ACTIVE ENERGY GROUP PLC
ANNUAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 2017
Company Registration Number: 03148295
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
CONTENTS
Company Information
Chairman’s Statement
Operations Review
Strategic Report
Report of the Directors
Independent Auditor’s Report to the Members
Consolidated Statement of Income and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Notes to the Consolidated Financial Statements
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ACTIVE ENERGY GROUP PLC
COMPANY INFORMATION
Country of Incorporation
England and Wales
Directors
Secretary
Registered Office
Corporate Head Office
T M S Rowan
R G Spinks
S C Melling (appointed 16 March 2018)
B Evans‐Jones (resigned 5 February 2018)
Cargil Management Services Ltd
27‐28 Eastcastle Street
London
W1W 8DH
27‐28 Eastcastle Street
London
W1W 8DH
Mwldan Business Park
Bath House Road
Cardigan
SA43 1JY
Registered Number
03148295
Auditors
Bankers
Solicitors
Nominated Adviser
Broker
Financial Public Relations & Investor Relations
Jeffreys Henry LLP
Chartered Accountants and Registered Auditors
London
EC1V 9EE
HSBC Bank Plc
69 Pall Mall
London
SW1Y 5EY
DWF LLP
20 Fenchurch Street
London
EC3M 3AG
Northland Capital Partners Limited
40 Gracechurch Street
London
EC3V 0BT
Optiva Securities Ltd
49 Berkeley Square,
London
W1J 5AZ
St Brides Partners
3 St Michael’s Alley
London
EC3V 9DS
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ACTIVE ENERGY GROUP PLC
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2017
2017 saw the Group’s CoalSwitch™technology and Peatswitch derivative emerge as the Group’s primary
international utility companies (including domestic heating fuel distributors),
value driver, with
government agencies and coal power plant operators beginning to recognise the revolutionary potential
of our 'drop‐in' biomass fuel. The Board’s main focus during the year was to commercialise the
CoalSwitch™ process, following the successful testing at the initial demonstration plant in Salt Lake City
during 2016. I am delighted to report that this was achieved post year end, with the opening of our
inaugural five‐tonne‐per‐hour CoalSwitch™ plant in Utah, and significant progress has been made in
relation to our roll out and expansion of commercial activities during H1 2018.
The Board believes that the commercial opportunities associated with the CoalSwitch™ product are
significant, as the product has the potential to be a direct, lower cost, higher energy substitute to
traditional pellets and all other tested alternatives available in the market today. Furthermore, the wood
pellet market has been growing significantly since 2014, most notably in Europe, and the next stage of
significant growth is expected to be in Asia, particularly Japan and South Korea. The Company has been
active in discussions with prospective customers in Asia and the Board hopes to be in a position to update
the market with further developments regarding expansion in due course.
The dominance of our CoalSwitch™ division during 2017 reflected the Company’s strategy refocusing the
business on higher margin, higher growth opportunities associated with CoalSwitch™, and the recently
launched PeatSwitch product, whilst continuing to focus on developing a substantial forestry
management business to guarantee long‐term feedstock requirements to complement these activities.
To this end, as first reported in May 2017, AEG reduced its exposure to its low margin and high risk
Ukrainian wood fibre business throughout the second half of 2017.
In tandem with our increased focus on CoalSwitch™ during 2017, our activity levels in respect to our
Timberlands forestry management business have also increased markedly, and this work has begun to
come to fruition post period end. The important strategic focus on Timberlands is two‐fold: firstly, by
securing feedstock for our growing CoalSwitch™ business we are able to demonstrate the security of long‐
term supply and thus attract further interest from large utility companies and government agencies to the
various benefits of CoalSwitch™. Secondly, we are able to monetise underutilised or undervalued existing
forestry assets, generating a new revenue stream for the Group and in so doing, re‐energising the forestry
industry in rural jurisdictions. The Board is confident that our Timberlands proposition will become an
increasingly important part of AEG’s overall strategy moving forwards.
Financial Review:
In March 2017 the Company raised US$14.15 million (before expenses) through the issue of convertible
loan notes, for the construction of the first CoalSwitch™ plant and progressing the Timberlands’ growth
strategy. The Group received support from new institutional investors as well as existing shareholders,
reflecting their endorsement of our strategy.
In November 2017 AEG raised a further £1.75 million (before expenses) via an oversubscribed placing of
new equity with new and existing investors. These funds have predominantly been used to accelerate the
commercial roll out of CoalSwitch™ and also provided the Group with additional working capital.
The year ended 31 December 2017 was a period of restructuring and refocus of the business and
accordingly the consolidated income statement reflects this:
Research and development costs of US$2,389,807 (2016: US$nil) reflect AEG's investment in the
development of CoalSwitch™ and PeatSwitch technologies.
Administrative expenses were US$2,870,721 (2016: US$1,956,795) reflecting ongoing corporate
costs and business development activity associated with CoalSwitch™ and PeatSwitch products.
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ACTIVE ENERGY GROUP PLC
Finance costs of US$3,031,054(2016: US$1,784,170), relate to debt servicing and foreign
exchange losses.
Loss on discontinued operations of US$7,284,981(2016: Profit of US$1,528,339), relates to the
poor trading performance of the Ukrainian wood fibre business; losses on sale of certain fixed
assets of this operation; impairment of assets associated with this business and the loss relating
to the cessation of the Ukrainian operating company ("Nikwood") following the sale of certain
assets.
The tax credit of US$355,491(2016: US$8,985) reflects receipts associated with research and
development tax credits.
Losses attributable to non‐controlling interests combined with gains on assets results in a total
comprehensive loss for the year attributable to owners of the parent of US$14,783,962 (2016:
US$2,490,640).
It is important to note that the bare figures, need to be considered in the overall context of the
development and reconfiguration of the business:
During 2017, US$5.8 million was spent on research and development, construction of the
CoalSwitch™ plant in Utah and business development associated with our CoalSwitch™ and
PeatSwitch technologies and relevant intellectual property development. Given the potential
opportunities associated with these products, the Board regards this as capital effectively
deployed.
AEG continued to invest its time and efforts to secure the finalisation of the CTL and FMA in
Newfoundland. Total expenditure on the development of these assets was US$0.9 million during
the year ended 31 December 2017, which was recorded as development costs under intangible
fixed assets.
The withdrawal from the Ukrainian business and the associated losses are, of course, unfortunate.
However, the timely exit from this business has enabled AEG to limit its exposure to further
liabilities, as well as recalibrating the risk profile of the Group.
Outlook:
2017 was a pivotal year for AEG where the Board identified the key areas of opportunity and started to
implement strategies to execute its commercialisation model and deliver shareholder value in 2018 and
beyond.
During 2017 our board composition changed. In Q2 2017 Matteo Girlanda, our former Chief Operating
Officer, who had been focussed primarily on our wood fibre business in Ukraine, stepped down from the
Board. In Q1 2018, Brian Evans‐Jones stepped down and shortly after, we welcomed Simon Melling as a
Non‐Executive Director. Simon brings with him over 30 years' experience of working in senior roles within
the finance sector and was previously the CEO of AIM listed stockbroker Cenkos Securities Limited. We
are already benefitting from his commercial and capital markets experience which will be invaluable as
we build the profile of the Company and promote our unique products and investment proposition to the
investment community.
The Group has now identified the regions which it wishes to operate in, primarily being USA, Canada and
Europe. The aim is to secure the greatest market opportunities, including customers and strategic
partnerships for CoalSwitch™ and develop derivative products such as PeatSwitch. To complement this,
AEG continues to use its underlying knowledge and experience in forestry management to secure and
monetise strategic timber licences; thereby generating additional revenue streams and underpinning long
term contracts for CoalSwitch ™ through visibility of these secured feedstock arrangements.
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ACTIVE ENERGY GROUP PLC
In line with the focused corporate strategy and execution of the new opportunities in Canada and Europe,
the Board and Richard Spinks have agreed that Richard should now focus his efforts on the development
of CoalSwitch™, new business opportunities in Poland, and work with Antonio Esposito, a 20‐year forestry
professional, on the forestry management activities in North America. Richard has helped create these
significant business opportunities and the Board acknowledges that these now require his undivided
attention. Accordingly, he will step down from his role as Chief Executive Officer of the Group at the
forthcoming Annual General Meeting (‘AGM’), to maximise his time on these key projects. Richard will
remain on the Board where his contribution will continue to be invaluable for both strategy and ensuring
the future commercial success of AEG’s portfolio. At the AGM, Michael Rowan will assume the
responsibilities of Chief Executive Officer for the Group.
Furthermore, we remain active in identifying additional candidates to further bolster our Board and
Senior Management team in the coming months as we enter the execution stage of our strategy and look
to monetise our CoalSwitch™ and PeatSwitch products and bring into operation our significant forestry
management opportunities, in existing and new markets.
2017 presented challenges, but with the continued dedication of our team, combined with the inherent
value in our technology and business model, I am confident that we can reach our commercial and
strategic goals, as we look to revolutionise the traditional coal fired‐power and biomass industries,
through the commercialisation of our second‐generation biomass fuel and its derivative products.
Michael Rowan
Executive Chairman
18 June 2018
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ACTIVE ENERGY GROUP PLC
OPERATIONS REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2017
The Group’s primary activities are centred on the commercialisation of its CoalSwitch™ product and
process, and the associated PeatSwitch product, together with its forestry management business,
Timberlands. During 2017, the Group also conducted wood fibre and wood chip manufacturing
operations in Ukraine, however these interests were formally wound up before the end of 2017.
CoalSwitch™
CoalSwitch™ uses patented technologies to create a new second generation biomass fuel which can be
briquetted or pelleted as required by customers. CoalSwitch™ has a number of significant advantages
compared with existing biomass fuels such as torrefied or white pellet alternatives, namely and among
others:
Lower unit costs reflecting lower feedstock costs. CoalSwitch™ technology can process lower
quality fibre materials such as forestry residuals and waste wood including waste, bark, branches
leaves, needles and salty hog thus reducing feedstock costs.
CoalSwitch™ has a higher energy density than alternative biomass fuels.
CoalSwitch™ has a higher bulk density than alternative biomass fuels.
CoalSwitch™ when pelletised is hydrophobic meaning that the pellets do not degrade in water in
the same way as traditional white or torrefied pellets. In addition, CoalSwitch™ pellets can be
transported with minimal losses/degradation due to being almost dust‐free in storage, handling
or transport.
CoalSwitch™ pellets can be used in coal fired power stations, without the need for significant
capital expenditure for retrofitting and modifying existing coal burning facilities.
AEG first became involved in this ground‐breaking technology in 2015. During 2016 work was primarily
focused on research and development activities. 2017 was the pivotal year for commercialisation of
CoalSwitch™ technology.
Commercial Activities in the USA
In September 2017, AEG announced that it was constructing a five‐tonne‐per‐hour CoalSwitch™ plant at
its premises in Utah, USA. In February 2018, AEG announced that this plant was officially open and
operational. Since this announcement AEG has continued to operate the facility, albeit with the
customary issues as one would expect when commissioning any new technology or equipment.
The Board regards the completion and initial operation of the plant as the major breakthrough in the
development of the CoalSwitch™ business model, showing that positive laboratory results can be
upscaled to industrial scale production facilities. The Company is now in discussions with global
engineering procurement and construction contractors to ensure that future plants are constructed in an
efficient and scalable manner.
Joint Venture in Poland and Test Results from the Polish Government
On 13 March 2018, AEG announced that it had signed a joint venture agreement with Cobant Sp. z o.o.
('Cobant'), a Polish research, development and environmental waste coal recovery company active in the
land reclamation, environmental services and energy sectors. The aim of the joint venture is to explore
additional opportunities to blend CoalSwitch™ with reclaimed coal from coal slurry dumps in Upper Silesia,
Poland to produce a "SuperFuel" product with strong environmental credentials.
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ACTIVE ENERGY GROUP PLC
On 13th June, AEG announced that the joint venture had received confirmation from the Polish
Government Burn Test Laboratory that testing had been completed on a new ‘SuperFuel’ product that
utilises a blend of CoalSwitch ™with cleaned coal fines from Poland’s legacy coal waste dumps. The results
demonstrate that the “SuperFuel” has a similar calorific value to coal with significantly lower sulphur
content and low ash and SOx and NOx emissions. The testing satisfies all the requirements of the Polish
Government and its AntiSmog legislation.
The Board regards this test result as an important landmark for the commercial development of
CoalSwitch™ and “SuperFuel”. The joint venture intends to proceed to production and revenues as quickly
as possible and accordingly, the Board and Richard Spinks have agreed that Richard should dedicate his
time to ensure the future commercial success of this opportunity for both the joint venture and AEG.
Asian Activities
The group has been developing market interest and prospective customers in Japan and Northern Asia. In
addition, Advanced Biomass Solutions (“ABS”) was incorporated as an affiliate company to lead sales and
project management activities in the region. Commercial enquiries have been increasing, notably from
Thailand, Malaysia and Indonesia for the use of the CoalSwitch™ process in the utilisation of waste
products from palm oil and other agricultural residues.
In December 2017, Brian Evans‐Jones changed his role within the Group to focus on business
development for ABS. In February 2018 Brian resigned from the Board of AEG plc and in June 2018 he
resigned from his role within ABS.
In September 2017 ABS entered into an agreement with Lumino Capital LLC ("Lumino") regarding the
financing, development and operation of eight CoalSwitch™ Plants across South East Asia. Given recent
management changes at ABS and the new strategic focus of AEG toward the activities in North America
and Europe, the Board will now reconsider the previous arrangements between ABS and Lumino and
discuss the timing, construction and viability of future projects with Lumino. Progress on these projects
has taken considerably longer than originally anticipated whilst other opportunties have accelerated in
Canada and Europe and these now have taken priority for AEG. Nevertheless, Asia remains an important
offtake market in the medium term.
PeatSwitch
During the development of the CoalSwitch™ technology, AEG's scientists identified that the technology
can also be reconfigured to produce an enhanced soil replacement product from waste fibre. This
advanced substrate can be easily adjusted and tailored to meet the specific requirements of an individual
agricultural customer and more importantly specific plant type or species. In addition, AEG quickly
identified that the cost to produce PeatSwitch is much lower than CoalSwitch™ and the ratio of feedstock
to final product is much higher, further increasing the economic attractiveness of this product.
On 28 February 2018, AEG announced that it had entered into an initial supply agreement with Young
Living Farms ('YLF'). The terms of the agreement state that YLF may supply AEG with up to 6,500 tonnes
of feedstock in the form of a waste by‐product which would then be processed into PeatSwitch substrate
at the plant in Utah. The resulting PeatSwitch could then be resold post‐processing back to YLF. Deliveries
under this arrangement commenced shortly after the announcement. Following successful demonstration
of the process, discussions were commenced with YLF to provide them, on‐site, at their Mona, Utah,
facility with their own processing plant.
On 11 June 2018, the Group announced that it had entered into a Memoradum of Understanding with YLF,
pursuant to which YLF would become the first buyer of a PeatSwitch plant with an initial order to deliver
a three‐tonne‐per‐hour plant to their farm and production facility in Mona, Utah for a total consideration
of US$3.4m. AEG and YLF have already commenced work to finalise and start construction. Contracts are
being completed and the Group expects this initial plant to be completed and operational before the end
of 2018. All parties expect this commercial relationship to continue to develop, with the sale of further
plants at other YLF operations centres in the USA.
