TIDMRUR
RNS Number : 0312O
Rurelec PLC
07 June 2022
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 (MAR) as in force in
the United Kingdom pursuant to the European Union (Withdrawal) Act
2018. Upon the publication of this announcement via Regulatory
Information Service (RIS), this inside information is now
considered to be in the public domain.
7 June 2022
Rurelec PLC
("Rurelec" or the "Company")
Audited results for the year ended
31(st) December 2021
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 2021. The annual report will be available from the
Company's website www.rurelec.com from today.
Highlights
-- Operating loss GBP2.1 million (2020: loss GBP2.9 million)
dominated by a GBP1.3 million (2020: GBP1.8 million) impairment of
the PEL investment, the valuation of which reflects the expected
performance of EdS under the prevailing difficult operating
conditions in Argentina. There was a GBP134k provision for closing
costs of SEA Energy S.A. (2020: GBPnil).
-- Loss before tax GBP3.6 million (2020: loss GBP5.3 million)
includes GBP1.3 million net provision for expected credit losses on
loans to PEL (2020: GBP2.0) and foreign exchange losses of GBP0.2
million (2020: losses GBP0.5 million).
-- Rurelec received GBP0.3 million (2020: GBP1.8 million) of
debt repayments from PEL under the terms of the November 2019
Umbrella Agreement regulating the division of debt repayments to be
made by PEL to its two joint venture ("JV") partners.
-- Improvement in the Group's liquidity position; cash increased
to GBP745k (2020: GBP668k) whilst current liabilities rose
marginally to GBP0.5 million (2020: GBP0.4 million).
-- Following the repayment of secured debts in previous years,
the Group was able to operate without relying on debt
facilities.
-- Sale of Chilean turbine, as announced on 9 September 2021,
sale proceeds GBP0.7 million/US$1.0 million, all proceeds were
received during the year. A gain on disposal of GBP330k is shown in
Other Income.
-- Administration expenses of GBP1.0 million (2020: GBP1.1
million), the further reduction being primarily as a result of
savings in employment costs and legal fees. Head Office costs
showed an even greater reduction, declining from GBP1.0 million to
GBP0.8 million.
-- Total loss per share 0.65p (2020: loss 0.95p).
-- Net Asset Value per share 2.1p (2020: 2.7p).
-- Since the end of the period under review:
As announced on 27 May 2022 US$758k/GBP605k of loan repayments
were received from PEL.
Annual General Meeting
A copy of the annual report and accounts, and the notice of AGM
will be posted to shareholders on or around 07 June 2022. The
annual general meeting of Rurelec PLC will be held at 5 St. John's
Lane, London, England, EC1M 4BH at 11.00 a.m. on 30 June 2022.
Commenting on the results, Andy Coveney, Executive Director,
said:
The loss before tax of GBP3.6 million is an improvement over the
previous year (2020: loss GBP5.3 million) and despite reductions in
Rurelec head office costs and the successful disposal of the
group's sale of the Arica turbine asset in Chile in September 2021,
results are again dominated by the write-down of loans originally
made to PEL in the period from 2008 to 2009 to fund the combined
cycle expansion of the Argentinian EdS operation , and the
write-down of the investment in PEL. This write-down follows a
further downgrade in value of the underlying share of assets in EdS
given the uncertain prospect of there being significant improvement
in the economic environment in which the Argentinian business
operates.
The downgrade in value of EdS has resulted from revised
assessments of cash generation from EdS's Argentinian power plant.
As previously announced, in 2021 EdS experienced a sharp decline in
revenues following the expiry of the PPA granted under Resolution
SE 220/2007 ("PPA" or "Resolution 220 tariff") by which the output
of the steam turbine was remunerated at a premium. After the expiry
of the PPA in September 2020 the offtake from both steam and gas
turbines were remunerated at the much lower spot tariff under
Resolution SE 31/220, albeit these spot rates were increased by
29.5 per cent with effect from February 2021 under Resolution SE
440/2021; and on 18 April 2022, the Argentinian government approved
a 30 per cent. increase of the spot tariff from February 2022 to
May 2022 with a further 10 per cent. increase from June 2022 under
Resolution 238/2022 ("Resolution 238"). Resolution 238 replaces
Resolution SE 440/2021 ("Resolution 440) which governs Spot prices.
This impacts the price at which EdS can charge for the electricity
it generates. The main changes with respect to Resolution 440
are:
-- It increases payment prices by 30% for the February-May
period and by an added 10% as from June.
-- It makes the clause on reduction of income from availability
void, based on the use factor. The validity of this clause was
suspended for EDS from February 2021, which represented an increase
in our income of AR$ 86M during 2021.
These changes are applicable as from February 2022. This tariff
increase has been awarded by the Secretariat of Energy in
recognition of the inflationary environment in Argentina.
These spot tariffs are problematic for the power generation
industry in Argentina and may not be sufficient to remunerate
companies sufficiently to fund essential maintenance programmes
needed in 2022 and beyond. It is the view of the directors of both
EdS and Rurelec that the current spot tariff rates in Argentina are
unsustainable in the long term and unless tariffs are increased
further over and above Argentine rates of inflation, power
generators will have to shut down. Gripped by domestic economic
crisis, high inflation, high interest rates and bearing the
economic strain of the COVID-19 pandemic, further tariff increases
have not been above rate of inflation and cash generation of EdS
suffered as a result, thereby significantly restricting the funds
EdS was able to pay up to PEL.
We believe there was significant political importance for the
current Argentinian government to keep retail utility prices low in
the run-up to the next Argentinian general election expected in
October 2023. Therefore, we believe further tariff increases at or
above the rate of inflation are increasingly unlikely. As a
consequence, PEL's ability to repay debts to Rurelec and Basic
Energy, Rurelec's JV partner, remains severely restricted. Total
loan repayments from PEL to Rurelec were GBP0.3 million in 2021
compared with GBP1.8 million in 2020. A repayment of GBP0.6 million
was received after the year end on 27 May 2022.
The Group benefitted from a significantly improved relationship
with its joint venture partners following the 19 November 2019
renegotiation of the Loan notes owed by PEL to the 50:50 joint
venture partners in the Argentinian operation and the Shareholders
Agreement between those partners. The renegotiated agreement
established a framework regulating future cash repayments and
between 19 November 2019 and by 31 December 2021, under those
renegotiated agreements the Group had received GBP2.7 million from
PEL being its share of debt repayments made from EdS to PEL.
However future receipts are totally dependent on EDS being able to
generate surplus cash in what is an extremely challenging power
generation environment in Argentina. In these circumstances loan
and investment impairments of GBP1.3 million each, total GBP2.6
million, were considered necessary by Rurelec's Directors. The post
impairment carrying values are GBP3.8 million in loans (2020:
GBP5.4 million) and GBP0.3 million in investments (2020: GBP1.6
million).
In 2021, the COVID-19 pandemic had relatively little effect on
the running of Rurelec's UK head office operations (which were able
to operate remotely) but the effect of the pandemic was felt more
by the Argentinian operations given the effect of the pandemic on
an already weak economy. The main effects were felt in terms of
lack of funding experienced by the Argentinian Government's
Secretariat of Energy and within CAMMESA and prolonged delays in
decision making regarding potential tariff increases.
The Board of Rurelec has ensured that EdS's management continues
to be engaged with the Argentinian government and energy regulators
at the highest level to lobby for improved tariffs or concessions
for EdS. EdS has benefitted from the full-year effect of overhead
cost reductions at its power plant and the Argentinian head office
including the retirement of senior staff and a move to part time
working. However, against a background of severe economic hardship
in Argentina, exacerbated by the effects of the COVID-19 pandemic
and political uncertainty, at the date of this report it remains
uncertain to what extent, if any, EdS will be granted any local or
regional support in addition to improvements in the aforementioned
tariffs. In the absence of further improvements in the price EdS
receives for the power it generates, there will be severe
restrictions on the ability of EdS to generate surplus cash. This
will in turn will have a significant impact on the Company's
working capital position. Prospects for excess cash generation over
and above the Argentinian operations existing cash reserves are
highly limited until such time as the economic and political
climate improves in Argentina.
Another side-effect of Argentinian economic conditions is the
continuation of severe exchange controls imposed by the Argentinian
government and which persisted throughout 2021. Under these
conditions it has continued to be punitively expensive to exchange
Argentinian pesos into US Dollars. In fact, during the year the
cost of replacing US$ for the one transfer made in June 2021 from
Argentina would have resulted in a 54 per cent. loss in its value.
There are no immediate signs of these exchange controls being
lifted under the current Argentinian Government.
The lower cash remittances received by the Group and increase in
accruals, have resulted in a slight rise in current liabilities to
GBP0.5 million (2020: GBP0.4 million).
Rurelec's cash generation was assisted in 2021 by the disposal
of the Frame 6B turbine in Arica, Chile. This had a net positive
cash impact on group finances of GBP0.7 million which helped offset
the reduction in receipts from the Argentinian operations. Results
were also improved by a 13 per cent. reduction in Rurelec group
administration costs from GBP1.11 million to GBP0.97 million
particularly as a result of reducing staffing costs, directors'
fees and professional fees. However, given the uncertainty over the
timing of future cash generation by the Argentinian operations and
its ability to fund future maintenance programmes, cash generation
of the Group is highly dependent on further sales of assets. As
previously announced such disposals would likely be a fundamental
disposal under the AIM Rules and would be subject to shareholder
approval, further updates would be provided at the time. Since the
year end there has been increased interest in the Company's
remaining turbines, carrying value in this report GBP7.0
million/US$9.4 million, however there is no certainty as to whether
a sale will complete.
At the 2020 AGM there was approval of a Special Resolution to
allow the restructuring of the share capital of the Company. With
sufficient available cash, this would allow for the payment of
dividends to shareholders. In the absence of improvements in cash
generation of the Argentinian operations or additional asset sales
the Company has insufficient cash reserves for the Board to
recommend a dividend in relation to the results for the year ending
31 December 2021.
For further information please contact:
Rurelec PLC W.H.Ireland
Andy Coveney, Executive Director Katy Mitchell
www.rurelec.com
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Tel: +44 (0)20 7549 2829 Tel: +44(0) 20 7220 1666
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NON-EXECUTIVE DIRECTOR'S STATEMENT
Dear Shareholder
The overall strategy for Rurelec remains the continued
stabilisation of the financial position of the Group, with the
intention of enabling value to be realised from the asset portfolio
and ultimately returned to shareholders.
The full effect of COVID 19 on the already weak economy and
chaotic power sector in Argentina, may well have overwhelmed the
Company, in the year ended 31 December 2021 had the Board who have
preceded me in recent years not managed to eliminate the Company's
debt. As it was, through limited income from Argentina, the
disposal of the GE 6B Turbine and a parsimonious approach to
expenditure, we were able to achieve a satisfactory outcome in the
circumstances.
The year in review
In light of the severe exchange control restrictions imposed by
the Argentine government, and the need to maintain liquidity within
EdS for operational reasons, the Directors consider that the
receipt by Rurelec of GBP0.4 million through our joint venture
partner in Patagonia Energy Limited ("PEL") during the year is
indicative of the improved working relationship with our joint
venture partners. This cooperation is crucial as PEL's Argentinian
asset, Energia del Sur SA ("EdS") continues to face headwinds
comprising weak tariffs, costly scheduled maintenance outages and
adverse political and economic conditions in Argentina. A more
detailed discussion on tariffs, and implications of the scheduled
maintenance program at EdS is set out below and in the Executive
Director's report.
In line with our strategy to make asset disposals, on 9
September 2021 the Group announced the sale of its Frame 6B gas
turbine generating set and certain associated ancillary equipment
for US$1.0 million/GBP0.7 million. After settlement of local
Chilean costs and other expenses connected with the sale, the Group
received US$ 0.94million/GBP0.7 million net from this transaction.
Following the disposal of the turbine, we have begun a process of
closing dormant companies in Chile, which simplifies our Group
structure and thereby reduces costs in relation to audits and other
associated fees.
The Company's cost base fell during the year, despite
unavoidable increases such as in insurance. Simon Morris left the
Company during the period, having been instrumental in eliminating
the debt, and he has not been replaced at the current time. With
relatively few suppliers, every invoice is scrutinised by the
board, and we now believe that no further material savings can be
made while running a publicly quoted company responsibly. Currently
expenditure is now less than GBP1 million per annum. In the current
year some further travel and associated expenditure will, however,
be necessary as we manage the EdS situation carefully, and as the
disposal program of our other assets is actively pursued.
The 6B gas turbine disposal represents an improvement in our
liquidity at a time when we cannot rely on EdS to generate surplus
cash at least in the short term; cash at 31 December 2021 stood at
GBP745k (31 December 2020 GBP668k).
Argentina
EdS has continued to perform well from an operational
standpoint, and we now enjoy a constructive and co-operative
working relationship with our joint venture partner in PEL, which
is crucial as all future cash remittances from EdS need to flow up
through PEL given all direct debts owed from EdS to the Group were
repaid in 2020.
However, the generation of surplus cash by EdS and rate of cash
remittances from EdS to PEL was weak due to the deteriorating
economic situation in Argentina. This has been exacerbated by the
impact of the COVID-19 pandemic which spanned the entire period
under review and included a nationwide lockdown between 22 and 31
May 2021.
Argentinian cost inflation continued to soar, with an annual
rate of 50.9 per cent. in 2021 with the interannual rate at the end
of April 2022 of 58 per cent. [1] , which affected our staff costs
in particular. The value of the Argentinian peso against the US
Dollar fell by nearly 14.7 per cent. in 2021, The Argentinian
Central Bank ("BCRA") exchange controls have a direct effect on the
cash remittances by EdS to PEL (PEL is not resident in Argentina).
The cost of transferring money out of Argentina continues to be
punitive with the loss suffered on transferring Argentine Pesos to
US dollars has amounted to approximately 48 per cent. of the
underlying face value; in addition, at the operating level energy
spot prices are no longer linked to US Dollars but to Argentinian
Pesos which increases the foreign exchange risk for the Group.
As we have previously announced the year began with great
uncertainty following the expiration of the Resolution SE
220/2007tariff with remuneration levels falling significantly to
spot-market rates governed by the existing Resolution SE 31/2020
tariff ("Resolution 31").
Despite negotiations at the highest possible level with the
Argentinian Government, its Secretariat of Energy and also with
CAMMESA, output from the Steam Turbine was remunerated at
Resolution 31 spot rates between September 2020 and February
2021.
On 12 February 2021 CAMMESA agreed to a 12 month suspension of
interest and repayments for two maintenance loans to EdS and a
constant Utilization Factor, which is used to calculate capacity
equal to 70 per cent. of nominal output from 1(st) February
2021.
On 19 May 2021, Resolution SE 440/2021 ("Resolution 440") was
announced introducing the following changes to the existing
Resolution 31 tariff:
-- Spot generation tariffs increased by additional payments of 29 per cent. on average.
-- This increase is to be retroactively applied from February
2021 (though payment of these sums is delayed - see below).
