TIDMRUR
RNS Number : 4764J
Rurelec PLC
28 June 2017
Rurelec PLC
("Rurelec" or "the Company")
Audited results for the year ended 31 December 2016
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 2016. The annual report will be posted to shareholders on
28 June 2017 together with a notice of Annual General Meeting to be
held at the offices of W.H. Ireland Group PLC at 24 Martin Lane,
London, EC4R 0DR at 11.30 a.m. on 20 July 2017.
The annual report for the year ended 31 December 2016 and Notice
of Annual General Meeting will be available from the Company's
website at www.rurelec.com.
Highlights
-- Focus of the Company has been to continue reducing costs, to
stabilise the Company, and to seek certain asset disposals
-- Overall loss before tax from continuing operations GBP9.3 million (2015: GBP20.0 million)
-- Further write downs of assets to values directors believe can
be supported in market conditions
-- Repayment of a Radix loan plus interest of GBP621k in February 2016
-- Group borrowings of GBP4.0 million (2015: GBP3.1 million)
-- Loss per share 1.65p (2015: 3.57p)
-- Net Asset Value per share 5.6p (2015: 6.7p)
-- Qualification in respect of potential accrued interest of Joint Venture partner loans
Commenting on the results Simon Morris, Rurelec's Executive
Director, said:
"During 2016 the Company has actively pursued the sale of
certain Group assets. This has been carried out against a
background of continued cost reductions and cash flow constraints.
To date no asset disposals have been achieved. Certain Group assets
are currently being marketed.
For most of 2016 liquidity remained an issue, but eased towards
the end of the year when cash remittances from the Group's
operations in Argentina resumed. This enabled the Company to settle
a number of long standing creditor positions. However, liquidity
remains an issue for the Group given the recent outage suffered by
the operations in Argentina.
The overall loss before tax for the year of GBP9.3 million
reflects further write downs on a number of the Group's assets to
values that the directors believe can be supported in current
market conditions and given the overall financial position of the
Group. Liquidity remains a critical issue for the Group.
For further information please contact:
Rurelec PLC WH Ireland Limited
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Simon Morris, Executive Paul Shackleton &
Director James Bavister
www.rurelec.com
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Tel: +44 (0)20 Tel: +44(0) 20 7220
7025 8028 1666
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The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
Rurelec PLC is an owner, developer and operator of power
generation capacity internationally.
Rurelec's main business consists of the ownership and
development of power generation facilities on national and regional
grids and in isolated areas, selling wholesale electricity as a
generator on commercial terms, through capacity payments or power
purchase agreements ("PPAs").
Our current business is centred on our share of an operational
plant in Argentina whilst also seeking to sell the remainder of the
small hydro portfolio in Peru and to complete the development of
our project in Chile.
Non-Executive Director's Statement
Brian Rowbotham
Dear Shareholder
It is my duty to present the results of Rurelec PLC ("Rurelec")
for the financial year ended 31 December 2016, which has seen
further stabilisation in the Company's financial situation through
additional cost cutting. During the course of the year, the Company
was offered an extension of its original bridging facility from
Bridge Properties (Arena Central) Limited ("BPAC") and entered into
an additional small facility from the same lender under the
original security, which has provided additional support against
the threats that could arise in the event that receipts from
Argentina are not as forecast at any time due to operational
reasons. Since the year end these facilities have been further
extended to the end of June 2018.
Outlook
The Company is well placed in its joint venture of its Argentine
asset in a country which is making rapid progress in improving its
energy systems to contribute to economic development,
sustainability and energy security and where demand continues to
grow at around 6% per annum. During the year, CAMMESA, the market
administrator, issued tenders for 1.9 GW of new thermal capacity
and also launched the RenovAr project to procure 1 GW of renewables
as part of Argentina's programme to ensure that at least twenty per
cent. of its generation capacity will be provided from renewables
by 2025. Energia del Sur S.A. ("EdS") has ready potential to
increase its site capacity through an expansion project which is
under continuous review and demand in the Chubut region would
support the initiative.
By contrast, there has been a downturn in demand in Chile, due
to a slowdown in the mining sector and saturation of the
transmission system in the north from new renewable projects.
Without improvement to the transmission system, and an upturn in
demand, it was not, in 2016, opportune to progress the Central
Illapa project in Mejillones although all consents to construct the
project are now in place. Recently there have been signs that new
investment in the mining sector is beginning to pick up and an
increase in demand for copper in particular could reverse the
recent decline. As a result, we are currently looking at ways in
which the project can be further progressed.
During the year, the Company worked towards a sale of the
remaining hydro portfolio in Peru for which the prospective
purchaser paid for exclusivity for part of the period but the sale
unfortunately failed to close and the assets are once again held
for sale. As a result, the Company's planned disposals of assets to
repay its borrowings are behind schedule.
Nevertheless, the plant in Argentina continues to perform well
and represents an attractive asset in a country where investment in
the power sector is buoyant. If the intended disposal of non-core
assets is achieved in the near future, the Company remains poised
to lever off its position as an incumbent generator in a market
which continues to expand.
--------------------
Brian Rowbotham
Non-executive Director
28 June 2017
Strategic Report
Strategy
The strategy for the Group continues to be determined by its
financial position, the reasons for which are set out in more
detail below. The Group will dispose of assets, in particular the
hydro portfolio in Peru. The level of ongoing development work
continues to be severely restricted due to the Group's financial
position. On completion of certain asset sales, the Group can
return to a stable financial footing. The Board will then decide
whether certain unfinished development work, such as the Central
Illapa project in Chile, can be completed. Cost control will remain
a key element of the Group's strategy.
The overall strategy is to stabilise the financial position of
the Group, to enable the Board to realise as much value for the
asset portfolio (including further development work where
appropriate), and return that value to shareholders.
Liquidity
The liquidity issues facing the Group in early 2016, and the
reasons behind them, were fully set out in last year's Strategic
Report.
During 2016, BPAC provided new facilities to the Group of GBP1.6
million, of which GBP1.52 million has been drawn down. These funds
were used to repay the short-term facility and interest thereon
from Radix Investments UK Limited of GBP621,000, and to meet
on-going working capital requirements. The BPAC loan was
rescheduled on 08 June 2017 for repayment on 30 June 2018.
During the first 8 months of 2016 the cash receipts from our
plant in Argentina in Comodoro Rivadavia were severely restricted.
In September 2016 the Group started to receive more regular
payments from Argentina in respect of the Group's outstanding loans
to EdS. This enabled the Company to settle a number of long
outstanding creditors. In particular, the Company was able to agree
a debt restructuring involving both Ethos Energy Italia S.p.A. and
IPSA Group PLC ("IPSA") during February 2017 in respect of
outstanding monies in relation to the two Siemens 701DU turbines
stored in Italy. The balance of this debt under the restructuring
continues to be paid by the Company.
On 31 March 2017, as announced, EdS's plant in Argentina, in
which the group has a 50% interest, suffered damage as a result of
severe weather conditions, resulting in the plant ceasing to
operate for the period until 23 May 2017. This outage caused a
short- term reduction in remittances from EdS whilst they
re-assessed their financial position. However, the cumulative 2017
receipts at the time of the outage were running ahead of 2016 and
following EdS's assessment of their cash position since the plant
has recommenced generation they expect full year 2017 remittances
to be greater than 2016. Notwithstanding this, and in order to
strengthen its position the Board is seeking alternative sources of
finance to bridge any potential funding gap, none of which have
been secured yet.
Management team
Following the significant changes in the Board during 2015,
Brian Rowbotham (non-executive) and I have remained in office
throughout 2016. The Board was further strengthened by the
appointment of Andy Coveney on16 November 2016 as finance director.
The appointment of Andy has been a very welcome addition to the
Board.
I would like to again thank Brian for his continued support
through what has been another difficult year for your Company.
Financial results
The operating loss for the year of GBP12.8 million is an
improvement on that incurred last year (2015: GBP21.9 million).
Strict control over administration expenses of GBP2.4 million
(2015: GBP4.4 million) has given rise to a 45% reduction in this
category. Further significant write-downs in the carrying value of
certain Group assets totalling GBP10.5 million (2015: GBP17.6
million) has led to a marked impact on the results. These write
downs reflect the Board's view of the carrying values for the
Group's assets in current market conditions. The overall loss
before tax for the year was GBP9.3 million (2015: GBP20.0
million).
The Group continues to actively market our Peruvian assets for
sale. At the time of this report there can be no guarantee that
these sales will conclude.
Until there is a disposal of assets, the Group is dependent upon
joint venture receipts from Argentina in order to comply with
payment arrangements made since the year-end with its creditors.
There exists uncertainty as to the timing and the quantum of the
receipts from its joint venture in Argentina and for this reason
the Directors are, in the meantime, pursuing alternative sources of
working capital until disposal receipts are assured, none of which
have been secured yet.
Key performance indicators
The Directors use a range of performance indicators to monitor
progress in the delivery of the Group's strategic objectives, to
assess actual performance against targets and to aid management of
the businesses.
Rurelec's key performance indicators ("KPIs") include both
financial and non-financial targets which are set annually.
Financial KPIs
Financial KPIs address operating profitability, net asset value
and earnings per share.
i) Operating profitability
Operating loss excludes all non-operating costs, such as
financing and tax expenses as well as one-off items and non-trading
items such as negative goodwill. The exclusion of these
non-operating items provides an indication of the performance of
the underlying businesses. The Group made a loss of GBP12.8 million
in the year (2015 GBP21.9 million loss).
ii) Net asset value
Net asset value is calculated by dividing funds attributable to
Rurelec's shareholders by the number of shares in issue. The net
assets of the Group reduced in the year to 5.6 pence per share
(2015 6.7 pence per share).
iii) Earnings per share
Earnings per share provide a measure of the overall
profitability of the Group. It is defined as the profit or loss
attributable to each Ordinary Share based on the consolidated
profit or loss for the year after deducting tax and minority
interests. Growth in earnings per share is indicative of the
Group's ability to identify and add value. The Group made a loss of
1.65 pence per share in the year (2015: loss of 3.57 pence per
share) and hence there were no positive earnings per share.
Non-Financial KPIs
Non-financial KPIs address other important technical aspects of
the business, such as gross capacity, operating efficiency and
availability.
i) Gross capacity
Gross capacity is the total generation capacity owned by Group
companies and is affected by acquisitions, expansion programmes and
disposals. The group continues to own three turbines ready for
deployment in projects, although it is expected that local
opposition to the Arica project in Chile is likely to lead to the
turbine being deployed elsewhere.
ii) Operating efficiency
Operating efficiency is the average operating efficiency of the
generating plant owned by Group companies. It can be improved
through the installation of more thermally efficient turbines,
refurbishment activities or through conversion to combined cycle
operation. No change was noted in the operating efficiency of the
Group in the year.
iii) Technical availability
Technical availability measures when a plant is available for
dispatch. The measurement method excludes time allowed for planned
maintenance activities which occur at regular intervals during the
life of the unit plus an allowance for unplanned outages. Unplanned
and forced outages in excess of the annual allowance will cause a
reduction in the technical availability factor. Average
availability through the year for our plant in Argentina was 92.6%
per cent. due to unplanned and forced outages and a schedule
maintenance outage (2015: 94.4 per cent.), making the plant one of
the most reliable in the Argentine interconnected system.
Review of Financial Performance
Group Results
The Group loss after tax for the financial year under review is
GBP9.3 million (2015: GBP20.0 million loss). Most of the losses
were associated with impairments and loss on disposals of GBP10.5
million (2015: GBP17.6 million). The impairment losses were GBPnil
(2015: GBP13.3 million) for Argentina operations, GBP1.3 million
(2015: GBP2.3 million), for Chilean operations, excluding the 701
turbines write-down of GBP6.4 million (2015: nil), GBP41k (2015:
GBP1.7 million) from the disposal of Independent Power Corporation
and GBP2.7 million (2015: GBP0.2 million) for Peruvian
operations.
