ACTIVE ENERGY GROUP PLC
ANNUAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 2018
Company Registration Number: 03148295
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
CONTENTS
Company Information
Chief Executive Officer’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 and Company Statement of Financial Position
Consolidated and Company 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
S C Melling
A Esposito
Cargill Management Services Ltd
27-28 Eastcastle Street
London
W1W 8DH
27-28 Eastcastle Street
London
W1W 8DH
12 Hay Hill, Mayfair
London
W1J 8NR
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
SP Angel Corporate Finance LLP
Prince Frederick House,
35 – 39 Maddox Street
London
W1S 2PP
St Brides Partners
WeWork The Monument,
51 EastCheap, London
EC3M 1JP
Finsbury, London
EC2M 5QQ
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ACTIVE ENERGY GROUP PLC
CHIEF EXECUTIVE OFFICER STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2018
2018 was an important year for Active Energy as it focussed on building its position as a developer and
supplier of renewable based fuels. It completed the construction of the first prototype plant to utilise the
CoalSwitch™ technology and commenced on a strategy of commercial development for CoalSwitch™ as
both a renewable fuel by itself as well as a component for derivative renewable fuels combining with other
biomass and coal based material.
During 2018 AEG achieved several significant developmental milestones and the Board’s focus moved from
validating the feasibility of the technology, to identifying the important commercial opportunities which
must be focused on to successfully develop CoalSwitch™.
In February 2018, AEG announced the opening of the first CoalSwitch™ reference plant in Utah, US(the
“Reference Plant”), which represented a significant achievement for the CoalSwitch™ programme. It was
the first scalable plant with an ability to produce CoalSwitch™ in sufficient quantities to meet prospective
customer demand. Although the Reference Plant was subsequently verified by a number of commercial
partners & customers, the Board recognised that it had to be relocated to commence commercial
production as the Utah site was not in an optimal location for scalable production.
At the same time, the Group continued to focus on feedstock business opportunities which would assist
the commercial development of the CoalSwitch™ programme. The Group had worked extensively with the
Province of Newfoundland and Labrador, (the “Province”) to secure forestry rights which could provide a
commercial base for a CoalSwitch™ operation in the Province. The process took time to complete, but in
November 2018, the Group secured cutting timber permits ("CTPs") for Blocks 17 and 18 in the Province.
The Group believes that this represents a starting point for a long-term relationship with the Province and
has been in active conversations to assess additional complementary opportunities in the Province.
In tandem with the above, additional feedstock opportunities were identified in North America, Europe and
Asia to complement the CoalSwitch™ programme and each geography has its own unique circumstances.
Accordingly, the Board believes that the optimum route to market is now through the actual production of
CoalSwitch™ to sell to end customers with a lesser focus on the feedstock supply issues.
With this in mind, the Board made a series of strategic decisions in mid 2018 to accelerate the
commercialisation of Coalswitch™. The first decision was to choose the optimal location for the business in
the US. Upon thorough investigation, the Board decided that the prime base had to be on the East Coast of
the US. The area has huge amounts of lumber feedstock, an established transportation infrastructure and
links both domestically and to pellet markets in Western Europe and Asia.
The pellet market has been growing significantly since 2014, most notably, in Europe. Global wood pellet
imports were 24million tonnes in 2018 and the global wood pellet market is forecast to rise to over 35
million tonnes per annum by 2025(source: Futuremetrics 2018.) The market for a CoalSwitch™ pellet
remains highly attractive with potential customers indicating an enthusiasm for the pellet and for Active
Energy to commence deliveries as soon as possible. The Group has therefore updated its business strategy
to capitalise on this and optimise the business opportunities.
The second key decision was to accelerate AEG’s commercial strategy with the establishment of
partnerships in the industry. The Board believes that, in consideration of the Group’s available resources,
the optimal way to build a global franchise is through such industry partnerships.
In 2018 the Group started to establish these commercial partnerships. The first signed in the fourth quarter
of 2018, was a joint venture agreement with Georgia Renewable Power LLC ("GRP") to advance the
commercial development of CoalSwitch™ in North Carolina and further examine the derivative product
opportunities.
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ACTIVE ENERGY GROUP PLC
The second significant collaboration to assist the Group was with Andritz. A global engineering group
focussed on the supply of equipment to the pulp and paper industry, Andritz completed an
assessment of the initial pilot plant in Utah and agreed to work with the Group in forthcoming commercial
opportunities. In the first half of 2019, this partnership has strengthened with joint presentations to
prospective customers and the establishment of a technical programme which aims to produce a new
facility with production capacity up to 50 tonnes per hour.
The third partnership was with Cobant in Poland. Cobant has commenced test production for the recovery
of environmentally damaging coal fines stored in coal slurry ponds in Poland. Through testing at their
proprietary laboratories, Cobant established that CoalSwitchTM could be used as a binder to form briquettes
suitable for burning, either to existing coal plants, or into the retail market. The relationship was extended
with the formation of a joint venture to jointly examine commercial opportunities and examine financing
opportunities, including EU funding. Testing and analysis for the fuel including CoalSwitchTM was completed
in Poland. As announced on 9 April 2019, although the EU grant funding has not been forthcoming at this
time, the collaboration with Cobant has been important. Their support has been highly valued and the
Board hopes that joint commercial opportunities can be established in Poland in the coming months.
The Board continues to actively explore other commercial industrial partnerships with the prime focus
being the production of CoalSwitchTM and the creation of revenues from CoalSwitch™ either as a renewable
fuel of itself, or as component for other renewable fuels including other waste biomass products.
Developments since December 2018
As mentioned, the Group recognised that for its corporate strategy to succeed, it needed an operational
base in the prime lumber regions of the US, especially with its new relationship with GRP. During the fourth
quarter of 2018 and into the early months of 2019, the Group focused on identifying a suitable site to
achieve these objectives.
In the first quarter of 2019, AEG acquired an industrial site in Lumberton, North Carolina (“Lumberton Site”).
The site will become the new base for all Active Energy’s CoalSwitch™ operations in the US and house the
first permanent production facility for CoalSwitch™. It includes up to 415,000 sq ft of covered factory space
and circa 151 acres of surrounding land and was purchased for a total consideration of US$3,330,000. It
also includes ancillary facilities, such as water treatment, an analysis lab, offices and IT hardware, thus
reducing the amount of capital expenditure required for the Lumberton Site.
The Directors believe that the size of the Lumberton Site will ensure significant scope for the expansion of
the initial CoalSwitch™ plant via the addition of extra CoalSwitch™ production facilities targeting capacity
of up to 400,000 tonnes per annum during 2021. Furthermore, the Directors expect that AEG will benefit
from complementary biomass, saw logging and other renewable technology opportunities in the
Lumberton area.
The Lumberton Site is of significant strategic importance to AEG. It provides access to the prime lumber
district in the US, steam and power via AEG's joint venture partner, GRP, as well as proximal access to the
Eastern Seaboard of the United States, ensuring that AEG is connected to established export routes for sales
to Europe and South East Asia. In recent weeks, long term local feedstock supply contracts in North Carolina
have been completed, ready to commence lumber deliveries as soon as the existing 5 tonne per hour plant
is operational. This contract can be expanded to supply up to 800,000 tonnes of lumber per annum to the
Lumberton Site.
The Board believes that these developments provide the bedrock for the future development of the
business by providing key elements required to commercialise the CoalSwitch™ product-namely access to
significant quantities of feedstock, access to power and steam, the establishment of proven and scalable
technology and easy access to routes to market.
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ACTIVE ENERGY GROUP PLC
As a result, AEG has now completed the relocation of the existing Reference Plant from Utah to the
Lumberton site, with the intention of commencing CoalSwitch™ production at a rate of 5 tonnes per hour
in the second half of 2019. AEG’s recent collaboration with Andritz means that developments are well
underway to significantly increase the production capacity at the Lumberton Site, aiming for a 50 tonne per
hour plant facility before the end of 2020. Andritz and AEG are currently working together on the designs
for this new plant facility.
The support for the Group in the local region has been positive. In April 2019 the Group was awarded a
US$500,000 building re-use and renovation grant for the site after the North Carolina Rural Infrastructure
Authority voted to support the project. This is being allocated through the Community Development Block
Grant programme of the U.S. Department of Housing and Urban Development and administered in part by
the North Carolina Department of Commerce.
Further grants are currently being evaluated and the Group is working with its partners to make the
Lumberton Site the primary base for all the Company’s U.S. CoalSwitch™ operations and the focus of the
Lumberton Site as a renewable energy hub.
Financial Review:
Overview
During 2018 management has focused on reducing costs and strengthening the Group's balance sheet. As
a result losses attributable to AEG excluding non-cash share based payment were limited to US$2,360,674
(2017: US$ 14,476,213). Similarly, the Group's overall net assets position has improved to US$497,408
(2017: net liabilities US$2,534,966).
Consolidated income statement
Following the losses in 2017 associated with the discontinuance of the Ukrainian wood fibre business, the
Group focused its efforts on reducing costs and minimising losses in 2018. As a result, total comprehensive
loss for the year attributable to owners of the parent was limited to US$3,256,104 (2017: US$14,783,962).
Excluding non-cash share based payments losses attributable to AEG were limited to US$2,360,674 (2017:
US$ 14,476,213). The primary elements of the consolidated income statement are as follows:
• Revenues were US$195,000 (2017: US$nil) reflecting the provision of engineering consultancy
services associated with the Group's CoalSwitch™ technology.
• Research and development costs of US$nil (2017: US$2,389,807). The 2017 expenses reflect AEG's
investment in research and development associated with CoalSwitch™ technology, prior to the
construction of the first reference plant.
• An impairment charge of US$950,700 (2017: US$Nil) was recorded against the Northern Alberta
and Ukrainian intangible development assets, reflecting a re-evaluation of the economics of these
assets.
• Administrative expenses were US$2,982,866 (2017: US$2,870,721) reflecting ongoing corporate
costs and business development activity. Excluding non-cash share based payments, administrative
expenses were US$2,087,436 (2017: US$ 2,562,972) reflecting cost reduction initiatives undertaken
in 2018.
