffs for
boilers below 200kw range has meant that it is unlikely that the
Company will pursue any other projects in this sector and at this
level.
Wind Electricity Generation
In Ireland, the Company is currently operating a cash generating
800kW Enercon wind turbine in Pluckanes, County Cork. This plant
was financed by company equity and bank debt provided by AIB Bank
plc and has a 15-year Power Purchase Agreement with Viridian Energy
Limited.
The Company is reviewing its participation in this sector in
light of recent developments at corporate level.
Outlook
The Company with the support of the Company's existing
stakeholders, new investors and its majority shareholder EBIOSS,
has the potential to take advantage of the significant
opportunities presenting themselves in the UK EfW market and in
turn advance its pipeline of projects throughout the UK.
The Company has formed an important strategic partnership with
EBIOSS, which will both provide it with access to a greater range
of financial resources to fund its continuing operations and
development as well as providing a stronger platform to exploit the
significant opportunity currently in the EfW sector using EGT
technology and EBIOSS's existing contacts and pipeline in the
UK.
The Company looks forward to updating its shareholders in the
future on further developments as the Company further builds its
position in the EfW market.
Dermot O'Connell Gerry Madden
Chairman Chief Executive
EQTEC plc (formerly REACT Energy plc)
Unaudited Condensed Consolidated Income Statement
for the six months ended 31 December 2016
6 months ended 6 months
ended
Notes 31 Dec 2016 31 Dec 2015
Continuing operations: EUR EUR
Revenue 6 105,464 131,031
Cost of sales - -
--------------- ------------
Gross profit 105,464 131,031
Operating expenses
Administrative expenses (451,096) (251,257)
(Losses)/gains on foreign
exchange (55,384) 2,533
--------------- ------------
Impairment of amounts due
from customers under construction
contracts (49,127) -
--------------- ------------
Operating loss (450,143) (117,693)
Finance costs (297,868) (294,105)
Finance income 8 4
--------------- ------------
Loss before taxation 6 (748,003) (411,794)
Income tax expense 7 - -
--------------- ------------
Loss for the period from
continuing operations (748,003) (411,794)
--------------- ------------
Loss for the period (748,003) (411,794)
=============== ============
(Loss)/Profit attributable
to:
Owners of the Company (643,661) (410,718)
Non-controlling interest (104,342) (1,076)
--------------- ------------
(748,003) (411,794)
=============== ============
6 months 6 months
ended ended
31 Dec 2016 31 Dec 2015
EUR per EUR per
share share
Basic earnings/(loss) per
share:
From continuing and discontinued
operations 8 (0.009) (0.006)
============ ============
From continuing operations 8 (0.009) (0.006)
============ ============
Diluted earnings/(loss)
per share:
From continuing and discontinued
operations 8 (0.009) (0.006)
============ ============
From continuing operations 8 (0.009) (0.006)
============ ============
EQTEC plc (formerly REACT Energy plc)
Unaudited Condensed Consolidated Statement of Comprehensive
Income
for the six months ended 31 December 2016
6 months 6 months
ended ended
31 Dec 2016 31 Dec 2015
EUR EUR
(Loss)/Profit for the
period (748,003) (411,794)
Other comprehensive
income and expense
Exchange differences
arising on retranslation
of foreign operations (109,434) (25,032)
------------ ------------
Total comprehensive
income and expense
for the period (857,437) (436,826)
============ ============
Attributable to:
Owners of the company (707,344) (332,774)
Non-controlling interests (150,093) (104,052)
------------ ------------
(857,437) (436,826)
============ ============
EQTEC plc (formerly REACT Energy plc)
Unaudited Condensed Consolidated Statement of Financial
Position
As at 31 December 2016
As at As at
Notes 31 Dec 30 June
2016 2016
ASSETS EUR EUR
Non-current assets
Property, plant and equipment 10 11,209,398 10,799,870
Financial assets 9 - -
------------- -------------
Total non-current assets 11,209,398 10,799,870
------------- -------------
Current assets
Amounts due from customers
under construction contracts 101,720 150,847
Trade and other receivables 353,290 158,029
Cash and cash equivalents 190,303 324,195
------------- -------------
Total current assets 645,313 633,071
------------- -------------
Total assets 11,854,711 11,432,941
============= =============
EQUITY AND LIABILITIES
Equity
Share capital 11 17,453,246 17,453,246
Share premium 21,863,190 21,863,190