The results for the operations in Argentina, Peru, and Chile are
shown below.
Group revenue was GBP0.1 million (2015: GBP0.2 million), Cost of
Sales was GBPnil (2015: GBP22k) Operating and Administrative
expenses amounted to GBP2.4 million (2015: GBP4.4 million).
Operating loss was GBP12.8 million (2015: GBP21.9 million loss).
The loss before tax is GBP9.3 million (2015: GBP20.0 million loss).
The basic loss per share is 1.65p (2015: 3.57p loss). In 2016, the
total assets of GBP 39.1 million (2015: GBP44.1 million) includes
assets of GBP 2.2 million (2015: GBP3.6 million), which are held
for sale. Total equity stands at GBP31.4 million (2015: GBP37.5
million), or a Net Asset Value 5.6 pence per share (2015: 6.7 pence
per share).
A more detailed analysis of the business entities is given
below.
Energia del Sur S.A. Results
At the operating level the plant in Comodoro Rivadavia and
therefore based on 100% of EdS's activities the net operating
profit for the year was AR$ 111.0 million (2015: AR$ 67.5 million)
on revenues of AR$ 375.3 million (2015: AR$ 261.6 million), whilst
the gross operating profit was AR$ 333.5 million (2015: AR$ 100.7
million). The net profit for the year in EdS was AR$ 27.6 million
(2015: loss AR$ 49.6 million) which included foreign exchange
losses of AR$ 34.2 million (2015: AR$ 85.0 million).
As set out in note 26 the Directors have determined that the
Group is a joint venture operation and is therefore equity
accounted.
Rurelec Chile
The development operations in Chile have expensed limited direct
costs in the year of GBP68k (2015: GBP139k). Capitalised
development costs have accumulated to GBP 0.4 million (2015: GBP1.1
million, including Arica) on the Central Illapa project. In 2016
the Arica project was impaired by GBP0.3 million (2015: GBP2.3
million). The development costs associated with the Central Illapa
project were not impaired in 2016 or 2015.
Cascade Hydro Power (Peru)
Rurelec has, after IFRS impairments, outstanding loans of GBP1.3
million (2015: GBP1.1 million) to the Cascade group at the period
end. The other assets of the Cascade group include GBP2.4 million
(2015: GBP2.1 million) of bonds held by the Ministry of Minerals
and Energy in connection with the Colca project.
Review of Operations
Argentina
Operations at the power plant continue to allow EdS to show a
good availability record. Gross energy output was 3.8 per cent.
lower at approximately 871 GWh (2015: 905 GWh), this was due to
unplanned and forced outages and scheduled maintenance. The average
heat rate of the plant was 8.39 MMBTU/MWh (2015: 8.37). The average
heat rate for the plant includes fuel consumption on both the gas
turbines and auxiliary firing of the steam turbine.
The following table sets out the Group's share of its interest
in the joint venture in Argentina following the changes in the
accounting for joint ventures to the equity accounting method:
Year ended Year ended
-------------------------
31.12.16 31.12.15
-------------------------
GBP'000 GBP'000
------------------------- ----------- -----------
Revenue attributable
to the Group 9,325 8,908
Expenses (9,198) (9,109)
Foreign Currency
Ex change (895) (2,930)
Net loss (768) (3,131)
Non-current Assets 5,482 7,772
Current Assets 4,853 4,236
Non-current Liabilities (19,236) (15,757)
Current Liabilities (7,989) (9,339)
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Chile
Arica
Following the reassessment of the project the Board is
considering deploying the Frame 6B turbine acquired for the project
elsewhere. An application has therefore been made to the state
asset bureau for a refund of the purchase price for the land and a
buyer is to be sought for the turbine unless it can be redeployed.
Given the uncertainty of the future sale of the turbine and the
recoverability of the land cost an impairment charge of GBP1.3
million (2015: GBP2.3 million) has been recorded in the year.
Central Illapa
The project has continued to make some progress in
development.
The Group carrying value for projects are assessed for possible
impairments. In light of current local market conditions, in order
for the project to be attractive to joint venture partners, the
capital value of the 701 Siemens Turbines going into the project
has been assessed at $12.0 million. The Directors also obtained an
independent valuation produced by a competent person. The report
stated that the price in the turbine market has fallen due to an
increase in stock levels resulting in the fair value of the
turbines being $12.0 million. This represents an impairment of
$13.0 million and, after exchange rate differences an impairment of
GBP6.4 million has been charged in 2016 (2015: nil)
Peru
The 5.3 MW Canchayllo plant was sold in May 2015 to EnergĂas
Renovables de los Andes, S.A., a subsidiary of Union Group of
Uruguay. The Group has retained a reduced presence in Lima to
maintain the development rights and manage the sale of the 12.05 MW
Colca project in the province of Huancayo on the Junin River for
which performance bonds have been lodged. Bonds in respect of the
other two development projects Chilcay and Huasicancha have been
forfeited because of the decision of the board not to pursue
marginal projects. Exclusive negotiations for the sale of Colca,
Chilcay and Huisicancha project companies commenced in late 2015
and continued into 2017. Unfortunately, the prospective buyer
pulled out just prior to expected signing. Other alternative
prospective purchasers are currently in negotiation. However, at
this stage there can be no guarantee that the sales will close. If
a sale is completed, then it is expected that net proceeds from the
release of the performance bonds will be available to Rurelec.
The large Santa Rita 255 MW project rights are retained by
Cascade Hydro Power SAC but contrary to expectation, to date no
tender for large hydro PPA's has been announced. When this occurs,
there would be an opportunity to work with or sell the project
rights to a strong partner active in the large-scale hydro
sector.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group, are
possible changes in demand and pricing for electricity in the
markets in South America in which the Group operates, relate to
political risk and uncertainties in the financial markets.
a) Political risk - there exists significant political risks in areas where the Group operates.
b) Financial markets - Whilst project finance may be available
in the markets in which the Group operates, the Group's plans
remain dependent on raising project finance from a combination of
local partners and lending institutions. The Group is seeking to
broaden its base of potential partners and lending
institutions.
c) Exposure to foreign currency - The Group's activities are in
South America and therefore the Group's results will be affected by
exchange rate movements and local inflation rates. Furthermore,
past experience has shown that exchange controls restrictions can
sometimes be applied and these may have an impact on the Group's
ability to repatriate funds to the parent company. The Group seeks
to limit these risks by raising funds in the currency of the
operating units.
d) Efficient operation - The Group has an effective maintenance
programme and has entered into long term service agreements to
reduce these risks as appropriate.
e) Liquidity - The Group needs to be in a position to meet its
short-term cash requirements. Please see Going Concern in the
Directors Report and note 1b for further details.
The Strategic Report was approved by the Board of Directors on
28 June, 2017 and was signed on its behalf by
------------------------------------------
Simon Morris (Executive Director).
BOARD OF DIRECTORS
BRIAN ROWBOTHAM
Non-Executive Director - appointed 16 October 2013
Brian is the Senior Independent Non-Executive Director and
Chairman of the Audit Committee. He worked as a Chartered
Accountant with Deloitte and Touche. He has extensive experience
working in the City of London, joined Teather and Greenwood in 1997
and was involved as partner and then Finance Director in the
company's flotation on AIM and subsequent move to the Official
List. He ran his own consultancy specialising in turnarounds and
start-ups until joining Hitchens, Harrison & Co plc in January
2005. He left Hichens, Harrison & Co plc after its acquisition
by Religare in 2008. Brian is a Fellow of the Institute of
Chartered Accountants in England and Wales
SIMON MORRIS
Executive Director - appointed 19 July 2015
Fellow of the Institute of Chartered Accountants in England and
Wales, qualified as a Chartered Accountant in 1980. After obtaining
a degree in Business Studies, spent his career with Grant Thornton
and became a partner in 1988. He specialised in corporate finance
and corporate recovery, principally restructuring work. He was
appointed Chief Operating Officer of Grant Thornton UK in 2008,
retiring in late 2011. Since then he has acted as a business
consultant. He is also an accredited mediator.
ANDY COVENEY
Finance Director- appointed 16 November 2016
Member of the institute of Chartered Accountants, qualified as
Chartered Accountant in 1990. After obtaining a degree in Geology
from the University of Durham he joined Deloitte Haskins &
Sells, later moving into Corporate Finance advisory work with
Coopers & Lybrand. Left the profession in 1993, embarking on a
career as finance director/managing director of several
manufacturing & distribution businesses, specialising in
turn-arounds, cash flow management & profit improvement,
including CP Pharmacuticals (Holdings) Ltd, Benders Holdings Ltd
& Bernstien Holdings Ltd. He established his own advisory &
consultancy business in 2011 to specialise in & invest in
business turn arounds & growth companies.
DIRECTORS' REPORT
The Directors submit their annual report together with the
audited financial statements for the year ended 31 December,
2016.
Principal activities
The Company and the Group's principal activity is the
acquisition, development and operation of power generation assets
in markets in Latin America.
Since the Company's admission to AIM in August 2004, the Company
has acquired interests in power generation operations in Bolivia
(disposed of in 2010) and Argentina and, since 2012, has commenced
development of assets in Peru and Chile.
Results and dividends
The Group results for the year ended 31 December, 2016 are set
out in the Consolidated Statement of Total Comprehensive
Income.
No dividend was paid during the year to 31 December, 2016 (2015:
nil).
Share capital
Details of the issued share capital are set out in Note 19.
Going concern
The Company has been in negotiations for prospective sales of
Group assets. There exists uncertainty as to the timing of the
sales of assets as well as the quantum of the corresponding
proceeds.
During 2016 and since the year end the Company has reached
payment agreements with and settled certain creditors resulting in
an overall reduction in trade and other payables. Until there is a
disposal of assets, the Group is reliant on repayments of loans
from its joint venture Argentine operations. However, the quantum
and timing of such receipts may be subject to variation and are not
guaranteed as there is no formal agreement in place. Whilst
anticipated loan repayments from the joint venture are expected to
be sufficient to meet the working capital requirements for the
Group, the Directors are considering raising additional facilities
to increase headroom.
The Group's 100% subsidiary Cascade Hydro Ltd has outstanding
third party loans of GBP2.4 million (2015: GBP2.2 million). These
loans have not been repaid in accordance with their original
payment schedules. Further details are set out in Note 24.
On the basis that the Group receives the joint venture
remittances referred to above or the alternative sources of working
capital, the Directors have assessed that the Group would have
sufficient working capital based on their review of cashflow
forecasts for a period of at least 12 months from the signing of
the financial statements.
Directors
The following Directors served during the year:
Brian Rowbotham - Non-Executive Director
Simon Morris - Executive Director
Andy Coveney - Executive Director (appointed 16 November
2016)
Directors' interests
The Directors' beneficial interests in the shares of the Company
were on the reference dates as stated below:
23.06.17 31.12.16 31.12.15
Brian Rowbotham 450,000 450,000 450,000
Significant shareholdings in the Company
In addition to the shareholdings shown above, the Company is
aware of the following interests of 3 per cent. or more in the
issued ordinary share capital of the Company notifiable at 23 June
2017, being the last practicable date for reporting this
information.
Number of % holding
shares
Sterling Trust Ltd 303,092,303 53.989
YF Finance Ltd 96,565,166 17.201
HSBC Client Holdings Nominees
(UK) Limited 16,884,673 3.008
The percentages shown are based on 561,387,586 shares in
issue.
Risk management and objectives
The financial risk management policies and objectives are set
out in Note 28.
