ACTIVE ENERGY GROUP PLC
ANNUAL REPORT & ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2020
Company Registration Number: 03148295
ACTIVE ENERGY GROUP PLC
Active Energy Group plc is a London listed (AIM: AEG) renewable energy company
focused on the production and development of next generation biomass products
that have the potential to transform the traditional coal fired-power industry and the
existing renewable biomass industry.
The Company has developed a proprietary technology which transforms waste
biomass material into high-value renewable fuels. Its patented product, CoalSwitch™,
is a leading drop-in renewable fuel that can be co-fired with coal, or completely
replace coal as an alternative feedstock without requiring significant plant
modifications or replace existing biomass feedstock resources. Active Energy Group's
immediate strategic focus is the production and commercialisation of CoalSwitch™
and further CoalSwitch™ fuel blends that utilise other waste wood and residual
materials.
ANNUAL REPORT
FOR THE YEAR ENDED 31 DECEMBER 2020
CONTENTS
Strategic Report
Chairman’s Letter
AEG Strategy
Chief Executive Officer’s Statement
Finance Review
Principal Risks & Uncertainties
Corporate Social Responsibility Report
Corporate Governance
Directors & Company Information
Corporate Governance Statement
Report of the Directors
Directors’ Remuneration Report
Statement of Directors’ Responsibilities
Financial Statements
Independent Auditor’s Report
Consolidated Statement of Income and Other Comprehensive Income
Consolidated and Company Statement of Financial Position
Consolidated and Company Statement of Changes in Equity
Consolidated and Company Statement of Cash Flows
Notes to the Consolidated and Company Financial Statements
PAGE
1-3
4
5-10
12-14
15-17
18-19
20-21
22-25
26-28
29-31
32
33-40
41
42
43-44
45
46-83
Frequently used abbreviations/definitions
Active Energy Group Plc
Tonne per hour
North Carolina Department of Environmental Quality
CoalSwitchTM, the registered trademark
PeatSwitchTM, the registered trademark
151 acre property in Lumberton, North Carolina, USA
CoalSwitch production facility:
“Active Energy”, “AEG”, “Group”, the “Company”
“tph”
“NCDEQ”
“CoalSwitch”
“PeatSwitch”
“Lumberton” or “Lumberton Site”
• Lumberton, North Carolina, USA
• Ashland, Maine, USA
“Lumberton Facility”
“Ashland Facility”
ACTIVE ENERGY GROUP PLC
CHAIRMAN’S LETTER
Dear Shareholders
During 2020, Active Energy Group achieved a number of significant milestones on its path to commercialising
the transformation of waste biomass material into high-value renewable fuels. At the same time, it has
been encouraging to witness the changes within Active Energy as it matures into a company capable of delivering
fuel and its underlying technology to prospective commercial partners in North America and internationally from
its UK base.
Having joined the Board in November 2019 as a Non-Executive Director, I was appointed to the role of Non-
Executive Chairman in February 2021. I welcome the opportunity to make an increasing contribution towards
AEG in terms of achieving its commercial goals, building out of a successful transatlantic operation and at the
same time founded on strong principles of corporate governance.
Your Company made encouraging progress during 2020: having acquired the site in Lumberton in April 2019,
the Company moved to assemble a new CoalSwitch manufacturing facility at the site, established limited
complementary lumber operations and commenced an air permit approval process for the site. Local interests
were active in that debate which revealed concerns from local environmental proponents about the
construction of the CoalSwitch reference plant. AEG welcomed the cross examination on the issues and, after
public consultation and full scrutiny by all relevant local agencies, an air and construction permit was approved
and issued at the beginning of August 2020 by the North Carolina Department of Environmental Quality
(“NCDEQ”).
We listen to the concerns of local environmental groups and encourage the opportunity to interact with all
parties to explain more fully the environmental benefits of AEG’s proprietary technology processes. The recent
construction delays, resulting from the installation of additional enhanced emissions controlling equipment,
serve as further evidence that the Company remains wholly focussed on current and future compliance with all
applicable environmental regulations. We must ensure that the positive message of the opportunities and
benefits that CoalSwitch offers remain clear and the Company’s focus on using residual forestry and waste wood
products from the timber industry is delivered effectively.
In December 2020, the Company secured its first test order for CoalSwitch from PacifiCorp, the largest grid
operator in the western United States and part of the Berkshire Hathaway Group. The PacifiCorp order delivered
to the Hunter Power Station in Utah represents a fantastic opportunity for AEG to use a world-class platform to
test CoalSwitch performance. This trial run is being conducted in conjunction with a study group from the
University of Utah and Brigham Young University and will provide exceptional data and analysis of CoalSwitch
performance in an operating environment, which we anticipate will support future marketing activities and
additional commercial interest.
Our research and marketing activities in 2021 have already identified that there are several timber producers
with issues in the handling of residual and waste wood products. Given the market interest in an accelerated
roll out and availability of CoalSwitch, a near term emphasis on the production and delivery of smaller volume
production plants, with proximity to the timber producers presents a unique opportunity for AEG. Aligned with
this focus, we are working with feedstock providers in the North-Eastern United States and, having completed
the second reference plant in Ashland, Maine, these commercial goals can be achieved.
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ACTIVE ENERGY GROUP PLC
Given the current permitting issues in Lumberton, the CoalSwitch plant in Ashland, which is now complete and
operational, provided an alternative location to produce CoalSwitch to fulfil initial customer orders. I am pleased
to report that at the time of writing CoalSwitch is being delivered to the Hunter Power Station in Utah.
A final significant development from work commenced in 2020 and announced in February 2021 was the
completion of the balance sheet restructuring of the Convertible Loan Note (“CLN”). We were encouraged by
the support of the CLN holders throughout the process to allow the Company to restructure the indebtedness,
which had been restricting the Company’s growth strategy. We are also grateful to those shareholders and new
investors who contributed to the £7.0 million (gross) capital raise in the same month. As intended, the Company
has utilised those funds mainly in the construction of the Lumberton and Maine Facilities, and the ongoing
corporate development of AEG.
Significant effort has gone into strengthening your Board and broadening the requisite skill sets. In January 2020,
we were delighted to announce the appointment of two independent non-executive directors, Max Aitken
based in the UK and Jason Zimmermann, based in Canada. Each brings considerable experience, relevant
knowledge, and energy from their sectors of expertise in the biomass and forestry industries. In late November
2020, we were also able to attract Andrew Diamond to join the Board as Group Finance Director, a post hitherto
unfilled. The benefits of the new board members to the Company are already being felt. As part of the
restructuring process, it was also announced that Antonio Esposito would step down from the Board. Antonio
has remained on hand to focus on the construction and commissioning of the CoalSwitch reference plants during
his notice period. I wish to express my gratitude, on behalf of the Board, to Antonio for his extraordinary
contribution to AEG over the years and particularly during the difficult months of 2020 with the challenges
presented by the Covid-19 pandemic.
AEG’s new Board is highly focused on the development and commercial roll-out of the CoalSwitch product. The
Company operates within a limited budget and will seek to maximise returns from this exciting technology. We
wish to distinguish ourselves as a ‘next generation’ biomass product which is distinct from existing products,
both in terms of feedstock sourcing to manufacture the fuel and in terms of the creation of renewable fuel which
exceeds existing performance parameters. We believe strongly in the positive environmental impact this
product could have on the operations of current coal-fired and biomass power producers, and at the same time
assisting the timber industry in making strides to utilise residual products as feedstock. Our aim is to create an
environmental win-win for both industries as the world transitions to a fully renewable energy state.
The Board is committed to the core principles of corporate governance, as set out in the QCA corporate
governance code and each of the directors is currently ensuring that these principles are observed.
The headwind in the form of Covid-19 that has harassed and unsettled many businesses over the period to the
end of calendar 2020, was also felt by AEG. On the ground in North Carolina there were, for a period, severe
restrictions on the movement of people and product. I am pleased to say the situation has now improved in part.
Travel restrictions meant that the executive directors were unable to make relevant site visits for the period,
which impacted on our ability to execute our growth strategy and, more importantly hampered our efforts in
establishing and developing an infrastructure for community and local authority relations in North Carolina. It is
pleasing to note that most recently both our CEO and FD have been able to cross the Atlantic to re-energise the
strategy planning and local relations. The pandemic has exacted a tragic death toll across the globe, and AEG
remains determined to play its part in minimising the effects of the crisis where it can.
AEG is focusing its capital allocation on CoalSwitch. Existing timber cutting permits in Ukraine and Newfoundland
do not align to this strategy, and the Company is looking for an orderly exit from those interests.
Further, whilst it was a positive to see revenues being generated from the small-scale sawmill and saw log export
businesses, the act of felling trees and exporting lumber products could not be supported in the context of a
corporate strategy which focuses on environmental credentials as a core operating principle.
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ACTIVE ENERGY GROUP PLC
By contrast, the sawmill business has been instrumental in identifying critical local business partners in the
South-Eastern United States from whom to source residual feedstock for future CoalSwitch operations. Its
immediate profitability has been hampered by sub-scale throughput, a continuing requirement to invest in
additional capital expenditure and the extended industry disruption caused by exceptional operating conditions
within the Covid-19 pandemic which remains at this time. The Board has decided to exit the saw log export
operations while the sawmill operation remains under review.
These ancillary activities have consumed much of management’s time and effort and future operations need to
be focused on the development of CoalSwitch and its commercial roll-out, which is where the Board believes
AEG’s greatest commercial opportunities lie. The Financial Statements for 2020 contain impairments to reflect
these strategic decisions taken by the Board. The current global focus on climate change and the US political
landscape are very encouraging for growth in the renewable energy industry, including biomass sourced
renewable fuels. We believe that CoalSwitch is perfectly suited to take advantage of this momentum.
After a long wait, it is undoubtedly an exciting time for your Company. We look forward to the outcome from
the forthcoming deliveries of CoalSwitch fuel to customers, including PacifiCorp, the co-firing test results, and
the consequent commercial opportunities. On these and other developments, I look forward to updating you as
we progress.
James Leahy
Non-executive Chairman
14 June 2021
Ashland Facility construction - Source: AEG
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ACTIVE ENERGY GROUP PLC
AEG STRATEGY
To commercialise CoalSwitch, a proprietary technology which transforms waste
biomass material into high-value renewable fuels.
•
•
•
•
•
•
•
•
WHAT IS THE STRATEGY FOR AEG?
•
Advance CoalSwitch as a next generation renewable fuel using waste biomass materials, which can be
supplied to either coal-fired power generation market as a drop-in renewable fuel to be co-fired with coal,
or completely replace coal as an alternate feedstock to reduce overall emissions without requiring
significant plant modifications or replacing existing biomass resources.
To source relevant residual and waste materials, which are by-products from the forestry industry and
which are not currently utilised, to use as feedstock in the production of CoalSwitch.
To achieve the first two objectives at scale to monetise the CoalSwitch technology for the benefit of
shareholders. Studies in 2021 indicated that production plants should be initially optimised toward
production facilities of up to 20tph to take advantage of the immediate commercial opportunities in the
current dispersed location of residual and waste materials.
WHAT ARE THE KEY PERFORMANCE INDICATORS?
•
Independent data and research validating CoalSwitch as a high calorific and hydrophobic renewable fuel
with low emissions from its consumption which is a commercially viable replacement fuel for either the
coal-fired power industry or biomass power industry.
Off-take agreements with existing power generators or industrial partners.
Feedstock supply agreements and JV agreements with established forestry product providers for the
provision of residual and waste materials to produce CoalSwitch.
Increased shareholder returns.
HOW HAVE WE PERFORMED IN 2020?
•
Air and construction permit obtained for a 5tph CoalSwitch production plant in Lumberton, North Carolina.
This process was impacted by the Covid-19 epidemic in 2020. in 2021 the Company has experienced
additional construction delays owing to manufacturing improvements made to the final production plant
design during construction which require additional approvals.
First commercial CoalSwitch order from PacifiCorp.
Completion of engineering and design work for the Lumberton Facility and procurement of all critical
equipment for completion of the plant.
WHAT ARE THE KEY PRIORITIES FOR 2021?
•
•
Investigate funding opportunities for growth.
Complete construction of a CoalSwitch reference plant to ensure delivery of first orders and meet
additional indicated commercial interest.
Market CoalSwitch as an alternate renewable fuel and secure off-take agreements, production
partnerships, and feedstock partners.
WHAT ARE THE KEY RISKS THAT COULD PREVENT US FROM ACHIEVING OUR STRATEGY?
•
CoalSwitch as a fuel does not deliver in its operating performance despite positive initial testing from test
samples already produced.
Prospective power generators, using existing coal fired facilities, are not able to recognise the benefit of
CoalSwitch over existing feedstocks or justify the economic costs involved in switching to new alternative
renewable fuels.
Inability to secure long-term off-take agreements for CoalSwitch or delays in the process of uptake.
Loss of market opportunity resulting from competitive biomass products or alternate renewable
technologies.
Lack of funding to adequately market and expand production capabilities to meet demand for CoalSwitch.
•
•
•
•
Further key risks and uncertainties are disclosed on pages 15 to 17.
