TIDMRUR
RNS Number : 0841J
Rurelec PLC
06 June 2014
6 June 2014
Rurelec PLC
("Rurelec" or "the Company")
Audited results for the year ended
31st December 2013
Rurelec PLC (AIM: RUR), the electricity utility focused on
ownership and operation of power generation plants in Latin
America, announces its audited results for the year ended 31
December 2013.
Highlights
-- Continued strong performance in Argentina
-- Focus now on completing finance of Rurelec sponsored projects in Chile and Peru
-- In Chile - two projects with 295 MW of thermal capacity under development
-- In Peru - commercial operation of the 5.3MW run of river
hydro early in third quarter 2014; a further 12MW under development
with PPA awarded by the Government; and a 255 MW run of river hydro
under development awaiting PPA bid process from the Government
-- Acquisition of Independent Power Corporation PLC which has provided profit of GBP2.1 million
-- Revenues improve to GBP15.1 million (2012: GBP13.4 million)
-- Loss before tax of GBP39.2 million (2012: loss GBP2.5 million)
-- Loss per share 7.92p (2012: loss 0.75p)
-- Group borrowings of GBP26.1 million (2012: GBP13.6 million)
-- Net Asset Value per share 10.46p (2012: 19.33p)
-- Payment of US $31.5 million received in settlement by Bolivia
of the Arbitration Award of the Permanent Court of Arbitration in
The Hague in February 2014.
Commenting on the results, Peter Earl, Rurelec's Chief
Executive, said:
"The results released today are massively affected by the write
down we have been forced to take against the book value of our
Bolivian assets following the disastrous Arbitration Award of the
Permanent Court of Arbitration in The Hague on 1st February 2014
and the subsequent pressure placed on us by an avaricious and mean
spirited lender whose lack of support forced us to agree with the
Government of Bolivia a large discount against the already
unsatisfactory PCA Award.
In spite of these recent traumas, the underlying performance of
the Company's business has shown a real improvement. The Energia
del Sur plant in Patagonia, Argentina continues to run well and
contribute positive cash flow to the Group. The reported loss at
EdS is due to foreign exchange write downs. Argentina's recent
announcement of a Paris Club settlement is a major step towards
resolving the country's debt and currency issues, and we believe
that we are now in Argentina at the start of a new period of
economic resurgence. We already see positive signs and expect to be
able to take advantage of new opportunities to supply power
profitably.
In Peru we are in the final weeks of completing our first
run-of-river hydro plant and we have a further two plants under
development. In Chile, during 2013, we have laid the foundations
for an exciting year in 2014, when we expect to commence commercial
operations on the first of our two greenfield plants, which will
overall add 295 MW to our portfolio and which will see us
generating electricity in three countries in South America.
With the Bolivian claim now settled and paid, albeit at a
fearful cost to us all, I look forward to returning Rurelec to
being a reliable power producer, capable of paying dividends and
demonstrating growth through hard work and ingenuity."
- Ends -
For further information please contact log on to our website
www.rurelec.com or contact:
Peter Earl, CEO, Rurelec PLC Tel: 020 7793 5610
Ana Ribeiro, Head of Communications
-------------------------------------- -------------------
Paul Shackleton Tel: 020 7776 6550
Daniel Stewart & Company Plc
-------------------------------------- -------------------
James Joyce and Nick Field Tel: 020 7220 1666
W.H. Ireland
-------------------------------------- -------------------
CHAIRMAN'S STATEMENT
Dear Shareholder
I hereby present the results of Rurelec PLC ("Rurelec") for the
financial year ended 31 December 2013, my first since joining the
Board in October 2013. It has been a pivotal year for the Company
as the arbitration hearing against Bolivia was completed in April
2013, and although the compensation award, which was announced by
the Permanent Court of Arbitration ("PCA") in February 2014, was
significantly less than management expected, it allows us to look
to the future away from the shadow of Bolivia.
In doing so, and in a bid to diversify our business, we acquired
Independent Power Corporation PLC ("IPC") in June 2013, a company
with an eighteen year history of developing, constructing and
operating power generation facilities for corporate and government
clients on four continents. The acquisition has seen us continue to
switch from being a pure owner of power plants to an active
developer and operator, both in Latin America and elsewhere.
In October, with my appointment to the Board, Andrew Morris
stood down after three and a half years as Non-Executive Chairman
to take over as Group Finance Director, whilst Elizabeth Shaw has
become Executive Director Project Finance. In addition, we are
pleased to welcome Brian Rowbotham to the Board as Senior
Independent Non-Executive Director. Brian is a qualified Chartered
Accountant and brings with him extensive corporate finance
experience accumulated through his time working in the City.
Strategy
The Group strategy is to seek generation opportunities for small
to medium sized power plants in countries where we can leverage our
significant proven experience of power plant development and
operation. We have concentrated on the southern cone of South
America in Argentina, Chile and Peru in recent years. However, we
are also looking at opportunities in Africa, Europe and Asia where
the addition of the past experience of IPC has been a critical
development in the year. The objective of the Group is to own and
operate a portfolio of generating assets in a number of different
countries with differing ownership structures. In this way we
minimise the country risk whilst bringing in funding partners to
ensure that our capital is used in the most efficient way.
Further details of the operations of the Company can be found in
the Chief Executive's Review of Operations.
I present the results of Rurelec PLC for the financial year
ended 31 December 2013.
Group Results
The Group loss after tax for the financial year under review is
GBP39.2 million (2012: GBP3.1 million loss). Most of the loss is
due to the low level of award in the arbitration against the
Government of Bolivia. The carrying value of the Bolivian entity
was GBP51.5 million and was reported as a receivable in the 2012
Report and Accounts. The amount of the investment claimed under
Bilateral Investment Treaties, as submitted to the Permanent Court
of Arbitration in The Hague, was US$142.3 million and the
Arbitration proceedings were held in April 2013. The award amount
was for US$28.9 million (approximately GBP17.5 million) plus
interest from 1 May 2010 to the date when the award was paid
leading to a write down of GBP29.5m. In addition the Tribunal
representing the ("PCA") decided not to award costs to either side.
The cost of the Arbitration to Rurelec was GBP4.9 million. The book
loss for the period is GBP34.4 million in relation to the Bolivian
settlement.
In addition to this loss, are the costs of the Birdsong loan of
US$15.45 million taken out in July 2012 which relate to interest on
the loan and contingent value rights related to the award from
Bolivian arbitration amounting to GBP3.9 million. The Birdsong loan
was repaid on 2 June 2014.
The Group figures also include a loss attributed to the
unrealised foreign exchange losses from the Argentinian operation
of GBP3.1 million.
The individual results for the operations in Argentina, Peru,
Chile and for IPC are shown below.
Energia del Sur S.A. Results
At the operating level, and therefore based on 100 per cent of
Energia del S.A.'s ("EdS") activities, the gross operating profit
for the plant in Comodoro Rivadavia for the year was GBP10.9
million (2012: GBP9.7 million) on revenues of GBP19.3 million
(2012: GBP26.5 million). In local currency terms the revenues
decreased to AR$167 million (2012: AR$192 million) whilst the
operating profit was AR$115 million (2012: AR$70 million). The
increase in operating profit was due to the change in the
contracting terms with CAMMESA the buyer of the power from the
plant, whereby the sales of spot power shows a net payment for the
power less the costs of the gas to make the power. The increase in
the net loss for the year in EdS of GBP4.2 million (2012: GBP2.4
million) was largely due to the one-off write-back of interest
payable in 2012 on loans between EdS and Patagonia Energy Limited,
which is 50 per cent. owned by Rurelec, and the effects of a
significant deterioration in the Peso exchange rate.
Independent Power Corporation PLC
IPC was acquired in June 2013 and has made a profit for the year
of GBP2.1 million. The activities of the company involve the
development work for new projects, the supply of engineering
services to Group companies and also the administration of the
London office. The administration expenses for the year were GBP1.1
million.
Rurelec Chile
The development operations in Chile have incurred limited direct
costs in the year of GBP111,000. However, we have purchased the
land, the turbine and transformer for the Arica project at a cost
of GBP4 million.
Development costs during the year have been GBP1 million on both
the Central Illapa and Arica projects.
Cascade Hydro Power
In Peru we have been constructing the Canchayllo run-of-river
hydro plant since the end of 2012. The value of the plant under
construction at the year-end is GBP5.7 million. Rurelec has
outstanding loans of GBP5.8 million to the Cascade group at the
year end, whilst there is a bank loan with the Corporacion
Interamericana de Inversion ("IIC") of GBP4.2 million and other
loans of GBP0.9 million. The other assets of the Cascade group
include GBP3.5 million of bonds held by IIC and the Ministry of
Minerals and Energy.
Outlook
In spite of the set back of the disappointing judgment of the
PCA early in 2014 and the considerable write-off against reserves
which this entails, the Board of Rurelec is optimistic that the
outlook for the Group is good. We are now active in Peru and Chile,
two of the strongest economies in Latin America, and we are now in
a position to choose long-term equity partners for both of those
countries with whom to share ownership of our excellent projects.
Receipts from the sale of this equity will both recycle funds of
over US$30 million to Rurelec for us to reinvest in other projects
as well as enable us to engage with regional partners with whom to
share the challenges of building greenfield plants many thousands
of miles away from the United Kingdom. Rurelec has demonstrated its
capability to grow organically and by acquisition over the last ten
years. Now we can look forward to accelerated roll-out of new
capacity with the saga of the Bolivian nationalisation finally a
thing of the past.
I would like to congratulate the executive team under Peter
Earl's leadership for the persistent and tireless way they pursued
the Bolivian settlement. Under extreme pressure from outside
sources to settle early, they obtained a pragmatic solution that
now allows us to continue to grow our business.
Colin Emson
Chairman
5 June, 2014
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
The year 2013 was perhaps the most frustrating for the Board and
shareholders alike since Rurelec came to the AIM Market in 2004 as
the first AIM quoted utility and power company. The year was
dominated by delays in the process to achieve an independent
determination at the PCA, in The Hague, of Rurelec's claim for
compensation from the Government of Bolivia for the May 2010
nationalisation of its Bolivian generation assets.
The final decision of the three man arbitration tribunal was
expected to be handed down between October and November 2013, and
all of Rurelec's financing arrangements were geared to this
court-led timetable following the actual final hearing of the
tribunal which took place in early April 2013 in Paris. Instead,
the judgment was only released in the early hours of 1 February
2014.
From the first moment of the nationalisation, when armed
military took over the Guaracachi power plants early on May Day
2010, Rurelec had expected compensation to be no less than the pro
rata book value of its Bolivian assets. That would have suggested
compensation of around US$75 million before interest and other
adjustments, and this figure has been constantly maintained in the
audited accounts of the Rurelec Group. Incredibly, the arbitration
tribunal decided that the fair market value of Rurelec's investment
in Guaracachi as at 1 May 2010 was US$28.9 million. This
represented a sum of less than two years of Guaracachi EBITDA, as
projected immediately prior to the nationalisation for the full
year 2011 following completion of the Guaracachi combined cycle gas
turbine ("CCGT") power plant. Inclusive of interest to 31 January
2014, the full value of the PCA award was US$35.5 million, roughly
the same price paid by Rurelec in 2006 for its controlling stake in
Guaracachi before it added over 170 MW of new, high tech gas fired
generation capacity and before Rurelec had successfully doubled the
EBITDA of Guaracachi with the installation of Bolivia's first CCGT
plant.