Directors' responsibilities
The Directors are responsible for preparing the Strategic
Report, the Directors' Report, Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have to prepare the financial statements in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
the European Union. Under company law, the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs and profit
or loss of the Company and Group for that period. In preparing
these financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors confirm that:
-- there is no relevant audit information of which the Company's auditors are unaware; and
-- the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditors are aware of that
information.
-- the Directors are responsible for the maintenance and
integrity of the corporate and financial information included on
the Company's website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Auditor
Pursuant to Section 489 of the Companies Act of the Companies
Act 2006, the auditors are Saffery Champness LLP.
On behalf of the Board
------------------------
Susan Laker
Company Secretary
28 June, 2017
CORPORATE GOVERNANCE REPORT
for the year ended 31 December 2016
Policy Statement
The Board is committed to applying high standards of corporate
governance and integrity to all our activities. As the Company is
listed on the AIM Market of London Stock Exchange PLC, it is not
required to comply with all aspects of the UK Corporate Governance
Code 2014 (the "Code"). The Group does not comply with the Code.
However, the Board has been briefed on the Code and is accountable
to the Company's shareholders for good corporate governance and
therefore seeks to draw on those aspects of the Code that are
considered to be relevant to the Group.
Board of Directors
Subject to the Articles of Association, UK legislation and any
directions given by special resolution, the business of the Group
is managed by the Board. The Board is responsible for providing
leadership to the management of the Group, determining strategy and
ensuring that agreed strategy is implemented as well as approving
major capital expenditure items, disposals, annual budgets and
financing matters.
The Board appoints its members and those of its principal
committees following the recommendations of the Nominations and
Remunerations Committees. The Board regularly reviews the
identification, evaluation and management of the principal risks
faced by the Group and the effectiveness of the Board's internal
controls. The Board considers the appropriateness of its accounting
policies on an annual basis. The Board believes that the accounting
policies, in particular in relation to income recognition are
appropriate. Financial results with comparison to budget and
forecast results are reported to the Board on a regular basis,
together with commercial reports on operational issues. Significant
variances from budget or strategy are discussed at Board meetings
and actions set in place to address them.
The Board comprises one Non-Executive Director and two Executive
Directors: the Chief Executive Officer and the Finance Director.
All Directors are involved in significant decisions.
Board and committee meetings are scheduled in line with the
financial calendar of the Group. The timing of meetings ensures
that the latest operational detail is available and that
appropriate time and focus can be given to matters under
consideration. The Board met 18 times throughout the year to
discuss a formal schedule of business.
Roles of Non-Executive Director and CEO
The Code requires that there should be a clear division of
responsibilities between the running of the Board and the executive
responsible for the Group's business so as to ensure that no one
person has unrestricted powers of decision.
The Non-Executive Director is responsible for leadership of the
Board ensuring its effectiveness and setting its agenda. Once
strategic and financial objectives have been agreed by the Board,
it is the Chief Executive Officer's responsibility to ensure that
they are delivered upon.
Composition of and Appointments to the Board
The Code requires that there should be a balance of Executive
and Non-Executive Directors and when appointing new directors to
the Board, there should be a formal, rigorous and transparent
process.
The Board comprises one Non-Executive Director, Brian Rowbotham
who is regarded by the Board as independent in character and
judgement and two Executive Directors. The sole Executive Director
and Chief Executive Officer for most of the year was Simon Morris.
On 16(th) November 2016, Andrew Coveney was appointed as Finance
Director to strengthen leadership in financial management and
reporting. Simon Morris and Andrew Coveney form the management
team. Short biographies of the Directors are given on page 6.
The Board is satisfied with the balance between executive and
non-executive directors. The Board considers that its composition
is appropriate in view of the size and requirements of the Group's
business and the need to maintain a practical balance between
executive and non-executive directors.
Each member of the Board brings different experience to the
Board and the Board Committees. The Board is satisfied that there
is sufficient diversity in the Board structure to bring a balance
of skills, experience, independence and knowledge to the Group. It
is noted that the non-executive director holds shares in the
Company but the Board consider that this does not impact his
independence.
The Code requires that the Board undertakes a formal and
rigorous annual evaluation of its own performance and that of its
Committees and Directors. The Board reviews its composition
annually to ensure there is adequate diversity to allow for its
proper functioning and that the Board works effectively as a
unit.
When a new appointment is made to the Board, consideration is
given to the particular skills, knowledge and experience that a
potential new member could add to the existing Board
composition.
Re-election
Under the Code, the Directors should offer themselves for
re-election at regular intervals. Additionally, under the Company's
Articles of Association, at least one third of the directors who
are subject to retirement by rotation are required to retire and
may be proposed for re-election at each annual general meeting
("AGM"). New directors who were not appointed at the previous AGM,
automatically retire at their first AGM and, if eligible, can seek
re-appointment.
Internal Controls
The Board takes responsibility for establishing and maintaining
reliable systems of control in all areas of operation. These
systems of control, especially financial control, can only provide
reasonable but not absolute assurance against material misstatement
or loss.
The key matters relating to the systems of internal control are
set out below:
-- the Company operates a comprehensive system for reporting
financial and non-financial information to the Board including
review of strategy and financial budgets.
-- financial performance is reviewed against budget, forecast
and other performance indicators with action dictated according to
each meeting.
-- sufficient resource is focused to maintain and develop
internal control procedures and information systems especially in
financial management.
The Board considers that there have been no substantial
weaknesses in internal financial controls that have resulted in any
material losses, contingencies or uncertainties that have to be
disclosed in the accounts.
Information and Development
The Code requires that the Board should be supplied in a timely
fashion with information in a form and of a quality appropriate to
enable it to discharge its duties.
Updates dealing with changes in legislation and regulation
relevant to the Group's business are provided to the Board by
external advisors, the Finance Director and legal counsel.
Directors may seek independent professional advice at the Company's
expense in furtherance of their duties as Directors.
Investor Relations
The Group values the views of its shareholders and recognises
their interest in the Group's strategy and performance, The
Directors hold meetings with institutional shareholders to discuss
and review the Group's activities and objectives. Communication
with private shareholders is largely through the Annual General
Meeting ("AGM"), where participation is encouraged and where the
Board is available to answer questions.
The AGM is used to communicate with institutional and private
investors with whom dialogue is encouraged. Directors also
undertake consultation with major shareholders from time to time.
Feedback is reported to the Board so that all Directors develop an
understanding of the views of major shareholders. Trading updates
and press releases are issued as appropriate and are available on
the Company's website, where up to date information is maintained
on the investor section at www.rurelec.com.
Every shareholder has access to a full annual report each year
end and an interim report at the half year end. Care is taken to
ensure that any price sensitive information is released to all
shareholders at the same time in accordance with London Stock
Exchange requirements.
AIM Rules Compliance Report
Rurelec is quoted on AIM, London Stock Exchange's market for
small cap companies. Rurelec complies with the AIM Rules, in
particular AIM Rule 31 which requires the following:
-- to have in place sufficient procedures, resources and
controls to enable compliance with the AIM Rules;
-- to seek advice form the Nominated Adviser ("Nomad") regarding
its compliance with the AIM Rules whenever appropriate and to take
that advice into account;
-- to provide the Nomad with any information it reasonably
requests in order for the Nomad to carry out its responsibilities
under the AIM Rules for Nomads, including any proposed changes to
the Board and to provide draft RNS notifications in advance;
-- to ensure that each of the Directors accepts full
responsibility collectively and individually for compliance with
the AIM Rules;
-- to ensure that each Director discloses without delay all
information which the Company needs to disclose in order to comply
with AIM Rule 17 (Disclosure of Miscellaneous Information) insofar
as that information is known to the Director or could with
reasonable diligence be ascertained by the Director.
Audit Committee
The Audit Committee comprises Brian Rowbotham as Chairman of the
Committee and Simon Morris. Mr Rowbotham and Mr Morris are
Chartered Accountants and have recent and relevant financial and
commercial experience.
The Committee's remit is to review financial reporting
practices, internal financial controls and internal and external
audit policy including the appointment of the Company's Auditor.
During the year, the Audit Committee met three times to discuss
previous auditors partner extension, review the draft half year and
annual financial statements.
The Audit Committee considered the appointment of new auditors
for the Company after the current auditors, Grant Thornton was
coming to the end of an eleven year tenure and also since the
current senior auditor, Chris Smith, had been in place for six
years, an additional year to the maximum of five years of
representation. A tender for new auditors for the Company and its
group of companies was carried out and under the recommendation of
the Audit Committee, Saffery Champness LLP was appointed as
external auditor of Rurelec PLC and its group of companies.
Remuneration Committee
The Remuneration Committee comprises Brian Rowbotham who reviews
the remuneration policy for the Executive Directors and for key
management personnel. The Executive Director determines the
remuneration arrangements for the Non-Executive Director. No
Director may participate in decisions regarding his or her own
remuneration. Details of the Directors' remuneration can be found
in Note 8.
Nomination Committee
The Nomination Committee presently comprises Brian Rowbotham.
The Committee is responsible for monitoring the composition of the
Board and makes recommendations to the Board on all new Board
appointments and succession planning. The Board has not used
external consultants in the appointment of Directors. All Directors
are subject to re-election by shareholders in accordance with the
Company's Articles of Association.
Health, Safety and Environmental Protection Policy
The Group is committed to compliance with all relevant laws and
regulations and continues to assess its operations to ensure
protection of the environment, the community and the health and
safety of its employees. The Group maintains appropriate procedures
to ensure that all activities are carried out in compliance with
safety regulations, in a culture where the safety of personnel is
paramount and which recognises environmental sustainability and
respect for cultural and heritage issues.
Share Dealing Code
The Company has issued a new Share Dealing Code in compliance
with its obligations under the Market Abuse Regulations which
covers dealings by Persons Discharging Managerial Responsibilities
("PDMRs") and certain employees of the Company and its
subsidiaries. The Share Dealing Code restricts dealings in shares
during designated closed periods and at any time when in possession
of unpublished price sensitive information.
Compliance Statement
The Board recognises that the Company is not obliged to and does
not comply with the Code. The board constantly monitors its
compliance and opportunities to improve.
Susan Laker
Company Secretary
28 June 2017
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF RURELEC PLC
We have audited the financial statements of Rurelec Plc for the
year ended 31 December 2016 set out on pages 15 to 48. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditors' report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' Responsibilities
Statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the group's and the parent company's circumstances
and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the financial
statements. In addition, we read all the financial and
non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to
identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired
by us in the course of performing the audit. If we become aware of
any apparent material misstatements or inconsistencies we consider
the implications for our report.
Basis for Qualified Opinion
The Annual Report discloses the Group's share of assets and
liabilities of Patagonia Energy Limited, in which it holds a 50%
interest. Included within the joint venture's liabilities of
GBP54.5m, as disclosed in Note 26, is US$6.31m payable to Basic
Energy Limited, the joint venture partner. No accrued interest has
been reflected in these financial statements and we were unable to
obtain sufficient audit evidence in respect of potential accrued
interest. The Group did not have appropriate evidence that no
accrued interest was payable and Basic Energy Limited have not
confirmed the total accrued interest that is owed to them.
Opinion on financial statements
In our opinion, except for the possible effects of the matter
described in the Basis for Qualified Opinion paragraph:
-- the financial statements give a true and fair view of the
state of affairs of the group and the parent company as at 31
December 2016 and of the group's loss for the year then ended;
and
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union; and
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Emphasis of matter - Going Concern
In forming our opinion on the financial statements, which is
qualified, we considered the adequacy of disclosures made on Page
23 of the financial statements concerning the going concern status
of the Company. In order to meet trade payables and borrowings
falling due within one year, the Company is dependent on the
continuing receipt of loan repayments from Energia del Sur SA.