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ACTIVE ENERGY GROUP PLC
CHIEF EXECUTIVE OFFICER’S STATEMENT
Strategy
Our strategy is to commercialise CoalSwitch, a proprietary technology which transforms waste biomass material
into high-value renewable fuels.
Events in the last eighteen months have created new opportunities for the biomass industry and an increasing
market awareness that biomass will play a part in future renewable energy solutions. At the same time,
increasing environmental regulation and scrutiny is rightfully being applied. AEG is focussed on making its
contribution towards the biomass industry goals in developing its unique proprietary technology to ensure that
there is a long-term future for next generation sustainable biomass production. These goals will be achieved
through a combination of its own production facilities, creating commercial partnerships for fuel production,
and licensing the relevant technology.
AEG believes that CoalSwitch will have an immediate positive impact on reducing emissions from existing coal-
fired power facilities. As a result, AEG is focussing its near-term commercial activities on the production of next
generation biomass fuels in North America. The USA is only now aligning itself with other countries in the use of
sustainable power alternatives and awareness of a need for solutions which mitigate pollution from the
consumption of fossil fuels. North America is already dominant in the production of biomass fuels and has vast
knowledge and operating capacity in the production of such fuels for international markets but, to date,
domestic consumption has been limited. By producing next generation fuels in the United States, using waste
biomass resources, AEG is intent on capturing this immediate market opportunity.
Summary of 2020
Operationally, 2020 was an important year for AEG. We worked toward the completion of a commercial scale
CoalSwitch production facility at Lumberton, North Carolina. At the same time, we developed ancillary small-
scale sawmill and saw log export operations at the Lumberton site to demonstrate to prospective commercial
partners how CoalSwitch production aligns with traditional timber operations. AEG has faced the challenges of
the Covid-19 pandemic and our colleagues have responded tremendously to the difficulties presented by these
operating conditions.
CoalSwitch operations
Lumberton is, and will remain, an important component for AEG’s future growth in the United States. Its location
on the US East Coast is commercially valuable. Our goal remains to develop it as a ‘carbon neutral’ site with its
prime focus on the production and development of next generation biomass fuels, using forestry co-products.
During 2020, a significant focus of management’s time was spent on securing the relevant air and construction
permits (the “Permits”) for the Lumberton Facility, which involved working with our partners in Robeson County,
State Officials and with officials at North Carolina Department of Environmental Quality (“NCDEQ”). A public
hearing was scheduled to take place in March 2020, however due to Covid-19 restrictions, the meeting was
postponed to 22 June 2020. While the public hearing was not technically required, for such a minor permit, AEG
worked alongside the local community to take the opportunity to address environmental concerns. The public
hearing process raised concerns on the potential emissions from the production process and the exact
specifications of the manufacturing procedures, which are wholly different to existing biomass manufacturing
processes. AEG welcomed the analysis of local groups and the NCDEQ and continues to address these ongoing
environmental concerns.
AEG has always ensured that all operations at the Lumberton Site remain in compliance with all relevant
environmental regulations. The Board considers the recent claims made by the Southern Law Environmental
Centre to be totally without foundation and AEG is seeking appropriate legal redress in North Carolina.
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ACTIVE ENERGY GROUP PLC
AEG obtained the requisite Permits in August 2020, thereby allowing AEG to commence construction of the
Lumberton Facility. The Permits allow for CoalSwitch production through to November 2028 in volumes of up
to 5tph (or circa 35,000 tonnes per annum).
With the Permits obtained, AEG appointed Player Design Inc (“PDI”) as its engineering, procurement, and
construction partner to orchestrate the planning and construction of the Lumberton Facility. PDI has a well-
respected reputation in the biomass industry in North America, having completed a number of small and large
manufacturing facilities over the last two decades and their involvement has proven invaluable.
full-scale
In September 2020, PDI carried
a
review of all
equipment on site, independent
evaluation of the CoalSwitch
technology
provided
and
financial budgets towards the
completion of the first reference
plant. The project plan was
approved by the Board in Q4
2020, and work commenced
immediately. Despite ongoing
Covid-19 disruptions, additional
equipment was sourced by PDI
from within the United States
component
key
and
deliveries to the Lumberton
Facility commenced late in Q4
2020.
the
With visibility on a construction
timeline for the Lumberton Facility, in December 2020, AEG was pleased to announce the first commercial order
from PacifiCorp to test CoalSwitch fuel in its coal-fired power plant at Hunter Valley in Utah. The fuel is to be
used for a test burn, co-firing with coal, monitored by both the University of Utah and Brigham Young University.
The results will be published later this year to demonstrate the co-firing results from CoalSwitch and the
emissions benefits.
Post Period End
With all components on site, construction commenced in early 2021 and the Lumberton Facility was in the final
stages of construction, both on time and on budget, in early May 2021.
The CoalSwitch manufacturing process has certain novel elements requiring both the NCDEQ and AEG to
proceed cautiously to ensure that the process meets and exceeds all current environmental regulations. To that
end, during construction, AEG and PDI added additional emissions control equipment which satisfied standard
Environmental Protection Agency regulations in the United States. Given the award of the Permits, in most
circumstances in the US, such improvements to minor permits are uncontroversial and generally quickly
accepted. However, NCDEQ decided to require a formal permit amendment from AEG for these minor revisions.
In May 2021, AEG complied with the notice from NCDEQ to suspend construction of the additional components
at the Lumberton Facility, made the requisite amendment application and provided relevant information to
address NCDEQ’s concerns. Discussions are ongoing between AEG and NCDEQ to expedite the approval of the
amendment request. The emissions data being gathered from the Ashland Facility is expected to demonstrate
that producing CoalSwitch is wholly different from existing biomass production processes. However, it is not
possible to comment on the timing or process of obtaining approval of the permit amendment. AEG’s goal
remains to commence production of CoalSwitch from the Lumberton Facility at the earliest opportunity.
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ACTIVE ENERGY GROUP PLC
AEG has received several enquiries from prospective customers and partners who wish to test CoalSwitch
product and observe an operational production facility in the heart of North Carolina. AEG has also received
additional commercial enquiries about additional uses for the Lumberton Site and these are currently being
evaluated by AEG to work alongside the forthcoming operational CoalSwitch reference plant.
Joint Venture with PDI
As construction continued at the Lumberton Facility in Q2 2021, PDI itself also received additional enquiries for
CoalSwitch fuel, principally from prospective partners in North-Eastern United States. PDI and AEG both wanted
to build a second facility to increase production capacity in the United States, and to benefit from the additional
operating data from a second working CoalSwitch facility.
such
second
PDI is based in Maine, with a series of
engineering
and manufacturing
operations, and in April 2021 arranged
for AEG and PDI to meet with local
regulatory and environmental agencies
in Maine to examine the possibility of
building a
facility.
Following the meeting, an operating
permit was granted to allow the
operation of a second CoalSwitch
production facility at Ashland, Maine
(the “Ashland Facility”). This permit
allowed for the production of an initial
1,000 tons of CoalSwitch by no later
than
Following
submission of emissions results, we will
submit a permit application to increase
production capacity up to 35,000
tonnes per annum.
2021.
July
31
PDI and its associated companies own the Ashland Facility. AEG and PDI agreed that the most efficient route
forward was via a joint venture between the parties, details of which were announced on 26 May 2021. In
summary, the joint venture only applies to production activities from the Ashland Facility and allows for a fully
operational second CoalSwitch reference plant to produce fuel for onward sale and to further demonstrate the
operating technology to prospective customers.
Sales teams assembled in the United States and internationally
During the first half of 2021, AEG assembled a sales team in North Carolina who are currently marketing to a
variety of prospective off-take customers for CoalSwitch fuel and potential commercial production partners
across North America. In addition, AEG has also appointed sales representatives in Japan to accommodate
customer enquiries for CoalSwitch. AEG has complemented these activities with the addition of a data analysis
team to assemble a proprietary database on the fuel requirements of prospective customers throughout North
America.
The marketing feedback, the expanding data information and general background of increasing environmental
awareness in the US has accelerated prospective customer interest for CoalSwitch fuel and the immediate
customer demand for test samples of CoalSwitch fuel. The joint venture with PDI, complementing the activities
at the Lumberton Facility form a further critical step forward for the full-scale commercial roll out of CoalSwitch.
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ACTIVE ENERGY GROUP PLC
CoalSwitch technology – Continuing Technology and Commercial Development
Throughout 2020, AEG continued to develop and extend its intellectual property portfolio regarding CoalSwitch
and the underlying production processes within the production reactors. In December 2020, AEG was awarded
an additional patent in the US (Patent No 10,858,607). After this award, an additional and complementary
patent application was filed in the US.
In late 2019, applications had also been made to file for Canadian patents. On 7 June 2021, the Canadian
Intellectual Property Office indicated that we have been granted a notice of allowance, meaning that AEG will
be awarded the Canadian patent.
AEG has maintained a continual filing, review, and renewal programme for its current intellectual property (“IP”)
during 2020 and will continue to expand the IP portfolio and know-how as the first operational data and fuel
testing from production fuels are completed. In 2021, AEG has also been establishing links with various academic
institutions in the US and Canada whose forestry expertise will facilitate and accelerate expansion of AEG’s
technical knowledge of CoalSwitch IP and further increase market awareness of these next generation biomass
fuels.
International interest for licensing the CoalSwitch production technology has also continued and with those
forthcoming opportunities, AEG has ensured that the proprietary technology is correctly protected. Applications
are being processed for patents for the EU (including the UK) and territories in South-East Asia. The timing of
any such patent awards will not affect the timing of prospective commercial opportunities, given the current
validity of the US patents.
AEG has continued to develop commercial relationships for complementary licensing and production deals both
in North America and elsewhere. The first precedent was established in Canada in 2019.During 2020 and 2021,
AEG has engaged in several additional enquires. Ongoing discussions continue with parties in South-East Asia,
India, South Africa and within the US.
Source: AEG
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ACTIVE ENERGY GROUP PLC
Sawmill and lumber activities at Lumberton
During 2020, the initial focus for operations at the Lumberton site had been on the establishment of an
operational lumber business, whose focus was not only to generate revenues to allow the Lumberton site to
function, but also to become a component of the forthcoming CoalSwitch production operations.
To consolidate the operations from existing joint venture arrangements, in March 2020, AEG and RLS agreed to
operate all the lumber activities in Lumberton under the trading name Active Energy Renewable Power (“AERP”).
The prime operations were the production of rail ties and saw log export. Both operations continued to operate
through Covid-19 but remained small scale. Operation of the sawmill has brought a number of benefits, including
establishing AERP’s reputation in North Carolina with local lumber suppliers and commercial partners, who are
increasingly enthusiastic to supply forestry waste and residual for the forthcoming CoalSwitch operations.
Post Period End
In Q2 2021, the Board determined that saw log export was neither aligned with the future environmental
strategy for the Group nor was it able to produce sufficient economic returns to become a profitable operation.
To achieve a profitable operation AEG would be required to invest heavily in equipment to expand production
and scale up these operations. The Board has therefore decided to focus its capital allocation toward CoalSwitch
production activities and has decided to withdraw from saw log export operations. The sawmill, which is viewed
as more complementary to the Group’s strategy, has continued to operate through H1 2021 as it supports
forthcoming CoalSwitch operations with the processing of residual feedstock. Decisions made on its future will
depend on NCDEQ’s approval of the Permit amendments and how the Lumberton Facility develops in the coming
months.
Forestry assets in Ukraine and Newfoundland and Labrador
Prior to 2018, AEG’s strategy was based upon the ownership of timberland assets which might assist in the
commercial development and production of biomass fuels.
In respect of the Province of Newfoundland and Labrador (the “Province’) AEG was awarded commercial cutting
permits with a 5-year duration which included certain performance thresholds required to be achieved prior to
May 2021. During 2020 and 2021, Covid-19 restrictions prevented any travel to the Province. In 2020, AEG
appointed advisers to seek modifications to the commercial cutting permits, which were initially rejected by the
Province. Nonetheless AEG continues to work with the Province to mitigate the consequences resulting from
not achieving the required harvesting thresholds during this difficult period. AEG believes that there are benefits
for the Province in establishing a CoalSwitch solution and working with local lumber partners to utilise the
cutting permits.
In Ukraine, AEG also held timberland interests for an area surrounding Lyubomi through its operating subsidiary,
AE Ukraine. During 2020, AEG sought to dispose of these assets. As it was unable to do so, the Board decided to
accelerate the impairment of the entire asset from the balance sheet and cease any further activities in Ukraine.
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ACTIVE ENERGY GROUP PLC
Financing Activities during 2020 and post period in 2021
During the year, AEG completed a series of financing activities, including the issuance of some additional
convertible loan notes in June 2020, and an equity fundraising in August 2020 of £1.5 million (before expenses),
completed upon the news of the award of the Permits for the Lumberton Facility. The funding for this came
from existing shareholders and bondholders and we remain grateful to their support.
These events were a prelude to the balance sheet restructuring completed in February 2021, where all
outstanding convertible loan notes were converted to equity or redeemed to ensure the full extinguishment of
the outstanding Convertible Loan Note (the “Notes”). At the same time, AEG was grateful for the support of
existing and new shareholders to raise additional equity totalling £7 million (before expenses). Most importantly
the redemption or conversion of the Notes meant that all former security obligations which were incumbent
upon the entire AEG group were extinguished, allowing AEG the flexibility to properly utilise its balance sheet.