The PCA judgment did not award costs to Rurelec even though the
judgment confirmed that Bolivia had failed to pay adequate
compensation for the expropriation of Rurelec's assets. The costs
of the arbitration were around US$7 million. The net award to
Rurelec was thus only US$28.9 million before costs. One of the
three panellists on the tribunal issued a minority report stressing
the inequity of not awarding us costs but the two man majority view
prevailed.
As this annual report goes to print, Bolivia has paid a
discounted sum of US$31.5 million to Rurelec in full and final
settlement of the award. With this matter behind us we can
concentrate all our efforts in developing, funding and constructing
a portfolio of power plants in a number of countries using a range
of renewable and high technologies.
Argentina
Operations at the power plant continue to allow EdS to show an
excellent availability record. Gross energy output was
approximately 840 GWh (2012: 928 GWh) a fall of 10.5 per cent due
to a major outage in November at which time the steam turbine was
stopped for the first time in three years. Ahead of the outage the
heat rate had improved slightly to 8.43 MMBTU/ MWh (2012: 8.1).
During 2013, the Ministry of Energy has enacted a number of
changes in the electricity sector largely driven by the weak
performance of the distribution sector, the increase in demand and
the widening gap between the official and unofficial exchange
rates.
The major impact of the changes for EdS has been to remove
theobligation to pay for gas, thus reducing turnover whilst
increasing gross margin. Since May thedispatch centre, CAMMESA, has
been accounting for gas consumption for the gas turbines and the
auxiliary firing of the steam turbines reducing revenues and
expenditure. The average notional cost of gas per MWhgenerated was
AR$118.36 (2012: AR$108.25), in US$ terms the gas cost has moved to
US$21.50 per MWh from US$23.7 in 2012. The average price of
electricity in peso terms increased by 28.5 per cent to AR$265.17
(2012: AR$206.40) and by 7 per cent in dollar terms, US$48.17
(2012: US$45.16) as a result of the weakening of the peso. The Res
220 contract is the main driver of the strengthening performance at
the EBITDA level, as the proportion of US$ based revenue is boosted
by the exchange rate as well as the removal of gas (a US$ expense)
from the revenue line and the increased proportion of peso based
expense. Turnover at EdS during 2013 fell to AR$166.5 million from
AR$192.2 million in 2012, which figure also included AR$7.5 million
in respect of the final CERs under the CAF/KfW contract. No CERs
were registered in 2013 as the low CER prices currently do not
cover the cost of registration. Even so, gross margin increased in
peso terms to AR$115 million from AR$70 million. Large foreign
exchange losses due to the impact of the revaluation of US$
borrowings arising from the weakening peso exchange rate once again
increased the after tax loss. Cash flow was strong, allowing EdS to
remit US$6 million to the UK during the year, however, the
electricity sector is still held back by cash flow restrictions
imposed as a result of the low tariffs of the two largest
electricity distribution companies. CAMMESA has struggled to
maintain timely payment of invoices to generators since the middle
of the year.
Exchange rates in Q4 saw the biggest correction as the
Government finally allowed the official peso exchange rate to move
towards the unofficial exchange rate. At the start of the year it
was AR$4.96 to the US$, by year-end it was AR$6.2, which has been
relatively stable throughout the first half of 2014 after a 17 per
cent devaluation in January 2014. The deterioration in the exchange
rate was having an impact on our receivables, until a new directive
was brought in to compensate generators for the impact for the late
payment of their invoices.
Chile
Arica
In April 2013, we took delivery of the industrial frame GE 6B
turbine in Arica. Construction was delayed when local interest
groups objected to the change in the environmental approval. After
a number of intensive stakeholder meetings at which the impact of
the new plant on the local area was fully discussed the objections
were assuaged. However, in the meantime, a review of the approval
was put through the Chilean legal system and although the case was
found largely in our favour, the Supreme Court did require the
permit to be reviewed once again by the local environmental office.
Final approval for the use of the gas turbine is expected shortly.
Construction is expected to commence in the second half of the
year.
Central Illapa
Following receipt of the environmental approval for the Central
Illapa plant using Siemens 701 DU turbines, Rurelec acquired two
refurbished turbines from IPSA Group PLC in June 2013. Pending the
conclusion of project financing Rurelec is finalising the selection
of a joint venture partner for the project. The selection of a
partner and the closing of bank financing is expected to be
achieved in the latter half of 2014.
Peru
During 2013, the construction of the 5.3 MW Canchayllo project
continued apace. The successful closing of the financing of the
plant with IIC together with further equity funding from Rurelec in
2014 has allowed to continue of the construction of the 5.3MW
Canchayllo plant and the development of a further 30 MW of new
projects. Although we were able to submit the new projects
successfully for the new renewable tender round in Q4, the slow
pace of the Bolivian arbitration process has meant that we elected
to fund only one project to close a power purchase agreement in
this round. The two other projects have had to be held back for the
next round planned for later this year.
At the present time, Canchayllo is 95 per cent complete, with
commercial operation targeted for August this year. Rurelec has
arranged additional funds to cover cost overruns, largely due to
unforeseen geological conditions found in the construction of the
power house, a 10 per cent overspend in the waterways and increased
labour costs due to lack of funds.
The overall cost per MW installed is 18 per cent over budget, at
US$2.36 million per MW, and the plant is financed with 52 per cent
debt and 48 per cent equity. The plant is still expected to be the
first to commence operations of the second renewables round. With
one of the lowest tariffs awarded, the challenge now is to secure a
new PPA in order to improve returns once the plant enters
production.
The Canchayllo project has proved challenging, but having gauged
the pricing correctly in the third tender round, we can look
forward to the portfolio growing steadily both in size and
profitability in future years.
Independent Power Corporation
In June 2013, Rurelec completed the acquisition of IPC, one of
the United Kingdom's leading power developers and the former parent
company of the original Rurelec business. IPC's team of engineers,
financial modellers and environmental specialists has now been
integrated within the Rurelec Group giving Rurelec the capability
not only to manage its own greenfield planning and project
supervision but also the ability to earn revenues from third party
clients.
IPC is currently short-listed in a government tender for the
construction of a new power plant of 80 MW for GibElec in Gibraltar
as well as being retained as lead developer on two dual fuel power
developments in Ghana. IPC is also in advanced negotiations for a
similar third party project in Ivory Coast and for the repowering
of a combined heat and power plant in Russia.
After a tough and less satisfying year, we expect the future to
be better. We are working hard to make sure that it really is.
Peter Earl
Chief Executive Officer
5 June, 2014
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
NOTES GBP'000 GBP'000
---------------------------------------------------------------- ----- ---------- ----------
Revenue 4 15,093 13,373
---------------------------------------------------------------- ----- ---------- ----------
Cost of sales 6 (5,805) (8,386)
---------------------------------------------------------------- ----- ---------- ----------
Gross profit 9,288 4,987
---------------------------------------------------------------- ----- ---------- ----------
Administrative expenses 7 (8,109) (3,979)
---------------------------------------------------------------- ----- ---------- ----------
Operating profit 1,269 1,008
---------------------------------------------------------------- ----- ---------- ----------
9
Other expense a,b,c (41,581) (3,895)
---------------------------------------------------------------- ----- ---------- ----------
Finance income 10 2,200 3,281
---------------------------------------------------------------- ----- ---------- ----------
Finance expense 10 (1,272) (2,940)
---------------------------------------------------------------- ----- ---------- ----------
(Loss)/profit before tax (39,384) (2,546)
---------------------------------------------------------------- ----- ---------- ----------
Tax expense 11 189 (598)
---------------------------------------------------------------- ----- ---------- ----------
(Loss)/profit for the year attributable to owner of the company (39,195) (3,144)
---------------------------------------------------------------- ----- ---------- ----------
Earnings per share 12
---------------------------------------------------------------- ----- ---------- ----------
Basic (loss)/earnings per share (7.92p) (0.75p)
---------------------------------------------------------------- ----- ---------- ----------
Diluted (loss)/earnings per share (7.92p) (0.75p)
---------------------------------------------------------------- ----- ---------- ----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
NOTES GBP'000 GBP'000
--------------------------------------------------------------------------------- ------ ---------- ----------
(Loss)/profit for the year (39,195) (3,144)
----------------------------------------------------------------------------------------- ---------- ----------
Other comprehensive income/(loss) for the year
--------------------------------------------------------------------------------- ------ ---------- ----------
Items that will subsequently Reclassified to Profit & Loss
--------------------------------------------------------------------------------- ------ ---------- ----------
Exchange differences on translation of foreign operations (934) (1,443)
----------------------------------------------------------------------------------------- ---------- ----------
Total other comprehensive loss (934) (1,443)
----------------------------------------------------------------------------------------- ---------- ----------
Total comprehensive (loss)/income for year attributable to owners of the company (40,129 (4,587)
----------------------------------------------------------------------------------------- ---------- ----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2013
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
NOTES GBP'000 GBP'000
------------------------------------------------------------- ----- ---------- ----------
Assets
------------------------------------------------------------- ----- ---------- ----------
Non-current assets
------------------------------------------------------------- ----- ---------- ----------
Property, plant and equipment 14 39,158 18,487
------------------------------------------------------------- ----- ---------- ----------
Intangible assets 15 4,959 3,168
------------------------------------------------------------- ----- ---------- ----------
Trade and other receivables 16a 16,809 15,376
------------------------------------------------------------- ----- ---------- ----------
Deferred tax assets 17 341 389
------------------------------------------------------------- ----- ---------- ----------
61,267 37,420
------------------------------------------------------------- ----- ---------- ----------
Current assets
------------------------------------------------------------- ----- ---------- ----------
Inventories 18a 227 494
------------------------------------------------------------- ----- ---------- ----------
Trade and other receivables 16b 9,831 4,797
------------------------------------------------------------- ----- ---------- ----------
Compensation claim, Interest & Dividends Receivable on Award 19 19,126 51,473
------------------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents 20 3,750 6,122
------------------------------------------------------------- ----- ---------- ----------
32,935 62,886
------------------------------------------------------------- ----- ---------- ----------
Total assets 94,202 100,306
------------------------------------------------------------- ----- ---------- ----------
Equity and liabilities
------------------------------------------------------------- ----- ---------- ----------
Shareholders' equity
------------------------------------------------------------- ----- ---------- ----------
Share capital 21 11,145 8,413
------------------------------------------------------------- ----- ---------- ----------
Share premium account 67,369 53,012
------------------------------------------------------------- ----- ---------- ----------
Foreign currency reserve (1,532) (598)
------------------------------------------------------------- ----- ---------- ----------
Share option reserve 22 107 46
------------------------------------------------------------- ----- ---------- ----------
Other reserves 1,050 1,050
------------------------------------------------------------- ----- ---------- ----------
Retained earnings (19,949) 19,389
------------------------------------------------------------- ----- ---------- ----------
Total equity attributable to shareholders of Rurelec PLC 58,190 81,312
------------------------------------------------------------- ----- ---------- ----------
Non-controlling interests 142 224
------------------------------------------------------------- ----- ---------- ----------
Total equity 58,332 81,536
------------------------------------------------------------- ----- ---------- ----------
Non-current liabilities
------------------------------------------------------------- ----- ---------- ----------
Tax liabilities 24a 18 210
------------------------------------------------------------- ----- ---------- ----------
Deferred tax liabilities 17 420 568
------------------------------------------------------------- ----- ---------- ----------
Borrowings 25a 1,499 1,301
------------------------------------------------------------- ----- ---------- ----------
1,938 2,079
------------------------------------------------------------- ----- ---------- ----------
Current liabilities
------------------------------------------------------------- ----- ---------- ----------
Trade and other payables 23b 8,883 4,325
------------------------------------------------------------- ----- ---------- ----------
Current tax liabilities 24b 466 53
------------------------------------------------------------- ----- ---------- ----------
Borrowings 25b 24,583 12,313
------------------------------------------------------------- ----- ---------- ----------
33,932 16,691
------------------------------------------------------------- ----- ---------- ----------
Total liabilities 35,870 18,770
------------------------------------------------------------- ----- ---------- ----------
Total equity and liabilities 94,202 100,306
------------------------------------------------------------- ----- ---------- ----------
The financial statements were approved by the Board of Directors
on 5 June, 2014 and were signed on its behalf by P. Earl (Chief
Executive) and A. Morris (Group Finance Director).