• Finance expenses were US$406,929 (2017: US$3,031,054), reflects ongoing servicing of the Group's
Convertible Loan Notes, offset by interest capitalised to tangible and intangible fixed assets and
foreign exchange gains.
Loss on discontinued operations of US$386,994 (2017: US$7,284,981) reflects the close out of
contractual matters associated with Active Energy's former Ukrainian wood chip operations. No
further costs are expected to be incurred on these operations, which ceased during 2017.
•
• The tax credit of US$1,346,010 (2017: US$355,491) reflects income associated with research and
development tax rebates.
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ACTIVE ENERGY GROUP PLC
Statement of financial position
During 2018 the Group has focused on stabilising its financial position and as a result the Group's overall
net assets position improved to US$497,408 (2017: net liabilities US$2,534,966.) The primary elements of
the consolidated statement of financial position are explained below.
• Non-current assets increased to US$14,587,953 (2017: USD12,633,431). This increase primarily
relates to investment in the construction of the CoalSwitch™ reference plant in the first half of 2018
of US$2,069,877; combined with investment of US$596,345 in CoalSwitch™ related intellectual
property and costs incurred of US$804,103 to secure timber licences in Newfoundland and
Labrador, partially offset by the impairment charges discussed above.
• Current assets increased to US$2,003,178 (2017: US$680,300) reflecting anticipated research and
development tax rebates.
• Current liabilities increased to US$4,179,400 (2017:US$2,034,283) reflecting increased shareholder
loans.
• Non-current liabilities decreased to US$11,914,323(2017: US$13,814,414) reflecting the conversion
of convertible loan notes into ordinary equity shares during 2018.
• Equity attributable to owners of the parent
improved to US$497,408 (2017: negative
US$2,534,966) as a result of the following:
➢
➢
In June 2018 the Company announced that it had raised £1m (before expenses) through an
issue of equity via an oversubscribed placing of new equity with new and existing investors.
In November 2018 AEG raised a further £1.495 million (before expenses) via the issue of new
equity. In addition certain creditors resolved to receive a total of 15,500,000 ordinary shares of
1p each (“Ordinary Shares”) in lieu of cash in consideration for services provided to the
Company.
➢ During 2018 certain holders of convertible loan notes elected to convert their notes into shares,
resulting is the issue of ordinary equity shares during 2018.
➢ Movements in the consolidated income statement described above.
Post year-end developments
Since the end of 2018 the Group has continued to stabilise and secure its financial position. On 4 March
2019 the Company announced that it had completed a fund raising of US$3,413,000 (or £2,573,906) (before
expenses) through the subscription of convertible loan notes by new and existing institutional investors in
order to acquire an industrial site in Lumberton, North Carolina. Furthermore, on 23 April 2019 the
Group announced that it has been awarded a US$500,000 building re-use and renovation grant for the
Lumberton site. Management continues to actively discuss opportunities with existing and prospective
partners and potential providers of project finance, in order execute Active Energy’s business plan following
the acquisition of the Lumberton Site.
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ACTIVE ENERGY GROUP PLC
Corporate:
During 2018, our board composition changed to reflect the strategic development of the business. In Q1
2018, Brian Evans-Jones stepped down and shortly thereafter, 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. Simon was previously the CEO of AIM listed stockbroker Cenkos Securities Limited and is
currently CEO of Vermeer LLP. In July 2018 Richard Spinks relinquished the role of Chief Executive Officer
for the Group and Michael Rowan assumed this position.
Mr. Spinks later stepped down as an Executive Director of the Group in October 2018 and has now resigned
from all positions within the AEG Group. In December 2018, Antonio Esposito joined the Board. Mr Esposito
is a qualified engineer with over 18 years' experience in logistics, operations, business development and
project management globally and has an in-depth understanding of commodities export and global markets
with a notable focus on woods and biomass-based fuels.
Furthermore, we are in active discussions with individuals to join the Senior Management team in the
coming months along with candidates to join the Board, as we look to strengthen our team ahead of the
production and commercialisation phase.
Outlook:
2018 was a pivotal year for AEG, where the Board made the necessary decisions to optimise the commercial
opportunities for Coalswitch™. The core technology has been supported by independent analysis from
commercial partners and the Group’s sole focus must be on execution of a profitable business plan. Recent
conversations have only supported this strategy and more prospective partners are now emerging as the
Lumberton Site gets closer to scalable production.
Following the acquisition of the Lumberton Site and commercial partnerships with GRP and Cobant,
coupled with the Company’s ongoing collaboration with Andritz, the Board believes that the key strategic
elements are now in place to underpin the future development of the business and successful roll out of
CoalSwitch™ as a black pellet fuel.
I would like to take this opportunity to thank all members of the current team for their commitment and
dedication to AEG.
2018 presented challenges, and with the continued dedication of our team, combined with the inherent
value in our technology and revised business model, I am confident that we can reach our immediate
commercial and strategic goals. We look to capitalise on the opportunities arising from the changes
occurring in the coal fired-power and biomass industries, by the commercialisation and delivery of a second-
generation biomass black pellet fuel and its derivative products.
Michael Rowan
Chief Executive Officer
26 June 2019
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ACTIVE ENERGY GROUP PLC
OPERATIONS REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2018
The Group’s primary activities are centred on the commercialisation of its CoalSwitch™ product and process
supported by a forestry management business, Timberlands.
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 & 2017 work was
primarily focused on research and development activities. 2018 was a pivotal year for the commercial
development of CoalSwitch™ technology.
Construction of Reference Plant
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 the opening of this plant. During the first half of
2018, AEG operated the facility, albeit with the customary issues as one would expect when commissioning
any new technology or equipment. Additional testing of the design and functionality of the reactors was
undertaken and samples were produced. The Board regarded the completion and initial testing of the plant
as the significant breakthrough in the development of the CoalSwitch™ business model, showing that the
initial reactor results and positive laboratory results can be upscaled to industrial scale production facilities.
At the end of the H1 2018, the Board decided to limit activity at the Utah Reference Plant, pending review
of the optimal deployment of this facility, which included a potential sale of the Reference Plant at that
time to a customer. The review is now complete and AEG has now moved the Reference Plant to the
Lumberton site in North Carolina, where it intends to commence scalable production in the second half of
2019.
Activities in North Carolina, United States of America
During the fourth quarter of 2018 and into the first half of 2019, North Carolina, USA emerged as the centre
of activity for AEG's CoalSwitch™ business. This jurisdiction is ideally placed to leverage value from AEG's
CoalSwitch™ technology, as it provides access to the prime lumber district in the US, as well as proximal
access to the Eastern Seaboard of the United States, ensuring that AEG is connected to established export
routes for sales to Europe and South East Asia.
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ACTIVE ENERGY GROUP PLC
On 15 October 2018, AEG announced that it had entered into a joint venture agreement with Georgia
Renewable Power LLC to advance the commercial development of CoalSwitch™. The aim of the joint
venture is to leverage the significant synergies between GRP and AEG's businesses including GRP's
established steam and drying infrastructure at its existing power plants. The joint venture also intends to
work on a number of additional projects, including the creation of black pellet fuel inclusive of poultry litter
(a beneficiated pelletised fuel derived from poultry litter) using CoalSwitchTM technology.
On 27 March 2019, AEG announced that it had completed the acquisition of an industrial site in Lumberton,
North Carolina for a total consideration of US$3,330,000. The site, which includes up to 415,000 sq ft of
covered factory space and approximately 151 acres of surrounding land, is the new base for all Active
Energy's CoalSwitch™ operations in the US . The Lumberton Site has a number of additional advantages for
AEG:
•
It is strategically located close to AEG's joint venture partner GRP thereby providing access to steam
and power, required to operate CoalSwitch™ facilities.
• The Lumberton Site is fully permitted for operations and the permits, thus reducing the time to
market of the planned production of CoalSwitch™.
• The Lumberton Site includes key ancillary facilities, such as water treatment, an analysis laboratory,
offices and IT hardware, thus further reducing the amount of capital expenditure required.
• The Directors believe that the size of the Lumberton Site provides significant scope for the
expansion of the initial CoalSwitch™ plant via the addition of extra CoalSwitch™ production
facilities. Furthermore, the Directors expect that AEG will also benefit from complementary
biomass, saw logging, rental and other commercial opportunities in the Lumberton area. The site
is also eligible for government grants and support and in April 2019, the Group was awarded a
US$500,000 building re-use and renovation grant.
• As part of Active Energy's due diligence on the Lumberton Site, the Company's Directors reviewed
an independent valuation report on the Lumberton Site. The report, which was dated November
2017, valued the Lumberton Site at US$4,550,000.
AEG has relocated the existing Reference Plant from Utah to the Lumberton Site, with the intention of
commencing CoalSwitch™ production at a rate of 5 tonnes per hour in the second half of 2019. AEG
is targeting additional investment and development in order to increase production capacity via a new 50
tonne per hour production facility with the ability to produce to up to 400,000 tonnes per annum from
2021.
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. a
Polish research, development and environmental waste coal recovery company active in the land
reclamation, environmental services and energy sectors. The joint venture's primary objective was the
production and commercialisation of a "SuperFuel" product that blends CoalSwitch™ with reclaimed coal
from coal slurry dumps in Upper Silesia, Poland. On the 13 June 2018, AEG announced that the joint venture
received confirmation from the Polish Government Burn Test Laboratory that testing had been completed
on the "SuperFuel™" product. The test results demonstrated that the "SuperFuel" has a similar calorific
value to coal with significantly lower sulphur content and low ash and SOx and NOx emissions. Receipt of
approval from the formal independent certification tests enable the commencement of commercial
production of the "SuperFuel" for use in coal fired power stations across Poland, and also in municipal
heating and private household heating systems. In addition, this approval certified the "SuperFuel" product
to carry the Polish Government's Ecological Safety Symbol, a requirement to allow solid fuels to be sold
without restriction in Poland.
In August 2018, the joint venture applied to the EU to request grant funding to support further development
of the SuperFuel technology. In April 2019, the joint venture was notified that, whilst the Company's
application scored highly, it had been unsuccessful in receiving funds. AEG and Cobant are working together
to develop the optimal strategy for CoalSwitch™ and SuperFuel™ related opportunities in Poland.