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ACTIVE ENERGY GROUP PLC
Timberlands
Overview
The mission of the Timberlands business is to identify, develop and manage forestry projects. This
business has multiple benefits and advantages to AEG and the forestry owners, including, among others:
Security and traceability of feedstock for CoalSwitch™ and PeatSwitch production plants located
at these sites.
Using timber in CoalSwitch™ technology optimises output and value, as wood which is
traditionally seen as waste, can be processed in CoalSwitch™ plants to produce value.
Access to secure long‐term timber proprietary tenures should allow AEG to enter into significant
and long‐term supply agreements for its products without risk of market fluctuations in the
supply chain.
The timber business and associated licences represent an asset against which debt can be secured,
thereby facilitating lower cost group‐wide financing for these projects and the associated plant.
Focus on timber licences previously viewed as economically marginal, enables regeneration for
rural communities who have traditionally relied on the forestry industry for their livelihoods.
Control of the supply chain ensures co‐ordinated environmental sustainability.
Newfoundland
In Q2 2017, AEG announced that it had entered into an agreement in principle (“Agreement in Principle”)
with the Canadian Province of Newfoundland and Labrador (“Province”). This arrangement envisaged the
award of a Crown Timber Licence ("CTL") and a forestry management agreement ("FMA") with a
renewable 20‐year term, effectively becoming an ‘evergreen’ contract, relating to two Forest
Management Districts, Districts 17 and 18 covering approximately 1.2 million hectares with 770,000
hectares being commercially viable mature, natural forestry, on the Great Northern Peninsular of
Newfoundland.
The AIP permitted AEG the right to commercial cutting permits in Districts 17 and 18 in the Northern
Peninsular. This was provided to AEG as a provision of conditional exclusivity over the area being
negotiated and as a prelude to the award of the CTL and FMA in the Province as all parties completed the
preparatory and regulatory work for the award of the FMA. The Province extended the AIP late in 2017 to
further accommodate the regulatory preparations and process and to further demonstrate their
commitment toward AEG.
On 12 October 2017, AEG submitted all final documents to the Ministry of Fisheries and Land Resources
of the Crown Province of Newfoundland and Labrador associated with the CTL and FMA's. The submission
included all requested documentation, including the proposed financial term sheets for the prospective
FMAs.
During 2017 and H1 2018 AEG has continued to develop management and supplier capability as well as
government relations, in order to ensure the future success of this business. Most notably this has
involved:
Outsourcing forestry management planning & operational supervision to Canadian forestry
consultancy company, Zimmfor Management Services Ltd.
Putting in place outsourcing agreements with existing companies engaged in forestry operations,
logging & saw milling activities in the area.
Collaborating closely with government departments such as the Ministry of Fisheries & Land
Resources, the Ministry of Tourism, Culture, Innovation & Investment, the Ministry of Municipal
Affairs & Environment, the Ministry of the Economy and the Justice Ministry of Newfoundland
and Labrador.
Developing and reinforcing links with municipalities and local stakeholders, including the Town of
St. Anthony, the St. Anthony Port Authority, the Town of Roddickton Bide‐Arm and the Municipal
University of Newfoundland.
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ACTIVE ENERGY GROUP PLC
During the second half of 2017 and into the first quarter of 2018, the Ministry of Fisheries and Land
Resources, with input from AEG and their consultants, had been working hard to enable the creation of
the legislative framework to allow the issuance of FMAs in the Province. As this FMA is to be the first ever
issued in the Province, a condition precedent to allow this to occur was that appropriate legislation to
allow for FMA structures to exist in the Province was required. This legislation came into effect at the end
of March 2018.
All involved in the process, including government agencies working with AEG, believe that AEG is now in
the final stages of receiving full and final approval. AEG understands that all parties at the relevant
Ministries are proceeding and AEG would like to thank everyone in both St. John’s and Corner Brook, NL,
who have worked so diligently with AEG.
The Board anticipates that the award of these FMAs and CTL will have a significant positive impact for the
Province, the local communities on the Great Northern Peninsular and AEG:
It will allow Timberlands to harvest and utilise up to 140,000 solid cubic metres of wood per
annum.
It will be the catalyst for the upgrading and re‐commissioning of an existing sawmill and provide a
solid and reliable off take for the currently, significantly, under‐employed local forestry operations
on the Great Northern Peninsular.
The Board intends to install a 5 tonne per hour CoalSwitch™ processing facility at Roddickton in
the first instance, enabling transformation of waste wood, forestry residues and pulpwood, as
well as the sawmill waste, to be converted into CoalSwitch™ pellets, thereby optimising value
from the three complementary businesses.
The geographical location of Newfoundland and Labrador and the forestry management tenures
are ideally located, logistically, to take advantage of a number of significant market opportunities
being developed by AEG in terms of creating and developing the European market for
CoalSwitch™. The forestry and the nearby site of the proposed production facilities in
Roddicktonis proximate to ocean port facilities, located at St. Anthony, Newfoundland. Therefore,
AEG will have direct access to the shortest shipping routes for biomass fuels to Europe from North
America.
A number of parties have expressed interest in entering into offtake agreements for deliveries of
CoalSwitch™ to customers in the European market once the CTL and FMA have been granted, and the
Company intends to formalise these agreements as soon as practicable upon receipt of the CTL and FMA.
Alberta
On 17 May 2018, AEG announced an MoU with Powerwood Canada (“Powerwood’) which subject to
formal contract and available funding, will allow AEG to assume a controlling interest in Powerwood.
Powerwood already has a number of forestry assets granted by the Crown in the name of the Province of
Alberta. However, the owners of Powerwood are focussing on the development of biomass power
generation in the Province and not on forestry management operations.
The owners of Powerwood are keen that AEG utilises both its forestry expertise and CoalSwitch™
processes to increase the underlying value of the aspen stands, the dominant species in these forests. All
parties are proceeding as quickly as possible to complete these contractual arrangements and commence
commercial activities. AEG remains hopeful that these activities may complement AEG’s previous efforts
in the Province.
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ACTIVE ENERGY GROUP PLC
With the strong support and encouragement of the Government of the Province of Alberta and the
improved relationship between the Métis Settlements General Council under the stewardship of Metis
Settlements General Council President Gerald Cunningham, AEG is increasingly confident that in future
the Company’s activities will likely involve the Métis Settlements, including their forestry assets and their
local knowledge and experience.
Ukraine
Whilst AEG has no companies or business activities in Ukraine at this time, the Group retains its supply
contract granted by the Lyubomi Forestry, which is the administrator of the Lyubomi Forest in the Ukraine.
Following the extension of the contract term during the 2014, The remaining useful life on contractual
relationships is 46 years. AEG is reviewing options to utilise this asset to provide feedstock, and therefore
security of supply, to future CoalSwitch™ operations in Eastern Europe, notably Poland.
Wood Fibre
The Group suffered a significant downturn in the trading fortunes of its Ukrainian wood fibre business
during H2 2016 and Q1 2017. This downturn was primarily driven by political events in Turkey specifically,
the attempted coup d’état in July 2016, which had a negative impact on Turkish imports and thereby the
export of our woodchip product to Turkey. In addition, three new competitors entered the Ukrainian
woodchip production and export market, supplying what AEG believed to be an inferior quality product,
at a time when the Turkish lira had been devalued. As a result of these factors gross margins deteriorated
and the Board took the decision in April 2017 to suspend trading with a view to exiting the business as
soon as practicable before it became untenable.
Following the announcement of our intention to reorganise AEG in May 2017, the Group’s Directors
began negotiations with its former Chief Operating Officer, Matteo Girlanda regarding a possible sale of
the Group’s Ukrainian assets. These negotiations did not come to fruition and it was therefore necessary
to review further options. As a result various items of property, plant and equipment were sold to third
parties, following which the operating company (Nikwood) was divested for a nominal amount in
December 2017. As a result, the Group exited this business in accordance with its previously announced
timeline, therefore reducing exposure to creditors and other ongoing liabilities. The Group retains
ownership of certain equipment which it intends to either transfer to future European or North American
CoalSwitch™ operations or realise on the open market.
The Board believes that exiting the Ukrainian wood fibre business has significantly reduced the Group's
country, political and trading risk profiles, and has allowed the management team to focus the Company’s
resources on the development of the higher value CoalSwitch™, PeatSwitch and Timberlands business
activities in North America and Europe.
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ACTIVE ENERGY GROUP PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2017
The Directors of Active Energy Group Plc present their Strategic Report for the year ended 31 December
2017.
OPERATING REVIEW
The Chairman’s report highlights the operational performance of the year under review and post balance
sheet events.
Principal Activities
The Group's principal activities are the development and commercialisation of cutting edge renewable
energy and soil replacement products; and the development of timber resources.
Organisation Overview
The Group’s business is directed by the Board with executive management carried out through the
Executive Chairman and Chief Executive Officer.
Following the resignation of Brian Evans‐Jones on 5 February 2018, the Board of Directors comprises two
Executive Directors (being the Chief Executive Officer and the Executive Chairman) and one Non‐Executive
Director.
The corporate structure of the Group reflects its two core business lines and the need, where appropriate,
for operational, fiscal and other reasons, to have incorporated entities in particular territories.
Day‐to‐day activities are managed through offices in the United Kingdom and United States, supported by
our multi‐national network of professional advisors.
Aims, Strategy and Business Plan
The Group’s aim is to develop a profitable international operation founded on CoalswitchTM and
PeatSwitch technologies, underpinned by a forestry management business. The Group aims to generate
significant shareholder value through the enactment of its strategy, at the same time as having a positive
impact on the environment and local communities in the jurisdictions in which we operate.
The Group seeks to limit country and political risk by working within diversified, lower risk territories and
jurisdictions; operating in an open and transparent manner throughout all its dealings; and maintaining a
zero‐tolerance policy towards corruption.
The Group’s business model is to establish efficient, low cost synergistic operations across all of its
activities and markets. The Board seeks to run the Group with a low cost base, consistent with the nature
and level of activity being undertaken. The Group engages the services of a limited number of full‐time
employees alongside a portfolio of carefully selected professional consultants and contractors.
The Group is financed through periodic capital raises, loan notes and by short‐and medium‐term
borrowings. As certain of the Group’s new business ventures reach maturity the board is reviewing
strategic opportunities to obtain specialist development funding from future customers, governments,
international investors, strategic partners, royalty and/or other market arrangements.
Executive Management:
Following the resignation of Brian Evans‐Jones on 5 February 2018, the Group’s current executive team
comprises:
Michael Rowan: Executive Chairman; with responsibility for oversight of all activities with
specific focus on strategic, commercial and legal matters.
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ACTIVE ENERGY GROUP PLC
Richard Spinks: Executive Director and CEO; with overall responsibility for all Group activities.
In addition, and in order to strengthen its operational capability and overall co‐ordination the Group has
recently established an operating committee. This committee comprises senior management (the Chief
Operating Officer, Chief Financial Officer, Chief Technical Officer) as well as other members of the
executive team.
Corporate Responsibility
The Board takes regular account of the significance of social, environmental and ethical matters affecting
the Group wherever it operates. It has developed a specific set of policies on corporate social
responsibility, which seek to protect the interests of all of its stakeholders through ethical and transparent
actions and include an anti‐corruption policy and code of conduct.
Corporate Governance:
The Group is committed to high standards of corporate governance and seeks to continually evaluate its
policies, procedures and structures to ensure that they are fit for purpose.
In order to protect the interests of its shareholders and other stakeholders the Board has chosen to adopt
the Quoted Companies Alliance (QCA) Corporate Governance Code for Small and mid‐size Quoted
Companies (the “QCA Code”), and the Directors are always prepared, where practicable, to enter into
dialogue with all such parties to promote a mutual understanding of objectives.
The Company’s AIM Rules Compliance Committee (see below) acknowledges the new AIM Rules
regarding Corporate Governance which were announced in March 2018 and will ensure they are
implemented on a timely basis before the 28 September 2018 deadline.
Composition of the Board of Directors
The Board of Directors is currently comprised of the Executive Chairman (based in the UK), the Chief
Executive Officer (based in Ukraine, Canada and the UK), and the Non‐Executive Director (based in the
UK). The Board considers that this structure is consistent with the nature and scope of the Group’s
business, operating in the sectors and regions that it does. The Board is aware of the need to refresh its
membership from time to time and will consider appointing additional executive and independent non‐
executive directors in the future.
Specifically, the Company acknowledges that the guidance in the QCA Code is for a company to have at
least two independent non‐executive directors. However, the Directors are satisfied that at present the
Company's board composition is appropriate given the Company's size and stage of development. The
Directors shall keep the position under regular review and to the extent additional independence is felt to
be required on the Board, it shall be sought.
Role of the Board:
The role of the Board is to agree the Group’s long‐term strategy and direction and to monitor
achievement of its business objectives. The Board meets several times per annum, either by
teleconference or in person. Furthermore, it holds additional meetings as are necessary to transact
ongoing business.
Board Committees:
Remuneration Committee
The Remuneration Committee is made up of Simon Melling and Michael Rowan and is chaired by Michael
Rowan. This committee is responsible for the scale and structure of the remuneration of the Chairman,
the Chief Executive, the Executive Directors and reports to the Chief Executive. The recommendations of
the committee must be approved by the Board of Directors. No director or manager shall be involved in
decisions relating to his/her own remuneration.
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ACTIVE ENERGY GROUP PLC
AIM Rules Compliance Committee
The AIM Rules Compliance Committee is made up of Michael Rowan and Richard Spinks and is chaired by
Michael Rowan. This committee is charged with ensuring that the Group has sufficient procedures,
resources and controls in place to ensure compliance with the AIM rules for companies. Among other
things, the committee shall ensure that an Executive Director is at all times able to respond to requests
for information from the Nominated Adviser and that all Directors and employees are aware of their
obligations with regards to the disclosure of any trading in the Group’s shares.
Audit Committee
The Audit Committee is made up of Simon Melling and Michael Rowan and is chaired by Simon Melling.
This committee is required to monitor the integrity of the financial statements of the Group, including the
interim and annual reports. The committee also reviews financial returns to regulators and any financial
information contained in announcements of a price sensitive nature. The committee shall also consider
and make recommendations to the Board regarding resolutions to be put to shareholders for approval at
the Annual General Meeting, with respect to the appointment or re‐appointment of the Group’s external
auditors. The audit committee, together with the external auditors, are responsible for determining the
scope of the annual audit.
Nomination Committee
The Company does not currently have a nomination committee as the Board does not consider it
appropriate to establish such a committee at this stage of the Company's development. Decisions which
would usually be taken by the nomination committee will be taken by the Board as a whole.
Environment
The Board recognises that its principal activities have the potential to impact the environment and is
committed to working with states and other bodies in all of the territories in which it operates to establish
and follow international principles of environmental sustainability and renewability.
Employees
The Group engages its employees in all aspects of the business and seeks to remunerate them fairly. The
Group gives full and fair consideration to applications for employment regardless of age, gender, colour,
ethnicity, disability, nationality, religious beliefs or sexual orientation. The Board takes employees’
interest into account when making decisions. Any suggestions from employees aimed at improving the
Group’s performance are welcomed.
Suppliers and Contractors
The Group recognises that the goodwill of its contractors, consultants and suppliers is crucial to the
success of its business, and seeks to build and maintain this goodwill through fair and transparent
business practices. The Group has a prompt payment policy and aims to settle genuine liabilities in
accordance with contractual obligations.
Health and Safety
The Board recognises that it has a responsibility to provide strategic leadership and direction in the
development and maintenance of the Group’s health and safety strategy, in order to protect all of its
stakeholders.