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2013
31.12.13 31.12.12
NOTES GBP'000 GBP'000
----------------------------- ----- -------- --------
Assets
----------------------------- ----- -------- --------
Non-current assets
----------------------------- ----- -------- --------
Investments 26 16,743 18,988
----------------------------- ----- -------- --------
Trade and other receivables 16c 42,287 40,397
----------------------------- ----- -------- --------
59,030 59,385
----------------------------- ----- -------- --------
Current assets
----------------------------- ----- -------- --------
Inventories 18b 16,195 -
----------------------------- ----- -------- --------
Trade and other receivables 16d 34 162
----------------------------- ----- -------- --------
Cash and cash equivalents 20 21 4,502
----------------------------- ----- -------- --------
16,250 4,664
----------------------------- ----- -------- --------
Total assets 75,280 64,049
----------------------------- ----- -------- --------
Equity and liabilities
----------------------------- ----- -------- --------
Shareholders' equity
----------------------------- ----- -------- --------
Share capital 21 11,145 8,413
----------------------------- ----- -------- --------
Share premium account 67,369 53,012
----------------------------- ----- -------- --------
Share option reserve 22 107 46
----------------------------- ----- -------- --------
Retained earnings (8,486) 1,879
----------------------------- ----- -------- --------
Total equity 70,135 63,350
----------------------------- ----- -------- --------
Current liabilities
----------------------------- ----- -------- --------
Trade and other payables 23c 5,145 699
----------------------------- ----- -------- --------
5,145 699
----------------------------- ----- -------- --------
Total equity and liabilities 75,280 64,049
----------------------------- ----- -------- --------
The financial statements were approved by the Board of Directors
on 5 June, 2014 and were signed on its behalf by P. Earl (Chief
Executive) and A. Morris (Group Finance Director).
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
NOTES GBP'000 GBP'000
--------------------------------------------------- ----- ---------- ----------
Cash flows from operating activities
--------------------------------------------------- ----- ---------- ----------
Cash used in operations 28 (1,942) (2,267)
--------------------------------------------------- ----- ---------- ----------
Interest paid (1,271) (252)
--------------------------------------------------- ----- ---------- ----------
Taxation paid 189 (587)
--------------------------------------------------- ----- ---------- ----------
Net cash used in operating activities (3,024) (3,106)
--------------------------------------------------- ----- ---------- ----------
Cash flows from investing activities
--------------------------------------------------- ----- ---------- ----------
Purchase of plant and equipment 14 (7,944) (3,320)
--------------------------------------------------- ----- ---------- ----------
Sale of plant and equipment - -
--------------------------------------------------- ----- ---------- ----------
Repayments from/(loans to) joint venture company 3,840 629
--------------------------------------------------- ----- ---------- ----------
Net cash used in investing activities (4,104) (2,691)
--------------------------------------------------- ----- ---------- ----------
Net cash outflow before financing activities (7,128) (5,797)
--------------------------------------------------- ----- ---------- ----------
Cash flows from financing activities
--------------------------------------------------- ----- ---------- ----------
Issue of shares (net of costs) - -
--------------------------------------------------- ----- ---------- ----------
Deferred Consideration - -
--------------------------------------------------- ----- ---------- ----------
Loan drawdowns 4,756 10,126
--------------------------------------------------- ----- ---------- ----------
Loan repayments - -
--------------------------------------------------- ----- ---------- ----------
Net cash generated from financing activities 4,756 10,126
--------------------------------------------------- ----- ---------- ----------
Increase / (Decrease) in cash and cash equivalents (2,372) 4,329
--------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents at start of year 6,122 1,793
--------------------------------------------------- ----- ---------- ----------
Cash and cash equivalents at end of year (3,750) 6,122
--------------------------------------------------- ----- ---------- ----------
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
NOTES GBP'000 GBP'000
------------------------------------------------------------------ ----- ---------- ----------
Cash flows from operating activities
------------------------------------------------------------------ ----- ---------- ----------
Cash used in operations 28 5,783 (3,243)
------------------------------------------------------------------ ----- ---------- ----------
Interest paid - -
------------------------------------------------------------------ ----- ---------- ----------
Net cash used in operations 5,783 (3,243)
------------------------------------------------------------------ ----- ---------- ----------
Cash flows from investing activities
------------------------------------------------------------------ ----- ---------- ----------
Investments in Assets - -
------------------------------------------------------------------ ----- ---------- ----------
Investment in and loans to subsidiaries and joint venture company (14,104) (4,793)
------------------------------------------------------------------ ----- ---------- ----------
Loan repayments by joint venture company 3,840 1,257
------------------------------------------------------------------ ----- ---------- ----------
Loan from subsidiary - 9,896
------------------------------------------------------------------ ----- ---------- ----------
Net cash generated from/(used in) in investing activities (10,264) 6,360
------------------------------------------------------------------ ----- ---------- ----------
Net cash inflow/(outflow) before financing activities (4,481) 3,117
------------------------------------------------------------------ ----- ---------- ----------
Cash flows from financing activities
------------------------------------------------------------------ ----- ---------- ----------
Issue of shares (net of costs) - -
------------------------------------------------------------------ ----- ---------- ----------
Loan repayments - -
------------------------------------------------------------------ ----- ---------- ----------
Net cash generated from financing activities - -
------------------------------------------------------------------ ----- ---------- ----------
Increase / (Decrease) in cash and cash equivalents (4,481) 3,117
------------------------------------------------------------------ ----- ---------- ----------
Cash and cash equivalents at start of year 4,502 1,385
------------------------------------------------------------------ ----- ---------- ----------
Cash and cash equivalents at end of year 21 4,502
------------------------------------------------------------------ ----- ---------- ----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
FOREIGN SHARE NON-
SHARE SHARE CURRENCY OPTION RETAINED OTHER CONTROLLING TOTAL
CAPITAL PREMIUM RESERVE RESERVE EARNINGS RESERVES TOTAL INTEREST EQUITY
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Balance at 1.1.12 8,413 53,012 845 - 22,533 1,050 85,853 - 85,853
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Transactions with owners
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Issue of share options - - - 46 - - 46 - 46
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Non-controlling interest - - - - - - - 224 224
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Total transactions with
owners - - - 46 - - 46 224 270
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Loss for year - - - - (3,144) - (3,144) - (3,144)
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Exchange differences - - (1,443) - - - (1,443) - (1,443)
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Total comprehensive loss - - (1,443) - (3,144) - (4,587) - (4,587)
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Balance at 31.12.12 8,413 53,012 (598) 46 19,389 1,050 81,312 224 81,536
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Transactions with owners
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Issue of share 2,732 14,357 - - - - 17,089 - 17,089
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Issue of share options - - - 61 - - 61 - 61
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Non-controlling interest - - - - - - - (82) (82)
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Total transactions with
owners 2,732 14,357 - 61 - - 17,150 (82) 17,068
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Loss for year - - - - (39,337) - (39,337) - (39,337)
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Exchange differences - - (934) - - - (934) - (934)
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Total comprehensive loss - - (934) - (39,337) - (40,271) - (40,271)
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
Balance at 31.12.13 11,144 67,369 (1,532) 107 (19,948) 1,050 58,190 142 58,332
---------------------------- ------- ------- -------- ------- -------- -------- -------- ----------- --------
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
SHARE
SHARE SHARE OPTION RETAINED TOTAL
CAPITAL PREMIUM RESERVE EARNINGS EQUITY
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------- ------- ------- -------- --------
Balance at 1.1.12 8,413 53,012 - 2,483 63,908
------------------------------- ------- ------- ------- -------- --------
Transactions with owners
------------------------------- ------- ------- ------- -------- --------
Issue of share options - - 46 - 46
------------------------------- ------- ------- ------- -------- --------
Total transactions with owners - - 46 - 46
------------------------------- ------- ------- ------- -------- --------
Loss for the year - - - (604) (604)
------------------------------- ------- ------- ------- -------- --------
Total comprehensive loss - - - (604) (604)
------------------------------- ------- ------- ------- -------- --------
Balance at 31.12.12 8,413 53.012 46 1,879 63,350
------------------------------- ------- ------- ------- -------- --------
Transactions with owners
------------------------------- ------- ------- ------- -------- --------
Issue of share 2,732 14,357 - - 17,089
------------------------------- ------- ------- ------- -------- --------
Issue of share options - - 61 - 61
------------------------------- ------- ------- ------- -------- --------
Total transactions with owners 2,732 14,357 61 - 17,150
------------------------------- ------- ------- ------- -------- --------
Loss for the year - - - (10,364) (10,364)
------------------------------- ------- ------- ------- -------- --------
Total comprehensive loss - - - (10,364) (10,364)
------------------------------- ------- ------- ------- -------- --------
Balance at 31.12.13 11,145 67,369 107 (8,486) 70,135
------------------------------- ------- ------- ------- -------- --------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
1 General information, basis of preparation and new accounting
standards
1a General information
Rurelec PLC is the Group's ultimate parent company. It is
incorporated and domiciled in England and Wales. The address of
Rurelec's registered office is given on the information page.
Rurelec's shares are traded on the AIM market of the London Stock
Exchange PLC.
The nature of the Group's operations and its principal
activities are the generation of electricity in South America.
1b Basis of preparation, including going concern
The Company and the consolidated financial statements have been
prepared in compliance with International Financial Reporting
Standards ("IFRSs") and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations as adopted by
the European Union and company law applicable to companies
reporting as at 31 December 2013. The Directors have continued to
adopt the going concern basis for the preparation of these
financial statements since 2 June 2014 the Group received US$31.5
million from the Government of Bolivia in full settlement of the
Bolivian arbitration and also settled the full amount of the
outstanding Birdsong loan of US$25.9 million.
1c New accounting standards
At the date of authorisation of these financial statements
certain new standards, amendments and interpretations to existing
standards have been published but are not yet effective. The Group
has not early adopted any of these pronouncements. The new
Standards, amendments and Interpretations that are expected to be
relevant to the Group's financial statements are as follows:
Applicable for financial
Standard/interpretation Content years beginning on/after
----------------------- ----------------------------------------------------- ------------------------
IFRS 9 Financial instruments: Classification and measurement 1 January, 2015
IFRS 10 Consolidated Financial Statements 1 January, 2014
IFRS 11 Joint Arrangements 1 January, 2014
IFRS 12* Disclosure of Interests in Other Entities 1 January, 2014
IAS 28 (Revised)* Investments in Associates and Joint Ventures 1 January, 2014
Amendments to IAS 32* Offsetting Financial Assets and Financial Liabilities 1 January, 2014
* Not expected to have a material impact on the Group.
IFRS 9, 'Financial instruments: Classification and
measurement'
In November 2009, the Board issued the first part of IFRS 9
relating to the classification and measurement of financial assets.