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ACTIVE ENERGY GROUP PLC
South East Asia Activities
During 2018 and into 2019 the strategic focus of AEG has shifted towards North America, and specifically
opportunities in North Carolina and Canada, and resources have been dedicated to those regions
accordingly. Nevertheless, AEG is continuing to make progress in South East Asia. The research and
development program into the creation of CoalSwitch™ from empty fruit bunch palm oil waste has been
successfully completed. Furthermore, AEG has had approaches from and is actively working with
government bodies, who are taking an increasing interest in AEG’s knowledge and experience, and the
Group is actively working with local commercial partners in the region. The Board hopes for a commercial
milestone as soon as practicable.
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 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.
On 11 June 2018, the Group announced that it had entered into a Memorandum of Understanding with
Young Living Farms ("YLF"), pursuant to which YLF would become the first buyer of a PeatSwitch plant,
utilising components of the Reference Plant. However, this did not result in a definitive commercial
contract due to internal strategic reviews at YLF. In the light of this AEG is currently considering the
commercial opportunities with this product.
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™ 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.
• An opportunity to secure long-term timber proprietary tenures should allow AEG to enter into
significant and long-term supply agreements for its products with a lesser risk of market price
fluctuations and the opportunity to increase profitability of the CoalSwitch™ product.
• Control of the supply chain ensures co-ordinated environmental sustainability.
Newfoundland
On 26 November 2018, and following many months of work and negotiation, AEG announced that its
subsidiary, Timberlands
local operating company Timberlands
International (Newfoundland and Labrador) Inc, had been formally issued two five-year Commercial Timber
Permits ('CTPs') for Forestry Management Areas 17 and 18 by the Ministry of Fisheries and Land Resources
of the Crown Province of Newfoundland and Labrador.
International Limited through
its
The CTPs were issued with a five-year revolving renewal facility relating to a total Annual Allowable Cut of
100,000 cubic metres per annum. In addition, the CTPs specify certain standard conditions including the
species, class and volume of timber that may be cut and the locations from where such timber may be cut.
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ACTIVE ENERGY GROUP PLC
The Group is currently reviewing the optimal commercial strategy to develop its opportunities in
Newfoundland. Recent conversations have presented complementary business opportunities for the Group,
in additions to the CTPs. These are being examined with the aim to construct and install a CoalSwitch™
plant in the Province.
Alberta
AEG is continuing to consider various commercial opportunities in Alberta. On 17 May 2018, AEG
announced an MoU with Powerwood Canada (“Powerwood”) which, subject to formal contract and
available funding, would allow AEG to assume a controlling interest in Powerwood. Powerwood has access
to a number of forestry assets granted by the Crown in the name of the Province of Alberta. Commercial
conversations have continued between the parties but at this time, there is no immediate prospect of a
transaction.
In addition, AEG has continued to maintain an ongoing relationship with the Métis Settlements General
Council under the stewardship of Metis Settlements General Council President Gerald Cunningham.
Finally, in recent weeks, AEG has been approached by commercial partners, who may wish to acquire a
territorial licence to develop CoalSwitch™ in Alberta.
AEG is examining various solutions to realise value and see the commencement of operations in Alberta
and will provide the market with a further update as soon as practicable.
Ukraine
Whilst AEG has no current active 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 45 years. AEG is currently reviewing options to utilise this asset to provide feedstock to
future CoalSwitch™ operations including AEG’s proposed activities in Poland.
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ACTIVE ENERGY GROUP PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2018
The Directors of Active Energy Group Plc present their Strategic Report for the year ended 31 December
2018.
OPERATING REVIEW
The Chief Executive Officer'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 low cost biomass into
renewable energy pellet products and the associated development of timber resources to work with each
biomass energy project.
Organisation Overview
The Group’s business is directed by the Board with executive management carried out through the
Executive Directors.
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 technologies,
underpinned, to the extent available, 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 Richard Spinks on 31 October 2018 and the appointment of Antonio Esposito
on 17 December 2018, the Group’s current executive team comprises:
Michael Rowan: Executive Director and CEO; with overall responsibility for all Group activities.
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ACTIVE ENERGY GROUP PLC
Antonio Esposito: Executive Director and COO; with overall responsibility for all Group operations.
In addition, and in order to strengthen its operational capability and overall co-ordination the Group has
established an operating committee. This committee comprises 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.
By complying with this code the Company ensured compliance with the new AIM Rules regarding Corporate
Governance introduced September 2018.
Full details of the Company's policy on Corporate Governance can be found on the website under:
https://www.aegplc.com/investors/corporate-governance/
Composition of the Board of Directors
The Board of Directors is currently comprised of the Chief Executive Officer (based in the UK), the Chief
Operating Officer (based in the USA)and the Non-Executive Director (based in the UK). The Company
acknowledges that the guidance in the QCA Code is for a company to have at least two independent non-
executive directors and also that the Chairman and Chief Executive Officer roles are currently being
discharged by the same person.
The Directors are, therefore currently reviewing the roles and composition of its board and to the extent
additional members and 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. Meetings are
attended by all board members.
12
ACTIVE ENERGY GROUP PLC
Board Committees:
Remuneration Committee
The Remuneration Committee is made up of Simon Melling and has access to external expertise should that
be required. This committee is responsible for the scale and structure of the remuneration of 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.
AIM Rules Compliance Committee
The AIM Rules Compliance Committee is made up of Michael Rowan and Antonio Esposito 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.
13
ACTIVE ENERGY GROUP PLC
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 CoalSwitchTM technology.
• Commercialise new derivative products which utilise the new CoalSwitchTM technology
• Conduct operations in a safe and environmentally responsible manner.
• Positively impact local communities in the jurisdictions in which we operate.
• 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:
A summary of the key risks and mitigation strategies is below:
Risk
Mitigation
1.
2.
3.
4.
Insufficient cash resources to meet liabilities,
continue as a going concern and finance key
projects.
Loss of key management/staff resulting in
failure to secure and meet contractual
requirements.
Project execution risk associated with capital
intensive activities.
Health and safety risks to employees,
contractors and local communities associated
capital intensive operations.
Short term and 5 year business plans are
prepared and are reviewed on an ongoing
basis. This analysis provides the basis for
capital raising activity.
Regular review of salaries and benefits
including long term incentives. Ongoing
communication with key individuals.
Strategy is to outsource construction projects
to established EPC contractors and to engage
suitable engineering counterparties where
possible.
Employment of experienced operational
managers and contractors. Group wide HSE
policies to be introduced on commencement of
production.
14
ACTIVE ENERGY GROUP PLC
5.
6.
7.
Failure to comply with law and regulations in
the jurisdictions in which we operate.
Failure to maintain strong and effective
relations with key stakeholders in the areas in
which we operate, resulting in loss of contracts.
Significant changes in the political environment
results in loss of resources/market and/or
business failure.
Key management are professionally qualified.
In addition the Company appoints relevant
professional advisers (legal, tax, accounting
etc) in the jurisdictions in which we operate.
Senior management seeks to establish and
maintain an open and transparent dialogue
with key stakeholders in the areas in which we
operate.
The Company exited its Ukrainian wood fibre
business in 2017 and refocussed its activities in
North America and Western Europe, in order to
reduce the Group's country, political and
trading risk profiles. Management also
monitors the wider political environment on an
ongoing basis.
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 26 June 2019 and signed on its behalf by:
Michael Rowan
Chief Executive Officer
15
ACTIVE ENERGY GROUP PLC
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2018
The Report of Directors
The Directors present their report together with the audited financial statements of the Group for the year
ended 31 December 2018.
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 2018 and an
indication of likely future developments in the Group’s business in the Chief Executive Officer’s Report, the
Operations Report and the Strategic Report (on pages 11 to 15).
Dividends:
No dividend is proposed for the year ended 31 December 2018 (2017: £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 (resigned 31 October 2018)
B Evans-Jones (resigned 5 February 2018)
S C Melling (appointed 16 March 2018)
A Esposito (appointed 17 December 2018)
Remuneration:
Remuneration and benefits received during the year ended 31 December 2018 for Directors, together with
interests in share options and warrants at the year end, were as follows:
2018
Gross
Fees
and
Salary
US$
193,295
178,375
-
19,996
37,000
6,291
434,957
2018
Share-
based
Payments
US$
390,463
467,047
-
-
-
-
857,510
T M Rowan
R G Spinks
M Girlanda
B Evans-Jones
S Melling
A Esposito
2017
Gross
Fees
and
Salary
US$
137,120
255,879
107,759
218,535
-
-
719,293
16
2017
Share-
based
Options /
Exercise
Payments
US$
Warrants
No.
Price
p
191,733
-
-
56,776
-
-
248,509
20,500,000
25,000,000
-
-
-
-
45,500,000
6.4
6.5
-
-
-
-
ACTIVE ENERGY GROUP PLC
Given cash flow constraints during the period associated with the transition to a CoalSwitch™ producing
business, the directors agreed to defer receipt of certain salary and expense payments. As a result of this
the following monies were outstanding to existing directors at the 31 December 2018: TMS Rowan
US$115,121; A Esposito US$101,433; and SC Melling US$10,410. The amount due to Mr. Esposito primarily
represents monies earned, prior to his appointment as a director.
In addition, the share options awarded to TMS Rowan and RG Spinks, and which generated the share based
payments accounting charge, do not currently have any value based on the share price at the date of
publication of this report.
Significant Shareholders:
The Directors are aware of the following significant shareholdings of 3 per cent or more of the current
Issued Ordinary Share Capital (“ISC”) of 1,201,906,951 shares and Total Voting Rights (“TVR”) of
1,201,906,951 shares on 31 May 2019:
Gravendonck Private Foundation
R G Spinks
R M Derrickson
No.
221,898,809
54,105,333
37,457,777
ISC (%)
18.46
4.50
3.12
TVR (%)
18.46
4.50
3.12
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.
17
ACTIVE ENERGY GROUP PLC
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
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
Chief Executive Officer
Date: 26 June 2019
Company Registration Number: 03148295
18
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 2018 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 2018 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
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.