-- There was a cancellation of the Update Clause (Art 2. SE
Resolution 31/2020) for the increase in rates based on the Consumer
Price index "CPI" and the Internal Wholesale Price Index "IPIM"
Under this change, steam and gas turbine capacity and offtake
revenue are all remunerated under the same Resolution 440 tariff.
Previously just gas turbine offtake was remunerated under the
Resolution 31 spot tariff.
On the 18 April 2022, Resolution 238/2022 ("Resolution 238") was
announced introducing the following changes to existing Resolution
440:
-- Spot generation tariffs increased by additional payments of
30 per cent. for the February-May 2022 period and by an added 10
per cent. as from June 2022.
-- It makes the clause on reduction of income from availability
void, based on the use factor. The validity of this clause was
suspended for EDS from February 2021, which represented an increase
in our income of AR$ 86M during 2021.
These changes are to be retroactively applied from February
2022. This tariff increase has been awarded by the Secretariat of
Energy in recognition of the inflationary environment in Argentina
and therefore there is no change overall for EdS.
Despite the increases in Resolution 440, the income generated
under this new tariff is significantly lower than under Resolution
220.
Outlook
We have now focussed on the disposal of the two 701 DU 125MW
turbines and generators which have been in storage in Italy since
2008, before they were acquired in June 2013. This equipment, while
of a dated design, is high quality and has been carefully stored.
We consider that in the environment of global demand for
electricity currently exceeding the rate at which renewable sources
can be developed, there is a window of opportunity in which we must
explore opportunities to dispose of these assets which have been
owned by the Company for nine years. We expect that they are likely
to be deployed in developing countries and we are following up a
number of leads in different geographies. The complex and often
slow nature of financing power projects of the scale for which
these turbines will be used makes it difficult for us, both to
determine the credibility of a purchaser, and to predict the timing
of any sale, ahead of receipt of a contractual commitment validated
by a deposit. We are continuing to explore all leads, including the
esoteric and improbable, because a successful outcome will allow us
to deliver our strategy of returning value to shareholders.
The Group's Central Illapa project ("Mejillones") remains
consented, and licence fees have been paid to maintain that
consent. There has been no progress with the disposal of this asset
since our last report in September 2021. While we consider that it
has value, there is a limited universe of potential purchasers for
this asset. Given the growing need for electricity and security of
supply, a project such as this may have increased appeal and we
will pursue this over the next year.
Group current liabilities at 31 December 2021 stood at GBP0.5
million, which compares with the position at 31 December 2020 of
GBP0.4 million.
Paul Shackleton
Non-executive Director
6 June 2022
STRATEGIC REPORT
Strategy
The overall strategy for the Group remains the continued
stabilisation of the financial position of the Group, with the
intention of enabling value to be realised from the asset portfolio
and ultimately returned to shareholders. In order to make this
possible the Directors succeeded in carrying out a capital
reconstruction of the Company at the 2020 AGM.
Liquidity
This strategy has been determined by the on-going financial
position of the Group. The main borrowing of the Group was the 2016
secured BPAC loan, which was repaid in 2019 enabling the associated
debenture to be released. The Group thus became debt-free and it
remained debt-free throughout 2021. Current liabilities have
reduced from GBP2.0 million at 31 December 2018 to GBP0.5 million
at 31 December 2021 with all significant arrears to creditors being
satisfied. Group liquidity is now dominated by the timing and
quantum of inflows from two main sources - surplus cash generated
by the Argentinian operations, and ad-hoc asset disposals.
During 2021, continued normal operations and cash generation at
EdS enabled the Argentinian operations to remit unsecured debt
repayments of GBP0.5 million/$0.6 million (2020: GBP2.3
million/$3.0 million) to Patagonia Energy Limited ("PEL"). Of this
amount, Rurelec received GBP0.3 million (2020: GBP1.8 million) of
debt repayments from PEL under the terms of the November 2019
Umbrella Agreement regulating the division of debt repayments to be
made by PEL to its two joint venture ("JV") partners.
At 31 December 2021, EdS had GBP2.8 million of cash reserves
(2020 GBP2.8 million).
Post year end to date the Group has received GBP0.6 million of
debt repayments (2020: GBP0.3 million) from PEL.
Group liquidity - cash outflows
There are now no group debt outflows, and outflows on Group
administrative expenses have halved in recent years from GBP2.1
million per annum in 2017 to GBP1.0 million in 2021.
Group liquidity - the effect of tariff changes on cash inflows
from Argentinian operations
When it was operating at full capability, EdS traditionally
generated cash surpluses. The tariffs which are used to remunerate
EdS are obviously of fundamental importance in determining EdS's
cash inflow. In 2021 EdS experienced a sharp decline in revenues
following the expiry of the Resolution SE 220/2007 tariff in
September 2020 which had remunerated the output of the steam
turbine at a premium rate and which had been in place for 10
years.
Following this expiry, the offtake from both steam and gas
turbines were remunerated at the much lower spot tariff under
Resolution SE 31/220, albeit these spot rates were increased by
29.5 per cent. with effect from February 2021 under Resolution SE
440/2021. These spot tariffs are problematic for the power
generation industry in Argentina and may not be sufficient to
remunerate companies sufficiently to fund essential maintenance
programmes needed in 2023 and beyond. Gripped by domestic economic
crisis, high inflation, high interest rates and bearing the
economic strain of the COVID-19 pandemic, further tariff increases
were not granted by the Argentinian government after February 2021
and cash generation of EdS suffered as a result, thereby
significantly restricting the funds EdS was able to pay up to PEL
in 2021.
It is the view of the directors of both EdS and Rurelec that the
current spot tariff rates in Argentina are unsustainable in the
long term and unless tariffs are increased, power generators may
have to shut down/mothball their plants. EdS management expect that
tariffs will increase and/or there will be funding from CAMMESA for
maintenance programmes in 2023 and beyond, but this is not a
certainty. EdS' management remains hopeful that an additional
tariff increase will be awarded to EdS owing to the cost of
producing electricity in the Comodoro Rivadavia area and because
EdS is strategically important to the supply of electricity to its
surrounding area but as this is currently uncertain, there are
significant liquidity risks as a result.
Group liquidity - the effect of operating cash receipts on cash
inflows from Argentinian operations
In 2021, the EdS power plant in Patagonia operated normally
without any major outages. The demand for power from the grid has
been scaled back since 2019 owing to the commissioning of wind
farms in the region. In 2021 EDS operated at an output of 59.9 MW
compared to a nominal plant capacity of 136 MW using one of its two
gas turbines at any one time, and powering its steam turbine at
reduced output. This reduced load and alternation between the two
gas turbines has helped liquidity by prolonging the period between
costly maintenance programmes so in 2021 no major maintenance was
necessary.
Group liquidity - The Importance of maintenance on the ability
of EdS to generate surplus cash inflows
Although major maintenances have been validly delayed due to
running at reduced output, they cannot be postponed indefinitely,
and this is going to have a significant impact on liquidity going
forwards. The last major maintenance programme between October 2018
and January 2019 cost $6 million (albeit that also involved the
replacement of certain turbine blades following the blade failure
event in September 2017) and was primarily funded by loans from
CAMMESA. During that maintenance programme, the steam turbine and
generator were completely overhauled, the rotor and missing turbine
blades were replaced, and one of the gas turbines also underwent a
rotor replacement and overhaul. A minor maintenance will occur on
one gas turbine in 2022 but more significant maintenance programmes
are due in 2023 and 2024. In the absence of further loan/grant
support from CAMMESA and/or improved tariffs, EdS may not generate
sufficient cash to fund these programmes. Getting that support may
depend on having a new political regime in the Argentinian
Government/Secretariat of Energy. This introduces considerable
uncertainty and delay into the ability of EdS to generate surplus
cash to contribute towards group liquidity.
Group liquidity - The effect of currency conversion costs on
group inflows
Since EdS has repaid all the debt owed directly to Rurelec group
companies, Rurelec's liquidity is driven by the flow of receipts
from PEL. PEL's liquidity is, in turn, determined by the ability of
EdS to purchase US Dollars to repay the debts it owes to PEL or to
pay dividends to PEL. Since September 2019, the Argentinian
government has imposed severe exchange rate controls as a result of
which the timing and quantum of payments from EdS to PEL is heavily
affected by those controls which firstly restrict the ability of
EdS to transmit funds to PEL and secondly increase the money
conversion cost of achieving those transfers. Both these factors
combine to generate adverse and uncertain conditions surrounding
the Group's liquidity.
Effective in the prior year, liquidity continues to be affected
by the increased foreign exchange risk for the Group resulting from
the policy change announcement by the Argentinian Government in
response to the economic crisis that revenue deriving from the
electricity generated by EdS from its steam turbine and sold on the
energy spot market will no longer be linked to the US Dollar but to
the Argentinian Peso, as are the output and capacity payments for
the gas turbines.
Group liquidity - asset sales
The other main source of group receipts was derived from an
asset sale. In 2021, the group successfully sold its Frame 6B
turbine located near Arica, Chile. This asset which was owned by a
Chilean subsidiary was sold for $1.0 million of which net cash
proceeds received into Rurelec entity were GBP721k after local
transaction costs.
The Board remain hopeful for the prospects of realising other
group assets notably the two 701 DU 125MW turbines and generators
in storage in Italy. A sale of these assets would have a material
effect on group liquidity if and when it occurs, but the sale of
these units is dependent on a customer undertaking a suitable
project as this size of older turbine are very rarely bought "for
stock"- they would only be bought by a buyer with a specific
project in mind in an appropriate territory where such turbines are
permitted to operate. Hence the exact timing of a future sale
remains uncertain and this introduces a natural unpredictability to
the timing of receipts from such sales
Group liquidity- the impact of COVID-19
The Directors have performed a review of Rurelec's cashflow, as
described below in the Going Concern section of this report,
following which it has been concluded that any lasting impact of
the COVID-19 pandemic to date has had little adverse effect on the
Directors' view on going concern of the Group for the next 12
months after the signing of this report.
Financial Results and Going Concern
The operating loss for the year of GBP2.1 million for 2021
represents a decrease in losses compared to the GBP2.9 million
operating loss for 2020. This is explained in more detail in Notes
8 and 9 to the accounts. Included in the loss is an impairment in
the carrying value of Group assets of GBP1.5 million (2020: GBP1.8
million) coupled with administration expenses which fell at a Group
level from GBP1.1 million in 2020 to GBP1.0 million in 2021. These
losses were offset by a gain of GBP330k (2020: GBPnil) on the
disposal of the Arica turbine, recorded in Other Income.
The impairment is dominated by a reduction in the forecast net
present value of the future cash generation of EdS which is used to
support the value of the loan repayments receivable from PEL. This
reduction in forecast cash generation is the result of revised
assessments of the unfavourable cash generation resulting from
tariffs imposed in replacement of the Resolution 220 tariff
combined with uncertainties surrounding how future maintenance
programmes will be funded. They reflect the Board's view of the
carrying value for the Group's assets in current market
conditions.
The overall loss before tax for the year was GBP3.6 million
(2020: GBP5.3 million). This was after a net finance expense of
GBP1.3 million (2020: GBP2.0 million), due to slower projected PEL
loan note repayments increasing the expected credit losses. There
was a GBP0.3 million reduction in foreign exchange losses from
GBP0.5 million in 2020 to GBP0.2 million in 2021.
Unless there is a significant disposal of assets, in the long
term, the Group is dependent upon debt repayments from Argentina
via PEL. There is considerable uncertainty as to the timing and the
quantum of those receipts given exchange rate controls and other
austerity measures imposed by the Argentinian Secretariat of Energy
and CAMMESA in response to the Argentinian economic crisis.
At the date of the signing of the Financial Statements, having
considered Rurelec's current cash balances and the cash forecasts
and current cash balances of the Argentinian operation together
with potential asset disposals, the Directors believe, bearing in
mind the reduced outgoings of the Group, there is currently
sufficient headroom in existing working capital facilities to avoid
the need to seek further sources of working capital. However, these
receipts are not guaranteed and if neither source of funds
generates sufficient cash there exists a material uncertainty over
the ability of the Company to finance its ongoing activities,
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 cashflow, operating profitability, net
asset value and earnings per share.
i) Cash Flows
The Group is heavily focused on optimising cashflow generation.
It regularly monitors actual and forecast Net Cashflows used in
Operating Activities, Net Cashflows Generated by Investing
Activities (predominantly the repayment of loans from PEL) and Net
Cash Used in Financing Activities (although those will in the
foreseeable future be minimal as the Group has become debt-free).
The Net increase in Cash and Cash Equivalents in the year was
GBP77k (2020: increase GBP531k), cash balances at the year-end were
GBP745k (2020: GBP668k).
ii) 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 an operating loss of
GBP2.1 million in the year (2020 GBP2.9 million loss).
iii) 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 2.1 pence per share
(2020: 2.7 pence per share).
iv) 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. Growth in earnings
per share is indicative of the Group's ability to identify and add
value. The Group made a loss of 0.65 pence per share in the year
(2020: loss of 0.95 pence 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. EdS in which the Group has a 50% interest has an
installed nominal capacity output of 138 MW. No additional capacity
was added in the period. The group continues to own two turbines
(2020: three) ready for deployment in projects or onward sales.
These have a nominal capacity of 125 MW.
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. The annual heat rate was 8.63 MMBTU/KWh (2020: 8.46
MMBTU/KWh).
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 95.2
per cent. (2020: 91.7 per cent.).
Review of Financial Performance
Group Results
The Group loss after tax for the financial year under review is
GBP3.6 million (2020: GBP5.3 million loss). This included net
impairments of GBP1.5 million (2020: GBP1.8 million), net expected
credit losses of GBP1.3 million (2020: GBP2.0 million), an
impairment provision of GBP0.1 million (2020: GBPnil) relating to
closure costs of 100% owned subsidiary SEA Energy S.A. and foreign
exchange losses of GBP0.2 million (2020: GBP0.5 million losses).
The impairments//Net Expected Credit Losses are detailed below:
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
Impairments//Net Expected Credit
Losses
Investment in JV Companies 1,336 1,826
Net Expected Credit Losses 1,345 1,964
Provision re closure costs of SEA 133 -
Energy
Total 2,814 3,790
----------- -----------
Group revenue was GBPnil (2020: GBPnil), Operating and
Administrative expenses amounted to GBP1.0 million (2020: GBP1.1
million). Operating loss was GBP2.1 million (2020: GBP2,9 million
loss). The loss before tax is GBP3.6 million (2020: GBP5.3 million
loss). The basic loss per share is 0.65p (2020: 0.95p loss). Total
assets are GBP12.2 million (2020: GBP15.4 million). Total equity
stands at GBP11.7 million (2020: GBP15.1 million), or a Net Asset
Value of 2.1 pence per share (2020: 2.7 pence per share).
The results for the operations in Argentina, and Chile are shown
below.