There is no formal agreement in place for the repayment of the loan
resulting in a material uncertainty that casts doubt on the
Company's ability to continue as a going concern.
Emphasis of matter - Realisation of assets
In forming our opinion on the financial statements, which is
qualified, we considered the adequacy of disclosures made in Note
9b and 16b to the financial statements concerning loans to Group
undertakings and inventories.
The realisation of amounts due from Group undertakings of
GBP10.34m included within the Company Statement of Financial
Position are dependent on the realisation of assets held in those
Group undertakings which is uncertain.
The realisation of inventories of GBP9.7m included within the
Company Statement of Financial Position is dependent on achieving
either the sale of these assets or the successful development of
the Illapa project, which are uncertain.
Other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the Strategic Report and the
Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- the Strategic Report and the Directors Report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the Strategic Report or
the Directors' Report.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we
require for our audit.
Jamie Cassell (Senior Statutory Auditor)
For and on behalf of
Saffery Champness LLP
Chartered Accountants
Statutory Auditors
71 Queen Victoria Street
London
EC 4v 4BE
28 June 2017
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2016
Notes Year ended Year ended
-------------------------------------- ------
31.12.16 31.12.15
-------------------------------------- ------
GBP'000 GBP'000
-------------------------------------- ------ ----------- -----------
Revenue 4 95 179
Cost of Sales 6 - (22)
Gross Profit 95 157
Administrative Expenses 7 (2,420) (4,435)
Other Expense 9b (10,500) (17,572)
Operating Loss (12,825) (21,850)
Share of Joint Venture Profit/(Loss) 26 - -
Foreign Exchange Gains/(Losses) 9a 1,243 (106)
Finance Income 10 2,683 2,385
Finance Expense 10 (355) (458)
Loss before Tax (9,254) (20,029)
Tax Expense 11 (4) (3)
Loss for the year attributable
to owners of the Company (9,258) (20,032)
Earnings per Share 12
Basic Loss per Share (1.65) (3.57)
Diluted Loss per Share (1.65) (3.57)
-------------------------------------- ------ ----------- -----------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
Notes Year Year Ended
Ended
----------------------------------------- -------
31.12.16 31.12.15
----------------------------------------- -------
GBP'000 GBP'000
----------------------------------------- ------- --------- -----------
Loss for the year (9,258) (20,032)
Other Comprehensive Income/(Loss)
for the year:
Items that will be subsequently
Reclassified to Profit & Loss:
Exchange Differences on translation
of Foreign Operations 3,171 999
Total Other Comprehensive Income/(Loss) 3,171 999
Total Comprehensive Loss for year
attributable to owners of the Company (6,087) (19,033)
-------------------------------------------------- --------- -----------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
for the year ended 31 December 2016
Notes Year Ended Year Ended
------
31.12.16 31.12.15
------
GBP'000 GBP'000
------------------------------------- ------ ------------------ ------------
Assets
Non-current Assets
Property, Plant and Equipment 14 11,176 19,217
Intangible Assets 15 29 23
Investment in Joint Venture 26 - -
11,205 19,240
Current Assets
Trade and Other Receivables 16a 24,761 20,866
Cash and Cash Equivalents 18 960 386
25,721 21,252
Assets classified as held for
sale 32 2,207 3,644
Total Assets 39,133 44,136
Equity and Liabilities
Shareholders' Equity
Share Capital 19 11,228 11,228
Share Premium Account 21 22,754 22,754
Foreign Currency Reserve 958 (2,212)
Share Option Reserve 20 - -
Other Reserves - -
Special Non-distributable Reserve 21 45,000 45,000
Retained Earnings (48,520) (39,262)
Total Equity attributable to owners
of the Company 31,420 37,508
Non-controlling interests - -
Total Equity 31,420 37,508
Current Liabilities
Trade and Other Payables 22a 2,434 2,856
Current Tax Liabilities 23 12 -
Borrowings 24 4,037 3,054
6,483 5,910
Liabilities classified as held
for Sale 32 1,230 718
Total Liabilities 7,713 6,628
Total Equity and Liabilities 39,133 44,136
------------------------------------- ------ ------------------ ------------
The financial statements were approved by the Board of Directors
on 28 June 2017 and were signed on its behalf by Andy Coveney
(Executive Director) and Brian Rowbotham (Non-executive
Director).
----------------------- ------------------------
Andrew Coveney Brian Rowbotham
COMPANY STATEMENT OF FINANCIAL POSITION company number:
4812855
For the year ended 31 December 2016
Notes Year Ended Year Ended
------------------------- ------
31.12.16 31.12.15
------------------------- ------
GBP'000 GBP'000
------------------------- ------ ----------- ------------------
Assets
Non-current Assets
Investments 25 100 100
100 100
Current Assets
Inventories 17 9,755 16,195
Trade and Other
Receivables 16b 27,989 24,657
Cash and Cash
Equivalents 18 955 386
38,699 41,238
Total assets 38,799 41,338
------------------------- ------ ----------- ------------------
Equity and liabilities
Shareholders'
equity
Share Capital 19 11,228 11,228
Share Premium
Account 21 22,754 22,754
Share Option 20 - -
Reserve
Other Reserves 21 45,000 45,000
Retained Earnings (43,921) (41,146)
Total Equity 35,061 37,836
Current Liabilities
Trade and Other
Payables 22b 2,065 2,592
Current tax liabilities 23 12 -
Borrowings 1,661 910
3,738 3,502
Total Equity
and Liabilities 38,799 41,338
------------------------- ------ ----------- ------------------
As permitted by s408 Companies Act 2006, the Company has not
presented its own profit and loss account and related notes. The
Company's loss for the year was GBP2.8 million (2015: GBP33.8
million).
The financial statements were approved by the Board of Directors
on 28 June, 2017 and were signed on its behalf by Andy Coveney
(Executive Director) and Brian Rowbotham (Non-executive
Director).
----------------------- ------------------------
Andrew Coveney Brian Rowbotham
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2016
Notes Year Year
ended ended
31.12.16 31.12.15
GBP'000 GBP'000
Cash Flows from Operating Activities
Cash used in Operations 27 (2,066) (5,545)
Taxation Paid - (3)
Net Cash used in Operating Activities (2,066) (5,548)
Cash Flows from Investing Activities
Proceeds from Sale of subsidiary - 4,358
Loan Repayments from Joint Venture
company 2,311 2,417
Net Cash generated from Investing
Activities 2,311 6,775
Net Cash Inflow before Financing
Activities 245 1,227
Cash Flows from Financing Activities
Settlement of Deferred Consideration (321) (1,237)
Loan Drawdowns 1,500 1,861
Loan Principal Repayments (830) (1,707)
Loan Interest Repayments (20) (41)
Net Cash Generated from/(Used
in) Financing Activities 329 (1,124)
Increase in Cash and Cash Equivalents 574 103
Cash and Cash Equivalents at
start of year 386 283
Cash and Cash Equivalents at
end of year 960 386
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2016
Notes Year Year
ended ended
31.12.16 31.12.15
GBP'000 GBP'000
Cash Flows from Operating Activities
Cash Used in Operations 27 (1,333) (4,070)
Net Cash Used in Operations (1,333) (4,070)
Cash Flows from Investing Activities
Investment in and Loans to subsidiaries (673) (1,511)
Loan Repayment from subsidiary 2,311 5,407
Net Cash Generated from Investing
Activities 1,638 3,896
Net Cash Inflow/(Outflow) before
Financing Activities 305 (174)
Cash Flows from Financing Activities
Loan Drawdowns 1,500 1,861
Loan Principal Repayments (830) (1,261)
Loan Interest Repayments (20) (41)
Net Cash Generated from Financing
Activities 650 559
Increase in Cash and Cash Equivalents 569 385
Cash and Cash Equivalents at
start of year 386 1
Cash and Cash Equivalents at
end of year 955 386
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Share Share Foreign Share Retained Special Other Total Non-controlling Total
Capital Premium Currency Option Earnings Non-distributable Reserves GBP'000 Interest Equity
GBP'000 Account Reserve Reserve GBP'000 Reserve GBP'000 GBP'000 GBP'000 GBP'000
GBP'000 GBP'000 GBP'000
----------------- -------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
Balance at
01.01.15 11,228 22,754 (3,211) 146 (20,426) 45,000 1,050 56,541 283 56,824
----------------- -------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
Non-controlling
Interest
Transfer to
Assets for Sale - - - - - - - - (283) (283)
----------------- -------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
Share
option/Plant
Reserve - - - (146) 1,196 - (1,050) - - -
----------------- -------- -------- --------- ------------------ --------- --------- ---------------- ---------
Total
Transactions
with Owners - - - (146) 1,196 - (1,050) - (283) (283)
----------------- -------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
Loss for year
including
Minority Loss - - - - (20,032) - - (20,032) - (20,032)
----------------- -------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
Exchange
Differences - - 999 - - - - 999 - 999
-------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
Total
Comprehensive
Loss - - 999 - (20,032) - - (19,033) - (19,033)
----------------- -------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
Balance at
31.12.15 11,228 22,754 (2,212) - (39,262) 45,000 - 37,508 - 37,508
--------- -------- --------- ---------
Total - - - - - - - - - -
Transactions
with Owners
----------------- -------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
Loss for year
attributable to
owners of the
parent - - - - (9,258) - - (9,258) - (9,258)
----------------- --------- -------- --------- --------- ---------------- ---------
Exchange
Differences - - 3,171 - - - - 3,171 - 3,171
-------- --------- ---------------- ---------
Total
Comprehensive
Loss - - 3,171 - (9,258) - - (6,087) - (6,087)
----------------- -------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
Balance at
31.12.16 11,228 22,754 958 - (48,520) 45,000 - 31,420 - 31,420
----------------- -------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
Notes: 19 21 20 21
----------------- -------- -------- --------- -------- --------- ------------------ --------- --------- ---------------- ---------
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2016
Share Share Share Retained Special Total
Non-distributable
Capital Premium Option Earnings Reserve
Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1.1.15 11,228 22,754 146 (7,521) 45,000 71,607
Transactions with
owners
Cancel charge
for share options - - (146) 146 - -
Total transactions
with owners - - (146) 146 - -
Loss for the year - - - (33,771) - (33,771)
Total Comprehensive
Loss - - - (33,771) - (33,771)
Balance at 31.12.15 11,228 22,754 - (41,146) 45,000 37,836
Loss for the year - - - (2,775) - (2,775)
Total Comprehensive
Loss - - - (2,775) - (2,775)
Balance at 31.12.16 11,228 22,754 - (43,921) 45,000 35,061
Notes: 19 21 20 21
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
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
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 year ended 31 December 2016.
Going Concern
The Directors have continued to adopt the going concern basis
for the preparation of these financial statements. During 2016 the
Group continued to receive funds from its joint venture in
Argentina, EdS, in service of the loans to the joint venture and a
wholly owned subsidiary Rurelec Project Finance Ltd.
The Company has been in negotiations for the prospective sales
of Group assets. There exists uncertainty as to the timing of the
sales of assets as well as the quantum of the corresponding
proceeds.
During 2016 and since the year end the Company has reached
payment agreements with and settled certain creditors resulting in
an overall reduction in creditors. Until there is a disposal of
assets, the Group is reliant on repayments of loans from its joint
venture. However, the quantum and timing of such receipts are
subject to variation and are not guaranteed. Whilst anticipated
loan repayments from the joint venture are expected to be
sufficient to meet the working capital requirements for the Group,
the Directors are considering raising additional facilities to
increase headroom.
The Group's 100% subsidiary Cascade Hydro Ltd has outstanding
third party loans of GBP2.4 million (2015: GBP2.2 million). These
loans have not been paid in accordance with their original payment
schedules. Further details are set out in Note 24.