In addition, the Company will benefit from reduced finance charges going forward.
Appointment of a Finance Director
The appointment of Andrew Diamond as Finance Director in January 2021 was a significant appointment for
AEG. Andrew’s previous PLC experience has already proven invaluable in recent months.
Post Period End
All the foundations achieved in 2020 allowed AEG to move toward the delivery stage of its strategy in H1 2021.
While the Lumberton Facility has been under construction in recent months, the management team has already
been building toward the next stage of growth for AEG. The joint venture with PDI and the assembly and
completion of a second CoalSwitch facility in Maine within 14 weeks demonstrate the forthcoming commercial
opportunities AEG is seeking to realise.
Outlook
AEG is delivering on our strategy to commercialise CoalSwitch, our proprietary technology which transforms
waste biomass material into high-value renewable fuels through AEG’s own resources and through commercial
partnerships.
The Board believes that AEG’s CoalSwitch technology process has clear advantages over traditional biomass
manufacturing processes and that there are few alternative next generation biomass fuels currently available.
Our achievement in making CoalSwitch available for customers for their independent analysis is a significant
milestone and we are now witnessing considerable market interest in North America in both our process and
our product.
Our clear focus is on accelerating the commercialisation of CoalSwitch.
Michael Rowan
Chief Executive Officer
14 June 2021
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ACTIVE ENERGY GROUP PLC
COALSWITCH - PLANT CONSTRUCTION
Lumberton, North Carolina
Ashland, Maine
Source: AEG
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ACTIVE ENERGY GROUP PLC
FINANCE REVIEW
FOR THE YEAR ENDED 31 DECEMBER 2020
Having started as the incoming Finance Director on 1 January 2021, a look back at the year ended 31 December
2020 (“Current Year”) reveals a year where progress has been made, but the rate of that progress was hampered
by Covid-19 related factors. I can report that the rate of progress following the year end is much improved, and
the Company is now at a very exciting point where it has just produced the first commercial volumes of
CoalSwitch from its Ashland Facility.
Subsequent events
It is unusual to start a report with events which happen after the period being reported upon but given the
magnitude of these events it is appropriate to do so this year.
In January 2021, Advanced Biomass Solutions Plc, a subsidiary of the Company, completed and drew upon a
debt facility of £550,000. The debt instrument is repayable within twelve months based on monthly capital
repayments following a four-month repayment holiday. Initiation fees of 7% were payable, and interest is
charged at 10% p.a. payable quarterly in arrears. The Company has provided a corporate guarantee as security.
In February 2021, the convertible loan note (“CLN”) holders agreed to either convert their CLN’s or have them
redeemed. Furthermore, the CLN holders agreed to a release of the securities held over the Companies assets
in favour of the CLN holders. At the same time the Company raised £7.0 million in a fundraising (before
expenses), principally to progress the final stages of construction of the Lumberton Facility. At the time of
reporting the CLN obligation has been fully extinguished. The shares in issue at the reporting date were
3,902,051,743, compared to 1,541,178,043 at 31 December 2020. This injection of funding, along with the
removal of the debt and the underlying security obligations have provided the Company an opportunity to
deliver on its long-promised product: CoalSwitch.
On 20 May 2021, the Company announced its joint venture arrangement with Player Design Inc. (“PDI”). Under
the JV, AEG and PDI will jointly own and operate a CoalSwitch plant in Ashland, Maine. The plant has been
completed and is in production and will supply CoalSwitch for customers, including PacifiCorp.
Going concern
The Financial Statements have been prepared on a going concern basis. Note 1 of the Financial Statements lays
out the material uncertainties relating to the Company’s ability to continue as a going concern. The proceeds
raised in February 2021, after fees and certain CLN redemptions, have been used to construct the CoalSwitch
plants in Lumberton NC and Ashland Maine, and further funding will be required in the coming 12-month period
to finance expansion of CoalSwitch production, additional research and testing programs and marketing
activities.
Summary of 2020
Having acquired the property in Lumberton, in 2019 (the “Prior Year”) the Company made application for an air
and construction permit (“Permit”) to enable the construction of the CoalSwitch reference plant. The Permit
was issued on 4 August 2020, after lengthy delays due to Covid-19. Following the Permit issuance, the Company
proceeded to engage a contractor for final engineering designs and plan the construction of the 5tph CoalSwitch
plant, with equipment orders, in addition to equipment previously acquired by AEG, being placed late in the
year.
12
ACTIVE ENERGY GROUP PLC
In March 2020, the Company acquired a 100% interest in the lumber activities at Lumberton from its joint
venture partner Renewable Logistics Systems LLC (“RLS”). As consideration, AEG agreed to pay RLS US$350,000
in equity for the outstanding 70% equity interest, waive $250,000 of loans, and a further $150,000 has been
provided for as contingent consideration. AEG issued 64,863,412 new ordinary shares of 1p to RLS. The assets
and inventory acquired were transferred into Active Energy Renewable Power LLC (“AERP”), which has since
operated the lumber businesses.
The acquisition allowed the Company to:
•
•
Control the lumber operations at Lumberton outright;
Assess the local timber suppliers with the intention of securing a long-term feedstock provider for the
CoalSwitch reference plant; and
• Demonstrate to future prospective customers the benefit of locating a CoalSwitch plant alongside lumber
operations.
In 2021, the Board has reassessed AEG’s strategy, which is detailed on page 4, and determined that the saw log
export business, which involved loading sawlogs into containers to be shipped to South-East Asia, did not align
with AEG’s strategy of being a consumer of residual and waste forestry products from the lumber industry. The
Company has not been able to operate the container business at a scale to produce profitable returns. Whilst
the objectives above were achieved, the level of capital investment required to scale up and operate profitably
was deemed unacceptable and the Board decided to exit this business.
Likewise, the sawmill business has also struggled to operate profitably, principally due to a lack of capital
investment to allow the business to operate at a scale that recovers the fixed cost elements. The Board is
determined to focus its time and capital allocations on CoalSwitch and has placed this business under review.
Statement of Consolidated Income
Despite revenues, principally from the sale of lumber, of US$1.8 million (2019: US$1.9 million mainly from the
granting of a CoalSwitch licence), the costs incurred in processing and selling the lumber products resulted in a
gross loss of US$1.1 million (2019: gross profit of US$1.9 million). As mentioned above, the Company was unable
to operate at a scale large enough in either the sawmill or saw log export businesses to generate profits and has
taken appropriate action in 2021.
Furthermore, the Board determined that the timber-cutting licences in Ukraine and Newfoundland are not
aligned with AEG’s environmental strategy and the Company will seek to dispose or amend these licences, if
permitted. The Company will not allocate future capital to the development these licenses. Consequently, the
Board has determined that it is prudent to fully impair these assets. A non-cash impairment charge of US$4.2
million has been raised (2019: US$nil). In addition to the impairments of licences, with losses generated by the
lumber and saw log export businesses, a full impairment of the goodwill arising on the RLS acquisition of US$0.6
million (2019: US$nil). The total impairment charge for the year was US$4.8 million (2019: US$nil).
Administrative expenses of US$1.7 million (2019: US$2.8 million) reflect ongoing corporate costs and business
development activity. Excluding non-cash share-based payments, administrative expenses were US$1.6 million
(2019: US$2.4 million), with losses on disposal of assets of US$0.7 million recorded in the prior year. Finance
expenses were US$1.3 million (2019: US$2.5 million). These costs relate to ongoing servicing of the Group's
Convertible Loan Notes, other loan interest and foreign exchange gains and losses, offset by interest capitalised
to tangible and intangible fixed assets.
The tax credit of US$0.2 million (2019: US$0.9 million) reflects the deferred tax impact resulting from the
impairment of assets in the current year, and income associated with research and development tax credits.
13
ACTIVE ENERGY GROUP PLC
Loss for the year was US$8.8 million (2019: US$2.5 million). Other comprehensive loss of US$0.7 million (2019:
income of US$1.2 million) reflects a reversal of the non-cash revaluation of other financial assets raised in the
prior year of $0.5 million, with a gain of US$0.5 million related to the Lumberton property revaluation in the
prior year. Total comprehensive loss was US$9.4 million (2019: US$1.3 million). Loss per share (basic and diluted)
was US$0.65 (2019: US$0.21).
Statement of financial position
As a result of the operating losses in 2020, and in particular the impairment provisions raised against non-core
operations and licences, the Group's overall net assets position declined to a net liability position of US$5.9
million (2019: net asset position of US$0.4 million), underlining the importance of the CLN conversion which
occurred after financial year end.
Non-current assets decreased to US$16.6 million (2019: US$19.9 million). This decrease relates to the
impairment of the intangible licences in Ukraine and Newfoundland and the revaluation of other financial assets.
Current assets remained stable at US$1.5 million (2019: US$1.5 million).
Current liabilities decreased to US$2.4 million (2019: US$2.5 million). Non-current liabilities increased to
US$22.5 million (2019: US$18.6 million) as a result of new CLN issuances, and CLN issuances in settlement of
CLN interest charges for the first three quarters of the year.
Statement of cash flows
The Group utilised cash of US$1.3 million in operating activities (2019: generated US$1.7 million).
US$1.5 million of proceeds were received from CLN issuances (2019: US$2.8 million). Net proceeds of US$1.8
million were raised in the September placing.
US$1.0 million of cash and cash equivalents was on hand at year end (2019: US$0.4 million).
Andrew Diamond
Finance Director
14 June 2021
Source: AEG
14
ACTIVE ENERGY GROUP PLC
PRINCIPAL RISKS AND UNCERTAINTIES
The Group is subject to a number of potential risks and uncertainties, which could have a material impact on the
long-term performance of the Group. This could cause actual results to differ materially from the Board’s
expectations.
The management of risk is the collective responsibility of the Board of Directors. To mitigate this risk the Group
has developed a range of internal controls and procedures. The controls, procedures and identified risks are
discussed and reviewed annually by the Audit Committee and their findings and recommendations are reported
to the Board. The principal risks and uncertainties inherent in the Group’s business model have been grouped
into four categories: strategic, financial, regulatory and operational. The risk items and the planned actions to
mitigate these risks are listed below:
Risk
STRATEGIC
The acceptance of biomass as a
credible form of renewable energy
Governmental development of
policies to support an environmental
improvement agenda
Favourable US policies within which
CoalSwitch becomes a viable choice
for coal-fired power generators
CoalSwitch as the next generation
pellet is found to be sub-efficient in
calorific value, emissions reductions
and/or ability to be co-fired with
coal in existing power stations
Political and regulatory uncertainty
and delays or refusal in granting
permits may severely inhibit
expansion plans
2020 Outcome and Mitigation Action
The Group is reliant on the growth of the biomass industry for
the development of the CoalSwitch product and monetisation
of its assets and intellectual property
Globally the focus on climate change continues to increase. The
current US administration is highly focused on renewable
energy; however, the role of biomass remains a contentious
discussion item.
Opportunities to produce or licence CoalSwitch which arise in
other countries will be considered.
Whilst limited in the resources to affect federal policy change,
the Group will utilise the resources at its disposal to positively
affect policy direction.
At present many coal-fired power producers are considering
their viability based on the environmental concerns associated
with coal. The Group will be challenged to convince these
producers that CoalSwitch is both a more environmentally
friendly solution, a lower-cost and more immediate alternative
and to evidence that it has the scale to extend the production
life of the current coal-fired power plants.
Laboratory and in-house testing have produced exciting results.
Early production of CoalSwitch will again be tested to validate
the product’s properties to support the marketing activities. A
successful trial run at PacifiCorp will be immeasurably useful in
providing validation to our target market.
The Group has limited marketing resources in-house and will
need to employ additional personnel with an understanding
and gravitas in both the power and timber sectors.
Continued engagement and communication is key on this point.
We have been actively engaging with the respective
Government and Regulatory Body Representatives to ensure
the continued progression of the Group’s agenda.
15
ACTIVE ENERGY GROUP PLC
Risk
FINANCIAL
2020 Outcome and Mitigation Action
Growth and expansion are reliant on access to capital
Insufficient cash resources to meet
liabilities, continue as a going
concern and finance key projects
and expansions required to build out
production of CoalSwitch
Cash management is critical at this vital point in our expansion.
Management has a tight control over the Group’s cash
resources and is frugal in capital allocation, most notably
ensuring the money is spent in pursuit of the Group’s core
strategies.
The Group’s ability to access funding
to meet commitments and
development plans
The Group’s ability to access local
government support in each
jurisdiction we operate within
REGULATORY
Failure to comply with
construction/environmental
permitting and emissions
requirements
Failure to comply with law and
regulations in the jurisdictions in
which we operate
The Company raised gross proceeds of £7 million in February
2021, and at the same time restructured the balance sheet by
converting the CLNs into equity and thereby deleveraged the
business. All security underpinning the CLN has since been
revoked, which has unencumbered the balance sheet. The
proceeds of the fundraise have been put to work as intended.
Further build-out of production for CoalSwitch development
will require additional funding.
There is no guarantee that market conditions will permit the
raising of necessary funds, by way of debt financing or issue of
new equity, as and when the Group requires.