Energia del Sur S.A. Results
After the application of Argentine GAAP accounting treatments to
recognise the effects of hyperinflation, based on 100% of EdS's
activities, the net operating profit for the year was GBP2.8
million/AR$314.0 million (2020: GBP7.8 million/AR$722.9 million) on
revenues of GBP6.6 million/AR$ 914.2 million (2020: GBP16.7
million/AR$1,540.2 million), the net pre-tax profit for the year at
EdS was GBP0.9 million/AR$122.1 million (2020: profit GBP1.9
million/AR$174.8 million) which included foreign exchange gains of
GBP0.3 million/AR$ 239.1 million (2020: losses GBP2.6
million/AR$239.1 million).
As set out in note 22 the Directors have determined that the
relationship with EdS is a joint venture and is therefore equity
accounted.
Rurelec Chile
The development of our 100% owned investments in Chile has
expensed limited direct costs in the year of GBP83k (2020:
GBP164k). Capitalised development costs are GBPnil (2020: GBP0.1
million) on the Central Illapa project. As previously announced the
Arica turbine was disposed of in the year, the sales proceeds were
US$1.0 million, the net profit of GBP330k is shown in other income
note 8b. All sale proceeds were received during the year. The
development costs associated with the Central Illapa project were
impaired to GBPnil in 2021 (2020: GBP0.1m), the remaining
transformer has a carrying value of GBP35k (2020: GBPnil).
Review of Operations
Argentina
In 2021, the EdS power plant in Patagonia operated normally
without any major outages. The demand for power from the grid had
been scaled back in 2019 owing to the commissioning of wind farms
in the region and this reduced demand continued in 2021. In 2021
EDS operated at an output of 59.9 MW compared to a nominal plant
capacity of 136 MW using one of its two gas turbines at any one
time and powering its steam turbine at reduced output. This reduced
load and alternation between the two gas turbines has prolonged the
period between maintenance programmes so in 2021 no major
maintenance was undertaken.
Gross energy generated for the year 2021 of 454 GWh compares to
522 GWh for 2020. The average heat rate of the plant in 2021 was
8.63 MMBTU/KWh compared to 8.46 MMBTU/KWh for 2020. The average
heat rate for the plant includes fuel consumption on both the gas
turbines and auxiliary firing of the steam turbine.
In response to the anticipated decline in revenue, EdS
management embarked on a cost cutting programme which included a
restructuring of the Long-Term Service Agreements which has
previously funded maintenance at the plant and the full year effect
of this cost reduction programme was seen in 2021. Additional cost
savings were achieved through personnel changes, including the
retirement of the EdS Managing Director and the second-in command
office at the power plant at Comodoro Rivadavia and a move to part
time working by the Finance Director and other certain senior
management at the La Plata office near Buenos Aires.
The following table sets out the Group's 50 per cent. share of
its interest in Patagonia Energy Limited ("PEL") the BVI registered
joint venture holding company of EdS, its 100 per cent. owned
Argentinian operating subsidiary. The table shows the financial
impact on revenue of the expiry of the Resolution 220 PPA and its
replacement with spot tariffs as referred to in the above sections
in this report. It is to the credit of local management that
despite a 60 per cent. fall in revenue, operating costs were also
trimmed, and the company generated an overall profit in the
year:
Group share of Joint Venture results Year Ended Year Ended
and net assets
31.12.2021 31.12.2020
GBP'000 GBP'000
Results
Revenue 3,300 8,357
Operating Expenses - excluding foreign
exchange losses (2,175) (4,464)
Foreign exchange losses 130 (1,288)
EBITDA 1,255 2,605
Depreciation (1,047) (1,043)
EBIT 208 1,562
Intragroup interest - credit re write
back of prior year charge 2,478 2,578
Third party interest payable (398) (634)
Profit before tax 2,288 3,506
Tax 151 (829)
Profit after tax 2,439 2,677
Summary of Statement of Financial
Position
Non-current assets 10,871 10,407
Cash 1,419 1,418
Current trade and other receivables 918 1,196
Non-current liabilities (17,100) (18,681)
Current liabilities (907) (2,060)
Net assets/(liabilities) (4,798) (7,720)
Chile
Arica
Following the reassessment of the project, the Board sought to
redeploy the Frame 6B turbine acquired for the project. As
separately announced on 9 September 2021 a sale of the turbine was
concluded at US$1.0 million (approximately GBP0.72 million), the
gain of GBP330k being shown in Other Income. All proceeds were
received in the year, see note 8b for further details. The
associated transformer is held at GBP35k (2020: GBPnil).
Central Illapa
The necessary environmental consents granted for the project
were maintained and an application which had been made in 2019 for
the extension of the construction period from Ministerio de Bienes
Nacionales, the Chilean Ministry of National Assets was duly
approved in January 2020.
The Group's carrying value for projects is 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 US $9.4 million (2020:US $9.4 million). The
Directors also obtained an independent valuation produced by a
competent person. Based on valuation advice the Directors have
decided not to further impair the carrying value of these turbines
(2020: GBPnil). After exchange rate movements these assets are duly
recorded at a value of GBP7.0 million (2020: GBP6.9 million).
Future developments have been considered in the non-executive
Director's statement.
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, political
risk, uncertainties in the financial markets, and unexpected
operational events.
a) Political risk - there are significant political risks in the
areas where the Group operates. These include potential for
unfriendly actions towards foreign investments (including the
imposition of exchange controls that can significantly reduce the
return on investment due to the difficulty and cost of repatriating
funds) and towards the domestic utilities sector generally, the
imposition of new tariffs and/or taxes and/or government cash
shortages resulting in slow payment for electricity generated. That
political risk also extends to labour laws which can result in
significant employment-related cost inflation and punitive
employment compensation legislation which can make it difficult and
uneconomic to carry out staff restructuring programmes. There is
also the possibility that domestic economic instability could lead
to political unrest or vice versa. These are significant risks to
Rurelec which are inherent in operating in such territories
b) Financial markets - Should, after careful assessment, the
Group wish to develop its assets, project finance may be
unavailable 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.
c) Exposure to foreign currency - The Group's activities are in
South America and therefore results will be affected by exchange
rate movements and local inflation rates. Furthermore, at times of
economic crisis (such as in Argentina since late 2019), exchange
control restrictions have been imposed and may be further
tightened. These may have a significant impact on the Group's
ability to repatriate funds to the parent company and introduce an
additional cost of achieving that repatriation. 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 is committed to maintaining the equipment in a manner
appropriate to the foreseeable demands on that plant to reduce the
breakdown risk 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.
f) Economic, market and business operations risk resulting from
pandemics, particularly the COVID-19 pandemic. In March 2020, the
World Health Organisation declared the spread of COVID-19 to be a
pandemic. The rapid spread of the virus and consequent global
emergency containment measures resulted in business closures,
travel shutdowns and restrictions that severely curtailed economic
activity and political and economic decision making. The prolonged
nature of the COVID-19 pandemic had a severe negative impact on the
UK, Argentinian and Chilean economies where the Group operates. The
demand for electricity experienced some decline from the reduced
industrial and commercial activity, but background demand was
maintained. The greater risk has been the effect of the pandemic on
already fragile economies such as that of Argentina and measures
such as emergency labour laws and restrictions on profit returns
from utility companies generally have been implemented to prevent
social hardship with the expectation that business meets the burden
of that implementation.
To date, the pandemic had not had a significant impact on
operations. London head office operations of Rurelec were able to
continue remotely without disruption. All current Head Office
records were digitised before the UK lockdown to allow for remote
access and work has continued from employees' homes. In Argentina,
the spread of the virus did affect the EdS workforce but measures
taken by EdS's management minimised disruption (such as operating
with reduced on-site manpower for non-essential personnel) and this
mitigated any major adverse effect on EdS's operations to date. The
EdS plant has not experienced COVID-19 related shutdowns
The adverse economic and social effects of the COVID-19 pandemic
started to recede in late 2021. Although many global supply chains
continued to be disrupted and distorted ats Economies recovered,
this has had little discernible effect on EdS or Rurelec to date.
However, despite widespread global stimulus packages and efforts to
control and eradicate the virus, it is not currently known what the
lasting effects of COVID-19 and its variants will be on the growth
rates of global economies, and what the effect will be on the
ongoing demand for electricity, the ability to operate and the
ability to obtain spare parts and engineering expertise in the
event of maintenance or equipment breakdowns. There are no
guarantees there will not be yet further disruption and this could
extend to an inability to transfer funds out of the country for
debt repayments owed to the Group. Group cash flows have been
prepared under the scenario that cash will continue to be received
under current conditions and local management's expectations.
g) War in Ukraine - its current effects on the Group are not
considered to be an adjusting post balance sheet event. See the
Directors Report and note 5 - exchange rate sensitivity for further
details.
Directors' Section 172 Statement
Statement by the directors in performance of their statutory
duties in accordance with s172(1) Companies Act 2006.
The Board of Directors of Rurelec Plc acknowledge that they have
a statutory duty under s172 (1) (a-f) of the Act to promote the
success of the Company for the benefit of the members as a whole
considering broader stakeholder interests, and notably having
regard to:
a) the likely consequence of any decision in the long term;
b) the interests of employees;
c) the need to foster business relationships with suppliers, customers and others;
d) the impact of operations on the community and the environment;
e) the desirability of the company maintaining a reputation for
high standards of business conduct; and
f) the need to act fairly as between members of the Company
We report below on how in the year ended 31 December 2021 the
Board's strategies, actions and key decision making took place
observing these duties with the objective of delivering positive
outcomes for the Company, its shareholders and its wider
stakeholders the most relevant of which have been identified as
including creditors, employees of the Company and of interests in
foreign JV operations and those impacted by its operations in the
wider community.
a) Regarding the likely consequences of long-term decision
making, those decisions were made with clear strategic focus on the
need to return value to shareholders and the need to continue to
build financial strength, thereby avoiding the near-insolvency
event experience by the Company in the past. That strategy drove
cash conservation and cost cutting decisions so that the business
could withstand financial stress. The Company was able to withstand
those stresses in 2021.
The Group culminated realisation of an asset with the successful
sale in September 2020 of its Frame 6B turbine located near Arica,
Chile for $1.0 million, net cash proceeds were received by the
Company.
b) Our employees are fundamental to the delivery of our
strategy. The Board has prioritised fair remuneration and pension
arrangements for those employees and undertakes regular
communication updates in an open environment. Decisions taken to
maximise the resilience of the business, preserving cash and
minimising risk, are taken after prioritising the continued
employment of those employee roles that have been instrumental to
the turnaround of the business. Rurelec's Directors have been
instrumental in using impending retirements and encouraging
part-time working to lower the future costs of its Argentinian
operations.
c) Regarding the need to foster business relationships with
suppliers, customers and others, Rurelec has for some time been
keen to repay arrears to trade creditors who have supported the
business over a significant timescale and to repay in full all
secured creditors. The Company has been freed from the interest
burden that was being paid on past loans, thereby benefitting other
stakeholders. Rurelec is now essentially debt- free and, as
operating circumstances allow, the Board's stated objective of
returning value to shareholders can be realised.
d) Regarding the impact of operations on the community and the
environment, Rurelec takes a close interest in the operations in
Argentina. At the operations level, EdS has assumed sustainable
development of its activity and in the region. Its Environmental
Policy is adapted to the nature, environment, scale and
environmental impact of the activities and services of the plant.
It has implemented an Environmental Management System that has been
certified by Bureau Veritas. This system has procedures,
instructions, and records in accordance with the requirements of
ISO 14.001: 2004, whose compliance is verified through periodic,
external and internal audits that contribute to the continuous
improvement of EdS.
e) Regarding the desirability of Rurelec maintaining a
reputation for high standards of business conduct, the Board of
Directors' intention is to ensure that the business operates and
behaves in a responsible manner with high standards of business
conduct and governance. Regular communication amongst the Board and
employees and effective, formally recorded Board Meetings ensure
such standards are maintained. Where appropriate, independent legal
advice is obtained to support the decision process.
f) Regarding the need to act fairly, as between members of the
Company, all shareholders are welcome to express their views at the
Annual General Meeting. In December 2019, the Company took the
decision to apply to shareholders and the law courts for a capital
reconstruction in 2020. This reconstruction was duly approved in
2020 to facilitate the distribution of future returns to
shareholders should cash reserves grow to the extent of permitting
this.
The Strategic Report was approved by the Board of Directors on
06 June 2022 and was signed on its behalf by:
_______________________
Andrew Coveney (Executive Director)
BOARD OF DIRECTORS
BRIAN ROWBOTHAM
Non-Executive Director
Brian was 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 Hitchens, Harrison & Co plc after its acquisition
by Religare in 2008. Brian is a Fellow of the Institute of
Chartered Accountants in England and Wales. During the period he
held a number of other board positions.
Brian resigned on 13 April 2021.
SIMON MORRIS
Executive Director
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.
Simon resigned on 17 August 2021.
ANDY COVENEY
Finance Director
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, in 1991 then specialising in Corporate Finance advisory
work. In 1993, Andy embarked on a 15-year spell as FD/MD of several
financial and operational turnarounds in the manufacturing and
distribution sectors, starting with the acquisition and subsequent
turnaround of CP Pharmaceuticals Limited, a loss-making division of
Fisons plc before it was sold to Wockhardt Group a decade later.
Founded Coveney Associates Consulting in 2010 providing FD advice,
turnaround services and cashflow management advice to a portfolio
of businesses.
PAUL SHACKLETON
Non-Executive Director
Paul is the Senior Independent Non-Executive Director and
Chairman of the Audit Committee. He is a corporate finance adviser
at Arden Partners PLC. After university, he spent six years as an
officer in the British Army. In 1996 he joined UBS limited where he
worked with small caps covering Mergers and Acquisitions and Equity
capital markets for listed and AIM traded companies. He
subsequently joined Singer & Friedlander Limited where he was a
founder member of the team which undertook a MBO to form Bridgewell
Limited. Since then, he has continued to specialise in small
companies; his experience also includes being an adviser to Rurelec
between 2006 and 2017.
Paul was appointed on 26 July 2021.
DIRECTORS' REPORT
The Directors submit their annual report together with the
audited financial statements for the year ended 31 December
2021.
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
acquired assets in Argentina and Bolivia and commenced development
of new power generation projects in Peru and Chile. The power
generation projects in Peru were sold on 30 January 2018.
Results and dividends
The Group results for the year ended 31 December 2021 are set
out in the Consolidated Statement of Total Comprehensive
Income.
No dividend was paid during the year to 31 December 2021 (2020:
nil).
Share capital
Details of the issued share capital are set out in Note16.
Going concern
The directors have prepared budgets and forecasts, and performed
stress tests thereon, for a period of at least 12 months from the
date of signing of the financial statements to assess the Group and
Company's ability to continue as a going concern.
On the basis that the Group receives the joint venture
remittances referred to below, the Directors have assessed that at
the date of signing of the financial statements, the Group and
Company would have sufficient working capital for a period of at
least 12 months from the signing of the financial statements,
without the need to seek further sources of working capital and
have therefore prepared the financial statements on a going concern
basis.