• Company only loans.
19
ACTIVE ENERGY GROUP PLC
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$8,459,850 at the
year ended 31 December 2018 (31 December 2017:
US$8,054,947).
Tested management’s assessment of indicators of
impairment by considering various sources of
internal and external information.
The Directors have a duty to confirm that all
intangibles, are correctly recognised.
Compared management’s recoverable amounts and
valuation to third party valuation reports for
Timberlands business.
IAS 36 Impairment of assets (“IAS 36”) states that
assets must be assessed for 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, the difference is recorded
as an impairment loss.
The investment held in Alpha Prospects has been
revalued in the year to US$752,215. The revaluation
has been assessed and the reasoning behind the
revaluation
corroborated with
management. The difference compared to prior year
is due to forex differences.
been
has
Refer to Note 1 and Note 15 to the Financial
Statements for discussion of the related accounting
policy.
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
the basis by which
are not, understanding
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 45 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.
20
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
liabilities, along with detailed
account existing
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 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 forecast includes a number of assumptions
related to future cash flows and associated risks. Our
focused on evaluating and
audit work has
these
the
challenging
assumptions and their impact on the forecast period
and ensuring that all key matters are correctly
disclosed in the going concern note.
reasonableness
of
Specifically we obtained, challenged and assessed
managements
and
concern
performed procedures including:
forecast
going
• Verifying the consistency of key
inputs
relating to future costs to other financial and
operational information obtained 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 have highlighted this uncertainty to the
members in this report.
The Company has amounts due from group
companies US$17,752,012 (2017: US$13,629,890).
The directors have confirmed these
recoverable.
loans are
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.
21
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$180,000 (31 December 2017:
US$400,000).
Based on 1% of gross assets.
We believe that gross assets is a
primary measure
by
used
in assessing the
shareholders
performance of the Group, as the
group is at a pre-revenue stage.
Whilst gross asset values and
revenue are a representation of
the size of the Group;
Company financial statements
US$163,000 (31 December 2017:
US$290,000).
Based on 1% of gross assets.
We believe that gross assets is a
primary measure
by
the
shareholders
performance of the Company, as
the Company is at a pre-revenue
stage. Whilst gross asset values
and revenue are a representation
of the size of the Company
used
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$700 and
US$163,000.
We agreed with the Audit Committee that we would report to them misstatements identified during our
audit above US$9,000 (Group audit) (31 December 2017: US$20,000) and US$8,150 (Company audit) (31
December 2017: US$14,500) 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 5 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 5 reporting units.
The Group engagement team performed all audit procedures.
22
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 pages 17 and 18, 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.
23
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
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 is made solely to the Company's members as a body in accordance with Chapter of Part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's
members those matters that we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company, or the Company's members as a body, for our audit work, for this report, or for the
opinions we have formed.
Sanjay Parmar
Senior Statutory Auditor
For and on behalf of
Jeffreys Henry LLP (Statutory Auditors)
Finsgate
5-7 Cranwood Street
London EC1V 9EE
26 June 2019
24
ACTIVE ENERGY GROUP PLC
CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2018
REVENUE FROM CONTRACTS WITH CUSTOMERS
GROSS PROFIT
R&D expenditure
Impairment charge
Administrative expenses
OPERATING LOSS
Finance costs
(Loss) from continuing operations
Income tax credit on continuing operations
(Loss) from discontinued operations
LOSS FOR THE PERIOD
Note
3
5
6
8
7
2018
US$
195,000
195,000
-
(950,700)
(2,982,866)
(3,738,566)
(406,929)
(4,145,495)
1,346,010
(386,994)
(3,186,479)
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)
(Profit)/Loss attributable to Non‐controlling Interest
(69,625)
437,110
(Loss) attributable to the Parent Company
(3,256,104)
(14,783,962)
OTHER COMPREHENSIVE INCOME/(EXPENSE):
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of operations
Revaluation of assets held for resale
(278,237)
(34,658)
137,734
331,585
Total other comprehensive expense
(312,895)
469,319
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD
(3,568,999)
(14,314,643)
(Loss) per share (US cent) – continuing operations
(Loss) per share (US cent) – discontinued operations
Basic and Diluted (loss) per share (US cent)
9
(0.28)
(0.04)
(0.32)
(0.90)
(0.88)
(1.78)
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 30 to 70 form part of these financial statements.
25
ACTIVE ENERGY GROUP PLC
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2018
NON-CURRENT ASSETS
Intangible assets
Property, plant and equipment
Investment in subsidiaries
Long term loans
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
NON-CURRENT LIABILITIES
Deferred income tax liabilities
Finance leases falling due in more
than one year
Loans and borrowings
TOTAL LIABILITIES
NET ASSETS
Note
10
11
12
14
15
16
17
18
19
22
21
20
21
22
Group
2018
US$
8,459,850
5,375,888
-
-
752,215
14,587,953
-
1,704,410
298,768
2,003,178
Group
2017
US$
8,054,947
3,791,611
-
-
786,873
12,633,431
20,349
517,902
142,049
680,300
Company
2018
US$
-
-
58,426
17,372,234
752,215
18,182,875
Company
2017
US$
-
-
58,427
-
786,873
845,300
-
784,268
234
784,502
-
13,772,668
135,706
13,908,374
16,591,131
13,313,731
18,967,377
14,753,674
2,851,693
1,327,707
1,944,676
-
1,469,614
1,000,000
1,122,458
-
-
89,607
-
-
4,179,400
2,034,283
2,469,614
1,122,458
241,585
384,169
-
205,993
-
-
-
-
11,672,738
11,914,323
16,093,723
497,408
13,224,252
13,814,414
15,848,697
(2,534,966)
11,672,738
11,672,738
14,142,352
4,825,025
13,224,252
13,224,252
14,346,710
406,964
23
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
Share capital
Share premium
Merger reserve
Foreign exchange reserve
Own shares held reserve
Convertible debt / warrant reserve
Retained earnings
Non‐controlling Interest
TOTAL EQUITY
17,265,379
17,303,159
2,350,175
(204,815)
(268,442)
2,720,933
(38,310,938)
(358,043)
497,408
14,493,246
14,740,478
2,350,175
108,080
(779,222)
2,930,209
(35,950,264)
(427,668)
(2,534,966)
17,265,379
17,303,159
2,350,175
(716,115)
(268,442)
2,720,933
(33,830,064)
-
4,825,025
14,493,246
14,740,478
2,350,175
(403,220)
(779,222)
2,930,209
(32,924,702)
-
406,964
The financial statements were approved and authorised for issue by the Directors on 26 June 2019
and were signed on their behalf by:
Michael Rowan
Chief Executive Officer
Company Number 03148295
The notes on pages 30 to 70 form part of these financial statements
26
ACTIVE ENERGY GROUP PLC
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER
2018
Cash (outflow)/inflow from
operations
Income tax paid
Net cash (outflow)/inflow
from operating activities
Cash flows from investing
activities
Purchase of intangible assets
Acquisition of investment
Purchase of property, plant
and equipment
Sale of property, plant and
equipment
Net cash outflow from
investing activities
Cash flows from financing
activities
Issue of equity share capital,
net of share issue costs
Loans raised
Note
Group
2018
US$
Group
2017
US$
Company
2018
US$
Company
2017
US$
26
(1,515,299)
(5,821,095)
(4,242,757)
(13,717,090)
-
(6,684)
-
-
(1,515,299)
(5,827,779)
(4,242,757)
(13,717,090)
(1,108,770)
(1,438,017)
-
-
(1,777,388)
(3,923,481)
123,222
221,504
(2,762,936)
(5,139,994)
-
-
-
-
-
-
(58,427)
-
-
(58,427)
3,299,248
2,350,445
3,142,674
7,537,671
3,299,247
2,022,738
3,142,674
10,181,201
Finance expenses
(1,193,316)
(1,693,031)
(1,193,316)
(1,454,191)
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
4,456,377
8,987,314
4,128,669
11,869,684
178,142
(1,980,459)
(114,088)
(1,905,833)
142,049
2,121,841
135,706
2,041,134
(21,423)
667
(21,384)
405
18
298,768
142,049
234
135,706
The notes on pages 30 to 70 form part of these financial statement
27
ACTIVE ENERGY GROUP PLC
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018
Share capital
US$
12,621,134
-
Share
premium
US$
13,469,916
-
Merger
reserve
US$
2,350,175
-
-
-
1,872,112
1,270,562
-
-
-
-
-
-
-
-
-
-
-
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
Foreign
exchange
reserve
US$
(29,654)
-
137,734
-
-
-
-
Own shares
held reserve
US$
(779,222)
-
-
-
-
-
-
Convertible
debt and
warrant
reserve
US$
1,075,301
-
-
-
1,854,908
Retained
earnings
US$
(21,805,636)
(15,221,072)
331,585
-
-
Non-
controlling
Interest
US$
-
-
-
-
-
-
-
307,749
437,110
-
(427,668)
Total equity
US$
6,902,014
(15,221,072)
469,319
3,142,674
1,854,908
307,749
9,442
At 31 December 2017
14,493,246
14,740,478
2,350,175
108,080
(779,222)
2,930,209
(35,950,264)
(427,668)
(2,534,966)
Loss for the period
Other comprehensive
income
CLN conversions
Issue of share capital
Embedded derivative
on CLN issue
Share based payments
Cancellation of
Treasury shares
Minority Interest
At 31 December 2018
-
-
-
-
734,267
1,812,079
2,548,646
750,602
-
-
(510,780)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(312,895)
-
-
-
-
-
-
-
-
-
-
-
510,780
-
(3,186,479)
-
-
-
-
-
895,430
-
(339,081)
-
129,805
-
-
-
-
-
-
-
-
-
-
(3,186,479)
(312,895)
2,207,265
3,299,248
129,805
895,430
-
-
17,265,379
17,303,159
2,350,175
(204,815)
(268,442)
2,720,933
(38,310,938)
(358,043)
497,408
(69,625)
69,625
The purpose and nature of each of the above reserves is described in note 25.
The notes on pages 30 to 70 form part of these financial statements.
