TIDMLEAF
RNS Number : 9076I
Leaf Clean Energy Company
31 March 2015
31 March 2015
Leaf Clean Energy Company
Unaudited results for the period ended 31 December 2014
The board of Leaf Clean Energy Company ("Leaf") announces the
Leaf Group's unaudited results for the period ended 31 December
2014.
Significant updates for the period are:
-- NAV per share for the Leaf Group was 81.94 cents or 52.57
pence at US$1.5587 to the GBP1 (30 June 2014: 89.90 cents or 52.57
pence).
-- US$8.9 million loss on revaluation in the carrying value of the portfolio companies.
-- Leaf made an additional US$2.7 million of direct equity and
debt investments in existing portfolio businesses, inclusive of the
US$1.25 million additional investment in Lehigh, previously
announced in the annual report.
-- Leaf received cash payments of accrued and current interest
and repayments of principal on loans to its investee companies
totalling US$0.2 million and US$1.2 million respectively.
-- Leaf's cash balance was US$9.0 million as at 31 December 2014.
For further information, please contact:
Mark Lerdal +1 (415) 264 5096
Leaf Clean Energy Company
Ivonne Cantu +44 (0) 207 397 8900
Cenkos Securities plc
Chairman's Statement
In the second half of 2014 Leaf Clean Energy Company ("Leaf")
and its subsidiaries (together, the "Leaf Group") continued its
transition from an investing company to a company realising the
value of its investments. Prior to, and during the transition to
the new investment policy, the board and management have continued
to focus on improving the liquidity of the portfolio of companies
and assisting investees in reaching critical business
milestones.
As of today, we have either sold outright or are under contract
to sell Johnstown Regional Energy, LLC (JRE), Multitrade Telogia,
LLC (MT) and Multitrade Rabun Gap, LLC (MRG). With regard to the
sale of JRE, the US federal regulatory approval required involves
much more burdensome conditions than we anticipated, and therefore
the exact timeline for closing of the potential transaction cannot
be determined at this time.
In the second quarter of 2014, the Board of Directors of SkyFuel
conducted a strategic review of its business, which included an
extensive marketing effort for the sale of the company. The company
has been in negotiations with a single party for the sale of
SkyFuel since May 2014. However, given the recent tenor of
SkyFuel's negotiations with the counterparty, which have included a
significant reduction in the agreed price, we do not expect a
transaction to be consummated. Consequently Leaf has written down
this investment by US$12.7 million.
On the expense side, we are on budget for the six months ended
December 31, 2014 and are on track for the first half of 2015. As
previously reported, the staff incentive program is based entirely
upon distributions to shareholders. We have preserved our cash
balance while making limited follow on investments in Skyfuel and
JRE to preserve these companies' ability to operate
efficiently.
Financial
Net Asset Value ("NAV") per shared has moved to 81.94 cents
(52.57 pence) from the 30 June 2014 figure of 89.90 cents (52.57
pence), with Investment valuations negatively impacted by 6.9
cents/share (4.4 pence/share). While the NAV per share in cents
decreased by 8.0%, the NAV per share in pence remained the same due
to the strengthening of the dollar versus the pound sterling during
the period.
Total assets of US$105.8 million at the balance sheet date
included US$9 million of cash.
Operating expenses have fallen significantly as a result of the
cost measures discussed in the 30 June 2014 annual report and for
the 6 months to 31 December 2014 have fallen to US$1.5 million
compared with US$2.8 million for the comparable period of the
previous year. No accrual has been made for management incentives,
which are contingent on cash returned to shareholders following the
sale of investments.
Portfolio Overview
As outlined and approved by the shareholders at the EGM, Leaf
will continue to make additional investments in its existing
portfolio as appropriate in order to support these investments to
achieve optimum realisation value for the shareholders. Since July
1, 2014 Leaf made US$2.7 million of additional investments in its
existing portfolio companies. Those investments were made in Lehigh
Technologies, Inc. ("Lehigh"), SkyFuel and JRE. Currently Leaf does
not contemplate making any further material investments in its
operating companies. As previously noted, we are under contract to
sell, or have sold, three of our portfolio companies. Those under
contract are awaiting regulatory approvals and/or other conditions
precedent necessary for the final closing. The remaining assets
owned by Leaf are:
Invenergy Wind LLC, North America's largest independently owned
wind power generation company continues to execute on its capacity
expansion plans and development initiatives across its core
markets. Leaf is currently evaluating options for monetising its
investment in this well-performing asset but is not expected to
realise the value of this asset prior to 2016. Leaf's investment in
Invenergy represents more than half of the value of the
portfolio.
Escalona, a hydroelectricity development company in Mexico is in
the process of securing financing to construct a 14.5 megawatt
hydroelectric facility in Veracruz. Leaf is a co-developer of this
project with its large Mexican EPC partner. Escalona has faced and
overcome several of the development obstacles typical for energy
projects in Mexico. The company is in negotiations for several
power purchase agreements, which will add contracted off-takers to
its customer base, and also completed a power purchase agreement
with the national utility. Mexico continued its reform process with
additional plans for clean energy certificates as part of the
electricity markets. Leaf believes the value of this project is
enhanced after financing and once construction of the facility has
commenced.