In November 2019, the signing of the Umbrella Agreement and
Revised Shareholder Agreement with the JV partner has significantly
improved the clarity of how the cash proceeds of the JV will be
split between the parties. To date debt repayments of GBP3.3
million has been received from the JV in part payment of the
Amended and Restated Loan Notes. Loan repayments already received,
at the date of this report, along with projected rest of year
repayments from the joint venture are expected to be sufficient to
meet the working capital requirements for the Group.
However, the quantum and timing of further receipts may be
subject to variation (particularly as a result of Argentine
exchange rate controls) and are not guaranteed or secured. Without
the remittances from its joint venture there is uncertainty on the
availability of funds to cover the Group's forecast expenditure
during the going concern period.
Additionally, there exists uncertainty as to the timing of
potential asset sales. Unless there is a significant disposal of
assets, the Group remains reliant on the repayments of loans from
its joint venture Argentine operations.
Whilst it is the expectation of the Directors that forecast
remittances from the joint venture will be received, the matters
set out above indicate that a material uncertainty exists that may
cast significant doubt on the Group and Company's ability to
continue as a going concern and therefore its ability to realise
its assets and settle its liabilities in the normal course of
business. These consolidated financial statements do not reflect
the adjustments or reclassification of assets and liabilities,
which would be necessary if the Group and Company were unable to
continue its operations.
Directors
The following Directors served during the year and up to the
date of signature of the financial statements as follows:
Brian Rowbotham - Non-Executive Director. Resigned on 13 April
2021.
Simon C. Morris - Executive Director. Resigned on 17 August
2021.
Andy H. Coveney - Executive Director
Paul Shackleton was appointed as Non-Executive Director on 26
July 2021 and elected at the 2021 Annual General Meeting.
Directors' interests
The Directors' beneficial interests in the number of shares inf
the Company were on the reference dates as stated below:
01.06.2022 31.12.2021 31.12.2020
Brian Rowbotham - resigned
26 July 2021 - n/a 450,000
Simon C. Morris - resigned - n/a -
17 August 2021
Andrew H. Coveney - - -
Paul Shackleton - - -
Directors' Indemnity
The Company's Articles of Association provide, subject to the
provisions of UK legislation, an indemnity for Directors and
officers of the Company in respect of liabilities they may incur in
the discharge of their duties or in the exercise of their powers,
including any liabilities relating to the defence of any
proceedings brought against them which relate to anything done or
omitted, or alleged to have been done or omitted, by them as
officers or employees of the Company. Appropriate directors' and
officers' liability insurance cover is in place in respect of all
the Directors.
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 01 June
2022, being the last practicable date for reporting this
information.
Number of shares % holding
Sterling Trust Ltd 303,092,303 53.989
YF Finance Ltd 96,565,166 17.201
Mr & Mrs Scott 17,808,000 3.172
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 22.
Impact Assessments
United Kingdom's Exit from the European Union (Brexit)
The UK left the European Union ("EU") at 11.00 pm on 31 January
2020. The Transition period that was put in place - during which
the UK was still subject to EU rules - ended on 31 December 2020.
The rules governing the new relationship between the EU and UK took
effect on 1 January 2021. The new Trade and Cooperation Agreement
and other agreements were reached between the UK and the EU on 24
December 2020 and were signed during the Transition period. They
are in the process of being ratified.
The Group has very limited transactions with EU members and
those are limited to the provision of services. Rurelec entity and
the Group has only one supplier of services based in the EU.
Therefore, Brexit has not had a material impact on the Company.
Coronavirus Pandemic (COVID-19)
The COVID-19 pandemic spread globally in the first Quarter of
2020. Widespread measures have been implemented globally by
governments to control the virus and to support economies in the
markets where the Group operates. However, it is uncertain whether
those measures will be successful in the long-term eradication of
the virus or in achieving recovery in those economies and over what
timescale. The magnitude and duration of the disruption and decline
in business in the markets in which the Group operates is currently
uncertain.
During the year under review, the COVID-19 pandemic continued
and the Argentinian Government implemented a nationwide lockdown
between 22 and 31 May 2021, which did not affect to the operations
of the power plant or the head office at La Plata as EdS continued
to apply the preventative measures set up in 2020 to protect and
safeguard staff. To date the COVID-19 pandemic has had relatively
little impact on the ability of EdS to continue in operation.
Notwithstanding the above, it is not considered possible to
estimate the long-term financial impact of COVID-19 on the
Argentinian economy at the present time, nor to anticipate the
economic and fiscal measures that the Argentinian Government will
impose. The Group's Head Office in London and the EdS head office
in Buenos Aires have operated on a remote basis and the EdS plant
in Argentina has implemented procedures and protocols to allow safe
working practices as near to normal since the commencement of the
pandemic. Notwithstanding the above, it is not considered possible
to estimate the long-term financial impact of COVID-19 on the
Argentinian economy.
War in Ukraine
The Group has no activities in, or relating to, Ukraine. Whilst
the war's future impacts are by nature uncertain, at the time of
signing this report, no direct impact on the Group is anticipated
over the following 12 months.
As widely reported, global gas prices have risen exponentially
in the last 12 months. With recent highs being attributed to supply
issues caused by the war. It should be noted that the Group's main
CGU, its JV operations in Argentina, under the terms of their
supply contract to CAMMESA, the expense of the gas used in
generation is borne by CAMMESA rather than EdS.
It is not known to what extent CAMMESA purchase imported gas
versus domestically produced gas, but with end users paying
currently fixed prices without increases relating to world markets,
the situation is likely to constrain CAMMESA's current and future
cashflows. This in turn could lead to delays in payments to
generators.
Another indirect effect of the war has been shown in the
strengthening exchange rates of the US$ to GBP, this is common in
times of increased global insecurity. The principal assets of the
Group, being the 2 x 701 turbines and JV debt, are US$ denominated.
Consequently, wide US$ to GBP exchange rate fluctuations have
significant effects on the Income Statement and the Statement of
Financial Position. Please refer to note 5 for exchange rate
sensitivity analysis.
Statement of 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
and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 for
reporting year ended 31 December 2021. 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
Group, and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Statement as to disclosure of information to auditor
As far as the Directors are aware, they have each taken all
necessary steps to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that
information.
As far as the Directors are aware, there is no relevant audit
information of which the Company's auditor is unaware.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the Companies Act
2006.
Auditor
Pursuant to Section 489 of the Companies Act 2006, BDO LLP has
expressed its willingness to continue in office as auditor and a
resolution to reappoint it will be proposed at the forthcoming
Annual General Meeting.
On behalf of the Board
Maria J. Bravo Quiterio
Company Secretary
06 June 2022
CORPORATE GOVERNANCE REPORT
for the year ended 31 December 2021
Introduction
Rurelec PLC applies the QCA Corporate Governance Code (the "QCA
Code") published in April 2018 and this Corporate Governance report
for the year ended 31 December 2021 is based upon the Code.
The principal means of communicating our application of the QCA
Code are this Annual Report (pages 17-21) and our Corporate
Governance section on our website ( www.rurelec.com ).
This report sets out the Group's application of the Code,
including where appropriate, cross reference to other sections of
the Annual Report.
Where our practices depart from the expectations of the Code, an
explanation is given as to why, at this time, it is appropriate for
the Group to depart from the Code.
The QCA Code is constructed around ten broad principles and a
set of disclosures which notes appropriate arrangements for growing
companies and requires companies who have adopted the QCA Code to
provide an explanation about how they are meeting those principles
through the prescribed disclosures. In the paragraphs below,
Rurelec PLC explains how it has applied them.
Principle 1. Establish a strategy and business model which
promotes long-term value for shareholders.
The Board is committed to strengthening the Group's underlying
financial position. The Board sets out to deliver long-term value
to shareholders in the following ways:
-- Stabilising the Group's position by reducing cash outflows;
-- Reducing the Company's vulnerability to fluctuations in the
timing of debt repayments receivable from subsidiaries and JVs;
-- Working with joint venture partners to ensure that debts from
those entities are repaid to the fullest extent possible;
-- Using that financial stability to permit an orderly
realisation of assets and investments in a timescale that allows
maximisation of the proceeds of such sales;
-- Where asset realisations are not possible in the short term
due to market conditions, preserving the value of those assets
and/or maximising the cashflow generated by those assets;
The execution of this strategy presents key challenges in the
maximisation of returns on assets given market conditions. Those
challenges are addressed by ensuring that the Company is stable
enough to be able to avoid having to offload such assets when to do
so would minimise value, instead choosing to seek opportunities to
maximise the long term returns that will optimise value for
shareholders.
The business model as to how the Company plans to make money for
its investors revolves around maximising the long term collection
of debts owed in connection with the JV formed to develop the EdS
business in Argentina, whilst repaying Rurelec's own creditors and
continually assessing the value and saleability of its assets with
a view to developing and/or realising those assets in such a way as
to maximise the returns to all shareholders.
Principle 2. Seek to understand and meet shareholder needs and expectations.
The Board attaches great importance to providing shareholders
with clear and transparent information on the Group's activities,
strategy and financial position. Details of all shareholder
communications are provided on the Group's website.
The Board regards the annual general meeting as a good
opportunity to communicate directly with shareholders via an open
question and answer session. Covid-19 restrictions related to
social distancing requirements restricted the ability of
shareholders to communicate with the Board members in person at
shareholder meetings during 2021. The Board looks forward to
resuming in person meetings with shareholders in the post pandemic
environment and will also be exploring other methods of shareholder
engagement
The Company lists contact details on its website and on all
announcements released via RNS, should shareholders wish to
communicate with the Board.
The resolutions put to a vote at past AGMs can be found in
www.rurelec.com/investors/circulars
The Board seeks to engage with all shareholders as and when
relevant information needs to be disclosed. The Board recognises
that shareholders may have different time horizons for their
shareholdings and is mindful of the need to consider the interests
of shareholders as a whole in this regard.
Shareholders can communicate with the Company through the email
address in its website. The Board is responsible for reviewing all
communications received from members and determining the most
appropriate response.
Principle 3. Take into account wider stakeholder and social
responsibilities and their implications for long-term success.
The contraction of the Group and the focus on stabilisation of
the financial position of the business has led to frequent
communication at Board level and regular communication with
suppliers/funders to maintain their confidence in the business
model and strategy being pursued by the Board. The long-term
success of the Group relies on maintaining open communication and
good relationships with its stakeholders.
Communication also extends to the Board receiving regular
updates and feedback within the small London-based workforce in the
Company and there are also regular communications with the
directors of the Group's joint venture partner in the British
Virgin Islands. The Group's main trading asset is the joint venture
operation in Argentina. This operation is run by a full-time local
management team that maintains good relations with all key
stakeholders to the business in Argentina.
When permitted, the Executive Directors travel regularly to
Argentina and they meet key stakeholders in person. This year due
to COVID-19 restrictions such visits to Argentina have not taken
place.
Principle 4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation
Given past changes in the Company's financial position, the
Board considers risk management to be of paramount importance and
this has driven its strategy of pursuing financial stability rather
than expansion in order that shareholder value can be maximised
through an orderly realisation of the Group's assets. The risk
position of the Group is considered on a regular basis by the Board
given the cash constraints that the Group has had to work within.
The feedback on its strategy of pursuing a low-risk approach is
received clearly in terms of reductions in cash outflow as measured
by weekly reviews of cash forecasting models, and in terms of
reduced exposure to fluctuations in cash inflow.
Although the Company does not undertake specific risk
assessments, the Board as a whole undertakes regular views of the
principal risks and uncertainties facing the Group as reported in
page 9 of the Strategic Report. The Company is in the process of
implementing a risk register which should be under the Audit
Committee reporting to be compliant with the QCA Code.
Principle 5. Maintain the Board as a well-functioning, balanced team led by the chair.
The board acknowledges that the Company is not compliant with
the QCA Code as the Company currently does not have a Chairman and
does not have two independent Non-Executive Directors.
The Board takes collective responsibility for the quality of,
and approach to corporate governance by the Company, governance and
the systems and procedures by which the Company is directed and
controlled. A prescribed set of rules does not itself determine
good governance or stewardship of a company and, in fulfilling
their responsibilities, the Directors believe that they govern the
Company in the best interests of the shareholders, whilst having
due regard to the interests of other 'stakeholders' in the Group
including, in particular, customers, employees and creditors.
The Board is responsible for running the Company, including all
major business and financial risks and taking strategic
decisions.
The Directors communicate at least weekly on significant
matters, in particular on matters affecting cashflow and on matters
concerning the joint venture in Argentina.
Brian Rowbotham was considered to be independent since his
appointment in October 2013 until his resignation in April 2021.
The board evaluated the independence requirements of the QCA Code
and considered that Brian Rowbotham was independent during the
period. Paul Shackleton was appointed in July 2021. The board
evaluated the independence requirements of the QCA Code and
considered that Paul Shackleton was independent during the
period.
The number of times the Board met during the year to 31 December
2021 was 18. All serving directors were present at all the Board
meetings.
The three principal standing committees of the Board are the
Audit, Nominations and Remuneration Committees.
Audit, Remuneration and Nominations Committees
The Board acknowledges that the Company is not compliant with
the QCA Code terms of reference for these committees as these
committees should be made up only of Independent Non-Executive
Directors. As Paul Shackleton is the Company's only Independent
Non-Executive Director, matters normally reserved for these
committees are currently considered by the whole board. The
business of the board committees will resume when further
appropriate appointments are made to the board.
The executive directors are part time directors of the Company
although all directors are expected to commit sufficient time to
the Company in addition to attending the Board meetings.
The Board minutes and papers are circulated to directors in good
time and ahead of the relevant Board meeting.
The Board has established audit, remuneration and nominations
committees which meet regularly. Details of the Audit, Remuneration
and Nominations Committees for the period:
Director Date of Date of Role at Date of Board Committee
Appointment Resignation 31 December (re-) appointment
2021
Brian Rowbotham 16.10.2013 13.04.2021 - 27.06.2018 N R A
Simon C. Morris 19.07.2015 17.08.2021 - 30.06.2020 - - A
Andrew H. Coveney 16.11.2016 - Executive Director 27.06.2019 - - -
Paul R.A. Shackleton 26.07.2021 - Senior Independent 14.10.2022 N R A
Non-Executive
N = Nomination Committee
R = Remuneration Committee
A = Audit Committee
The Audit Committee met 3 times during the year to 31 December
2021. All the committee members were present at the meetings.
Due to the size of the Company, the Board does not comply with
the principle that the Board should at least have two independent
directors and therefore its committees' membership is also not
compliant with their terms of reference. Given the current level of
transactions within the Company, the Board considers that adequate
resources are available at Board level, although a further
executive director is currently being sought.