28
ACTIVE ENERGY GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2018
At 31 December 2016
Loss for the year
Other comprehensive income
Issue of share capital
Embedded derivative on issue of CLN
Share based payments
At 31 December 2017
Loss for the period
Other comprehensive income
CLN conversions
Issue of share capital
Embedded derivative on CLN issue
Share based payments
Share
capital
US$
Share
premium
US$
12,621,134 13,469,916
Merger
reserve
US$
2,350,175
-
-
-
-
1,872,112
1,270,562
-
-
-
-
-
-
-
-
-
Foreign
exchange
reserve
US$
(1,023,565)
-
620,345
-
-
-
-
-
-
-
734,267
1,812,079
2,548,646
750,602
-
-
-
-
-
-
-
-
-
-
-
-
-
(312,895)
-
-
-
-
-
-
-
-
-
-
-
510,780
Own
shares
held
reserve
US$
(779,222)
Convertible
debt and
warrant
reserve
US$
1,075,301
Retained
earnings
US$
(22,345,436)
Total equity
US$
5,368,303
(11,218,600)
(11,218,600)
331,585
951,930
-
307,749
(1,800,792)
(1,800,792)
-
-
-
-
-
-
3,142,674
1,854,908
307,749
406,964
(312,895)
2,207,265
3,299,248
129,805
895,430
-
-
-
895,430
-
-
-
-
-
-
-
-
-
1,854,908
-
-
(339,081)
-
129,805
14,493,246 14,740,478
2,350,175
(403,220)
(779,222)
2,930,209
(32,924,702)
Cancellation of Treasury shares
(510,780)
At 31 December 2018
17,265,379 17,303,159
2,350,175
(716,115)
(268,442)
2,720,933
(33,830,064)
4,825,025
The purpose and nature of each of the above reserves is described in note 25.
The notes on pages 30 to 70 form part of these financial statements.
29
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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
approved by the Directors
in accordance with International Financial Reporting Standards,
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
Historically, the Group's primary revenue generating business segment was the Ukrainian wood fibre
business. This was discontinued during 2017 and since then the group has focused its efforts on the
CoalSwitch™ business segment. This business segment had not generated significant 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 note that the current operational plans involve commencement of production and sale
of CoalSwitchTM and other biomass products in the second half of 2019. In addition the Directors have
identified a variety of potential sources of funds including issue of additional equity and/or debt, tax
credits, rental income, government subsidies and sale of investments. 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, production and sale of CoalSwitchTM has
not commenced and not all of the potential sources of funds have been finalised and therefore there
can be no guarantee that sufficient funds will be received to secure the future of the group. 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.
30
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1. ACCOUNTING POLICIES (continued)
Standards, interpretations and amendments to existing standards
The following Adopted IFRSs have been issued but have not been applied by the Group in these
Financial Statements. The full impact of their adoption has not yet been fully assessed; however,
management do not expect the changes to have a material effect on the Financial Statements unless
otherwise indicated:
• Annual Improvements to IFRSs – 2015-2017 Cycle (1 January 2019)
• Amendments to IAS 1 and IAS 8 – on definition of materiality (1 January 2019)
• Amendments to IAS 19 – employees benefits plan amendments, curtailments or settlements
• Amendments to IAS 28 on long term interests in associates and joint ventures
• Amendments to IFRS 3 “Business combinations” on definition of a business
• Amendments to IFRS 9, financial instruments on prepayment features with negative
compensation
•
IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (effective
date to be confirmed)
• Amendments to IAS 40 Investment Property (effective date to be confirmed)
•
IFRIC 23 Uncertainty over Income Tax Treatments (1 January 2019)
• Amendments to IAS 28 Investments in Associates and Joint Ventures (effective date to be
confirmed)
•
IFRS 17 Insurance contracts (1 January 2021)
Changes in accounting standards: Standards which have been implemented in the year
IFRS 9 ‘Financial Instruments’: The standard replaces all phases of the financial instruments project and
IAS 39 'Financial Instruments: Recognition and Measurement'. The standard is effective from periods
beginning on or after January 2018 and introduces:
• new requirements for the classification and measurement of financial assets and financial
Liabilities; and,
• a new model for recognising provisions based on expected credit Losses.
IFRS 15 ‘Revenue from Contracts with Customers’: IFRS 15 replaced IAS 18 ‘Revenue’ and IAS 11
‘Construction Contracts’ for accounting periods commencing on or after 1 January 2018. The core
principle of the standard is that an entity will recognise revenue at an amount that reflects the
consideration to which the entity expects to be entitled in exchange for transferring promised goods
or services to a customer.
The impact of IFRS 9 & 15 has been assessed at a Group level, and there is no material impact on the
consolidated results of the Group.
31
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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 recognised in according with the requirements of IFRS 15 'Revenue from Contracts with
Customers'. The Company recognises revenue to depict the transfer of promised goods and services
to customers in an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. This core principle is delivered in a five-step model framework:
1. Identify the contract(s) with the customer; 2. Identify the performance obligations in the contract;
3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in
the contract; and 5. Recognise revenue when (or as) the entity satisfy a performance obligation.
Revenue
is recognised when control of the products have been transferred to the
customer. Control is considered to have transferred once products have been received by
the customer unless shipping terms dictate otherwise. Revenues exclude intra-group sales
and value added taxes and represent net invoice value less estimated rebates, returns and
settlement discounts. The net invoice value is measured by reference to the fair value of
consideration received or receivable by the Group for goods supplied.
32
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1. ACCOUNTING POLICIES (continued)
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).
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 in joint operations by recognising its share of assets,
liabilities, revenues and expenses in accordance with its contractually conferred rights and
obligations.
33
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1. ACCOUNTING POLICIES (continued)
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).
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.
34
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1. ACCOUNTING POLICIES (continued)
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 assets and liabilities
The Group classifies its financial assets at inception into three measurement categories; 'amortised
cost', 'fair value through other comprehensive income' ('FVOCI') and 'fair value through profit and loss'
('FVTPL'). The Group classifies its financial liabilities, other than financial guarantees and loan
commitments, as measured at amortised cost. Management determines the classification of its
investments at initial recognition. A financial asset or financial liability is measured initially at fair value.
At inception transaction cost that are directly attributable to its acquisition or issue, for an item not at
fair value through profit or loss, is added to the fair value of the financial asset and deducted from the
fair value of the financial liability.
Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or
liability is measured at initial recognition, minus principal payments, plus or minus the cumulative
amortisation using the effective interest method of any difference between the initial amount
recognised and maturity amount, minus any reduction for impairment.
Fair value measurement
Fair value is the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arm’s length transaction on the measurement date. The fair value
of assets and liabilities in active markets are based on current bid and offer prices respectively. If the
market is not active the group establishes fair value by using appropriate valuation techniques. These
include the use of recent arm’s length transactions, reference to other instruments that are
substantially the same for which market observable prices exist, net present value and discounted cash
flow analysis.
35
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1. ACCOUNTING POLICIES (continued)
Derecognition
Financial assets are derecognised when the rights to receive cash flows from the financial assets have
expired or where the group has transferred substantially all of the risks and rewards of ownership. In
a transaction in which the group neither retains nor transfers substantially all the risks and rewards of
ownership of a financial asset and it retains control over the asset, the group continues to recognise
the asset to the extent of its continuing involvement, determined by the extent to which it is exposed
to changes in the value of the transferred asset. There have not been any instances where assets have
only been partly derecognised. The group derecognises a financial liability when its contractual
obligations are discharged, cancelled or expire.
Impairment
The Group assesses at each financial position date whether there is objective evidence that a financial
asset or group of financial assets is impaired. If there is objective experience (such as significant
financial difficulty of obligor, breach of contract, or it becomes probable that debtor will enter
bankruptcy), the asset is tested for impairment. The amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of the estimated future cash flows
(excluding future expected credit losses that have not been incurred) discounted at the financial asset’s
original effective interest rate (that is, the effective interest rate computed at initial recognition).The
carrying amount of the asset is reduced through use of an allowance account. The amount of loss is
recognised in the Statement of Comprehensive Income.
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.
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.
36
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1. ACCOUNTING POLICIES (continued)
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.
Where the proceeds from the convertible debt have been used to finance construction of property,
plant and equipment, or to invest in intangible assets, then the associated borrowing costs are
allocated to the relevant asset in accordance with the requirements of IAS23.
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.
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.
37
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
1. ACCOUNTING POLICIES (continued)
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 were reclassified as
discontinued operations in 2017.
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.
38
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
2. SEGMENTAL INFORMATION (continued)
3. 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.
2018
2018
2018
Forestry &
Natural
Resources
US$
-
(995,545)
(995,545)
142,584
(852,961)
2017
Forestry &
Natural
Resources
US$
-
-
-
-
-
CoalSwitch™/
PeatSwitch™
US$
Total
US$
195,000
195,000
(407,323)
(407,323)
1,203,426
796,103
(1,402,868)
(1,402,868)
1,346,010
(56,858)
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)
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 were 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$2,666,222 (2017:
US$3,877,226) and capital expenditure relating to the Forestry and natural resource segment was
US$804,103 (2017: US$896,957).
39
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
2. SEGMENTAL INFORMATION (continued)
Reconciliation of reportable segment profit or loss, assets and liabilities to the Group’s corresponding
amounts are as follows:
Total (loss) from reportable segments
Unallocated amount - corporate expenses
Unallocated amount - finance income
Unallocated amount - finance expense
Share based payments
Discontinued operations
Loss for the period
An analysis of non-current assets by location of assets is given below:
United Kingdom
Ukraine
Canada
United States
3. REVENUE
2018
US$
2017
US$
(56,858)
(2,914,066)
(1,440,268)
(1,683,222)
-
-
(406,929)
(3,031,054)
(895,430)
(307,749)
(386,994)
(7,284,981)
(3,186,479)
(15,221,072)
2018
US$
2017
US$
5,303,081
1,267,925
2,701,058
5,315,889
4,741,653
2,170,583
2,179,584
3,541,611
14,587,953 12,633,431
All revenues in 2017 relating to the Ukrainian wood fibre business (shown below as sale of goods) have
been reclassified as discontinued and therefore are not shown on the face of the income statement.