As noted above, the expansion of CoalSwitch production
capacity will require additional funding. The Board will consider
the timing and nature of additional funding requirements as
they arise.
Engagement with key stakeholders in each jurisdiction will be
key. The Group will use all the tools it has available to ensure
this engagement is productive and that applicable support is
obtained.
Production of CoalSwitch will be subject to scrutiny from
various regulatory and environmental bodies in each of the
jurisdictions we elect to operate in
Compliance is a key driver in the success of the business.
Compliance improvement processes are being implemented
and reported monthly to the board. Recent events, whereby
the NC DEQ have suspended construction of components of the
Lumberton plant evidence the potential impact a lack of
continuous focus and engagement with relevant authorities can
have upon future operations.
Management will always seek to establish and maintain an
open and transparent dialogue with relevant authorities. The
Group acknowledges the importance of continuous compliance
in all areas of operations.
It is important that the Group employs people with the required
skill sets to manage and operate the Group’s business within
the laws and regulations which apply. Where required the
Group should provide the necessary training to staff to ensure
they remain up to date with laws and regulations.
16
ACTIVE ENERGY GROUP PLC
Risk
OPERATIONAL
Death, illness or serious business
disruption due to Covid-19 or other
pandemics
Health and safety risks to
employees, contractors and local
communities
Project execution risk associated
with capital intensive activities
Reliance on key management/staff
and inability to scale up the business
with talented resources fast enough
to support a growing Group as
production expands
Social licence to operate and the
need for support from the
community
2020 Outcome and Mitigation Action
Operational challenges in producing and selling CoalSwitch
The Group continues to comply with all legal requirements
within the current jurisdictions where it has operations.
Compliance with local and international Covid-19 regulations is
required across the Group.
The Group has a strong safety track record. The Group will
continue with Health and Safety Risk assessment processes to
induct and protect all employees and other stakeholders. The
Group will continue to ensure control measures are put in place
to manage the identified hazards and the risk associated with
them. Health and safety policies will be reviewed on a regular
basis.
The Group complies with OSHA requirements in the
jurisdictions within which it operates.
The Group outsources construction projects to established EPC
contractors for large projects. The process of selecting an EPC
contractor is rigorous to eliminate risk of failure.
Management is actively involved in construction activities to
ensure projects are completed on time and within budget.
The Group does have a very small compliment of employees
and is required to outsource many activities. By its nature the
Group is extremely reliant on a small handful of individuals. As
the Group demonstrates success with its CoalSwitch product
and starts to grow it will be able to, and need to, employ people
in diverse applications to further all business activities.
The Group rewards individuals appropriately for their time and
efforts in order to retain them. In February 2021, the Group
implemented a LTIP scheme to reward senior management on a
basis aligned with shareholder interests.
The Group will seek to engage with local communities and to
align and work with local communities where it operates.
Failure to win the support of the local communities could result
in difficult operating conditions.
17
ACTIVE ENERGY GROUP PLC
CORPORATE SOCIAL RESPONSIBILITY REPORT
At its core AEG is seeking to improve the quality of the environment. Whilst the credentials of biomass are
debated in various communities, the development of CoalSwitch as a next generation renewable fuel utilising
waste biomass remains an important technical milestone. A biomass fuel capable of co-firing with coal for power
generation which can result in significantly reduced emissions represents an important renewable power source
during the transitionary period as the world moves away from consumption of fossil fuels. The world continues
to develop and as it does, it becomes increasingly power-hungry. The requirement is to increase power
generation whilst reducing all emissions and reducing consumption of natural resources. We believe CoalSwitch
is uniquely positioned to contribute towards those renewable goals for the biomass fuel sector.
Corporate Responsibility
The Board takes regular account of the significance of social, environmental, and ethical matters affecting the
Group wherever it operates. It is developing a specific set of policies on corporate social responsibility, which
seek to protect the interests of all its stakeholders through ethical and transparent actions and include an anti-
corruption policy and code of conduct.
Covid-19
The emergence and spread of Covid-19 had an impact on the Group’s operations. As an example, the holding of
a public meeting, as a necessary step in obtaining the air and construction permit in Lumberton, was delayed by
months. Whilst precautions were taken in relation to ongoing operations at the Lumberton site, it too has
experienced disruptions. The restrictions imposed on international travel have made it difficult for the executive
management to travel to the USA, although recently both CEO and FD have been able to visit North Carolina.
Despite the pandemic related complications, the CoalSwitch construction crews have worked tirelessly to get
the reference plants in both Lumberton and Ashland completed on time and on budget. Office based workers
have worked from home.
The Group continues to monitor the development of Covid-19 and complies with the requirements in each of
the jurisdictions within which it operates.
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 each of the territories in which it operates to establish and follow
international principles of environmental sustainability and renewability.
In Lumberton, the Group’s property is a brownfields operation which imposes stringent performance and testing
obligations to decontaminate and monitor previous pollution. Since taking ownership of the site, the Company
has fully complied with these obligations (including employing dedicated personnel for such requirements) and
reported to the authorities on a regular basis. The Company has not contributed to any unauthorised or
unregulated water pollution during its time of ownership of the Lumberton site.
Likewise, the Company will comply with all environmental related requirements arising from its future
CoalSwitch operations in all applicable territories. In line with the Group’s strategy, every effort will be made to
improve the environment.
18
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. Despite
operating a sawmill, which is considered a hazardous activity, there were no lost time injuries in 2020, with only
one minor injury recorded.
The Group will always remain vigilant in this regard to ensure the health and safety of all stakeholders.
Community relations
Having moved into the Lumberton, North Carolina community, and more recently into the Ashland, Maine
community, the Group will seek to engage with these local communities on issues as they arise, and more
generally in everyday matters. The Group already employs locally to provide opportunities for those in the
communities within which we operate, will support local initiatives, and will pay local taxes and other fiscal
contributions as they become due.
Enhanced governance
Governance processes are discussed in the Corporate Governance Statement on pages 22 to 25. The Board
remains committed to improving the governance of the Company and encourages stakeholders who identify
opportunities for improvement to notify the Board.
Source: AEG
19
ACTIVE ENERGY GROUP PLC
DIRECTORS & COMPANY INFORMATION
James Leahy
Non-Executive Chairman
Michael Rowan
Chief Executive Officer
Andrew Diamond
Finance Director
in
for
London
Andrew has over 20 years of
relevant experience, particularly
listed
working
companies, as demonstrated by
his previous role as Finance
Director at Victoria Oil & Gas Plc,
an AIM listed gas production and
utility business. Throughout the
four years Andrew held this role,
two
involved
he was
substantial equity
raises, a
successful M&A transaction and
multiple
and debt
restructuring exercises.
Prior to this, Andrew worked
for a number of companies in
the resources sector, performing
financial and reporting based
roles. Andrew also has relevant
experience working in the US,
benefit AEG's
which will
operations.
capital
gained
Beginning his career at the London
Metal Exchange, James has spent
35 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,
which includes industrial minerals,
iron ore, precious metals,
coal,
copper,
lithium,
diamonds,
uranium, plantations, forestry and
palm oil. Lately, he has employed
his corporate governance skills,
having
substantial
independent
experience as an
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
Nedbank,
Canaccord and Mirabaud, where he
gained invaluable experience with
international
fund
managers, hedge funds, private
specialist
equity
investors. Additionally, Mr Leahy
has been involved in many IPOs, as
well as primary and secondary
placings, and the development of
companies
junior
through
is
currently a director of the listed
fund Geiger Counter Ltd, Savannah
Resources Plc and Capital Metals
Plc.
resources
to production. He
institutional
Lyonnais,
sector
and
from
graduating
International
Michael was appointed Chief
Executive officer in July 2018 after
a 3-year tenure as a non-executive
director of the Group. Michael is a
qualified
qualified
solicitor,
corporate financier with a broad
range of banking, commercial and
legal experience.
After
the
University of Cambridge, he
practised as a
solicitor at
Linklaters in London, Hong Kong
and New York. He then moved to
in
Merrill Lynch
London and New York, and over a
in
10-year period, he worked
Equity Capital Markets
and
Investment Banking division, with
for origination,
responsibility
execution
commercial
and
negotiation of equity and equity-
including
linked
transactions,
major
and
privatisations
demutualisations in the UK and
EMEA regions.
Since then, Michael has held
senior roles within venture capital
in Asia and worked with mid &
small cap growth companies in
London, Canada and the US both
as an adviser and investor. He was
formerly Non-Executive Chairman
of
Recycling
Technologies plc and is currently a
director of RD Active Capital
new
Limited,
technology companies both in the
US and the UK.
Environmental
incubating
20
ACTIVE ENERGY GROUP PLC
Jason Zimmermann
Non-Executive Director
Max Aitken
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.
is an experienced bioenergy
Max Aitken
entrepreneur. He is currently the CEO of Estover
Energy, a leader in the UK biomass industry.
Estover developed and operates three wood-
fuelled Combined Heat and Power plants using
over 750,000 tonnes a year of biomass fuel. Max
is entrepreneur who has founded and financed
several businesses in the energy industry. He is
also a trustee of the Beaverbrook Foundation
London, and President of the Beaverbrook
Canadian Foundation in Montreal.
Country of Incorporation
England and Wales
03148295
Directors
J Leahy
T M S Rowan
A Diamond
M Aitken
J Zimmermann
Secretary
Cargill Management Services Limited
27- 28 Eastcastle Street
London
W1W 8DH
Registered Office
27- 28 Eastcastle Street
London
W1W 8DH
Auditors
Jeffreys Henry LLP
Chartered Accountants and Registered Auditors
London
EC1V 9EE
Bankers
HSBC Bank Plc
69 Pall Mall
London
SW1Y 5EY
Solicitors
DWF LLP
20 Fenchurch Street
London
EC3M 3AG
Nominated Advisor& Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London
W1S 2PP
Joint Broker
Allenby Capital Limited
5th Floor, 5 St Helen’s Place
London
EC3A 6AB
Registrars
Share Registrars
The Courtyard, 17 West Street
Farnham
GU9 7DR
21
ACTIVE ENERGY GROUP PLC
CORPORATE GOVERNANCE STATEMENT
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. It is the responsibility of the Board to ensure
that the Group is managed in an efficient, effective and entrepreneurial manner for the benefit of all
shareholders over the longer term. Corporate governance is an important aspect of this, reducing risk and adding
value to our business.
As a Company whose shares are traded on the AIM market of the London Stock Exchange, the Company complies
with the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”) as the basis of the Group’s
Governance framework and its Statement of Compliance can be found on the Company website:
https://www.aegplc.com/investors/corporate-governance/
Board:
The Board is collectively responsible for the governance of the Company and is accountable to the Company’s
shareholders for the long-term success of the Group. The Board sets the Company’s strategic objectives and
ensures that they are properly pursued within a sound framework of internal controls and risk management. It
is ultimately responsible for the management, governance, controls, risk management, direction and
performance of the Group.
At the date of this report the Board of Directors currently has five members, comprising the Non-Executive
Chairman, Chief Executive Officer, Finance Director and two independent Non-Executive Directors. Max Aitken
and Jason Zimmermann joined as independent Non-Executive Directors in January 2020. Andrew Diamond
joined as Finance Director in January 2021. Antonio Esposito, Executive Director resigned as a director in
February 2021. James Leahy was appointed Non-Executive Chairman on 1 February 2021, replacing Michael
Rowan, an Executive Director.
The Chairman is responsible for leadership of the Board. He is assisted by other Board members in formulating
strategy and, once agreed by the Board, the Executive Directors are responsible for its delivery. The structure of
the Board ensures that no one individual dominates the decision-making process and the Chairman facilitates
and ensures that there is effective contribution from other Executive and Non-Executive Directors. The Board
provides effective leadership and overall management of the Group’s affairs. The Board approves the Group’s
strategy and investment plans and regularly reviews operational and financial performance and risk
management matters. This includes the approval of business plans, the annual budget, major capital
expenditure, acquisitions and disposals, allocation and raising of funds, risk management policies and the
approval of the Financial Statements.
The Board currently represents an effective balance of skills and experience in the renewable energy and bio-
fuels industries, finance, corporate and business development as well as entrepreneurial and country
background. The experience and knowledge of each of the Directors gives them the ability to constructively
challenge the strategy and to scrutinise performance. The Board is committed to ensuring diversity of skill and
experience. Biographical details of the Directors as at the date of the Annual Report and Accounts are available
in the section ‘Directors and Other Information’ and on the Company’s website.
The Board is aware of other commitments and interests of its directors and changes to these commitments and
interests are reported to and, where appropriate, agreed with the rest of the Board. The Board holds four
scheduled meetings each year. Additional meetings are held where necessary to consider matters of importance
which cannot be held over until the next scheduled meeting. During the current year, the Board held four
scheduled meetings and also met a further eleven times. The Board may, when required, approve matters by
written resolutions and/or appointed a committee to approve specific matters. Details of the attendance of the
Directors at eligible meetings, together with meetings of the Audit and Remuneration Committees are set out
below.