Retained earnings - deficit (40,846,516) (40,139,172)
------------- -------------
Total deficit attributable
to equity holders of the parent (1,530,080) (822,736)
Non-controlling interests 1,489,687 1,639,780
------------- -------------
Total equity (40,393) 817,044
------------- -------------
Non-current liabilities
Borrowings 12 1,720,850 3,379,621
------------- -------------
Total non-current liabilities 1,720,850 3,379,621
------------- -------------
Current liabilities
Trade and other payables 13 6,426,165 5,425,146
Borrowings 12 3,748,089 1,811,130
------------- -------------
Total current liabilities 10,174,254 7,236,276
------------- -------------
Total equity and liabilities 11,854,711 11,432,941
============= =============
EQTEC plc (formerly REACT Energy plc)
Unaudited Condensed Consolidated Statement of Changes in
Equity
for the six months ended 31 December 2016 and the six months
ended 31 December 2015
Attributable
to equity
Retained holders of Non-controlling
Share capital Share premium earnings the parent interests Total
EUR EUR EUR EUR EUR EUR
Balance at 1 July
2015 13,006,149 20,713,637 (38,811,449) (5,091,663) 2,455,567 (2,636,096)
Conversion of debt
into equity under
examinership
settlement 3,747,097 1,977,634 - 5,724,731 - 5,724,731
Issue of equity under
rights of equity
kicker 700,000 (700,000) - - - -
Share issue costs - (128,081) - (128,081) - (128,081)
Loss for the financial
period - - (410,718) (410,718) (1,076) (411,794)
Unrealised foreign
exchange (loss)/gain - - 77,944 77,944 (102,976) (25,032)
-------------- -------------- ------------- ------------- ---------------- ------------
Balance at 31 December
2015 17,453,246 21,863,190 (39,144,223) 172,213 2,351,515 2,523,728
============== ============== ============= ============= ================ ============
Balance at 1 July
2016 17,453,246 21,863,190 (40,139,172) (822,736) 1,639,780 817,044
Loss for the financial
period - - (643,661) (643,661) (104,342) (748,003)
Unrealised foreign
exchange loss - - (63,683) (63,683) (45,751) (109,434)
----------- ----------- ------------- ------------ ---------- ----------
Balance at 31 December
2016 17,453,246 21,863,190 (40,846,516) (1,530,080) 1,489,687 (40,393)
=========== =========== ============= ============ ========== ==========
EQTEC plc (formerly REACT Energy plc)
Unaudited Condensed Consolidated Statement of Cash Flows
for the six months ended 31 December 2016
Notes 6 months 6 months
ended ended
31 Dec 31 Dec
2016 2015
Cash flows from operating activities EUR EUR
(Loss)/Profit before taxation (748,003) (411,794)
Adjustments for:
Depreciation of property, plant
and equipment 36,457 36,401
Impairment of amounts due from
customers under construction
contracts 49,127 -
Unrealised foreign exchange
losses/(gains) 84,064 (629,453)
Interest expense 297,868 294,105
Interest income (8) (4)
---------- ----------
Operating cash flows before
working capital changes (280,495) (710,745)
(Increase)/decrease in:
Trade and other receivables (193,605) 24,283
Increase in:
Trade and other payables 294,493 176,426
---------- ----------
(179,607) (510,036)
Income taxes paid (3) (2)
---------- ----------
Net cash used in operating activities (179,610) (510,038)
---------- ----------
Cash flows from investing activities
Payments for property, plant
and equipment - (40,274)
Interest income received 8 4
---------- ----------
Net cash from/(used in) investing
activities 8 (40,270)
---------- ----------
Cash flows from financing activities
Proceeds from borrowings 225,000 1,526,631
Repayments of borrowings (43,000) (7,500)
Payments for share issue costs - (128,081)
Payment for loan issue costs - (521,133)
Interest paid (136,651) (109,758)
---------- ----------
Net cash from/(used in) financing
activities 45,349 760,159
---------- ----------
Net (decrease)/increase in cash
and cash equivalents (134,253) 209,851
Cash and cash equivalents at
the beginning of the financial
period 323,649 211,341
---------- ----------
Cash and cash equivalents at
the end of the financial period 189,396 421,192
========== ==========
EQTEC plc (formerly REACT Energy plc)
Notes to the Unaudited Condensed Consolidated Financial
Statements
for the six months ended 31 December 2016
1. GENERAL INFORMATION
EQTEC plc (formerly REACT Energy plc) ("the Company") was
incorporated in Ireland on 2 October 2008. The address of its
registered office and principal place of business is Building 1000,
City Gate, Mahon, Cork, Ireland. The Company's shares are quoted on
the AIM market of the London Stock Exchange plc.