Group
Sale of goods
Engineering services
40
2018
US$
2017
US$
- 1,323,200
195,000
-
195,000 1,323,200
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
3. REVENUE (continued)
The following table analyses revenue by location of customer. Revenues in 2017 relate to the Ukrainian
wood fibre business and was therefore reclassified as discontinued in the 2017 financial statements.
Switzerland
USA
Turkey
Ukraine
2018
US$
25,000
170,000
-
-
2017
US$
-
-
856,869
466,331
195,000 1,323,200
Revenue derived from a single external customer amounted to US$170,000 (2017: US$856,869).
4. EMPLOYEE COSTS AND DIRECTORS
The following table analyses group wages and salaries before any allocations to property, plant and
equipment or intangible assets.
Group
Wages and salaries
Social security costs
Share based payments – others
Share based payments – directors
2018
US$
2017
US$
2,021,959 2,068,200
183,631
2,199,422 2,251,831
59,240
248,509
37,920
857,510
177,463
The average monthly number of employees during the year was as follows:
Directors
Administration
Production
3,094,852 2,559,580
2018
3
6
10
19
2017
3
11
25
39
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 16.
Directors' emoluments
Share based payments (note 24)
2018
US$
434,957
857,510
2017
US$
719,293
248,509
1,292,467
967,802
The emoluments of the highest paid Director for the year, excluding non-cash share based payments,
were US$193,295 (2017: US$255,879).
41
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
5. OPERATING LOSS
Group
The loss before income tax is stated after charging/(crediting):
2018
US$
2017
US$
Operating leases - premises
Operating leases - vehicles
Operating leases - equipment
Amortisation of intangible assets
Depreciation and impairment
Loss / (profit) on disposal of fixed assets/discontinued operations
Auditors' remuneration - parent company and consolidation
Auditors' remuneration - subsidiaries
Auditors' remuneration - taxation services
Auditors' remuneration - other services
Share based payments
Foreign exchange (gains)/loss
6. FINANCE INCOME AND COSTS
Group
Finance costs
Interest on convertible loan
Other loan interest and charges
Foreign exchange losses
Net finance (credit)/costs
33,596
-
-
44,845
950,700
1,778
40,830
23,605
4,466
14,035
895,430
(640,353)
26,807
2,886
29,045
44,845
280,473
5,600,464
34,000
20,500
9,400
-
307,749
(754,703)
2018
US$
2017
US$
1,003,213
958,299
44,070
(640,354)
406,929
929,083
1,143,672
3,031,054
Foreign exchanges movements primarily relate to movements in US$/Sterling exchange rates and
resulting movements in intercompany balances.
42
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
7. LOSS FROM DISCONTINUED OPERATIONS
During 2017 AEG plc discontinued its Wood fibre business in Ukraine. The results of this business are
disclosed as a single line item in the Group Income and Expenditure Statement in accordance with
IRFS5. Details of the results of these operations are shown below.
REVENUE
Cost of sales
GROSS PROFIT
Administrative expenses
OPERATING (LOSS)/PROFIT
Finance income
(Loss)/profit for the Period
Loss on sale of discontinued operations
Income tax
(Loss)/profit attributable to the Parent Company
2018
US$
-
(265,006)
(265,006)
(120,210)
2017
US$
1,323,200
(2,925,138)
(1,601,938)
(719,519)
(385,216)
-
(385,216)
(1,778)
-
(2,321,457)
641,126
(1,680,331)
(5,600,464)
(4,186)
(386,994)
(7,284,981)
Discontinued operations cashflows from operating activities were US$1,135,216 outflow (2017:
US$124,081 outflow); cash flows from investing activities were US$123,222 inflow (2017: US$221,504
inflow); and cashflows arising from financing activities were US$200,000 (2017: US$nil).
43
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
8. TAXATION
Group
Current tax
Overseas tax charge on discontinued operations
R&D tax credit
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
2018
US$
2017
US$
-
(1,203,426)
(142,584)
(1,346,010)
-
(1,346,010)
(1,346,010)
4,187
(346,522)
(8,969)
(351,304)
4,187
(355,491)
(351,304)
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:
R&D tax credit rate
Non-deductible expenses
Overseas tax rate difference from UK rate
Income not taxable
Accelerated depreciation
Revenue items capitalised
Losses carried forward
Current tax (credit)/charge
Tax charge relating to discontinued operations
Tax (credit) relating to continued operations
2018
US$
2017
US$
(4,532,489)
19%
(861,173)
(15,572,377)
19.25%
(2,997,683)
(1,203,426)
187,707
(25)
(81,940)
-
(110,991)
723,838
(1,346,010)
(1,346,010)
113,516
1,553,856
4,883
(264,739)
15,839
-
1,223,022
(351,306)
4,187
(355,491)
44
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
8. TAXATION (continued)
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 2018
Adjusted Loss per A/c's
Surrendered for R&D tax credit
Tax losses carried forward at 31 December 2018
US$
22,614,986
4,668,938
(8,299,489)
18,984,435
This equates to a potential deferred tax asset at 17% of US$3,227,354 at the year-end 2018 (2017:
US$$4,296,847), which has not been recognised due to uncertainties regarding the recoverability of
this balance.
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
Investor relations
Sundry items
9. LOSS PER SHARE
2018
US$
-
-
-
170,132
14,804
-
-
2,470
301
2017
US$
399,295
184,206
848,402
59,242
70,556
63,830
(62,937)
-
(8,738)
187,707
1,553,856
Basic and diluted loss per share is calculated by dividing the loss attributable to equity holders of the
company of US$3,256,104 (2017: US$14,783,962) by the weighted average number of Ordinary Shares
in issue during the year, excluding own shares held, of 1,013,575,699 (2017: 829,908,445).
At 31 December 2018, there were no own shares held (2017:33,212,841) Ordinary Shares. The
weighted average number of own shares held by the company during the year are not included in the
weighted average Ordinary Shares in issue during the financial year.
45
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
10. INTANGIBLE ASSETS
Group
Cost
Other
intellectual
Goodwill
US$
property Development
US$
US$
Total
US$
At 31 December 2016
2,212,930
2,746,747
2,936,252
7,895,929
-
541,060
896,957
1,438,017
(2,212,930)
-
1,911,121
-
-
(2,212,930)
1,911,121
Additions
Disposals
Costs incurred by JV partner
Transfers from investment in associate
R&D costs transferred to income
statement
At 31 December 2017
Additions
At 31 December 2018
Accumulated amortisation
At 31 December 2016
Charge for year
At 31 December 2017
Impairment charge
Amortisation charge for year
At 31 December 2018
Net book value
At 31 December 2018
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
596,345
804,103
1,400,448
4,551,228
5,919,939
10,471,167
362
-
970,565
44,845
970,927
44,845
362
1,015,410
1,015,772
950,700
44,845
950,700
44,845
-
362
2,010,955
2,011,317
4,550,866
3,908,984
8,459,850
3,954,521
4,100,426
8,054,947
-
-
-
-
-
-
-
-
-
-
-
-
46
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
10. INTANGIBLE ASSETS (continued)
Company
At 31 December 2016
Transfers to other group companies
At 31 December 2017
At 31 December 2018
Accumulated amortisation
At 31 December 2016, 2017 and 2018
Net book value
At 31 December 2017 & 2018
Intellectual
property
US$
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 for that year.
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 during 2017.
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 41 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. As a result
of this review the group recorded an impairment charge of US$668,073 for the year ended 31
December 2018.
47
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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 and monetise
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.
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. In addition, management undertakes a review at each balance sheet date to assess
whether these balances need to be impaired. As a result of this review the group recorded an
impairment charge of US$282,627 for the year ended 31 December 2018.
Newfoundland: On 29 November 2018 the Provincial Government of Newfoundland & Labrador
announced that it had issued two five-year commercial cutting permits to Timberlands International
(Newfoundland and Labrador) Inc., a subsidiary of Active Energy Group (AEG) Plc, totalling 100,000 m3
annually (500,000 m3 over five years) in Forest Management Districts 17 and 18 on the Great Northern
Peninsula. Prior to this date AEG invested significant time and resources in developing management
and supplier capability as well as government relations in order to not only secure the licences, but
also to develop the business model and capabilities to monetise the permits once awarded.
Costs incurred in acquiring these licences have been recorded as additions to intangible fixed assets
These costs will be amortised over the period of awarded licences. No amortisation has been
recognised in the current accounting period as the licence awards occurred at the end of 2018 and
commencement of production had not occurred at the balance sheet date. Management undertakes
a review at each balance sheet date to assess whether these balances need to be impaired. No
impairment was recorded for the year ended 31 December 2018.
48
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
11. PROPERTY, PLANT AND EQUIPMENT
Group
Plant
and
equipment
US$
Furniture and
office
equipment
US$
Cost
At 31 December 2016
Foreign exchange difference
Additions
Disposals
At 31 December 2017
Additions
Disposals
At 31 December 2018
Accumulated depreciation
At 31 December 2016
Foreign exchange difference
Elimination on disposal
Charge for year
At 31 December 2017
Impairment charge
At 31 December 2018
Net book value
At 31 December 2018
At 31 December 2017
3,187,609
(534,717)
4,219,081
(3,080,362)
3,791,611
2,069,877
(420,600)
5,440,888
628,633
(155,592)
(752,588)
279,547
-
65,000
65,000
5,375,888
3,791,611
Total
US$
3,219,955
(533,949)
4,219,081
(3,104,516)
3,800,571
2,069,877
(420,600)
32,346
768
-
(24,154)
8,960
-
-
8,960
5,449,848
29,177
(20,737)
(406)
926
8,960
8,960
657,810
(176,329)
(752,994)
280,473
8,960
65,000
73,960
-
-
5,375,888
3,791,611
The net book value of asset held under finance leases included within Property, Plant & Equipment above
are US$nil (2017: US$345,600). No depreciation (2017:nil) has been charged on these assets as the
machinery had not been brought into use at the balance sheet dates.
Additions in the year primarily relate to the construction of the inaugural CoalSwitch™ plant in Utah. The
exchange rates movements in 2017 relate to the reduction in value of the Ukrainian Wood Fibre business,
which was denominated in Ukrainian Hryvnia. This business was discontinued during 2017.