On the basis that the Group receives these joint venture
remittances or the alternative sources of working capital, the
Directors have assessed that the Group would have sufficient
working capital based on their review of cashflow forecasts for a
period of at least 12 months from the signing of the financial
statements.
1c New accounting standards
The Directors consider that no revisions to IFRS standards
implemented in the year have had any significant effect on these
statements.
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 years
Standard/interpretation Content beginning on/after
IFRS 9 (2014) Financial instruments: 01/01/2018
IFRS 15 Revenue from contracts with customers 01/01/2018
IFRS 16 Leases 01/01/2019
Revisions to IAS 7 Statement of cash flows 01/01/2017
IFRS 9, 'Financial instruments: Classification and
Measurement'
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.
IFRS 15, 16 & IAS 7 'Revenue from contracts with customers',
'Leases' and 'Statement of cash flows'
The Directors have not completed their assessment of the impact
of the adoption of these standards.
2. Summary of significant accounting policies
2.1 Basis of Consolidation
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at 31 December
2016. Control is achieved when the Group is exposed, or has rights,
to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the
investee. Generally, there is a presumption that a majority of
voting rights result in control. To support this presumption and
when the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an
investee.
Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
All intra-group assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
The Group reports its interests in joint venture using the
equity method of accounting, except when the investment is
classified as held for sale.
A joint venture is a joint arrangement whereby the Group and
other parties that have joint control of the arrangement have
rights to the net assets of the arrangement (IFRS 11).
Under the equity method, investments in joint ventures are
carried in the consolidated statement of financial position at cost
as adjusted for post-acquisition changes in the Group's share of
the net assets of the joint venture, less any impairment in the
value of individual investments. Losses of a joint venture in
excess of the Group's investment in that joint venture are not
recognised, unless the Group has incurred legal or constructive
obligations or made payments on behalf of the joint venture.
Any excess of the cost of acquisition over the Group's share of
the net fair value of the identifiable assets, liabilities and
contingent liabilities of the joint venture recognised at the date
of acquisition is recognised as goodwill.
The goodwill, if any is included within the carrying amount of
the investment and is assessed annually for impairment as part of
the investment. Any excess of the Group's share of the net fair
value of the identifiable assets, liabilities and contingent
liabilities over the cost of acquisition, after reassessment, is
recognised immediately as a profit or loss.
Unrealised gains on transactions between the Group and its joint
venture are eliminated to the extent of the Group's interest in the
joint venture. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Unrealised gains on transactions between the Group and
subsidiary entities are eliminated. 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 are dealt with by the acquisition
method. This 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 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 subsidiaries and joint ventures, 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 despatch 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, other than those from investments in associates and
joint ventures, are recognised at the time the right to receive
payment is established. No dividends were paid or received during
the year (2015: 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 which is not depreciated by equal annual instalments
over their estimated useful economic lives. The periods generally
applicable are:
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. The Group recognises a cash-generating unit
by its ability to independently earn income. The Group carries each
cash-generating unit in an individual special purpose company so
they are easily recognised.
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 Non-current Assets Held for Sale and Discontinued
Operations
In general IFRS 5 outlines how to account for non-current assets
held for sale such that assets (or disposal groups) held for sale
are not depreciated, are measured at the lower of carrying amount
and fair value less costs to sell, and are presented separately in
the statement of financial position.
The following conditions must be met for an asset (or 'disposal
group') to be classified as held for sale: IFRS 5.6-8
-- management is committed to a plan to sell
-- the asset is available for immediate sale
-- an active program to locate a buyer is initiated
-- the sale is highly probable, within 12 months of
classification as held for sale (subject to limited exceptions)
-- the asset is being actively marketed for sale at a sales
price reasonable in relation to its fair value
-- actions required to complete the plan indicate that it is
unlikely that plan will be significantly changed or withdrawn
The carrying value of the assets need to be recovered
principally through sale. When the Group is committed to a sale
involving loss of control of a subsidiary that qualifies for
held-for-sale classification under IFRS 5 the Group classifies all
of the assets and liabilities of that subsidiary as held for sale,
even if the entity will retain a non-controlling interest in its
former subsidiary after the sale. Non-current assets or disposal
groups that are classified as held for sale are measured at the
lower of carrying amount and fair value less costs to sell. Assets
classified as held for sale, and the assets and liabilities
included within a disposal group classified as held for sale, are
presented separately on the face of the statement of financial
position. The sum of the post-tax profit or loss of the
discontinued operation and the post-tax gain or loss recognised on
the measurement to fair value less cost to sell or fair value
adjustments on the disposal of the assets (or disposal group) is
presented as a single amount on the face of the statement of
comprehensive income.
2.10 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.
2.11 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 re-measured 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 assets carrying amount and the present value of
estimated cash flows.
2.12 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 short-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.
2.13 Operating leases
Leases where substantially all the risks and rewards of
ownership remain with the lessor are accounted for as operating
leases and are accounted for on a straight-line basis over the term
of the lease and charged to the income statement.
2.14 Inventories
Inventories in the Company comprise turbines and associated
spare parts and similar items for use in the Group's plant and
equipment. Inventories are carried at the lower of cost and net
realisable value.
2.15 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 account" 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.
"Special Non-distributable reserves" comprises the reduction of
the share premium account.
"Other Reserves" represent plant revaluation reserves.
2.16 Pensions
During the year under review, the Group did not operate or
contribute to any pension schemes (2015: Nil).
2.17 Segment Reporting
In identifying its operating segments, management follows the
Group's geographic locations and are reported in a manner
consistent with the Chief Operating Decision Maker. 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 make 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 consider 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 review, with
the assistance of external expert valuers, the useful lives of
depreciable assets at each reporting date. Actual results, however,
may vary due to changes in technology and industry practices.
b) Impairment - management review 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) Management have assessed that we do not control the Argentine
Joint Venture and therefore have treated the joint venture in
accordance with IAs 28 (see Note 26). This assessment is based on
the lack of joint control over the investee and due to the exposure
to variable returns from its involvement with the investee.
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 Groups joint venture operations in Argentina have been
excluded, see note 26 for more detail.
The following tables provide an analysis of the operating
results, total assets and liabilities, capital expenditure and
depreciation for 2016 and 2015 for each geographic segment.
a) 12 months to Chile Peru UK Consolidation Total
31.12.2016
Adjustments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------------- ---------
Revenue - - 95 - 95
Cost of Sales - - - - -
Gross Profit/(Loss) - - 95 - 95
Administrative
Expenses (130) (683) (1,644) 37 (2,420)
Profit/(Loss) from
Operations (130) (683) (1,549) 37 (2,325)
Other (Expense)/Income (7,745) (2,714) - (41) (10,500)
Foreign Exchange
(Losses)/Gains 374 (1,847) 2,718 (2) 1,243
Finance Income - - 3,845 (1,162) 2,683
Finance Expense (572) (820) (117) 1,154 (355)
(Loss)/Profit before
Tax (8,073) (6,065) 4,897 (13) (9,254)
Tax Expense (4) - - - (4)
(Loss)/Profit for
the year (8,077) (6,065) 4,897 (13) (9,258)
Total Assets 2,193 2,207 38,799 (4,066) 39,133
Total Liabilities 10,096 (3,619) 3,738 (2,502) 7,713
Depreciation - 26 - - 26
b) 12 months to Chile Peru UK Consolidation Total
31.12.2015
Adjustments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------------- ---------
Revenue - - 179 - 179
Cost of Sales - - (22) - (22)
Gross Profit/(Loss) - - 157 - 157
Administrative
Expenses (139) (1,760) (2,573) 37 (4,435)
Profit/(Loss) from
Operations (139) (1,760) (2,416) 37 (4,278)
Other (Expense)/Income (2,345) (245) (1,669) (13,313) (17,572)
Foreign Exchange
(Losses)/Gains (165) (1,828) 1,887 - (106)
Finance Income (802) (508) 3,695 - 2,385
Finance Expense - (361) (88) (9) (458)
(Loss)/Profit before
Tax (3,451) (4,702) 1,409 (13,285) (20,029)
Tax Expense - (3) - - (3)
(Loss)/Profit for
the year (3,451) (4,705) 1,409 (13,285) (20,032)
Total Assets 6,688 3,644 41,338 (7,534) 44,136
Total Liabilities 6,510 718 3,502 (4,102) 6,628
Capital Expenditure - - - - -
Depreciation - 45 3 - 48
5. Exchange rate sensitivity analysis
The key exchange rates applicable to the results were as
follows:
Year Ended Year Ended
31.12.16 31.12.15
i) Closing rate
AR $ (Argentine Peso)
to GBP 19.71 19.25
US $ to GBP 1.2302 1.4824
CLP (Chilean Peso)
to GBP 795.4 1,048.2
PEN (Peruvian Sol)
to GBP 3.38 4.96
ii) Average rate
AR $ (Argentine Peso)
to GBP 20.08 14.38
US $ to GBP 1.3448 1.5256
CLP (Chilean Peso)
to GBP 902.1 1,005.2
PEN (Peruvian Sol)
to GBP 3.38 4.82
If the exchange rate of sterling at 31 December 2016 had been
stronger or weaker by 10 per cent. from the above. with all other
variables held constant, shareholder equity at 31 December 2016
would have been GBP0.1 million (2015: GBP2.5 million) lower or
higher than reported.
If the average exchange rate of sterling during 2016 had been
stronger or weaker by 10% per cent. with all other variables held
constant, the profit for the year would have been GBP0.1 million
(2015: GBP0.2 million) higher or lower than reported.
6. Cost of sales
Year Year
ended ended
-------------------------------
31.12.16 31.12.15
-------------------------------
GBP'000 GBP'000
Expenditure incurred in cost
of sales is as follows:
Other - 22
------------------------------- ----------- --------------
- 22
------------------------------------------- --------------
7. Administrative expenses
Year ended Year ended
----------------------------------------
31.12.16 31.12.15
----------------------------------------
GBP'000 GBP'000
Expenditure incurred in administrative
expenses is as follows:
Payroll and social security 1,090 1,728
Services, legal and professional 679 1,095
Office costs and general overheads 611 1,539
Audit services(1) 40 73
---------------------------------------- ----------- -----------------
2,420 4,435
----------- -----------------
(1) Audit services include GBP40.0k (2015: GBP72.5k) paid to the
auditors for the audit of the Company and the Group financial
statements. . Fees paid to other auditors, in respect of the audit
of joint venture companies, amounted to GBP21.5k (2015: GBP13.4k).
The auditors also provided tax advice for the Group in the year,
the costs were GBP6.6k.
8. Employee costs
Year ended Year ended
31.12.16 31.12.15
GBP'000 GBP'000
a) Group
Aggregate remuneration of all employees
and Directors, including social security
costs 1,090 1,728
------------------------------------------- ----------- -----------
The average number of employees in the Group, including
Directors, during the year was as follows:
Number Number
------------------------------------------- ----------- -----------
Management 4 4
Development 4 16
Administration 6 11
------------------------------------------- ----------- -----------
Total 14 31
------------------------------------------- ----------- -----------
Year ended Year ended
31.12.16 31.12.15
GBP'000 GBP'000
b) Company
Aggregate remuneration of all employees
and Directors, including social security
costs 802 1,405
------------------------------------------- ----------- -----------
The average number of employees in the Company, including
Directors, during year was as follows:
Number Number
------------------------------------------- ----------- -----------
Management 2 4
Administration 5 5
------------------------------------------- ----------- -----------
Total 7 9
------------------------------------------- ----------- -----------
c) Directors' remuneration, including social security costs
The total remuneration paid to the Directors was GBP400k (2015:
GBP859k). The total remuneration of the highest paid Director was
GBP226k (2015: GBP235k). Other emoluments paid in 2015 were health
insurance costs GBP10k, there were no bonuses, pension costs or
share based payments paid during the year (2015: Nil)
Year ended Year ended Year
31.12.16 31.12.16 ended
GBP'000 GBP'000 31.12.15
GBP'000
Base Salary/Fee Total Total
P. Earl - - 235
E. Shaw 90 90 183
A. Morris 21 21 169
M. Blanco - - 30
C Emson - - 25
B Rowbotham 30 30 30
P Galante - - 7
M Keegan 17 17 84
S Morris 226 226 96
A Coveney 16 16 -
Total 400 400 859
E. Shaw resigned 14 July 2015, she received payments in 2016
according to her contract. These payments ceased in July 2016.