Principle 6. Ensure that between them, the directors have the
necessary up to date experience, skills and capability
The Company has two directors, Paul Shackleton, Senior
Independent Non-Executive Director and Andrew Coveney, Executive
Director. Biographical details of the Directors can be obtained in
https://www.rurelec.com/about-us/biographies
As the financial position of the Group evolved, so have the
skills required of its directors. The current directors have been
chosen for their skills in maintaining, preserving and realising
shareholder value by pursuing financial stability rather than by
pursuing the aggressive expansion of the past. The Executive
Directors serving during the period, have a wealth of experience of
dealing with the consequence of deterioration in the financial
positions of businesses and in implementing the change necessary to
restore such businesses back to stability. Those skills have been
honed within financial and restructuring backgrounds. It is
important that the directors are seen to be professional, reliable,
trustworthy and represent a safe pair of hands.
The directors keep their skills up to date by attending regular
professional briefings From the Nominated Adviser and lawyers
covering regulations that are relevant to their role as directors
of an AIM-quoted Company.
The Board is grateful for the regular, thorough and diligent
input of a qualified professional Company Secretary. As such the
Company Secretary provides frequent advice to the Board. On legal
matters, the Company Secretary is supported by the Company's
solicitors. The Independent Non-Executive Director provides
guidance and support on relevant matters on a regular basis.
Principle 1.
Principle 7. Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement.
The Board evaluates its own performance on a monthly basis and
also regularly considers any feedback from external parties as and
when that feedback is received.
Board performance is evaluated in the light of its own strategic
objectives and tactical plans, in particular in relation to cash
management and other financial forecasts. Any Board appointments
are considered closely in relation to the ability of the proposed
Director to make an active contribution to delivering value to
shareholders through the achievement of the strategies and plans
balanced against the cost of such an appointment.
The Company has not previously engaged any external evaluation
for the performance of the Board members or external advisors for
succession planning. Candidates to the Board have been proposed by
the Board members based on their skills and experience and the
requirements of the Company at the time of the appointment.
There are currently no formal evaluations of the Board.
Principle 8. Promote a corporate culture that is based on ethical values and behaviours.
The Group's corporate culture is based on creating an atmosphere
of trust, openness, communication and professionalism. Due to the
size of the Company, the Board is in very close contact with all
employees and is able to engender an ethical, professional and
effective environment in its day to day and strategic
activities.
The Company has currently 4 employees (including the directors).
The Board seeks to ensure that all of its employees are aware of
its ethical values communicating on a personal basis with its
employees and encourages the adoption of these values through the
appraisal and recruitment process.
Principle 9. Maintain governance structures and processes that
are fit for purpose and support good decision making by the
Board.
In addition to the high level of explanation of the application
of the QCA Code set out in the corporate governance statement:
-- The Board of Directors is responsible for approving Company
policy and strategy. The Board meets regularly throughout the year.
To enable the Board to perform its duties, each director has access
to advice from the Company Secretary and independent professionals
at the Company's expense.
-- The Board currently comprises an Executive Director and a
Non-Executive Director. Under the QCA Code a further Non-Executive
Director is required to be compliant with the said code. A further
Non-Executive Director is being sought.
-- Biographical details of the Board of Directors can be obtained in www.rurelec.com/about-us/board-of-directors-and-senior-management .
-- All matters are reserved for the Board although the Board has
chosen to delegate some of them to the Audit, Remuneration and
Nominations Committees which will issue advice to the Board on
those matters. Some of the matters reserved for the Board
include:
o Reviewing, approving and guiding group strategy, annual
budgets and business plans; setting performance objectives;
monitoring and implementing corporate performance; and overseeing
major capital expenditures and disposals;
o Monitoring the effectiveness of the Company's governance
arrangements and practices, making changes as needed to ensure the
Company's governance framework complies with current best practices
in accordance with the size of the Company;
o Monitoring and managing potential conflicts of interest that
may arise with Board members, shareholders and external
advisers;
o Overseeing the process of external disclosure and communications.
-- The Board is also responsible for all other matters which are
considered to be of importance to the Group as a whole because of
strategic, financial or reputational implications or
consequences.
-- The Board has established audit, remuneration and nominations
committees however owing to the size of the board at the current
time, all matters are dealt with by the board. Details of these
committees are set out in Principle 5 above.
-- 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.
-- There are no plans to change the current governance framework.
-- The role of the Chair, which is currently undertaken by the
Independent Non-Executive Director includes:
o to take the chair at general meetings and Board meetings;
o providing leadership to the Board;
o ensuring proper information for the Board;
o planning and conducting Board meetings effectively;
o getting all directors involved in the Board's work;
o ensuring the Board focuses on its key tasks
o determination of the order of the agenda;
o ensuring that the Board receives accurate, timely and clear information;
o keeping track of the contribution of individual directors and
ensuring that they are all involved in discussions and
decision-making;
o to ensure effective communication with shareholders and, where appropriate, the stakeholders.
Principle 10. Communicate how the Company is governed and is
performing by maintaining a dialogue
Disclosure of the outcomes of all votes are in
www.rurelec.com/investors/proxy-results
Historical annual reports and other governance-related material,
including notices of all general meetings over the last five years
can be obtained in www.rurelec.com/investors/circulars
Further disclosure required under QCA Principle 10 can be found
in Principles 5 and 9 above.
Maria J. Bravo Quiterio
Company Secretary
06 June 2022
Independent auditor's report to the members of Rurelec Plc
Opinion on the financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
December 2021 and of the Group's loss for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
-- the Parent Company financial statements have been properly
prepared in accordance with UK adopted international accounting
standards 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.
We have audited the financial statements of Rurelec Plc (the
'Parent Company') and its subsidiaries (the 'Group') for the year
ended 31 December 2021 which comprises the consolidated income
statement, the consolidated statement of comprehensive income, the
consolidated statement of financial position, the company statement
of financial position, the consolidated statement of cash flows,
the company statement of cash flows, the consolidated statement of
changes in equity, the company statement of changes in equity and
notes to the financial statements, including a summary of
significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and UK
adopted international accounting standards and, as regards the
Parent Company financial statements, as applied in accordance with
the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's
Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
Material uncertainty related to going concern
We draw attention to Note 1 to the financial statements which
indicates that the Group's and Parent Company's ability to continue
as a going concern is reliant on further remittances from its joint
venture in relation to loan repayments. The quantum and timing of
such remittances may be subject to variation (particularly as a
result of Argentine exchange rate controls) and are not guaranteed
or secured. As stated in Note 1, these events or conditions, along
with the other matters as set forth in Note 1, indicates that a
material uncertainty exists which may cast significant doubt over
the Group's and Parent Company's ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
For the reasons set out above and the resulting impact on our
risk assessment, we determined going concern to be a key audit
matter Our evaluation of the Directors' assessment of the Group and
the Parent Company's ability to continue to adopt the going concern
basis of accounting and in response to the key audit matter
included:
-- Reviewing the Directors' budget and cash flow forecasts
prepared for a period of at least 12 months from the date of
approval of the financial statements;
-- Checking the mathematical accuracy of the budgets and forecasts;
-- Obtaining support for the Directors' assumptions used in the
forecast which included assumptions related to cash receipts
relating to loan repayments from Energía del Sur S.A;
-- Reviewing the Directors' stress tests performed on the
forecasts based on receiving no further loan repayments from
Energía del Sur S.A and considering the impact on the Group's going
concern;
-- Confirming the actual cash repayments of the loan from the
joint venture for the months post year end by agreeing it to the
bank statement;
-- Reviewing board minutes during the year and post year end to
identify any other issues that may indicate inability of the Group
to continue as a going concern; and
-- Reviewing the Equipment Sale Agreement of the Frame 6B
Turbine, announced on 9 September 2021 to confirm the sale value,
validity, and any conditions precedent.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
100% (2020: 100%) of Group loss before
Coverage tax
100% (2020: 100%) of Group total assets
2021 2020
Valuation
of turbine
assets
Key audit matters Going Concern
Valuation
of investments
and recoverability
of intercompany
loans, including
loans to joint
venture
------------------------------------------
Group financial statements as a whole
Materiality
GBP351,000 (2020: GBP451,000) based on
3% (2020: 3%) of Net Assets
------------------------------------------
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a
risk of material misstatement.
The Group operates through the parent company, a subsidiary
undertaking registered in the UK and a joint venture undertaking
registered in the British Virgin Islands which were considered to
be significant components for the purposes of the audit as well as
a number of non-trading subsidiary undertakings. In establishing
our overall approach to the Group audit, we determined the type of
work that needed to be performed in respect of each component. This
consisted of us carrying out a full scope audit of the UK
significant components of the Group and utilising local non-BDO
component auditors for the full scope audit of the joint venture
and to perform specific procedures on the remaining non-significant
components.
We directed our work toward areas of the financial statements
which we assessed as having the highest risk of containing material
misstatements, and tested and examined information using both
analytical procedures and tests of detail, to the extent necessary
to provide us with a reasonable basis to draw conclusions. These
procedures, together with our detailed review of procedures
performed by component auditors, gave us the evidence that we need
for our opinion on the financial statements as a whole.
Our involvement with component auditors
The Group audit team was actively involved in the direction of
the full scope audit and specific audit procedures performed by the
component auditors along with the consideration of findings and
determination of conclusions drawn. As part of our audit strategy,
we issued detailed group audit engagement instructions, which
included component materiality and discussed the instructions with
component auditors. We performed a remote review of the component
auditors working papers and held planning and closing meetings with
component auditors to discuss the results of work performed. We
also attended the closing meeting with the component auditors and
management.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
In addition to the matter described in the material uncertainty
related to going concern section, we have determined the matters
below to be the key audit matters to be communicated in our
report.
Key audit matter How the scope of our audit
addressed the key audit matter
Valuation The Group holds two Siemens In this area our procedures
of turbine turbines. At the year included:
assets (Note end the Directors obtained * Verifying the existence of the assets, their storage
12) independent valuations and condition.
Accounting from a third party to
policy 2.8 assess the carrying value
of these assets. * Reviewing the valuation report prepared by the
Directors independent expert, assessing the
Given the complexity of conclusions reached and the underlying assumptions
the valuation involved, used.
the carrying value of
the turbine assets was
considered to be a key * We confirmed the expert's independence, competence
area of focus for our and objectivity by reviewing their qualifications,
audit. work experience and terms of engagement.
* Reviewing the independent valuations to check that
the value of the assets is recoverable through sale.
* Reviewing insurance documentation and
storage/maintenance documentation to identify any
indicators of impairment
Key Observations
Based on procedures performed
we did not identify any matters
to suggest that the financial
statement valuations of the
turbine assets were not appropriate
----------------------------- -----------------------------------------------------------------
Valuation The repayment of these In this area our procedures
of investments loans and the recoverability included:
and recoverability of the investment is * Obtaining loan confirmations of balances and any
of intercompany dependent interest accrued;
loans, including on the economic feasibility
loans to of the underlying operations
joint venture within the Group. The * Confirming the actual cash repayments of the loan
(Note 13 recoverability of these from the joint venture for the months post year end
& 20) loans and investments by agreeing it to the bank statement
Accounting is judgemental and hence
policy 2.11 there is a risk that the
loans are overstated. * Assessing recoverability of the loans and investment
through review of the inputs, assumptions and outputs
The investment value of of the financial projections model mainly revenue,
the joint venture, the which was assessed against communication from the
loans to the joint venture local Argentinian authority, fixed operating expenses
and the intercompany loans and maintenance costs, which was assessed against
due to the Parent Company historic levels taking into consideration the effects
were reviewed by the of inflation and the net asset positions of the
Directors subsidiaries and the joint venture.
and it was deemed that
an impairment was required
to the joint venture
investment
balance and an expected
credit loss was applied Key Observations
to the loan receivable
from the joint venture Our work did not indicate
based on the cash flow that management's assessment
models in respect of the of the valuation of investments
joint venture. and the recoverability of
intercompany loans was not
Management's assessment appropriate.
of the valuation of
investments
and inter-company loans
contain a number of key
assumptions such as revenue
that require significant
estimation and judgement.
Given the subjectivity
involved, the carrying
value of investments and
recoverability of loans
is considered to represent
a key audit matter.
----------------------------- -----------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance materiality
as follows:
Group financial statements Parent company financial
statements
2021 2020 2021 2020
GBP GBP GBP GBP
------------------- ------------------ -------------- --------------
Materiality 351,000 451,000 346,000 442,000
------------------- ------------------ -------------- --------------
Basis for 3% of Net assets 3% of Net assets
determining
materiality
--------------------------------------- ------------------------------
Rationale The Group's activities We considered net assets
for the benchmark of investing in power to be the most appropriate
applied assets are focussed benchmark as the primary
on the realisation focus of the users of the
of asset sales, therefore financial statements are
net assets was considered on capital growth.
to be the most appropriate
benchmark.
--------------------------------------- ------------------------------
Performance
materiality 211,000 270,000 208,000 265,000
------------------- ------------------ -------------- --------------
Basis for 60% of materiality based on consideration of
determining factors including the level of historical misstatements
performance (based on past experience) and the nature of
materiality the Group and Parent Company's activities.
-----------------------------------------------------------------------
Component materiality
Component materiality ranged from GBP3,400 to GBP346,000. In the
audit of each component, we further applied performance materiality
levels of 60% of the component materiality to our testing to ensure
that the risk of errors exceeding component materiality was
appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of GBP8,000 (2020:
GBP9,000). We also agreed to report differences below this
threshold that, in our view, warranted reporting on qualitative
grounds.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the annual
report other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and
matters as described below.
Strategic In our opinion, based on the work undertaken in
report and the course of the audit:
Directors' * the information given in the Strategic report and the
report 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.
In the light of the knowledge and understanding
of the Group and Parent 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.
Matters We have nothing to report in respect of the following
on which matters in relation to which the Companies Act
we are required 2006 requires us to report to you if, in our opinion:
to report
by exception * 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.
------------------------------------------------------------------------
Responsibilities of Directors
As explained more fully in the statement of Directors'
responsibilities, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
-- We gained an understanding of the legal and regulatory
framework applicable to the Group and industry in which it
operates, through discussion with management and the Audit
Committee and our knowledge of the industry. We focused on
significant laws and regulations that could give rise to a material
misstatement in the financial statements, including, but not
limited to UK Employment Legislation, Companies Act 2006, Health
and Safety Law, Corporate Tax and VAT Legislation, Employment
Taxes, and Argentinian legal compliance which included compliance
with the Corporate Tax and Health and Safety laws and
regulations.
-- We considered compliance with these laws and regulations
through discussions with management, the company secretary and
component auditors. Our procedures also included reviewing minutes
from board meetings and inspecting invoices for legal fees incurred
in the period.
-- We involved our tax specialists in assessing the Groups
compliance with the relevant tax legislations.
-- We performed a review of the working papers prepared by our
component auditors in relation to compliance with laws and
regulations and the risk of management override of controls;
-- We assessed the susceptibility of the Group's financial
statements to material misstatements, including how fraud might
occur. We considered the fraud risk area to be management override
of controls.
-- We obtained an understanding of management's controls
designed to prevent and detect irregularities, including fraud.
-- We performed a review of the Group's year end adjusting
entries and journals throughout the year and investigated any that
appeared unusual as to nature or amount by agreeing to supporting
documentation.
