ACTIVE ENERGY GROUP PLC
ANNUAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 2019
Company Registration Number: 03148295
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
CONTENTS
Company Information
Chief Executive Officer’s Statement
Operations Review
Strategic Report
Report of the Directors
Independent Auditors 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
J Leahy
M Aitken
J Zimmermann
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
Joint 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
Allenby Capital Limited
5th Floor, 5 St Helen's Place
London
EC3A 6AB
Camarco,
107 Cheapside,
London
EC2V 6DN
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ACTIVE ENERGY GROUP PLC
CHIEF EXECUTIVE OFFICER’S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
In 2019, Active Energy Group (“AEG” or “Active Energy”) continued its development to become a producer
of biomass products focused on the utilisation of low cost and waste biomass materials that create higher
value, energy efficient and carbon neutral fuels. To achieve this, Active Energy has focused on re-
establishing business operations in the lumber sector which provide not only consistent revenue streams
but also open up new business relationships for the forthcoming production of biomass pellets, which
include its proprietary CoalSwitchTM technology. As I write this, the business has enhanced its position in
the market since year end by strengthening its board and management team and expanding operations at
the Lumberton site in North Carolina (“Lumberton” or the “Lumberton Site”) as we move into our next
phase of growth.
Lumberton – A significant strategic step
The foundations for the Company’s achievements in 2019 were laid in late 2018 with the strategic decision
to move the operations from Utah to Lumberton. After entering into our initial joint venture with Georgia
Renewable Power LLC (“GRP”) in October 2018, the Company identified the Lumberton Site which is
adjacent to GRP’s power facility In March 2019 AEG acquired the Lumberton Site which consists of covered
factory space up to 415,000 sq ft and 151 acres of surrounding land. Lumberton also had a number of
additional benefits including water treatment facilities, a laboratory for analysis of future biomass fuels and
existing facilities capable of accommodating not only a functioning lumber operation but also a laboratory
facility to produce and test biomass pellets, including CoalSwitchTM pellets.
The Directors believe that Lumberton’s size can accommodate expansion both in the short and medium
term, both for lumber operations and the scaled production of second-generation biomass fuels, including
CoalSwitchTM pellets. The commercial goal for the production of biomass fuels, including CoalSwitchTM to
be in operation as soon as possible, remains the Board’s prime focus. Having acquired the Lumberton Site
and completed the transaction during the second quarter of 2019, Active Energy focussed on establishing
commercial activities at Lumberton. Certain inherited business activities have remained operational at
Lumberton during the last 12 months, in line with our plans to create a carbon neutral hub at Lumberton.
Requisite equipment (including the relevant CoalSwitchTM reactors) was transferred from Utah to
Lumberton during the summer of 2019 and preparatory works commenced for the reconstruction of the
existing CoalSwitchTM plant to operate at the Site. As the facility at Utah had never been completed or
commissioned to production targets, Active Energy has had to spend additional time and money in
preparation work toward the installation and construction of the first CoalSwitchTM facility. Vendor and
construction contracts and additional equipment identification have been completed in order to minimize
the time required toward first production from this CoalSwitchTM facility.
As an existing “brownfield site”, Lumberton already owned certain permits to allow operational activities
to commence. Nonetheless, after joint analysis of the new project with the North Carolina Department of
Environmental Quality (“DEQ”) and given that no relevant permits had ever been applied for in Utah, a
recommendation was made to require an application for an air and construction permit in order to ensure
the optimal production potential and the full scale operation of the existing CoalSwitchTM plant at
Lumberton.
Active Energy and the DEQ worked together to comply with the local procedures and Active Energy utilised
locally qualified personnel to assist in organisation of the application process. The relevant permit
application was completed and submitted in November 2019. The approval process anticipated a standard
review process, including drafting of the specific permit to take up to 90 days. Unfortunately, this review
and approval process has been subject to delays, owing to the DEQ determining the need to hold a public
hearing meeting in Lumberton and more recently, the imposition on restrictions to hold such public
meetings as a result of the COVID 19 pandemic. In spite of these difficulties, the Board remains confident
that the requisite permits will be issued by the DEQ.
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ACTIVE ENERGY GROUP PLC
The establishment of an operating centre at Lumberton has been highly significant for Active Energy’s
future development. The Company’s goal for Lumberton is to develop facilities for a carbon neutral
operational facility which, not only produces second generation carbonised biomass pellets, but can also
become a research and development centre for future biomass fuels using a variety of residual feedstock
resources. In addition, Active Energy intends to create additional timber & lumber activities with new
commercial partners. The Lumberton Site is uniquely placed with an abundance of local feedstock resources
immediately available in North Carolina and in close proximity to all existing transportation infrastructure
for the delivery of biomass and lumber products globally. As such, Active Energy is working hard with the
local communities to establish an economic centre at Lumberton.
Active Energy intends to accelerate the lumber activities at Lumberton as quickly as possible and the
announcement of the joint venture with Renewable Logistics Systems LLC (“RLS”) in July 2019 was a
significant part of the Company’s growth strategy. Following the announcement of the joint venture with
RLS, work commenced at Lumberton to establish lumber operations and the first revenues were achieved
during Q4 2019. This was a significant milestone for the Company as it meant that by the end of 2019
operating sawmill activities had commenced at Lumberton with firm plans to scale up the production
volumes during 2020. RLS’s input to date, combined with the ramp up in production following the recent
acquisition by AEG, has helped to create a meaningful business with many potential industry partners and
prospective customers, both locally and internationally. In addition, the current operations at Lumberton
will benefit from the forthcoming preparations for the production from the CoalSwitchTM facility of biomass
pellet fuels.
CoalSwitchTM Technology – Continuing Development
Active Energy has continued to work on complementary business opportunities from the CoalSwitchTM
technology. As was stated in 2019, Active Energy has focussed on accelerating the commercial strategy with
the establishment of commercial partnerships. One example of this has included working with prospective
partners who wish to licence some of the core technology to build their own CoalSwitchTM production
facilities. It was with great pleasure that Active Energy announced its first licence with RMD Environmentals,
Inc (“RMDE”), a British Columbia based forestry management and environmental engineering and
consultancy business, for the production of CoalSwitchTM in the Provinces of Alberta and British Columbia
on 28 November 2019. Active Energy has granted to RMDE an exclusive licence for the production of
CoalSwitchTM in these territories. Since the licence was granted to RMDE, representatives from Active
Energy have provided technical assistance to RMDE in regard to its plans for the commencement of
construction of CoalSwitchTM production facilities in Alberta.
Another partnership had involved working with Cobant Sp. z.o.o., a Polish research, development and
environmental waste coal recovery company, regarding the development and production of a fuel blend,
involving reclaimed coal from coal slurry dumps in Upper Silesia in Poland and CoalSwitchTM. Initial testing
had provided favourable results and an application was made to the EU for an additional grant to continue
this research and development. In April 2019, it was confirmed that the application had been unsuccessful.
Active Energy has no immediate plans to resubmit an application in regard to this blended fuel.
Throughout 2019, Active Energy has continued to maintain and develop its intellectual property portfolio
around CoalSwitchTM and some of the underlying production processes. All filings and requisite procedures
have been maintained in the US and the EU. The Company has further extended the portfolio to include
submission of additional patent applications in Malaysia, Thailand and Canada in 2019 and 2020. At the
Lumberton Site, once the Permits are issued, the Company is keen to commence testing of alternative waste
materials in laboratory conditions to examine potential other constituents which could create steam
exploded biomass pellets with improved heat and environmental performance over existing white pellets.
Complementary Focus on Timber and Feedstock Opportunities
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ACTIVE ENERGY GROUP PLC
The Company has continued to focus on feedstock business opportunities which would assist the
commercial development of biomass fuels, including CoalSwitchTM. The Company continues to work with
the Province of Newfoundland and Labrador, (the “Province”) to commercialise the secured cutting timber
permits (“CTPs”) for Blocks 17 and 18, which were granted in November 2018. The Company and the
Province maintained a regular dialogue throughout 2019 and the early months of 2020 and are working
together with the aim of establishing activity later in 2020.
In addition, feedstock opportunities in and around North Carolina have also been presented to Active
Energy in recent months and the Company is examining these opportunities with a view as to how these
might complement existing activities at the Lumberton Site.
Greater Environmental Awareness within the Biomass Industry
Active Energy plans to be at the forefront of the development of next generation biomass fuels which
address current and prospective environmental concerns. Work has already commenced in examining
alternate feedstock for biomass fuels, including residual wood, chicken litter and energy crops, namely
miscanthus grass to create steam exploded pellets which have an equivalent energy value to existing fossil
fuels without their existing carbon footprint. More work needs to be undertaken but AEG’s Directors believe
the Lumberton Site presents an invaluable opportunity to develop these next generation fuels for the global
markets.
The existing white pellet market has been growing significantly since 2014, most notably, in Europe. The
Unites States remains the largest exporter of white pellet, producing nearly 2.5 times as much white pellet
as the second largest exporter, Vietnam (source: Futuremetrics). While consumption growth in Europe is
beginning to plateau, new markets are emerging in Japan and South Korea and in the Unites States. There
is an increasing demand for a pelletised fuel which can co-fire with coal or fully fire instead of coal. Active
Energy believes that biomass pellets, such as CoalSwitchTM, using waste and forest residual wood could
further accommodate tighter environmental criteria being set by regulators globally.
Developments since December 2019 and the impact of COVID 19
Active Energy has experienced more significant developments since the beginning of 2020. From an
operational perspective, the lumber activities at the Lumberton Site have increased. Steady production
volumes of various lumber products have increased over the recent months at Lumberton. There has been
minimal impact on these production activities during the recent COVID 19 outbreak, nonetheless Active
Energy remains concerned about the health and welfare of all its employees and is taking all action possible
to protect its employees and all staff working at Lumberton.
While the State of North Carolina has declared a state of emergency limiting much economic and social
activity, activities within the lumber industry have been exempted. Active Energy’s current focus in regard
to lumber activities remain fully operational. Nonetheless, in the current circumstances the Board now
expects there may be some time delays in the growth and development of additional activities at
Lumberton, including future biomass pellet production.
As AEG has already announced, there have been delays in the review and approval process in regard to the
requisite air and construction permits to be issues by the Department of Environmental Quality of North
Carolina owing to the COVID-19 pandemic. Active Energy has been actively working with both the DEQ and
our partners in Robeson County (where the Lumberton Site is situated) to resolve these process issues and
address any outstanding concerns. Active Energy continues to believe that its next generation biomass fuels
will address existing environmental concerns.
The commercial goals for Active Energy have not altered in spite of COVID 19. While timelines on project
development are expected to be affected by the general disruption to economic activity, Active Energy will
continue to execute its strategic plan and update its stakeholders as soon as practicable on all
developments.
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ACTIVE ENERGY GROUP PLC
The Company has achieved a number of significant milestones in 2020. Firstly, following the appointment
of James Leahy as a non-executive Director in November 2019, the Board was further strengthened by the
appointments of Max Aitken and Jason Zimmerman as non-executive Directors in January 2020. Each
individual brings a specific area of expertise to Active Energy given their knowledge of the lumber industry,
biomass and power generation markets and global capital markets.
These new appointments follow the departure of Simon Melling in the fourth quarter of 2019. Simon
stepped down as a non-executive Director and I would like to thank Simon for his invaluable contribution
during his two year tenure on the AEG board.