Key Performance Indicators:
The key performance indicators of the Group are set out below:
Commercialise and develop the new CoalSwitchTMand PeatSwitch technology.
Secure and develop selected timber licences.
Conduct operations in a safe and environmentally responsible manner.
Positively impact local communities in the jurisdictions in which we operate.
12
ACTIVE ENERGY GROUP PLC
Optimise shareholder value through targeted investment and sound project and operational
management.
Maintain sufficient capital to meet the requirements of existing and future business.
Identify and progress other new business initiatives and bring these to fruition.
Optimise administration expenses and operating unit costs.
Performance against these measures is discussed elsewhere in the Strategic Report and Chairman’s
Statement. It is likely that other KPIs will be identified as the business develops. The Board believes that
the detailed information published by the Group in its Regulatory News Service (RNS) announcements or
in its published financial statements provide the best guide to its progress and performance.
Risk and Uncertainties:
Operational Risk
Given the international nature of the Group’s operations, it is inevitably subject to various operational
and financial challenges.
The Directors are constantly vigilant of these challenges, and have undertaken the steps necessary to
secure the Group’s position.
Political Risk
Based upon experience of geo‐political disruption to the Group’s Ukrainian operations and its key market
in Turkey, the Board has decided to focus future activities of the Group in low risk, politically stable
jurisdictions.
Intellectual property
The Company has acquired significant intellectual property relating to its CoalSwitchTM and PeatSwitch
technology. The board is actively working with its legal advisers in order to secure and defend its rights to
this proprietary knowledge.
Financing Risk
The principal financial risks faced by the Group are discussed in the financial statements.
Internal Controls and Risk Management:
The Directors are responsible for the Group’s internal financial controls. Although no system of internal
financial control can provide absolute assurance against material misstatement or loss, the Group’s
systems and processes are designed to provide reasonable assurance that issues are identified in a timely
basis and dealt with appropriately.
The group is currently undertaking a review of its internal controls in order to optimise cost control and
monitoring of on‐going financial performance.
Forward Looking Statements:
The Annual Report contains certain forward‐looking statements that have been made by the Directors in
good faith based upon the information at the time of the approval of the Report. By their nature, such
forward‐looking statements involve risks and uncertainties because they relate to events, and depend
upon circumstances, that will or may occur in the future. Actual results may differ materially from those
expressed in such statements.
This Strategic Report was approved by the Board of Directors on 18 June 2018 and signed on its behalf by:
Michael Rowan
Executive Chairman
13
ACTIVE ENERGY GROUP PLC
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2017
The Report of Directors
The Directors present their report together with the audited financial statements of the Group for the
year ended 31 December 2017.
In accordance with section 414C (11) of the Companies Act 2006, the Directors have chosen to include
particulars of important events affecting the Group that have occurred since the end of 2017 and an
indication of likely future developments in the Group’s business in the Chairman’s Report, the Operations
Report and the Strategic Report (on pages 2 to 13).
Dividends:
No dividend is proposed for the year ended 31 December 2017 (2016: £nil).
Financial Instruments and Financial Risk Management:
Details of the use of financial instruments by the Group and its subsidiary undertakings, and related
matters are contained in Note 27 of the financial statements.
Going Concern:
The Directors consideration of going concern is set out in Note 1 to the financial statements.
Directors:
The Directors during the year under review were:
T M S Rowan
R G Spinks
M Girlanda (resigned 8 May 2017)
B Evans‐Jones (resigned 5 February 2018)
S C Melling was appointed to the Board on 16 March 2018.
Remuneration:
Remuneration and benefits received during the year ended 31 December 2017 for Directors, together
with interests in share options and warrants at the year end, were as follows:
2017
Gross
Fees
and
Salary
US$
137,120
255,879
107,759
218,535
‐
719,293
2017
Share‐
based
Payments
US$
191,733
‐
‐
56,776
‐
248,509
T M Rowan
R G Spinks
M Girlanda
B Evans‐Jones
F Lewis
2016
Share‐
based
Payments
US$
‐
(153,299)
565,848
143,160
‐
555,709
Options /
Exercise
Price
p
6.0
5.0
Warrants
No.
4,500,000
‐
‐
12,000,000
‐
16,500,000
2016
Gross
Fees
and
Salary
US$
54,207
201,785
231,608
162,620
33,881
684,101
14
ACTIVE ENERGY GROUP PLC
Significant Shareholders:
The Directors are aware of the following significant shareholdings of 3 per cent or more of the current
Issued Ordinary Share Capital of 1,032,704,504 shares and Total Voting Rights (“TVR”) (excluding the
33,212,841 own shares held) of 999,491,663 shares on 7 June 2018:
Gravendonck Private Foundation
Ruffer LLP
R G Spinks
R M Derrickson
No.
241,898,809
56,171,946
52,105,333
37,457,777
ISC (%)
23.42
5.44
5.04
3.63
TVR (%)
24.20
5.62
5.20
3.75
Directors’ Responsibilities:
The Directors are responsible for preparing the 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 elected to prepare the Group and Company financial statements in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under
company law the Directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and Company for that period and of the profit
or loss of the Group for that period. In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
state whether they have been prepared in accordance with applicable IFRSs as adopted by the
European Union, subject to any material departures disclosed and explained in the financial
statements; and
prepare the financial statements on the going concern basis, unless it is inappropriate to presume
that the Group will continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time
the financial position of the Group and the Company and enable them to ensure that the financial
statements comply with the requirements of the Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
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 Group’s website at www.active‐
energy.com 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 Group’s website is the responsibility of the Directors. The Directors'
responsibility also extends to the on‐going integrity of the financial statements contained therein.
The Directors consider that the annual report and the accounts, taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group and the
Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Report of Directors confirm that, to the
best of their knowledge:
the Group financial statements, which have been prepared in accordance with IFRSs as adopted
by the European Union, give a true and fair view of the assets, liabilities and financial position;
the Company financial statements, which have been prepared in accordance with IFRSs as
adopted by the European Union, give a true and fair view of the assets, liabilities, financial
position and loss of the Parent Company; and
15
ACTIVE ENERGY GROUP PLC
the Chairman’s Statement includes a fair review of the development of the business and the
position of the Group and the Company, together with a description of the principal risks and
uncertainties that it faces.
Statement as to Disclosure of Information to Auditors:
Each Director has confirmed that:
So far as the Directors are aware, there is no relevant audit information of which the Group’s
auditor is unaware; and
They have taken all the steps that they ought to have taken as a Director in order to make
themselves aware of any relevant audit information and to establish that the Group’s auditor is
aware of that information
This confirmation is given in accordance with Section 418 of the Companies Act 2006.
Auditors:
A resolution to re‐appoint Jeffreys Henry LLP as auditor for the ensuing year will be proposed at the
Annual General Meeting.
By order of the Board:
Michael Rowan
Executive Chairman
Date: 18 June 2018
Company Registration Number: 03148295
16
ACTIVE ENERGY GROUP PLC
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ACTIVE ENERGY GROUP PLC
Opinion
We have audited the financial statements of Active Energy Group (the ‘parent company’) and its
subsidiaries (the ‘group’) for the year ended 31 December 2017 which comprise the consolidated
statement of income and other comprehensive income, the consolidated and parent company statement
of financial position, the consolidated and parent company statement of cash flows, the consolidated and
parent company statements of changes in equity and the notes to the financial statements, including a
summary of significant accounting policies. The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been
applied in the preparation of the parent company financial statements is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union, as applied in accordance with
the provisions of the Companies Act 2006.
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 2017 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRS’s
as adopted by the European Union 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.
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 are independent of the
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. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 1 in the financial statements, which explains that the Group is dependent
upon on further fund raising to commercialise or develop its core businesses. These events or conditions,
along with the other matters as set forth in note 1, indicate that a material uncertainty exists that may
cast doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of
this matter.
Our audit approach
Overview
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) 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. This is not a complete list of all risks identified by our audit.
Carrying value of investments and intangible assets.
Going concern issues.
17
ACTIVE ENERGY GROUP PLC
Company only loans.
These are explained in more detail below
Audit scope
We conducted audits of the Group and Parent Company financial information of Active Energy Group Plc.
We performed specified procedures over certain account balances and transaction classes at other Group
companies.
Taken together, the Group companies over which we performed our audit procedures accounted for
100% of the absolute profit before tax (i.e. the sum of the numerical values without regard to whether
they were profits or losses for the relevant reporting units) and 100% of revenue.
Key audit matters
Key audit matter
Carrying value of available for sale investment and
intangible assets
How our audit addressed the key audit matter
The Group had intangibles of US$8,054,947 at the
year ended 31 December 2017 (31 December 2016:
US$6,925,002).
Tested management’s assessment of indicators of
impairment by considering various sources of
internal and external information.
The Directors have confirmed all intangibles, were
correctly recognised.
IAS 36 Impairment of assets (“IAS 36”) states that
assets must be assessed
indicators of
impairment at each reporting period, for all cash‐
generating units (“CGUs”). Should such indicators
exist the recoverable amount of the asset will be
compared to the carrying value, and if the carrying
value exceeds
the
recoverable amount,
difference is recorded as an impairment loss.
the
for
The investment held in Alpha Prospects has been
revalued in the year to US$786,874. The revaluation
has been assessed and the reasoning behind the
revaluation
corroborated with
management.
been
has
Refer to Note 1 and Note 15 to the Financial
Statements for discussion of the related accounting
policy.
Compared management’s recoverable amounts and
valuation to third party valuation reports for
Timberlands business.
We considered whether the component of the
Group was expected to be profit making and had an
ability to trade successfully into the future.
Confirmed whether all assets which
remain
capitalised are included in future budgets and, if
they are not, understanding the basis by which
management anticipate being able to recover the
amounts that have been capitalised.
Lyubomi Forestry CGU impairment review has been
performed by management. The remaining useful
life on contractual relationships
is 46 years.
Sensitivity analysis has been performed on the
Lyubomi impairment.
Management has prepared a financial model for
CoalSwitch. This shows positive economics of the
CoalSwitch technology going forward. The key
model inputs have been assessed.
We tested management’s assumption that no
impairment existed by carrying out sensitivity
analysis through changing the assumptions used
and re‐running the cash flow forecast.
Going concern assumption
The Group is dependent upon its ability to generate
sufficient cash flows to meet continued operational
costs and hence continue trading.
Evaluated the suitability of management’s model
for the forecast.
18
ACTIVE ENERGY GROUP PLC
the
considered
cash
The Directors have
requirements of the business for the following 12
months. As part of this process, they have taken
into account existing liabilities, along with detailed
operating cashflow requirements. The projections
prepared include ongoing running costs of the
Group and committed expenditure at the date of
approving the financial statements.
The forecast includes a number of assumptions
related to future cash flows and associated risks.
Our audit work has focused on evaluating and
challenging
these
impact on the forecast
assumptions and their
period.
reasonableness
the
of
Specifically we obtained, challenged and assessed
and
concern
managements
performed procedures including:
forecast
going
The Group's primary revenue generating business
segment, the Ukrainian wood fibre business, was
discontinued during 2017. As a result this unit has
not generated any revenues in 2018. Following the
discontinuance of this operating segment, the
group has focused its efforts on the CoalSwitch and
Forestry and Natural Resources business segments.
Neither of these business segments have generated
material revenues at the date of signing these
financial statements.
The Directors have identified a variety of potential
sources of funds including issue of additional equity
and/or debt, shareholder loans, tax credits and sale
In addition, the
of
Directors have identified additional cost reductions
which may be implemented if necessary.
Company loans to subsidiaries
investments and/or plant.
The Company has amounts due from group
companies US$13,629,890 (2016: US$275,589).
The directors have confirmed these
recoverable.
loans are
Verifying the consistency of key
inputs
relating to future costs to other financial
information obtained
and operational
during the audit;
Assessed the reasonableness of expenses
and costs established;
Corroborated with management relating to
future cash inflows.
the
reviewed
We
latest management
accounts to gauge the financial position.
We reviewed the carrying value of the investments
and
loans to fellow subsidiaries. The review
considered the current position of the subsidiaries,
the future outlook and forecasts prepared by
management.
Management have performed impairment reviews
relating to the intangible assets.
We reviewed the subsidiary accounts and forecasts
and have assessed the financial position of the
subsidiaries.
We have also discussed payments of the loans with
the directors to confirm recoverability.
We have also assessed the impairment reviews
performed by management as set out under the
impairment review work on
intangibles noted
above.
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative
thresholds for materiality. These, together with qualitative considerations, helped us to determine the
scope of our audit and the nature, timing and extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the effect of misstatements, both individually and
in aggregate on the financial statements as a whole.
19
ACTIVE ENERGY GROUP PLC
Based on our professional judgement, we determined materiality for the financial statements as a whole
as follows:
Overall materiality
How we determined it
Rationale for
benchmark applied
Group financial statements
US$400,000 (31 December 2016:
US$190,000).
Based on the average of 10% of
loss before tax and 1% of gross
assets.
We believe that loss before tax is
a primary measure used by
shareholders
in assessing the
performance of the Group whilst
gross asset values and revenue
are a representation of the size
of the Group; both are generally
accepted auditing benchmarks.
Company financial statements
US$290,000 (31 December 2016:
US$190,000).
Based on the average of 10% of
loss before tax and 1% of gross
assets.
We believe that loss before tax is
a primary measure used by
shareholders
the
performance of
the Company
whilst gross asset values are a
representation of the size of the
Company; both are generally
accepted auditing benchmarks.
in assessing
For each component in the scope of our Group audit, we allocated a materiality that is less than our
overall Group materiality. The range of materiality allocated across components is ranged from US$8,000
and US$290,000.
We agreed with the Audit Committee that we would report to them misstatements identified during our
audit above US$20,000 (Group audit) (31 December 2016: US$9,500) and US$14,500 (Company audit) (31
December 2016: US$9,500)as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement
in the financial statements. In particular, we looked at where the directors made subjective judgements,
for example in respect of significant accounting estimates that involved making assumptions and
considering future events that are inherently uncertain. As in all of our audits we also addressed the risk
of management override of internal controls, including evaluating whether there was evidence of bias by
the directors that represented a risk of material misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial statements as a whole, taking into account the structure of the Group and the
Company, the accounting processes and controls, and the industry in which they operate.
The Group financial statements are a consolidation of 6 reporting units, comprising the Group’s operating
businesses and holding companies.
We performed audits of the complete financial information of the Group and Parent Company of Active
Energy Group Plc reporting units, which were individually financially significant and accounted for 100% of
the Group’s revenue and 100% of the Group’s absolute profit before tax (i.e. the sum of the numerical
values without regard to whether they were profits or losses for the relevant reporting units). We also
performed specified audit procedures over other intangible assets, as well as certain account balances
and transaction classes that we regarded as material to the Group at the 6 reporting units.
The Group engagement team performed all audit procedures, with the exception of the audit of Nikwood
which was performed by a component auditor in Ukraine.
20
ACTIVE ENERGY GROUP PLC
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.
In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable
legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the 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.
We have nothing to report in respect of the following matters in relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for
our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and
returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 15, 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 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.
21
ACTIVE ENERGY GROUP PLC
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.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters which we are required to address
We were appointed as auditors by the Company at the Annual General Meeting on 24 July 2017. Our total
uninterrupted period of engagement is 2 years, covering the periods ending to 31 December 2017.
The non‐audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the
parent company and we remain independent of the group and the parent company in conducting our
audit. Our audit opinion is consistent with the additional report to the audit committee.