Lehigh Technologies, Inc., the green materials company,
continued to grow its customer base and expanded its global
presence in the tire, industrial rubber, and plastics industries.
In the six-month period ending December 31(st) , the company saw
strong growth in all segments, including completion of a record
year for the coatings, construction, and asphalt markets.
Additionally, Lehigh announced and completed a strategic investment
from JSR Corporation, a global chemical company and one of the
leading rubber chemical companies in Asia. As part of this
investment round, existing investors made follow-on investments of
which Leaf made a follow on investment of US$1.25 million in the
equity financing, as previously announced in the 30 June 2014
annual report.
Vital Renewable Energy Company (VREC), the owner of an ethanol
plant and sugar factory in Brazil operated during the 2014 crushing
season according to plan, achieving record output. It expects to
complete a significant two-stage capacity expansion program in time
for the 2015 and 2016 crushing seasons, which is expected to boost
VREC's output by 50%. Unfortunately despite the performance of the
plant, the world market for sugar has been depressed and the
ethanol market in Brazil has also been negatively impacted by the
steep decline in the world wide price of crude oil. Very few merger
and acquisition transactions have occurred in this sector in the
last two years.
Operations
As previously stated, the Leaf Group's new investment policy
directs the board to an orderly realisation of the portfolio, which
will occur in timeframes appropriate for each asset and which
includes the ability to provide follow-on investments to existing
portfolios to preserve or increase value.
While the board is committed to realising its investments as
soon as reasonably practicable, it is in the interest of maximising
return to shareholders to continually evaluate Leaf's portfolio in
order to assess the most appropriate strategy and timeline for each
investment.
In addition, as with all private equity investments, Leaf's
remaining investments are illiquid and cannot be realised without
the assistance of the underlying portfolio company and/or other
shareholders. Therefore, there is no set timeline for realising
Leaf's investments and it is difficult to precisely predict when
the work of the Leaf Board and management will be complete.
However, it will likely take at least two years to realise all of
the investments.
Mark Lerdal
Chairman
30 March 2015
Management report
Overview
Leaf's management spent the six months ended 31 December 2014
diligently working to implement the new strategy approved by the
shareholders on 1 July 2014 (see New Strategy below). Throughout
the period, the management team remained focused on portfolio
management and on orderly realisation activities, with due
attention to maximizing realisation value. These activities
included the negotiation and signing of agreements to sell three of
the assets, including JRE, MT and MRG.
New strategy
As previously reported Leaf's shareholders voted at an
extraordinary general meeting (EGM) held on 1 July 2014 to accept
the board's proposed resolution to change the Leaf Group's
investment strategy to an orderly realisation and return of capital
to the shareholders, which will occur on an asset-by-asset basis in
timeframes appropriate for each asset. Key elements of the new
strategy, disclosed in a circular to shareholders in advance of the
EGM are:
-- Orderly and expedient realisation: The investments are to be
realised in an orderly and expedient manner, at the Leaf Board's
discretion. The board will balance the goal of returning capital
expediently to investors with the goal of maximising the
realisation value of the investments.
In executing this aspect of the new strategy, Leaf will take a
flexible approach that appropriately balances timing of any
monetisation while still maximising value for shareholders. This
means that some investments may be considered appropriate for sale
in the short term, while others may be held for a longer period, as
required by circumstances and market conditions.
-- No new investments into new companies: Leaf will not invest
in any new portfolio companies, but will make judicious additional
investments in existing portfolio companies where required to
preserve or enhance the realisation value of these investments.
-- Timing of realisations and redemptions is unpredictable:
Leaf's holdings are all in the debt and equity of unlisted
companies. Therefore, realisations of these investments require the
cooperation of the investee companies and of other investors as
well as Leaf. In addition, the individual circumstances and market
conditions surrounding each investment must be taken into account,
affecting the timescale before which a particular investment can be
realised.
Financial highlights
Below is a summary of financial highlights across the Leaf
portfolio during the six-month period ended 31 December 2014:
-- Leaf made an additional US$2.7million of direct equity and
debt investments in existing portfolio businesses, inclusive of the
US$1.25 million additional investment in Lehigh, previously
announced in the annual report;
-- Leaf received cash payments of accrued and current interest
and repayments of principal on loans to its investee companies
totalling US$0.2 million and US$1.2 million respectively.
Financial performance
The Leaf Group's total net asset value (NAV) on 31 December 2014
was US$105.5 million, US$10.2 million lower than on 30 June 2014.
This change resulted from the US$10.2 million comprehensive loss
for the period, which consisted primarily of a US$8.9 million loss
on revaluation in the carrying value of the portfolio companies and
US$1.5 million of administration expenses, partially offset by
US$0.2 million of interest income on loans to portfolio companies.
At the end of the period, US$9.0 million of Leaf's NAV was held in
cash and US$96.0 million in investments.
NAV per share for the Leaf Group was 81.94 cents or 52.57 pence
at US$1.5587 to the GBP1. This was a decrease of 8.9 per cent for
the six-month period from 30 June 2014. The decrease was primarily
due to the unrealised loss on investments (-7.7%) and
administration expense (-1.3%), slightly offset by interest income
on investments (+0.2%).