IFRS 9 will ultimately replace IAS 39. The standard requires an
entity to classify its financial assets on the basis of the
entity's business model for managing the financial assets and the
contractual cash flow characteristics of the financial asset, and
subsequently measures the financial assets as either at amortised
cost or fair value. The new standard is mandatory for annual
periods beginning on or after 1 January, 2015.
IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the portion of IAS 27 'Consolidated and
Separate Financial Statements' that addresses the accounting for
consolidated financial statements. It also includes the issues
raised in SIC-12 'Consolidation - Special Purpose Entities'. IFRS
10 establishes a single control model that applies to all entities
including special purpose entities. The changes introduced by IFRS
10 will require management to exercise significant judgement to
determine which entities are controlled, and therefore, are
required to be consolidated by a parent, compared with the
requirements that were in IAS 27. This standard becomes effective
for annual periods beginning on or after 1 January, 2014.
IFRS 11 Joint Arrangements
IFRS 11 supersedes IAS 31 'Interests in Joint Ventures' (IAS
31). It aligns more closely the accounting by the investors with
their rights and obligations relating to the joint arrangement. In
addition, IAS 31's option of using proportionate consolidation for
joint ventures has been eliminated.
The Directors do not anticipate that the adoption of these
standards and interpretations in future periods will have any
material impact on the financial statements of the Group.
2 Summary of significant accounting policies
2.1 Basis of consolidation
The Group financial statements consolidate the results of the
Company, its 50 per cent interest in EdS, its 100 per cent interest
in entities in Chile and in Peru.
Subsidiaries are entities over which the Group has the power to
control the financial and operating policies so as to obtain
benefits from its activities. The Group obtains and exercises
control through voting rights.
Joint ventures are arrangements in which the Group has a
long-term interest and shares control under a written contractual
agreement. The Group reports its interests in jointly controlled
entities using proportionate consolidation such that the Group's
share of the assets, liabilities, income and expenses of jointly
controlled entities are combined with the equivalent items in the
consolidated financial statements on a line by line basis.
Goodwill, or the excess of interest in acquired assets,
liabilities and contingent liabilities over Fair Value of
consideration, arising on the acquisition of the Group's interest
in subsidiary or jointly controlled entities is accounted for in
accordance with the Group's accounting policy for goodwill arising
on the acquisition of a subsidiary.
Unrealised gains on transactions between the Group and
subsidiary and joint venture entities are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Amounts reported in the
financial statements of subsidiary and joint venture entities have
been adjusted where necessary to ensure consistency with the
accounting policies adopted by the Group.
Acquisitions of subsidiaries and joint venture entities are
dealt with by the acquisition method. The purchase method involves
the recognition at fair value of all identifiable assets and
liabilities, including contingent liabilities of the acquired
company, at the acquisition date, regardless of whether or not they
were recorded in the financial statements of the entity prior to
acquisition. On initial recognition, the assets and liabilities of
the acquired entity are included in the consolidated statement of
financial position at their fair values, which are also used as the
bases for subsequent measurement in accordance with the Group's
accounting policies. Investments in subsidiaries and joint ventures
are stated at cost in the statement of financial position of the
Company.
2.2 Goodwill
Goodwill representing the excess of the cost of acquisition over
the fair value of the Group's share of the identifiable net assets
acquired is capitalised and reviewed annually for impairment.
Goodwill is stated after separating out identifiable assets and
liabilities. Goodwill is carried at cost less accumulated
impairment losses. Any excess of interest in acquired assets,
liabilities and contingent liabilities over fair value is
recognised immediately after acquisition through the income
statement.
2.3 Foreign currency translation
The financial information is presented in pounds sterling, which
is also the functional currency of the parent company.
In the separate financial statements of the consolidated
entities, foreign currency transactions are translated into the
functional currency of the individual entity using the exchange
rates prevailing at the dates of the transactions ("spot exchange
rate"). Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation of
remaining balances at year-end exchange rates are recognised in the
income statement within 'other expense'.
In the consolidated financial statements, all separate financial
statements of subsidiary and jointly controlled entities,
originally presented in a currency different from the Group's
presentation currency, have been converted into sterling. Assets
and liabilities have been translated into sterling at the closing
rate at the reporting date. Income and expenses have been converted
into sterling at the average rates over the reporting period. Any
differences arising from this procedure have been recognised in
other comprehensive income and accumulated in the Foreign Currency
Reserve.
2.4 Income and expense recognition
Revenue represents amounts receivable for goods or services
provided in the normal course of business, net of trade discounts,
VAT and other sales-related taxes, and excluding transactions with
or between Group companies. Revenues from the sale of electricity
are recorded based upon output delivered at rates specified under
contract terms or prevailing market rates as applicable. Revenue is
recognised on the supply of electricity when a contract exists and
supply has taken place. Revenue received for keeping power plants
operating and available for dispatch into the grid as required is
recognised on a straight-line basis over the contractual period.
During the year under review and the prior year, no revenues were
derived from the sale of equipment purchased with a view to
subsequent resale.
Operating expenses are recognised in the income statement upon
utilisation of the service or at the date of their origin. All
other income and expenses are reported on an accrual basis.
2.5 Dividends
Dividends paid/receivable are recognised on a cash paid/cash
received basis. No dividends were paid or received during the year
(2012: nil).
2.6 Borrowing costs
All borrowing costs are expensed as incurred except where the
costs are directly attributable to specific construction projects,
in which case the interest cost is capitalised as part of those
assets.
2.7 Property, plant and equipment
Property, plant and equipment are stated at cost, net of
depreciation and any provision for impairment. No depreciation is
charged during the period of construction.
All operational buildings and plant and equipment in the course
of construction are recorded as plant under construction until such
time as they are brought into use by the Group. Plant under
construction includes all direct expenditure and may include
capitalised interest in accordance with the accounting policy on
that subject. On completion, such assets are transferred to the
appropriate asset category.
Repairs and maintenance are charged to the income statement
during the financial period in which they are incurred. The cost of
major renovations and overhauls is included in the carrying amount
of the assets where it is probable that the economic life of the
asset is significantly enhanced as a consequence of the work. Major
renovations and overhauls are depreciated over the expected
remaining useful life of the work.
Depreciation is calculated to write down the cost less estimated
residual value of all property, plant and equipment other than
freehold land by equal annual instalments over their estimated
useful economic lives. The periods generally applicable are:
Buildings 25 to 50 years
Plant and equipment 3 to 15 years
Material residual values are updated as required, but at least
annually. Where the carrying amount of an asset is greater than its
estimated recoverable amount, it is written down immediately to its
recoverable amount.
2.8 Impairment of tangible and intangible assets
At each reporting date, the Group reviews the carrying amount of
its property, plant and equipment and intangible assets to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset,
the Group estimates the recoverable amount of the cash-generating
unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
the income statement.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but only to the extent
that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been
recognised for the asset (or cash-generating unit) in prior years.
A reversal of an impairment loss is recognised immediately in the
income statement.
2.9 Taxation
Current income tax assets and liabilities comprise those
obligations to, or claims from, fiscal authorities relating to the
current or prior reporting period, that are unpaid at the reporting
date. They are calculated according to the tax rates and tax laws
applicable to the fiscal periods to which they relate, based on the
taxable profit for the period. All changes to current tax assets or
liabilities are recognised as a component of tax expense in the
income statement or through the statement of changes in equity.
Deferred income taxes are calculated using the liability method
on temporary differences. This involves the comparison of the
carrying amounts of assets and liabilities in the consolidated
financial statements with their respective tax bases. However, in
accordance with the rules set out in IAS 12, no deferred taxes are
recognised in respect of non-tax deductible goodwill. In addition,
tax losses available to be carried forward as well as other income
tax credits to the Group are assessed for recognition as deferred
tax assets.
Deferred tax liabilities are provided for in full with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of
realisation, provided that they are enacted or substantially
enacted at the reporting date.
Deferred tax is provided on differences between the fair value
of assets and liabilities acquired in an acquisition and the
carrying value of the assets and liabilities of the acquired entity
and on the differences relating to investments in subsidiary and
joint venture companies if the difference is a temporary difference
and is expected to reverse in the foreseeable future.
Changes in deferred tax assets and liabilities are recognised as
a component of tax expense in the income statement, except where
they relate to items that are charged or credited directly to
equity in which case the related deferred tax is also charged or
credited directly to equity.
2.10 Financial assets
The Group's financial assets include cash and cash equivalents,
loans and receivables.
Cash and cash equivalents include cash at bank and in hand as
well as short-term highly liquid investments such as bank
deposits.
Loans and receivables are non-derivative financial assets with
fixed or determinable payment dates that are not quoted in an
active market. They arise when the Group provides money, goods or
services directly to a debtor with no intention of trading the
receivable. Receivables are measured initially at fair value and
subsequently remeasured at amortised cost using the effective
interest method, less provision for impairment. Any impairment is
recognised in the income statement.
Trade receivables are provided against when objective evidence
is received that the Group will not be able to collect all amounts
due to it in accordance with the original terms of the receivables.
The amount of the write-down is determined as the difference
between the asset's carrying amount and the present value of
estimated cash flows.
2.11 Financial liabilities
Financial liabilities are obligations to pay cash or other
financial instruments and are recognised when the Group becomes a
party to the contractual provisions of the instrument. All
transaction costs are recognised immediately in the income
statement.
A financial liability is derecognised only when the obligation
is extinguished, that is when the obligation is discharged,
cancelled or expires.
Bank and other loans are raised for support of long-term funding
of the Group's operations. They are recognised initially at fair
value, net of transaction costs and are subsequently measured at
amortised cost using the effective interest method. Finance
charges, including premiums payable on settlement or redemption,
and direct issue costs are charged to the income statement on an
accruals basis using the effective interest method and are added to
the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.
2.12 Inventories
Inventories comprise spare parts and similar items for use in
the Group's plant and equipment. Inventories are valued at the
lower of cost and net realisable value on a first in, first out
basis.
2.13 Shareholders' equity
Equity attributable to the shareholders of the parent company
comprises the following:
"Share capital" represents the nominal value of equity
shares.
"Share premium" represents the excess over nominal value of the
fair value of consideration received for equity shares, net of
expenses of the share issue.
"Foreign currency reserve" represents the differences arising
from translation of investments in overseas subsidiaries. "Share
option reserve" represents the fair value of options granted and
outstanding at the year-end.
"Retained earnings" represents retained profits.
"Other reserves" comprises unrealised revaluations of plant and
machinery.
2.14 Pensions
During the year under review, the Group did not operate or
contribute to any pension schemes (2012: nil).
2.15 Segment reporting
In identifying its operating segments, management follows the
Group's geographic locations. The activities undertaken by segments
are the generation of electricity in their country of incorporation
within South America.
Each of the operating segments is managed separately as the
rules and regulations vary from country to country.
The measurement policies used by the Group for segment reporting
under IFRS 8 are the same as those used in the financial
statements.