Secondly, in February 2020 Active Energy announced a renegotiation of the key terms of its outstanding
convertible loan note (“CLN”) pursuant to which the existing CLN holders agreed to significant amendments
to the coupon structure of the CLN. The Board is extremely grateful for the continuing support of the CLN
holders.
Finally, negotiations with RLS were successfully completed for the re-organisation of the existing joint
venture activities under one entity, Active Energy Renewable Power, a wholly owned subsidiary of Active
Energy (“AERP”). With the ongoing support of RLS team members (now working for AERP), this should
provide a significant contribution toward a platform for the growth of all the lumber activities at the
Lumberton Site in the coming months. In the recent COVID-19 operating environment, their commitment
and experience has already been valuably demonstrated.
Financial Review:
Overview
During 2019 management continued to focus on stablising the Group's financial position. As a result losses
attributable to AEG excluding non-cash share based payment reduced to US$2,101,372 (2018:
US$2,360,674). Similarly, the Group's overall net assets position remained stable at US$371,859 (2018:
US$497,408).
Consolidated income statement
During 2019, the management continued to focus its efforts on developing revenue generating activities in
the newly acquired Lumberton’s site and through licencing of its CoalSwitch™ technology while proceeding
with cost consolidation and reduction. As a result, total comprehensive loss for the year attributable to
owners of the parent decreased to US$1,264,088 (2018: US$ 3,568,999). Excluding non-cash share based
payments losses attributable to AEG were limited to US$895,237 (2018: US$2,673,579). The primary
elements of the consolidated income statement are as follows:
Revenues were US$1,895,972 (2018: US$195,000) reflecting income from licencing of AEG’s
CoalSwitch™ technology, rental income from AEG’s Lumberton site and the provision of
engineering consultancy services.
An impairment charge of US$Nil (2018: US$950,700) was recorded in 2018 against the Northern
Alberta and Ukrainian intangible development assets, reflecting a re-evaluation of the economics
of these assets.
Administrative expenses were US$2,779,473 (2018: US$2,982,866) reflecting ongoing corporate
costs and business development activity. Excluding non-cash share based payments, administrative
expenses were US$2,410,623 (2018: US$2,087,436). The year on year increase reflects losses on
disposal of certain items of equipment, partially offset by cost reduction initiatives.
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ACTIVE ENERGY GROUP PLC
Finance expenses were US$2,461,376 (2018: US$406,929). These cost relate to ongoing servicing
of the Group's Convertible Loan Notes, foreign exchange gains and losses, offset by interest
capitalised to tangible and intangible fixed assets. The year on year movement primarily reflects
foreign exchange movements.
Loss on discontinued operations were US$Nil (2018: US$386,994). This reflected the close out of
contractual matters associated with Active Energy's former Ukrainian wood chip operations during
2018.
The tax credit of US$874,655 (2018: US$1,346,010) reflects income associated with research and
development tax credits.
Total other comprehensive income was US$1,206,134 (2018 expense of: US$312,895) reflecting
upward revaluations of the recently acquired Lumberton site and the Group’s available for sale
investments.
Statement of financial position
During 2019 Group's overall net assets position remained stable at US$371,859 (2018: US$497,408.) The
primary elements of the consolidated statement of financial position are explained below.
Non-current assets increased to US$19,882,848 (2018: US$14,587,953). This increase relates to the
purchase and subsequent revaluation of land & buildings at Lumberton of $4m ; an increase in
Intangible Assets of US$720,616 due to further investment in CoalSwitch™ intellectual property;
and further investment, and revaluation of, AEG’s available for sale investment totalling
US$718,424.
Current assets reduced to US$1,544,138 (2018: US$2,003,178) reflecting movements in research
and development tax credits receivable.
Current liabilities decreased to US$2,500,079 (2018:US$4,179,400). This reduction reflects
repayment of shareholder loans.
Non-current liabilities increased to US$18,555,048 (2018: US$11,914,323) reflecting the issue of
convertible loan notes during 2019.
Equity attributable to owners of the parent company were US$371,859 (2018: US$497,408) as a
result of the following:
An increase in the convertible debt reserve to US$3,490,621 (2018: US$ 2,720,933) reflecting
the equity element of convertible loan notes issued during the year;
An increase in the revaluation reserve to US$504,646 (2018: US$Nil) due to the revaluation of
the Group’s Lumberton site;
Other movements in the consolidated income statement relating to profit for the year, foreign
exchange variations and revaluation of available for sale investments.
Outlook:
2019 was a pivotal year for AEG, during which the Company completed a strategic review of the market
opportunities based upon establishing commercial operations in Lumberton. Significant goals have been
achieved with the acquisition of the Site and the commencement of timber and lumber operational
activities. At the same time, preparation work toward the production and manufacture of biomass
pelletised fuels utilising the existing CoalswitchTM technologies has continued.
Looking forward the outlook is very positive. All the efforts of the last 12 months at Lumberton are coming
to fruition for AEG. The Company is currently generating revenues with a material increase expected in
production volumes and revenues as lumber activities increase in the near term.
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ACTIVE ENERGY GROUP PLC
The revenue generation gives the Company a consolidated platform to launch its biomass products
including CoalSwitchTM as soon as practicable in spite of the delays in the approval process for the grant of
the permit and the disruption caused by the COVID-19 pandemic. The Board is confident in AEG’s ability to
deliver on its strategic aims in this financial year and become both a material producer of next generation
biomass pellets from Lumberton and a significant provider of lumber services in North Carolina.
Michael Rowan
Chief Executive Officer
29 May 2020
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ACTIVE ENERGY GROUP PLC
OPERATIONS REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2019
The Group’s primary activities are centred on the commercialisation of its CoalSwitch™ product, alongside
wood processing and trading activities, supported by a forestry management business, Timberlands.
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 operational activities. 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. At the same time this jurisdiction provides the platform for
AEG to benefit from complementary biomass, saw logging, property rental and other commercial
opportunities.
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$3.3 million. 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™ and lumber operations in the US . The Lumberton Site has a number of additional
advantages for AEG. 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. In April 2019, the AEG announced that it had been awarded a US$500,000 building re-use and
renovation grant for its new manufacturing site in Lumberton, Robeson County, North Carolina. The grant,
awarded after the North Carolina Rural Infrastructure Authority voted to support the Project on Thursday
18th April, 2019, will be 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.
Following completion of the acquisition of the site, the Company's Directors obtained an independent
valuation report on the Lumberton Site. The report, which was dated September 2019, valued the
Lumberton Site at US$4,000,000. Finally, in April 2020 Active Energy Renewable Power received
confirmation from the that its application to the US Department of Agriculture under the Advanced Biofuel
Payment Program had been accepted.
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.
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ACTIVE ENERGY GROUP PLC
AEG first became involved in this ground-breaking technology in 2015. During 2016 & 2017 work was
primarily focused on research and development activities. In February 2018, AEG announced the opening
of its inaugural CoalSwitchTM Reference Plant (the “Reference Plant”). 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. During the summer of 2019 AEG moved the Reference Plant to the
Lumberton site in North Carolina, where it intends to commence scalable production, subject to receiving
appropriate permits.
On 7 February 2020 AEG announced that the North Carolina Department of Environment and Natural
Resources, Department of Air Quality ("NCDAQ") had completed its internal review with regard to the
issuance of relevant construction and air permit for the reference plant at Lumberton. In accordance with
industry practices, with existing pellet mills in North Carolina, NCDAQ requested that a public information
meeting must be held prior to the issuance of the Permit. Due to the Covid-19 restrictions this meeting will
be held online on 15th June 2020 and the public comment period will close on the 19th June 2020. Subject
to any conditions within the permit, AEG expects construction of the plant to commence once the permit
is granted.
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. Once the existing
reference plant is fully operational, AEG is targeting additional investment and development in order to
increase production capacity up to 50 tonne per hour via a large scale production facility, which would have
the ability to produce to up to 400,000 tonnes per annum.
Coalswitch™ licencing
The directors recognise that the potential market for CoalSwitch™ is far larger than AEG’s existing resources.
Therefore, the fastest and most cost effective way of monetising CoalSwitch™ technology is via the grant
of licences.
On 28 November 2019, AEG announced that it has agreed terms for the issuance of its first
CoalSwitch™ Licence Agreement to RMD Environmentals, Inc. ("RMDE"), a British Columbia based forestry
management and environmental engineering and consultancy business, to develop and manage projects
involving the use of CoalSwitch™ technology in each of the Crown Provinces of Alberta and British Columbia
in Canada.
Under the terms of the Licence Agreement, RMDE acquired the exclusive rights for the sale and commercial
development of CoalSwitch™ in the licenced jurisdictions for the next 20 years, in exchange for an up front
fee, plus royalty payments of US$5 per tonne of CoalSwitch™. Initial preparatory and pre-engineering work
by RMDE has commenced in Alberta for its first plant and RMDE is examining additional projects using the
CoalSwitch™ technology in each of the Territories.
South East Asia Activities
During 2018 and 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. AEG has established a
network of local commercial partners in the region and the Company is therefore well positioned to
capitalise on opportunities within these jurisdictions.
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ACTIVE ENERGY GROUP PLC
Intellectual Property-derivative activities
During the development of the CoalSwitch™ technology, AEG identified that the technology can also be
reconfigured to produce an enhanced soil replacement product from waste fibre. This substrate can be
adjusted and tailored to meet the specific requirements of an individual agricultural customer and more
importantly specific plant type or species.
Sawmill and saw logging activities
As a result of the acquisition of the Lumberton site, AEG’s Management in conjunction with the
development of the CSW plant, and to exploit the potential synergies with the core activity, started to
explore the existing opportunities for other commercial operations related to the wood industry. As a result,
on 24 July 2019 AEG announced that it had entered into a joint venture agreement, with Renewable
Logistics Systems LLC ("RLS"), to export saw logs from the Company's Lumberton Site and pursue related
lumber opportunities. A sawmill was installed and commissioned in Q4 2019 along with the procurement
of the initial feedstock in the local market. . On 31 March 2020 AEG announced that it has entered into an
agreement, whereby AEG secured 100% control and ownership of the sawmill and saw log export assets
and activities based at the Lumberton site, in exchange for US$350,000. This sum was payable to RLS in the
form of 64,863,412 new ordinary shares of 1p in AEG and is subject to certain closing adjustments including
the provision of additional consideration in either cash or additional Ordinary Shares.
The Directors believe that this transaction will result in a number of ancillary benefits for AEG:
There is an opportunity to double production via the commencement of 2 shift operations. In the
medium term, AEG intends to increase production by installing additional sawmill capacity,
adjacent to the existing operations.
All these activities generate low value waste products which will be utilised as feedstock for the
production of CoalSwitch™ and other black pellet fuels.
The transaction will improve operational efficiency within AEG.
Timberlands
Overview
The mission of the Timberlands business is to identify, develop and manage forestry projects in accordance
with identified environmental and sustainable goals. This business has multiple benefits and advantages to
AEG and the forestry owners, including:
Control of the supply chain ensures co-ordination and control of environmental sustainability.
Security and traceability of feedstock for production plants.
Using timber in CoalSwitch™ technology optimises output as wood which is traditionally seen as
waste, can be processed 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.