The principal activity of the Company and its subsidiaries
(together the "Group") is to identify, develop, build, own and
operate clean energy electricity and heat generating power plants
in the UK and Ireland.
2. BASIS OF PREPARATION
The unaudited interim condensed consolidated financial
statements are for the six months ended 31 December 2016 and are
presented in Euro (EUR), which is the functional currency of the
parent company. They have been prepared in accordance with
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 2016.
The Group incurred a loss on continuing operations of EUR748,003
(6 months ended 31 December 2015: EUR411,794) during the period
ended 31 December 2016, and it had net current liabilities of
EUR9,828,941 (30 June 2016: EUR6,603,205) and net liabilities of
EUR40,393 (30 June 2016: net assets of EUR817,044) at 31 December
2016.
The Company recently concluded discussions with EBIOSS Energy AD
("EBIOSS") such that in return for a debt-for-equity conversion of
amounts owed by NBL to EBIOSS, EBIOSS was issued such number of new
ordinary shares in EQTEC so that it was interested in just under
51% of the Company's then enlarged issued share capital.
Details of the transaction and the shareholder resolutions
required to approve the transaction are contained in the circular
which was issued to all shareholders on 10 January 2017. The
resolutions were approved at the EGM on 6 February 2017. As a
result of the transaction with EBIOSS, the Company has formed a
strategic partnership with EBIOSS which will both provide it with
access to a greater range of financial resources to fund its
continuing operations and development as well as a stronger
platform to exploit the significant opportunity currently in the
Energy from Waste sector using EGT technology and EBIOSS's existing
contacts and pipeline in the UK. Development of, and revenue
generation from, the principal assets of the Company will require
additional financing which is expected to be sourced in due
course.
During February and March 2017, the Company raised GBP985,000
before expenses through two placings to fund ongoing working
capital needs and in particular to fund the further progression of
existing projects such as Newry and Clay Cross and also to
progress, in conjunction with EBIOSS, existing Energy from Waste
projects in the UK waste sector. As part of recent fundraising
activities, an approximate EUR920,000 of debt was removed from the
Company's Balance Sheet through further debt-for-equity
conversions, thereby allowing EBIOSS to maintain its majority
shareholding in EQTEC.
The Directors have given careful consideration to the
appropriateness of the going concern basis in the preparation of
the interim financial statements. The validity of the going concern
basis is dependent upon additional financing being obtained for the
development of, and revenue generation from, the principal assets
of the Company and the refinancing of existing debt facilities with
Altair Group Investment Limited ("Altair") which are due to be
repaid in July 2017 (see Note 12 (b)). As no definite agreement has
been concluded on either of these a material uncertainty exists in
relation to the Company and the Group's ability to continue as a
going concern.
The Directors believe that progress towards securing finance and
restructuring the Altair loan have been made. The Directors have a
reasonable expectation that the Company will source the necessary
financing and consent to restructure the Altair loan and 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 financial
statements do not include any adjustments that would result if the
Group was unable to continue as a going concern.
The Group continues to invest capital in developing and
expanding its portfolio of clean 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 12 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
during this period the Group will require additional funds to
continue with its activities and its planned development
program.
Whilst the strategy is to build, own and operate plants, once a
site has been secured and planning and permitting obtained the
Group would be in a position, if it so chose, to monetise the value
of the project.