Use of this report
This report, including the opinions, has been prepared for and only for the parent company’s members as
a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
Sanjay Parmar
Senior Statutory Auditor
For and on behalf of
Jeffreys Henry LLP (Statutory Auditors)
Finsgate
5‐7 Cranwood Street
London EC1V 9EE
18 June 2018
22
ACTIVE ENERGY GROUP PLC
CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2017
REVENUE
Cost of sales
GROSS PROFIT
R&D expenditure
Administrative expenses
OPERATING LOSS
Finance income
Finance costs
Share of loss of associate
(Loss) from continuing operations
Income tax credit on continuing operations
(Loss)/profit from discontinued operations
LOSS FOR THE PERIOD
Loss attributable to Non‐controlling Interest
Note
3
5
6
6
13
8
7
Excluding
Discontinued
operations
2016
US$
‐
‐
‐
‐
(1,956,795)
(1,956,795)
18,152
(1,784,170)
(305,151)
(4,027,964)
8,985
1,528,339
(2,490,640)
‐
2017
US$
‐
‐
‐
(2,389,807)
(2,870,721)
(5,260,528)
‐
(3,031,054)
‐
(8,291,582)
355,491
(7,284,981)
(15,221,072)
437,110
Loss attributable to the Parent Company
(14,783,962)
(2,490,640)
OTHER COMPREHENSIVE INCOME/(EXPENSE):
Items that may be subsequently reclassified to profit
or loss
Exchange differences on translation of foreign
operations
Exchange differences on translation of associate
Revaluation of assets held for resale
137,734
‐
331,585
(106,675)
189,450
‐
Total other comprehensive income
469,319
82,775
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
ATTRIBUTABLE TO OWNERS OF THE PARENT
(14,314,643)
(2,407,865)
(Loss) per share (US cent) – continuing operations
(Loss)/profit per share (US cent) – discontinued
operations
Basic and Diluted (loss) per share (US cent)
9
(0.90)
(0.88)
(1.78)
(0.61)
0.23
(0.38)
The Company has elected to take the exemption under section 408 of the Companies Act 2006
not to present the parent Company income statement.
The notes on pages 28 to 67 form part of these financial statements.
23
ACTIVE ENERGY GROUP PLC
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017
NON‐CURRENT ASSETS
Intangible assets
Property, plant and equipment
Investment in subsidiaries
Investment in associate
Loan to joint venture partner
Available for sale financial assets
CURRENT ASSETS
Inventory
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Finance leases falling due in less
than one year
Income tax liabilities
NON‐CURRENT LIABILITIES
Deferred income tax liabilities
Finance leases falling due in more
than one year
Loans and borrowings
TOTAL LIABILITIES
NET ASSETS/(LIABILITIES)
Note
Group
2017
US$
8,054,947
3,791,611
‐
‐
‐
786,873
12,633,431
10
11
12
13
14
15
16
17
18
20,349
517,902
142,049
680,300
13,313,731
Group
2016
US$
6,925,002
2,562,145
‐
1,282,627
1,911,121
83,455
12,764,350
424,998
2,650,332
2,121,841
5,197,171
17,961,521
19
22
21
1,944,676
‐
3,021,152
7,062,730
89,607
‐
2,034,283
‐
2,488
10,086,370
Company
2017
US$
‐
‐
58,427
‐
‐
786,873
845,300
‐
13,772,668
135,706
13,908,374
14,753,674
1,122,458
‐
‐
‐
1,122,458
Company
2016
US$
2,746,396
262
2,040,292
2,333,177
1,911,121
83,455
9,114,703
‐
324,102
2,041,134
2,365,236
11,479,939
1,408,036
4,123,600
‐
‐
5,531,636
20
384,169
393,137
‐
‐
205,993
21
22 13,224,252
13,814,414
15,848,697
(2,534,966)
‐
580,000
973,137
11,059,507
6,902,014
‐
13,224,252
13,224,252
14,346,710
406,964
23
14,493,246
14,740,478
2,350,175
108,080
(779,222)
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Share capital
Share premium
Merger reserve
Foreign exchange reserve
Own shares held reserve
Convertible debt / warrant
reserve
Retained (loss)
Non‐controlling Interest
TOTAL EQUITY
The financial statements were approved and authorised for issue by the Directors on 18 June
2018 and were signed on their behalf by:
2,930,209
(35,950,264)
(427,668)
(2,534,966))
12,621,134
13,469,916
2,350,175
(29,654)
(779,222)
14,493,246
14,740,478
2,350,175
(403,220)
(779,222)
2,930,209
(32,924,702)
‐
406,964
1,075,301
(21,805,636)
‐
6,902,014
Michael Rowan
Executive Chairman
Company Number 03148295
The notes on pages 28 to 67 form part of these financial statements.
24
‐
580,000
580,000
6,111,636
5,368,303
12,621,134
13,469,916
2,350,175
(1,023,565)
(779,222)
1,075,301
(22,345,436)
‐
5,368,303
ACTIVE ENERGY GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2017
Note
Group
2017
US$
Group
2016
US$
Company
2017
US$
Company
2016
US$
26
(5,821,095)
(6,684)
(982,318)
(285,563)
(13,717,090)
548,626
‐
‐
(5,827,779)
(1,267,881)
(13,717,090)
548,626
Cash (outflow)/inflow from
operations
Income tax paid
Net cash (outflow)/inflow from
operating activities
Cash flows from investing
activities
Purchase of intangible assets
(1,438,017)
(163,257)
‐
Acquisition of investment
Contribution to associate
Loan to joint venture partner
Purchase of property, plant and
equipment
Sale of property, plant and
equipment
Finance income
Net cash outflow from investing
activities
Cash flows from financing
activities
Issue of equity share capital, net
of share issue costs
Loans raised
Finance expenses
Net cash inflow from financing
activities
Net increase/(decrease) in cash
and cash equivalents
Cash and cash equivalents at
beginning of the year
Exchange (losses)/gains on cash
and cash equivalents
Cash and cash equivalents at
end of the year
‐
(58,427)
‐
‐
‐
(255,714)
(1,351,904)
(3,923,481)
(285,113)
221,504
‐
58,020
18,152
(163,257)
(581,801)
(255,714)
(1,351,904)
‐
‐
‐
‐
‐
‐
‐
‐
(5,139,994)
(1,979,816)
(58,427)
(2,352,676)
3,142,674
7,537,671
(1,693,031)
2,921,762
837,667
(97,095)
3,142,674
10,181,201
(1,454,191)
2,921,762
957,777
(100,389)
8,987,314
3,662,334
11,869,684
3,779,150
(1,980,459)
414,637
(1,905,833)
1,975,100
2,121,841
1,643,855
2,041,134
43,335
667
63,349
405
22,699
18
142,049
2,121,841
135,706
2,041,134
The notes on pages 28 to 67 form part of these financial statements.
25
ACTIVE ENERGY GROUP PLC
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Share
capital
Share
premium
Merger
reserve
Foreign
exchange
reserve
Own shares
held
reserve
US$
US$
US$
US$
US$
Convertible
debt and
warrant
reserve
US$
Retained
earnings
US$
Non‐
controlling
Interest
US$
At 31 December 2015
Loss for the year
Other comprehensive income
Issue of share capital
Own shares reserve
Share based payments
At 31 December 2016
Loss for the year
Other comprehensive income
Issue of share capital
Embedded derivative on issue of
CLN
Share based payments
Minority Interest
At 31 December 2017
10,099,329
‐
‐
2,521,805
‐
‐
12,621,134
‐
‐
1,872,112
8,603,703
‐
‐
4,866,213
‐
‐
13,469,916
‐
‐
1,270,562
2,350,175
‐
‐
‐
‐
‐
2,350,175
‐
‐
‐
(112,429)
‐
82,775
‐
‐
‐
(29,654)
‐
137,734
‐
(1,229,630)
‐
‐
‐
450,408
‐
(779,222)
‐
‐
‐
1,075,301
‐
‐
‐
‐
‐
1,075,301
‐
‐
‐
(19,946,461)
(2,490,640)
‐
‐
‐
631,465
(21,805,636)
(15,221,072)
331,585
‐
‐
‐
‐
‐
‐
1,854,908
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
14,493,246
‐
‐
14,740,478
‐
‐
2,350,175
‐
‐
108,080
‐
‐
(779,222)
‐
‐
2,930,209
307,749
437,110
(35,950,264)
‐
(427,668)
(427,668)
Total equity
US$
839,988
(2,490,640)
82,775
7,388,018
450,408
631,465
6,902,014
(15,221,072)
469,319
3,142,674
1,854,908
307,749
9,442
(2,534,966)
The purpose and nature of each of the above reserves is described in note 25.
The notes on pages 28 to 67 form part of these financial statements.
26
ACTIVE ENERGY GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2017
Share
capital
Share
premium
Merger
reserve
Foreign
exchange
reserve
Own shares
held reserve
Convertible
debt and
warrant reserve
Retained
earnings
Total equity
US$
US$
US$
US$
US$
US$
US$
US$
At 31 December 2015
Loss for the year
Other comprehensive income
Issue of share capital
Own shares reserve
Share based payments
At 31 December 2016
Loss for the year
Other comprehensive income
Issue of share capital
Embedded derivative on issue
of CLN
Share based payments
10,099,329
‐
‐
2,521,805
‐
‐
12,621,134
‐
‐
1,872,112
‐
‐
8,603,703
‐
‐
4,866,213
‐
‐
13,469,916
‐
‐
1,270,562
‐
‐
2,350,175
‐
‐
‐
‐
‐
2,350,175
‐
‐
‐
(399,473)
‐
(624,092)
‐
‐
‐
(1,023,565)
‐
620,345
‐
‐
‐
‐
‐
(1,229,630)
‐
‐
‐
450,408
‐
(779,222)
‐
‐
‐
‐
‐
1,075,301
‐
‐
‐
‐
‐
1,075,301
‐
‐
‐
1,854,908
(15,683,653)
(7,293,248)
‐
‐
‐
631,465
(22,345,436)
(11,218,600)
331,585
‐
4,815,752
(7,293,248)
(624,092)
7,388,018
450,408
631,465
5,368,303
(11,218,600)
951,930
3,142,674
‐
1,854,908
‐
307,749
307,749
406,964
At 31 December 2017
14,493,246
14,740,478
2,350,175
(403,220)
(779,222)
2,930,209
(32,924,702)
The purpose and nature of each of the above reserves is described in note 25.
The notes on pages 28 to 67 form part of these financial statements.
27
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. ACCOUNTING POLICIES
General information
Active Energy Group plc is a company incorporated in England and Wales and quoted on the AIM
market of the London Stock Exchange. The address of the registered office is disclose on page 1 of
the annual report. The principal activity of the Group is described in the Strategic Report.
Basis of preparation
The principal accounting policies adopted in preparation of the financial statements are set out
below. The policies have been consistently applied to all the years presented, unless otherwise
stated.
Both the Company financial statements and the Group financial statements have been prepared and
in accordance with International Financial Reporting Standards,
approved by the Directors
International Accounting Standards and IFRIC interpretations (collectively IFRS) as adopted by the
European Union, and with those parts of the Companies Act 2006 applicable to companies reporting
under IFRS. The consolidated financial statements have been prepared on the historical cost basis, as
modified by the revaluation of property, plant and equipment, available for sale financial assets, and
financial assets and liabilities, including derivative financial instruments, at fair value through profit
or loss.
The preparation of financial statements in compliance with IFRS requires the use of certain critical
accounting estimates. It also requires Group management to exercise judgment in the most
appropriate application in applying the Group's accounting policies. The areas where significant
judgments and estimates have been made in preparing the financial statements and their effect are
disclosed in note 29.
Going concern
The Group's primary revenue generating business segment, the Ukrainian wood fibre business, was
discontinued during 2017. As a result this unit has not generated any revenues in 2018. Following the
discontinuance of this operating segment, the group has focused its efforts on the CoalSwitch™ and
Forestry and Natural Resources business segments. Neither of these business segments have
generated material revenues at the date of signing these financial statements.
The Directors have considered the cash requirements of the business for the following 12 months. As
part of this process, they have taken into account existing liabilities, along with detailed operating
cash flow requirements. The projections prepared include ongoing running costs of the Group and
committed expenditure at the date of approving the financial statements.
The Directors have identified a variety of potential sources of funds including issue of additional
equity and/or debt, shareholder loans, tax credits and sale of investments and/or plant. In addition,
the Directors have identified additional cost reductions which may be implemented if necessary.
Taking this into account and following a detailed review by the Directors of the Group’s cash flow
requirements, the directors believe that the Group will have sufficient cash resources to continue to
trade for a period of at least 12 months from the date that the financial statements are signed.
Consequently, the financial statements have been prepared on a going concern basis.
However, as of the date of signing these financial statements, none of the potential sources of funds
have been finalised and therefore there can be no guarantee that further funds will be received.
These circumstances indicate the existence of a material uncertainty which may cast significant
doubt on the Company’s ability to continue as a going concern.
28
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. ACCOUNTING POLICIES (continued)
Standards, interpretations and amendments to existing standards
At the date of authorisation of these financial statements, the IASB and IFRS Interpretations
Committee have issued standards, interpretations and amendments which are applicable to the
Company. These standards and interpretations are not effective for, and have not been adopted by
the Company in the preparation of these financial statements. Management has not yet fully
assessed the impact of these new standards.
IFRS 1: First‐time Adoption ‐ Annual improvements 2014 – 2016 cycle (from 1 January 2018)
IFRS 2: Amendments Share based payments – classification and measurement of share based
payment transactions (from 1 January 2018)
IFRS 4: Insurance Contracts – interaction of IFRS 4 and IFRS 9 (from 1 January 2018)
IFRS 9: Financial Instruments – replaces IAS 39 in its entirety (from 1 January 2018)
IFRS 15: Revenue from Contracts with Customers (from 1 January 2018)
IFRS 16: Leases – replaces IAS 17 in its entirety (from 1 January 2019)
IAS 28 Amendments: Investments in Associates and Joint Ventures – amendments resulting
from annual improvements 2014‐2016 cycle ‐ clarifying certain fair value measurements
(from 1 January 2018)
IAS 39 Amendments: Financial Instruments ‐Recognition and measurement. Amendments to
permit an entity to elect to continue to apply the hedge accounting requirements in IAS 39
for a fair value hedge of the interest rate exposure of a portion of a portfolio of financial
assets or financial liabilities when IFRS 9 is applied and to extend the fair value option to
certain contracts that meet the ‘own use’ scope exception (from 1 January 2018)
IAS 40 Amendments: Investment Property – amendments to clarify transfers of property to
or from investment property (from 1 January 2018)
IFRIC 22 Amendments: Foreign currency transactions and advance consideration‐
amendments to clarify the accounting for transactions that include the receipt for payment
of advance consideration in a foreign currency (from 1 January 2019)
29
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. ACCOUNTING POLICIES (continued)
Basis of consolidation
The financial information incorporates the results of the Company and entities controlled by the
Company (its subsidiaries). Control is achieved when the Group has power over relevant activities, is
exposed, or has rights, to variable returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. The consolidated financial statements present
the financial results of the Company and its subsidiaries (the Group) as if they formed a single entity.
Where necessary, adjustments are made to the results of subsidiaries to bring the accounting policies
used into line with those used by the Group. All intra‐Group transactions, balances, income and
expenses are eliminated on consolidation.