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
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ACTIVE ENERGY GROUP PLC
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.
The Group is currently reviewing the commercial strategy to develop its assets in Newfoundland and
Labrador, including newly identified and complementary business opportunities.
Ukraine
Whilst AEG has no current active business activities in Ukraine, the Group retains its supply contract granted
by the Lyubomi Forestry, which is the administrator of the Lyubomi Forest in the Ukraine. During 2014, the
term of the contract was extended to 2060. AEG is currently reviewing options to utilise this asset, by
leveraging AEG’s other commercial, technological and operational strengths.
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ACTIVE ENERGY GROUP PLC
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2019
The Directors of Active Energy Group Plc present their Strategic Report for the year ended 31 December
2019.
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 and wood
processing activities 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 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, by wood processing and trading activities and 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 and loan notes.
Executive Management:
The Group’s current executive team comprises:
Michael Rowan: Executive Director and CEO; with overall responsibility for all Group activities.
Antonio Esposito: Executive Director and COO; with overall responsibility for all Group operations.
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ACTIVE ENERGY GROUP PLC
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 ensures compliance with the new AIM Rules regarding Corporate
Governance introduced in 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 three Non-Executive Directors (two of whom are based in the
UK and the other is based in Canada). All three non-executive directors are considered by the board to be
independent. The Company acknowledges that the Chairman and Chief Executive Officer roles are currently
being discharged by the same person and will keep this under review as the business progresses.
Following the appointment of Max Aitken and Jason Zimmermann in January 2020 the board is composed
on the following individuals as of the date of this report:
Michael Rowan (Chief Executive Officer): Michael is a qualified solicitor, qualified investment manager and
successful corporate financier with a broad range of international commercial and legal experience.
After graduating from the University of Cambridge, he practised as a solicitor at Linklaters in London, Hong
Kong and New York, working with leading global financial institutions. He then moved to Merrill Lynch
International in London and New York, where he became a director of Equity Capital Markets, with
responsibility for origination, execution and commercial negotiation of equity and equity-linked
transactions, including major privatisations in the UK and EMEA regions.
Since then, Michael has held senior roles within the venture capital and mid & small cap broking sectors in
London and Hong Kong. More recently, he was Business Development Director and an Investment Manager
at JM Finn & Co and he continues to be involved in private companies which specialise in investing in
international micro capital and seed financing opportunities. He joined the Board in 2015 and was
appointed as Chief Executive Officer in July 2018.
13
ACTIVE ENERGY GROUP PLC
Antonio Esposito (Executive Director) : Antonio 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 focus on woods and biomass-based fuels.
He has a proven track record as a project manager, having been in charge of both the construction and the
launch of a production facility in Eastern Europe, as well as overseeing the construction of biomass fired
power plants in various locations worldwide. More recently, Antonio has managed the export of wood,
wood products and other bulk commodities to South East Asia, India and Europe in addition to the
procurement of wood supplies in excess of 5 million tonnes per annum. Whilst serving as Chief Operating
Officer at Active Energy he was instrumental in the planning and construction of the Company's inaugural
CoalSwitch™ plant in Utah, U.S. and the planned roll out of the Company's associated technologies including
PeatSwitch™ in AEG's target markets
James Leahy (Senior Independent Non-Executive Director) : Beginning his career at the London Metal
Exchange, James has spent the subsequent 34 years involved in stockbroking and commodities in a variety
of roles, including research analyst, equity salesman and specialist corporate broker, which covered mining
finance, origination and distribution. He has worked on a wide range of projects worldwide, ranging from
industrial minerals, coal, iron ore, precious metals, copper, diamonds, lithium, uranium, plantations,
forestry and palm oil. Lately, he has employed his corporate governance skills, having gained substantial
experience as an independent director on the boards of several quoted and unquoted companies. In
addition, Mr Leahy has direct experience in capital markets, having worked at James Capel, Credit Lyonnais,
Nedbank, Canaccord and Mirabaud, where he gained invaluable experience with international institutional
fund managers, hedge funds, private equity and sector specialist investors. Additionally, Mr Leahy has been
involved in many IPOs, as well as primary and secondary placings, and the development of junior mining
companies through to production. He is currently a director of the listed fund Geiger Counter Ltd, Savannah
Resources Plc and a private start up, Energy Minerals Investments Ltd.
Max Aitken (Non-Executive Director): Max Aitken is an entrepreneur who has founded and been
instrumental in the financing of several businesses in energy, IT, and media. He is currently the CEO of
Estover Energy Ltd. Over the last 10 years Estover Energy has established itself as a leader in the UK biomass
industry developing 3 wood-fuelled biomass CHP plants producing up to 70 MW in the UK, financed with
£375m of capital. He is also a trustee of the Beaverbrook Foundation London, and President of the
Beaverbrook Canadian Foundation in Montreal. He is also a Non-Executive Director for 42 M&P, a fully
integrated management and production company in the TV and film industry, based in London and Los
Angeles.
Jason Zimmermann (Non-Executive Director): Jason Zimmermann has over 20 years’ experience in the
timber resource sector. He is currently the President of Zimmfor Management Services Ltd (“Zimmfor”),
an industry leading consulting firm focused on sustainable forestry management. Jason has field and
technical expertise relating to timberland assets worldwide and Zimmfor has worked with AEG in previous
projects in Canada and Ukraine. He is a Registered Professional Forester and a graduate of the University
of British Columbia with a Bachelor of Science in Forestry.
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.
14
ACTIVE ENERGY GROUP PLC
Board Committees:
Remuneration Committee
The Remuneration Committee is made up of James Leahy 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 James Leahy and Michael Rowan and is chaired by James Leahy. 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. Under the QCA’s “Comply or Explain” maxim, the Company differs from the norm
in that Michael Rowan is an Executive Director of the Company. The norm is for the Audit Committee to be
composed entirely of non-executives. This construct remains under review.
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.
15
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 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
Commercialise and develop forestry licences, sawmill and saw log export activities.
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 the Chief Executive
Officer’s Statement. Other KPIs may 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, annual 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
16
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
or failure to secure necessary permits or
licences.
Significant changes in the political
environment, including the impact of Brexit,
results in loss of resources/market and/or
business failure.
8.
Death, illness or serious business disruption
due to Covid-19 or other pandemics.
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’s operational activities are now
focused on North America in order to reduce
the Group's country, political and trading risk
profiles. Management also monitors the wider
political environment on an ongoing basis to
ensure that steps are taken to mitigate political
risk.
The Company seeks to comply with all legal
requirements and guidance within the various
territories in which it operates. The Board aims
to take all reasonable steps to protect its
employees, suppliers and customers, whilst
safeguarding its business interests.
Section 172 Statement
The Directors are well aware of their duty under Section 172 of the Companies Act 2006 to act in the way
which they consider, in good faith, would be most likely to promote the success of the Company for the
benefit of its members as a whole and, in doing so, to have regard (amongst other matters) to:
The likely consequences of any decision in the long term;
The interests of the Company’s employees;
The need to foster the Company’s business relationships with suppliers, customers and others;
The impact of the Company’s operations on the community and the environment;
The desirability of the company maintaining a reputation for high standards of business
conduct; and
The need to act fairly between members of the Company.
The Board recognises that the long-term success of Active Energy Group requires positive interaction with
its stakeholders, including customers, suppliers, governmental and regulatory authorities. The directors
seek to actively identify and positively engage with key stakeholders in an open and constructive. The board
believes that this strategy enables our stakeholders to better understand the activities, needs and
challenges of the business and enable the Board to better understand and address relevant stakeholder
views which will assist the Board’s in its decision making and to discharge its duties under Section 172 of
the Companies Act 2006.
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.
17
ACTIVE ENERGY GROUP PLC
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 29 May 2020 and signed on its behalf by:
Michael Rowan
Chief Executive Officer
18
ACTIVE ENERGY GROUP PLC
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2019
The Report of Directors
The Directors present their report together with the audited financial statements of the Group for the year
ended 31 December 2019.
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 2019 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 2 to 18).
Dividends:
No dividend is proposed for the year ended 31 December 2019 (2018: £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 24 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
S C Melling (resigned 10 October 2019)
J Leahy (appointed 1 November 2019)
A Esposito
Remuneration:
Remuneration and benefits received during the year ended 31 December 2019 for Directors, together with
interests in share options and warrants at the year end, were as follows:
2019
Gross
Fees
and
Salary
US$
191,540
-
-
33,519
6,385
180,000
411,444
2019
Share-
based
Payments
US$
144,010
-
-
-
-
-
144,010
2018
Gross
Fees
and
Salary
US$
193,295
178,375
19,996
37,000
-
6,291
434,957
2018
Share-
based
Options / Exercise
Payments
Warrants
Price
US$
390,463
467,047
-
-
-
-
857,510
No.
20,500,000
25,000,000
-
-
-
-
45,500,000
p
6.4
6.5
-
-
-
-
T M Rowan
R G Spinks
B Evans-Jones
S Melling
J Leahy
A Esposito
Given cash flow constraints during the period associated with the transition to a 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 2019: TMS Rowan US$118,875; A
Esposito US$70,346.
19
ACTIVE ENERGY GROUP PLC
Significant Shareholders:
The Directors are aware of the following significant shareholdings of 3 per cent or more of the current
Issued Ordinary Share Capital (“ISC”) of 1,273,539,063 shares and Total Voting Rights (“TVR”) of
1,273,539,063 shares on 27 April 2020:
Gravendonck Private Foundation
Renewable Logistics Systems LLC
R G Spinks
R M Derrickson
No.
238,171,971
64,863,412
54,105,333
44,474,592
ISC (%)
18.70%
5.09%
4.25%
3.49%
TVR (%)
18.70%
5.09%
4.25%
3.49%
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.aegplc.com in
accordance with legislation in the United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the
Group’s website is the responsibility of the Directors. The Directors' responsibility also extends to the on-
going integrity of the financial statements contained therein.
The Directors consider that the annual report and the accounts, taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group and the
Company’s performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the Report of Directors confirm that, to the
best of their knowledge:
the Group financial statements, which have been prepared in accordance with IFRSs as adopted by
the European Union, give a true and fair view of the assets, liabilities and financial position;
20
ACTIVE ENERGY GROUP PLC
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 Chief Executive Officer’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
29 May 2020
Company Registration Number: 03148295
21
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 PLC (the ‘parent company’) and its
subsidiaries (the ‘group’) for the year ended 31 December 2019 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 2019 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 IFRSs 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.
As detailed within note 1, whilst there is a global impact of the COVID-19 outbreak, the Group has been
able to operate during the pandemic to date. It remains difficult to assess reliably whether there will be any
material disruption in the future which could adversely impact the Group’s forecast.
Our opinion is not modified in respect of this matter.
Our audit approach
Overview
Key audit matters
22
ACTIVE ENERGY GROUP PLC
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.
Going concern assumption
Carrying value of intangible assets
Carrying value of property, plant and equipment
Carrying value of available for sale investments
Carrying value of Intercompany loans
These are explained in more detail below.
Audit scope
We conducted audits of the Group and Parent Company financial information.
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
Going concern assumption
How our audit addressed the key audit matter
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.
We have performed the following audit procedures:
the
have
considered
The Directors
cash
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 Directors have identified a variety of potential
sources of funds including issue of additional equity
and/or debt, shareholder loans, tax credits and sale
of
In addition, the
Directors have identified additional cost reductions
which may be implemented if necessary.
investments and/or plant.