As a result of measures taken to bring spending in line with the
new strategy, Leaf's expenses for the six-month period ended 31
December 2014 were US$1.3 million lower than the comparable prior
period, having adhered to the previously announced US$3.1 million
budget for the current fiscal year. Leaf is currently on track to
meet this budget for the full year. Note that, due to uncertain
timing and amounts the budget does not include transaction-related
costs or payments of incentives under the previously announced
revised staff incentive plan. Leaf has not accrued anything for
these items, other than certain transaction-related costs that were
incurred during the period.
Portfolio update
Key updates regarding Leaf's portfolio companies during the
interim report period included the following:
-- Invenergy Wind LLC (Invenergy), North America's largest
independently owned wind power generation company, commissioned
several new wind energy projects, increasing its installed capacity
by approximately 400 megawatts. The company also completed a number
of new project financings and raised in excess of US$700 million.
The Company has commenced construction of numerous projects, some
of which are expected to be commissioned during the 2015 calendar
year.
-- Energía Escalona (Escalona), the hydroelectric project
development company based in Mexico City, continued development of
its flagship hydroelectric development project and received certain
required construction permits in the period. In addition, Escalona
completed and signed a long-term off-take contract with the
national utility in Mexico and is in negotiations to sign
additional power purchase agreements with private off-takers. The
company is continuing in the financing due diligence process with
an expectation of beginning construction in 2015.
-- Johnstown Regional Energy, LLC (JRE), a landfill gas
reclamation company, continued sales to contracted customers in the
six months to 31 December 2014 with no material safety or
operations interruptions in the reporting period. The company is
continuing in the monetization process, as previously announced,
with progress to-date that is consistent with Leaf Management's
expectations. Specifically, on 12 November 2014 an affiliate of
Leaf has entered into a binding stock purchase agreement to sell
100% of Leaf's interests in JRE for cash consideration.
Importantly, this agreement is subject to certain specific and
customary conditions precedent, including state and federal
regulatory approvals, which adds an element of uncertainty to the
potential transaction.
Leaf Management continues to work with its advisors and staff
regarding these conditions precedent, particularly the regulatory
approvals, and has secured conditional state-level approval as of
the time of this filing. While the regulatory approval process may
be completed in the near term, given the nature of those regulatory
approvals at the federal level the timeline for closing of the
potential transaction cannot be determined precisely at this point
in time.
-- The management of SkyFuel, Inc. (SkyFuel), the solar thermal
power technology company, continues discussions for a change of
control transaction with a strategic buyer. However, given the
tenor of recent negotiations with the counterparty in the potential
transaction, Leaf Management does not expect this transaction to be
consummated and consequently Leaf's investment in SkyFuel has been
written down by US$12.7 million.
-- Lehigh Technologies, Inc. (Lehigh), the green materials
company, continued its global expansion with increased non-U.S.
sales and strong overall revenue growth. Sales in the European
market, the company's newest market, continued to grow as new
customers were added. Additionally, Lehigh completed a strategic
investment from JSR Corporation, a leading Asian chemicals
manufacturer, which will accelerate growth into Asian markets.
-- Vital Renewable Energy Company (VREC), a developer of
sugar-cane-based ethanol facilities in Brazil achieved a record
2014/2015 crushing season with growth in excess of 20% over the
prior period. The company was also able to hit or exceed its key
financial targets.
-- The sale of Multitrade Telogia, LLC (MT), the biomass power
plant, was completed subsequent to the period end, on 11 March
2015, on terms substantially similar to those previously disclosed
in Leaf's annual report for 30 June 2014, with total proceeds to
Leaf and other investors of up to US$2.5 million. Leaf received a
nominal amount at closing, with the balance contingent upon a
number of events expected to occur after closing. On 7 November
2014, Multitrade Rabun Gap, LLC (MRG), the biomass power plant,
entered into a contract for sale, and the sale is expected to be
completed by early next quarter.
In the coming months the Leaf Management team will continue its
focus on maximizing portfolio value and achieving expedient
realisations of the assets to enable future distributions to the
shareholders. This effort will carefully take into account the
appropriate timing required for each investment to maximise
realisation value. While this timing is uncertain for the
realisation of a given investment, for the reasons given above and
in the Chairman's Statement, it is likely to take two years or more
to realise all of the investments. As a result, the Leaf Board and
management have maintained and will continue to maintain an
appropriate cash balance to ensure that Leaf can execute the new
strategy.
30 March 2015
Condensed consolidated statement of comprehensive income
for the six months ended 31 December 2014
Note (Unaudited) (Unaudited)
6 months ended 6 months ended
31 December 31 December
2014 2013
US$'000 US$'000
Interest income on cash
balances - 6
Interest income on investments
at fair value through
profit or loss 169 751
Net (loss)/gain on investments
at fair value through
profit or loss 11.1 (8,885) 358
Net foreign exchange loss (7) (2)
------------------------------------ ------- ---------------- ----------------
Gross portfolio (loss)/return (8,723) 1,113
Administration expenses 6 (1,507) (2,808)
------------------------------------ ------- ---------------- ----------------
Loss before taxation (10,230) (1,695)
Taxation (12) (99)
------------------------------------ ------- ---------------- ----------------
Total loss and total comprehensive
loss for the period (10,242) (1,794)
==================================== ======= ================ ================
Loss for the period attributable
to equity holders (10,242) (1,794)
Basic and diluted loss
per share (cents) 9 (7.96) (1.39)
==================================== ======= ================ ================
The accompanying notes form an integral part of these interim
condensed consolidated financial statements.