In the Company's statement of financial position, investments in subsidiaries are stated at cost less
provisions for any permanent diminution in value.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, and represents
amounts receivable for goods supplied, stated net of discounts and value added taxes. The Group
recognises revenue when the following conditions have been satisfied:
the Group has transferred to the buyer the significant risks and rewards of ownership;
the Group does not retain either the continuing managerial involvement normally associated with
ownership or effective control over the goods;
the amount of revenue can be reliably measured;
it is probable that the economic benefits associated with the transaction will flow to the Group;
and
the costs to be incurred in respect of the transaction can be reliably measured.
Goodwill and business combinations
On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at
their fair values at the date of acquisition. Any excess of cost of acquisition over the fair values of the
identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition
below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited
to the income statement in the period of acquisition.
When the consideration transferred by the Group in a business combination includes assets or
liabilities from a contingent consideration arrangement, the contingent consideration is measured at
its acquisition date fair value and included as part of the consideration paid. Changes in the fair value
of the consideration that qualify as measurement period adjustments are adjusted retrospectively,
with corresponding adjustments against goodwill.
Goodwill arising on consolidation is recognised as an intangible asset and reviewed for impairment at
least annually by comparing the carrying value of the asset to the recoverable amount. Any
impairment is recognised immediately in profit or loss and is not subsequently reversed.
Associates
Where the Group has the power to participate in (but not control) the financial and operating policy
decisions of another entity, it is classified as an associate. Associates are initially recognised in the
consolidated statement of financial position at cost. Subsequently associates are accounted for using
the equity method, where the Group's share of post‐acquisition profits and losses and other
comprehensive income is recognised in the consolidated statement of profit and loss and other
comprehensive income (except for losses in excess of the Group's investment in the associate unless
there is an obligation to make good those losses).
30
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. ACCOUNTING POLICIES (continued)
Profits and losses arising on transactions between the Group and its associates are recognised only to
the extent of unrelated investors' interests in the associate. The investor's share in the associate's
profits and losses resulting from these transactions is eliminated against the carrying value of the
associate.
Any premium paid for an associate above the fair value of the Group's share of the identifiable
assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount
of the associate. Where there is objective evidence that the investment in an associate has been
impaired the carrying amount of the investment is tested for impairment in the same way as other
non‐financial assets.
Joint arrangements
Profits and losses arising on transactions between the Group and its joint ventures are recognised
only to the extent of unrelated investors' interests in the joint venture. The investor's share in the
Joint Venture profits and losses resulting from these transactions is eliminated against the carrying
value of the Joint Venture. Any premium paid for an investment in a joint venture above the fair
value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is
capitalised and included in the carrying amount of the investment in joint venture. Where there is
objective evidence that the investment in a joint venture has been impaired the carrying amount of
the investment is tested for impairment in the same way as other non‐financial assets.
The Group accounts for its interests joint operations by recognising its share of assets, liabilities,
revenues and expenses in accordance with its contractually conferred rights and obligations.
Impairment of non‐financial assets (excluding inventories, investment properties and deferred tax
assets)
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are
undertaken annually at the financial year end. Other non‐financial assets are subject to impairment
tests whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of
value in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment
test is carried out on the smallest group of assets to which it belongs for which there are separately
identifiable cash flows; its cash generating units (“CGUs”). Goodwill is allocated on initial recognition
to each of the Group's CGUs that are expected to benefit from the synergies of the combination
giving rise to the goodwill. Impairment charges are included in profit or loss, except to the extent
they reverse gains previously recognised in other comprehensive income. An impairment loss
recognised for goodwill is not reversed.
Intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a
straight‐line basis over their useful economic lives.
Intangible assets are recognised on business combinations if they are separable from the acquired
entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are
arrived at by using appropriate valuation techniques (see note 29 related to critical estimates and
judgements below).
31
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. ACCOUNTING POLICIES (continued)
Intangible assets
Internally generated intangible fixed assets are recognised if they meet the requirements set out by
international accounting standards. Specifically,
the asset must be separately identifiable that is to say that either it is capable of being separated
or divided from the entity and sold, transferred, licensed, rented or exchanged; or it arises from
contractual or other legal rights, regardless of whether those rights are transferable or separable
from the entity or from other rights and obligations.
The cost of the asset can be measured reliably;
the technical feasibility of completing the intangible asset;
the Group intends and is able to complete the intangible asset and use or sell it;
the intangible asset will generate probable future economic benefits;
there are available and adequate technical, financial and other resources to complete and to use
or sell the intangible asset.
Expenditure attributable to the intangible asset is measurable.
The significant intangibles recognised by the Group, their useful economic lives and the methods
used to determine the cost of intangibles acquired in a business combination are disclosed in note
10.
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less accumulated depreciation and
any recognised impairment loss. Cost includes the purchase price and all directly attributable costs.
Depreciation is provided at the following annual rates in order to write off each asset over its
estimated useful life.
Plant and equipment
Furniture and office equipment
– 2 to 10 years straight line
– 2 to 5 years straight line
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of
each reporting period.
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable
value. Cost is determined using the first‐in, first‐out (FIFO) method. Cost comprises all costs of
purchase, costs of conversion and other costs incurred in bringing the inventories to their present
location and condition. Net realisable value is the estimated selling price in the ordinary course of
business, less applicable selling expenses.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision‐maker. The chief operating decision maker has been identified as the
management team including Executive Directors.
Financial instruments
The Group classifies its financial instruments into one of the categories discussed below, depending
on the purpose for which the asset was acquired. The Group has not classified any of its financial
assets as held to maturity, or at fair value through profit or loss.
The accounting policy for each category is as follows:
32
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. ACCOUNTING POLICIES (continued)
Loans and receivables
The Group's loans and receivables comprise trade and other receivables, loan to joint venture
partner and cash and cash equivalents in the statement of financial position. These assets are non‐
derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are initially recognised at fair value plus transaction costs that are directly attributable
to their acquisition or issue, and are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment. Cash and cash equivalents includes cash in hand,
deposits held at call with banks, other short term highly liquid investments with original maturities of
three months or less, and for the purpose of the statement of cash flows, bank overdrafts.
Available for sale financial assets
Available for sale financial assets are non‐derivatives that are either designated in this category or
not classified in any of the other categories. They are initially recognised at fair value plus transaction
costs that are directly attributable to their acquisition or issue, and are subsequently carried at fair
value with changes in fair value recognised in other comprehensive income. When available for sale
financial assets are sold or impaired, the accumulated fair value adjustments recognised in equity are
transferred to the income statement. Dividends on available for sale equity instruments are
recognised in the income statement as part of other income when the Group’s right to receive
payments is established.
Other financial liabilities
Other financial liabilities include the following items:
Borrowings are initially recognised at fair value net of any transaction costs directly attributable to
the issue of the instrument. These are subsequently measured at amortised cost using the
effective interest rate method, which ensures that any interest expense over the period to
repayment is at a constant rate on the balance of the liability carried in the statement of financial
position. The interest expense includes initial transaction costs and premiums payable on
redemption, as well as any interest or coupon payable while the liability is outstanding.
Trade payables and other short‐term monetary liabilities are initially recognised at fair value and
subsequently carried at amortised cost using the effective interest method.
Taxation
Current taxes are based on the results shown in the financial statements and are calculated
according to local tax rules, using tax rates enacted or substantively enacted by the year‐end date.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in
the consolidated statement of financial position differs from its tax base, except for differences
arising on:
the initial recognition of goodwill;
the initial recognition of an asset or liability in a transaction which is not a business combination
and at the time of the transaction affects neither accounting or taxable profit; and
investments in subsidiaries and jointly controlled entities where the Group is able to control the
timing of the reversal of the difference and it is probable that the difference will not reverse in the
foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable
profit will be available to utilise the difference. The amount of the asset or liability is determined
using tax rates that have been enacted or substantively enacted by the reporting date and are
expected to apply when the deferred tax liabilities/assets are settled/recovered.
33
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. ACCOUNTING POLICIES (continued)
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset
current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the
same tax authority on either:
the same taxable group company; or
different Group entities which intend either to settle current tax assets/liabilities on a net basis, or
to realise the assets and settle the liabilities simultaneously, in each future period in which
significant amounts of deferred tax assets or liabilities are expected to be settled/recovered.
Foreign currencies
Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which they operate (their "functional currency").
The Company and Consolidated financial statements are presented in United States Dollar (“US
Dollar”, “US$”), which is the Group’s presentation currency as the Group’s activities are ultimately
linked to the US Dollar. The Company’s functional currency is Pound Sterling.
Transactions entered into by Group entities in a currency other than their functional currency are
recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
On consolidation, the results of overseas operations are translated into the Group’s presentation
currency, US Dollars, at rates approximating to those ruling when the transactions took place. All
assets and liabilities of overseas operations, including goodwill arising on the acquisition of those
operations, are translated at the rate ruling at the reporting date. Differences arising on translating
the opening net assets at opening rate and the results of overseas operations at actual rate are
recognised in other comprehensive income and accumulated in the foreign exchange reserve.
Exchange differences recognised in the statement of comprehensive income of Group entities'
separate financial statements on the translation of long‐term monetary items forming part of the
Group's net investment in the overseas operation concerned are reclassified to the foreign exchange
reserve on consolidation. On disposal of a foreign operation, the cumulative exchange differences
recognised in the foreign exchange reserve relating to that operation up to the date of disposal are
transferred to the consolidated statement of comprehensive income as part of the profit or loss on
disposal.
Convertible debt
The proceeds received on issue of the Group's convertible debt are allocated into their liability and
equity components. The amount initially attributed to the debt component equals the discounted
cash flows using a market rate of interest that would be payable on a similar debt instrument that
does not include an option to convert. Subsequently, the debt component is accounted for as a
financial liability measured at amortised cost until extinguished on conversion or maturity of the
bond. The remainder of the proceeds are allocated to the conversion option and are recognised in
the "Convertible debt reserve" within shareholders' equity, net of income tax effects.
Leased assets
Where substantially all of the risks and rewards incidental to ownership of a leased asset have been
transferred to the Group (a "finance lease"), the asset is treated as if it had been purchased outright.
The amount initially recognised as an asset is the lower of the fair value of the leased property and
the present value of the minimum lease payments payable over the term of the lease. The
corresponding lease commitment is shown as a liability. Lease payments are analysed between
capital and interest.
34
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
1. ACCOUNTING POLICIES (continued)
Where substantially all of the risks and rewards incidental to ownership are not transferred to the
Group (an "operating lease"), the total rentals payable under the lease are charged to the
consolidated income statement on a straight‐line basis over the lease term.
Share based payments
Where employees receive remuneration in the form of shares or share options, the fair value of the
share‐based employee compensation arrangement at the date of the grant is recognised as an
employee benefit expense in the consolidated income statement. The total expense to be
apportioned over the vesting period of the benefit is determined by reference to the fair value
(excluding the effect of non‐market‐based vesting conditions) at the date of the grant. The
assumptions underlying the number of awards expected to vest are subsequently adjusted for the
effects of non‐market‐based vesting to reflect the conditions prevailing at the year‐end date. Fair
value is measured by the use of a Monte Carlo (JSOP options) or Black Scholes (other options)
simulations. The expected life used in the model has been adjusted, based on management's best
estimate, for the effects of the non‐transferability, exercise restrictions and behavioural
considerations.
Where equity instruments are granted to persons other than employees, the consolidated income
statement is charged with the fair value of goods and services received; except where that fair value
cannot be estimated reliably, in which case they are measured at the fair value of the equity
instruments granted, measured at the date the entity obtains the goods or the counterparty renders
the service.
Own shares held
Consideration paid/received for the purchase/sale of shares held in escrow or in trust for the benefit
of employees is recognised directly in equity. The nominal value of such shares held is presented
within the “own shares held” reserve. Any excess of the consideration received on the sale of the
shares over the weighted average cost of the shares sold is credited to retained earnings.
Neither the purchase nor sale of own shares leads to a gain or loss being recognised in the Group
consolidated income statement.
Investment in subsidiaries
Investments in subsidiaries are stated at cost less provision for impairment in the Company financial
statements.
2. SEGMENTAL INFORMATION
The Group reports two operating continuing business segments:
"Forestry & Natural Resources" denotes the Group’s initiatives to secure ownership of the entire
timber supply chain from forest to finished product
"CoalSwitch™/PeatSwitch denotes the Group’s renewable wood pellet and soil replacement
business.
Revenues and costs associated with the Ukrainian Wood Fibre business have been reclassified as
discontinued operations.
Factors that management used to identify the Group's reportable segments
The Group's reportable segments are strategic business units that offer different products. During the
business development stage they are managed separately because each business operates in
different markets and locations. In future it is likely that these business segments may be combined
into single operations and reporting structures will be revisited accordingly.
35
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2. SEGMENTAL INFORMATION (continued)
Measurement of operating segment profit or loss
The Group evaluates segmental performance on the basis of profit or loss from operations calculated
in accordance with IFRS but excluding corporate overheads, non‐recurring losses, such as goodwill
impairment, the effects of share‐based payments, and joint venture profit and losses.
2017
Forestry &
Natural
Resources
US$
‐
‐
‐
‐
‐
2016
Forestry &
Natural
Resources
US$
‐
(349,989)
(349,989)
8,969
(341,020)
2017
2017
CoalSwitch™
/ PeatSwitch
US$
‐
(3,260,588)
(3,260,588)
346,522
(2,914,066)
Total
US$
‐
(3,260,588)
(3,260,588)
346,522
(2,914,066)
2016
2016
Coalswitch™
/ Peatswitch
US$
‐
‐
‐
‐
‐
Total
US$
‐
(349,989)
(349,989)
8,969
(341,020)
Total Revenue
Operating segment (loss)
Segment (loss) before tax
Tax charge
Segment (loss) for the year
Total Revenue
Operating segment (loss)
Segment (loss) before tax
Tax charge
Segment (loss) for the year
Profits and losses associated with the Ukrainian wood fibre business have been reclassified as
discontinuing in 2017 and have therefore be excluded from the above analysis. All other finance costs
relate to Group funding and are not allocated to an individual segment.
Capital expenditure relating to the CoalSwitch™/PeatSwitch segment was US$3,877,226 and capital
expenditure relating to the Forestry and natural resource segment was US$896,957.
36
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
2. SEGMENTAL INFORMATION (continued)
Reconciliation of reportable segment profit or loss, assets and liabilities to the Group’s corresponding
amounts are as follows:
Total (loss) from reportable segments
Unallocated amount ‐ corporate expenses
Unallocated amount ‐ finance income
Unallocated amount ‐ finance expense
Share based payments
Discontinued operations
Loss for the period
An analysis of non‐current assets by location of assets is given below:
United Kingdom
Ukraine
Canada
United States
3. REVENUE
2017
US$
2016
US$
(2,914,066)
(1,683,222)
‐
(3,031,054)
(307,749)
(7,284,981)
(15,221,072)
(341,020)
(1,280,476)
18,152
(1,784,170)
(631,465)
1,528,339
(2,490,640)
2017
US$
2016
US$
4,741,653
2,170,583
2,179,584
3,541,611
12,633,431
6,623,193
4,858,530
1,282,627
‐
12,764,350
All revenues relate to the Ukrainian wood fibre business have been reclassified as discontinued and
therefore are not shown on the face of the income statement.
Group
Sale of goods
2017
US$
2016
US$
1,323,300
19,196,559
37
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
3. REVENUE (continued)
The following table analyses revenue by location of customer. All these revenues relate to the
Ukrainian wood fibre business and have therefore been classified as discontinued in the 2017 financial
statements.
Turkey
Ukraine
2017
US$
856,869
466,331
1,323,200
2016
US$
19,186,708
9,851
19,196,559
Revenue derived from a single external customer amounted to US$856,869 (2016:US$19,186,708),
which relate to the Ukrainian Wood Fibre segment.