Key assumptions that impact the conclusions are the
levels of future revenue, the ability to fundraise, and
the ability to control operating costs.
23
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
management’s
and
performed procedures including:
forecast
concern
going
Verifying the consistency of key inputs and
fund raisers relating to future costs to other
financial and operational
information
obtained during the audit;
Assessed the reasonableness of production
reserve, expenses and costs established;
Corroborated with management relating to
future cash inflows.
the
reviewed
We
latest management
accounts to gauge the financial position.
ACTIVE ENERGY GROUP PLC
These are therefore inherent risks that the forecasts
may overstate future revenue due to timing of
closure future contracts, or understate future costs,
and that the Company will not be able to operate
within its cash resources and continue to operate as
a going concern.
The COVID-19 pandemic has created a great deal of
uncertainty regarding the future outlook of the
business.
We reviewed the status of permits.
We performed stress tests.
Considered the Group’s historic ability to
raise funds.
Reviewed the financing options available to
the Group to evaluate the ability of the
Group to pay their debts as they become
due.
We have enquired with management as to the
impact of COVID-19 and the steps being taken to
limit the impact of the pandemic on the business.
We have reviewed forecasts and
latest bank
its
balances to ensure the group can cover
overheads. The forecasts have been stress tested by
management and the assumptions have been
challenged. Letters of support obtained from the
parent company, confirming they will continue to
support all the subsidiaries for at least 12 months
from the date of this report. Additionally we note
that salary deferral letters have been signed by
Directors to give further comfort.
However, due to the risks outlined above, a material
uncertainty relating to going concern is highlighted
in the auditor’s report.
Carrying value of intangible assets
The Group had intangibles of US$9,180,466 at the
year end (2018: US$8,459,850).
Included within intangibles assets were additions
to capitalised development costs of
relating
US$394,774 and capitalised other
intellectual
property of US$476,833. Other intellectual property
comprises costs incurred to secure the rights and
knowledge associated with the CoalSwitch and
PeatSwitch technology. The contractual rights over
Lyumboml Forest as the Timber Licence.
We have performed the following audit procedures:
Tested management’s assessment of indicators of
impairment by considering various sources of
internal and external information. Assessed the
methodology used by management to estimate the
future profitability of the Group and recoverable
value of the investment.
Ensured key judgements are robust by review of
events surrounding the judgement and validating
the judgements by agreeing to supporting evidence.
The Directors have a duty to confirm that all
intangibles, are correctly recognised.
Reviewed management’s assessment of future
operating cashflows and indicators of impairment.
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.
Where indicators of impairment were identified, we
challenged management’s assessment of the any
recoverable amount from the investment.
Where no indicators of impairment were highlighted
by management, we challenged the judgements
made in management’s assessment by identifying
contradictory signs of any potential indicators of
impairment.
24
ACTIVE ENERGY GROUP PLC
Key assumptions for the CoalSwitch input model are:
Labour fixed cost
Discount rate applied
Average selling price per tonne
FX rate
Cost inflation
Maintenance capex
PPE average useful life – 10 years
Utilisation rate
Corporate tax rate
tonnes per hour capacity for the Lumberton
reference plant
Plant output
Sawlog average selling price
Refer to Note 1 and Note 14 to the Financial
Statements for discussion of the related accounting
policy.
Carrying value of property, plant and equipment
The Group had property, plant and equipment of
US$9,231,743 at the year end (2018: US$5,375,888).
in property, plant and equipment
Included
is
additions of US$3,512,999 relating to the purchase
of the Lumberton site in North Carolina in the year.
to
Certified General Real Estate Appraisers
the
independent valuation of
undertake an
Lumberton site compared with other commercial
properties in the area, the Group revalued the
property in line with the valuation prepared by the
independent firm.
25
We considered whether the component of the
Group was expected to be profit making and had an
ability to trade successfully into the future.
remain
Confirmed whether all assets which
capitalised are included in future budgets and, if they
are not, understanding
the basis by which
management anticipate being able to recover the
amounts that have been capitalised.
We reviewed the carrying value of the Group’s
development costs in respect of CoalSwitch to
ensure no impairment required. We tested to see if
capitalised costs agreed to IAS 38 Development
costs.
Lyubomi Forestry CGU impairment review has been
performed by management. The remaining useful
life on contractual relationships
is 40 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.
We compared the Group’s assumption to externally
derived date in relation to key inputs such as
discount rates, commodity prices, labour costs,
exchange rates, inflation cost and tax rate.
We vouched additions in the year. Valuation report
obtained for Lumberton site to determine the fair
competence and
value. We evaluated
independence of the valuation firm.
the
Reviewed the assumptions applied by the valuation
firm and compared with similar commercial
businesses.
A valuation has been obtained giving comfort over
the recoverability of the balance within Timberlands
International Limited and the RMDE agreement
giving further comfort. With the cash paid and the
royalty of $5 per tonne gives further comfort.
ACTIVE ENERGY GROUP PLC
We obtained signed licences with RMDE. We noted
that Management were in regular contact with
RMDE to get the plant into production in Alberta. We
challenged management
the
components of the kit has monetary value.
The plant has been in storage since transfer from
Utah. The plant is to be assembled and awaiting to
commence CoalSwitch project.
to ensure
that
The terminal value has been calculated using the net
present value of future cash flows. The CoalSwitch IP
and CoalSwitch Plant have been assessed together
which gives a significant surplus.
Ensured key judgements are robust by review of
events surrounding the judgement and validating
the judgements by agreeing to supporting evidence.
Carrying value of available for sale investments
We have obtained confirmation
from Alpha
Prospects accounts to confirms AEG’s shareholding.
in
the year
The investment held in Alpha Prospects has been
revalued
to US$1,470,639. The
revaluation has been assessed and the reasoning
behind the revaluation has been corroborated with
management.
Shares purchased
in the year amounted to
US$132,705 and revaluation to market value of
US$563,947.
Have reviewed the forecasts and assumptions made
by Alpha Prospects. Assessed the recoverability of
the assets, and given shares where issued recently
by Alpha Prospects, this gave an indication for the
valuation of the shares. We obtained confirmation
that the last placement occurred at a share price of
5.5 pence per share.
We obtained published update to the shareholders
communications and announcements
for any
indicators of a change in fair value of the investment.
We obtained management’s assessment of the fair
value of
the
assessment for any indicators of a change in fair
value of the investment.
investment. We reviewed
the
We assessed whether the Group’s disclosures were
appropriate in respect of the judgements, estimates
and assumptions applied in calculating the fair value.
We reviewed the carrying value of the investments
loans to fellow subsidiaries. The review
and
considered the current position of the subsidiaries,
the future outlook and forecasts prepared by
management, taking COVID-19 into account.
The carrying value of investments and inter-
company loans to subsidiaries (Company only risk)
The Company has investments and amounts due
from group companies of US$23,796,415 (2018:
US$17,752,012).
There is a risk that these inter-company receivables
are not recoverable.
26
ACTIVE ENERGY GROUP PLC
We reviewed the subsidiary accounts and forecasts
and have assessed the financial position of the
subsidiaries.
We have also discussed the assumptions made on
the recovery 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.
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
of
total
Group financial statements
US$113,000 (31 December 2018:
US$180,000).
Based
10%
on
comprehensive loss.
total
that
We believe
comprehensive
the
period is a primary measure used
by shareholders in assessing the
performance of the Group, as the
group is at a pre-revenue stage.
loss
the
for
of
total
Company financial statements
US$110,000 (31 December 2018:
US$163,000).
Based
10%
on
comprehensive loss.
total
that
We believe
comprehensive loss for the period
is a primary measure used by
shareholders
the
performance of the Company, as
the Company is at a pre-revenue
stage.
in assessing
the
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$113,000.
We agreed with the Audit Committee that we would report to them misstatements identified during our
audit above US$6,500 (Group audit) (31 December 2018: US$9,000) and US$5,500 (Company audit) (31
December 2018: US$8,150) as well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
An overview of the scope of our audit
27
ACTIVE ENERGY GROUP PLC
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 7 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 7 reporting units.
The Group engagement team performed all audit procedures.
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:
28
ACTIVE ENERGY GROUP PLC
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 20 and 21, 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.
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
29 May 2020
29
ACTIVE ENERGY GROUP PLC
CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2019
REVENUE FROM CONTRACTS WITH CUSTOMERS
GROSS PROFIT
Impairment charge
Administrative expenses
OPERATING LOSS
Finance costs
(Loss) from continuing operations
Income tax credit on continuing operations
(Loss) from discontinued operations
Note
2019
US$
2018
US$
3
5
6
8
7
1,895,972
195,000
1,895,972
-
(2,779,473)
195,000
(950,700)
(2,982,866)
(883,501)
(3,738,566)
(2,461,376)
(406,929)
(3,344,877)
(4,145,495)
874,655
-
1,346,010
(386,994)
LOSS FOR THE PERIOD
(2,470,222)
(3,186,479)
(Profit)/Loss attributable to Non-controlling Interest
-
(69,625)
(Loss) attributable to the Parent Company
(2,470,222)
(3,256,104)
OTHER COMPREHENSIVE INCOME/(EXPENSE):
Items that may be subsequently reclassified to profit or loss
Exchange differences on translation of operations
Revaluation of land and buildings
Revaluation of assets held for resale
137,540
504,646
563,948
(278,237)
-
(34,658)
Total other comprehensive income (expense)
1,206,134
(312,895)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD
(1,264,088)
(3,568,999)
(Loss) per share (US cent) – continuing operations
(Loss) per share (US cent) – discontinued operations
Basic and Diluted (loss) per share (US cent)
9
(0.21)
0.00
(0.21)
(0.28)
(0.04)
(0.32)
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 35 to 71 form part of these financial statements.