3 Key assumptions and estimates
When preparing the financial statement, management makes a
number of judgements, estimates and assumptions about the
recognition and measurement of assets, liabilities income and
expenses. The actual results may differ from the judgements,
estimates and assumptions made and will seldom equal the estimated
results. The areas which management considers are likely to be most
affected by the significant judgements, estimates and assumptions
on recognition and measurement of assets, liabilities, income and
expenses are:
a) Useful lives of depreciable assets - management reviews, with
the assistance of external expert valuers, the useful lives of
depreciable assets at each reporting date. This review includes
consideration of the book value of plant under construction which
at the year-end amounted to GBP9.8 million. Actual results,
however, may vary due to changes in technology and industry
practices.
b) Impairment - management reviews tangible and intangible
assets at each balance sheet date to determine whether there is any
indication that those assets have suffered an impairment loss. This
review process includes making assumptions about future events,
circumstances and operating results. The actual results may vary
from those expected and could therefore cause significant
adjustments to the carrying value of the Group's assets. Details of
the assumptions underlying management's forecasts for the Group's
main Cash-Generating Unit ("CGU") are set out in note 15.
c) Deferred tax assets and liabilities - there exists an element
of uncertainty regarding both the timing of the reversing of timing
differences and the tax rate which will be applicable when the
reversing of the asset or liability occurs.
d) Asset acquisitions - where the Group acquires assets or a
company which is not considered to be a business as defined by IFRS
3, the transaction is accounted for as an asset acquisition and not
a business combination.
e) The compensation claim is judged to be an asset due to the
fact that an inflow of future economic benefit is virtually certain
in accordance with the Bilateral Investment Treaties. The
compensation asset is measured at cost (plus legal fees and
interest) because, although a successful claim is virtually
certain, management cannot reliably determine the fair value of
these cash flows as there is a significant variability in the range
of possible outcomes. Accordingly, and by analogous reference to
IAS 39, the asset is recorded at cost.
4 Segment Analysis
Management currently identifies the Group's four geographic
operating segments-Argentina, Chile, Peru and the head office in
the UK-as operating segments as further described in the accounting
policy note. These operating segments are monitored and strategic
decisions are made on the basis of segment operating results.
The following tables provide an analysis of the operating
results, total assets and liabilities, capital expenditure and
depreciation for 2013 and 2012 for each geographic segment. The
main customer (accounting for over 90 per cent of revenues) in
Argentina is a body which is subject to supervision by the
Government electricity regulator.
CONSOLIDATION
ARGENTINA CHILE PERU UK BOLIVIA ADJUSTMENTS TOTAL
---------------------------
a) 12 months to 31.12.2013 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- ------- ------- -------- -------- ------------- --------
Revenue 9,651 - - 5,442 - - 15,093
Cost of sales (4,186) - - (1,619) - - (5,805)
Gross profit 5,465 - - 3,823 - - 9,288
Administrative expenses (4,278) (55) (475) (3,211) - - (8,019)
Profit/(loss) from
operations 1,187 (55) (475) 612 - - 1,269
Other expense - - - - (38,314) - (38,314)
Foreign exchange losses (3,761) (55) 197 (504) - 856 (3,267)
Finance income - - 186 3,857 (198) (1,645) 2,200
Finance expense (1,819) (3) (219) (12,218) - 12,987 (1,272)
Loss before tax (4,393) (113) (311) (8,253) (38,512) 12,198 (39,384)
Tax credit/(expense) 218 - (29) - - - 189
Loss for the year (4,174) (113) (340) (8,255) (38,512) 12,198 (39,195)
Total assets 15,741 944 6,499 78,441 (1,729) (5,694) 94,202
Total liabilities 22,169 1,701 6,869 6,199 - (1,068) 35,870
Capital expenditure 221 1,786 5,934 16,195 - - 24,136
Depreciation 435 - 4 5 - - 444
--------------------------- --------- ------- ------- -------- -------- ------------- --------
CONSOLIDATION
ARGENTINA CHILE PERU UK BOLIVIA ADJUSTMENTS TOTAL
-----------------------------
b) 12 months to 31.12.2012 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ------- ------- ------- ------- ------------- -------
Revenue 13,248 - - 125 - - 13,373
Cost of sales (8,386) - - - - - (8,386)
Gross profit 4,862 - - 125 - - 4,987
Administrative expenses (2,936) - - (1,043) - - (3,979)
Profit/(loss) from
operations 1,926 - - (918) - - 1,008
Other expense (670) - - (825) - - (1,495)
Foreign exchange (loss)/gain (1,027) - - (1,373) - - (2,400)
Finance income - - - 4,869 - (1,588) 3,281
Finance expense (2,000) - - (2,438) - 1,498 (2,940)
(Loss)/profit before
tax (1,771) - - (685) - (90) (2,546)
Tax (expense)/income (598) - - - - - (598)
Loss for the year (2,369) - - (685) - (90) (3,144)
Total assets 21,991 2,188 3,593 21,061 51,473 - 100,306
Total liabilities 12,849 604 193 12,695 - (7,571) 18,770
Capital expenditure 238 2,188 894 - - - 3,320
Depreciation 729 - - - - - 729
----------------------------- --------- ------- ------- ------- ------- ------------- -------
5 Exchange rate sensitivity analysis
The key exchange rates applicable to the results were as
follows:
31.12.13 31.12.12
---------------------------- -------- --------
i) Closing rate
AR$ (Argentine Peso) to GBP 10.7073 7.92
US$ to GBP 1.6488 1.62
CLP (Chilean Peso) to GBP 866 773
PEN (Peruvian Sol) to GBP 4.55 4.12
ii) Average rate
AR$ (Argentine Peso) to GBP 10.54 7.19
US$ to GBP 1.64 1.62
CLP (Chilean Peso) to GBP 863 770
PEN (Peruvian Sol) to GBP 4.51 4.12
---------------------------- -------- --------
If the exchange rate of sterling at 31 December 2013 had been
stronger or weaker by 10 per cent with all other variables held
constant, shareholder equity at 31 December 2013 would have been
GBP0.9 million (2012: GBP1.5 million) lower or higher than
reported.
If the average exchange rate of sterling during 2012 had been
stronger or weaker by 10 per cent with all other variables held
constant, the profit for the year would have been GBP0.4 million
(2011: GBP0.2 million) higher or lower than reported.
6 Cost of sales
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
----------------------------------------------------- ---------- ----------
Expenditure incurred in cost of sales is as follows:
Cost of fuel 3,021 6,962
Depreciation 435 729
Maintenance 730 486
Cost of Equipment and ancillary costs 1,475 -
Other 144 209
5,805 8,386
----------------------------------------------------- ---------- ----------
7 Administrative expenses
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
--------------------------------------------------------------- ---------- ----------
Expenditure incurred in administrative expenses is as follows:
Payroll and social security 3,370 2,256
Services, legal and professional 497 447
Office costs and general overheads 4,065 1,216
Audit and non-audit services(1) 87 60
8,019 3,979
--------------------------------------------------------------- ---------- ----------
1 Audit and non-audit services include GBP75,300 paid to the
Auditor for the audit of the Company and the Group financial
statements and GBPnil paid to the Company's Auditor for non-audit
professional services provided to the Company in connection with
the review of overseas activities (2012: GBP6,000). Fees paid to
other auditors, in respect of the audit of joint venture companies,
amounted to GBP11,500 (2012: GBP20,000).
8 Employee costs
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
--------------------------------------------------------------------------------------- ---------- ----------
Aggregate remuneration of all employees and Directors, including social security costs 3,370 2,256
--------------------------------------------------------------------------------------- ---------- ----------
The average number of employees in the Group, including
Directors, during the year was as follows:
NUMBER NUMBER
--------------- ------ ------
Management 12 15
Operations 17 30
Development 7
Administration 24
Total 60 45
--------------- ------ ------
b) Company GBP'000 GBP'000
------------------------------------------------------- ------- -------
Aggregate remuneration of all employees and Directors,
including social security costs 409 442
------------------------------------------------------- ------- -------
The average number of employees in the Company, including
Directors, during year was as follows:
NUMBER NUMBER
----------- ------ ------
Management 6 6
----------- ------ ------
c) Directors' remuneration, including social security costs
The total remuneration paid to the Directors was GBP615,000
(2012: GBP292,000). The total remuneration of the highest paid
Director was GBP230,000 (2012: GBP107,000). Other emoluments paid
were health insurance costs, there were no bonuses, pension costs
or share based payments paid during the year (2012: nil)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
31.12.13 31.12.13 31.12.13 31.12.12
GBP'000 GBP'000 GBP'000 GBP'000
------------- -------------------- ---------------- ---------- ----------
Base Salary/Fee Inc.
Social Security Other Emoluments Total Total
P. Earl 226 4 230 107
E. Shaw 157 3 160 79
A. Morris 88 - 88 50
M. Blanco 95 - 95 28
L. Coben 30 - 30 28
C. Emson 6 - 6 -
B. Rowbotham 6 - 6 -
Total 608 7 615 292
------------- -------------------- ---------------- ---------- ----------
9 a) Other expense
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
---------------------------------------- ---------- ----------
Carbon Emission Reduction adjustment(1) - 670
Loan arrangement fees(2) - 825
Foreign exchange losses(3) 3,268 2,400
Total 3,268 3,895
---------------------------------------- ---------- ----------
1 In 2009, EdS contracted to sell Carbon Emission Reduction
(CER) credits over a four year period 2009 to 2012. The number of
CERs actually generated was less than the original forecast and the
GBP670,000 charge in the prior year represent the adjustment
arising from this reduction.
2 Loan arrangement fees relate to the arrangement fees charged
in connection with the US$15.45 million set out in note 25.
3 Foreign exchange losses have arisen in Argentina on US$
denominated loans and in the UK on US$ denominated receivables.
9 b) Other expense
YEAR ENDED YEAR ENDED
Loss on Bolivia settlement 31.12.13 GBP'000 31.12.12 GBP'000
----------------------------------------- ---------------- ----------------
Loss on settlement of Claim - Bolivia(1) 29,455 -
Arbitration Costs(2) 4,929 -
Total 34,384 -
----------------------------------------- ---------------- ----------------
1. The loss on the settlement with the Plurinational Government
of Bolivia has been arrived at further to the agreement in April
2014 from meetings held between the senior management of Rurelec
plc and the Attorney General of Bolivia. The agreed settlement is
US$31.5 million or GBP19.1 million which is made up of GBP17.5
million compensation claim and interest of GBP1.6 million. The
carrying value of the claim, excluding interest and reimbursement
of costs, as at 31 December 2012 was GBP47.0 million and therefore
the loss was GBP29.5 million.
2. The arbitration costs were not awarded to Rurelec and so
GBP4.9 million has been taken as a charge in 2013, in 2012 these
costs had been shown as a debtor from the claim.
9 c) Other expense
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
Birdsong Loan Expense GBP'000 GBP'000
--------------------------------------------------- ---------- ----------
Interest Payable to Birdsong Loan(1) 2,327 244
Birdsong loan participation expense - CVR costs(2) 1,299 1,860
Accrued lender costs in 2014(3) 303 -
Total 3,929 2,104
--------------------------------------------------- ---------- ----------
1 Interest on the Birdsong loan of US$15.45 million has been
shown in the table above and accrued until May 2014.
2 The Birdsong loan included a contingent value right which
amounted to 15 per cent of the Bolivian claim plus interest.
3 The Birdsong lender charges for extending the loan past 31st
December 2013 have been accrued in 2013.
10 Finance income & Expense
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
------------------------------------------------------ ---------- ----------
Inter-group interest received/receivable(1) 2,399 1,501
Interest accrued on Bolivian claim(2) (199) 1,780
Total interest income 2,200 3,281
------------------------------------------------------ ---------- ----------
Interest paid/payable on bank borrowings and loans(3) (1,272) (2,860)
------------------------------------------------------ ---------- ----------
1 Inter-group interest arises on loans by the Company to its 50
per cent owned joint venture companies (PEL and EdS). The loans by
the Company to PEL and EdS exceed the loans of the other 50 per
cent shareholder by GBP13.5 million (2012: GBP14.4 million).