4. EMPLOYEE COSTS AND DIRECTORS
Group
Wages and salaries
Social security costs
Share based payments – others
Share based payments – directors (note 24)
The average monthly number of employees during the year was as follows:
Directors
Administration
Production
2017
US$
496,861
73,959
570,820
59,240
248,509
878,569
2016
US$
1,137,321
80,418
1,217,739
75,756
555,709
1,849,204
2017
3
11
25
39
2016
4
14
32
50
Directors’ and key management personnel remuneration
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Group. During the period these were considered to be
the Directors of the Company listed on page 14.
Directors' emoluments
Compensation for the loss of office
Share based payments (note 24)
2017
US$
719,293
‐
719,293
248,509
967,802
2016
US$
667,161
16,940
684,101
555,709
1,239,810
The emoluments of the highest paid Director for the year, including non‐cash share based payments,
were US$328,853 (2016: US$797,457).
38
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
5. OPERATING LOSS
Group
The loss before income tax is stated after charging/(crediting):
2017
US$
2016
US$
Operating leases ‐ premises
Operating leases ‐ vehicles
Operating leases ‐ equipment
Amortisation of intangible assets
Depreciation
Loss / (profit) on disposal of fixed assets/discontinued operations
Auditors' remuneration ‐ parent company and consolidation
Auditors' remuneration ‐ subsidiaries
Auditors' remuneration ‐ taxation services
Share based payments
Foreign exchange (gains)/loss
6. FINANCE INCOME AND COSTS
Group
Finance income
Bank interest
Finance costs
Interest on convertible loan
Other loan interest and charges
Foreign exchange losses
Net finance costs
26,807
2,886
29,045
44,845
280,473
5,600,464
34,000
20,500
9,400
307,749
(754,703)
61,716
11,347
38,709
44,845
344,495
(58,020)
31,000
9,000
2,000
631,465
37,864
2017
US$
2016
US$
‐
18,152
958,299
929,083
1,143,672
160,447
671,069
952,654
3,031,054
1,784,170
Foreign exchanges losses primarily relate to movements in US$/Sterling exchange rates and resulting
movements in intercompany balances.
39
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
7. LOSS FROM DISCONTINUED OPERATIONS
During 2017 AEG plc discontinued its Wood fibre business in Ukraine. Details of the circumstances
surrounding this exit are provided in the Chairman's report and operational review. The results of
this business are disclosed as a single line item in the Group Income and Expenditure Statement in
accordance with IRFS5. Details of the results of these operations are shown below.
REVENUE
Cost of sales
GROSS PROFIT
Administrative expenses
OPERATING (LOSS)/PROFIT
Finance income
Finance costs
(Loss)/profit for the Period
Loss on sale of discontinued operations
Income tax
(Loss)/profit attributable to the Parent Company
2017
US$
1,323,200
(2,925,138)
(1,608,938)
(719,519)
2016
US$
19,196,559
(16,344,727)
2,851,832
(1,132,326)
(2,321,457)
641,126
‐
(1,680,331)
(5,600,464)
(4,186)
(7,284,981)
1,719,506
‐
(60,055)
1,659,451
‐
(131,112)
1,528,339
Discontinued operations cashflows from operating activities were US$124,081 outflow (2016:
inflow (2016:
US$1,177,035 outflow); cash flows from
US$282,215 outflow); and cashflows arising from financing activities were US$nil (2016: US$60,055
outflow).
investing activities were US$221,504
8.
INCOME TAX
Group
Current tax
Overseas tax charge on discontinued operations
R&D tax credit at 14.5% on continued operations
Deferred tax
Reversal of temporary differences
Total income tax (credit)/charge
Breakdown between continuing and discontinuing operations
Tax charge relating to discontinued operations
Tax (credit)/charge relating to continued operations
40
2017
US$
2016
US$
4,187
(346,522)
131,112
‐
(8,969)
(351,304)
(8,969)
122,143
4,187
(355,491)
(351,304)
131,112
(8,969)
122,143
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
8. TAXATION (continued)
Factors affecting the tax charge
The tax on the Group assessed for the year is higher than the standard rate of corporation tax in the
UK. The difference is explained below:
Loss before income tax
Standard rate of corporation tax
Loss before tax multiplied by standard rate of corporation tax
Effects of:
Difference between R&D tax credit rate (14.5%) and effective
rate
Non‐deductible expenses
Overseas tax rate difference from UK rate
Income not taxable
Accelerated depreciation
Losses carried forward
Current tax (credit)/charge
Tax charge relating to discontinued operations
Tax (credit) relating to Continued operations
2017
US$
2016
US$
(15,572,377)
19.25%
(2,997,683)
(2,368,513)
20%
(473,703)
113,516
1,553,856
4,883
(264,739)
15,839
1,223,022
(351,306)
4,187
(355,491)
‐
581,262
14,567
‐
‐
‐
122,126
131,112
(8,986)
The Finance Act 2017 confirmed that the main rate of corporation tax, which applies to most
companies subject to UK tax, will be reduced from the 19% rate applying from 1 April 2017 to 17%
from 1 April 2020.
Movements in the groups tax loss position can be summarised as follows:
Tax losses brought forward at 1 January 2017
Adjusted Loss per A/c's
Surrendered for R&D tax credit
US$
16,261,619
8,743,174
(2,389,807)
Tax losses carried forward at 31 December 2017
This equates to a potential deferred tax asset of $4,296,847 at the year‐end 2017, which has not
been recognised due to uncertainties regarding the recoverability of this balance.
22,614,986
41
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
8. TAXATION (continued)
Tax effects of amounts which are not deductible/(taxable) in calculating taxable income are as follows:
Intercompany loan written off
Loss on disposal of investments
Impairment of investment
Share based payments
Legal and professional fees
Revaluation of assets held for sale
Revaluation gains
Amortisation
Sundry items
2017
US$
399,295
184,206
848,402
59,242
70,556
63,830
(62,937)
‐
(8,738)
1,553,856
2016
US$
541,483
‐
‐
‐
30,717
‐
‐
8,969
93
581,262
9. LOSS PER SHARE
Basic and diluted loss per share is calculated by dividing the loss attributable to equity holders of the
company of US$14,783,962 (2016: US$2,490,640) by the weighted average number of ordinary
shares in issue during the year, excluding own shares held, of 829,908,445(2016: 651,515,665).
At 31 December 2017, own shares held amounted to 33,212,841 (2016:33,212,841) ordinary shares.
The weighted average number of own shares held by the company during the year are not included
in the weighted average ordinary shares in issue during the financial year.
42
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
10. INTANGIBLE ASSETS
Group
Goodwill
Other
intellectual
property
Development
US$
US$
US$
Total
US$
Cost
At 31 December 2015
Foreign exchange
difference
Additions
At 31 December 2016
Foreign exchange
difference
Additions
2,212,930
104,124
2,936,252
5,253,306
‐
‐
2,212,930
(17,287)
2,659,910
2,746,747
‐
‐
2,936,252
(17,287)
2,659,910
7,895,929
‐
‐
‐
‐
‐
541,060
896,957
1,438,017
(2,212,930)
1,911,121
‐
‐
Disposals
(2,212,930)
‐
1,911,121
Costs incurred by JV
partner
Transfers from
investment in associate
R&D costs
transferred to
income statement
At 31 December 2017
Accumulated
amortisation
At 31 December 2015
Charge for year
At 31 December 2016
Charge for year
At 31 December 2017
Net book value
At 31 December 2017
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
1,282,627
1,282,627
(1,244,045)
‐
(1,244,045)
3,954,883
5,115,836
9,070,719
362
‐
362
‐
362
925,720
44,845
970,565
44,845
926,082
44,845
970,927
44,845
1,015,410
1,015,772
3,954,521
4,100,426
8,054,947
At 31 December 2016
2,212,930
2,746,385
1,965,687
6,925,002
43
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
10. INTANGIBLE ASSETS (continued)
Company
At 31 December 2015
Foreign exchange difference
Additions
At 31 December 2016
Transfers to other group companies
At 31 December 2017
Accumulated amortisation
At 31 December 2015, 2016 and 2017
Net book value
At 31 December 2017
At 31 December 2016
Intellectual
property
US$
103,762
(17,276)
2,659,910
2,746,396
(2,746,396)
‐
‐
‐
2,746,396
Goodwill
Goodwill arose from the acquisition of Nikofeso and was considered to relate solely to the underlying
business acquired which is a single cash generating unit (“CGU”). The asset was reviewed at each
balance sheet dates to assess if it had been impaired. This Company was sold at the end of 2017 and
therefore the associated goodwill was included in loss on sale of discontinued operations in the
Income and Expenditure Statement.
Other intellectual property
Other intellectual property comprises costs incurred to secure the rights and knowledge associated
with the CoalSwitch™ and PeatSwitch technology.
In 2015 the Group entered into a joint venture agreement with Biomass Energy Enhancements LLC
(“BEE”), incorporated in the United States, for the joint commercial development and exploitation of
intellectual property assets held by BEE in connection with biomass technologies. A long term loan
to BEE was recognised in the accounts to reflect monies loaned by AEG to the joint venture. An
agreement was later reached with the other joint venture partners whereby AEG became the sole
proprietor of this technology and as a result the loan balance was transferred to intangible fixed
assets.
Ongoing research costs associated with this activity have been recognised in the income statement in
line with IAS38. Costs which specifically relate to future plant design have been capitalised an
intangible fixed assets.
Development assets
Development assets relate to the following:
Ukraine: The Group is party to a supply contract granted by the Lyubomi Forestry, which is the
administrator of the Lyubomi Forest in the Ukraine. This contract was extended to October 2060
from 1 January 2015 and the Company is currently reviewing options to develop this asset as
feedstock for CoalSwitch™ plants in Eastern Europe. The remaining useful life on the Ukrainian assets
is assessed to be 42 years and the asset is being amortised over this period. Management undertakes
a review at each balance sheet date to assess whether these balances need to be impaired.
44
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
10. INTANGIBLE ASSETS (continued)
Northern Alberta: During 2014 the Group acquired a 45% interest in a joint venture, KAQUO Forestry
& Natural Resources Development Corporation, incorporated in Canada, to exclusively commercialise
forestry and agricultural land holdings belonging to the indigenous Métis Settlements of Alberta in
Western Canada. Cost associated with this activity were originally recorded as Investments in
Associates. This Joint Venture is no longer operational. However, AEG is continuing to work with the
Canadian authorities and its partners in Northern Alberta to develop and secure title to these assets.
As a result the costs incurred on the joint venture were transferred to intangible fixed assets during
2017, on the basis that these costs fulfil the definition of an internally generated intangible fixed
asset under IAS38.
Newfoundland: On 22 May 2017, AEG announced that it had entered into an agreement in principle
with the Canadian Province of Newfoundland and Labrador. This arrangement envisaged the award
of a Crown Timber Licence ("CTL") and a forest management agreement ("FMA") for 20 years relating
to two Forest Management Districts covering 1.2 million hectares. On 12 October 2017 AEG
announced that it had submitted all final documents to the Ministry of Fisheries and Land Resources
of the Crown Province of Newfoundland and Labrador associated with the CTL and the FMAs. During
2017 and 2018 AEG has continued to develop management and supplier capability as well as
government relations. The Canadian authorities have
informed AEG that all necessary
documentation has now been received with regards to the final award of the FMAs and the Company
is anticipating final award of the FMA's in due course.
Costs incurred in acquiring these potential licences (in Northern Alberta and Newfoundland) have
been recorded as additions to intangible fixed assets in 2017. These costs will be amortised over the
period of awarded licences. No amortisation has been recognised in the current accounting period
pending licence awards and commencement of production. Management undertakes a review at
each balance sheet date to assess whether these balances need to be impaired.
45
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
11. PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 31 December 2015
Foreign exchange difference
Additions
Disposals
At 31 December 2016
Foreign exchange difference
Additions
Disposals
At 31 December 2017
Accumulated depreciation
At 31 December 2015
Foreign exchange difference
Elimination on disposal
Charge for year
At 31 December 2016
Foreign exchange difference
Elimination on disposal
Charge for year
At 31 December 2017
Net book value
At 31 December 2017
Plant
and
equipment
US$
Furniture
and office
equipment
US$
2,967,931
(1,638)
282,255
(60,939)
3,187,609
(534,717)
4,219,081
(3,080,362)
3,791,611
349,980
(1,533)
(60,939)
341,125
628,633
(155,592)
(752,588)
279,547
‐
29,488
‐
2,858
‐
32,346
768
‐
(24,154)
8,960
25,807
‐
‐
3,370
29,177
(20,737)
(406)
926
8,960
Total
US$
2,997,419
(1,638)
285,113
(60,939)
3,219,955
(533,949)
4,219,081
(3,104,516)
3,800,571
375,787
(1,533)
(60,939)
344,495
657,810
(176,329)
(752,994)
280,473
8,960
3,791,611
‐
3,791,611
At 31 December 2016
2,558,976
3,169
2,562,145
The net book value of asset held under finance leases included within Property, Plant & Equipment above
are US$345,600 (2016:nil). No depreciation (2016:nil) has been charged on these assets as the machinery
had not been brought into use at the balance sheet date.
Additions in the year primarily relate to the construction of the inaugural CoalSwitch™ plant in Utah. The
exchange rates movements relate to the reduction in value of the Ukrainian Wood Fibre business, which
was denominated in Ukrainian Hryvnia. This business was discontinued during 2017.
46
Furniture
and office
equipment
US$
9,830
(1,637)
8,193
767
8,960
8,887
(1,532)
576
7,931
755
274
8,960
‐
262
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
11. PROPERTY, PLANT AND EQUIPMENT (continued)
Company
Cost
At 31 December 2015
Foreign exchange difference
At 31 December 2016
Foreign exchange difference
At 31 December 2017
Accumulated depreciation
At 31 December 2015
Foreign exchange difference
Charge for year
At 31 December 2016
Charge for year
Foreign exchange difference
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
47
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
12. INVESTMENTS IN SUBSIDIARIES
Company
Cost
At 31 December 2015
Additions
Foreign exchange translation difference
At 31 December 2016
Additions
Disposals
Foreign exchange translation difference
At 31 December 2017
Provision for impairment
At 31 December 2015
Charge for the period
Foreign exchange translation difference
At 31 December 2016
Charge for the period
Foreign exchange translation difference
At 31 December 2017
At 31 December 2017
At 31 December 2016
US$
4,933,491
581,801
(903,722)
4,611,570
58,431
(546,804)
431,848
4,555,045
728,628
1,964,027
(121,377)
2,571,278
1,684,557
240,783
4,496,618
58,427
2,040,292
The exchange rates movements in 2017 reflect the appreciation of the British Pound against the US
Dollar, which resulted in a corresponding increase in the value of investments denominated in
Sterling.
At 31 December 2017 the Group held share capital of the following companies:
Subsidiary undertaking
Country of
incorporation
Nature of business
Percentage Holding
AE Ukraine
Nikofeso Holdings Limited
Nikwood Company LLC*
AETrading (EMEA) SarL
Active Energy Italia s.r.l.