-- We identified areas at risk of management bias, particularly
cashflow models to support loan and investment valuations, and
reviewed key estimates and judgements applied by Management in the
financial statements to assess their appropriateness (as mentioned
in the Key Audit Matters Section above).
-- We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members and
component auditors and remained alert to any indications of fraud
or non-compliance with laws and regulations throughout the
audit.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities . This description forms
part of our auditor's report.
Use of our report
This report is made solely to the Parent 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 Parent Company's members those matters we are required to state
to them in an auditor's 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 Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Laura Pingree (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2021
Notes Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
-------------------------------------- ------ ----------- -----------
Revenue 4 - -
Gross Profit - -
Administrative Expenses 6 (967) (1,110)
Other Income 8b 352 22
Impairment Charges 8b (1,469) (1,826)
Operating Loss (2,084) (2,914)
Share of Joint Venture Profit/(Loss) 21,22 - -
Foreign Exchange Losses 8a (214) (456)
Finance Income 9 491 819
Finance Expense 9 (1,827) (2,783)
Loss before Tax (3,634) (5,334)
Tax Expense 10 - -
Loss for the year attributable to
owners of the Company (3,634) (5,334)
-------------------------------------- ------ ----------- -----------
Earnings per Share - in pence 11
Basic Loss per Share (0.65) (0.95)
Diluted Loss per Share (0.65) (0.95)
-------------------------------------- ------ ----------- -----------
The Notes on pages 36 to 59 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2021
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
---------------------------------------------- ----------- -----------
Loss for the year (3,634) (5,334)
Other Comprehensive (Loss)/Income for
the year:
Items that will be subsequently Reclassified
to Profit & Loss:
Exchange Differences on Translation
of Foreign Operations 285 (130)
Total Other Comprehensive Income 285 (130)
Loss for the year attributable to owners
of the Company (3,349) (5,464)
---------------------------------------------- ----------- -----------
The Notes on pages 36 to 59 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2021
31.12.2021 31.12.2020
Notes GBP'000 GBP'000
------------------------------------- ------ ----------- -----------
Assets
Non-current Assets
Property, Plant and Equipment 12 7,003 7,371
Investment in Joint Venture 20,21 312 1,648
Trade and Other Receivables 13a 3,103 4,586
10.418 13,605
Current Assets
Trade and Other Receivables 13b 997 1,142
Cash and Cash Equivalents 15 745 668
1,742 1,810
Total Assets 12,160 15,415
------------------------------------- ------ ----------- -----------
Equity and Liabilities
Shareholders' Equity
Share Capital 16 5,614 5,614
Foreign Currency Reserve 1,078 793
Retained Earnings/Losses 5,014 8,648
Total Equity attributable to owners
of the Company 11,706 15,055
Current Liabilities
Trade and Other Payables 18a 448 353
Current Tax Liabilities 19 6 7
Total Liabilities 454 360
Total Equity and Liabilities 12,160 15,415
------------------------------------- ------ ----------- -----------
The financial statements were approved by the Board of Directors
on 06 June 2022 and were signed on its behalf by Andrew Coveney and
Paul Shackleton.
Andrew Coveney Paul Shackleton
The notes on pages 36 to 59 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF FINANCIAL POSITION COMPANY NUMBER: 4812855
At 31 December 2021
Notes
31.12.2021 31.12.2020
GBP'000 GBP'000
------------------------------ ------ ----------- -----------
Assets
Non-current Assets
Investment in Joint Venture 20,21 312 1,648
Trade and Other Receivables 13 3,104 4,586
3,416 6,234
Current Assets
Inventories 14 6,968 6,923
Trade and Other Receivables 13a 825 1,397
Cash and Cash Equivalents 15 743 667
8,536 8,987
Total Assets 11,952 15,221
------------------------------ ------ ----------- -----------
Equity and Liabilities
Shareholders' Equity
Share Capital 16 5,614 5,614
Retained Earnings/Losses 5,922 9,153
Total Equity 11,536 14,767
Current Liabilities
Trade and Other Payables 18b 410 447
Current Tax Liabilities 19 6 7
416 454
Total Equity and Liabilities 11,952 15,221
------------------------------ ------ ----------- -----------
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 GBP3.2 million (2020: loss GBP5.5
million).
The financial statements were approved by the Board of Directors
on 06 June 2022 and were signed on its behalf by Andrew Coveney and
Paul Shackleton.
Andrew Coveney Paul Shackleton
The notes on pages 36 to 59 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2021
Notes Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
--------------------------------------- ------ ----------- -----------------------
Cash Flows from Operating Activities
Cash used in Operations 22 (991) (1,273)
Net Cash used in Operating Activities (991) (1,273)
Cash Flows from Investing Activities
Net? proceeds from Sale of Turbine 721 -
Loan Repayments from Joint Venture
Company 347 1,804
Net Cash generated from Investing
Activities 1,068 1,804
Net Cash Inflow before Financing
Activities 77 531
Increase/(Decrease) in Cash and
Cash Equivalents 77 531
Cash and Cash Equivalents at the
Start of the year 668 137
Cash and Cash Equivalents at the
End of the year 745 668
--------------------------------------- ------ ----------- -----------------------
The notes on pages 36 to 59 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2021
Notes Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------------------------------------- ------ ----------- -----------
Cash Flows from Operating Activities
Cash used in Operations 22 (909) (1,110)
Net Cash used in Operating Activities (909) (1,110)
Cash Flows from Investing Activities
Investment in and Loans to Subsidiaries (83) (164)
Loan repayments from Subsidiaries 721 -
Loan Repayments from Joint Venture
Company 347 1,804
Net Cash generated from Investing
Activities 985 1,640
Net Cash Inflow before Financing
Activities 76 530
Increase/(Decrease) in Cash and
Cash Equivalents 76 530
Cash and Cash Equivalents at the
Start of the year 667 137
Cash and Cash Equivalents at the
End of the year 743 667
----------------------------------------- ------ ----------- -----------
The notes on pages 36 to 59 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2021
Share Share Foreign Retained Special Total
Capital Premium Currency Losses/Earnings Non-distributable
Reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ---------- ----------------- ------------------- --------
Balance at 01.01.2020 11,228 22,754 923 (59,386) 45,000 20,519
Transactions with
owners
Transfer of Special
non-distributable
reserve - - - 45,000 (45,000) -
Capital reduction
- Share Premium - (22,754) - 22,754 - -
Capital reduction
- Share Capital (5,614) - - 5,614 - -
Total transactions
with owners (5,614) (22,754) - 73,368 (45,000) -
Loss for the year
attributable to
owners of the parent - - - (5,334) - (5,334)
Exchange Differences - - (130) - - (130)
Total Comprehensive
Loss - - (130) (5,334) - (5,464)
Balance at 31.12.2020 5,614 - 793 8,648 - 15,055
Loss for the year
attributable to
owners of the parent - - - (3,634) - (3,634)
Exchange Differences - - 285 - - 285
Total Comprehensive
Loss - - 285 (3,634) - (3,349)
Balance at 31.12.2021 5,614 - 1,078 5,014 - 11,706
Notes: 16 17 17
The notes on pages 36 to 59 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2021
Share Share Accumulated Special Total
Capital Premium Losses Non-distributable
Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ------------ ------------------- --------
Balance at 01.01.2019 11,228 22,754 (54,239) 45,000 24,743
Loss for the year - - (4,508) - (4,508)
Total Comprehensive
Loss - - (4,508) - (4,508)
Balance at 01.01.2020 11,228 22,754 (58,747) 45,000 20,235
Transactions with
owners
Transfer of Special
non-distributable
reserve - - 45,000 (45,000) -
Capital reduction
- Share Premium - (22,754) 22,754 - -
Capital reduction
- Share Capital (5,614) - 5,614 - -
Total transactions
with owners (5,614) (22,754) 73,368 (45,000) -
Loss for the year - - (5,468) - (5,468)
Total Comprehensive
Loss - - (5,468) - (5,468)
Balance at 31.12.2020 5,614 - 9,153 - 14,767
Loss for the year - - (3,231) - (3,231)
Total Comprehensive
Loss - - (3,231) - (3,231)
Balance at 31.12.2021 5,614 - 5,922 - 11,536
Notes: 16 17 17
The notes on pages 36 to 59 form an integral part of these
Consolidated Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2021
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") as adopted in the UK and in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 for reporting year ended 31
December 2021.
Basis of measurement
The presentational currency of the Group is Pounds Sterling. The
functional currencies of Group entities are Pounds Sterling,
Argentinian Pesos, Chilean Pesos and United States Dollars.
Going Concern
The directors have prepared budgets and forecasts, and performed
stress tests thereon, for a period of at least 12 months from the
date of signing of the financial statements to assess the Group and
Company's ability to continue as a going concern.
On the basis that the Group receives the joint venture
remittances referred to below, the Directors have assessed that at
the date of signing of the financial statements, the Group and
Company would have sufficient working capital for a period of at
least 12 months from the signing of the financial statements,
without the need to seek further sources of working capital and
have therefore prepared the financial statements on a going concern
basis.
In November 2019, the signing of the Umbrella Agreement and
Revised Shareholder Agreement with the JV partner has significantly
improved the clarity of how the cash proceeds of the JV will be
split between the parties. To date debt repayments of GBP3.3
million has been received from the JV in part payment of the
Amended and Restated Loan Notes. Loan repayments already received,
at the date of this report, along with projected rest of year
repayments from the joint venture are expected to be sufficient to
meet the working capital requirements for the Group.
However, the quantum and timing of further receipts may be
subject to variation (particularly as a result of Argentine
exchange rate controls) and are not guaranteed or secured. Without
the remittances from its joint venture there is uncertainty on the
availability of funds to cover the Group's forecast expenditure
during the going concern period.
Additionally, there exists uncertainty as to the timing of
potential asset sales. Unless there is a significant disposal of
assets, the Group remains reliant on the repayments of loans from
its joint venture Argentine operations.
Whilst it is the expectation of the Directors that forecast
remittances from the joint venture will be received, the matters
set out above indicate that a material uncertainty exists that may
cast significant doubt on the Group and Company's ability to
continue as a going concern and therefore its ability to realise
its assets and settle its liabilities in the normal course of
business. These consolidated financial statements do not reflect
the adjustments or reclassification of assets and liabilities,
which would be necessary if the Group and Company were unable to
continue its operations.
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.
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
2021. 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.
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 (IFRS11). 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 less impairment in
the statement of financial position of the Company.
2.2 Equity Accounted Joint Ventures
The Group reports its interests in joint ventures using the
equity method of accounting, except when the investment is
classified as held for sale. Whilst the Group does not directly
have revenues, its JV operating plant at EdS does. Revenues are
derived from electricity exported to the Argentinian grid. CAMMESA
records the level of exports, raising the required documentation,
on a monthly basis. This is agreed with EdS, the receivables then
become due for payment after 60 days.
2.3 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.
2.4 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 'Foreign Exchange (Losses)/Gains'.
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. 2021 marks the fifth year
of inflation accounting adjustments in Argentina. It is the
Directors' judgement that the Argentine GAAP hyperinflation
adjustments to the accounts of the Group's Joint Venture operations
in Argentina give an approximate fair value of these operations.
There are no material differences arising from Argentine GAAP
inflationary accounting and IAS 29.
Non-monetary assets are valued at historic rates.
2.5 Expense recognition
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.
2.6 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 (2020: nil).
2.7 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.
2.8 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.
2.9 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 of
disposal 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 it's 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.
2.10 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 accounted for through other
comprehensive income or charged or credited directly to equity in
which case the related deferred tax is also charged or credited
directly to equity, or other comprehensive income.
2.11 Financial Assets
The Group's financial assets include cash and cash equivalents,
loans and receivables, held at amortised cost.
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. These are assets held on a 'hold to collect' basis.
They arise when the Group provides money, goods or services
directly to a debtor with no intention of trading the receivable.
Receivables are measured initially at fair value and subsequently
remeasured to test for impairment, the carrying value is less
provision for impairment. Any impairment is recognised in the
income statement.
The portion of loans due from the Joint Venture which are
expected to be received in 2022 are shown as current assets. The
remainder are expected in 2023 to 2034 these are shown as
non-current assets.
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.
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 Short term leases
IFRS 16 provides a single lessee accounting model, requiring the
recognition of assets and liabilities for all leases, together with
the option to exclude leases where the lease term is 12 months or
less, or where the underlying asset is of low value. IFRS 16
substantially carries forward the lessor accounting in IAS 17, with
the distinction between operating leases and finance leases being
retained. The Group does not have significant leasing activities
acting as a lessor, also, there are no impacts as a lessee.
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.
"Retained Losses/Earnings" represents losses/earnings to
date.
"Special Non-distributable reserves" comprises the reduction of
the share premium account.
2.16 Pensions
Under the Pensions Act 2008, every employer in the UK must put
certain staff into a workplace pension scheme and contribute
towards it. This is called 'automatic enrolment'. Rurelec's staging
date was 1 October 2017. Rurelec chose to set up its auto enrolment
contribution plan pension scheme with NEST which ensures access to
suitable, low-charge pension provision to meet the new duty to
enrol all eligible workers into a workplace pension
automatically.
Rurelec also offers a Salary Sacrifice Scheme within NEST by
which employees sacrifice part of their salary in exchange for the
company to make an employer contribution on their behalf to the
pension scheme and also to contribute their national insurance
savings on the amount sacrificed by the employee.
During the year under review, the Company continued its
contributions to the contribution plan NEST Pension scheme.
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 development of generation assets and
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 statements, management makes a
number of judgements, estimates and assumptions about the
recognition and measurement of assets, liabilities, income from
loan repayment receipts and asset sales 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:
Impairment - management review tangible and intangible assets,
including intra group and Joint Venture loans, at each balance
sheet date to determine whether there is, in their judgement, 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 8b.
Income - the Group is reliant on receipts from its JV or asset
sales, a material uncertainty exists as to whether projected
receipts will occur.
Expected Credit Losses - judgements used to assess the ECL's for
the current year included the macroeconomic factors which includes
inflation forecasts and foreign exchange controls.
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 Group's joint venture operations in Argentina have
been excluded, see note 22 for more detail.