Interest on inter-group loans has been changed at rates of between
8 per cent and 19 per cent.
2 The settlement of the Bolivian claim includes interest of
GBP1.58 million on the settlement from May 2010, being the date
that the assets were nationalised, up to the payment date in May
2014. The effective interest rate for this amount on the award of
GBP17.5 million (US$ 28.9 million) is a rate of 2.14 per cent. This
has let to a write down of GBP0.2 million of the interest accrual
in 2013.
3 Interest paid/payable includes interest on bank borrowings and
other loans in Peru and Argentina whilst excludes interest accrued
on the US$15.45 million loan referred to in note 25, however the
amount shown for 2012 included accrued interest on the loan of
GBP578,000. The details of amounts due under the loan are shown in
note 25
Sensitivity analysis arising from changes in borrows costs is
set out in note 25.
11 Tax expense
The relationship between the expected tax expense at the basic
rate of 23.75 per cent. (31 December 2012: 24 per cent) and the tax
expense actually recognised in the income statement can be
reconciled as follows:
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
----------------------------------------------------------- ---------- ----------
Result for the year before tax (39,384) (2,546)
Standard rate of corporation tax in UK 23.75% 24%
Expected tax credit/(charge) 9,354 611
Adjustment for non-tax expense (8,166) -
Group relief surrender by joint venture company - 74
Adjustment for different basis of calculating overseas tax (997) (1,283)
Actual tax expense 189 (598)
Comprising:
Current tax expense 136 (626)
Deferred tax (net credit) 53 28
Total expense 189 (598)
----------------------------------------------------------- ---------- ----------
12 Earnings per share
Basic loss per share is calculated by dividing the loss for the
period attributable to shareholders by the weighted average number
of shares in issue during the period.
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
----------------------------------------------------------- ----------- -----------
Average number of shares in issue 494,993,260 420,671,505
Effect of dilution - share options outstanding 19,525,000 19,525,000
Result for the year
(Loss)/profit attributable to equity holders of the parent GBP(39.2m) GBP(3.1m)
Basic (loss)/earnings per share (7.92p) (0.75p)
Diluted (loss)/earnings per share (7.92p) (0.75p)
----------------------------------------------------------- ----------- -----------
There is no difference between the Basic and Diluted loss per
share as there was a loss in the year and therefore the outstanding
options were anti-dilutive.
13 Holding company's result for the year
As permitted by Section 408 of the Companies Act 2006, the
holding company's income statement is not shown separately in the
financial statements. The loss for the year was GBP10.4 million
(2012: GBP0.6 million).
14 Property, plant and equipment
PLANT AND PLANT UNDER
LAND EQUIPMENT CONSTRUCTION TOTAL
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------- --------- ------------ -------
a) Group
Cost at 1.1.12 86 21,540 - 21,626
Exchange adjustments (14) (3,392) - (3,406)
Additions - 238 3,082 3,320
Cost at 31.12.12 72 18,386 3,082 21,540
Exchange adjustments (19) (4,661) (321) (5,000)
Additions 72 16,418 7,649 24,134
Cost at 31.12.13 125 30,142 10,409 40,678
Depreciation at 1.1.12 - 2,849 - 2,849
Exchange adjustments - (525) - (525)
Charge for the year - 729 - 729
Depreciation at 31.12.12 3,053 3,053
Exchange adjustments - (1,977) - (1,977)
Charge for the year - 444 - 444
Depreciation at 31.12.13 1,520 1,520
Net book value - 31.12.13 125 28,621 10,409 39,158
Net book value - 31.12.12 72 15,333 3,082 18,487
-------------------------- ------- --------- ------------ -------
Operating property, plant and equipment is located in
Argentina.
Plant under construction comprises plant in Chile (GBP3.7
million) and Peru (GBP6.7 million).
b) Company
The Company had no property, plant and equipment.
15 Intangible assets
GOODWILL TOTAL
GBP'000 GBP'000
-------------------------------------------------- -------- -------
At 1 January 2013 3,168 3,168
Fair value adjustment on Goodwill and intangibles 1,791 1,791
At 31 December 2013 4,959 4,959
At 31 December 2012 3,168 3,168
-------------------------------------------------- -------- -------
a) Goodwill represents the difference between the Group's share
of the fair value of the net identifiable assets acquired and the
consideration transferred on the acquisition of 50 per cent of PEL
in June 2008 and the acquisition of 100 per cent of IPC in June
2013 including intangibles.
The Group tests goodwill and other intangible assets annually or
more frequently if there are indications that the intangible asset
might be impaired. The recoverable amounts are determined from
value in use calculations. The key assumptions for the value in use
calculations are those regarding the future cash flows (for a
period of 5 years) which are based on the most recent financial
projections prepared for each Cash Generating Unit ("CGU"). The
projections incorporate management's assumptions regarding revenue
volumes, revenue prices, operating costs, including gas and
forecast growth and are based on historical experience and current
information. A long term discount rate, derived from market data on
comparable interest rates in the local markets in which the Group
operates, is then applied to the projected future cash flows. The
equity discount rate applied is 13 per cent (2012 - 14 per
cent).
The following specific assumptions in respect of the Group's
main CGU in Argentina include:
i) Resolution by no later than 2018 of the current foreign
currency issues in Argentina which presently restrict the outflow
of certain types of debt
ii) No adverse change in the gas price relative to the Government's set price tariff
iii) Existing contracts run their expected life and are renewed
on terms no less favourable than the existing terms
iv) Operating costs remain stable
v) No major plant disruptions occur
vi) Maintenance expenditure remains in line with past experience
vii) Any period over and above the forecast period of 5 years
assumes nil growth other than that applicable to inflation.
The assumptions in respect of the IPC CGU include the financial
close and payment of development fees to IPC from the development
company for developments in Chile and Peru, whilst also including
engineering fees and recharge of expenses. The costs of the group
that are charged into IPC are well known and are shown to rise at a
reasonable inflationary rate of 3 per cent and expansionary rate of
an additional 7 per cent per annum. The goodwill impairment test
has been completed and shows no need for any impairment. Indeed the
brand value of IPC and its experience over 20 years in the South
American market supports the intangible assets shown within the IPC
financial statements.
The amount of goodwill that has been included in the intangible
asset is GBP1,276,621.
IPC has been active in the development, financing and
construction of power generation plants in South America, Asia,
Africa and Europe for 19 years and has customer bases in these
markets which Rurelec did not have prior to this business
combination. The Group can ascribe separate identifiable intangible
assets in some of these markets where Rurelec has not been active
over the past years. The direct cashflow basis has been used as the
methodology to assess the value of the separate markets from
Rurelec's established market in South America.
The main addition to the revenue streams are the engineering
fees and costs reimbursement plus development fees outside South
America. The effect is that the NPV of the separate markets can be
valued at GBP514,000 which values the Goodwill and Intangibles at
GBP1,791,000 with the goodwill element being GBP1,276,621.
b) IPC for the period up to acquisition had Revenues of
GBP1,354k and Profit of GBP749k. For the full year Revenues were
GBP5,604k and Profits were GBP2,108k.
c) Costs relating to the acquisition of IPC were GBP201k and
these have been recognised as an expense and included in
administrative costs. All issue costs were recognised as an
expense.
d) IPC's gross contractual amounts of trade and other
receivables were GBP46k and GBP1,510k respectively.
16 Trade and other receivables
31.12.13 31.12.12
GBP'000 GBP'000
-------------------------------------------- -------- --------
a) Group - non-current
Trade receivables(1) 535 556
Amounts due from joint venture companies(2) 15,399 14,441
Other receivables and prepayments(3) 875 379
16,809 15,376
-------------------------------------------- -------- --------
1 Non-current trade receivables includes GBP22,297 (2012:
GBP211,000) of retentions by the Electricity Regulator in Argentina
(which is expected to be either released or contributed towards
ongoing capital projects) and GBP513,000 (2012: GBP345,000) of
trade receivables which are not expected to be received within the
next 12 months.
2 Amounts due from joint venture companies represent the excess
of the amounts lent by the Company, in excess of the amounts lent
by the other 50 per cent shareholder, to PEL and EdS, including
credit support provided to suppliers of EdS. Interest on these
amounts has been accrued at rates of between 8 per cent and 18 per
cent per annum.
3 Other receivables comprise GBP379,125 (2012: GBP379,000) of
income tax paid by EdS which is expected to be recovered as an
offset against future profits.
31.12.13 31.12.12
GBP'000 GBP'000
---------------------------------- -------- --------
b) Group - current
Trade receivables 3,043 3,267
Other receivables and prepayments 6,788 1,530
9,831 4,797
---------------------------------- -------- --------
Other receivables and prepayments includes GBP921,000 of VAT
recoverable in Peru.
31.12.13 31.12.12
GBP'000 GBP'000
------------------------------------------- -------- --------
c) Company - non-current
Amounts owed by subsidiary companies(1) 16,851 7,608
Amounts owed by joint venture companies(2) 25,436 32,789
42,287 40,397
------------------------------------------- -------- --------
The amounts by subsidiary companies include:
1 Loans to subsidiaries in Chile (GBP6.2 million) and Peru
(GBP5.7 million) are repayable on demand. The loans to Chile are
currently non-interest bearing. The loans to Chile and Peru bear
zero per cent interest at rates.
2 The amounts owed by joint venture companies are interest
bearing at rates of between 8 per cent and 18 per cent and are
repayable on demand but are not expected to be fully received
within the next 12 months. GBP7.7 million (2012: GBP10.7 million)
is secured by a fi rst charge against the assets of EdS.
31.12.13 31.12.12
GBP'000 GBP'000
---------------------------------- -------- --------
d) Company - current
Other receivables and prepayments 34 162
34 162
---------------------------------- -------- --------
All trade and other receivables are unsecured, with the
exception of the GBP7.7 million referred to in 16c above, and are
not past their due by dates. The fair values of receivables are not
materially different to the carrying values shown above.
17 Deferred tax
31.12.13 31.12.12
GBP'000 GBP'000
---------------------------------- -------- --------
a) Asset at 1 January 2013 389 520
Exchange translation (101) (83)
(Debited)/Credited to tax expense 53 (48)
Asset at 31 December 2013 341 389
---------------------------------- -------- --------
The Group deferred tax asset arises principally from tax losses
carried forward in Argentina.
31.12.13 31.12.12
GBP'000 GBP'000
------------------------------- -------- --------
b) Liability at 1 January 2013 568 762
Exchange translation (148) (174)
Credited to tax expense - (20)
Liability at 31 December 2013 420 568
------------------------------- -------- --------
The Group deferred tax liability arises from deferred tax
provisions on the fair value adjustments arising on the acquisition
of 50 per cent of PEL.
18 Inventories
31.12.13 31.12.12
GBP'000 GBP'000
--------------------------- -------- --------
a) Group - Inventories
Spare pars and consumables 227 494
--------------------------- -------- --------
Spare parts and consumables are valued at cost
31.12.13 31.12.12
GBP'000 GBP'000
-------------------------------- -------- --------
b) Parent Company - Inventories
Inventories 16,195 -
-------------------------------- -------- --------
Inventories comprises of two Siemens 701DU Turbines acquired
from IPSA in June 2013, these will be sold to Central Illapa SA for
use in Chile during 2014.