Condensed consolidated statement of financial position
as at 31 December 2014
(Unaudited) (Audited)
Note 31 December 2014 30 June 2014
US$'000 US$'000
Assets
Investments at fair
value through profit
or loss 11.1 95,950 103,300
Property, plant and
equipment 8 15
Total non-current
assets 95,958 103,315
------------------------------ ----- ----------------- -------------
Trade and other receivables 793 884
Restricted cash 7 30 69
Cash and cash equivalents 9,015 12,002
------------------------------ ----- ----------------- -------------
Total current assets 9,838 12,955
------------------------------ ----- ----------------- -------------
Total assets 105,796 116,270
============================== ===== ================= =============
Equity
Share capital 14 28 28
Share premium 14 306,809 306,809
Retained losses (201,339) (191,097)
------------------------------ ----- ----------------- -------------
Total equity 105,498 115,740
------------------------------ ----- ----------------- -------------
Liabilities
Trade and other payables 298 530
Total current liabilities 298 530
------------------------------ ----- ----------------- -------------
Total liabilities 298 530
------------------------------ ----- ----------------- -------------
Total equity and liabilities 105,796 116,270
============================== ===== ================= =============
Net asset value per
share (cents) 81.94 89.90
============================== ===== ================= =============
The accompanying notes form an integral part of these interim
condensed consolidated financial statements.
The interim condensed consolidated financial statements were
approved by the board of directors on 30 March 2015 and signed on
their behalf by:
Mark Lerdal Stephen Coe
Executive Chairman Non-Executive Director
Condensed consolidated statement of changes in equity
for the six months ended 31 December 2014
Share Share Retained Total
Capital Premium losses equity
US$'000 US$'000 US$'000 US$'000
------------------------------------- ---------- ---------- ------------ -----------
Balance at 30 June 2014 (audited) 28 306,809 (191,097) 115,740
Total comprehensive loss for
the period - - (10,242) (10,242)
Balance at 31 December 2014
(unaudited) 28 306,809 (201,339) 105,498
===================================== ========== ========== ============ ===========
Share Capital Share Premium Retained losses Total equity
US$'000 US$'000 US$'000 US$'000
------------------------------------------- -------------- -------------- ---------------- -------------
Balance at 30 June 2013 (audited) 28 306,809 (123,170) 183,667
Total comprehensive loss for the period - - (1,794) (1,794)
Balance at 31 December 2013 (unaudited) 28 306,809 (124,964) 181,873
=========================================== ============== ============== ================ =============
The accompanying notes form an integral part of these interim
condensed consolidated financial statements.
Condensed consolidated statement of cash flows
for the six months ended 31 December 2014
(Unaudited) (Unaudited)
6 months 6 months
ended ended
31 December 31 December
2014 2013
Note US$'000 US$'000
Cash flows from operating
activities
Interest received on
cash balances - 6
Interest received on
loans 11.1 169 751
Income tax refund 15 -
Received from debtors 52 -
Operating expenses paid (1,698) (2,830)
Income tax paid (28) (108)
------------------------------ ----- -------------- --------------
Net cash used in operating
activities (1,490) (2,181)
------------------------------ ----- -------------- --------------
Cash flows from investing
activities
Purchase of financial
assets at fair value
through profit or loss 11.1 (2,715) (5,898)
Repayment of capital
by investee companies 11.1 1,180 6,339
Net cash (used in)/generated
by investing activities (1,535) 441
------------------------------ ----- -------------- --------------
Net decrease in cash
and cash equivalents (3,025) (1,740)
Cash and cash equivalents
at start of the period 12,071 20,995
Effect of exchange rate
fluctuations on cash
and cash equivalents (1) (1)
------------------------------ ----- -------------- --------------
Cash and cash equivalents
at end of the period 9,045 19,254
------------------------------ ----- -------------- --------------
The accompanying notes form an integral part of these interim
condensed consolidated financial statements.