AEG Trading Limited
AEG Pelleting Limited
AEG Balkan
AEG Biopower Limited
AEG Coalswitch Limited
ABS plc
Timberlands Int. Ltd
Woodchip processing and distribution
Ukraine
Wood chip distribution
Cyprus
Wood chip processing and distribution
Ukraine
Wood chip distribution
Switzerland
Wood chip distribution
Italy
United Kingdom Wood chip distribution
United Kingdom
Montenegro
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Biomass for energy development
Dormant
Biomass for energy development
Biomass for energy development
Biomass for energy development
Biomass for energy development
2017
100
100
‐
100
‐
100
100
‐
100
100
85
95
2016
100
100
100
100
100
100
100
100
100
‐
‐
‐
Alpha Prospects Ltd
United Kingdom
Energy/Natural resources investments
holding company
4.2
4.1
48
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
13. INVESTMENT IN ASSOCIATE
Carrying value at beginning of the year
Contribution to associate arrangement
Share of loss for the year
Share of other comprehensive income for the
year ‐ translation of foreign operation
Transfer to intangible fixed assets
Transfer to other group companies
Carrying value at end of the year
Group
2017
US$
Group
2016
US$
1,282,627 1,142,605
255,721
(305,151)
‐
‐
2017
US$
Company Company
2016
US$
2,333,176 2,077,463
255,714
‐
‐
‐
189,452
‐
‐
‐
(1,282,627)
‐
‐
‐ 1,282,627
‐
(2,333,176)
‐
‐
‐ 2,333,177
During 2014 the Group acquired a 45% interest in a joint venture, KAQUO Forestry & Natural
Resources Development Corporation (KAQUO), incorporated in Canada, to exclusively commercialise
forestry and agricultural land holdings belonging to the indigenous Métis Settlements of Alberta in
Western Canada.
This joint venture is no longer operational and the licences were not awarded as anticipated.
However, AEG is continuing to work with the Canadian authorities and its partners in Alberta to
develop and secure title to these assets. As a result the costs incurred on the joint venture have been
transferred to intangible fixed assets.
Summarised financial information in relation to the joint venture is presented below:
2017
US$
At 31 December
Current assets
Current liabilities
Period ended 31 December
Revenues
Loss for the year
Other comprehensive income
Total comprehensive income
‐
‐
‐
‐
‐
‐
2016
US$
‐
(2,334,546)
‐
(678,113)
421,000
(257,113)
49
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
14.
LOAN TO JOINT VENTURE PARTNER
Group
2017
US$
Group
2016
US$
Company
2017
US$
Carrying value at beginning of the year
Foreign exchange differences
Advanced during the year
Transfer to intangible fixed assets
Transfer to other group companies
Carrying value at end of the year
691,748
1,911,121
‐
(132,531)
‐ 1,351,904
‐
(1,911,121)
‐
‐
‐ 1,911,121
1,911,121
‐
‐
‐
(1,911,121)
‐
Company
2016
US$
691,748
(132,531)
1,351,904
‐
‐
1,911,121
In September 2015 the Group entered into a joint venture agreement with Biomass Energy
Enhancements LLC (“BEE”), incorporated in the United States, for the joint commercial development
and exploitation of intellectual property assets held by BEE in connection with biomass technologies.
A long term loan to BEE was recognised in the accounts to reflect monies loaned by AEG to the joint
venture. An agreement was later reached with the other joint venture partners whereby AEG
became the sole proprietor of this technology and as a result the loan balance was transferred to
intangible fixed assets.
15. AVAILABLE FOR SALE FINANCIAL ASSET
Fair value at beginning of the year
Revaluation to market value
Foreign exchange translation
Fair value at end of the year
Group
2017
US$
83,455
786,393
(83,065)
786,873
Group
2016
US$
100,137
‐
(16,682)
83,455
Company
2017
US$
83,455
786,393
(83,065)
786,873
Company
2016
US$
100,137
‐
(16,682)
83,455
Available for sale assets consist of an unquoted equity instrument which is classified as non‐ current
assets. The asset was revalued in 2017 based on the proceeds received from issue of shares by this
entity, less a discount to reflect the absence of a liquid market for these shares. The available‐for‐sale
financial asset is denominated in Pound Sterling.
50
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
16. INVENTORIES
Group
Raw materials
Finished goods and goods for resale
Total inventories
2017
US$
20,349
‐
20,349
2016
US$
143,855
281,143
424,998
The cost of inventories recognised as an expense and included in ‘cost of sales’ within discontinued
operations amounted to US$521,080 (2016: US$10,434,931).
17. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Amounts due from group companies
Other receivables
VAT
Prepayments
Corporation tax credit receivable
Group
2017
US$
Group
2016
US$
Company Company
2016
US$
2017
US$
268,980
128,136
‐
1,198
42,046
346,522
128,136
‐ 13,629,890
‐
14,642
‐
‐
381,111
233,713
‐ 1,766,528
‐
‐
275,589
15,449
33,064
‐
‐
Total
517,902 2,650,332 13,772,668
324,102
In the Directors' opinion the carrying values of trade and other receivables are stated at their fair
value, after deduction of appropriate allowances for irrecoverable amounts as these assets are not
interest bearing and receipts occur over a short period and are subject to an insignificant risk of
changes in value.
Trade and other receivables that have not been received within the payment terms are classified as
overdue. As at 31 December 2017 trade receivables of US$Nil (2016: US$Nil) were overdue.
51
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
17. TRADE AND OTHER RECEIVABLES (continued)
As at 31 December 2017, Group trade receivables of US$NIL (2016: US$NIL) were overdue and
impaired. The provision for impairment is analysed as follows:
At beginning of the period
Provided during the year
Provision (released)/utilised
2017
US$
2016
US$
‐
‐
‐
‐
838,984
(838,984)
‐
‐
An analysis of the Group's trade and other receivables classified as financial assets by currency is
provided in note 27.
Group
2017
US$
2016
US$
142,049 2,121,841
142,049 2,121,841
Group Company Company
2016
2017
US$
US$
135,706 2,041,134
135,706 2,041,134
Group
2017
US$
Group Company Company
2016
2017
US$
US$
2016
US$
200,512
41,598
936,111
45,902
799,816
40,920
866,594 1,493,623
686,793
268,549
26,331
859,279 1,113,156
‐
1,944,676 3,021,152 1,122,458 1,408,036
21,069
96,069
18. CASH AND CASH EQUIVALENTS
Bank accounts
19. TRADE AND OTHER PAYABLES
Current
Trade payables
Social security and other taxes
Accruals and deferred income
Other payables
52
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
19. TRADE AND OTHER PAYABLES (continued)
The carrying values of trade and other payables approximate their fair value as payments occur over
a short period and the risk of material changes in value is insignificant. The following table analyses
the maturity of the trade and other payables, excluding borrowings. These are classified as financial
liabilities on the balance sheet and they are measured at amortised cost.
Less than three months
Three to 12 months
Group
2017
US$
1,944,676
‐
1,944,676
Group
2016
US$
3,021,152
‐
3,021,152
Company
2017
US$
372,458
750,000
1,122,458
Company
2016
US$
1,408,036
‐
1,408,036
The amounts shown are undiscounted and represent the contractual cash‐flows. An analysis of the
Group's trade and other payables classified as financial liabilities by currency is provided in note 27.
20. DEFERRED TAXATION
Deferred tax is calculated on temporary differences under the liability method using tax rates
applicable in the respective Group entities’ jurisdiction. The movement on the deferred tax account
is shown below and the balance relates to deferred tax on fair value adjustments related to
intangibles:
Group
At beginning of the period
Reversal of temporary differences
At the end of the period
2017
US$
393,137
(8,968)
384,169
2016
US$
402,106
(8,969)
393,137
The deferred tax liability relates to temporary differences arising on the fair valuation of intangible
assets acquired in 2011.
No provision for the deferred tax asset in respect of tax losses has been made in the Group or
Company due to the uncertainty of the Group or Company being able to generate sufficient future
taxable profits from which the future reversal of the timing difference can be deducted. See note 8
for further details of this balance.
53
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
21. FINANCE LEASES
The future minimum finance lease payments are as follows:
Less than 1 year
Between 1 and 3 years
Group
2017
US$
89,607
205,993
295,600
Group Company Company
2016
2017
US$
US$
-
-
‐
‐
‐
‐
2016
US$
-
‐
‐
The finance lease relates to a Pellet Mill leased from the manufacturer for use at the Utah
CoalSwitch™ plant. The lease term is 3 years. At the end of the lease term the company has the
option to purchase the asset for $1.
22. LOANS AND BORROWINGS
The book value and fair value of loans and borrowings are as follows:
Group
Non‐Current
Convertible debt
Unsecured loans
Current
Convertible debt
Unsecured loans
Total loans and borrowings
Company
Non‐Current
Convertible debt
Unsecured loans
Current
Convertible debt
Unsecured loans
Book value
2017
US$
Fair value Book value
2016
US$
2017
US$
Fair value
2016
US$
13,224,252 13,224,252
‐
13,224,252 13,224,252
‐
‐
580,000
580,000
‐
580,000
580,000
‐
‐
‐
‐
‐
‐
13,224,252 13,224,252
1,233,600
5,829,130
7,062,730
7,642,730
1,233,600
5,829,130
7,062,730
7,642,730
Book value
2017
US$
Fair value Book value
2016
US$
2017
US$
Fair value
2016
US$
13,224,252 13,224,252
‐
13,224,252 13,224,252
‐
‐
580,000
580,000
‐
580,000
580,000
‐
‐
‐
‐
‐
‐
13,224,252 13,224,252
1,233,600
2,890,000
4,123,600
4,703,600
1,233,600
2,890,000
4,123,600
4,703,600
Unsecured loans
During the year the Group repaid all outstanding unsecured short term loans.
54
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
22. LOANS AND BORROWINGS (continued)
Convertible debt
On the 14 March 2017 the company successfully completed a fund raising of £11.57 million before
expenses (or $14.15 million) through the issue of convertible loan notes (‘CLNs’) to new and existing
investors. The CLNs have a maturity date of 14 March 2022 and have been listed on the International
Securities Exchange. The CLN can be converted into ordinary shares of AEG plc, at any time prior to
the Maturity Date, at a 30% premium to 2.535p, being the Company’s 10 day Volume Weighted
Average Price immediately prior to the issue date. The fair value of the liability component at
inception was calculated using a market interest rate for an equivalent instrument without
conversion option. The CLN has a coupon rate of 8% and the imputed interest rate applied was 12%.
On 15 March 2017 the Convertible Loan Note to Brahma Finance for £1,000,000 was repaid in full
and settled.
Convertible debt
The following table analyses the maturity of loan and borrowings. The amounts shown are
undiscounted and represent contractual cash‐flows.
Group
At 31 December 2017
Convertible debt
At 31 December 2016
Convertible debt
Unsecured loans
Company
At 31 December 2017
Convertible debt
At 31 December 2016
Convertible debt
Unsecured loans
Up to 3
months
US$
Between 3
and 12
months
US$
Between 1
and 2 years
US$
Between 2
and 5
years
US$
Total
US$
‐
‐
‐
‐
‐
‐
13,224,252
13,224,252
13,224,252
13,224,252
1,233,600
204,000
1,437,600
‐
5,625,130
5,625,130
‐
580,000
580,000
‐
‐
‐
1,233,600
6,409,130
7,642,730
Up to 3
months
Between 3
and 12
months
Between 1
and 2 years
Between 2
and 5 years
Total
US$
US$
US$
US$
US$
‐
‐
‐
‐
‐
‐
13,224,252
13,224,252
13,224,252
13,224,252
US$
US$
US$
US$
US$
1,233,600
204,000
1,437,600
‐
2,686,000
2,686,000
‐
580,000
580,000
‐
‐
‐
1,233,600
3,470,000
4,703,600
55
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
23. CALLED UP SHARE CAPITAL
Allotted, called up and fully paid
Ordinary shares of 1p each
At 1 January
Issue of shares
As at 31 December
Shares issued for Cash
2017
Number
2017
US$
2016
Number
2016
US$
840,381,500
142,689,776
983,071,276
12,621,134 642,158,903
1,872,112 198,222,597
14,493,246 840,381,500
10,099,329
2,521,805
12,621,134
During 2017 the Company issued 142,689,776 ordinary shares for a total consideration of US$3.3m
as follows:
On 27 June 2017 the company issued 17,623,110 ordinary shares at 1.6 US cents satisfying
exercise notices over warrants in issue.
On 6 November 2017 the company issued 83,333,333 ordinary shares at 2.7 US cents following a
new share placement.
On 21 December 2017 the company issued 40,000,000 ordinary shares at 1.6 US cents satisfying
exercise notices over share options in issue.
On 21 December 2017 the company issued 1,733,333 ordinary shares at 1.6 US cents satisfying
exercise notices over warrants in issue.
During 2016 the Company issued 198,222,597 ordinary shares for a total consideration of US$7.3m
as follows:
On 29 June 2016 the company issued 1,554,666 ordinary shares at 1.6 US cent satisfying
exercise notice over warrants in issue.
On 4 July 2016 the company issued 586,661 ordinary shares at 1.6 US cent satisfying exercise
notice over warrants in issue.
On 3 August 2016 the company issued 77,358,491 ordinary shares at 3.5 US cent, being a new
shareholder equity contribution.
On 24 November 2016 the company issued 88,722,779 ordinary shares at 3.3 US cent in
settlement of existing debt and acquisition of an investment in the BEE joint venture. Of these
shares 29,287,159 were issued from Treasury shares.
On 21 December 2016 the company issued 30,000,000 ordinary shares at 3.4 US cent in
settlement of convertible debt.
56
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
24. SHARE OPTIONS AND WARRANTS
From time to time the Company has entered into share option arrangements under which the
holders are entitled to subscribe for a percentage of the Company's ordinary share capital. All
options vest immediately with the exception of 14,166,667(2016: 95,500,000) options which are
based on various market, service and performance conditions. The number of warrants and share
options exercisable at 31 December 2017 was 127,325,099 (2016: 239,655,831).
The movements of warrants and share options during the period were as follows:
Weighted
average
exercise
price
(UK pence)
Number of
Warrants
and Share
Options
Weighted
average
exercise
price
(UK pence)
Number of
Warrants
and Share
Options
Outstanding at beginning of the period
Cancelled
Granted
Exercised
Outstanding at end of the period
1.96
1.09
‐
1.25
2.72
239,655,831
(54,707,622)
‐
(57,623,110)
127,325,099
1.68
0.57
‐
1.25
1.96
267,959,701
(26,162,543)
‐
(2,141,327)
239,655,831
At 31 December 2017, the weighted average remaining contractual life of warrants and share options
exercisable was 4.02 years (2016 – 5.02 years). There were no share options granted during the year
(2016:nil). Therefore no information is provided regarding the weighted average assumptions
associated with estimating the fair values of options granted.
There was charge for equity settled share based payments of US$307,749 (2016: US$631,465) in the
income statement for the year ended 31 December 2017. In addition, during the year ended 31
December 2017 certain nil‐cost options were cancelled. This resulted in a credit to equity settled
share based payments of US$1,044,452. This was not shown in the income statement for the year
ended 31 December 2017, but was recorded as a reserve transfer.
57
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
24. SHARE OPTIONS AND WARRANTS (continued)
Options and warrants outstanding at 31 December 2017 were exercisable as follows:
Exercise price range (Pence, US cent in
brackets)
2017
2016
Number
Number
0.000p (0 cent)
1.250p (1.686 cent)
1.500p (2.023 cent)
1.750p (2.360 cent)
3.000p (4.047cent)
5.000p (6.745 cent)
6.000p (8.094 cent)
6.375p (8.600 cent)
7.000p (9.444 cent)
7.500p (10.118 cent)
20.000p (26.982 cent)
‐
56,500,000
7,500,000
19,047,619
13,450,000
15,000,000
4,500,000
1,823,480
‐
9,000,000
504,000
37,500,000
117,616,448
7,500,000
19,047,619
25,950,000
15,000,000
4,500,000
1,823,480
1,214,284
9,000,000
504,000
At the end of the period
127,325,099
239,655,831
The above disclosures apply to both the Company and the Group.