19 Compensation claim
31.12.13 31.12.12
GBP'000 GBP'000
-------------------- -------- --------
Book value of claim 19,126 51,473
-------------------- -------- --------
As detailed in the 2010 Report and Accounts, on 1 May 2010 the
Bolivian Government nationalised by force Rurelec's controlling
interest in Guaracachi. The Bolivian book value of the net assets
of Guaracachi, together with declared but unpaid dividend for 2009,
was not less than GBP47.0 million and was reported in the 2012
Report and Accounts. The amount of the investment claimed under
Bilateral Investment Treaties as submitted to the Permanent Court
of Arbitration in The Hague, was US$142.3 million and the
Arbitration proceedings were held in April 2013. The award amount
was for US$28.9million plus interest from 1 May 2010 to the date
when the award is paid. As at 31 January the interest amounted to
US$6.6 million making the total amount due to Rurelec in settlement
of the claim US$35.5million or GBP21.5million. The Tribunal
representing the Permanent Court of Arbitration decided not to
award costs to either side. The costs of the Arbitration to Rurelec
were GBP4.9 million.
After further negotiations with the Plurinational State of
Bolivia at the end of April 2014 the total payment to be received
by Rurelec would be $31.5 million or GBP19.1 million. This is a
total loss of GBP34.6 million on the carrying value of the assets
as at 31st December 2013 being a loss of GBP29.5 million on the
underlying assets and GBP5.1 million on the legal fees and accrued
interest.
Further details and information on this claim can be found in
the Chief Executive Officer's Review of Operations.
20 Cash and cash equivalents
31.12.13 31.12.12
GBP'000 GBP'000
---------------------------------- -------- --------
a) Group
Cash and short-term bank deposits 3,750 6,122
b) Company
Cash and short-term bank deposits 21 4,502
---------------------------------- -------- --------
Cash and short-term bank deposits are held, where the balance is
material, in interest bearing bank accounts, accessible at between
1 and 30 days' notice. The effective average interest rate is less
than 1 per cent. The Group holds cash balances to meet its
day-to-day requirements. Included within the Group and the
Company's balance at 31 December 2012 was $2.15 million of cash
held in a blocked account pending payment of a deposit on plant
being shipped to Chile, this was settled in 2013.
21 Share capital
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
----------------------------------------------------------- ---------- ----------
In issue, called up and fully paid
557,236,492 ordinary shares of 2p each (2012: 420,671,505) 11,145 8,413
----------------------------------------------------------- ---------- ----------
Reconciliation of movement in share capital
NUMBER GBP'000
---------------------------- ----------- -------
Balance at 1 January 2012 420,671,505 8,413
Allotment in June 2013 136,564,987 2,732
Balance at 31 December 2013 557,236,492 11,145
---------------------------- ----------- -------
The allotment in June 2013 was at 12.5 pence per share. The
difference between the total consideration arising from shares
issued and the nominal value of the shares issued has been credited
to the share premium account. Costs associated with allotments are
debited to the share premium account.
22 Share option reserve
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
---------------------------------------------- ---------- ----------
Balance at 1 January 2013 46 -
Fair value of options granted during the year 61 46
Balance at 31 December 2013 107 46
---------------------------------------------- ---------- ----------
In March 2012, the Company introduced a share option plan and
granted options over 19,525,000 shares at 9.5p per share. Of these
options, 3,875,000 were exercisable from the date of grant.
5,216,667 options vested in 2013, the remuneration committee
approved 50 per cent vesting of these, the remaining 50 per cent
are dependent of performance targets being met or being waived at a
future date. The remaining 10,433,333 shares vest in two equal
tranches in March 2013 and March 2015 and are subject to
performance targets.
The Black-Scholes option pricing model has been used to
calculate the fair value of options granted during the year.
Expected volatility in the share price has been based on 20 per
cent.
All of the options granted to directors vest in the three equal
tranches and are subject to performance criteria, as referred to
above.
Options granted to the directors which were outstanding at the
year-end:
31.12.13 31.12.12
NUMBER OF NUMBER OF
SHARES SHARES
---------- --------- ---------
A. Morris 1,000,000 1,000,000
P. Earl 5,000,000 5,000,000
E. Shaw 4,000,000 4,000,000
M. Blanco 2,000,000 2,000,000
L. Coben 650,000 650,000
---------- --------- ---------
No options were exercised during the year and the total number
of options outstanding at the year-end was 19,525,000.
23 Trade and other payables
31.12.13 31.12.12
GBP'000 GBP'000
----------------------- -------- --------
a) Group - non-current
CER liability - -
b) Group - current
Trade payables 8,417 2,373
Accruals 466 1,952
8,883 4,325
c) Company - current
Trade payables 5,084 526
Accruals 61 173
1,921 699
----------------------- -------- --------
24 Tax liabilities
31.12.13 31.12.12
a) Group - non-current GBP'000 GBP'000
----------------------- -------- --------
Tax due in Argentina 18 210
----------------------- -------- --------
31.12.13 31.12.12
b) Group - current GBP'000 GBP'000
--------------------------------------------- -------- --------
UK corporation tax - -
P.A.Y.E in the UK 29 -
--------------------------------------------- -------- --------
VAT in UK 11 -
--------------------------------------------- -------- --------
Tax due in Argentina 56 53
--------------------------------------------- -------- --------
Other taxes due in Argentina principally VAT 343 -
--------------------------------------------- -------- --------
P.A.Y.E. in Peru 27 -
--------------------------------------------- -------- --------
466 53
--------------------------------------------- -------- --------
This liability for tax due in Argentina relates to an agreement
reached with the tax authorities in 2009 in respect of a claim for
tax on the capitalisation of a loan in earlier years before the
Group had an interest in EdS which has been deemed taxable by the
tax authorities. The tax is payable in equal quarterly instalments
with the final instalment due in August 2019. The total liability
outstanding at 31 December 2013 was GBP191,000 (2012:
GBP263,000).
25 Borrowings
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
------------------------------------------------- ---------- ----------
a) Group - non-current
Loan from CAMMESA(1) 877 1,301
Other loans(2) 622 -
1,499 1,301
b) Group - current
Loan from CAMMESA(1) 1,516 316
Other loans(2) 23,067 11,997
24,583 12,313
Group - total borrowings 26,082 13,614
The Group's borrowings are repayable as follows:
Within 1 year 24,583 11,313
In more than 1 year, but less than 2 years 311 462
In more than 2 years, but less than 3 years 311 316
In more than 3 years 877 523
26,082 13,614
------------------------------------------------- ---------- ----------
1 CAMMESA, the Argentine wholesale market administrator, has
advanced funds to EdS to support capital expenditure. The loan
bears interest at 7 per cent per annum. The loan is repayable in
instalments with the fi nal repayment due in July 2016.
2 Other loans comprise a loan of US$15.45 million, plus accrued
interest, to Birdsong Overseas Limited, a wholly owned subsidiary
of Rurelec PLC. The loan was arranged in July 2012 in order to
provide additional working capital for the Group's expansion in
Chile and Peru and the costs of the Bolivian litigation. The loan
was repayable by 31 December 2013 secured by a fi rst charge on the
proceeds from the Bolivian Arbitration claim and the assets of
Birdsong Overseas Limited. In December 2013 the term of the loan
was extended to 30 April 2014. It was also extended a second time
on 1 May 2014. Under the terms of the loan, the loan provider is
entitled to a portion of the proceeds recovered in relation to the
fi nal settlement of the award, in connection with the Bolivian
arbitration. The portion of the proceeds payable to the loan
provider is dependent upon a number of variables, including the
length of time to recover such proceeds and the quantum of the
proceeds. The minimum amount payable became 15 per cent of the
proceeds recovered after 1January 2014 and based on the carrying
value of the claim (see note 19), the portion of the proceeds which
the lender will be entitled to receive amounts US$5.2 million and
accordingly has been accrued at 31 December 2013. Interest on the
loan is payable at 12 per cent per annum up to 31st December 2013
and 24 per cent thereafter.
Sensitivity analysis to changes in interest rates:
If interest rates on the Group's borrowings during the year had
been 0.5 per cent higher or lower with all other variables held
constant, the interest expense and pre-tax profits would have been
GBP1.3 million lower or higher than reported.
Sensitivity analysis to changes in exchange rates:
The Group's external borrowings are denominated in AR$ and US$.
As a result, the liability to the Group's lenders will change as
exchange rates change. The Group's borrowings are substantially
related to specific electricity generating assets and therefore the
effect on the net equity of the Group is limited. The overall
effect on the Group's net equity which would arise from changes in
exchange rates is set out in note 5 above.
The effect on borrowings alone if exchange rates weakened or
strengthened by 10 per cent with all other variables held constant
would be to reduce or increase the value of the Group's borrowings
and equity by GBP1.2 million (2012: GBP1.2 million).
26 Investments
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
------------------------------------------------------------- ---------- ----------
Cost at 1 January 2013 18,998 8,470
Additions during 2012 - 10,528
Investment in Cascade Hydro Limited 269 -
Investment in Termoelectrica del Norte SA 4,190 -
Investment in Central Illapa SA 33 -
Investment in Independent Power Corp PLC 4,000 -
Reduction in Investment in Birdsong (10,455) -
Reduction in Investment in Energia para Sistemas Aislados SA (292) -
Balance at 31 December 2013 16,743 18,998
------------------------------------------------------------- ---------- ----------
At the year-end the Company held the following investments:
1 50 per cent (2012: 50 per cent) of the issued share capital of
Patagonia Energy Limited ("PEL"), a company registered in the
British Virgin Islands under registration number 620522. PEL owns
100 per cent of the issued share capital of Energia del Sur S.A.
("EdS"), a company registered in Argentina. EdS is a generator and
supplier of electricity to the national grid in Argentina.
2 100 per cent (2012: 100 per cent) of the issued share capital
of Birdsong Overseas Ltd ("BOL"), a company registered in the
British Virgin Islands, under registration number 688032. BOL owns
100 per cent of Bolivia Integrated Energy Limited ("BIE"), a
company registered in the British Virgin Islands, under
registration number 510247. Until 1 May 2010, BIE owned, through an
intermediary holding company, 50.00125 per cent of the issued share
capital of Empresa Electrica Guaracachi S.A. ("Guaracachi"), a
company registered in Bolivia. During 2013 BOL made a loss of
GBP6.8 million due to the accounting for the Bolivian Arbitration
Award received in January 2014.
3 100 per cent (2012: 70 per cent) of the issued share capital
of Cascade Hydro Limited (CHL), a company registered in England and
Wales under registration number 7640689. CHL owns, through
intermediate holding companies, 100 per cent interest in
Electricidad Andina S.A. and 93 per cent of Empresa de Generacion
Electrica Canchayllo S.A.C., both being companies registered in
Peru. During 2013 CHL acquired the remaining 30 per cent minority
stake by way of an exchange of shares. The minority shareholders
received 1,737,116 new Rurelec shares for their holdings in CHL,
issued at a price of 12.5 pence per share, an aggregate
consideration of GBP217,139.
4 100 per cent (2012: 100 per cent) of Cochrane Power Limited, a
company registered in England and Wales under registration number
8220905. Cochrane Power Limited owned at the year-end, through
intermediate holding companies, 100 per cent interest in Central
Illapa S.A. and 100 per cent interest in Termoelectrica del Norte
S.A., both being companies registered in Chile.
5 100 per cent (2012: 100 per cent) of Central Illapa SA, a
company registered in Chile under registration number 76.14535-9
and owner of the Illapa 255 MW project.