(Unaudited) (Unaudited)
6 months 6 months
ended ended
31 December 31 December
2014 2013
Reconciliation of total gain/(loss) US$'000 US$'000
and total comprehensive gain/(loss)
for the period to net cash used
in operating activities
Total (loss)/gain and total comprehensive
(loss)/gain for the period (10,242) (1,794)
Adjustments for:
Net loss/(gain) on investments
at fair value through profit
or loss 8,885 (358)
Depreciation expense 6 6
Net foreign exchange loss 2 2
Taxation 12 108
------------------------------------------- ------------- -------------
Operating loss before changes
in working capital (1,337) (2,036)
Movement in trade and other receivables 91 (35)
Movement in trade and other payables (232) (2)
Income taxes paid (net of refunds
received) (12) (108)
------------------------------------------- ------------- -------------
Net cash used in operating activities (1,490) (2,181)
------------------------------------------- ------------- -------------
Notes to the interim condensed consolidated financial
statements
for the six months ended 31 December 2014
1 Leaf
Leaf was incorporated and registered in the Cayman Islands on 14
May 2007. Leaf was established to invest in clean energy projects,
predominantly in North America. Clean energy includes activities
such as the production of alternative fuels, renewable power
generation and the use of technologies to reduce the environmental
impact of traditional energy. The investments of Leaf will be
realised in an orderly and expedient manner, that is, with a view
to achieving a balance between: (i) returning cash to Shareholders
at such times and from time to time and in such manner as the Board
may (in its absolute discretion) determine; and (ii) maximising the
realisation value of Leaf's investments. In light of the
realisation strategy, there will be no specific investment
restrictions applicable to Leaf's portfolio going forward.
The Shares of Leaf were admitted to trading on the AIM market of
the London Stock Exchange ("AIM") on 28 June 2007 when dealings
also commenced.
Leaf's agents and the management team (all employees of Leaf's
subsidiary) perform all significant functions. Accordingly, Leaf
itself has no employees.
The consolidated financial statements of the Leaf Group as at
and for the year ended 30 June 2014 are available upon request from
Leaf's registered office at PO Box 309, Ugland House, George Town,
Grand Cayman KY1-1104, Cayman Islands or at
www.leafcleanenergy.com.
The interim condensed consolidated financial statements as at
and for the six months ended 31 December 2014 are for the Leaf
Group. Refer to note 13.
2 Statement of compliance
These interim condensed consolidated financial statements have
been prepared in accordance with IAS 34 Interim Financial
Reporting. They do not include all of the information required for
full annual financial statements, and should be read in conjunction
with the consolidated financial statements of Leaf as at and for
the year ended 30 June 2014.
These interim condensed consolidated financial statements were
approved by the board of directors on 30 March 2015.
3 Significant accounting policies
Save as for explained above, the accounting policies applied by
Leaf in these interim condensed consolidated financial statements
are the same as those applied by Leaf in its consolidated financial
statements as at and for the year ended 30 June 2014.
4 Use of estimates and judgements
The preparation of interim condensed consolidated financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
The significant judgements made by management in applying Leaf's
accounting policies and the key sources of estimation uncertainty
were the same as those applied to the consolidated financial
statements as at and for the year ended 30 June 2014.
The most significant area requiring estimation and judgement by
the directors is the valuation of unquoted investments, (see note
11).
5 Financial risk management
The Leaf Group's financial risk management objectives and
policies are consistent with those disclosed in the consolidated
financial statements as at and for the year ended 30 June 2014.
The below table summarises the valuation methodologies and key
assumptions in deriving the aggregate fair value of the investments
as at 31 December 2014 of US$96.0 million (30 June 2014: US$103.3
million):
Valuation Significant
Name of Investment methodology inputs / assumptions
--------------------------------- ----------------- ----------------------
Johnstown Regional Energy Market value Transaction
LLC ("JRE") terms, discount
rate
Invenergy Wind LLC ("Invenergy") Market value Choice of
comparable
companies,
publicly available
data about
transactions
and operating
results
SkyFuel Inc ("SkyFuel") Market value Transaction
terms
Multitrade Rabun Gap, Market value Transaction
LLC ("MRG") terms, discount
rate
Vital Renewable Energy Market value Choice of
Company, LLC ("VREC") comparable
companies,
publicly available
data about
transactions
and operating
results
Multitrade Telogia, Market value Transaction
LLC ("MT") terms, discount
rate
Energia Escalona s.r.l. Market value Forecast cash
("Escalona") Income approach flows discount
rate
Lehigh Technologies Market value Transaction
Inc. ("Lehigh") terms
--------------------------------- ----------------- ----------------------
The below table summarises the valuation methodologies and key
assumptions in deriving the aggregate fair value of the investments
as at 30 June 2014.
Valuation Significant
Name of Investment methodology inputs / assumptions
--------------------------------- ----------------- -----------------------
Johnstown Regional Energy Market value Proposed transaction
LLC ("JRE") terms
Invenergy Wind LLC ("Invenergy") Market value Choice of
comparable
companies,
publicly available
data about
transactions
and operating
results
SkyFuel Inc ("SkyFuel") Market value Proposed transaction
terms, forecast
cash flows
discount rate
Multitrade Rabun Gap, Estimated Estimated
LLC ("MRG") recovery value recovery value
MaxWest Environmental Estimated Estimated
Systems, Inc. ("MaxWest") recovery value recovery value
Vital Renewable Energy Market value Choice of
Company, LLC ("VREC") comparable
companies,
publicly available
data about
transactions
and operating
results
Multitrade Telogia, Market value Transaction
LLC ("MT") terms, discount
rate
Energia Escalona s.r.l. Market value Forecast cash
("Escalona") Income approach flows discount
rate
Lehigh Technologies Market value Transaction
Inc. ("Lehigh") terms
--------------------------------- ----------------- -----------------------
6 Administration expenses
(Unaudited) (Unaudited)
6 months ended 6 months ended
31 December 2014 31 December 2013
US$'000 US$'000
Salaries and related costs 476 870
Legal and professional fees 263 556
Directors' remuneration (note 8) 172 566
Administration fees 100 113
Rental fees 88 85
Travel and subsistence expenses 78 301
Audit fees 48 62
Other expenses 282 255
---------------------------------- ------------------ ------------------
Total 1,507 2,808
================================== ================== ==================
The legal and professional fees of US$263k included US$84k of
transaction related costs.