The interim financial information for both the six months ended
31 December 2016 and the comparative six months ended 31 December
2015 are unaudited and have not been reviewed by the auditors. The
financial information for the year ended 30 June 2016 represents an
abbreviated version of the Group's financial statements for that
year. Those financial statements contained an unqualified audit
report, with an emphasis of matter paragraph on going concern. The
interim condensed consolidated financial statements have neither
been audited nor reviewed pursuant to guidance issued by the
Auditing Practices Board.
3. BASIS OF CONSOLIDATION
The unaudited 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
unaudited interim condensed consolidated financial information are
unchanged from those disclosed in the Annual Report and Accounts of
EQTEC plc (formerly REACT Energy plc) for the year ended 30 June
2016.
5. ESTIMATES
The preparation of the unaudited 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 judgements, estimations and assumptions applied in the
unaudited interim financial statements, including the key sources
of estimation uncertainty, were the same as those applied in the
Group's last annual financial statements for the year ended 30 June
2016.
6. 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
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:
Segment Revenue Segment (Loss)/Profit
6 months ended 6 months ended
31 Dec 31 Dec 31 Dec 31 Dec
2016 2015 2016 2015
EUR EUR EUR EUR
Power Generation 105,464 131,031 (257,486) 48,485
-------- -------- ----------- -----------
Total from continuing
operations 105,464 131,031 (257,486) 48,485
======== ========
Central administration
costs and directors'
salaries (192,657) (166,178)
Interest income 8 4
Interest costs (297,868) (294,105)
----------- -----------
Loss before taxation
(continuing operations) (748,008) (411,794)
=========== ===========
Revenue reported above represents revenue generated from
external customers. Inter-segment sales for the six months ended 31
December 2016 amounted to EURNil (2015: EURNil). Included in
revenues arising from sales in the Power Generation segment is
EUR85,120 (2015: EUR106,944) arising from the sale of electricity;
EUR20,344 (2015: EUR23,887) arising from sales to an associated
undertaking, GG Eco Energy Limited; and EURNil (2015: EUR200) with
respect to the generation of heat.
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 Additions to non-current
amortisation assets
6 months ended 6 months ended
31 Dec 31 Dec 31 Dec 31 Dec
2016 2015 2016 2015
EUR EUR EUR EUR
Power Generation 36,457 36,401 707,909 5,004,267
In addition to the depreciation and amortisation reported above,
impairment losses of EURNil (2015: EURNil) were recognised in
respect of property, plant and equipment. These impairment losses
were attributable in full to the Power Generation segment.
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
Controlled Entities Non-current assets*
and External Customers
6 months 6 months
to to As at 31 As at 30
31 Dec 31 Dec Dec 2016 Jun 2016
2016 2015
EUR EUR EUR EUR
Republic of
Ireland 85,120 106,944 1,238,711 1,275,144
United Kingdom 20,344 24,087 9,970,687 9,524,726
------------ ------------ ----------- -----------
105,464 131,031 11,209,398 10,799,870
============ ============ =========== ===========
* 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.
7. INCOME TAX EXPENSE
6 months 6 months
ended ended
31 Dec 2016 31 Dec 2015
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 2016 or 31 December 2015 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.
8. LOSS/(EARNINGS) PER SHARE
6 months 6 months
ended ended
31 Dec 2016 31 Dec 2015
EUR EUR
Basic and diluted (loss)/earnings
per share
From continuing operations (0.009) (0.006)
From discontinued operations - -
------------ ------------
Total basic earnings/(loss)
per share (0.009) (0.006)
============ ============
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 2016 31 Dec 2015
EUR EUR
(Loss)/profit for period attributable
to equity holders of the parent (643,661) (410,718)
------------ ------------
Profit for period from discontinued
operations used in the calculation
of basic earnings per share - -
from discontinued operations
------------ ------------
Losses used in the calculation
of basic loss per share from
continuing operations (643,661) (410,718)
------------ ------------
Weighted average number of
ordinary shares for
the purposes of basic (loss)/earnings
per share 75,140,494 64,228,665
------------ ------------
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 2016 31 Dec 2015
Share warrants in issue 38,450,000 38,450,000
------------ ------------
Convertible loans in issue 10,000,000 10,000,000
------------ ------------
As noted in note 14 below, 110,162,735 ordinary shares were
issued after the period end. If these shares were in issue prior to
31 December 2016, 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 18,360,456 (assuming the shares were issued in December
2016).