6 100 per cent (2012: 100 per cent) Termoelectrica del Norte SA,
a company registered in Chile under registration number
76.043.067-6 and owner of the Arica project. The investment during
the year has been in the turbine and a transformer during the year
plus development costs of the project totalling GBP4.2 million.
7 100 per cent (2012: 100 per cent) of Energia para Sistemas
Aislados SA a company registered in Bolivia under registration
number 107782. The investment in this company in Bolivia of
GBP292,000 has been written down to zero in the year because the
assets have been incorporated within the overall settlement with
the Plurinational State of Bolivia with the nationalisation of the
assets of Empresa Electrica Guaracachi SA.
8 100 per cent (2012: Nil per cent) of the issued share capital
of Independent Power Corporation plc (IPC), a company registered in
England and Wales under registration number 3097552. The investment
in IPC was acquired in June 2013. IPC is one of the United
Kingdom's leading power developers and power plant operators. Since
1995 it has developed and operated thermal and hydro plants in
North America, Latin America, South Africa, Asia and Europe. In
consideration for the acquisition of the entire issued share
capital of IPC, 32,000,000 new Ordinary Shares in Rurelec PLC were
issued to the shareholders of IPC which, at the Placing Price,
represents an implied value for IPC of GBP4 million.
The provisional fair values of IPC's assets and liabilities
acquired were as follows:
BOOK FAIR VALUE PROVISIONAL
VALUE ADJUSTMENT FAIR VALUE
GBP'000 GBP'000 GBP'000
------------------------------------------------------------------- -------- ---------- -----------
Property, plant and machinery 16 0 16
Investments 8,523 (8,523) 0
Inventories 1,291 0 1,291
Trade and other receivables < 1 year 4,399 (2,321) 2,078
Cash 24 0 24
Trade and other payables > 1 year (12,964) 11,764 (1,200)
Total Net Assets acquired 1,289 920 2,209
Excess of acquired cost over net assets (Goodwill and Intangibles) 1,791
Purchase Consideration paid in the year in Rurelec PLC shares 4,000
------------------------------------------------------------------- -------- ---------- -----------
27 Joint venture
The following table sets out the Group's share of its interest
in its joint venture operation in Argentina.
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
--------------------------- ---------- ----------
Revenue 9,652 13,248
Expenses (8,465) (11,322)
Non-current assets 11,906 16,729
Current assets 3,103 4,048
Non-current liabilities(1) (16,682) (16,519)
Current liabilities (2,800) (3,199)
--------------------------- ---------- ----------
1 Non-current liabilities includes GBP15.4 million (2012:
GBP14.4 million) of loans advanced by the Company (see note
16).
28 Reconciliation of profi t before tax to cash generated from
operations
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
--------------------------------------------------------- ---------- ----------
a) Group
(Loss)/profit for the year before tax (39,384) (2,546)
Net finance income 928 (341)
Adjustments for:
Depreciation 444 729
Unrealised exchange losses in joint venture companies (3,267) 1,741
Movement in share option reserve 61 46
Adjustment for loss in Bolivia 34,384 -
Movement in working capital:
Change in inventories (267) (187)
Change in trade and other receivables (6.467) (1.907)
Change in trade and other payables 4,558 198
Cash used in operations (1,942) (2,267)
--------------------------------------------------------- ---------- ----------
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
----------------------------------------------- ---------- ----------
b) Company - -
(Loss)/profit for the year before tax (10,364) (604)
Net finance income 2,276 (2,511)
Adjustments for:
Unrealised exchange losses/(gains) on loans 437 1,105
Movement in share option reserve 61 46
Adjustment for loss in Birdsong 10,689 -
Movement in working capital:
Change in trade and other receivables (1,762) (1,528)
Change in trade and other payables 4,446 249
Cash used in operations 5,783 (3,243)
----------------------------------------------- ---------- ----------
29 Financial risk management
The Group is exposed to a variety of financial risks which
result from both its operating and investing activities. The
Group's risk management is coordinated to secure the Group's short
to medium-term cash flows by minimising its exposure to financial
markets. The Group does not actively engage in the trading of
financial assets for speculative purposes nor does it write
options. The most significant risks to which the Group is exposed
are described below:
a) Foreign currency risk
The Group is exposed to translation and transaction foreign
exchange risk. Foreign exchange differences on retranslation of
these assets and liabilities are taken to the profit and loss
account of the Group. The Group's principal trading operations are
based in South America and as a result the Group has exposure to
currency exchange rate fluctuations in the principal currencies
used in South America. The Group also has exposure to the US$ as a
result of borrowings denominated in these currencies.
b) Interest rate risk
Group funds are invested in short-term deposit accounts, with a
maturity of less than three months, with the objective of
maintaining a balance between accessibility of funds and
competitive rates of return.
c) Capital management policies and liquidity risk
The Group considers its capital to comprise its ordinary share
capital, share premium, accumulated retained earnings and other
reserves.
The Group's objective when maintaining capital is to safeguard
the entity's ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other
stakeholders.
The Company meets its capital needs primarily by equity
financing. The Group sets the amount of capital it requires to fund
the Group's project evaluation costs and administration expenses.
The Group manages its capital structure and makes adjustments to it
in the light of changes in economic conditions and the risk
characteristics of the underlying assets.
The Company and Group do not have any derivative instruments or
hedging instruments. It has been determined that a sensitivity
analysis will not be representative of the Company's and Group's
position in relation to market risk and therefore, such analysis
has not been undertaken.
As set out in note 25, the Group has GBP24.6 million of loans
falling due within 12 months. This includes the loan of US$15.45
million, plus interest, which is due for repayment by 30 April
2014. This loan was repaid on 2 June 2014 from the proceeds of the
claim against the Bolivian Government.
The following table sets out when the Group's financial
obligations fall due:
YEAR ENDED YEAR ENDED
31.12.13 31.12.12
GBP'000 GBP'000
------------------------------------------------------------ ---------- ----------
Current - due within 1 year:
Trade payables 8,883 2,373
Borrowings 25,049 12,313
Total due within 1 year: 33,932 14,686
Non-current - due in more than 1 year but less than 5 years
Borrowings 1,499 1,301
------------------------------------------------------------ ---------- ----------
d) Credit risk
Generally, the maximum credit risk exposure of financial assets
is the carrying amount of the financial assets as shown on the face
of the balance sheet (or in the detailed analysis provided in the
notes to the financial statements). Credit risk, therefore, is only
disclosed in circumstances where the maximum potential loss differs
significantly from the financial asset's carrying value. The
Group's trade and other receivables are actively monitored to avoid
significant concentrations of credit risk.
e) Fair values
In the opinion of the Directors, there is no significant
difference between the fair values of the Group's and the Company's
assets and liabilities and their carrying values and none of
Group's and the Company's trade and other receivables are
considered to be impaired.
The financial assets and liabilities of the Group and the
Company are classified as follows:
31 December 2013
GROUP COMPANY
FAIR VALUE BORROWINGS FAIR VALUE BORROWINGS
THROUGH LOANS AND PAYABLES THROUGH LOANS AND PAYABLES
PROFIT AND AT AMORTISED PROFIT AND AT AMORTISED
AND LOSS RECEIVABLES COST AND LOSS RECEIVABLES COST
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ----------- ------------ ---------- ----------- ------------
Trade and other receivables > 1 year - 16,809 - - 35,771 -
Trade and other receivables < 1 year - 9,831 - - 6,075 -
Cash and cash equivalents - 3,750 - - 21 -
Trade and other payables > 1 year - - - - - -
Trade and other payables < 1 year - - (8,883) - - (5,144)
Borrowings > 1 year - - (1,499) - - -
Borrowings < 1 year - - (24,583) - - -
Totals - 30,390 (34,965) - 41.867 (5,144)
------------------------------------- ---------- ----------- ------------ ---------- ----------- ------------
31 December 2012
GROUP COMPANY
FAIR VALUE BORROWINGS FAIR VALUE BORROWINGS
THROUGH LOANS AND PAYABLES THROUGH LOANS AND PAYABLES
PROFIT AND AT AMORTISED PROFIT AND AT AMORTISED
AND LOSS RECEIVABLES COST AND LOSS RECEIVABLES COST
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ----------- ------------ ---------- ----------- ------------
Trade and other receivables > 1 year - 15,376 - - 40,397 -
Trade and other receivables < 1 year - 4,797 - - 162 -
Cash and cash equivalents - 6,122 - - 4,502 -
Trade and other payables > 1 year - - - - - -
Trade and other payables < 1 year - - (4,325) - - (699)
Borrowings > 1 year - - (1,301) - - -
Borrowings < 1 year - - (12,313) - - -
Totals - 26,295 (17,949) - 45,061 (699)
------------------------------------- ---------- ----------- ------------ ---------- ----------- ------------
30 Capital commitments
The Group had outstanding capital commitments of US$0.7 million
(2012: GBP2.4 million) in respect of plant ordered but not
delivered at the year-end.
31 Contingent liabilities
EdS has entered into a long-term maintenance agreement with a
third party who provides for the regular service and replacement of
parts of two turbines. The agreement runs until 2022. The Group's
50 per cent share of the total payable under the agreement until
the year 2022 amounts to US$6.3 million/GBP3.8 million (2011:
US$6.6 million/GBP4.1 million). In the event that EdS wishes to
terminate the agreement before 2022, a default payment would become
payable. The Group does not anticipate early termination and
therefore no provision has been made in this regard.
32 Related party transactions
During the year the Company and the Group entered into material
transactions with related parties as follows:
a) Company
i) Paid, to its 100 per cent subsidiary Independent Power
Corporation PLC ("IPC"), a) GBP0.1 million to Independent Power
Corporation PLC ("IPC") under a "Shared Services Agreement", b)
paid a development fee of US$ 0.08 million in respect of a proposed
project in Chile c) reimbursed expenses incurred by IPC on behalf
of the Company totalling GBP9,000. d) Reimbursed pre-project
expenses relating to Central Illapa of GBP322,000. P.R.S. Earl and
E.R. Shaw are Directors of IPC which was acquired by the Company on
10 June 2013.
ii) Paid salaries to key management amounting to GBP0.6 million (2011: GBP0.3 million).
iii) Charged interest on loans to its joint venture companies
(PEL and EdS) amounting to GBP2.1 million and GBP0.8 million
respectively. Loans by the Company to PEL and EdS at the year-end
amounted to GBP19.4 million and GBP7.7 million respectively. In
addition, the Company has provided GBP3.8 million of support to
creditors of EdS. Interest on these loans has been accrued at rates
of between 8 per cent and 18 per cent.
iv) Provided loans totalling GBP5.6 million to its subsidiary
companies in Peru and charged interest amounting to GBP90,000
v) Provided loans totalling GBP1.0million to its subsidiaries companies in Chile.
b) Group
None.
33 Post balance sheet date events
Since the year-end, the Group has continued to develop the
generation projects in Chile whilst seeking local partners for the
two projects under development. The Group has also continued to
construct the Canchayllo run-of-river hydro plant in the Junin
province of Peru some 250km East of Lima, whilst also obtaining the
Peruvian Government backed power purchase agreement for a 12 MW
run-of-river hydro plant in the same province as Canchayllo by
depositing a $3 million bond with the Supervisory Agency for
Investment in Energy and Mining a public institution responsible
for regulating and supervising companies in the electricity, oil
and mining sectors.
On the 2 June 2014 the Group received US$31.5 million from the
Government of Bolivia in full settlement of the arbitration and
also settled the full amount of the outstanding Birdsong loan of
US$25.9 million.
The Chief Executive's Review of Operations contains further
details.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMGGVDVGGDZM
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