The following tables provide an analysis of the operating
results, total assets and liabilities, in 2021 and 2020 for each
geographic segment.
a) 12 months to 31.12.2021
Chile UK Consolidation Total
Adjustments
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------------- --------
Administrative Expenses (123) (844) - (967)
Loss from Operations (123) (844) - (967)
Other Income 365 (13) - 352
Other Expense - (1,469) - (1,469)
Foreign Exchange (Losses)/Gains (324) 110 - (214)
Finance Income - 1,173 (682) 491
Finance Expense (682) (1,827) 682 (1,827)
Loss before Tax from Operations (764) (2,870) - (3,634)
Tax Expense - - - -
Total Loss (764) (2,872) - (3,634)
Total Assets 452 17,090 (5,382) 12,160
Total Liabilities 12,966 462 (12,974) 454
b) 12 months to 31.12.2020
Chile UK Consolidation Total
Adjustments
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------------- --------
Administrative Expenses (97) (1,013) - (1,110)
Loss from Operations (97) (1,013) - (1,110)
Other Income - 22 - 22
Other Expense - (1,826) - (1,826)
Foreign Exchange (Losses)/Gains 8 (464) - (456)
Finance Income - 1,472 (653) 819
Finance Expense (653) (2,783) 653 (2,783)
Loss before Tax from Operations (742) (4,592) - (5,334)
Tax Expense - - - -
Total (Loss)/Profit (742) (4,592) - (5,334)
Total Assets 1,282 15,221 (1,088) 15,415
Total Liabilities 13,296 569 (13,505) 360
5. EXCHANGE RATE SENSITIVITY ANALYSIS
The key exchange rates applicable to the results were as
follows:
Year Ended Year Ended
31.12.2021 31.12.2020
------------ ------------
i) Closing rate
US $ to GBP 1.34894 1.3578
CLP (Chilean Peso) to GBP 1,139.4 965.3
ii) Average rate
US $ to GBP 1.35751 1.2872
CLP (Chilean Peso) to GBP 1,050.8 1,018.5
If the exchange rate of sterling at 31 December 2021 had been
stronger or weaker by 10 per cent. from the above, with all other
variables held constant, shareholder equity at 31 December 2021
would have been GBP1.2 million (2020: GBP1.4 million) lower or
higher than reported.
If the average exchange rate of sterling during 2021 had been
stronger or weaker by 10 per cent. with all other variables held
constant, the effect on the loss for the year would have been
GBP1.2 million (2019: GBP1.4 million) higher or lower than
reported.
If the average exchange rate of sterling during 2021 had been
stronger or weaker by 10% per cent. with all other variables held
constant, the effect on the total other comprehensive loss for the
year would have been GBP1.1 million (2020: GBP1.5 million) higher
or lower than reported.
6. ADMINISTRATIVE EXPENSES
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
Expenditure incurred in administrative
expenses is as follows:
Payroll and Social Security 397 522
Services, Legal and Professional 213 258
Office Costs and General Overheads 269 236
Audit Costs(1) 88 94
Total 967 1,110
----------- -----------
(1) Audit services include GBP88k (2020: GBP94k) paid to the
auditors for the audit of the Company, Group's UK subsidiaries and
Group's financial statements. GBP10k (2020: GBP10k) for the audit
of the Group's UK subsidiaries. Fees paid to other auditors, in
respect of the audit of joint venture companies, amounted to
GBP14.0k (2020: GBP13.2k). The group auditors also provided
taxation services for the Group in the year, the costs were
GBP15.0k (2020 GBP17.1k).
7. EMPLOYEE COSTS
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
a) Group
Aggregate remuneration of all employees
and Directors 372 490
Social Security Costs 17 20
Pension Costs 8 12
----------- -----------
Total 397 522
----------- -----------
The average number of employees in the Group, including
Directors, during the year was as follows:
Year Ended Year Ended
31.12.2021 31.12.2020
----------- -----------
Management 3 3
Administration and development 3 4
Total 6 7
----------- -----------
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
b) Company
Aggregate remuneration of all employees
and Directors 357 474
Social Security Costs 15 18
Pension Costs 8 13
----------- -----------
Total 380 505
----------- -----------
The average number of employees in the Company, including
Directors, during the year was as follows:
Year Ended Year Ended
31.12.2021 31.12.2020
----------- -----------
Management 3 3
Administration and development 2 3
Total 5 6
----------- -----------
c) Directors' remuneration
The total remuneration paid to the Directors was GBP240k (2020:
GBP280k). The total remuneration of the highest paid Director was
GBP145k (2020: GBP168k). There were no health insurance costs,
bonuses, pension costs or share based payments paid during the year
(2020: Nil).
Year Ended Year Ended Year Ended
31.12.2021 31.12.2021 31.12.2020
GBP'000 GBP'000 GBP'000
Base Salary/Fee Total Total
---------------- ----------- -----------
B Rowbotham 9 9 30
S Morris 79 79 82
A Coveney 145 145 168
P Shackleton 13 13 -
---------------- ----------- -----------
Total 246 246 280
B Rowbotham has been on payroll in 2020 and 2021 until his
resignation on 13 April 2021.
S Morris provided services under a service agreement contract
with SC Morris Ltd and received GBP26.4k via payroll (2020:
GBP22.5k). Simon resigned on 17 August 2021.
A Coveney provided services under a service agreement contract
with Coveney Associates Consulting Ltd and received GBP30k via
payroll (2020: GBP22.5k).
8. a) FOREIGN EXCHANGE
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
Foreign Exchange losses 214 456
Total 214 456
----------- -----------
Foreign currency-based assets are translated at the relevant
year end rates. The majority of foreign exchanges losses were
incurred on loans and development costs in Chile GBP324k (2020:
gain GBP8k). The 701 turbines, 2021 carrying value US$9.4 million
(2020: US$9.4 million) resulted in GBP45k gain in 2021 (2020: loss
GBP0.2 million) and net JV receivables in 2021 had a carrying value
US$5.6 million (2020: US$9.5 million) which resulted in gain of
GBP36k (2020: losses of GBP0.1 million).
b) OTHER INCOME/IMPAIRMENT CHARGES/(REVERSALS)
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
Other Income
Net profit on disposal of Chile turbine 330 -
Director's fees due from EdS 22 22
----------- -----------
Total 352 22
----------- -----------
Impairment Charges
Impairment on investment in Joint
Venture 1,336 1,826
Provision for closure costs relating 133 -
to investment in SEA Energy S.A.
Total 1,469 1,826
----------- -----------
During the year the directors tested all major assets for
indication of impairment the results of these were:
LOANS TO JOINT VENTURE COMPANIES:
Carrying Value 1.1.21 GBP5.4m
Exchange adjustment GBP0.0m
Repayments GBP(0.3m)
Reversal of 2020 Expected Credit GBP0.5m
Losses
2021 Expected Credit Losses GBP(1.8)m
Carrying Value 31.12.21 GBP3.8m
The carrying value of the loans is based on the replacement
Amended Loan Notes, gross value at 31 December 2021 of GBP10.5
million (2020: GBP10.7 million). These notes bear zero interest and
have a long stop maturity of 31 December 2039. Carrying values have
been determined by discounting the predicted future repayments at a
rate of 9 per cent. pa, it is anticipated that the notes will be
fully repaid in 2034 (2020: 2032). Assessment of discount rate
sensitivity, were the discount rate to be 10 per cent. higher or
lower then the expected credit losses would be +/- GBP0.2 million
(2020: +/-GBP0.3 million). The notes are held in the Statement of
Financial Position at their discounted value.
TURBINES FOR CENTRAL ILLAPA (CHILE):
GBP'000
Carrying value of turbine 1.1.21 GBP6,923
Exchange adjustment GBP 45
Impairment in year GBPnil
Carrying value of turbine 31.12.21 GBP6,968
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 GBP7.0 million (US $9.4 million)
(2020: GBP6.9 million (US $9.4 million)). The realisation of the
asset is dependent on a successful future sale or successful
development of the Central Illapa Project, both of which are
uncertain.
The Illapa turbines are included within Property, Plant and
Equipment in the Group and in the Company, they are included in
Inventories.
TURBINE - ARICA (CHILE)
GBP'000
Carrying value of Arica turbine GBP368
1.1.21
Foreign exchange revaluation GBP 3
Net sale proceeds GBP(701)
Profit on sale GBP330
Carrying value of Arica turbine GBPnil
31.12.21
The sale for US$1 million was announced on 09 September 2021,
all proceeds were received by 21 September 2021.
9. FINANCE INCOME & EXPENSE
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
Finance Income
Reversal of 2020 Expected Credit
Losses 491 819
Other Interest Received - -
----------- -----------
491 819
----------- -----------
Finance Expense
Charge for 2021 Expected Credit Losses(1) 1,827 2,783
Other interest payable - -
----------- -----------
1,827 2,783
----------- -----------
(1) Expected credit losses are charged as the Amended Loan Notes
repayments are projected to be received over a longer period of
time, with final repayment in 2034 (2020: 2032)
Sensitivity analysis arising from changes in borrowing costs is
set out in Note 20.
10. TAX EXPENSE
The relationship between the expected tax expense at basic rate
of 19 per cent. (2020: 19 per cent.) and the tax expense actually
recognised in the income statement can be reconciled as
follows:
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
Result for the year before tax (3,634) (5,334)
Standard rate of Corporation Tax
in UK 19% 19%
Expected Tax Credit (690) (1,013)
Tax effect not deductible in determining
taxable profits 94 350
Unrecognised Loss carried forward 675 663
Actual Tax Expense - -
Comprising:
Current Tax Expense - -
Deferred Tax/(Net Credit) - -
----------- -----------
Total Credit (Expense) - -
----------- -----------
A deferred tax asset for the year of GBP0.9 million (2020:
GBP0.7 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 GBP4.9 million (2020: GBP3.1 million), based on cumulative tax
losses of GBP19.8 million (2020: GBP16.2 million).
11. EARNING 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
31.12.2021 31.12.2020
Average number of shares in issue 561,387,586 561,387,586
Result for the year
Total Loss attributable to equity GBP3.6m GBP5.3m
holders of the parent
Basic Loss per share 0.65p 0.95p
Diluted Loss per share 0.65p 0.95p
----------------------------------- ------------ ------------
There is no difference between the Basic and Diluted loss per
share.
12. PROPERTY, PLANT AND EQUIPMENT
Plant Plant Total
and under
Equipment Construction
GBP'000 GBP'000 GBP'000
---------- ------------- --------
a) Group
Cost at 01.01.2020 14,889 2,141 17,030
Exchange Adjustments (774) (111) (885)
Cost at 31.12.2020 14,115 2,030 16,145
Exchange Adjustments 91 18 109
Disposal - (1,677) (1,677)
Cost at 31.12.2021 14,206 371 14,577
Accumulated Depreciation and Impairment
at 01.01.2020 7,722 1,623 9,345
Exchange Adjustments (530) (41) (571)
Charge for the year - - -
Charge for impairment for the year - - -
Accumulated Depreciation and Impairment
at 31.12.2020 7,192 1,582 8,774
Exchange Adjustments 46 9 55
Charge for the year - - -
Charge for impairment for the year - - -
Disposal - (1,255) (1,255)
Accumulated Depreciation and Impairment
at 31.12.2021 7,238 336 7,574
Net Book Value - 31.12.2021 6,968 35 7,003
Net Book Value - 31.12.2020 6,923 448 7,371
The plant and equipment of GBP7.0 million (2020: GBP6.9 million)
relates to two Siemens turbines, stored in Venice for use in the
Central Illapa project purchased for US $25.0 million. The turbines
are held as inventory in the Company.
Plant under construction comprises a transformer in Chile. The
turbine plant in Chile GBP0.4 million (2020: GBP0.4 million) was
sold as announced on 09 September2021, all proceeds were received
before the year end, the profit on disposal, shown in Other Income,
was GBP0.3 million, and Central Illapa development costs of GBPnil
million (2020: GBP0.1 million).
b) Company - The Company had no property, plant and equipment.
13. TRADE AND OTHER RECEIVABLES
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
a) Group - non-current
Amounts due from Joint Venture
Companies(1) 3,103 4,586
b) Group - current
Amounts due from Joint Venture
Companies(1) 714 843
Tax Receivable - VAT 4 4
Other Receivables and Prepayments 279 295
----------- -----------
997 1,142
----------- -----------
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
a) Company - non-current
Amounts due from Joint Venture
Companies(1) 3,103 4,586
b) Company - current
Amounts due from Joint Venture
Companies(1) 714 843
Tax Receivable - VAT 4 4
Loans to subsidiaries(2) - 448
Other Receivables and Prepayments 107 102
----------- -----------
825 1,397
----------- -----------
The amounts owed by subsidiary companies include:
(1) Amounts due from joint venture companies represent the
amounts lent by the Company, net of impairments, to PEL. Interest
on these amounts has been accrued at rates of nil per cent. (2020:
nil per cent.). These loans were replaced in 2019 with Amended Loan
Notes, as previously announced on 19 November 2019. These notes
bear zero interest. Carrying values have been determined by
discounting the predicted future repayments at a rate of 9 per
cent. pa, it is anticipated that the notes will be fully repaid in
2034, please see note 8b for details. The first GBP0.5 million
repayment was received in December 2019, in 2020: GBP1.8 million
and in 2021 GBP347k were received, one repayment of GBP0.6 million
has been received in 2022, the board expects that further
repayments will be received in the remainder of the year.
(2) Loans to subsidiaries in Cochrane Power Limited GBP11.4
million, (2020: GBP11.4 million) repayable on demand. These loans
have been impaired to GBPnil million (2020: GBP0.4 million) in
Cochrane Power Limited, the UK holding company for assets in Chile.
The loans to Chile bear nil per cent. interest.
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.
14. INVENTORIES
Company - Inventories Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
Inventories 6,968 6,923
----------- -----------
Inventories comprises of two Siemens 701DU turbines acquired
from IPSA in June 2013. Further details of which are set out in
note 12. Storage and insurance costs for the turbines in the year
totalled GBP105k (2020: GBP112k).
15. CASH AND CASH EQUIVALENTS
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
a) Group - current
Cash and short-term bank deposits 745 668
b) Company - current
Cash and short-term bank deposits 743 667
----------- -----------
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.
16. SHARE CAPITAL
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
------------------------------------- ----------- -----------
In issue, authorised, called up and
fully paid
561,387,586 ordinary shares of 1p
each 5,614 5,614
------------------------------------- ----------- -----------
Ordinary shares have no redemption rights and are entitled to
full rights to dividends and excess capital on winding up. The
capital reduction reduced the Nominal Value from two pence to one
pence, see below for further details, there was no change to the
number of shares in issue. This reduction in nominal value was
effective from 26 August 2020,
The Company applied to the High Court to allow for a capital
reorganisation in respect of each holding of ordinary shares of
GBP0.02 each in the capital of the Company ("Ordinary Shares") at
the close of business on 30 June 2020 each and every Ordinary Share
to be subdivided into (A) one ordinary share of GBP0.01 ("New
Ordinary Share"), each such New Ordinary Share having the same
rights and being subject to the same restrictions as the Ordinary
Shares and (B) one deferred share of GBP0.01 ("New Deferred
Share"), each such New Deferred Share having the rights and being
subject to the restrictions set out in the articles of association
of the Company to be adopted at the Company's annual general
meeting on 30 June 2020. On 14 August 2020, the High Court approved
the reorganisation of the issued share capital of the Company which
was reduced from GBP11,227,751.72 to GBP5,613,875.86 by cancelling
and extinguishing 561,387,586 of the issued New Deferred Shares of
GBP0.01 each in the Company, each of which is fully paid up, and
the amount by which the share capital is so reduced to be credited
to retained earnings.