22
ACTIVE ENERGY GROUP PLC
Directors
James Leahy
Michael Rowan
Antonio Esposito
Max Aitken(a)
Jason Zimmermann(a)
Board
(Scheduled)
4 of 4
4 of 4
4 of 4
4 of 4
4 of 4
Board
(Additional)
11 of 11
11 of 11
11 of 11
11 of 11
11 of 11
Audit
Committee
2 of 2
2 of 2
Remuneration
Committee
1 of 1
1 of 1
1 of 1
1 of 1
Nomination
Committee
-
-
-
-
-
(a) Max Aitken and Jason Zimmermann were appointed on 20 January 2020.
Board Committees
Audit Committee
The Audit Committee is chaired by James Leahy. The Chief Executive Officer, Finance Director and other
members of the Board attend the Audit Committee meetings by invitation. The Committee meets at least twice
a year. During the current year Michael Rowan, an Executive Director, was also a member of the audit
committee. Following the appointment of James Leahy as Non-Executive Chairman, 1 February 2021, Michael
Rowan stepped down from the Audit Committee and subsequently attends only upon invitation in compliance
with the QCA Code regarding the composition of Audit Committees.
During 2020, the Committee met two times. Additional meetings are held where necessary to consider matters
referred by the Board. It is responsible for ensuring that the financial activities of the Group are properly
monitored, controlled and reported on, complying with relevant legal requirements. The Committee receives
and reviews reports from management and the Group’s auditors relating to the Group’s Report and Accounts,
the interim results and review of the accounting policies. Meetings are held at least twice a year with the
auditors, once at the audit planning stage to consider the scope of the audit and thereafter at the reporting
stage, to receive post-audit findings. The ultimate responsibility for reviewing and approving the annual report
remains with the Board of Directors. The Committee is also responsible for reviewing the relationship with the
external auditors, making recommendations to the Board on their appointment and remuneration, monitoring
their independence, as well as assessing scope and results of their work, including any non-audit work. The
Committee authorises any non-audit work to be carried out by the external auditors and ensures that the
objectivity and independence of the external auditor has not been impaired in anyway by the nature of the non-
audit work undertaken, the level of non-audit fees charged for such work or any other factors.
The Committee, with management, reviews the effectiveness of internal controls.
Remuneration Committee
The Remuneration Committee is chaired by James Leahy. The Committee recommends to the Board the scale
and structure of the Executive Directors’ remuneration and that of senior management and the basis of their
service agreements with due regard to the interests of shareholders. In determining the remuneration of the
Executive Directors and senior management, the Committee seeks to ensure that the Company will be able to
attract and retain executives of the highest calibre. It makes recommendations to the Board concerning bonuses
and share awards. No Director participates in discussions or decisions concerning his own remuneration. Further
details regarding matters considered by the Remuneration Committee during the year are outlined in the
Remuneration Report. The Chairman of the Committee will attend the AGM and respond to any shareholder
questions on the Committee’s activities.
23
ACTIVE ENERGY GROUP PLC
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, including recruitment and senior appointments are be taken by the Board
as a whole. A review of the composition of the board (including skills, knowledge and experience) is performed
annually by the Board.
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 manner. The Board
believes that this strategy enables our stakeholders to better understand the activities, needs and challenges of
the business and enables the Board to better understand and address relevant stakeholder views which will
assist the Board in its decision making and to discharge its duties under Section 172 of the Companies Act 2006.
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. The Company’s strategy is intended to
have a positive impact on the environment and the Board seeks to ensure that all activities consider the potential
impact upon the environment.
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 or
practices are welcomed.
Suppliers and Contractors
The Group recognises that the goodwill of its contractors, consultants and suppliers is important 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.
Shareholders
The Board is active in communicating with all of its shareholders and encourages two-way communication with
both its institutional and private investors, subject to compliance with the AIM Rules and the Market Abuse
Regulations. The Executive Directors talk regularly with the Company’s major shareholders to ensure a mutual
understanding of objectives and to further explain the Group’s strategy and ensure that their views are
communicated fully to the Board.
24
ACTIVE ENERGY GROUP PLC
The Board recognises the AGM as an important opportunity to meet with private shareholders. In normal
circumstances, the Non-Executive Directors attend the shareholders’ meetings and are available to answer any
relevant questions. Regrettably, in common with all public companies, we have found that the impact of the
Covid-19 related restrictions and social distancing requirements has required us to hold the 2021 AGM as a
closed meeting. This has inevitably impeded the ability of shareholders to communicate with the Board.
However, the Board has set up a facility for questions in relation to the resolutions set out in the Notice of AGM
to be raised by the shareholders. They are encouraged to contact the Company prior to the AGM by email to
aeg@camarco.co.uk and label the email with “AEG AGM Question” to enable swift identification. The questions
raised will be responded to during the short presentation to be made by the Company at the AGM which will
also be made available on the Company's website following the AGM.
Extensive information about the Group’s activities is included in the Annual Report and the Interim Report. The
Group also issues regular updates to shareholders. Market sensitive information is regularly released to all
shareholders in accordance with London Stock Exchange rules for AIM-listed companies. The Company
maintains a corporate website where information on the Company is regularly updated, including Annual and
Interim Reports, presentations, and announcements.
Internal Controls and Risk Management
The Directors are responsible for the Group’s internal financial controls. Although no system of internal financial
control can provide absolute assurance against material misstatement or loss, the Group’s systems and
processes are designed to provide reasonable assurance that issues are identified in a timely basis and dealt
with appropriately.
The Board acknowledges that it is responsible for establishing and maintaining the Group’s system of internal
controls and reviewing its effectiveness. The procedures that include, inter alia, financial, operational, health
and safety, compliance matters and risk management (as detailed in the Principal Risks and Uncertainties
section) are reviewed on an ongoing basis.
The Group’s internal control procedures include Board approval for all significant projects, including corporate
transactions and major capital projects. The Board receives and reviews regular reports covering both the
technical progress of its projects and the Group’s financial affairs to facilitate its control.
The Group has in place internal control and risk management systems in relation to the Group’s financial
reporting process and the Group’s process for preparing consolidated accounts, which the Board considers
adequate in view of the size and nature of the Group’s operations. The Audit Committee reviews draft Annual
and Interim Reports before recommending them for approval to the Board.
The Board acknowledges that it is responsible for managing and preventing fraud, corruption or any other
malfeasance which comes to its attention, and to implementing control systems to ensure that knowledge of
such events is communicated to the Board in a timely and accurate manner. The internal control system can
only provide reasonable, rather than absolute, assurance against material misstatement or loss. The Board has
considered the need for a separate internal audit function but, bearing in mind the present size and composition
of the Group, does not consider it necessary for the time being.
25
ACTIVE ENERGY GROUP PLC
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 DECEMBER 2020
Principal Activities, Business Review & Strategies
The Company has developed a proprietary technology which transforms low-cost biomass material into high-
value renewable fuel. Its patented product CoalSwitch is a leading drop-in renewable fuel that can be co-fired
with coal, completely replace coal as an alternate feedstock without requiring significant power plant
modifications or replace existing biomass feedstock resources. Active Energy Group's immediate strategic focus
is the production and commercialisation of CoalSwitch and further CoalSwitch fuel blends that utilise other
waste and residual materials.
A detailed review of the significant developments and operating activities of the Group, as well as the business
environment, future prospects and the main trends and factors that are likely to affect the future development,
performance and position of the Group’s business are contained in the Strategic Report.
Directors
The Directors during the year under review and appointed post year end were:
•
•
•
•
•
•
Michael Rowan (Chief Executive Officer)
Antonio Esposito (Executive Director – resigned 1 February 2021)
James Leahy (Non-Executive Director)
Max Aitken (Non-Executive Director - appointed 20 January 2020)
Jason Zimmermann (Non-Executive Director - appointed 20 January 2020)
Andrew Diamond (Finance Director – appointed 1 January 2021)
In accordance with the Company’s Articles of Association, at the Annual General Meeting (“AGM”) held on
30 September 2020, Michael Rowan retired by rotation, and James Leahy, Max Aitken and Jason Zimmermann
retired having been appointed after the previous AGM. All were duly re-elected.
Dividends
No dividend is proposed for the year ended 31 December 2020 (2019: £nil).
Directors’ Indemnities
The Company maintained directors’ and officers’ liability insurance during the year and it remains in force at the
date of this report.
Auditors
Each person who is a Director at the date of approval of this Report and Accounts confirms that:
•
So far as the Director is aware, there is no relevant information of which the Company’s auditors are
unaware; and
The Director has taken all steps that he ought to have taken as a Director in order to make himself aware
of any relevant audit information and to establish that the Company’s auditor is aware of that information.
•
This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the
Companies Act 2006. A resolution to re-appoint the auditors, Jeffreys Henry LLP, was duly approved at the AGM
held on 30 September 2020.
26
ACTIVE ENERGY GROUP PLC
Significant Shareholders
At the time of reporting the Company has 3,902,051,743 Ordinary Shares in Issue (“OSI”). The Company had
received notification from the following shareholders of interests in excess of 3% of the Company’s OSI:
Shareholder
Gravendonck Private Foundation
Lombard Odier Asset Management (EU) Limited
Premier Fund Managers Limited
Hargreaves Lansdown Stockbrokers
AXA Investment Managers UK
Interactive Investor Services Limited
Number of shares
953,987,189
480,000,000
398,128,418
250,465,860
179,914,300
123,431,431
Percentage of OSI
24.45%
12.29%
10.20%
6.41%
4.61%
3.18%
Share Capital
Details of changes to share capital in the year are set out in Note 22. This includes the subscription of shares and
share capital reorganisation approved and implemented during the year.
Information set out in the Strategic Report
The Directors have chosen to set out the following information in the Strategic Report which would otherwise
be required to be contained in the Directors’ Report:
•
•
•
Results for the financial year
Principal risks and uncertainties
Likely future developments
Capital and financial risk management
Details of the Group’s capital and financial risks and the management thereof is set out in note 26.
Going Concern
The Group’s consolidated Financial Statements have been prepared on a going concern basis. The Directors
consideration of going concern is set out in Note 1 to the financial statements.
The Directors have given careful consideration to the appropriateness of the going concern basis in the
preparation of the financial statements. In performing their assessment of going concern, the Directors have
reviewed operating and cash forecasts in respect of the operating activities and planned work programmes of
the Group’s assets to 30 June 2022. The expected cash flows, plus available cash on hand, after allowing for
funds required for administration and capital project costs, working capital improvement and debt servicing, are
not expected to fully cover these activities.
Although the Group will require funding for the twelve-month period from the date of approval of these
Financial Statements, the Directors are of the view that following the balance sheet restructuring in February
2021, and having commenced production of CoalSwitch, they are confident additional equity or debt funding
can be accessed when it is required.
The Directors note that there are material uncertainties relating to going concern set out in Note 1. On the basis
of the considerations set out above, the Directors have concluded that it is appropriate to prepare the Financial
Statements on a going concern basis. These Financial Statements do not include any adjustments to the carrying
amount and classification of assets and liabilities that may arise if the Group was unable to continue as a going
concern.
27
ACTIVE ENERGY GROUP PLC
Covid-19
A statement on the impact of the Covid-19 pandemic on the Group, as well as the additional risks faced,
contingency planning and responses is detailed in the Chairman’s Letter, Finance Review, Principal Risks and
Uncertainties and Going Concern Review (see Note 1, Financial Statements).
Annual General Meeting
The Company’s AGM will be held on 8 July 2021. A notice of the meeting has been distributed with these Report
and Accounts. In accordance with current social distancing guidelines, the meeting will be a closed meeting.
The Notice of Meeting and Report and Accounts will be available on the Company’s website:
https://www.aegplc.com/investors/corporate-documents/
By Order of the Board
James Leahy
Non-Executive Chairman
14 June 2021
28
ACTIVE ENERGY GROUP PLC
DIRECTORS’ REMUNERATION REPORT
As an AIM-listed company, Active Energy is not obliged to implement the remuneration reporting requirement
for premium listed companies set out in The Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013. However, the Remuneration Committee (“the Committee”) has
chosen to disclose the following information in the interests of greater transparency:
•
An overview of the remuneration policy for the Group’s executives endorsed by the Committee following
a review of the existing remuneration arrangements; and
Remuneration arrangements including payments and awards made to the Directors for the current year
•
Remuneration Policy
The Company’s policy is to maintain levels of remuneration sufficient to recruit and retain senior executives of
the required calibre who can deliver growth in shareholder value. Aligned with the position of the Company,
senior executives have not received performance related pay to date, however the Committee desires to create
a strong alignment of interest between executives and shareholders. Consequently, the Committee will seek to
strike an appropriate balance between fixed and performance-related reward, with a clear link between pay and
performance.
The Company’s remuneration policy during the financial year consisted only of salary. There were no annual
bonuses awarded. The Committee recognises that the salary component is below market related benchmarks,
but believes this is appropriate in the Company’s position. Furthermore, the Company does not offer any
benefits to Executive Directors.
Looking forward, the Committee will seek to ensure salaries and performance pay are market-related to attract
and retain the right calibre executive. Furthermore, the Committee is in the process of initiating pension, medical
insurance and life insurance benefits for Executive Directors.
Long Term Incentive Plan
Following a recommendation from the Remuneration Committee, on 26 February 2021, the Board approved a
new Long Term Incentive Plan (“LTIP”). The LTIP is intended to align the interests of the Executive Directors and
senior management with the shareholders and includes malus and clawback clauses.