7 Restricted cash
The restricted cash balance at 31 December 2014 consisted of
collateral deposit of US$30,157 associated with the corporate
credit cards for Leaf Clean Energy USA, LLC held by HSBC US.
8 Directors' remuneration
Details of the directors' basic annual remuneration areas in
effect during the period was as follows:
31 December 2014
Basic annual remuneration
US$'000
Mark Lerdal (executive chairman) 125
Stephen Coe 35
Peter O'Keefe 15
James Potochny (resigned 24 November -
2014)
175
====================================== ============================
Directors' fees and expenses payable during the six month ended
31 December 2014 were:
31 December 2014 Directors' Annual Reimbursements Total
fees bonus
US$'000 US$'000 US$'000 US$'000
Mark Lerdal (executive
chairman) 125 - 23 148
Stephen Coe 35 - 19 54
Peter O'Keefe 15 - - 15
James Potochny (resigned - - - -
24 November 2014)
175 - 42 217
========================== =========== ======== =============== ========
31 December 2013 Directors' Annual Reimbursements Total
fees bonus
US$'000 US$'000 US$'000 US$'000
Peter Tom (chairman) 100 - - 100
Bran Keogh 200 175 - 375
J. Curtis Moffatt 40 - - 40
Peter O'Keefe 40 - 11 51
380 175 11 566
====================== =========== ======== =============== ========
Mr. Potochny currently receives an annual base salary of
US$230,000 as chief financial officer of Leaf's wholly-owned
investment advisory subsidiary.
9 Basic loss per share
Basic and Diluted
Basic and diluted loss per share is calculated by dividing the
loss attributable to equity holders of Leaf by the weighted average
number of ordinary shares in issue during the period:
(Unaudited) (Unaudited)
6 months ended 6 months ended
31 December 2014 31 December 2013
Loss attributable to equity holders (US$'000) (10,242) (1,794)
Weighted average number of ordinary shares in issue (thousands) 128,745 128,745
----------------------------------------------------------------- ------------------ ------------------
Basic and fully diluted loss per share (cents) (7.96) (1.39)
================================================================= ================== ==================
There is no difference between the basic and diluted loss per
share for the period.
10 Investments
Investments in underlying investee companies (held through
various wholly owned intermediary subsidiaries) comprise ordinary
stock, loans, convertible notes and preferred stock carrying a
cumulative preferred dividend, preferential return of capital and
capped rights to share in profits. The directors, with advice from
the in-house management team, Leaf Clean Energy USA, LLC, have
reviewed the carrying value of each investment and calculated the
aggregate value of the Leaf Group's portfolio. Investments are
measured at the directors' estimate of fair value at the reporting
date, in accordance with IAS 39 'Financial Instruments: Recognition
and measurement'.
11 Critical accounting estimates and assumptions
These disclosures supplement the commentary on the use of
estimates and judgments (see note 4).
Key sources of estimation uncertainty
Determining fair values
The determination of fair values for financial assets for which
there is no observable market prices requires the use of valuation
techniques as described in accounting policy 3.1 from the 30 June
2014 financial statements. For financial instruments that trade
infrequently and have little price transparency, fair value is less
objective, and requires varying degrees of judgement depending on
liquidity, concentration, uncertainty of market factors, pricing
assumptions and other risks affecting the specific instrument. See
also "Valuation of financial instruments" below.
Critical judgements in applying the Leaf Group's accounting
policies
Critical judgements made in applying the Leaf Group's accounting
policies include:
Valuation of financial instruments
The Leaf Group's accounting policy on fair value measurements is
discussed in accounting policy 3.1 from the 30 June 2014
consolidated financial statements. The Leaf Group measures fair
value using the following hierarchy that reflects the significance
of inputs used in making the measurements:
-- Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
-- Level 2: Valuation techniques based on observable inputs,
either directly (i.e., as prices) or indirectly (i.e., derived from
prices). This category includes instruments valued using: quoted
market prices in active markets for similar instruments: quoted
market prices for identical or similar instruments in markets that
are considered less than active; or other valuation techniques
where all significant inputs are directly or indirectly observable
from market data.
-- Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments where the valuation
technique includes inputs not based on observable data and the
unobservable inputs have a significant effect on the instrument's
valuation. This category includes instruments that are valued based
on quoted prices for similar instruments where significant
unobservable adjustments or assumptions are required to reflect
differences between the instruments.
Fair values of financial assets and financial liabilities that
are traded in active markets are based on quoted market prices or
dealer price quotations. For all other financial instruments the
Leaf Group determines fair values using valuation techniques.
Leaf, through its wholly-owned subsidiaries, holds full or
partial ownership interests in a number of unquoted clean energy
companies. These investments are classified as level 3 in the fair
value hierarchy.