9. INVESTMENT IN ASSOCIATE UNDERTAKINGS
Details of the Group's interests in associated undertakings at
31 December 2016 are as follows:
Name of jointly Country of Shareholding Principal
activity
controlled entity incorporation
GG Eco Energy England 30% Operator of
Limited biomass heat
generating
projects
Summarised financial information in respect of the group's
interests in associate undertakings is as follows:
31 Dec 2016 30 Jun 2016
EUR EUR
Non-current assets 1,406,264 1,510,448
Current Assets 130,103 118,885
Non-current liabilities (1,592,294) (1,670,973)
Current liabilities (534,726) (460,948)
------------ ------------
Net liabilities (590,653) (502,588)
============ ============
Group's share of net assets - -
of associated undertakings
============ ============
6 months ended
31 Dec 2016 31 Dec 2015
EUR EUR
Total revenue 260,279 307,373
Total expenses (223,669) (240,626)
------------ ------------
Total operating profit for
the period 36,610 66,747
Finance costs (137,684) (158,654)
------------ ------------
Total loss for the period (101,074) (91,907)
============ ============
Group's share of losses of - -
jointly controlled entities
============ ============
The investment in GG Eco Energy Limited is accounted for using
the equity method in accordance with IAS 28.
10. PROPERTY, PLANT AND EQUIPMENT
During the six month period ended 31 December 2016, the Group
incurred expenditure of EUR707,909 with respect to costs incurred
in the development of various projects. Included in this is a
transaction of EUR707,909 related to the purchase of biomass
gasifier equipment for the Newry biomass project.
11. SHARE CAPITAL
There were no movements in share capital in the six months ended
31 December 2016.
12. BORROWINGS
31 Dec 2016 30 June
2016
Non-current liabilities EUR EUR
at amortised cost
7.5% convertible secured
loan note b - 2,518,259
8% loan facility c 841,574 -
15% secured loan facility a 879,276 861,362
------------ ----------
1,720,850 3,379,621
============ ==========
Current liabilities at
amortised cost
Bank overdrafts 907 546
7.5% convertible secured b 2,568,932 -
loan note
8% loan facility c - 589,334
Bank borrowings d 1,073,250 1,116,250
---------- ----------
3,643,089 1,706,130
---------- ----------
Financial liabilities
carried at FVTPL
Business Expansion Scheme
Shares 105,000 105,000
---------- ----------
3,748,089 1,811,130
========== ==========
Borrowings at amortised cost
(a) On 15 July 2015, the Board of REACT announces that it has
raised GBP1,000,000 (before expenses) through a Secured Loan
Facility ("SLF"). EcoFinance, a group which sources finance for
renewable energy projects, has provided the SLF. The SLF is at a
fixed rate of 15% per annum, the interest on which will be paid
monthly in arrears. The SLF is for a five-year term and the
principal together with any accrued interest will be repayable by a
bullet repayment at the end of the term. The SLF is secured by
mortgage debentures, cross guarantees and share pledges over REACT
and its subsidiary companies.
(b) On 24 July 2015, as part of the Scheme of Arrangement
announced on 14 July 2016 as approved by the High Court in Dublin,
the existing secured debt held by Altair Group Investment Limited
("Altair" or "the Secured Creditor"), comprising the 9% Secured
Loan Note of GBP1.5 million issued in 2015 and the Examinership
financing facility of EUR500,000, was refinanced by way of a new
two-year 7.5% GBP2 million Convertible Secured Loan Note ("CSLN"),
repayable in July 2017, and is secured by the same security package
granted in favour of EcoFinance. This is governed by an
inter-creditor deed under which the SLF security plus interest and
costs shall rank in priority to the CSLN security plus interest and
costs. Under the terms of the CSLN, the Secured Creditor has the
right to convert up to GBP1 million into new Ordinary Shares at
GBP0.10.
(c) On 8 January 2016 (subsequently amended in March 2016), the
Company announced that it had secured a EUR750,000 Facility from
EBIOSS Energy AD. The Company may use the proceeds from the
facility for the continuing investment in its portfolio of biomass
gasification projects in the UK, and for working capital for the
Group. The facility is unsecured and is at a fixed rate of 8% per
annum on outstanding capital balances, which will accrue and be
repaid in full on repayment of the facility. The original agreement
noted that the facility is repayable on demand at any time after 7
January 2017.