49
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
11. PROPERTY, PLANT AND EQUIPMENT (continued)
Cost
At 31 December 2016
Foreign exchange difference
At 31 December 2017 & 2018
Accumulated depreciation
At 31 December 2016
Charge for year
Foreign exchange difference
At 31 December 2017 & 2018
Net book value
At 31 December 2017 & 2018
12. INVESTMENTS IN SUBSIDIARIES
Company
Cost
At 31 December 2016
Additions
Disposals
Foreign exchange translation difference
At 31 December 2017 & 2018
Provision for impairment
At 31 December 2016
Charge for the period
Foreign exchange translation difference
At 31 December 2017 & 2018
Net book value
At 31 December 2017 & 2018
50
US$
8,193
767
8,960
7,931
755
274
8,960
-
US$
4,611,570
58,431
(546,804)
431,848
4,555,045
2,571,278
1,684,557
240,783
4,496,618
58,427
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
12. INVESTMENTS IN SUBSIDIARIES (continued)
At 31 December 2018 the Group held share capital of the following companies:
Subsidiary
undertaking
Country of
incorporation
Nature of business
AE Ukraine
Nikofeso Holdings
Limited
AETrading (EMEA)
SarL
Ukraine
Cyprus
Woodchip processing and
distribution
Wood chip distribution
Switzerland
Wood chip distribution
AEG Trading Limited United Kingdom
AEG Pelleting
Limited
AEG Biopower
Limited
AEG Coalswitch
Limited
United Kingdom
United Kingdom
United Kingdom
Wood chip distribution
Biomass for energy development
Biomass for energy development
100
Biomass for energy development
100
ABS plc
United Kingdom
Biomass for energy development
Timberlands Int. Ltd
United Kingdom
United Kingdom
Biomass for energy development
Energy investments holding
company
Alpha Prospects Ltd
AEG CoalSwitch USA
LLC
Timberlands
Newfoundland &
Labrador Inc
United States
Biomass for energy development
100
Canada
Biomass for energy development
81
51
Percentage Holding
2017
2018
100
100
100
100
100
85
81
4.2
100
100
100
100
100
100
100
85
95
4.2
-
-
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
13. INVESTMENT IN ASSOCIATE
Carrying value at beginning of the
year
Transfer to intangible fixed assets
Transfer to other group companies
Carrying value at end of the year
Group
2018
US$
Group
2017
US$
Company
2018
US$
1,282,627
(1,282,627)
-
-
-
-
-
-
-
-
-
-
Company
2017
US$
2,333,176
-
(2,333,176)
-
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 were transferred to
intangible fixed assets during 2017
Summarised financial information in relation to the joint venture is presented below:
2018
US$
2017
US$
At 31 December
Current assets
Current liabilities
Period ended 31 December
Revenues
Loss for the year
Other comprehensive income
Total comprehensive income
-
-
-
-
-
-
-
-
-
-
-
-
52
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
14.
LONG TERM LOANS
Carrying value at beginning of the
year
Transfer to intangible fixed assets
Transfer to other group companies
Transfer from current assets
Accrued interest
Carrying value at end of the year
Group
2018
US$
Group
2017
US$
Company
2018
US$
-
-
-
-
-
-
1,911,121
(1,911,121)
-
-
-
-
-
-
-
15,577,661
1,794,573
17,372,234
Company
2017
US$
1,911,121
-
(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 during 2017.
During 2018 certain intercompany debts were reclassified as long term to reflect the commercial
reality of the likely repayment schedule of these loans. Interest was accrued at a rate of 12 % which is
considered to be a market rate.
15. AVAILABLE FOR SALE FINANCIAL ASSET
Group
2018
US$
Group
2017
US$
Company
2018
US$
Company
2017
US$
Fair value at beginning of the year
786,873
83,455
786,873
83,455
Revaluation to market value
-
786,483
-
786,393
Foreign exchange translation
(34,658)
(83,065)
(34,658)
(83,065)
Fair value at end of the year
752,215
786,873
752,215
786,873
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. This revaluation was
reperformed in 2018 and based on that assessment management concluded that the 2017 valuation
remained valid. The available-for-sale financial asset is denominated in Pound Sterling.
53
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
16. INVENTORIES
Group
Raw materials
Total inventories
2018
US$
-
-
2017
US$
20,349
20,349
17. TRADE AND OTHER RECEIVABLES
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.
Current
Trade receivables
Amounts due from group companies
Other receivables
VAT
Prepayments
Group
2018
US$
-
-
77,212
-
Group
2017
US$
Company
2018
US$
Company
2017
US$
128,136
-
128,136
-
379,778
13,629,890
1,198
42,046
-
-
-
77,212
14,642
-
-
-
Corporation tax credit receivable
1,627,198
346,522
327,278
Total
1,704,410
517,902
784,268
13,772,668
Trade and other receivables that have not been received within the payment terms are classified as
overdue. As at 31 December 2018 trade receivables of US$Nil (2017: US$Nil) were overdue.
54
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
17. TRADE AND OTHER RECEIVABLES (continued)
As at 31 December 2018, Group trade receivables of US$NIL (2017: US$NIL and 2016: US$NIL) were
overdue and impaired. An analysis of the Group's trade and other receivables classified as financial
assets by currency is provided in note 27.
18. CASH AND CASH EQUIVALENTS
Bank accounts
19. TRADE AND OTHER PAYABLES
Current
Group
2018
US$
298,768
298,768
Group
2017
US$
142,049
142,049
Company
2018
US$
234
Company
2017
US$
135,706
234
135,706
Group
2018
US$
Group
2017
US$
Company
2018
US$
Company
2017
US$
Trade payables
2,038,818
936,111
798,603
200,512
Social security and other taxes
3,122
45,902
3,122
41,598
Accruals and deferred income
809,753
866,594
667,889
859,279
Other payables
-
96,069
-
21,069
2,851,693
1,944,676
1,469,614
1,122,458
55
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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
2018
US$
2,851,693
-
Group
2017
US$
1,944,676
-
Company
2018
US$
1,469,614
-
Company
2017
US$
372,458
750,000
2,851,693
1,944,676
1,469,614
1,122,458
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
Impairment charge
At the end of the period
2018
US$
384,169
(8,968)
(133,616)
241,585
2017
US$
393,137
(8,968)
-
384,169
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.
56
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
21. FINANCE LEASES
The future minimum finance lease payments are as follows:
Less than 1 year
Between 1 and 3 years
Group
2018
US$
-
-
-
Group
2017
US$
89,607
205,993
295,600
Company
2018
US$
-
-
-
Company
2017
US$
-
-
-
The finance lease related 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 had the option to purchase
the asset for $1. This piece of machinery was returned to the supplier during 2018.
22. LOANS AND BORROWINGS
The book value and fair value of loans and borrowings are as follows:
Group
Non-Current
Convertible debt
Unsecured loans
Current
Unsecured loans
Book value
2018
US$
Fair value
2018
US$
Book value
2017
US$
Fair value
2017
US$
11,672,738
-
11,672,738
-
13,224,252
-
13,224,252
-
11,672,738
11,672,738
13,224,252
13,224,252
1,327,707
1,327,707
1,327,707
1,327,707
-
-
-
-
Total loans and borrowings
13,000,445
13,000,445
13,224,252
13,224,252
Company
Non-Current
Convertible debt
Unsecured loans
Current
Unsecured loans
Book value
2018
US$
Fair value
2018
US$
Book value
2017
US$
Fair value
2017
US$
11,672,738
-
11,672,738
-
13,224,252
-
13,224,252
-
11,672,738
11,672,738
13,224,252
13,224,252
1,000,000
1,000,000
1,000,000
1,000,000
-
-
-
-
Total loans and borrowings
12,672,738
12,672,738
13,224,252
13,224,252
57
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
22. LOANS AND BORROWINGS (continued)
Unsecured loans
During the year the Group obtained $1.3m of unsecured loans.
Convertible debt
On the 14 March 2017 the company successfully completed a fund raising of £11.57 million before
expenses (or $14.15 million) through the issue of convertible loan notes (‘CLNs’) to new and existing
investors. The CLNs have a maturity date of 14 March 2022 and have been listed on the International
Securities Exchange. The CLN can be converted into Ordinary Shares of AEG plc, at any time prior to
the Maturity Date, at a 30% premium to 2.535p, being the Company’s 10 day Volume Weighted
Average Price immediately prior to the issue date. The fair value of the liability component at inception
was calculated using a market interest rate for an equivalent instrument without conversion option.
The CLN has a coupon rate of 8% and the imputed interest rate applied was 12%.
During 2018 certain note holders took the opportunity to convert their CLN's into AEG Ordinary Shares.
Details of these transactions are disclosed below in note 23. During 2018 certain note holders took
the opportunity to convert their CLN's into AEG Ordinary Shares. Details of these transactions are
disclosed below in note 23. On 15 March 2017 the Convertible Loan Note to Brahma Finance for
£1,000,000 was repaid in full and settled. The following table analyses the maturity of loan and
borrowings. The amounts shown are undiscounted and represent contractual cash-flows.
Group
At 31 December 2018
Convertible debt
Unsecured loans
At 31 December 2017
Convertible debt
Company
At 31 December 2018
Convertible debt
Unsecured loans
At 31 December 2017
Convertible debt
Up to 3
months
US$
-
1,327,707
1,327,707
Between 3
and 12
months
US$
Between 1
and 2 years
US$
Between 2
and 5 years
US$
Total
US$
-
-
-
-
-
-
11,672,738
11,672,738
1,327,707
11,672,738
13,000,445
US$
US$
US$
US$
US$
-
-
-
-
-
-
13,224,252
13,224,252
13,224,252
13,224,252
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$
-
1,000,000
1,000,000
-
-
-
-
-
-
11,672,738
11,672,738
1,000,000
11,672,738
12,672,738
US$
US$
US$
US$
US$
-
-
-
-
58
-
-
13,224,252
13,224,252
13,224,252
13,224,252
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
23. CALLED UP SHARE CAPITAL
2018
Number
2018
US$
2017
Number
2017
US$
Allotted, called up and fully paid
Ordinary shares of 1p each
At 1 January
Issue of shares
983,071,276
14,493,246 840,381,500
12,621,134
252,048,515
3,282,913 142,689,776
1,872,112
Cancellation of treasury shares
(33,212,840)
(510,780)
-
-
As at 31 December
1,201,906,951
17,265,379 983,071,276
14,493,246
During 2018 the Company issued 252,048,515 Ordinary Shares for a total consideration of US$5.6m as
follows:
• On 28 March 2018 the Company announced the issue of 13,792,164 at 4.9 cents satisfying exercise
notices over CLN's.