30
ACTIVE ENERGY GROUP PLC
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019
Note
10
11
12
13
14
15
16
17
19
18
19
NON-CURRENT ASSETS
Intangible assets
Property, plant and equipment
Investment in subsidiaries
Long term loans
Available for sale financial assets
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
NON-CURRENT LIABILITIES
Deferred income tax liabilities
Loans and borrowings
TOTAL LIABILITIES
NET ASSETS
Group
2019
US$
9,180,466
9,231,743
-
-
1,470,639
19,882,848
1,146,815
397,323
1,544,138
21,426,986
2,391,229
108,850
2,500,079
364,316
18,190,732
18,555,048
21,055,127
371,859
17,265,379
17,303,159
2,350,175
(67,274)
(268,442)
20
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
Revaluation reserve
Non-controlling Interest
TOTAL EQUITY
(40,206,405)
504,646
-
371,859
3,490,621
Group
2018
US$
8,459,850
5,375,888
-
-
752,215
14,587,953
1,704,410
298,768
2,003,178
16,591,131
2,851,693
1,327,707
4,179,400
241,585
11,672,738
11,914,323
16,093,723
497,408
17,265,379
17,303,159
2,350,175
(204,815)
(268,442)
Company
2019
US$
-
-
1,455,091
23,272,315
1,470,649
26,198,055
954,232
360,622
1,314,854
27,512,909
1,441,593
-
1,441,593
-
18,190,732
18,190,732
19,632,325
7,880,584
17,265,379
17,303,159
2,350,175
(468,793)
(268,442)
Company
2018
US$
-
-
58,426
17,372,234
752,215
18,182,875
784,268
234
784,502
18,967,377
1,469,614
1,000,000
2,469,614
-
11,672,738
11,672,738
14,142,352
4,825,025
17,265,379
17,303,159
2,350,175
(716,115)
(268,442)
2,720,933
3,490,621
2,720,933
(38,310,938)
-
(358,043)
497,408
(31,791,515)
-
-
7,880,584
(33,830,064)
-
-
4,825,025
The financial statements were approved and authorised for issue by the Directors on 29 May
2020 and were signed on their behalf by:
Michael Rowan
Chief Executive Officer
Company Number 03148295
The notes on pages 35 to 71 form part of these financial statements
31
ACTIVE ENERGY GROUP PLC
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER
2019
Note
Group
2019
US$
Group
2018
US$
Company
2019
US$
Company
2018
US$
Cash (outflow)/inflow from
operations
Income tax paid
Net cash (outflow)/inflow
from operating activities
Cash flows from investing
activities
Purchase of intangible assets
Increase in share of subsidiary
undertaking
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
Issue of CLN
Unsecured loans repaid
Finance expenses
Net cash inflow from
financing activities
Net increase/(decrease) in
cash and cash equivalents
Cash and cash equivalents at
beginning of the year
Exchange (losses)/gains on
cash and cash equivalents
Cash and cash equivalents at
end of the year
23
1,675,831
-
(1,515,299)
-
1,201,865
-
(4,242,757)
-
1,675,831
(1,515,299)
1,201,865
(4,242,757)
(519,312)
(1,108,770)
-
-
-
(1,396,666)
(1,756,619)
(1,777,388)
362,790
123,222
-
-
(1,913,141)
(2,762,936)
(1,396,666)
-
-
-
-
-
-
2,762,781
(1,218,857)
(1,207,093)
3,299,248
2,350,445
-
(1,193,316)
-
2,762,781
(1,000,000)
(1,207,093)
3,299,247
2,022,738
(1,193,316)
336,831
4,456,377
555,688
4,128,669
99,521
178,142
360,887
(114,088)
298,768
142,049
234
135,706
(966)
(21,423)
(499)
(21,384)
16
397,323
298,768
360,622
234
The notes on pages 35 to 71 form part of these financial statements.
32
ACTIVE ENERGY GROUP PLC
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2019
Share
capital
US$
Share
premium
US$
14,493,246 14,740,478
-
-
Merger
reserve
US$
2,350,175
-
-
-
734,267
2,548,646
1,812,079
750,602
-
-
(510,780)
-
-
-
-
-
-
-
-
-
-
-
-
Foreign
exchange
reserve
US$
108,080
-
(312,895)
-
-
-
-
-
Own
shares
held
reserve
US$
(779,222)
-
Convertible
debt and
warrant
reserve
US$
2,930,209
-
Retained
earnings
US$
(35,950,264)
(3,186,479)
-
-
-
-
-
510,780
-
-
(339,081)
-
129,805
-
-
-
-
-
-
895,430
-
(69,625)
17,265,379 17,303,159
2,350,175
(204,815)
(268,442)
2,720,933
(38,310,938)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
137,541
-
-
-
-
-
-
-
-
-
-
-
-
-
769,688
(2,470,222)
563,948
-
-
-
-
368,850
(358,043)
Revaluation
Reserve
US$
-
-
-
-
-
-
-
-
-
-
-
-
504,646
-
-
-
Non-
controlling
Interest
US$
(427,668)
-
-
-
-
-
-
-
69,625
Total
equity
US$
(2,534,966)
(3,186,479)
(312,895)
2,207,265
3,299,248
129,805
895,430
-
-
(358,043)
497,408
-
-
-
-
-
(2,470,222)
701,489
504,646
769,688
368,850
358,043
-
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
Cancellation of Treasury
shares
Minority Interest
At 31 December 2018
Loss for the period
Other comprehensive
income
Revaluation of land &
buildings
Embedded derivative on
CLN issue
Share based payments
Minority Interest
adjustment
At 31 December 2019
The purpose and nature of each of the above reserves is described in note 22. The notes on pages 35 to 71 form part of these financial statements.
17,265,379 17,303,159
(40,206,405)
3,490,621
2,350,175
(268,442)
(67,274)
504,646
-
371,859
33
ACTIVE ENERGY GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2019
Share
capital
US$
14,493,246
Share
premium
US$
14,740,478
Merger
reserve
US$
2,350,175
Foreign
exchange
reserve
US$
(403,220)
Own shares
held
reserve
US$
(779,222)
-
-
-
-
734,267
1,812,079
2,548,646
750,602
-
-
(510,780)
-
-
-
-
-
-
-
-
-
-
-
(312,895)
-
-
-
-
-
-
-
-
-
-
-
510,780
Convertible
debt and
warrant
reserve
US$
2,930,209
-
-
(339,081)
-
129,805
Retained
earnings
US$
(32,924,702)
Total equity
US$
406,964
(1,800,792)
(1,800,792)
-
-
-
-
(312,895)
2,207,265
3,299,248
129,805
895,430
-
-
-
895,430
-
17,265,379
17,303,159
2,350,175
(716,115)
(268,442)
2,720,933
(33,830,064)
4,825,025
-
-
-
-
17,265,379
-
-
-
-
17,303,159
-
-
-
-
2,350,175
-
247,322
-
-
(468,793)
-
-
-
-
(268,442)
-
-
769,688
-
3,490,621
1,105,751
563,948
-
368,850
(31,791,515)
1,105,751
811,270
769,688
368,850
7,880,584
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
Cancellation of Treasury shares
At 31 December 2018
Profit for the period
Other comprehensive income
Embedded derivative on CLN issue
Share based payments
At 31 December 2019
The purpose and nature of each of the above reserves is described in note 22.
The notes on pages 35 to 71 form part of these financial statements.
34
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. ACCOUNTING POLICIES
General information
Active Energy Group plc is a public limited company incorporated in England and Wales and quoted on
the AIM market of the London Stock Exchange. The address of the registered office is disclosed 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 26.
Going concern
Historically, the Group's primary revenue generating business segment was the Ukrainian wood fibre
business. This was discontinued during 2017 and the group’s emphasis shifted toward development of
the CoalSwitch™ business segment. In Q1 2019 AEG purchased an industrial site in Lumberton, North
Carolina. Later that year saw log export and sawmill activities were commenced at that site by AEG’s
JV partner, Renewable Logistics Systems LLC. On 31 March 2020 AEG announced that it had acquired
a 100% interest in the Lumberton Wood business and this business activity has been operated by AEG’s
100% subsidiary (AERP) since this date.
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 the ramp up of sawmill production and
saw log exports during 2020, together with commencement of production and sale of CoalSwitchTM in
the second half of 2020. The Directors have identified a variety of potential sources of funding including
issue of additional equity and/or debt in order to finance the ramp up and commissioning of these
operational activities. In addition, the Directors have identified additional cost reductions and cash
flow optimisation steps, which may be implemented if necessary. Finally, the Directors have
considered the potential impact of the Covid-19 on the group and noted that AERP’s activities are
classified as pertaining to an “essential industry” by the state of North Carolina and that the business
has continued to operate during “lockdown” periods.
35
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. ACCOUNTING POLICIES (continued)
Going concern (continued)
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, the Company does not have a significant
period of history of sawmill and saw log export activity on which to rely. In addition the environmental
permit for the CoalSwitchTM plant has not yet been granted and production and sale of CoalSwitch has
not commenced. Furthermore, the potential sources of funds have not yet been finalised and therefore
there can be no guarantee that sufficient funds will be available to finance the ramp up and
commissioning of operations. Finally, the potential impact of the Covid-19 pandemic on the Group is
not fully known. 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.
Standards, interpretations and amendments to existing standards
There are a number of standards, amendments to standards, and interpretations which have been
issued by the IASB that are effective in future accounting periods that the group has decided not to
adopt early. 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. The most significant
of these are as follows, which are all effective for the period beginning 1 January 2020:
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors (Amendment – Definition of Material)
IFRS 3 Business Combinations (Amendment – Definition of Business)
Revised Conceptual Framework for Financial Reporting
Changes in accounting standards which have been implemented in the year
The following new standards have been adopted by the Group. No adjustments were required the
prior year’s figures as a result of the adoption of these standards.
IFRS 16 Leases (effective date 1 January 2019)
IFRIC 23 Uncertain tax treatments (effective date 1 January 2019
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.
36
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. ACCOUNTING POLICIES (continued)
Revenue recognition
Revenue is recognised in accordance 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.
In the case of income from licencing activities, revenue is recognised as and when the relevant
performance obligations defined by the licence agreement have been satisfied. This may be on initial
grant of the licence, if the grant is itself the performance obligation. Alternatively the performance
obligation may be dependent on certain further events, such as production under the terms of the
licence, in which case revenue will be recognised as this occurs.
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.
37
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. ACCOUNTING POLICIES (continued)
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 joint operations by recognising its share of assets, liabilities,
revenues and expenses in accordance with its contractually conferred rights and obligations.
Impairment of non-financial assets (excluding inventories, investment properties and deferred tax
assets)
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are
undertaken annually at the financial year end. Other non-financial assets are subject to impairment
tests whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of
value in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment
test is carried out on the smallest group of assets to which it belongs for which there are separately
identifiable cash flows; its cash generating units (“CGUs”). Goodwill is allocated on initial recognition
to each of the Group's CGUs that are expected to benefit from the synergies of the combination giving
rise to the goodwill. Impairment charges are included in profit or loss, except to the extent they reverse
gains previously recognised in other comprehensive income. An impairment loss recognised for
goodwill is not reversed.
38
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. ACCOUNTING POLICIES (continued)
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 26 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; and
Expenditure attributable to the intangible asset is measurable.
The significant intangibles recognised by the Group, their useful economic lives and the methods used
to determine the cost of intangibles acquired in a business combination are disclosed in note 10.
Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less accumulated depreciation and any
recognised impairment loss. Cost includes the purchase price and all directly attributable costs.
Depreciation is provided at the following annual rates in order to write off each asset over its estimated
useful life.
– 2 to 10 years straight line
Plant and equipment
– 2 to 5 years straight line
Furniture and office equipment
Buildings
– 25 to 50 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 the Executive Directors.
39
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. ACCOUNTING POLICIES (continued)
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.
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
obligation are discharge, 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.
40
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. ACCOUNTING POLICIES (continued)
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.
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$”), which is the Group’s presentation currency as the Group’s activities are ultimately
linked to the US Dollar. The Company’s functional currency is Pound Sterling.
Transactions entered into by Group entities in a currency other than their functional currency are
recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
On consolidation, the results of overseas operations are translated into the Group’s presentation
currency, US Dollars, at rates approximating to those ruling when the transactions took place. All
assets and liabilities of overseas operations, including goodwill arising on the acquisition of those
operations, are translated at the rate ruling at the reporting date. Differences arising on translating the
opening net assets at opening rate and the results of overseas operations at actual rate are recognised
in other comprehensive income and accumulated in the foreign exchange reserve. Exchange
differences recognised in the statement of comprehensive income of Group entities' separate financial
statements on the translation of long-term monetary items forming part of the Group's net investment
in the overseas operation concerned are reclassified to the foreign exchange reserve on consolidation
41
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
1. ACCOUNTING POLICIES (continued)
Foreign currencies (continued)
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign
exchange reserve relating to that operation up to the date of disposal are transferred to the
consolidated statement of comprehensive income as part of the profit or loss on disposal. The key
US$/GBP exchange rates used to prepare the accounts were as follows: rate at 31 December 2018:
1.276; average for year-ended 31 December 2019: 1.277; rate at 31 December 2019: 1.327.