A. Morris resigned 14 July 2015, he received payments in 2016
for consultancy services under a service agreement contract with
Setley Consultants Ltd.
B. Rowbotham provided services under a service agreement
contract with Mountbeach Associates Ltd.
M. Keegan resigned 14 December 2015, he received payments in
2016 according to a service contract with Ashton Agricultural &
General Ltd. These payments ceased in January 2016.
S. Morris provided services under a service agreement contract
with S.C.Morris Ltd.
A. Coveney provided services under a service agreement contract
with Coveney Associates Consulting Ltd.
9. (a) OTHER EXPENSE
Year ended Year ended
31.12.16 31.12.15
GBP'000 GBP'000
Foreign exchange Gains/(Losses) 1,243 (106)
--------------------------------- ----------- -------------------
Total 1,243 (106)
----------- -------------------
(b) OTHER EXPENSE
Year ended Year ended
31.12.16 31.12.15
GBP'000 GBP'000
Realised loss on disposal
IPC 41 1,669
Asset impairment
Turbines for Central Illapa 6,440 -
Impairment provisions
Argentina - 13,313
Peru 2,714 245
Chile (Arica Project) 1,305 2,345
Total 10,500 17,572
----------------------------- ------------ ------------
During the year the directors tested all major assets for
indication of impairment the results of these were:
Turbines for Central Illapa (CHILE):
Carrying Value b/fwd GBP16.2m
Recoverable amount GBP 9.8m
Impairment in year GBP 6.4m
Carrying value c/fwd GBP 9.8m
The impairment resulted from the deterioration of market
conditions in Chile for the generation market. The carrying value
of the turbines is based on the higher of fair value less costs to
sell and value in use. The Directors obtained an independent
valuation to determine an achievable market valuation, less costs
to sell. As a result, the Directors determined a recoverable amount
of GBP9.8 million ($12 million). The realisation of the asset is
dependent on a successful future sale or successful development of
the Illapa Project, both of which are uncertain.
The Illapa turbines are included within Property, Plant and
Equipment.
HELD FOR SALE ASSET (Peru)
Net assets held for sale b/fwd GBP2.9m
Net assets held for sale c/fwd GBP1.0m
Movement GBP1.9m
represented by:
Increase in impairment provision GBP2.7m
add back:
loss in year in Peru GBP0.6m
Foreign exchange revaluation GBP0.2m
Movement GBP1.9m
The impairment was determined by expected net proceeds from
asset sales. At present the assets are being marketed, however
there is currently no guarantee of a sale. The value is determined
by historic offers. The carrying value is assessed as fair value
less costs to sell. The principal assets are the development rights
in respect of three Hydro projects in Peru, one with a performance
bond of $3m.
These assets are presented as a Held for Sale asset on the
Statement of Financial Position.
TURBINE - ARICA (Chile)
Carrying value of Arica turbine b/fwd GBP2.0m
Foreign exchange revaluation GBP0.3m
Impairment in year GBP1.3m
Carrying value of Arica turbine b/fwd GBP1.0m
The impairment was determined by the diminution of expected net
realisable proceeds from sale of the turbine. The carrying value is
assessed as fair value less costs to sell, based on historic offers
and an independent valuation report. The asset is included in
Property, Plant and Equipment.
10. FINANCE INCOME & expense
Year ended Year ended
31.12.16 31.12.15
GBP'000 GBP'000
Inter-group interest received/receivable(1) 2,676 2,376
Bank interest 7 9
------------ ------------
Total interest income 2,683 2,385
------------ ------------
Interest expense paid/payable
on bank borrowings and loans(2) (355) (458)
--------------------------------------------- ------------ ------------
(1) Inter-group interest arises on loans by the Company to its
50 per cent. owned joint venture companies (PEL and EdS). Interest
on inter-group loans has been charged at rates of between 0 per
cent. and 11.1 per cent. Interest is charged on gross loan
values.
(2) Interest paid/payable includes interest on bank borrowings
and other loans in Peru. The details of the amounts due under the
loans are shown in Note 24.
Sensitivity analysis arising from changes in borrowing costs is
set out in Note 24.
11. Tax expense
The relationship between the expected tax expense at basic rate
of 20 per cent. (2015: 20 per cent.) and the tax expense actually
recognised in the income statement can be reconciled as
follows:
Year Year
ended ended
-----------------------------------
31.12.16 31.12.15
-----------------------------------
GBP'000 GBP'000
Result for the year before tax (9,254) (20,029)
Standard rate of corporation
tax in UK 20.00% 20.00%
Expected tax credit (1,851) (4,006)
Permanent differences - (3)
Unrecognised loss carried forward 1,851 4,006
Actual tax expense (4) (3)
Comprising:
Current tax expense (4) (3)
Deferred tax / (net credit) - -
--------- ---------
Total credit (expense) (4) (3)
----------------------------------- --------- ---------
A deferred tax asset credit for the year GBP1.9 million is not
recognised as an asset due to the uncertainty and unknown timing of
its realisation against future profits. The estimated accumulated
unrecognised deferred tax asset is GBP1.9 million.
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
31.12.16 31.12.15
Average number of shares
in issue 561,387,586 561,387,586
Result for the year
Loss attributable to GBP(9.3)m GBP(20.0)m
equity holders of the
parent
Basic loss per share (1.65p) (3.57p)
Diluted loss per share (1.65p) (3.57p)
-------------------------- ------------ ------------
There is no difference between the Basic and Diluted loss per
share.
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 GBP2.8 million
(2015: loss GBP33.8 million).
14. Property, plant and equipment
Land Plant Plant Total
and under
---------------------------
Equipment Construction
---------------------------
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- ---------- ------------- --------
a) Group
--------------------------- -------- ---------- ------------- --------
Cost at 1.1.15 72 16,255 5,863 22,190
--------------------------- -------- ---------- ------------- --------
Exchange adjustments - - (1,408) (1,408)
--------------------------- -------- ---------- ------------- --------
Transfer of Assets Held - - - -
for Sale
--------------------------- -------- ---------- ------------- --------
Impairments (72) (60) (1,364) (1,496)
--------------------------- -------- ---------- ------------- --------
Cost at 31.12.15 - 16,195 3,091 19,286
--------------------------- -------- ---------- ------------- --------
Exchange adjustments - - (606) (606)
--------------------------- -------- ---------- ------------- --------
Transfer of Assets Held
for Sale
--------------------------- -------- ---------- ------------- --------
Impairments (6,440) (969) (7,409)
--------------------------- -------- ---------- ------------- --------
Cost at 31.12.16 9,755 1,516 11,271
--------------------------- -------- ---------- ------------- --------
Accumulated Depreciation
at 1.1.15 - 21 - 21
--------------------------- -------- ---------- ------------- --------
Exchange adjustments - - - -
--------------------------- -------- ---------- ------------- --------
Charge for the year - 48 - 48
--------------------------- -------- ---------- ------------- --------
Accumulated Depreciation
at 31.12.15 - 69 - 69
--------------------------- -------- ---------- ------------- --------
Exchange adjustments - - - -
--------------------------- -------- ---------- ------------- --------
Charge for the year - 26 - 26
--------------------------- -------- ---------- ------------- --------
Transfer of Assets Held - - -
for Sale
--------------------------- -------- ---------- ------------- --------
Accumulated Depreciation
at 31.12.16 - 95 - 95
--------------------------- -------- ---------- ------------- --------
Net book value - 31.12.16 - 9,660 1,516 11,176
--------------------------- -------- ---------- ------------- --------
Net book value - 31.12.15 - 16,126 3,091 19,217
--------------------------- -------- ---------- ------------- --------
The Property, plant and equipment of GBP9.8 million relates to
two Siemens turbines, stored in Venice for use in Central Illapa
purchased for $25.0 million, at the year-end deferred consideration
of GBP1.5 million remains outstanding. Post year end GBP1.0 million
has been repaid. Please see note 9b for details of impairment
charged in the year. The turbines are held as inventory in the
Company.
Plant under construction comprises of a turbine plant in Chile
GBP1.0 million and Central Illapa development costs of GBP0.5
million.
b) Company - The Company had no property, plant and
equipment.
As set out in note 24 the Company has outstanding loans from
BPAC. Security on these loans include a pledge over all assets of
the Group.
15. Intangible assets
Goodwill
GBP'000
At 1 January 2016 23
Revaluation 6
At 31 December 2016 29
At 1 January 2015 1,321
Disposal of IPC (1,298)
At 31 December 2015 23
The Group tests goodwill 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. (2015 - 13 per cent.).
Central Illapa SA is a wholly owned indirect subsidiary of
Rurelec, the goodwill on acquisition was GBP23k.
16. Trade and other receivables
Year Ended Year Ended
-----------------------------------
31.12.16 31.12.15
-----------------------------------
GBP'000 GBP'000
a) Group - current
Trade Receivables 119 607
Amounts due from joint venture
companies(1) 24,345 20,103
Other Receivables and Prepayments 297 156
----------- -----------
24,761 20,866
----------------------------------- ----------- -----------
(1) Amounts due from joint venture companies represent the
amounts lent by the Company, net of impairments, to PEL and EdS,
including credit support provided to suppliers of EdS. Interest on
these amounts has been accrued at rates of between 11.1 per cent.
and 0 per cent. per annum.
Year Ended Year Ended
----------------------------
31.12.16 31.12.15
----------------------------
GBP'000 GBP'000
---------------------------- ----------- -----------
b) Company - current
Loans to Joint Ventures(2) 17,551 20,103
Loans to Subsidiaries(1) 10,343 4,149
Other receivables and
prepayments 95 405
----------- -----------
27,989 24,657
---------------------------- ----------- -----------
The amounts owed by subsidiary companies include:
(1) Loans to subsidiaries in Chile GBP8.5 million and Peru
GBP12.9 million are repayable on demand. These loans have been
impaired to GBP2.4 million in Chile and by GBP1.3 million in Peru.
The loans to Chile and Peru bear zero per cent. interest rates. The
loans to Peru are expected to be recovered once the assets have
been sold, which management expect to occur during 2017.
(2) The amounts owed by joint venture companies are interest
bearing at rates of between 0 per cent. and 11 per cent. and are
repayable on demand. During the year the Group received US $3.0
million from EdS in service of the amounts due of GBP6.8 million
(2015: GBP6.7 million).
All trade and other receivables are unsecured and are not past
their due by dates. The fair values of receivables are not
materially different to the carrying values shown above.
As set out in note 24 the Company has outstanding loans from
BPAC. Security on these loans includes a pledge over all assets of
the Group.
17. Inventories
Company - Inventories Year Ended Year Ended
31.12.16 31.12.15
GBP'000 GBP'000
Inventories 9,755 16,195
Inventories comprises of two Siemens 701DU Turbines acquired
from IPSA in June 2013. Further details of which are set out in
note 14. An impairment was recognised in the year, see note 9b. No
expense has been recognised in the income statement in respect of
inventories other than impairment (2015: nil).