The Board further approved the grant of 86,469,467 share options under the LTIP to Executive Directors and
senior management (RNS 26/2/2021), equal to 2.2% of the Ordinary shares in issue at that date. The share
options have a 3-year vesting period and a duration of 10 years. The first exercise price (on 50% of a director’s
award) of these share options is 2.0125 pence which represents an 75% premium to the Company's mid-market
price of 1.15 pence on 25 February 2021, while the second exercise price is set at a further 75% premium over
the first exercise price at 3.522 pence for the remainder of the director’s awards. Share options were granted to
Directors as follows:
Michael Rowan
Andrew Diamond
Max Aitken
Jason Zimmermann
58,530,776
13,657,181
4,877,565
4,877,565
These LTIP awards are not reflected in the table of Directors’ interests below as they were granted after 31
December 2020. James Leahy, as Non-Executive Chairman, was not granted LTIP awards.
29
ACTIVE ENERGY GROUP PLC
Directors’ Service Contracts
Executive Directors
Executive Directors are employed under service contracts with notice periods as follows:
Michael Rowan
Andrew Diamond
12 months(a)
6 months(a)
(a) In the event of a change of control, in which an executive director is terminated or resigns, they become
entitled to an addition twelve-month termination payment.
Non-Executive Directors
The Non-Executive Directors are appointed for an initial term of three years, with a notice period of one month
from the Company or the Non-Executive Director. At the reporting date, the unexpired term of the Non-
Executive Directors’ letters of appointment were:
31 October 2022
James Leahy
20 January 2023
Max Aitken
20 January 2023
Jason Zimmermann
22 months
25 months
25 months
Directors’ Remuneration
Remuneration and benefits for Directors were as follows:
12-months to 31 December 2020
T M Rowan
A Esposito
J Leahy
M Aitken(a)
J Zimmermann(a)
12-months to 31 December 2019
T M Rowan
S Melling
J Leahy
A Esposito
Gross Fees
& Salary
US$
331,695
203,203
32,101
36,669
39,812
643,480
Share-based
payments
US$
17,466
-
-
-
Bonus &
benefits
US$
-
-
-
-
17,466
-
Gross Fees
& Salary
US$
191,540
33,519
6,385
180,000
Share-based
payments
US$
144,010
-
-
-
411,444
144,010
Bonus &
benefits
US$
-
-
-
-
-
TOTAL
US$
349,161
203,203
32,101
36,669
39,812
660,946
TOTAL
US$
335,550
33,519
6,385
180,000
555,454
(a) Max Aitken and Jason Zimmermann joined AEG on 20 January 2020.
30
ACTIVE ENERGY GROUP PLC
Directors’ Interests in Share Capital of the Company
The interests of Directors who held office at 31 December 2020 are set out in the table below:
Ordinary Shares held
Ordinary Share Options
1 January
2020
31 December
2020
31 December
2020
5,486,250
2,000,000
2,000,000
-
-
8,486,250
2,000,000
4,000,000
1,000,000
1,961,500
25,000,000
-
-
-
-
Weighted
Exercise
price (p)
6.4
-
-
-
-
T M Rowan
A Esposito
J Leahy
M Aitken(a)
J Zimmermann(a)
James Leahy
Remuneration Committee Chairman
14 June 2021
31
ACTIVE ENERGY GROUP PLC
STATEMENT OF DIRECTORS’ RESPONSIBILITY
Responsibility Statement
The Directors are responsible for preparing the Annual Report and the Group and parent Company 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:
•
•
•
•
properly select and apply suitable accounting policies;
make judgements and accounting estimates that are reasonable and prudent and which result in relevant,
reliable, comparable and understandable information;
provide additional disclosures when compliance with the specific accounting standards is insufficient to
enable users to understand the impact of particular transactions, other events and conditions on the
Group’s financial position and financial performance; and
make an assessment of the Group’s ability to continue as a going concern.
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.
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 and profit or loss
of the Group and parent Company taken as a whole; and
the Strategic Report and the Directors’ Report include a fair review of the development and performance
of the business and the position of the Company and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks and uncertainties that they face.
•
This confirmation is given in accordance with Section 418 of the Companies Act 2006.
By order of the Board
James Leahy
Non-Executive Chairman
14 June 2021
32
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 2020 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 2020 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. The Directors have identified a variety of
potential sources of funds including issue of additional equity and/or debt, revenue from future operations and
tax credits. In addition, the Directors have identified additional cost reductions which may be implemented if
necessary. These events or conditions, along with the other matters as set forth in note 1, indicate that a material
uncertainty exists that may cast doubt on the Group's ability to continue as a going concern. Our opinion is not
modified in respect of this matter.
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.
33
ACTIVE ENERGY GROUP PLC
Our evaluation of the directors’ assessment of the entity’s ability to continue to adopt the going concern basis
of accounting included a detailed review of future forecasts and assessing the assumptions utilised by
management in preparing the forecast. These assumptions were further assessed along with those used in the
prior year to determine reasonability. We have reviewed the cash held at year end up to the date of signing of
this report and have further taken into account management’s previous ability to raise equity funding when
required in order to maintain operations.
We have performed the following audit procedures in relation to going concern:
• Evaluated the suitability of management’s model for the forecast.
The forecast includes a number of assumptions related to future cash flows and associated risks. Our audit work
has focused on evaluating and challenging the reasonableness of these assumptions and their impact on the
forecast period and ensuring that all key matters are correctly disclosed in the going concern note.
Specifically, we obtained, challenged and assessed management’s going concern forecast and performed
procedures including:
• 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.
• We reviewed the latest management accounts to gauge the financial position.
• We reviewed the status of permits.
• We performed stress tests.
• Considered the Group’s historic ability to raise funds, and
• Reviewed the financing options available to the Group to evaluate the ability of the Group to pay their debts
as they become due.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Our audit approach
Overview
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter
described in the material uncertainty paragraph relating to the going concern, we have determined the matters
described below to be the key audit matters to be communicated in our report. This is not a complete list of all
risks identified by our audit.
• Carrying value of intangible assets
• Carrying value of property, plant and equipment
• Carrying value of other financial assets
• Carrying value of investments in subsidiaries and intercompany loans (Company only risk)
These are explained in more detail below.
34
ACTIVE ENERGY GROUP PLC
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
Carrying value of intangible assets
The Group had intangibles of US$5,259,024 at the
year-end (2019: US$9,180,466).
Included within intangible assets were additions
relating
to capitalised development costs of
US$420,587. Other intellectual property comprises
costs incurred to secure the rights and knowledge
associated with the CoalSwitch and PeatSwitch
technology. Goodwill was also recognised during the
current year in the amount of $567,668 which was
subsequently fully impaired.
Impairments on intangible assets recognised during
the year amounted to US$4,758,707, comprising the
impairment of the Newfoundland & Labrador cutting
permits, the Alberta Metis Licence issued to RMDE,
the Lyubomi Forestry Timber permit in Ukraine and
the goodwill on acquisition of the remaining interest
in the joint venture RES LLC.
The Directors have a duty to confirm that all
intangibles are correctly recognised.
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.
Key assumptions for the CoalSwitch input model are:
• Discount rate applied
• Average selling price per tonne
• Cost of associated feedstock
• Consumption rate of feedstock
• Cost inflation
• Forecasted capital expenditure
• Tonnes per hour
capacity
CoalSwitch™ plants
How our audit addressed the key audit matter
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.
Reviewed management’s assessment of future
operating cashflows and indicators of impairment.
Where indicators of impairment were identified, we
challenged management’s assessment of any
recoverable amounts calculated.
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.
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.
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.
for
the
35
ACTIVE ENERGY GROUP PLC
• Other operational cost assumptions
Refer to Note 1 of 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$10,443,641
(2019:
the
US$9,231,743).
year-end
at
in property, plant and equipment
Included
is
additions of US$543,328 relating to the purchase of
the remaining interest in the joint venture RES LLC
held within AERP during the year.
Additionally, included is additions of a right-of-use
asset relating to the IFRS 16 accounting of the lease
within AERP of US$435,066 and capitalised interest
on the CoalSwitch™ plant of US$584,506.
Carrying value of other financial assets
The investment held in Alpha Prospects Limited has
a fair value at year-end of $931,312 (2019:
US$1,470,639). The downwards valuation has been
assessed and the reasoning behind the fair value
adjustment
corroborated with
management.
been
has
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 corroborated the Group’s assumption to
externally derived data in relation to key inputs such
as discount rates, commodity prices, labour costs,
exchange rates, inflation cost and tax rate.
We reviewed management’s decisions to impair the
Forestry assets, cutting permits, RMDE licence and
goodwill against future prospects of recoverability.
We vouched additions in the year. The fair value of
the Lumberton site was assessed to determine
whether
its current value still represents a
reasonable fair value based on the previous
valuation performed by the directors.
The CoalSwitch™ plant’s construction continued
during the current year, and we have assessed this
against management’s CoalSwitch™ economics to
determine whether any potential
indicators of
impairment exist.
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.
We have obtained confirmation
from Alpha
Prospects accounts to confirm AEG’s shareholding.
Limited. We have assessed
We have reviewed the financial results of Alpha
Prospects
the
recoverability of the assets against the net asset
value of the underlying investment, and we have
further assessed the value of Alpha Prospect Limited
shares as held by third parties.
We obtained management’s assessment of the fair
value of the investment and the determination of
the fair value adjustment during the period.
We assessed whether the Group’s disclosures were
appropriate in respect of the judgements, estimates
and assumptions applied in calculating the fair value.
36
ACTIVE ENERGY GROUP PLC
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$23,204,528 (2019:
US$23,796,415).
Impairments of intercompany receivables have been
the amount of
raised during
US$8,662,410.
the year
in
There is a risk that these inter-company receivables
are not recoverable.
We reviewed the carrying value of the investments
and
loans to fellow subsidiaries. The review
considered the current position of the subsidiaries
and the future outlook and forecasts prepared by
management, taking COVID-19 and the underlying
recoverable assets into account.
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
being that these are the underlying assets which
hold value in the subsidiaries.
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
Group financial statements
US$465,600 (2019: US$113,000). US$160,200 (2019: US$110,000).
Company financial statements
Based on 10% of loss for the year,
excluding impairments.
We believe that the loss for the
period is a primary measure used
by shareholders in assessing the
performance of the Group, and as
impairments
the
raised during the year are not
ordinary
the
transactions
normal course of business, these
have been excluded.
significant
in
Based on 10% of loss for the year,
excluding impairments.
We believe that the loss for the
period is a primary measure used
by shareholders in assessing the
performance of the Group, and as
the significant impairments raised
during the year are not ordinary
transactions in the normal course
of business, these have been
excluded.
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$100 and US$160,200.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit
above US$23,280 (Group audit) (2019: US$6,500) and US$8,010 (Company audit) (2019: US$5,500) as well as
misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
37
ACTIVE ENERGY GROUP PLC
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example
in respect of significant accounting estimates that involved making assumptions and considering future events
that are inherently uncertain. As in all of our audits we also addressed the risk of management override of
internal controls, including evaluating whether there was evidence of bias by the directors that represented a
risk of material misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the structure of the Group and the Company, the
accounting processes and controls, and the industry in which they operate.
The Group financial statements are a consolidation of 8 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 8 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:
• 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
38
ACTIVE ENERGY GROUP PLC
•
the parent company financial statements are not in agreement with the accounting records and returns;
or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 32, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is
detailed below.
The extent to which the audit was considered capable of detecting irregularities including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities,
including fraud and non-compliance with laws and regulations, was as follows:
•
the senior statutory auditor ensured the engagement team collectively had the appropriate competence,
capabilities and skills to identify or recognise non-compliance with applicable laws and regulations.
• we identified the laws and regulations applicable to the company through discussions with directors and
other management.
• we focused on specific laws and regulations which we considered may have a direct material effect on
the financial statements or the operations of the company, including taxation legislation, data
protection, anti-bribery, employment, environmental, health and safety legislation and anti-money
laundering regulations.
• we assessed the extent of compliance with the laws and regulations identified above through making
•
enquiries of management and inspecting legal correspondence.
identified laws and regulations were communicated within the audit team regularly and the team
remained alert to instances of non-compliance throughout the audit; and
• we assessed the susceptibility of the company’s financial statements to material misstatement,
including obtaining an understanding of how fraud might occur, by:
o making enquiries of management as to where they considered there was susceptibility to fraud,
their knowledge of actual, suspected and alleged fraud; and
o considering the internal controls in place to mitigate risks of fraud and non-compliance with
laws and regulations.
39
ACTIVE ENERGY GROUP PLC
To address the risk of fraud through management bias and override of controls, we:
• performed analytical procedures to identify any unusual or unexpected relationships;
•
• assessed whether judgements and assumptions made in determining the accounting estimates set out
tested journal entries to identify unusual transactions;
•
•
in note 1 of the Group financial statements were indicative of potential bias;
investigated the rationale behind significant or unusual transactions; and
in response to the risk of irregularities and non-compliance with laws and regulations, we designed
procedures which included, but were not limited to:
reading the minutes of meetings of those charged with governance;
o agreeing financial statement disclosures to underlying supporting documentation;
o
o enquiring of management as to actual and potential litigation and claims; and
o
reviewing correspondence with HMRC and the group’s legal advisors.