On 14 August 2020, the High Court approved the reduction in the
share premium account of the Company of GBP22,753,689 to be
credited to a reserve in the accounts of the Group and the
reduction of the Company's nominal share capital by way of
cancellation of 561,387,586 deferred shares of GBP0.01 each and the
cancellation of the share premium account of the Company also to be
credited to a reserve in the accounts of the Group (together, the
"Reduction of Capital") which became effective on 26 August
2020.
Following the Capital Reduction, the issued share capital of the
Company consists of 561,387,586 ordinary shares of GBP0.01 each and
the distributable reserves will amount to GBP14,620,074.
17. SPECIAL NON-DISTRIBUTABLE RESERVE/SHARE PREMIUM
1(st) Capital reduction
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, at that time, accumulated losses on its profit and loss
account of GBP7,371,683. The existence of these losses prevented
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. This transfer was effective on 26 August 2020.
The resolution was subsequently confirmed by the High Court in
the terms proposed at the time by the 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 after
certain creditors are repaid 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. Until
the creditors are repaid the balance is to be held in a Special
Non-distributable Reserve. The balance of unpaid creditors was
GBPnil (2019: GBPnil).
Share Premium account, after the 1(st) deduction of
GBP45,000,000 was GBP22,753,689.
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.
2(nd) Capital reduction
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, effective 26
August 2020, by way of a special resolution and subsequent
confirmation by the High Court, the Company has reduced the share
premium account of GBP22,753,689 to GBPnil and credited it to
retained earnings.
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.
The Capital Reduction does not affect the number of Shares in
issue, or the voting or dividend rights of any Shareholder.
18. TRADE AND OTHER PAYABLES
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
a) Group - current
Trade Payables 97 150
Accruals 351 203
448 353
b) Company - current
Trade Payables 46 104
Group borrowings 229 228
Accruals 135 115
410 447
----------- -----------
19. TAX LIABILITIES
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
Group/Company - Current
Other tax and social security 6 7
6 7
----------- -----------
20. INVESTMENTS
PEL Total
GBP'000 GBP'000
--------- ---------
Cost at 31.12.2020 11,652 11,652
Cost at 31.12.2021 11,652 11,652
Accumulated Impairment at 01.01.2020 (8,178) (8,178)
Impairment in year (1,826) (1,826)
Accumulated Impairment at 31.12.2020 (10,004) (10,004)
Impairment in year (1,336) (1,336)
Accumulated Impairment at 31.12.2021 (11,130) (11,130)
Carrying Value at 31.12.2021 312 312
Carrying Value at 31.12.2020 1,648 1,648
The 2019 amendment of the loan note receivable agreement to the
JV (US$ 17.6 million) is on a fixed term but carries no interest.
Because of this, under IFRS 9, a market rate of interest (9 per
cent.) was used to FV the loan. The difference been the balance
outstanding on the GBP12.9m, and the 2019 initial fair value
adjustment amount of GBP3.5m has been treated as an investment,
with the GBP9.4m remaining in receivables as at 31.12.19. After
review at 31 December 2020 an impairment of GBP1.8 million and at
31 December 2021 GBP1.3 million were recorded, this represents an
increase in expected credit losses, caused by slower repayment of
the receivable. Full repayment is now expected in 2034 (2020:
2032).
At the year end the Company held the following investments:
Direct investments:
1. 50 per cent. (2019: 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. (2019: 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.
3. 100 per cent. (2019: 100 per cent.) of the issued share
capital of Rurelec Project Finance Limited a company registered in
England and Wales under registration number 7523554. Rurelec
Project Finance Limited owned at the year-end 95 per cent. interest
in SEA Energy S.A.
5 per cent. (2020: 5 per cent. of SEA Energy S.A. a company
registered in Argentina under registration number CUIT
30-71022906-2.
Indirect investments:
Name Trading address/registered Interest
address Held
--------------------------- -------------------------------- ---------
Energia del Sur, S.A.* Arroyo 880, Piso 2 50%
---------
C10007AAB
---------
Ciudad Autónoma de Buenos
Aires
Argentina
------------------------------------------------------------ ---------
Electrica del Sur,
S.A.* Arroyo 880, Piso 2 50%
---------
C10007AAB
---------
Ciudad Autónoma de Buenos
Aires
Argentina
------------------------------------------------------------ ---------
SEA Energy, S.A.** Arroyo 880, Piso 2 95%
---------
C10007AAB
---------
Ciudad Autónoma de Buenos
Aires
Argentina
------------------------------------------------------------ ---------
Rurelec Chile SpA*** c/o Guerrero Olivos 100%
---------
Av. Vitacura 2939, Piso 8
---------
Las Condes
Santiago
Chile
------------------------------------------------------------ ---------
Rurelec Chile Limitada*** c/o Guerrero Olivos 100%
---------
Av. Vitacura 2939, Piso 8
---------
Las Condes
Santiago
Chile
------------------------------------------------------------ ---------
Termoelectrica del
Norte, S.A.*** c/o Guerrero Olivos 100%
---------
Av. Vitacura 2939, Piso 8
---------
Las Condes
Santiago
Chile
------------------------------------------------------------ ---------
Central Illapa, S.A.*** c/o Guerrero Olivos 100%
---------
Av. Vitacura 2939, Piso 8
---------
Las Condes
Santiago
Chile
------------------------------------------------------------ ---------
*Held via Patagonia Energy Limited and equity accounted as a
joint venture, see Note 21.
**Held via Rurelec Project Finance Limited
***Held via Cochrane Power 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.
21. 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 owns 100 per cent. of EdS, its operating asset 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 it has been accounted for using the equity accounting
method as set out in IAS 28.
Since previous blade failure issues were resolved in January
2019 plant availability continues to be within expectations, 2021
average 95.2 per cent. (2020: 91.7 per cent.).
The Group does not participate in the current year profits of
the joint venture, as they are exceeded by previous losses. 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 2021 and 2020 the joint venture
made a profit. Total loss position at the year-end was GBP28.0
million (2020: GBP32.5 million).
The following table sets out the results of the joint venture in
Argentina of which the Group has a 50 per cent. share:
Group share of Joint Venture results Year Ended Year Ended
and net assets
31.12.2021 31.12.2020
GBP'000 GBP'000
Results
Revenue 3,300 8,357
Operating Expenses - excluding foreign
exchange losses (2,175) (4,464)
Foreign exchange losses 130 (1,288)
EBITDA 1,255 2,605
Depreciation (1,047) (1,043)
EBIT 208 1,562
Intragroup interest - credit re write
back of prior year charge 2,478 2,578
Third party interest payable (398) (634)
Profit before tax 2,288 3,506
Tax 151 (829)
Profit after tax 2,439 2,677
Summary of Statement of Financial
Position
Non-current assets 10,871 10,407
Cash 1,419 1,418
Current trade and other receivables 918 1,196
Non-current liabilities (17,100) (18,681)
Current liabilities (907) (2,060)
Net assets/(liabilities) (4,798) (7,720)
The Group share of joint venture results and net assets are
shown in Argentinian GAAP, which is the accounting framework
applied to the Joint Venture with material IFRS adjustments. The
adjusted differences to IFRS are i) that fixed assets inspection
costs capitalised under Argentinian GAAP would be de-recognised
under IFRS. The impact, included in the table above, of this
adjustment would be to decrease the Group's share of Joint Venture
fixed assets by GBP1.0 million (2020: GBP0.8 million) and ii)
restatement of CAMMESA loans, in 2021 CAMMESA granted a repayment
holiday for a period of 2 years, under IFRS 9 an adjustment for an
interest credit and liability reduction of GBP259k is included in
the table above.
Revenue is derived from one principal customer, CAMMESA, which
is the Government appointed purchaser of wholesale electricity in
Argentina.
22. PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS
Year Ended Year Ended
31.12.2021 31.12.2020
a) Group GBP'000 GBP'000
Loss for the year before tax (3,634) (5,334)
Net Finance Income (491) (819)
Net Finance Expense 1,827 2,783
Adjustments for:
Foreign exchange losses 214 456
Write down of investment 1,366 1,826
Costs re investment in SEA Energy 134 -
Gain on disposal (330) -
Movement in Working Capital:
Change in Trade and Other Receivables (173) (73)
Change in Trade and Other Payables 96 (112)
Cash Used in Operations (991) (1,273)
----------- -----------
Year Ended Year Ended
31.12.2021 31.12.2020
b) Company GBP'000 GBP'000
----------- -----------
Loss for the year before tax (3,230) (5,467)
Net Finance Income (1,173) (1,472)
Net Finance Expense 1,827 2,783
Adjustments for:
Unrealised exchange (gains)/losses (108) 456
Write down of loans 492 883
Write down of investment 1,336 1,826
Provision on investments 134 -
Movement in working capital:
Change in Trade and Other Receivables (147) (41)
Change in Trade and Other Payables (38) (78)
Cash Used in Operations (909) (1,110)
----------- -----------
23. 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. 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. As a result of recent inflation, Argentine GAAP
measures for hyperinflation have come into force. The EdS
financials included in this report have been prepared with these
measures. The Directors are of the view that these accounts require
no further adjustment.
The Group also had exposure to the US Dollar 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 been undertaken.
The following table sets out when the financial obligations fall
due:
Year Ended Year Ended
31.12.2021 31.12.2020
a) Group GBP'000 GBP'000
----------- -----------
Current - due within 1 year:
Trade Payables 97 150
Accruals 351 203
Tax Liabilities 6 7
Borrowings - -
----------- -----------
Total due within 1 year: 454 360
Year Ended Year Ended
31.12.2021 31.12.2020
b) Company GBP'000 GBP'000
----------- -----------
Current - due within 1 year:
Trade Payables 46 104
Accruals 135 115
Intra Group borrowing 229 228
Tax Liabilities 6 7
Borrowings - -
----------- -----------
Total due within 1 year: 416 454
c) 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.
d) 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 2021 Company Company Group Group
Financial Borrowings Financial Borrowings
Assets and Payables Assets and Payables
At at Amortised At at
Cost Amortised
Amortised Amortised Cost
Cost Cost
GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ----------- --------------
Trade and Other Receivables
> 1 year 3,103 - 3,103 -
Trade and Other Receivables
< 1 year 814 - 986 -
Cash and Cash Equivalents 743 - 745 -
Trade and Other Payables
< 1 year - (416) - (454)
Total 4,660 (416) 4,834 (454)
----------- -------------- ----------- --------------
31 December 2020 Company Company Group Group
Financial Borrowings Financial Borrowings
Assets and Payables Assets and Payables
At at Amortised At at
Cost Amortised
Amortised Amortised Cost
Cost Cost
GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ----------- --------------
Trade and Other Receivables
< 1 year 4,586 - 4,586 -
Trade and Other Receivables
< 1 year 1,397 - 1,143 -
Cash and Cash Equivalents 667 - 668 -
Trade and Other Payables
< 1 year - (447) - (354)
Total 6,650 (447) 6,397 (354)
----------- -------------- ----------- --------------
24. SHORT TERM LEASE COMMITMENTS
Office premises
Low value, less than one year GBP16k (2020: GBP16k).
Office premises relates to the Company's offices.
25. 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, who are considered Key Management
Personnel which amounted to GBP0.2 million (2020: GBP0.3
million).
Year Ended Year Ended Year Ended
31.12.2021 31.12.2021 31.12.2020
GBP'000 GBP'000 GBP'000
Base Salary/Fee Total Total
---------------- ----------- -----------
B Rowbotham 9 9 30
S Morris 79 79 82
A Coveney 145 145 168
P Shackleton 13 13 -
---------------- ----------- -----------
Total 246 246 280
B Rowbotham provided services under a service agreement contract
with Mountbeach Associates Ltd until June 2017, since then he was
on payroll. He resigned on 13 April 2021.
S Morris provided services of GBP54k under a service agreement
contract with SC Morris Ltd. He resigned on 17 August 2021.
A Coveney provided services of GBP115k under a service agreement
contract with Coveney Associates Consulting Ltd.
P Shackleton joined on 27 July 2021, he is on payroll.
ii) Accrued interest on loans from its 100% subsidiary Rurelec
Project Finance Ltd ("RPFL") totalling GBPnil (2020: GBPnil). The
loan balance outstanding at the year-end due to RPFL was GBP0.2
million (2020: due GBP0.2 million).
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
Year-end Debtor - -
Year-end Creditor 229 228
Interest credited - -
/(charged)
----------- -----------
iii) Received loan repayments of GBP347k (2020: GBP1,804k). The
Directors have assessed the recoverability of the loans and
consider that it is appropriate to recognise an adjustment for
Expected Credit Losses to the carrying value of GBP1.8 million
(2020: GBP2.8 million) and a reversal of 2021 Expected Credit
Losses of GBP0.5 million (2020: GBP0.8 million), net charge GBP1.3
million (2020: GBP2.0 million) at the of the Amended Loan Notes
issued at value at GBP13.4 million (US$ 17.6 million) as a result
of their zero interest rate. After impairment reviews and expected
credit losses the loan balances at the year-end totalled GBP3.8
million (2020: GBP5.7 million). Interest on these loans has been
accrued at an effective rate of nil per cent (2020: nil per cent).
The total outstanding before impairment is GBP19.6 million (2020:
GBP24.9 million).
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- -----------
Y/E Debtor 3,807 5,428
Repayment 367 1,804
Interest charged - -
----------- -----------
iv) Provided loans and charged interest of 0.5% per month to its
100 per cent. subsidiary Cochrane Power Ltd. Net repayment in the
year totalled GBP0.7 million (2020: loans of GBP0.2 million). The
total outstanding at the year-end was GBP11.4 million (2020:
GBP11.4 million). These loans have been impaired to GBPnil (2020:
GBP0.4 million).
Year Ended Year Ended
31.12.2021 31.12.2020
GBP'000 GBP'000
----------- ------------------------------
Y/E Debtor - 448
(Repayment)/Further loans made (638) 164
Assignment of loan to Rurelec (1,266) -
plc.
Interest charged 682 653
----------- ------------------------------
26. CONTROL
The Directors consider that the ultimate controlling party is
Sterling Trust Limited on the basis of their 53.9% shareholding in
the Company.
27. POST BALANCE SHEET DATE EVENTS
As announced on 30 May 2022 the Company received GBP0.6 million
from PEL in partial repayment of the 2019 Amended Loan Notes.
There are no other significant subsequent events.
COMPANY INFORMATION
Directors
A.H. Coveney (Executive)
P.R.A. Shackleton (Non-Executive)
Secretary
M J. Bravo Quiterio
Company number
4812855
Registered office and business address
5 St. John's Lane
London
EC1M 4BH
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
[1] INDEC (Instituto Nacional de Estadística y Censos de la
Argentina) (Argentinas' National Statistics and Census Office)
Technical report, Índice de Precios al Consumidor (IPC). Cobertura
nacional. Abril de 2022 (indec.gob.ar)
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END
FR UBOORUSUNRAR
(END) Dow Jones Newswires
June 07, 2022 09:38 ET (13:38 GMT)
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