On 12 December 2016, it was announced that the terms of the
facility had been amended by agreement between the parties such
that the amount of the facility was increased by EUR600,000 to
EUR1,350,000 and the repayment date of the increased facility was
extended to 7 January 2018. The increased facility is to cover the
working capital requirements of the Company.
(d) Bank borrowings amounting to EUR1,073,250 at the balance
sheet date are secured by a charge over the shares and assets of
Pluckanes Windfarm Limited, a subsidiary of the Group. Current
interest rates are variable and average 4.0% per annum, including
the Bank's margin. All amounts due with respect to this facility
are repayable on demand by the bank at any time at its absolute
discretion. However, without prejudice to the Bank's right to
demand immediate payment, the facility is to be repaid by way of 60
quarterly instalments. The repayment schedule of these instalments
is as follows:
31 Dec 30 June
2016 2016
Payable by instalments EUR EUR
Due less than one year 86,000 86,000
Due between one and
five years 344,000 344,000
Due more than five years 643,250 686,250
---------- ----------
1,073,250 1,116,250
========== ==========
The Directors consider the carrying amount of the borrowings
approximates to their fair value.
13. TRADE AND OTHER PAYABLES
Included in trade and other payables at 31 December 2016 is a
liability of EUR5,800,226 related to the purchase of biomass
gasifier equipment for the Newry biomass project (see note 10).
14. COMMITMENTS AND CONTINGENCIES
There have been no other changes in commitments and contingent
liabilities since the end of the previous reporting period, 30 June
2016.
15. RELATED PARTY TRANSACTIONS
During the period ended 31 December 2016, the Group realised
EUR20,344 (2015: EUR23,887) from its associated undertaking, GG Eco
Energy Limited, on consultancy fees associated with the generation
of heat. Included in trade and other receivables at 31 December
2016 is EURNil due from GG Eco Energy Limited (30 June 2016:
EURNil).
Post 31 December 2016, EBIOSS Energy AD became a 50.03% holder
of the share capital of the Company. During the period ended 31
December 2016, EBIOSS Energy AD advanced EUR225,000 to the Company
with respect to the loan facility as detailed in Note 12(c).
Interest accruing to EBIOSS Energy AD in the six months ended 31
December 2016 amounted to EUR27,240 (2015: EURNil). At 31 December
2016, the amount of outstanding principal and accrued interest due
to EBIOSS Energy AD amounted to EUR841,574 (30 June 2016:
EUR589,334).
During the six months ended 31 December 2016, the Group
purchased EUR57,909 (Six months ended 31 December 2015:
EUR4,963,993) of biomass gasifier equipment for the Newry Biomass
project from EBIOSS Energy AD. At 31 December 2016, EUR5,150,226
was payable to EBIOSS Energy AD with respect to this purchase (30
June 2016: EUR5,092,317).
During the six months ended 31 December 2016, the Group
purchased EUR650,000 (Six months ended 31 December 2015: EURNil) of
biomass gasifier equipment for the Newry Biomass project from EQTEC
Iberia SL, a related undertaking of EBIOSS Energy AD. At 31
December 2016, EUR650,000 was payable to EQTEC Iberia SL with
respect to this purchase (30 June 2016: EURNil).
16. FAIR VALUES
For financial reporting purposes, fair value measurements are
categorised into Level 1, 2 or 3 based on the degree to which
inputs to the fair value measurements are observable and the
significance of the inputs to the fair value measurement in its
entirety, which are described as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: valuation techniques for which the lowest level of
inputs which have a significant effect on the recorded fair value
are observable, either directly or indirectly.
-- Level 3: valuation techniques for which the lowest level of
inputs that have a significant effect on the recorded fair value
are not based on observable market data.
Management uses valuation techniques to determine the fair value
of financial instruments (where active market quotes are not
available) and non-financial assets. This involves developing
estimates and assumptions consistent with how market participants
would price the instrument. Management bases its assumptions on
observable data as far as possible but this is not always
available. In that case management uses the best information
available. Estimated fair values may vary from the actual prices
that would be achieved in an arm's length transaction at the
reporting date. The following table shows the Levels within the
hierarchy of financial assets and liabilities measured at fair
value on a recurring basis at period-end.