As set out in note 24 the Company has outstanding loans from
BPAC. Security on these loans includes a pledge over all the assets
of the Group.
18. CASH AND CASH EQUIVALENTS
Year Ended Year Ended
31.12.16 31.12.15
GBP'000 GBP'000
a) Group
Cash and short-term bank deposits 960 386
b) Company
Cash and short-term bank deposits 955 386
----------------------------------- ----------- -----------
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.
As set out in note 24 the Company has outstanding loans from
BPAC. Security on these loans includes a pledge over all the assets
of the Group.
19. SHARE Capital
Year Ended Year Ended
31.12.16 31.12.15
GBP'000 GBP'000
In issue, called up and fully
paid
561,387,586 ordinary shares of
2p each (2015: 561,387,586) 11,228 11,228
-------------------------------- ---------- ----------
Ordinary shares have no redemption rights and are entitled to
full rights to dividends and excess capital on winding up.
20. SHARE OPTION RESERVE
Year Ended Year Ended
31.12.16 31.12.15
GBP'000 GBP'000
Balance at 1 January 2016 - 146
Change for the Year -
Cancellation of share option
scheme - (146)
Balance at 31 December 2016 - -
------------------------------- ------------- ------------
21. SPECIAL NON-DISTRIBUTABLE RESERVE
On 17 December 2014 The High Court approved the reduction in the
share premium account of the company of GBP45,000,000 and the
creation of a special reserve in the accounts of the Group. The
Group had accumulated losses on its profit and loss account of
GBP7,371,683. The existence of these losses prevents the Company
from paying dividends to its shareholders out of future profits
until these losses have been eliminated. The Board considered that
the accumulated losses represented a permanent loss and given the
size of the accumulated losses, there was in the opinion of the
Board no reasonable prospect of the losses being eliminated in the
short term. It was proposed that the permanent loss should be
recognised by eliminating the deficit on the profit and loss
account. This would be achieved by the reduction in the balance on
the Share Premium Account of the Company.
The Company had built up a substantial Share Premium Account
through the issue of shares for cash at values in excess of the
nominal value of those shares. At the time of the High Court
hearing, the balance standing to the credit of the share premium
account was GBP67,835,921. A resolution was proposed and
successfully passed at a General Meeting on 25 November 2014 to
reduce the amount standing to the credit of the share premium
account of the Company by GBP45,000,000 from GBP67,835,921 to
GBP22,835,921.
The resolution was subsequently confirmed by the High Court in
the terms proposed at the time by your Board, the effect of the
Capital Reduction was to release part of the amount standing to the
credit of the Share Premium Account of the Company so that
GBP45,000,000 (i) may be used by the Company to eliminate the
deficit on the profit and loss account and (ii) the balance
credited to the distributable reserves of the Company to allow the
Company to pay dividends in due course.
Share issue costs of GBP82,233 have been offset against the
Share Premium account, which is now shown at GBP22,753,689.
The implementation of the Capital Reduction is subject to a
number of criteria which are explained further below.
Capital Reduction - Share Premium Account
Share premium is treated as part of the capital of the Company
and arises on the issue by the Company of shares at a premium to
their nominal value. The premium element is credited to the Share
Premium Account. The Company is generally precluded from the
payment of any dividends or other distributions or the redemption
or buy back of its issued shares in the absence of sufficient
distributable reserves, and the Share Premium Account can be
applied by the Company only for limited purposes.
In particular, the Share Premium Account is a non-distributable
capital reserve and the Company's ability to use any amount
credited to that reserve is limited by the Companies Act. However,
with the confirmed approval of our shareholders by way of a special
resolution and subsequent confirmation by the High Court, the
Company has reduced our Company's share premium account and
credited it to the profit and loss account.
To the extent that the release of such a sum from the Share
Premium Account creates or increases a credit on the profit and
loss account, that sum represents distributable reserves of the
Company subject to the restrictions set out below.
Capital Reduction - Procedure
In order to approve the Capital Reduction, the High Court was
required to be satisfied that the interests of the Company's
creditors will not be prejudiced by the Capital Reduction. The
Company was not required to seek written consent to the Capital
Reduction from its creditors. However, for the benefit of those of
its creditors from whom consent is not required, the Company will
not be capable of making a distribution to shareholders until any
such outstanding obligations have been discharged, and the Company
has given an undertaking to that effect to the High Court. At the
date of the audit report there are some GBP 1.5 million of
creditors to be settled. The Board of Directors consider that these
amounts will be settled in the short term and therefore the GBP45
million remains within a Special Reserve which is non-distributable
until these settlements have occurred.
The Capital Reduction does not affect the number of Shares in
issue, the nominal value per Share or the voting or dividend rights
of any Shareholder.
22. Trade and other payables
Year Ended Year Ended
----------------------
31.12.16 31.12.15
----------------------
GBP'000 GBP'000
a) Group - current
Trade payables 2,434 2,856
Accruals - -
2,434 2,856
b) Company - current
Trade payables 2,065 2,592
Accruals -
2,065 2,592
---------------------- ----------- -----------
After the year end, the directors agreed formal settlement terms
with IPSA. The directors note that IPSA reported the amount owed by
Rurelec as GBP1.5 million in the accounts for the year ended 30
September 2016. On this basis, the directors have deemed it
appropriate to recognise GBP1.5 million as owing to IPSA at the
year-end.
23. Tax liabilities
Year Ended Year Ended
------------------------
31.12.16 31.12.15
------------------------
GBP'000 GBP'000
Group/Company - current
P.A.Y.E. 12 -
VAT - -
12 -
------------------------ ----------- -----------
24. Borrowings
Year Ended Year Ended
31.12.16 31.12.15
----------------------------
GBP'000 GBP'000
----------------------------
Group - Current
Other Loans 4,037 3,054
4,037 3,054
Group -Total Borrowings 4,037 3,054
The Group's borrowings are
repayable as follows:
Within 1 year 4,037 3,054
In more than 1 year, but - -
less than 2 years
In more than 2 years, but - -
less than 3 years
In more than 3 years - -
4,037 3,054
---------------------------- ----------- -----------
Company - Current
Other Loans 1,661 910
1,661 910
Company -Total Borrowings 1,661 910
The Group's borrowings are
repayable as follows:
Within 1 year 1,661 910
In more than 1 year, but - -
less than 2 years
In more than 2 years, but - -
less than 3 years
In more than 3 years - -
1,661 910
---------------------------- ----------- -----------
Group
Other loans of GBP4.0 million (2015: GBP3.1 million) including
accrued interest are made up of GBP2.3 million (2015: GBP2.2
million) from Technology Finance Ltd, these loans were past their
due dates in prior years. The defaults have not been remedied nor
the terms renegotiated by the date of this report. The Directors
consider that the existence of this liability does not implicate on
the going concern status of the Group as the parent company has not
guaranteed the debts of its Peruvian subsidiaries.
GBP1.7 million (2015: GBPnil) from BPAC this loan is secured by
a pledge against the Group's assets, the loan becomes due on 30
June 2018 or upon any significant asset sales. GBPnil Radix
Investments UK Ltd (2015: GBP611k) and Grange Capital Ltd GBPnil
(2015: GBP225k).
Company
Other loans of GBP1.7 million (2015: nil) including accrued
interest are from BPAC this loan is secured by a pledge against the
Group's assets, the loan becomes due on 30 June 2018 or upon any
significant asset sales (2015: GBP611k Radix Investments UK Ltd,
GBP225k Grange Capital Ltd and GBP75k Technology Finance Ltd).
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 had a
nominal impact on earnings.
Sensitivity analysis to changes in exchange rates:
Only US $480k (2015: US $375k) of these loans are denominated in
US $. These are included in liabilities held for sale. As a result,
the liability to the Group's lenders will change as exchange rates
change. 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 GBP20k (2015: GBP5k).
The Group's Joint Venture borrowings are denominated in AR $ and
US $ and are substantially related to specific electricity
generating assets and therefore the effect on the net equity of the
Group is limited.
25. Investments
Year
Ended
31.12.15
GBP'000
Cost at 1 January 2015 9,755
Additions during the year:
Impairment in Cascade Hydro
Limited (179)
Impairment in Patagonia Energy
Ltd (8,178)
Disposal of IPC (1,298)
Balance at 31 December 2015 100
Year
Ended
31.12.16
GBP'000
Cost at 1 January 2016 100
Additions during the year: -
Balance at 31 December 2016 100
-------------------------------- ---------
At the year end the Company held the following investments:
Direct investments:
1. 50 per cent. (2015: 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 EdS, a company
registered in Argentina. EdS is a generator and supplier of
electricity to the national grid in Argentina.
2. 100 per cent. (2015: 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.
3. 100 per cent. (2015: 100 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 97 per cent. of Empresa de Generacion
Electrica Colca, S.A.C., both being companies registered in
Peru.
4. 100 per cent. (2015: 100 per cent.) of the issued share
capital 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. (2015: 100 per cent.) of the issued share
capital of Rurelec Project Finance Limited a company registered in
England and Wales under registration number 7523554.
Indirect investments:
Name Trading address/registered Interest held
address
---------------------------- ---------------------------- --------------
Arroyo 880, Piso
2
C1007AAB
Ciudad Autonoma
Energia del Sur de Buenos Aires
SA* Argentina 50%
---------------------------- ---------------------------- --------------
Arroyo 880, Piso
2
C1007AAB
Ciudad Autonoma
Electrica del Sur de Buenos Aires
SA* Argentina 50%
---------------------------- ---------------------------- --------------
Arroyo 880, Piso
2
C1007AAB
Ciudad Autonoma
de Buenos Aires
SEA Energy SA** Argentina 100%
---------------------------- ---------------------------- --------------
C/O Nerine Trust
Company Limited
Nerine House
PO Box 434
St George's Place
St Peter Port
Guernsey
Bolivia Integrated Channel Islands
Energy Limited*** GY1 3ZG 100%
---------------------------- ---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago de Chile
Santiago
Rurelec Chile SpA**** Chile 100%
---------------------------- ---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago de Chile
Santiago
Rurelec Chile Limitata**** Chile 99.99%
---------------------------- ---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago de Chile
Termoelectrica Santiago
del Norte SA**** Chile 100%
---------------------------- ---------------------------- --------------
C/O Guerrero Olivos
Av Vitacura 2939
Piso 8
Las Condes
Santiago de Chile
Central Illapa Santiago
SA**** Chile 100%
---------------------------- ---------------------------- --------------
Av. Canaval y Moreyra
452
Pisos 15 - 17
Cascade Hydro Power Lima 27
SAC***** Peru 99.99%
---------------------------- ---------------------------- --------------
Av. Canaval y Moreyra
452
Pisos 15 - 17
CHP Construcciones Lima 27
SAC***** Peru 99.99%
---------------------------- ---------------------------- --------------
Av. Canaval y Moreyra
452
Pisos 15 - 17
Electricidad Andina Lima 27
SA***** Peru 99.99%
---------------------------- ---------------------------- --------------
Av. Canaval y Moreyra
452
Empresa de Generacion Pisos 15 - 17
Electrica Huasicancha Lima 27
SAC***** Peru 99.99%
---------------------------- ---------------------------- --------------
Av. Canaval y Moreyra
452
Empresa de Generacion Pisos 15 - 17
Electrica Colca Lima 27
SAC***** Peru 97%
---------------------------- ---------------------------- --------------
Av. Canaval y Moreyra
452
Empresa de Generacion Pisos 15 - 17
Electrica Chilcay Lima 27
SAC***** Peru 99.99%
---------------------------- ---------------------------- --------------
*Held via Patagonia Energy Limited and equity accounted as a
joint venture, see Note 26
**Held via Rurelec Project Finance Limited
***Held via Birdsong Overseas Limited
****Held via Cochrane Power Limited
*****Held via Cascade Hydro Limited
The results of all of the above directly and indirectly held
subsidiaries have been included in the consolidated group accounts
except where joint ventures are equity accounted as indicated.