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
From 1 January 2019, leases are recognised as a right-of-use asset and a corresponding liability at the
date at which the leased asset is available for use by the Group. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an
estimate of costs required to remove or restore the underlying asset, less any lease incentives
received. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease
term on a straight-line basis. The initial measurement of the corresponding lease liability is at the
present value of the lease payments that are not paid at the lease commencement date, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. The lease payments include fixed payments, less any lease incentive
receivable, variable leases payments based on an index or rate, and amounts expected to be payable
by the lessee under residual value guarantees.
The lease liability is subsequently measured at amortised cost using the effective interest method. It is
remeasured when there is a change in future lease payments arising from a change in an index or rate,
if there is a change in the Group’s estimate of the amount expected to be payable under a residual
value guarantee or if the Group changes its assessment of whether it will exercise a purchase,
extension or termination option. When the lease liability is remeasured in this way, a corresponding
adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if
the carrying amount of the right-of-use asset has been reduced to zero.
42
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
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™ denotes the Group’s renewable wood pellet business.
Revenues and costs associated with the Ukrainian Wood Fibre business were been 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 amended to reflect the
sawmill and saw log export activities and reporting structures will be revisited accordingly.
43
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
2. SEGMENTAL INFORMATION (continued)
Measurement of operating segment profit or loss
The Group evaluates segmental performance on the basis of profit or loss from operations calculated
in accordance with IFRS but excluding corporate overheads, non-recurring losses, such as goodwill
impairment, the effects of share-based payments, and joint venture profit and losses.
2019
2019
2019
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
Forestry &
Natural
Resources
US$
-
(150,991)
(150,991)
30,198
(120,793)
2018
Forestry &
Natural
Resources
US$
-
(995,545)
(995,545)
142,584
(852,961)
CoalSwitch™
US$
Total
US$
1,717,676
1,717,676
992,889
992,889
842,362
1,835,251
841,898
841,898
872,560
1,714,458
2018
2018
CoalSwitch™
US$
Total
US$
195,000
(407,323)
(407,323)
1,203,426
796,103
195,000
(1,402,868)
(1,402,868)
1,346,010
(56,858)
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™ segment was US$1,1335,274 (2018: US$2,666,222) and
capital expenditure relating to the Forestry and natural resource segment was US$394,774 (2018:
US$804,103). In addition AEG incurred capital expenditure of US$3,600,416 on the acquisition of land
and buildings at the Lumberton site during 2019.
44
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
2. SEGMENTAL INFORMATION (continued)
Reconciliation of reportable segment profit or loss, assets and liabilities to the Group’s corresponding
amounts are as follows:
Total (loss) from reportable segments
Unallocated amount - corporate expenses
Unallocated amount - rental income
Unallocated amount - finance expense
Share based payments
Discontinued operations
Loss for the period
An analysis of non-current assets by location of assets is given below:
United Kingdom
Ukraine
Canada
United States
3. REVENUE
Group
Grant of licence
Engineering services
Rental income
2019
US$
1,714,458
(1,532,750)
178,296
(2,461,376)
(368,850)
-
(2,470,222)
2018
US$
(56,858)
(1,440,268)
-
(406,929)
(895,430)
(386,994)
(3,186,479)
2019
US$
2018
US$
6,498,339
1,056,934
3,095,832
9,231,743
19,882,848
5,303,081
1,267,925
2,701,058
5,315,889
14,587,953
2019
US$
1,617,676
100,000
178,296
1,895,972
2018
US$
-
195,000
-
195,000
45
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
3. REVENUE (continued)
The following table analyses revenue by location of customer.
Switzerland
USA
Canada
Malaysia
2019
US$
-
178,296
1,617,676
100,000
1,895,972
2018
US$
25,000
170,000
-
-
195,000
Revenue derived from a single external customer amounted to US$1,617,676 (2018: US$170,000).
4. EMPLOYEE COSTS AND DIRECTORS
The following table analyses group wages and salaries before any allocations to property, plant and
equipment or intangible assets.
Group
Wages and salaries
Social security costs
Share based payments – others
Share based payments – directors
2019
US$
1,075,916
130,155
1,206,071
224,840
144,010
1,574,921
The average monthly number of employees during the year was as follows:
Directors
Administration
Production
2019
3
3
5
11
2018
US$
2,021,959
177,463
2,199,422
37,920
857,510
3,094,852
2018
3
6
10
19
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 19.
Directors' emoluments
Share based payments
2019
US$
411,444
144,010
555,454
2018
US$
434,957
857,510
1,292,467
The emoluments of the highest paid Director for the year, excluding non-cash share based payments,
were US$191,540 (2018: US$193,295).
46
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
5. OPERATING LOSS
Group
The loss before income tax is stated after charging/(crediting):
Operating leases - premises
Amortisation of intangible assets
Depreciation and impairment
Loss / (profit) on disposal of fixed assets/discontinued operations
Auditors' remuneration - parent company and consolidation
Auditors' remuneration - subsidiaries
Auditors' remuneration - taxation services
Auditors' remuneration - other services
Share based payments
Foreign exchange (gains)/loss
6. FINANCE INCOME AND COSTS
Group
Finance costs
Interest on convertible loan
Other loan interest and charges
Foreign exchange losses/(gains)
Net finance (credit)/costs
2019
US$
2018
US$
-
150,991
66,055
678,803
42,777
24,517
145,827
14,046
368,850
717,188
33,596
44,845
950,700
386,994
40,830
23,605
4,466
14,035
895,430
(640,353)
2019
US$
2018
US$
1,445,234 1,003,213
298,954
717,188
44,070
(640,354)
2,461,376
406,929
Foreign exchanges movements primarily relate to movements in US$/Sterling exchange rates and
resulting movements in intercompany balances.
47
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
7. LOSS FROM DISCONTINUED OPERATIONS
During 2017 AEG plc discontinued its Wood fibre business in Ukraine. The results of this business are
disclosed as a single line item in the Group Income and Expenditure Statement in accordance with
IRFS5. Details of the results of these operations are shown below.
REVENUE
Cost of sales
GROSS PROFIT
Administrative expenses
OPERATING (LOSS)/PROFIT
Finance income
(Loss)/profit for the Period
Loss on sale of discontinued operations
Income tax
(Loss)/profit attributable to the Parent Company
2019
US$
-
-
-
-
-
-
-
-
-
-
2018
US$
-
(265,006)
(265,006)
(120,210)
(385,216)
-
(385,216)
(1,778)
-
(386,994)
Discontinued operations cash flows from operating activities were US$Nil (2018: US$1,135,216
outflow); cash flows from investing activities were US$Nil (2018: US$123,222 inflow); and cash flows
arising from financing activities were US$60,000 (2018: US$200,000).
48
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
8. TAXATION
Group
Current tax
R&D tax credit at 14.5% on continued operations
Deferred tax
Reversal of temporary differences
Total income tax (credit)/charge
Breakdown between continuing and discontinuing operations
Tax charge relating to discontinued operations
Tax (credit)/charge relating to continued operations
Factors affecting the tax charge
2019
US$
2018
US$
(842,364)
(1,203,426)
(32,291)
(874,655)
(142,584)
(1,346,010)
-
(874,655)
(874,655)
-
(1,346,010)
(1,346,010)
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
Prior year adjustment
Current tax (credit)/charge
Tax charge relating to discontinued operations
Tax (credit) relating to Continued operations
2019
US$
2018
US$
(3,344,877)
19%
(635,527)
(4,532,489)
19%
(861,173)
(507,108)
8,275
272
-
107,718
(278,539)
-
(874,655)
(1,203,426)
187,707
(25)
(81,940)
-
(110,992)
-
(1,346,011)
(874,655)
(1,346,011)
49
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
8. TAXATION (continued)
Movements in the Group’s 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 2019
US$
18,984,435
5,402,157
(1,499,987)
22,886,605
This equates to a potential deferred tax asset at 19% of US$4,348,455 at the year-end 2018 (2018:
US$3,227,354), which has not been recognised due to uncertainties regarding the recoverability of this
balance.
Tax effects of amounts which are not deductible/(taxable) in calculating taxable income are as follows:
Intercompany loan written off
Share based payments
Legal and professional fees
Investor relations
Sundry items
9. LOSS PER SHARE
2019
US$
742
-
-
7,533
-
8,275
2018
US$
-
170,131
14,804
2,470
302
187,707
Basic and diluted loss per share is calculated by dividing the loss attributable to equity holders of the
company of US$2,375,092 (2018: US$3,256,104) by the weighted average number of Ordinary Shares
in issue during the year of 1,201,906,951 (2018: 1,013,575,699).
50
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
10. INTANGIBLE ASSETS
Group
Cost
At 31 December 2017
Additions
At 31 December 2018
Additions
At 31 December 2019
Accumulated amortisation
At 31 December 2017
Impairment charge
Amortisation charge for year
At 31 December 2018
Amortisation charge for year
At 31 December 2019
Net book value
At 31 December 2019
Other
intellectual
property
US$
Development
US$
Total
US$
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
476,833
394,774
871,607
5,028,061
6,314,713
11,342,774
362
1,015,410
1,015,772
-
-
950,700
44,845
950,700
44,845
362
2,010,955
2,011,317
-
362
150,991
150,991
2,161,946
2,162,308
5,027,699
4,152,767
9,180,466
At 31 December 2018
4,550,866
3,908,984
8,459,850
51
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
10. INTANGIBLE ASSETS (continued)
Company
At 31 December 2017, 2018 & 2019
Accumulated amortisation
At 31 December 2017, 2018 & 2019
Net book value
At 31 December 2017, 2018 & 2019
Intellectual
property
US$
-
-
-
Other intellectual property
Other intellectual property comprises costs incurred to secure the rights and knowledge associated
with the CoalSwitch™ 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. Since 2017 the Group has continued to undertake research, development and other activities to
further develop and secure its rights over its CoalSwitch™ technology.
Management undertakes a review at each balance sheet date to assess whether these balances need
to be impaired. Based on this review, the group did not record an impairment charge against this asset
in 2019 (2018: US$Nil). The directors have noted that the recoverability of this balance is dependent
upon the commercialisation of CoalSwitchTM project. Furthermore, as of the date of this report,
production of CoalSwitchTM in commercial quantities has not yet commenced. As a result the directors
intend to monitor the recoverability of this balance on an ongoing basis.
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 and/or other options to monetise this asset. The remaining life
of the supply agreement is assessed to be 40 years. However, given uncertainties over the timing and
nature of commercialisation of this asset Management has assessed the useful life to be 8 years and is
therefore the asset is being amortised over this period. In addition, management undertakes a review
at each balance sheet date to assess whether these balances need to be impaired. Based on this
review, the group did not record an impairment charge against this asset in 2019 (2018: a charge of
US$668,073 was recognised). However, the directors have noted that, as of the date of this report,
commercialisation of this asset has not yet commenced and intend to monitor the recoverability of
this balance on an ongoing basis.