Level Level Level Total
1 2 3
31 December 2016 EUR EUR EUR EUR
--------------------------- -------- ------------- ------ -------------
Financial assets
Amounts due from
customers under
construction contracts - 101,720 - 101,720
Trade and other
receivables - 353,290 - 353,290
Cash and cash equivalents 190,303 - - 190,303
Financial liabilities
Trade and other
payables - (6,426,165) - (6,426,165)
Investor loans - (4,289,782) - (4,289,781)
BES Shares - (105,000) - (105,000)
Bank overdrafts (907) - - (907)
Bank loans - (1,073,250) - (1,073,250)
--------------------------- -------- ------------- ------ -------------
189,396 (11,439,187) - (11,249,791)
=========================== ======== ============= ====== =============
Level Level Level Total
1 2 3
30 June 2016 EUR EUR EUR EUR
--------------------------- -------- ------------- ------ ------------
Financial assets
Amounts due from
customers under
construction contracts - 150,847 - 150,847
Trade and other
receivables - 158,029 - 158,029
Cash and cash equivalents 324,195 - - 324,195
Financial liabilities
Trade and other
payables - (5,425,146) - (5,425,146)
Investor loans - (3,968,955) - (3,968,955)
BES Shares - (105,000) - (105,000)
Bank overdrafts (546) - - (546)
Bank loans - (1,116,250) - (1,116,250)
--------------------------- -------- ------------- ------ --------------
323,649 (10,306,475) - (9,837,940)
=========================== ======== ============= ====== ==============
The carrying amount of the following financial assets and
liabilities is considered a reasonable approximation of fair
value:
-- Amounts due from customers under construction contracts;
-- trade and other receivables;
-- cash and cash equivalents;
-- trade and other payables; and
-- borrowings.
17. EVENTS AFTER THE REPORTING DATE
On 10 January 2017, the Company announced a conditional debt for
equity conversion of EUR5,150,226 owed by Newry Biomass Limited
("NBL") to EBIOSS Energy AD ("EBIOSS") into 78,210,000 new ordinary
shares of EUR0.001 in the Company ("Ordinary Shares") ("EBIOSS
Shares"), which was approved by shareholders at an Extraordinary
General Meeting (EGM) held on 6 February 2017. As a result, EBIOSS
converted its debt of EUR5,150,226 into 78,210,000 new Ordinary
Shares, resulting in EBIOSS owning approximately 51% of the
company. In order to issue the EBIOSS Shares, shareholders were
also required to approve a share capital reorganisation of each
existing ordinary share of nominal value EUR0.10 into one new
ordinary share of EUR0.001 and one deferred share of EUR0.099. At
the same EGM, the Company changed its name from REACT Energy plc to
EQTEC plc.
On 20 February 2017, the Company announced that it had raised
GBP500,000 (before expenses) through a placing of 10,000,000 new
Ordinary Shares at 5.0 pence per share. In addition, the Company
has agreed with EBIOSS to convert an amount of EUR585,000
(GBP500,000) under the loan facility dated 8 January 2016, which
was amended on 12 December 2016, into 10,000,000 new Ordinary
Shares at a conversion price of 5.0 pence per share.
On 9 March 2017, the Company announced that it had raised
GBP485,000 (before expenses) through a placing of 7,461,538 new
Ordinary Shares at 6.5 pence per share. In addition, the Company
has agreed with EBIOSS to convert an amount of EUR335,717, being
equal to the outstanding balance of capital plus accrued interest
due under the loan facility dated 8 January 2016, which was amended
on 12 December 2016, into 4,491,197 new Ordinary Shares at a
conversion price of 6.5 pence per share.
Following both placings and loan conversions, EBIOSS are
currently interested in 92,701,197 Ordinary Shares, equating to
50.03 per cent. of the enlarged share capital of the Company.
18. APPROVAL OF FINANCIAL STATEMENTS
The condensed consolidated financial statements for the six
months ended 31 December 2016, which comply with IAS 34, were
approved by the Board of Directors on 24 March 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFLDVFISFID
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