26. JOINT VENTURE
The Group's only joint arrangement within the scope of IFRS 11
is its 50 per cent. investment in Patagonia Energy Limited ("PEL"),
which owns100% of EdS in Argentina. Management has reviewed the
classification of PEL in accordance with IFRS 11 and has concluded
that it is a joint venture and therefore we have accounted for our
interest in the PEL joint venture using the equity accounting
method as set out in IAS 28.
The Group does not participate in losses of the joint venture.
In prior years the losses had exceeded the investment in the joint
venture and therefore the Group has not recognised its share of
losses in the joint venture. During 2016 the joint venture made a
loss. Total loss position at the year-end was GBP38.3 million
(2015: GBP29.8 million).
The following table sets out the results of the joint venture in
Argentina of which the Group has a 50 per cent. share.
Year ended Year ended
31.12.16 31.12.15
GBP'000 GBP'000
----------- -----------
Revenue 18,650 17,815
Expenses (20,184) (24,075)
Non-current Assets 10,963 15,544
Current Assets 9,705 8,471
Non-current Liabilities (38,471) (31,514)
Current Liabilities (15,978) (18,678)
------------------------- ----------- -----------
Revenue is derived from one principal customer, which the
directors consider is of a high quality.
1.
27. Reconciliation of profit before tax to cash generated from
operations
a) Group Year Year
ended ended
-------------------------------
31.12.16 31.12.15
-------------------------------
GBP'000 GBP'000
Loss for the year before
tax (9,254) (20,029)
Net Finance Income (2,328) (1,927)
Adjustments for: Depreciation 26 48
Unrealised Exchange Gains (1,243) 106
Write down of loans 2,662 15,903
Loss on disposal - 1,669
Write down of Turbine 6,440
Impairment of Goodwill (6) -
Movement in Working Capital:
Change in Trade and Other
Receivables 1,096 (1,366)
Change in Trade and Other
Payables 541 51
Cash Used in Operations (2,066) (5,545)
------------------------------- --------- ---------
b) Company Year Year
ended ended
-------------------------------
31.12.16 31.12.15
-------------------------------
GBP'000 GBP'000
(Loss)/Profit for the year
Before Tax (2,775) (33,771)
Net Finance Income (3,737) (3,482)
Adjustments for:
Unrealised exchange (gains)
on loans (4,137) (1,819)
Movement in share option -
reserve
Write down of investments 2,662 8,357
Write down of loans - 26,684
Loss on disposal - 1,669
Stock write down 6,440 -
Movement in working capital:
Change in trade and other
receivables 581 1,062
Change in trade and other
payables (367) (2,770)
Cash used in operations (1,333) (4,070)
------------------------------- --------- ---------
28. 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 income statement 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 this currency.
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 no such analysis
has not been undertaken.
As set out in Note 24, the Group has GBP4.0 million of loans
falling due within 12 months. The directors consider that the Group
will be able to raise sufficient funds from the sale of assets and
from other sources to discharge the loans.
The following table sets out when the Group's financial
obligations fall due:
Year ended Year ended
31.12.16 31.12.15
GBP'000 GBP'000
Current - due within 1 year:
Trade payables 2,434 2,856
Tax liabilities 12
Borrowings 4,037 3,054
Total due within 1 year: 6,483 5,910
Non-current - due in more than 1
year but less than 5 years
Borrowings Nil Nil
---------------------------------- -------------- ------------
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 2016 Company Company Group Group
Loans Borrowings Loans Borrowings
and and Payables and and Payables
Receivables at Amortised Receivables at Amortised
Cost Cost
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------- ------------ -------------
Trade and Other Receivables - - - -
> 1 year
Trade and Other Receivables
< 1 year 27,989 - 24,761
Cash and Cash Equivalents 955 - 960 -
Trade and Other Payables - - - -
> 1 year
Trade and Other Payables
< 1 year - (2,077) - (2,446)
Borrowings > 1 year - - - -
Borrowings < 1 year - (1,661) - (4,037)
Total 28,084 (3,738) 25,721 (6,483)
Company Company Group Group
Loans Borrowings Loans Borrowings
and and Payables and and Payables
Receivables at Amortised Receivables at Amortised
Cost Cost
31 December 2015 GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------- ------------ -------------
Trade and Other Receivables - - - -
> 1 year
Trade and Other Receivables
< 1 year 24,657 - 20,866 -
Cash and Cash Equivalents 386 - 386 -
Trade and Other Payables - - - -
> 1 year
Trade and Other Payables
< 1 year - (2,592) - (2,856)
Borrowings > 1 year - - - -
Borrowings < 1 year - (910) - (3,054)
Total 25,043 (3,502) 21,251 (5,910)
29. Capital commitments
The Group had outstanding capital commitments of GBPNil (2015:
Nil) in respect of plant ordered but not delivered at the
year-end.
30. FINANCIAL LEASE COMMITMENTS
At the year end the Group had the following outstanding lease
commitments:
Office Equipment
2016 2015
GBP'000 GBP'000
Up to
1 year 50 50
More than
1 year
less than
5 years 59 107
-------- --------
109 157
Since the year-end the office equipment leases have been novated
to Independent Power Corporation PLC, the Group has no
responsibility for the assets covered or liability for future
repayments.
Office premises
Less than one year GBP25,522 (2015: GBPnil).
Office premises relates to the Companies office.
31. Related party transactions
During the year the Company and the Group entered into material
transactions with related parties as follows:
a) Company
i) Paid salaries to directors and amounting to GBP0.4 million (2015: GBP0.9 million)
ii) Paid, to its former 100 per cent. subsidiary Independent
Power Corporation PLC ("IPC") GBP0.1 million under a Consultancy
Agreement. (2015: GBP0.1 million under a "Shared Service
Agreement").
2016 GBP'000s 2015 GBP'000s
Sales 40 85
Purchases 125 125
Y/E debtor - -
Y/E creditor 160 146
iii) Charged interest on loans to its 100% subsidiary Rurelec
Project Finance Ltd ("RPFL") totalling GBP1.4 million (2015:
GBP528k). The loan balance outstanding at the year-end was GBP6.7
million (2015: GBP6.8 million). In 2015 an impairment of GBP6.8
million was made this was reversed in 2016.
2016 2015
GBP'000s GBP'000s
Y/E debtor 6,693 -
Interest
charged 1,367 528
iv) Charged interest on loans to its 50% owned joint venture
company, Patagonia Energy Ltd ("PEL") amounting to GBP2.8 million
(2015: GBP2.2 million). Received loan repayments of GBP1.2 million.
The loan balances at the year-end totalled GBP17.5 million (2015:
GBP20.1 million). Interest on these loans has been accrued at
11.1%. The total outstanding before impairment is GBP38.3 million
(2015: GBP26.0 million). These loans have been impaired to GBP17.5
million.
2016 2015
GBP'000s GBP'000s
Y/E debtor 17,551 20,100
Repayment 1,238 -
Interest
charged 2,820 2,200
v) Received from its joint venture company Energia del Sur S.A.
("EdS") repayments totalling GBPnil (2015: GBPnil) of support
previously given to creditors of EdS. GBP0.5 million (2015: GBP0.7
million) of credit support remains outstanding at the year end.
vi) a) Charged IPSA Group PLC ("IPSA") GBP55k (2015: GBP93k)
under a "Shared Service Agreement". b) Repaid GBP0.1 million of
deferred consideration on the 2013 turbine purchase, GBP1.5 million
remains outstanding at the year end. P.R.S. Earl and S Laker are
Directors of IPSA.
2016 2015
GBP'000s GBP'000s
Sales 55 93
Purchases - -
Y/E debtor - 118
Y/E creditor 1,510 1,831
vii) Provided loans and charged interest of 0.5% per month to
its 100 per cent. subsidiary Cochrane Power Ltd of GBP0.7 million
(2015: GBP1.2 million). The total outstanding at the year-end was
GBP8.5 million (2015: GBP7.8 million). These loans have been
impaired to GBP2.4 million.
2016 2015
GBP'000s GBP'000s
Y/E debtor 2,374 3,022
Further
loans made 174 399
Interest
charged 482 801
viii) Provided loans to its 100 per cent. subsidiary Cascade
Hydro Ltd ("CHL") of GBP0.5 million (2015: net receipt GBP1.0
million) and charged CHL interest of GBP0.6 million (2015:
GBP560k). The interest rate was 0.5 per cent. per month. The total
outstanding at the year-end was GBP8.5 million. These loans have
been impaired to GBP1.3 million.
2016 2015
GBP'000s GBP'000s
Y/E debtor 1,276 1,127
Further
loans made 547 1,000
Interest
charged 606 560
b) Group
i) Former director A.J.S. Morris loaned CHL GBP50k in prior
years and was repaid GBP50k in the prior year. The total
outstanding at the year-end was GBP12.1k.
ii) E. R. Shaw loaned CHL GBP83.2k in prior years and was repaid
GBP83.2k in the prior year. The total outstanding at the year-end
was GBP11.2k.
iii) RPFL received GBP1.2 million (2015: GBP2.4 million) in
repayments from and accrued interest on amounts due from EdS of
GBPnil (2015: GBP0.2 million), the interest rate on the principal
was 18.5 per cent. The interest rate on accrued interest was zero,
the effective interest rate (on principal and accrued interest) was
zero (2015: 0.1 per cent.). The total outstanding at the year-end
was GBP6.8 million.
32. ASSETS HELD FOR SALE
Assets held for sale relate to three project companies within
Peru. These business segments were reclassified to assets held for
sale following the commitment of the Group's management on 16
September 2014 to restructure its Peruvian operations by means of
sale. Two disposal groups were identified, one of which comprises
the Canchayllo run of the river plant, sold in July 2015, with the
rest of the project companies included in the second group. At the
end of the year the assets were being actively marketed and a sale
is expected by the end of 2017.
Year Ended Year
Ended
Assets Classified as 31.12.16 31.12.15
Held for Sale
GBP'000 GBP'000
----------- ---------
Trade and Other Receivables 2,207 3,644
2,207 3,644
----------- ---------
Year Ended Year
Ended
Liabilities Classified 31.12.16 31.12.15
as Held for Sale
GBP'000 GBP'000
----------- ---------
Trade and Other Payables 1,230 718
1,230 718
----------- ---------
33. Control
The Directors consider that the controlling party is Sterling
Trust Limited on the basis of their 53% shareholding in the
Company.
34. Post balance sheet date events
Since the year end:
- In June 2017 the Company further extended its working capital
facility arrangement with BPAC in the amount of GBP1.6 million. The
repayment date is now 30 June 2018.
- On 31 March the plant owned by Energia del Sur S.A., in which
Rurelec has a 50% interest, suffered damage from severe weather.
The plant recommenced production on 22 May. The outage is not
expected to have a material impact on total 2017 remittances to
Rurelec.
The Chairman's statement and the Strategic Report with a review
of operations contains further details.
COMPANY INFORMATION
Directors
S.C. Morris (Executive)
A.H. Coveney (Executive)
B. Rowbotham (Non-Executive)
Secretary
S.A. Laker
Company number
4812855
Registered office and business address
18 Soho Square
London
W1D 3QL
Auditor
Saffery Champness LLP
71 Queen Victoria Street
London
EC4V 4BE
Bankers
Coutts & Co
440 Strand
London
WC2R 0QS
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PGUCUQUPMGAR
(END) Dow Jones Newswires
June 28, 2017 11:13 ET (15:13 GMT)
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