• On 20 April 2018 the Company announced the issue of 4,855,105 at 4.6 cents satisfying exercise
notices over CLN's.
• On 4 May 2018 the Company announced the issue of 11,565,537 at 5.0 cents satisfying exercise
notices over CLN's.
• On 10 May 2018 the Company announced the issue of 7,282,658 at 4.5 cents satisfying exercise
notices over CLN's.
• On 30 May 2018 the Company announced the issue of 12,137,763 at 4.4 cents satisfying exercise
notices over CLN's.
• On 26 June 2018 the Company announced the issue of 33,333,333 at 4.0 cents following a new
share placement.
• On 5 October 2018 the Company announced the issue of 4,081,955 at 4.8 cents satisfying exercise
notices over CLN's.
• On 30 November 2018 the Company announced the issue of 165,000,000 at 1.27 cents following
a new share placement.
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.
59
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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 41,000,000 (2017: 14,166,667) options which are based on various
market, service and performance conditions. The number of warrants and share options exercisable
at 31 December 2018 was 124,825,099 (2017: 127,325,099).
The movements of warrants and share options during the period were as follows:
Weighted
average
exercise
Number of
Warrants
and Share
Options
Weighted
average
exercise
Number of
Warrants
and Share
Options
price
price
(UK pence)
(UK pence)
Outstanding at beginning of the
period
Cancelled
Granted
Exercised
2.72 127,325,099
(78,500,000)
2.59
-
-
76,000,000
4.31
1.96 239,655,831
(54,707,622)
1.09
-
-
(57,623,110)
1.25
Outstanding at end of the period
3.77 124,825,099
2.72 127,325,099
At 31 December 2018, the weighted average remaining contractual life of warrants and share options
exercisable was 4.55 years (2017 – 4.02 years). Total share option of 41,000,000 (2017: nil) were
granted during the year at a weighted average exercise price of 6.5 pence.
There was charge for equity settled share based payments of US$895,430 (2017: US$307,749) in the
income statement for the year ended 31 December 2018. In addition, during the year ended 31
December 2018 certain share options were cancelled. This resulted in a credit to equity settled share
based payments of US$810,109 (2017: US$1,044,450). This was not shown in the income statement
for the year ended 31 December 2018, but was recorded as a reserve transfer.
60
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
24. SHARE OPTIONS AND WARRANTS (continued)
Options and warrants outstanding at 31 December 2018 were exercisable as follows:
Exercise price range (Pence, US cents in brackets)
2018
2017
1.250p (1.686 cent)
1.500p (2.023 cent)
1.750p (2.360 cent)
1.750p (2.2341 cent)
3.000p (4.047cent)
4.500p (6,281 cent)
5.000p (6.745 cent)
6.000p (8.094 cent)
6.375p (8.600 cent)
7.500p (10.118 cent)
8.500p (11.863 cent)
20.000p (26.982 cent)
At the end of the period
Number
Number
-
56,500,000
7,500,000
7,500,000
19,047,619
19,047,619
35,000,000
-
13,450,000
13,450,000
20,500,000
-
2,000,000
15,000,000
4,500,000
4,500,000
1,823,480
1,823,480
-
9,000,000
20,500,000
-
504,000
504,000
124,825,099
127,325,099
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.
61
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
24. SHARE OPTIONS AND WARRANTS (continued)
The Group measures the fair value of the awards using the Monte Carlo (JSOP options) the share based
payment expense is recorded over the expected life of the option. Share based payment expenses are
recognised in the income statement in accordance with the provisions of IFRS2.
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. These disclosures apply to both the Company and the Group. No awards were made in
2018 (2017:Nil). The share based payment charge for the year is US $Nil (2017: US$Nil) related to the
JSOP awards.
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.
62
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
26. NOTES SUPPORTING THE STATEMENT OF CASH FLOWS
Reconciliation of loss before taxation to cash outflows from operating activities
Group
Loss for the period
Adjustments for:
Share based payment expense
Depreciation
Amortisation of intangibles
R&D expensed to income statement
Impairment of property plant & equipment
Impairment of intangible assets
Loss/ (profit) on disposal of PP&E
Revaluation of investments for resale
Foreign currency translations
Finance expenses
Income tax
(Increase)/decrease in inventories
(Increase)/decrease in trade and other
receivables
(Decrease)/increase in trade and other
payables
2018
US$
(3,186,479)
895,430
-
44,845
-
65,000
950,700
1,778
34,658
(966,788)
1,047,283
(142,584)
(1,256,157)
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)
20,349
404,649
(1,186,508)
2,132,430
907,017
(1,372,076)
Net cash outflow from operating activities
(1,515,299)
(5,821,095)
63
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
26. NOTES SUPPORTING THE STATEMENT OF CASH FLOWS (continued)
Company
Loss for the period
Adjustments for:
2018
US$
2017
US$
(1,800,792)
(11,218,600)
Share based payment expense
895,430
-
-
-
(932,168)
1,047,283
(790,247)
(3,799,666)
307,749
755
2,040,292
(454,928)
702,918
1,648,174
(6,973,640)
(6,457,872)
347,156
(285,578)
(4,242,757)
(13,717,090)
Depreciation
Impairment of investments / intercompany
debtors
Revaluation of investments
Foreign currency translations
Finance expenses
Decrease in trade and other receivables
Increase/(decrease) in trade and other
payables
Net cash inflow/(outflow) from operating
activities
64
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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
A summary of the financial instruments held by category is provided below:
Financial assets
Loans and receivables
Group
2018
US$
Group
2017
US$
Company
2018
US$
Company
2017
US$
Cash and cash equivalents
298,768
142,049
234
135,706
Trade and other receivables
1,704,410
517,902
18,156,502
13,772,668
2,003,178
659,951
18,156,736
13,908,374
Available-for-sale financial asset
752,215
786,873
752,215
786,873
Total financial assets
2,755,393
1,446,824
18,908,951
14,695,247
Financial liabilities
Financial liabilities at amortised
cost
Group
2018
US$
Group
Company
Company
2017
US$
2018
US$
2017
US$
Trade and other payables
2,851,693
2,240,276
1,469,614
1,122,458
Loans and Borrowings
13,000,445
13,224,252
12,672,738
13,224,252
15,852,138
15,464,528
14,142,352
14,346,710
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).
65
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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
Group
2018
US$
-
1,704,410
-
1,704,410
Group
2017
US$
-
517,902
-
517,902
Company
2018
US$
17,752,012
404,490
-
18,156,502
Company
2017
US$
13,629,890
14,642
128,136
13,772,668
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
2018
US$
2,397
296,371
-
-
298,768
Group
2017
US$
134,510
3,945
2,214
1,380
142,049
Company
2018
US$
-
234
-
-
234
Company
2017
US$
132,262
3,244
200
-
135,706
Information about the Group’s loans and borrowings are provided in note 22.
66
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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
2018
US$
1,371,978
1,469,614
-
10,101
Group
2017
US$
1,106,200
1,122,457
4,304
7,315
Company
2018
US$
-
1,469,614
-
-
Company
2017
US$
-
1,122,458
-
-
2,851,693
2,240,276
1,469,614
1,122,458
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 net assets by US$46,713 (2017: increased in net assets US$7,107). 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.
67
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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 2018 (2017: Nil). The Group
had an overdraft at 31 December 2018 of $843 (2017: Nil) which is disclosed within other payables as
a liability on the balance sheet. No personal guarantees were in place.
Capital risk management
The Group's objective when managing capital is to establish and maintain a capital structure that
safeguards the Group as a going concern and provides a return to shareholders.
28. RELATED PARTY DISCLOSURES
Details of Director's remuneration are given in the Report of the Directors.
Transactions between the Company and its subsidiaries, which are related parties to the Company,
have been eliminated on consolidation. During the year in the Company's financial statements, the
Company made net cash recoveries from fellow Group companies of US$nil (2017: US$nil).
The Company’s intercompany receivable balances at the year-end were as follows:
Amounts due from Group companies
2018
US$
17,752,012
2017
US$
13,629,890
68
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
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.
69
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2018
30. CAPITAL AND OPERATING COMMITMENTS
Capital commitments at the 31 December 2018 were US$nil (2017: US$408,908). Operating lease
commitments at the 31 December 2018 were US$nil (2017: US$11,142). All amounts were due within
one year.
31. SUBSEQUENT EVENTS
The key business developments since 31 December 2018 were as follows:
• On 4 March 2019 AEG announced that it had entered into an agreement with Alamac Holdings
LLC to acquire an industrial site in Lumberton, North Carolina for US$3.3m. The acquisition
was funded by the issue of CLNs to new and existing institutional investors. The acquisition
was completed on 27 March 2019.
• On 23 April 2019 AEG announced that it has been awarded a US$500,000 building re-use and
renovation grant for the Lumberton site.
• On 4 June 2019 AEG provided a progress update regarding the next stage of development at
its industrial site in Lumberton. The update noted that the team was making rapid progress
advancing construction of new CoalSwitch™ operation at Lumberton, U.S, that the test reactor
were operational and that a five-year contract had been signed for the supply of up to 800,000
tonnes per annum of feedstock to Lumberton.
• Management continues to actively discuss opportunities with existing and prospective
partners and potential providers of project finance, in order execute Active Energy’s
business plan following the acquisition of the Lumberton Site.
Further details are provided in the Chief Executive Officer's statement.
32. ULTIMATE CONTROLLING PARTY
In the opinion of the directors there is no one ultimate controlling party.
70