11.1 Investments at fair value through profit or loss
The following table shows a reconciliation of the opening
balances to the closing balances for fair value measurements in
Level 3 of the fair value hierarchy.
(Unaudited) (Audited)
31 December 2014 30 June 2014
US$'000 US$'000
---------------------------------------- ----------------- -------------
Balance brought forward 103,300 162,633
Additional investments in subsidiaries 2,715 13,502
Repayment of capital investment (1,180) (9,448)
Movement in fair value of investments (8,885) (63,387)
Balance carried forward 95,950 103,300
======================================== ================= =============
Investments are stated at fair value through profit or loss on
initial recognition. Loans are reviewed for impairment in
conjunction with the related equity investment in the investee
company. All investee companies are unquoted. Leaf has an
established control framework with respect to the measurement of
fair values. The directors, with advice from the in-house
management team, Leaf Clean Energy USA, LLC, has overall
responsibility for all significant fair value measurements,
including Level 3 fair values. The in-house management team
regularly reviews significant unobservable inputs and valuation
adjustments.
11.2 (a) Significant unobservable inputs used in measuring fair value
The table below sets out information about significant
unobservable inputs used at 31 December 2014 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
Sensitivity to
Fair value at 31 changes in
December 2014 Valuation Unobservable significant
Description US$'000 technique input Range unobservable inputs
------------------ ----------------- ----------------- ------------------ ------------------ --------------------
Unlisted private 95,950 Transaction and EBITDA multiple 7.4 The estimated fair
equity market value would
investments multiples, increase (decrease)
income approach, if the EBITDA or
transaction operational
terms multiples
were higher/lower.
Operational US$73/mm tons -
multiples US$85/mm tons
Operational $1,590/kW -
multiples US$1,945/kW
Discount rates
13.1%-14.2% The estimated fair
value would
increase/(decrease)
if the discount
rate were
lower/higher
Forecast cash n/a n/a
flows
Transaction n/a n/a
terms
The table below sets out information about significant
unobservable inputs used at 30 June 2014 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
Sensitivity to
Fair value at 30 changes in
June 2014 Valuation Unobservable significant
Description US$'000 technique input Range unobservable inputs
----------------- ----------------- ----------------- ------------------ ------------------ ---------------------
Unlisted private 103,300 Transaction and EBITDA multiple 10.4 The estimated fair
equity market value would increase
investments multiples, (decrease) if the
income approach, EBITDA or
transaction operational
terms multiples
were higher/lower.
Operational US$108/mm tons -
multiples US$97/mm tons
Operational US$1,828/kW -
multiples US$1,964/kW
Discount rates
13.6%-22.9% The estimated fair
value would
increase/(decrease)
if the discount rate
were lower/higher
Forecast cash n/a n/a
flows
Transaction n/a n/a
terms
Estimated n/a The estimated fair
recovery value value would
increase/(decrease)
if the recovery
value were
higher/lower
Significant unobservable inputs are developed as follows.
EBITDA and operational multiples: Represent amounts that market
participants would use when pricing the investments. EBITDA and
operational multiples are selected from comparable public companies
or publicly disclosed transactions based on geographic location,
industry, size, target markets and other factors that management
considers to be reasonable. The traded multiples for the comparable
companies are determined by dividing the enterprise value of the
company by its EBITDA or operational metric and further adjusted if
appropriate for considerations such as the lack of marketability
and other differences between the comparable peer group and
specific company.
Discount rate: Represents the rate used to discount projected
levered or unlevered forecasted cash flows and terminal value for a
project or company to their present values as part of the
calculation of enterprise value for the project or company. Leaf
uses a capital asset pricing model (CAPM) approach to calculate a
discount rate appropriate for each project or company.
Forecast cash flows: Cash flows are forecast by the Leaf Group
by considering possible operational scenarios and transaction
terms, the amount to be paid or received under each scenario and
the probability of each scenario.
11.2 (b) Effects of unobservable input on fair value measurement
Although Leaf believes that its estimates of fair value are
appropriate, the use of different methodologies or assumptions
could lead to different measurements of fair value. For fair value
measurements in Level 3, changing one or more of the assumptions
used to reasonably possible alternative assumptions would have the
following effects on Leaf's net asset value (NAV) at 31 December
2014 (US$ millions): (Favourable: 18.5, Unfavourable: (13.5)).
The favourable and unfavourable effects of using reasonably
possible alternative assumptions for the above unobservable inputs
for the valuation of Leaf's unlisted private equity investments
have been calculated by varying these inputs in the applicable
valuation models based on a reasonable lower and upper range as
determined by Leaf Management. The most significant unobservable
inputs are the discount rate, either WACC or cost of equity, EBITDA
and operational multiples. The WACC and cost of equity used in the
models at 31 December 2014 ranged between 13.1% and 14.2% (with
reasonably possible alternative assumptions ranging between 12.1%
and 15.2%). The EBITDA multiple used in the models at 31 December
2014 was 7.4, with reasonably possible alternative assumptions of
10.4 and 4.4. The operational multiples used in the models at 31
December 2014 ranged from US$73/mm tons to US$85/mm tons, and
US$1,590/MW to US$1,945/MW, with reasonably possible alternative
assumptions of US$66/mm tons to US$100/mm tons, and US$625/MW to
US$2,288/MW.