JSOP awards
Under the JSOP, shares in the Company are jointly purchased at fair market value by the participating
employee and the trustees of the JSOP trust, with such shares held in the JSOP trust. For accounting
purposes the awards are valued as employee share options.
The JSOP trust holds the shares of the JSOP until such time as the JSOP shares are vested and the
participating employee exercises their rights under the JSOP. The JSOP trust is granted an interest
bearing loan by the Company in order to fund the purchase of its interest in the JSOP shares. The
loan held by the trust is eliminated on consolidation in the financial statements of the Group. The
Company funded portion of the share purchase price is deemed to be held in treasury until such time
as the shares are transferred to the employee and is recorded as a reduction in equity in both the
Group and Company financial statements.
The exercise price of the “option” is deemed to be the issue price of the shares. The awards vest
based on a market condition, which requires the shares to meet a specific share price hurdle, or a
change in control condition, as defined by the plan. Under the JSOP and subject to the vesting of the
employee’s interest, the participating employee will, when the JSOP shares are sold, be entitled to a
share of the proceeds of sale equal to the growth in market value of the JSOP shares versus the
exercise price, less simple interest on the original share purchase price, net of executives’ cash
contribution at inception, as agreed for each grant (the “Carry Charge”). The balance of proceeds will
remain to the benefit of the JSOP trust and be applied to the repayment of the loan originally made
by the Company to the JSOP trust. Any funds remaining in the JSOP trust after settlement of the loan
and any expenses of the JSOP trust are for the benefit of the Company.
58
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
24. SHARE OPTIONS AND WARRANTS (continued)
The Group measures the fair value of the awards using the Monte Carlo (JSOP options) or Black
Scholes (other options) simulations and the share based payment expense is recorded over the
expected life of the option. The full value of the JSOP awards is calculated using the Monte Carlo
simulation and share based payment expenses are recognised in the income statement in
accordance with the provisions of IFRS2. No awards were made in 2017. The share based payment
charge for the year is US $Nil (2016: US$13,450) related to the JSOP awards.
The Group granted 15,000,000 JSOP awards on 4 July 2013. The JSOP awards granted during 2013
contained a share price hurdle of 3p per share. The awards vested in 2015, but all remain
outstanding at year end. The above disclosures apply to both the Company and the Group.
25. RESERVES
The following describes the nature and purpose of each reserve within equity:
Reserve
Share premium
Merger reserve
Description and purpose
Amounts subscribed for share capital in excess of nominal value.
Difference between fair value and nominal value of shares issued to
acquire 90% or more interest in subsidiaries.
Foreign exchange reserve Gains/losses arising on retranslating the net assets of overseas
operations into US Dollars.
Own shares held reserve
Cost of own shares held by the employee benefit trust, the JSOP trust
or the company as shares held in escrow.
Convertible debt and
warrant reserve
Equity component of the convertible loan and the fair value of equity
component of warrants issued that do not form part of a share based
payment.
Retained earnings/
Accumulated loss
Cumulative net gains and losses recognised in the consolidated
statement of comprehensive income.
59
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
26. NOTES SUPPORTING THE STATEMENT OF CASH FLOWS
Reconciliation of loss before taxation to cash outflows from operating activities
2017
US$
(15,221,072)
‐
307,749
280,473
44,835
1,244,045
2,212,930
2,130,018
(454,928)
(556,421)
‐
3,031,054
(4,781)
(6,986,098)
404,649
2,132,430
(1,372,076)
(5,821,095)
2016
US$
(2,490,640)
305,151
631,465
344,495
44,845
‐
‐
(58,020)
‐
(899,328)
(18,152)
1,844,225
122,143
(173,816)
(118,789)
(76,244)
(613,469)
(982,318)
Group
Loss for the period
Adjustments for:
Share of loss of associate
Share based payment expense
Depreciation
Amortisation of intangibles
R&D expensed to income statement
Write off of goodwill
Loss/ (profit) on disposal of PP&E
Revaluation of investments for resale
Foreign currency translations
Finance income
Finance expenses
Income tax
Decrease/(increase) in inventories
Decrease/(increase)
other receivables
in
trade and
(Decrease)
payables
in
trade and other
Net cash outflow from operating
activities
60
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
26. NOTES SUPPORTING THE STATEMENT OF CASH FLOWS (continued)
Company
Loss for the period
Adjustments for:
Share based payment expense
Depreciation
Impairment of investments/
intercompany debtors
Revaluation of investments for resale
Foreign currency translations
Finance income
Finance expenses
(Increase)/decrease in trade and
other receivables
(Decrease)/increase in trade and
other payables
Net cash inflow/(outflow) from
operating activities
2017
US$
2016
US$
(11,218,600)
(7,293,248)
307,749
755
631,465
576
2,040,292
2,846,709
(454,928)
702,918
‐
1,648,174
(6,973,640)
‐
(527,845)
‐
1,661,491
(2,680,852)
(6,457,872)
592,506
(285,578)
2,636,972
(13,717,090)
548,626
61
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
27. FINANCIAL INSTRUMENTS
The Group's treasury policy is to avoid transactions of a speculative nature. In the course of trade
the Group is exposed to a number of financial risks that can be categorised as market, credit and
liquidity risks. The board reviews these risks and their impact on the activities of the Group on an
ongoing basis.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises,
are as follows:
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Available‐for‐sale financial assets
Loans and borrowings
Loan to joint venture partner
A summary of the financial instruments held by category is provided below:
Financial assets
Loans and receivables
Cash and cash equivalents
Trade and other receivables
Loan to joint venture partner
Available‐for‐sale financial asset
Total financial assets
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
Loans and Borrowings
Group
2017
US$
Group
2016
US$
Company
2017
US$
Company
2016
US$
142,049 2,121,841
650,091
129,334
‐ 1,911,121
271,383 4,683,053
83,455
786,873
1,058,256 4,766,508
135,706
13,758,026
‐
13,893,732
786,873
14,680,605
2,041,134
291,038
1,911,121
4,243,293
83,455
4,326,748
Group
2017
US$
Group
2016
US$
Company Company
2016
US$
2017
US$
2,240,276
13,224,252
15,464,528
3,021,152
7,642,730
10,663,882
1,122,458 1,408,036
13,224,252 4,703,600
14,346,710 6,111,636
Fair value measurement
The fair value measurement of the Group’s financial and non‐financial assets and liabilities utilises
market observable inputs and data as far as possible. Inputs used in determining fair value
measurements are categorised into different levels based on how observable the inputs used in the
valuation technique utilised are (the ‘fair value hierarchy’):
Level 1: Quoted prices in active markets for identical items (unadjusted)
Level 2: Observable direct or indirect inputs other than Level 1 inputs
Level 3: Unobservable inputs (i.e. not derived from market data).
62
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
27. FINANCIAL INSTRUMENTS (continued)
The classification of an item into the above levels is based on the lowest level of the inputs used that
has a significant effect on the fair value measurement of the item.
Transfers of items between levels are recognised in the period they occur.
The only financial asset carried at fair value consists of the available for sale financial asset, which is
classified as level 3.
Market Risk
Currency risk
The Group’s financial risk management objective is broadly to seek to make neither profit nor loss
from exposure to currency or interest rate risks. The Group is exposed to transactional foreign
exchange risk and takes profits and losses as they arise, as in the opinion of the directors, the cost of
hedging against fluctuations would be greater than the potential benefits.
The carrying amounts of the group’s trade and other receivable financial instruments are
denominated in the following currencies:
US Dollar
UK Pound sterling
Euro
Ukrainian Hryvnia
Group
2017
US$
‐
129,334
‐
‐
129,334
Group
2016
US$
574,952
45,445
1,052
28,642
650,091
Company Company
2016
US$
275,589
15,449
‐
‐
291,038
2017
US$
13,629,890
‐
128,136
‐
13,758,026
The carrying amounts of the group’s cash and cash equivalents are denominated in the following
currencies:
US Dollar
UK Pound sterling
Euro
Ukrainian Hryvnia
Group
2017
US$
134,510
3,945
2,214
1,381
142,050
Group
2016
US$
2,016,005
33,005
1,881
70,950
2,121,841
Company
2017
US$
132,262
3,244
200
‐
135,706
Company
2016
US$
2,011,994
28,786
354
‐
2,041,134
Information about the Group’s loans and borrowings are provided in note 22.
63
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
27. FINANCIAL INSTRUMENTS (continued)
The carrying amounts of the group’s trade and other payable financial instruments are denominated
in the following currencies:
US Dollar
UK Pound sterling
Euro
Ukrainian Hryvnia
Group
2017
US$
1,106,200
1,122,457
4,304
7,315
2,240,276
Group
2016
US$
2,498,548
291,776
16,135
214,693
3,021,152
Company
2017
US$
‐
1,122,458
‐
‐
1,122,458
Company
2016
US$
1,113,156
294,880
‐
‐
1,408,036
The effect of a 5 per cent strengthening of the US Dollar at the reporting date on the foreign
denominated financial instruments carried at that date would, all variables held constant, would
have resulted in a decrease in the net loss for the period and increased net assets by US$7,107 (2016:
US$100,800). A 5 per cent weakening in the exchange rate would, on the same basis, have increased
the net loss and decreased net assets by the same amount.
Interest rate risk
The Group and Company finances its operations through a mixture of equity and loans. The Group
and Company exposure to interest rate fluctuations on its borrowings has been limited by the terms
of the Convertible Loan Notes described in note 22.
Credit risk
Operational
The Group is mainly exposed to credit risk from credit agreements and sales. It is the Group’s policy,
implemented locally, to assess the credit risk of new customers before entering contracts. Such
credit ratings, taking into account local business practices are then factored into trading decisions.
The Group does not enter into any derivatives to manage credit risk. Further information on Trade
and other receivables are presented in note 17.
Financial
Financial risk relates to non‐performance by banks in respect of cash deposits and is mitigated by the
selection of institutions with a strong credit rating.
64
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
27. FINANCIAL INSTRUMENTS (continued)
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the finance charges and
principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities
when they become due. The Group finances its operations through a mix of equity and borrowings.
The Group’s objective is to provide funding for future growth. The Group's policies aim to ensure
sufficient liquidity is available to meet foreseeable needs through the preparation of short and long
term forecasts. Further disclosure of the Directors’ consideration of going concern is included in note
1.
The Group had no bank loans or invoice finance facilities at 31 December 2017 (2016: Nil). The Group
had no overdraft at 31 December 2017 (2016: Nil) and no personal guarantees were in place.
Capital risk management
The Group's objective when managing capital is to establish and maintain a capital structure that
safeguards the Group as a going concern and provides a return to shareholders.
28. RELATED PARTY DISCLOSURES
Details of Director's remuneration are given in the Report of the Directors.
Transactions between the Company and its subsidiaries, which are related parties to the Company,
have been eliminated on consolidation. During the year in the Company's financial statements, the
Company made net cash recoveries from fellow Group companies of US$nil (2016: net cash
recoveries of US$2,702,684).
The Company’s intercompany receivable balances at the year‐end were as follows:
Amounts due from Group companies
2017
US$
13,629,890
2016
US$
275,589
65
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
29. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of financial information in conformity with International Financial Reporting
Standards requires management to make estimates and judgements that affect the reported
amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the
year‐end date and the reported amounts of revenues and expenses during the reporting period.
Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were as follows:
Impairment of goodwill, intangible fixed assets and other assets
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment.
The recoverable amount of cash generating units is determined based on value in use calculations.
The use of this method requires the estimation of future cash flows and the choice of a discount rate
in order to calculate the present value of the cash flows. Actual outcomes may vary. Intangible fixed
assets and other assets are considered for impairment where such indicators exist using value in use
calculations or fair value and recoverability estimates. The use of these methods similarly requires
the estimation of future cash flows and the choice of a discount rate in order to calculate the present
value of the cash flows.
Share based payments
In determining the fair value of equity settled share based payments and the related charge to the
income statement, the Group makes assumptions about future events and market conditions. In
particular, judgements must be made as to the fair value of each award granted. The fair value is
determined using a valuation model which is dependent on further estimates, including the Group's
future dividend policy, the timing with which options will be exercised and the future volatility in the
price of the Group' shares. Such assumptions are based on publicly available information and reflect
market expectations and advice taken from qualified personnel. Different assumptions about these
factors to those made by the Group could materially affect the reported value of share based
payments.
Useful lives of intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are amortised or depreciated over their useful
lives. Useful lives are based on the management's estimates of the period that the assets will
generate revenue, which are periodically reviewed for continued appropriateness. Changes to
estimates can result in significant variations in the carrying value and amounts charged to the
consolidated statement of comprehensive income in specific periods.
Recognition of development costs within intangible fixed assets
The Group undertakes certain development activity which is recognised within intangible fixed
assets, if it meets certain criteria laid down by international accounting standards. This means that
management is required to assess various factors associated with these assets to determine whether
the asset is separately identifiable, that it is probable that future economic benefits attributable to
will arise; the technical feasibility of completing the asset; that the Group intends and is able to
complete the asset; and there are available and adequate technical, financial and other resources to
complete the asset. All these matters involve technical and economic judgement and changes to
these assessment can result in significant variations in the carrying value and amounts charged to the
consolidated statement of comprehensive income in specific periods.
66
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2017
29. CAPITAL AND OPERATING COMMITMENTS
Capital commitments at the 31 December 2017 were US$408,908 (2016: US436,220). Operating
lease commitments at the 31 December 2017 were US$11,142 (2016: US$54,142). All amounts were
due within one year.
30. SUBSEQUENT EVENTS
The key business developments since 31 December 2017 were as follows:
On 4 February 2018 the Group announced that its first commercial CoalSwitch™ plant in
Utah, United States (the 'Plant'), would be officially opened later that week.
On 13 March 2018 the Group announced that it has signed a joint venture agreement with
Cobant Sp. z o.o. a Polish research, development and coal recovery/production company, to
explore opportunities to commercialise the Company's CoalSwitch™ product in blends with
reclaimed coal from coal slurry dumps in Upper Silesia, Poland.
On 17 May 2018 the Group announced that it had signed a Memorandum of Understanding
to acquire a controlling interest in PowerWood Canada Corp, a privately owned Canadian
company which holds substantial forestry assets in Alberta, Canada.
On 11 June 2018 the Group announced the proposed sale of an advanced organic soil
manufacturing facility to Young Living Farms, utilising the Company's proprietary
PeatSwitch technology, for a total cash payment of US$3.4 million.
On 13 June 2018 the Group announced that two laboratories, including a Polish Government
laboratory, had conducted independent tests of the new 'Super Fuel' product that utilises a
blend of AEG's revolutionary CoalSwitch™ component with reclaimed and cleaned coal fines
from Poland's legacy coal waste dumps. The results of these tests indicated that the new
"Super Fuel" had a similar calorific value to coal (>23MJ/Kg), but with significantly low
sulphur content <0.9%, low ash content, and low SOx and NOx emissions when combusted
In the period from the 31 December 2017 to the date of issue of this report Company issued
49,633,227 equity shares due to conversions of CLN to equity.
Further details are provided in the chairman's statement.
31. ULTIMATE CONTROLLING PARTY
In the opinion of the directors there is no one ultimate controlling party.
67