52
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
10. INTANGIBLE ASSETS (continued)
Northern Alberta: Since 2014 AEG has invested a significant amount of time and resources building up
knowledge, expertise and contacts and preparing Timber Supply licences in this territory, with the
intention of developing forestry assets, in conjunction with AEG’s CoalSwitchTM technology. During
2019 AEG negotiated an agreement with RMDE whereby the latter would have the right to develop and
sell CoalSwitchTM related products in this territory. According to the terms of the licence agreement,
AEG was entitled to an upfront payment followed by a royalty of US$5 for each tonne of CoalSwitchTM
produced.
Cost incurred to date developing this asset have been recorded as development assets within intangible
fixed assets and management intends to amortise these costs over the period 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 did not record an impairment charge
against this asset (2018: a charge of US$282,627 was recognised). The directors have noted that the
recoverability of this balance is dependent upon the production of CoalSwitchTM under the terms of the
licence. Furthermore, as of the date of this report, this production has not yet commenced. As a result
the directors intend to monitor the recoverability of this balance on an ongoing basis.
Newfoundland: On 29 November 2018 the Provincial Government of Newfoundland & Labrador
announced that it had issued two renewable five-year commercial cutting permits to Timberlands
International (Newfoundland and Labrador) Inc., a subsidiary of AEG, totalling 100,000 m3 annually
(500,000 m3 over five years) in Forest Management Districts 17 and 18 on the Great Northern
Peninsula. Prior to this date AEG invested significant time and resources in developing management
and supplier capability as well as government relations in order to not only secure the licences, but also
to develop the business model and capabilities to monetise the permits once awarded.
Costs incurred in acquiring these licences have been recorded as additions to intangible fixed assets
These costs will be amortised over the period of production Management undertakes a review at each
balance sheet date to assess whether these balances need to be impaired. No impairment was recorded
for the year ended 31 December 2019 (2018: US$Nil). However, the directors have noted that, as of the
date of this report, commercialisation of this asset has not yet commenced, and therefore intend to
monitor the recoverability of this balance on an ongoing basis.
53
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
11. PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 31 December 2017
Additions
Disposals
At 31 December 2018
Revaluation of Land & Buildings
Additions
Disposals
Land &
Buildings
Plant and
equipment
US$
3,791,611
2,069,877
(420,600)
5,440,888
-
912,721
(1,106,593)
-
-
-
-
504,646
3,512,999
-
Furniture and
office
equipment
US$
Total
US$
8,960
-
-
3,800,571
2,069,877
(420,600)
8,960
5,449,848
-
504,646
33,137
-
4,458,857
(1,106,593)
At 31 December 2019
4,017,645
5,247,016
42,097
9,306,758
Accumulated depreciation
At 31 December 2017
Impairment charge
At 31 December 2018
Charge for the year
Disposals
At 31 December 2019
Net book value
At 31 December 2019
-
-
-
54,000
-
54,000
-
65,000
65,000
5,428
(65,000)
5,428
8,960
-
8,960
6,627
-
15,587
8,960
65,000
73,960
66,055
(65,000)
75,015
3,963,645
5,241,588
26,510
9,231,743
At 31 December 2018
-
5,375,888
-
5,375,888
The net book value of asset held under finance leases included within Property, Plant & Equipment above
are US$Nil (2018: US$Nil).
Additions in the year primarily relate to the purchase of the Lumberon site in North Carolina, which is
included in land & buildings above. Following the purchase of this site, the group contracted a firm of
independent Certified General Real Estate Appraisers to undertake an independent valuation of this
property. As a result of this valuation, which was based on an assessment of the value of the Lumberton
site compared with other commercial properties in the area, the group revalued the property in line with
the valuation prepared by the independent firm of Certified General Real Estate Appraisers.
54
Furniture and
office
equipment
US$
8,960
8,960
-
US$
4,555,044
1,396,665
5,951,709
4,496,618
1,455,091
58,426
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
11. PROPERTY, PLANT AND EQUIPMENT (continued)
Company
Cost
At 31 December 2017, 2018 & 2019
Accumulated depreciation
At 31 December 2017, 2018 & 2019
Net book value
At 31 December 2017, 2018 & 2019
12. INVESTMENTS IN SUBSIDIARIES
Company
Cost
At 31 December 2017 & 2018
Additions
At 31 December 2019
Provision for impairment
At 31 December 2017, 2018 & 2019
Net book value
At 31 December 2019
At 31 December 2017 & 2018
55
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
12. INVESTMENTS IN SUBSIDIARIES (continued)
At 31 December 2019 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
AEG Trading Limited
Active Energy Services UK
Limited (formerly AEG Pelleting
Limited)
AEG Biopower Limited
AEG Coalswitch Limited
AEG Coalswitch USA LLC
ABS plc
Timberlands Int. Ltd
Alpha Prospects Ltd
Timberlands Newfoundland &
Labrador Inc
Lumberton Energy Holdings LLC
Active Energy Renewable Power
LLC
Woodchip processing and
distribution
Ukraine
Cyprus
Wood chip distribution
Switzerland Wood chip distribution
United
Kingdom
Wood chip distribution
United
Kingdom
United
Kingdom
United
Kingdom
United States
United
Kingdom
United
Kingdom
United
Kingdom
United States
Corporate Services
Biomass for energy
development
Biomass for energy
development
Biomass for energy
development
Biomass for energy
development
Biomass for energy
development
Energy/Natural resources
investments holding
company
Biomass for energy
development
Biomass for energy
development
Wood processing and
distribution
Canada
United States Property Holding Company
Renewable Energy Systems
United States
Percentage
Holding
2019 2018
100
100
100
100
100
100
100
100
100
100
100
100
89
100
100
100
99
85
76
81
5.2
4.2
76
100
100
30
81
-
-
-
AEG Biopower Limited was in the process of being struck off and AETrading (EMEA) SarL was being wound
up as of the date of this report.
56
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
13. LONG TERM LOANS
Carrying value at beginning of the year
Loans advanced during the period
Transfer from current assets
Accrued interest
Carrying value at end of the year
Group
2019
US$
Group
2018
US$
-
-
-
-
-
-
-
-
-
-
Company
2019
US$
17,372,234
3,562,889
Company
2018
US$
-
-
-
15,577,661
2,337,192
1,794,573
23,272,315
17,372,234
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.
14. AVAILABLE FOR SALE FINANCIAL ASSET
Group
2019
US$
Group
2018
US$
Company
2019
US$
Company
2018
US$
Fair value at beginning of the year
752,215
786,873
752,215
786,873
Shares purchased during the period
132,705
Revaluation to market value
563,947
-
-
132,705
563,947
-
-
Foreign exchange translation
21,772
(34,658)
21,772
(34,658)
Fair value at end of the year
1,470,639
752,215
1,470,639
752,215
Available for sale assets consist of an unquoted equity instrument which is classified as a non- current
asset. During 2019 the Group increased its investment in these assets, reflecting managements
continued confidence in this asset. In addition, the asset was revalued in 2019 based on the proceeds
received from issue of shares by this entity, over a number of years at a stable share issue price. The
available-for-sale financial asset is denominated in Pound Sterling.
57
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
15. 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
Amounts advanced to joint venture
partners
Amounts due from group companies
Other receivables
VAT
Prepayments
Group
Group
Company
Company
2019
US$
2018
US$
2019
US$
2018
US$
200,000
-
48,321
-
-
-
200,000
-
688,768
379,778
21,507
-
43,957
77,212
43,957
77,212
50,000
-
-
-
-
327,278
Corporation tax credit receivable
804,537
1,627,198
Total
1,146,815
1,704,410
954,232
784,268
Trade and other receivables that have not been received within the payment terms are classified as
overdue. As at 31 December 2019 trade receivables of US$Nil (2018: US$Nil) were overdue. As at 31
December 2019, Group trade receivables of US$NIL (2018: US$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 24.
16. CASH AND CASH EQUIVALENTS
Bank accounts
Group
Group
Company
Company
2019
US$
2018
US$
2019
US$
397,323
298,768
360,622
397,323
298,768
360,622
2018
US$
234
234
Cash and cash equivalents are defined as cash at bank, demand deposits and other short-term highly
liquid investments that are readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
58
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
17. TRADE AND OTHER PAYABLES
Current
Trade payables
Group
2019
US$
Group
2018
US$
Company
2019
US$
Company
2018
US$
1,615,201
2,038,818
747,864
798,603
Social security and other taxes
136,193
3,122
42,758
3,122
Accruals and deferred income
639,835
809,753
650,971
667,889
2,391,229
2,851,693
1,441,593
1,469,614
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
2019
US$
2,391,229
-
Group
2018
US$
2,851,693
-
Company
Company
2019
2018
US$
1,441,593
-
US$
1,469,614
-
1,469,614
2,391,229
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 24.
1,441,593
2,851,693
18. 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
Deferred tax liability recognised on revaluation of land & buildings
Reversal of temporary differences
Impairment charge
At the end of the period
2019
US$
241,585
155,022
(32,291)
-
364,316
2018
US$
384,169
-
(8,968)
(133,616)
241,585
The opening deferred tax liability relates to temporary differences arising on the fair valuation of
intangible assets acquired in 2011 and this was subject to an impairment in 2018. During 2019 a
deferred tax liability was recognised to reflect the tax impact of the revaluation of land & buildings at
Lumberton. 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.
59
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
19. LOANS AND BORROWINGS
The book value and fair value of loans and borrowings are as follows:
Group
Non-Current
Convertible debt
Current
Convertible debt
Unsecured loans
Book value
2019
US$
Fair value
2019
US$
Book value
2018
US$
Fair value
2018
US$
18,190,732
18,190,732
18,190,732
18,190,732
11,672,738
11,672,738
11,672,738
11,672,738
-
108,850
108,850
-
108,850
108,850
-
1,327,707
1,327,707
-
1,327,707
1,327,707
Total loans and borrowings
18,299,582
18,299,582
13,000,445
13,000,445
Company
Non-Current
Convertible debt
Current
Unsecured loans
Book value
2018
US$
Fair value
2018
US$
Book value
2018
US$
Fair value
2018
US$
18,190,732
18,190,732
18,190,732
18,190,732
11,672,738
11,672,738
11,672,738
11,672,738
-
-
-
-
1,000,000
1,000,000
1,000,000
1,000,000
Total loans and borrowings
18,190,732
18,190,732
12,672,738
12,672,738
Unsecured loans
During the year the Group repaid US$1.2m of a total of US$1.3m of unsecured short term loans. These
loans had been made in 2018.
Convertible debt
On the 14 March 2017 the company completed a fund raising of £11.57 million before expenses (or
US$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 were listed on the International Securities
Exchange. These 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. During 2018 certain note holders took the opportunity to
convert their CLN's into AEG Ordinary Shares.
60
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
19. LOANS AND BORROWINGS (continued)
During 2019 the company issued a further of £4.76 million before expenses (or USD$6.32 million)
through the issue of further CLNs to new and existing investors. These CLN also have a maturity date
of 14 March 2022. These CLN can be converted into Ordinary Shares of AEG plc, at any time prior to
the Maturity Date, at a price of 1p. The fair value of the liability component at inception has been
calculated using a market interest rate for an equivalent instrument without conversion option. The
CLN has a coupon rate of 8% and the imputed interest rate applied was 12%.