There are inherent limitations in our audit procedures described above. The more removed that laws and
regulations are from financial transactions, the less likely it is that we would become aware of noncompliance.
Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations
to enquiry of the directors and other management and the inspection of regulatory and legal correspondence,
if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they
may involve deliberate concealment or collusion. A further description of our responsibilities for the audit of the
financial
at:
http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Council’s website
statements
Reporting
Financial
located
the
on
is
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 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members
those matters 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
14 June 2021
40
ACTIVE ENERGY GROUP PLC
CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
REVENUE
GROSS (LOSS)/PROFIT
Impairment charges
Administrative expenses
OPERATING LOSS
Finance costs
LOSS FROM CONTINUING OPERATIONS
Taxation
LOSS FOR THE YEAR - ATTRIBUTABLE TO THE
PARENT COMPANY
Basic and Diluted loss per share (US cent)
Note
3
4
5
7
8
9
OTHER COMPREHENSIVE (LOSS) / INCOME
Items that may be subsequently reclassified to profit or
loss
Exchange differences on translation of operations
Revaluation of land and buildings
Revaluation of other financial assets
2020
US$
2019
US$
1,810,206
1,895,972
(1,122,864)
(4,758,707)
(1,743,294)
1,895,972
-
(2,779,473)
(7,624,865)
(883,501)
(1,347,230)
(2,461,376)
(8,972,095)
(3,344,877)
214,176
874,655
(8,757,919)
(2,470,222)
(0.65)
(0.21)
(117,701)
-
(539,327)
137,540
504,646
563,948
Total other comprehensive (loss) / income
(657,028)
1,206,134
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(9,414,947)
(1,264,088)
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 parent Company’s loss after tax for the year is
$6,733,779.
The notes on pages 46 to83 form part of these financial statements.
41
ACTIVE ENERGY GROUP PLC
CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2020
Note
10
11
12
13
14
15
16
17
18
21
20
19
21
20
22
22
NON-CURRENT ASSETS
Intangible assets
Property, plant & equipment
Investment in subsidiaries
Long term loans
Other financial assets
CURRENT ASSETS
Inventory
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Lease liabilities
Other current liabilities
Loans and borrowings
NON-CURRENT LIABILITIES
Deferred taxation
Lease liabilities
Loans and borrowings
TOTAL LIABILITIES
NET (LIABILITIES)/ASSETS
EQUITY
Share capital – Ordinary shares
Share capital – Deferred shares
Share premium
Merger reserve
Foreign exchange reserve
Own shares held reserve
Convertible debt/warrant reserve
Retained earnings
Revaluation reserve
TOTAL EQUITY
Group
2020
US$
5,259,024
10,443,641
-
-
931,312
16,633,977
237,506
270,755
999,631
1,507,892
Group
2019
US$
9,180,466
9,231,743
-
-
1,470,639
19,882,848
-
1,146,815
397,323
1,544,138
Company
2020
US$
-
900
1,495,943
23,204,528
931,312
25,632,683
-
-
811,901
811,901
Company
2019
US$
-
-
1,455,091
23,272,315
1,470,649
26,198,055
-
954,232
360,622
1,314,854
18,141,869
21,426,986
26,444,584
27,512,909
2,091,657
136,891
150,000
21,772
2,400,320
150,139
202,417
22,105,551
22,458,107
24,858,427
(6,716,558)
219,436
18,148,898
18,711,637
2,350,175
(184,975)
(268,442)
3,701,803
(49,899,736)
504,646
(6,716,558)
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)
3,490,621
(40,206,405)
504,646
1,183,827
-
1,441,593
-
21,772
1,205,599
-
1,441,593
-
-
21,961,104
21,961,104
23,166,703
3,277,881
219,436
18,148,898
18,711,637
2,350,175
(124,920)
(268,442)
3,701,803
(39,460,706)
-
-
-
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)
3,490,621
(31,791,515)
-
371,859
3,277,881
7,880,584
The financial statements were approved and authorised for issue by the Directors on 14 June 2021 and
were signed on their behalf by:
Michael Rowan
Chief Executive Officer
Company Number 03148295
The notes on pages 46 to 83 form part of these financial statements.
42
ACTIVE ENERGY GROUP PLC
GROUP CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
Share
capital
US$
Merger
reserve
US$
17,265,379 17,303,159 2,350,175
Share
premium
US$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Foreign
exchange
reserve
US$
(204,815)
-
137,541
137,541
-
-
-
Own
shares
held
reserve
US$
(268,442)
Convertible
debt and
warrant
reserve
US$
2,720,933
Retained
earnings
US$
(38,310,938)
Revaluation
Reserve
US$
-
-
-
-
-
-
-
-
-
-
-
-
769,688
-
-
(2,470,222)
563,948
(1,906,274)
-
-
368,850
(358,043)
17,265,379 17,303,159 2,350,175
(67,274)
(268,442)
3,490,621
(40,206,405)
-
-
-
-
-
-
835,801
1,381,401
267,154
27,077
-
-
-
-
-
-
-
-
-
-
-
-
(117,701)
(117,701)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
211,182
-
(8,757,919)
(539,327)
(9,297,246)
(452,467)
-
-
56,382
18,368,334 18,711,637 2,350,175
(184,975)
(268,442)
3,701,803
(49,899,736)
504,646
Non-
controlling
Interest
US$
(358,043)
-
-
-
-
-
-
358,043
-
-
-
-
-
-
-
-
Total equity
US$
497,408
(2,470,222)
701,489
(1,768,733)
504,646
769,688
368,850
-
371,859
(8,757,919)
(657,028)
(9,414,947)
1,764,735
294,231
211,182
56,382
(6,716,558)
-
-
-
504,646
-
-
-
504,646
-
-
-
-
-
-
At 31 December 2018
Loss for the year
Other comprehensive income
Total comprehensive income
Revaluation of land & buildings
Embedded derivative on CLN issue
Share based payments
Minority Interest adjustment
At 31 December 2019
Loss for the year
Other comprehensive income
Total comprehensive income
Issue of share capital
Conversion of CLN
Embedded derivative on CLN issue
Share based payments
At 31 December 2020
The purpose and nature of each of the above reserves is described in note 24.
The notes on pages 46 to 83 form part of these financial statements.
43
ACTIVE ENERGY GROUP PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
At 31 December 2018
Profit for the year
Other comprehensive income
Total comprehensive income
Embedded derivative on CLN issue
Share based payments
At 31 December 2019
Loss for the year
Other comprehensive income
Total comprehensive income
Issue of share capital
Conversion of CLN
Embedded derivative on CLN issue
Share based payments
At 31 December 2020
Share capital
US$
17,265,379
Share
premium
US$
17,303,159
Merger
reserve
US$
2,350,175
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Foreign
exchange
reserve
US$
(716,115)
-
247,322
247,322
-
-
Own shares
held reserve
US$
(268,422)
-
-
-
-
-
Convertible
debt and
warrant
reserve
US$
2,720,933
-
-
-
769,688
Retained
earnings
US$
(33,830,064)
1,105,751
563,948
1,669,669
-
-
368,850
Total equity
US$
4,825,025
1,105,751
811,270
1,917,021
769,688
368.850
17,265,379
17,303,159
2,350,175
(468,793)
(268,442)
3,490,621
(31,791,515)
7,880,584
-
-
-
-
-
-
835,801
1,381,401
-
-
-
-
267,154
-
-
18,368,334
27,077
-
-
18,711,637
-
-
-
2,350,175
-
343,873
343,873
-
-
-
-
(124,920)
-
-
-
-
-
-
-
-
-
-
-
(268,442)
-
211,182
-
3,701,803
(6,733,779)
(539,327)
(7,273,106)
(452,467)
-
-
56,382
(39,460,706)
(6,733,779)
(195,454)
(6,929,233)
1,764,735
294,231
211,182
56,382
3,277,881
The purpose and nature of each of the above reserves is described in note 24.
The notes on pages 46 to 83 form part of these financial statements.
44
ACTIVE ENERGY GROUP PLC
CONSOLIDATED AND COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
Note
Group
2020
US$
Group
2019
US$
Company
2020
US$
Company
2019
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
Intercompany loans advanced
Unsecured debt repaid
Unsecured debt proceeds
Principal elements of lease
payments
Finance expenses
Net cash inflow from
financing activities
Net increase in cash and cash
equivalents
Cash and cash equivalents at
beginning of the year
Exchange losses on cash and
cash equivalents
Cash and cash equivalents at
end of the year
25
(1,302,560)
1,675,831
(1,761,243)
1,201,865
-
-
-
-
(1,302,560)
1,675,831
(1,761,243)
1,201,865
(661,939)
(519,312)
-
-
-
-
-
(1,396,666)
(738,993)
(1,756,619)
(1,222)
-
362,790
-
-
-
(1,400,932)
(1,913,141)
(1,222)
(1,396,666)
1,754,489
1,467,778
-
-
212,600
(95,758)
(37,842)
-
1,754,489
-
2,762,781
-
(1,218,857)
-
-
(1,207,093)
1,467,778
(1,076,176)
-
68,183
2,762,781
-
(1,000,000)
-
-
-
-
(1,207,093)
3,301,267
336,831
2,214,244
555,688
597,775
99,521
451,779
360,887
397,323
298,768
360,622
4,533
(966)
(500)
234
(499)
17
999,631
397,323
811,901
360,622
The notes on pages 46 to 83 form part of these financial statements.
45
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
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 21 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 (collectively the “Financial
Statements”) have been prepared and approved by the Directors in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by the European Union, and with those parts of the
Companies Act 2006 applicable to companies reporting under IFRS. The 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 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 at the
end of note 1.
Going concern
The Directors are required to give careful consideration to the appropriateness of the going concern
basis in the preparation of the Financial Statements.
During 2020 the Group applied for and obtained a construction and air permit for the CoalSwitch
reference plant in Lumberton, North Carolina. Engineering and design works for the plant were
completed, and the required equipment procured. Construction of the 3tph plant commenced in 2021.
Despite an interruption to the construction required to amend the air permit for additional emissions
control equipment, the reference plant is anticipated to be commissioned during Q3 2021. The
Company has signed a joint venture agreement with Player Design Inc., on a 50/50 basis, to develop a
5tph CoalSwitch plant in Ashland, Maine, which is strategically located in proximity to several large
timber manufacturers who have significant wood residuals to dispose of. Managements plans to
expand the production capacity of both the Lumberton and Ashland CoalSwitch plants will result in the
Group having capacity to produce 140,000 tons of CoalSwitch per annum from the start of 2022.
The Group announced its first order of 900 tons of CoalSwitch by PacifiCorp for their Hunter Power
Station, a coal-fired power plant in Utah, in December 2020. This first order is significant and will be
incorporated in a test burn in conjunction with a study group from the University of Utah to assess the
performance of CoalSwitch in terms of calorific value and emissions reductions. The ability to provide
samples to prospective customers, in conjunction with the data and findings from the PacifiCorp test
burn will greatly enhance existing marketing efforts to obtain long-term off-take agreements.
46
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
Going concern (continued)
In February 2021, the Company restructured its balance sheet by securing the conversion and
redemption of the entire convertible loan note obligation (“CLN”). Furthermore, the securities in place
for the CLN holders have been revoked. At the same time the Company recapitalised the business by
raising £7.0 million (gross) to be used principally for the construction of the Lumberton CoalSwitch
reference plant, certain CLN redemptions and improvement of the working capital position.
At the reporting date the Group has sufficient funding to complete both the Lumberton and Ashland
CoalSwitch plants, and to fund near-term administration, working capital costs and debt servicing but
will need to seek additional funding to finance further plant expansions and/or new plant
developments.
Uncertainties exist in relation to the performance of CoalSwitch, the completion of the Lumberton and
Ashland CoalSwitch Facilities, the Group’s ability to locate and secure long-term off-take agreements
for CoalSwitch and the Company’s ability to secure additional funding, either equity or debt, to support
these activities. These conditions indicate the existence of a material uncertainty which may cast
significant doubt over the Group’s ability to continue as a going concern.
The Directors have reviewed the cash forecasts in respect of the Group’s operating and planned
growth activities. The expected cash flows, plus available cash on hand, after allowing for funds
required and allowing for existing debt facilities, are not sufficient to cover these activities. The
Company will need to raise funding to support operations in the twelve-month period from the date
of approval of these Financial Statements. The Directors are confident, based on the CoalSwitch
progress made to date, and the restructured balance sheet of the Group, that it will be able to secure
the funding required.
On the basis of the considerations set out above, the Directors have concluded that it is appropriate
to prepare the Financial Statements on a going concern basis. These Financial Statements do not
include any adjustments to the carrying amount and classification of assets and liabilities that may
arise if the Group or the Parent Company was unable to continue as a going concern.
New and amended standards which are effective for these Financial Statements
A number of new and amended standards became mandatory and are effective for annual periods
beginning on or after 1 January 2020 including Amendment to IFRS 9, IAS 39 and IFRS7 - Interest Rate
Benchmark Reform Phase 1, Amendments to IFRS 3 - Definition of a Business, Amendments to IAS 1
and IAS 8 - Definition of Material, Amendments to References to the Conceptual Framework in IFRS
Standards, Amendments to IFRS 16 –Covid 19 - Related Rent Concessions, Amendment to IFRS 4 -
Extension of the Temporary Exemption from Applying IFRS 9, and they have not had a material impact
on the Financial Statements.