For fair value measurements in Level 3, changing one or more of
the assumptions used to reasonably possible alternative assumptions
would have the following effects on Leaf's net asset value (NAV) at
30 June 2014(US$ millions): (Favourable:29.1, Unfavourable:
(29.4)).
The discount rates used in the models at 30 June 2014 ranged
between 13.6% and 22.9% (with reasonably possible alternative
assumptions ranging between 12.6% and 23.9%). The EBITDA multiple
used in the models at 30 June 2014 was 10.4, with reasonably
possible alternative assumptions of 13.0 and 8.0. The operational
multiples used in the models at 30 June 2014 ranged from US$97/mm
tons to US$108/mm tons, and US$1,828/kW to US$1,964/kW, with
reasonably possible alternative assumptions of US$67/mm tons to
US$127/mm tons, and US$777/kW to US$2,619/kW.
12 Financial instruments not measured at fair value
The financial instruments not measured at fair value through
profit or loss are short-term financial assets and financial
liabilities whose carrying amounts approximate their fair value,
these are all categorised within level 2 of the fair value
hierarchy.
13 The subsidiaries
The following subsidiaries of the Leaf Group are held at fair
value on the consolidated financial statements in accordance with
IFRS 10:
Country of Principal activity Effective interest held
incorporation
-------------------------------------- -------------------- -------------------- ------------------------
Energía Escalona Coopertief U.A Netherlands Hydro Energy 87.5%
Escalona B.V Netherlands Hydro Energy 87.5%
Energíia Escalona I S.A. de C.V Mexico Hydro Energy 87.5%
Energía Escalona s.r.l. Mexico Hydro Energy 87.5%
Johnstown Regional Energy LLC USA (Pennsylvania) Landfill Gas 100%
Multitrade Rabun Gap LLC USA (Virginia) Biomass 75%(1)
Multitrade Telogia LLC USA (Virginia) Biomass 66.25%
Telogia Power LLC USA (Florida) Biomass 66.25%
SkyFuel Inc USA (Delaware) Solar Energy 54.4%
Leaf Clean Energy USA, LLC USA (Delaware) 100%
Leaf Escalona Company Cayman Islands 100%
Leaf Hydro Company Cayman Islands 100%
Leaf Invenergy Company Cayman Islands 100%
Leaf Invenergy US Investments, Inc USA (Delaware) 100%
Leaf Lehigh Company Cayman Islands 100%
Leaf LFG Company Cayman Islands 100%
Leaf LFG US Investments, Inc. USA (Delaware) 100%
Leaf MaxWest Company USA (Delaware) 100%
Leaf Bioenergy Company Cayman Islands 100%
Leaf Biomass Company Cayman Islands 100%
Leaf Biomass Investments, Inc. USA (Delaware) 100%
Leaf SkyFuels Company Cayman Islands 100%
Leaf Solar Company Cayman Islands 100%
Leaf Wind Company Cayman Islands 100%
Leaf VREC Cayman Islands 100%
Leaf Waste Energy Cayman Islands 100%
(1) Voting rights 81.9%
14 Share capital
Ordinary shares Number of Share capital Share premium
of GBP0.0001 each shares
US$'000 US$'000
At 30 June 2014
and 31 December
2014 128,745,726 28 306,809
The authorised share capital of the Leaf Group is GBP25,000
divided into 250 million Ordinary Shares of GBP0.0001 each.
Under the terms of the placement on 22 June 2007, Leaf issued
200,000,000 shares of GBP0.0001 each par value at a price of GBP1
each. The difference between the issue price and the par value was
transferred to share premium account, net of share issue
expenses.
Leaf have repurchased 71,254,274 shares, since 30 June 2012
there have been no further share repurchases.
Share capital and premium received was translated to US Dollars
at the exchange rate prevailing at the date of receipt of the
proceeds.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of Leaf. All shares rank equally with regards to
the Leaf Group's assets.
Capital management
At the 1 July 2014 extraordinary general meeting of Leaf's
shareholders, Leaf's shareholders voted to accept the board's
proposed resolution to change the Leaf Group's investment strategy
to an orderly realisation and return of capital to the
shareholders, which will occur on an asset-by-asset basis in
timeframes appropriate for each asset. The details of the new
strategy are disclosed in the EGM circular for this meeting, which
can be found on Leaf's website. The board's policy is to maintain
sufficient capital to sustain its orderly realisation strategy,
including prudent additional investment in its existing portfolio
companies as required to optimize realisation value of the
assets.
The Leaf Group's capital comprises share capital, share premium
and reserves and is not subject to externally imposed capital
requirements.
15 Subsequent Events
The sale of Multitrade Telogia, LLC was completed subsequent to
the period end, on 11 March 2015, on terms substantially similar to
those previously disclosed in Leaf's annual report for 30 June
2014, with total proceeds to Leaf and other investors of up to
US$2.5 million. Leaf received a nominal amount at closing, with the
balance contingent upon a number of events expected to occur after
closing.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR WGUBAWUPAGAU
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