The following table analyses the maturity of loan and borrowings. The amounts shown are
undiscounted and represent contractual cash-flows.
Group
Up to 3 months
US$
Between 3 and
12 months
US$
Between 1
and 2
years
US$
Between 2
and 5
years
US$
Total
US$
At 31 December 2019
Convertible debt
Unsecured loans
At 31 December 2018
Convertible debt
Unsecured loans
-
108,850
108,850
US$
-
1,327,707
1,327,707
-
-
-
-
-
-
20,190,995 20,190,995
-
108,850
20,190,995 20,299,845
US$
US$
US$
US$
-
-
-
-
-
-
13,335,583 13,335,583
1,327,707
13,335,583 14,663,290
-
Up to 3 months
Between 3 and
12 months
Between 1
and 2
years
Between 2
and 5
years
Total
Company
At 31 December 2019
Convertible debt
Unsecured loans
At 31 December 2018
Convertible debt
Unsecured loans
US$
US$
US$
US$
US$
-
-
-
-
-
-
-
-
-
20,190,995 20,190,995
-
-
20,190,995 20,190,995
US$
US$
US$
US$
US$
-
1,000,000
1,000,000
-
-
-
-
-
-
13,335,583 13,335,583
1,000,000
13,335,583 14,335,583
-
61
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
20. CALLED UP SHARE CAPITAL
2019
Number
2019
US$
2018
Number
2018
US$
Allotted, called up and fully paid
Ordinary shares of 1p each
At 1 January
Issue of shares
Cancellation of treasury shares
1,201,906,951
17,265,379
983,071,276
14,493,246
-
-
-
-
252,048,516
3,282,913
(33,212,841)
(510,780)
As at 31 December
1,201,906,951
17,265,379 1,201,906,951
17,265,379
During 2019 the Company did not issue any shares. During 2018 the Company issued 252,048,516
Ordinary Shares for a total consideration of US$5.6m.
21. 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 (2018: 41,000,000) options which are based on various
market, service and performance conditions. The number of warrants and share options exercisable
at 31 December 2019 was 123,001,619 (2018: 124,825,099).
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
Outstanding at end of the period
3.77
1.98
0.79
3.46
124,825,099
(36,823,480)
35,000,000
123,001,619
2.72
2.59
4.31
3.77
127,325,099
(78,500,000)
76,000,000
124,825,099
At 31 December 2019, the weighted average remaining contractual life of warrants and share options
exercisable was 4.63 years (2018 – 4.55 years). Total share options and warrants of 35,000,000 (2018:
41,000,000) were granted during the year at a weighted average exercise price of 0.78 pence (2018:
6.5 pence).
There was charge for equity settled share based payments to employees and directors of US$368,851
(2018: US$895,430) in the income statement for the year ended 31 December 2019. During the year
ended 31 December 2019 no share options granted to employees or directors were cancelled and as
a result no credit to equity settled share based payments was recognised during the year (2018: US$
810,109). This was not shown in the income statement for the year ended 31 December 2018, but was
recorded as a reserve transfer.
62
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
21. SHARE OPTIONS AND WARRANTS (continued)
Options and warrants outstanding at 31 December 2019 were exercisable as follows:
Exercise price range (Pence, US cents in brackets)
0.5p (0.657 cent)
1.000p (1.315 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)
8.500p (11.863 cent)
20.000p (26.982 cent)
At the end of the period
2019
Number
15,000,000
20,000,000
2018
Number
-
-
7,500,000
7,500,000
19,047,619
19,047,619
-
35,000,000
13,450,000
13,450,000
20,500,000
20,500,000
2,000,000
2,000,000
4,500,000
4,500,000
-
1,823,480
20,500,000
20,500,000
504,000
504,000
123,001,619
124,825,099
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.
63
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
21. 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
2019 (2018:US$Nil). The share based payment charge for the year is US $Nil (2018: US$Nil) related to
the JSOP awards.
22. 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.
Revaluation reserve
Increase in valuation of land and buildings to reflect updated valuations.
Retained earnings/
Accumulated loss
Cumulative net gains and losses recognised in the consolidated
statement of comprehensive income.
64
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
23. 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
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
Net cash outflow from operating activities
Company
Profit/ (loss) for the period
Adjustments for:
Share based payment expense
Foreign currency translations
Finance expenses
Increase in trade and other receivables
Increase/(decrease) in trade and other
payables
Net cash inflow/(outflow) from operating
activities
2019
US$
(2,470,222)
368,850
66,055
150,991
-
-
678,803
-
612,747
1,744,188
122,731
1,274,143
-
557,595
(155,907)
1,675,831
2019
US$
1,105,751
368,850
722,054
1,744,188
3,940,843
(5,267,287)
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)
20,349
(1,186,508)
907,017
(1,515,299)
2018
US$
(1,800,792)
895,430
(932,168)
1,047,283
(790,247)
(3,799,666)
2,528,309
347,156
1,201,865
(4,242,757)
Non-cash transactions relating to the issue of Convertible Loan Notes to acquire Land & Buildings or to
repay creditors are excluded from cash flows.
65
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
24. 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
Cash and cash equivalents
Amounts advanced to joint venture partners
Amounts due from group companies
Other receivables
VAT
Prepayments
Group
2019
US$
397,323
200,000
-
48,321
43,957
50,000
Group
2018
US$
Company
2019
US$
Company
2018
US$
298,768
-
-
-
77,212
-
360,622
200,000
234
-
23,961,083
17,752,012
21,507
43,957
-
-
-
77,212
-
327,278
Corporation tax credit receivable
804,537
1,627,198
Available-for-sale financial asset
1,470,639
752,215
1,470,639
752,215
Total financial assets
3,014,777
2,755,393
26,057,808
18,908,951
1,544,138
2,003,178
24,587,169
18,156,736
Financial liabilities
Financial liabilities at amortised cost
Trade payables
Social security and other taxes
Accruals and deferred income
Loans and Borrowings
Group
2019
US$
Group
Company
Company
2018
US$
2019
US$
2018
US$
1,615,201
2,038,818
136,193
639,835
3,122
809,753
747,864
42,758
650,971
798,603
3,122
667,889
18,299,582
13,000,445
18,190,732
12,672,738
20,690,811
15,852,138
19,632,325
14,142,352
66
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
24. FINANCIAL INSTRUMENTS (continued)
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).
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
Group
2019
US$
291,199
Group
2018
US$
-
Company
2019
US$
24,177,282
Company
2018
US$
17,752,012
855,616 1,704,410
49,265
404,490
1,146,815 1,704,410
24,226,547
18,156,502
The carrying amounts of the group’s cash and cash equivalents are denominated in the following
currencies:
US Dollar
UK Pound sterling
Euro
Group
2019
US$
267,529
125,873
3,921
397,323
Group
2018
US$
2,397
296,371
-
298,768
Company
2019
US$
261,311
99,303
8
360,622
Company
2018
US$
-
234
-
234
Information about the Group’s loans and borrowings are provided in note 19.
67
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
24. 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
2019
US$
856,202
1,441,593
-
93,434
2,391,229
Group
2018
US$
1,371,978
1,469,614
-
10,101
2,851,693
Company
2019
US$
-
1,441,593
-
-
1,441,593
Company
2018
US$
-
1,469,614
-
-
1,469,614
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 an increase in net assets by US$24,734 (2018: decreased in net assets US46,713). 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 19.
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 15.
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.
68
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
24. FINANCIAL INSTRUMENTS (continued)
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the coupon payments
associated with the group’s convertible loan notes. 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 convertible
loan notes. 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 2019 (2018: US$Nil). The
Group had an overdraft at 31 December 2019 of US$Nil (2018: US$843) which is disclosed within other
payables as a liability on the balance sheet. As of 31 December 2019 there were US$20,190,995
convertible loan notes (undiscounted) in issue (2018: US$13,335,583). 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.
25. RELATED PARTY DISCLOSURES
Details of Director's remuneration are given in the Report of the Directors. In Details of Director's
remuneration are given in the Report of the Directors. In July 2019 the Group announced that it had
entered into a Joint Venture arrangement with Renewable Logistics Systems LLC, to develop saw log
exports at AEG’s Lumberton site. This agreement was in addition to an existing rental agreement
between RLS and AEG Plc. Antonio Esposito holds a 30% interest in Renewable Logistics Systems LLC
via his wife, Lisa Esposito. During the remainder of 2019 AEG Plc advanced US$200,000 to Renewable
Logistics Systems LLC in order to finance the start up of these joint venture activities. This balance is
recorded within advances to joint venture partners on the group and Company statement of financial
position.
Transactions between the Company and its subsidiaries, which are related parties to the Company,
have been eliminated on consolidation.
The Company’s intercompany receivable balances at the year-end were as follows:
Amounts due from Group companies
2019
US$
23,796,415
2018
US$
17,752,012
69
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
26. 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 intangible fixed assets, property plant and equipment and other assets
The group has a variety of intangible fixed assets relating to development timber licences, supply
contracts and timber assets (Newfoundland, Alberta and Lybomyi). Details of these assets are
contained in the operations report and note 10 to the accounts. In addition the group has property
plant and equipment in the form of the Lumberton industrial site and the CoalSwitchTM reference plant.
Intangible fixed assets, property plant and equipment 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. Furthermore, these methods
require an assessment of various strategies to develop and monetise these assets as well as an
assessment of the success of these strategies. Actual outcomes may vary.
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.
70
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2019
26.`CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
(continued)
Recoverability of intercompany loans
The AEG Plc company only balance sheet contains various intercompany loans. These loans have not
been impaired on the basis that the counterparty will generate sufficient future cashflows to repay
these loans. This is based on an assessment of the assets and goodwill held by that counterparty and
its ability to monetise those assets in the future. Actual results may vary.
27. CAPITAL AND OPERATING COMMITMENTS
Capital commitments at the 31 December 2019 were US$Nil (2018: US$Nil). Operating lease
commitments at the 31 December 2019 were US$Nil (2018: US$Nil). All amounts were due within one
year.
28. SUBSEQUENT EVENTS
The key business developments since 31 December 2019 were as follows:
On 20 January 2020 AEG announced that Max Aitken and Jason Zimmermann had joined the
board.
On 14 February 2020 AEG announced that it had reached an agreement with all of its
bondholders to revise the terms and conditions of the outstanding CLN. Specifically, it had
been agreed that the Company has the option to decide that the coupon payment maybe by
either (1) in cash or (2) via the issuance of additional Bonds in regard to each relevant quarter
for the remainder of 2019.
On 31 March 2020 AEG announced that it had entered into an agreement with its joint venture
partner Renewable Logistics Systems LLC whereby AEG (through its 100% owned subsidiary
Active Energy Renewable Power LLC) secured 100% control and ownership of the sawmill and
saw log export activities based at AEG's industrial site in Lumberton, North Carolina.
AEG has continued to work with the local authorities in order to secure the necessary permits
to enable the commissioning of the CoalSwitchTM reference plant at AEG’s industrial site in
Lumberton, North Carolina.
Further details are provided in the Chief Executive Officer's statement.
29. ULTIMATE CONTROLLING PARTY
In the opinion of the directors there is no one ultimate controlling party.
71