47
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
New and amended standards which are not yet effective for these Financial Statements
There are a number of new and amended standards and interpretations that are not mandatory for
the 31 December 2020 reporting period and have not been early adopted by the Company. These will
be adopted in the period when they became mandatory unless otherwise indicated.
Ref
IAS1
Title
Presentation of Financial
Statements
Summary
Amendments regarding the classification of
liabilities
Application date
of standards
(periods
commencing)
1 January 2023
IFRS9,
IAS39 and
IFRS7
Interest Rate Benchmark
Reform Phase 2
Amendments to defer effective date of the
January 2020 amendments
Amendments regarding measurements and
classification
1 January 2023
1 January 2021
The standards mentioned are not expected to have a material impact on future reporting periods.
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. Total comprehensive income of non-wholly owned
subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to
their relative ownership interests, except when cumulative losses of the subsidiary result in negative
equity, whereafter total comprehensive income is attributed to the Group.
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.
48
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
Revenue recognition (continued)
Revenue is recognised when control of the products has 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.
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.
49
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
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)
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are
undertaken annually at the financial year end. Other non-financial assets are subject to impairment
tests whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of
value in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment
test is carried out on the smallest group of assets to which it belongs for which there are separately
identifiable cash flows; its cash generating units (“CGUs”). Goodwill is allocated on initial recognition
to each of the Group's CGUs that are expected to benefit from the synergies of the combination giving
rise to the goodwill. Impairment charges are included in profit or loss, except to the extent they reverse
gains previously recognised in other comprehensive income. An impairment loss recognised for
goodwill is not reversed.
Intangible assets
Externally acquired intangible assets with a finite useful life are initially recognised at cost and
subsequently amortised on a straight-line basis over their useful economic lives and tested for
impairment annually. Externally acquired intangible assets with an infinite life are not amortised but
are tested for impairment annually.
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 1 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;
50
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
Intangible assets (continued)
• 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:
Plant and equipment
Furniture and office equipment
Buildings
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period. Property is depreciated and is reviewed by means of an independent property valuer
on a three-year basis, unless indicators of impairment exist, in which case an independent valuation
will be performed. Land is not depreciated.
2 to 10 years straight line
2 to 5 years straight line
25 to 50 years straight line
–
–
–
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. Inventory consists of raw materials and finished timber
products.
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.
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.
51
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued); Financial assets and liabilities (continued)
Financial assets and liabilities (continued)
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
obligations are discharged, cancelled or expire.
Impairment
The Group assesses at each financial position date whether there is objective evidence that a financial
asset or group of financial assets is impaired. If there is objective experience (such as significant
financial difficulty of obligor, breach of contract, or it becomes probable that debtor will enter
bankruptcy), the asset is tested for impairment. The amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of the estimated future cash flows
(excluding future expected credit losses that have not been incurred) discounted at the financial asset’s
original effective interest rate (that is, the effective interest rate computed at initial recognition). The
carrying amount of the asset is reduced through use of an allowance account. The amount of loss is
recognised in the Statement of Comprehensive Income.
Taxation
Current taxes are based on the results shown in the Financial Statements and are calculated according
to local tax rules, using tax rates enacted or substantively enacted by the year-end date.
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in
the consolidated statement of financial position differs from its tax base, except for differences arising
on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is not a business combination
and at the time of the transaction affects neither accounting or taxable profit; and
• investments in subsidiaries and jointly controlled entities where the Group is able to control the
timing of the reversal of the difference and it is probable that the difference will not reverse in the
foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable
profit will be available to utilise the difference. The amount of the asset or liability is determined using
tax rates that have been enacted or substantively enacted by the reporting date and are expected to
apply when the deferred tax liabilities/assets are settled/recovered.
52
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
Taxation (continued)
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset
current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the
same tax authority on either:
• the same taxable group company; or
• different Group entities which intend either to settle current tax assets/liabilities on a net basis, or
to realise the assets and settle the liabilities simultaneously, in each future period in which
significant amounts of deferred tax assets or liabilities are expected to be settled/recovered.
Foreign currencies
Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which they operate (their "functional currency").
The Company and Consolidated financial statements are presented in United States Dollar (“US
Dollar”, “US$”), which is the Group’s presentation currency as the Group’s activities are ultimately
linked to the US Dollar. The Company’s functional currency is Pound Sterling.
Transactions entered into by Group entities in a currency other than their functional currency are
recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
On consolidation, the results of overseas operations are translated into the Group’s presentation
currency, US Dollars, at rates approximating to those ruling when the transactions took place. All assets
and liabilities of overseas operations, including goodwill arising on the acquisition of those operations,
are translated at the rate ruling at the reporting date. Differences arising on translating the opening
net assets at opening rate and the results of overseas operations at actual rate are recognised in other
comprehensive income and accumulated in the foreign exchange reserve. Exchange differences
recognised in the statement of comprehensive income of Group entities' separate financial statements
on the translation of long-term monetary items forming part of the Group's net investment in the
overseas operation concerned are reclassified to the foreign exchange reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign
exchange reserve relating to that operation up to the date of disposal are transferred to the
consolidated statement of comprehensive income as part of the profit or loss on disposal. The key
US$/GBP exchange rates used to prepare the accounts were as follows: rate at 31 December 2020:
1.363; average for year-ended 31 December 2020: 1.284; rate at 31 December 2019: 1.327.
Convertible debt
The obligations associated with the issue of the Company’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.
53
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
Leased assets
Leased assets 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.
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 using a
valuation tool (Monte Carlo or Black Scholes). 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.
54
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
Investment in subsidiaries
Investments in subsidiaries are stated at cost less provision for impairment in the Company financial
statements.
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. Deliberations surrounding going concern are detailed in note 1. The significant
judgements made by management in applying the Group's accounting policies and the key sources of
estimation uncertainty were as follows:
Impairment of goodwill, intangible fixed assets, 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 Lyubomi)(see note 10). In addition, the group
has property plant and equipment in the form of the Lumberton industrial site and the CoalSwitch
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 estimated future
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.
Revaluation of land and buildings
No indicators of impairment have been identified in relation to the land and buildings owned in
Lumberton, North Carolina. Management has relied on the independent valuation obtained in 2019 to
support the valuation of the land and buildings.
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 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.
55
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. ACCOUNTING POLICIES (continued)
Critical accounting judgements and key sources of estimation uncertainty (continued)
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
assessments can result in significant variations in the carrying value and amounts charged to the
consolidated statement of comprehensive income in specific periods.
Recoverability of intercompany loans
The AEG Plc company only balance sheet contains various intercompany loans. Certain of these loans
have been impaired on the basis that the counterparty is unlikely to 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.
2. SEGMENTAL INFORMATION
"CoalSwitch™” denotes the Group’s renewable wood pellet business.
“Wood processing” denotes the Group’s sawmill and saw log activities.
"Corporate and other" denotes the Group’s corporate and other costs.
The Group reports three business segments:
•
•
•
The business segments are aligned to the Group’s strategy as disclosed in the Strategic Report. The
comparative segmental information has been restated to align with the current reporting segments.
Factors that management used to identify the Group's reportable segments
The Group's reportable segments are strategic business units that offer different products or services.
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 other income, non-recurring losses, such as goodwill
impairment, the effects of share-based payments, and joint venture profit and losses.
56
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2. SEGMENTAL INFORMATION (continued)
Revenue
Operating segment (loss)
Segment (loss) before tax
Tax credit/(charge)
Segment (loss) for the year
Total Assets
Total Liabilities
Other segmental information
Capital Expenditure
Additions to Intangibles
Depreciation &amortisation
Impairments
Revenue
Operating segment (loss)
Segment (loss) before tax
Tax credit/(charge)
Segment (loss) for the year
Total Assets
Total Liabilities
Other segmental information
Capital Expenditure
Additions to Intangibles
Depreciation, amortisation
Impairments
2020
Wood
processing
US$
1,491,735
(1,705,156)
(1,705,156)
2,790
(1,702,366)
5,057,262
1,197,093
978,394
567,668
346,288
567,668
2019
Wood
processing
US$
-
(616,372)
(616,372)
2,093
(614,279)
4,120,217
4,051,380
3,600,416
394,774
66,055
-
2020
Corporate
& Other
US$
2020
Total
US$
-
(1,207,829)
(1,207,829)
211,386
1,491,735
(3,128,247)
(3,128,247)
214,176
(996,443)
(2,914,071)
1,877,991
18,141,869
23,229,992
24,858,427
1,222
189,262
151,363
4,191,038
1,564,122
988,255
497,651
4,758,707
2019
Corporate
& Other
US$
-
(390,661)
(390,661)
30,200
(360,461)
2019
Total
US$
1,717,676
(14,144)
(14,144)
874,655
860,511
6,651,369
21,821,119
3,713,682
19,767,712
-
-
150,991
-
4,458,857
871,607
217,046
-
2020
CoalSwitch
US$
-
(215,262)
(215,262)
-
(215,263)
11,206,616
432,342
584,506
231,325
-
-
2019
CoalSwitch
US$
1,717,676
992,889
992,889
842,362
1,835,251
11,049,533
12,002,650
858,441
476,833
-
-
57
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
2. SEGMENTAL INFORMATION (continued)
Segmental results of the activities formerly included in the forestry and natural resources segment,
including the impairment of these assets, are reflected in the Corporate and Other segment.
An analysis of non-current assets by location of assets is given below:
United Kingdom
United States
Ukraine
Canada
2020
US$
6,191,236
10,442,741
-
-
2019
US$
6,498,339
9,231,743
1,056,934
3,095,832
16,633,977 19,882,848
The assets in Ukraine and Canada were fully impaired in 2020 (see Note 4 and 10).
3. REVENUE
Group
Sales of product
Grant of licence
Other income
2020
US$
1,491,735
-
318,471
1,810,206
2019
US$
-
1,617,676
188,296
1,895,972
The Group had three customers contributing 10% or more of the Group’s revenue during the current
year, contributing US$1,611,377 or 89% (2019: one customer contributed US$1,617,676).
The following table analyses revenue by location of customer.
USA
Canada
Malaysia
4.
IMPAIRMENT CHARGES
Intangible Assets
Goodwill
2020
US$
1,810,206
-
-
2019
US$
178,296
1,617,676
100,000
1,810,206
1,895,972
2020
US$
4,191,039
567,668
4,758,707
2019
US$
-
-
-
Impairment of intangible assets and goodwill were charged through the Statement of Income.
58
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
5. 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
2020
US$
1,564,916
122,105
1,687,021
38,937
17,446
1,743,404
The average monthly number of employees during the year was as follows:
Directors
Administration
Production
2020
5
2
30
37
2019
US$
1,075,916
130,155
1,206,071
224,840
144,010
1,574,921
2019
3
3
5
11
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 year these were considered to be the
Directors of the Company, as listed on pages 20 and 21.
Directors' emoluments
Share based payments
2020
US$
643,480
17,446
660,926
2019
US$
411,444
144,010
555,454
The emoluments of the highest paid Director for the year, excluding non-cash share-based payments,
were US$331,695 (2019: US$191,540).
6. OPERATING LOSS
Group
The loss before income tax is stated after charging/(crediting):
Amortisation of intangible assets
Impairment charges
Depreciation
Depreciation on Right-of-Use Assets
Loss on disposal of fixed assets/discontinued operations
Auditors' remuneration - parent company and consolidation
Auditors' remuneration - subsidiaries
Auditors' remuneration - taxation services
Auditors' remuneration - other services
Share based payments
59
2020
US$
150,991
4,758,707
237,894
108,767
-
51,362
37,237
75,353
22,139
56,382
2019
US$
150,991
-
66,055
-
678,803
42,777
24,517
145,827
14,046
368,850
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
7. FINANCE COSTS
Group
Interest on convertible loan
Right -of-Use lease interest
Other loan interest and charges
Foreign exchange losses
Net finance costs
2020
US$
1,365,474
36,242
1,600
(56,086)
1,347,230
2019
US$
1,445,234
-
298,954
717,188
2,461,376
Foreign exchanges movements primarily relate to movements in US$/Sterling exchange rates.
8. TAXATION
Group
Current tax
R&D tax credit at 14.5% on continued operations
Deferred tax
Reversal of temporary differences
Total income tax credit
Factors affecting the tax charge
2020
US$
2019
US$
-
(842,364)
(214,176)
(214,176)
(32,291)
(874,655)
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
Other
Accelerated depreciation
Revenue items capitalised
Losses not recognised
2020
US$
(8,972,095)
19%
(1,704,698)
-
1,130,662
(120,069)
(26,421)
-
-
506,350
2019
US$
(3,344,877)
19%
(635,527)
(507,108)
8,275
272
-
107,718
(278,539)
Current tax credit
(214,176)
(874,655)
60
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
8. TAXATION (continued)
Movements in the Group’s tax loss position can be summarised as follows:
Tax losses brought forward - 1 January
Adjusted Loss per A/c's
True up to prior losses
Surrendered for R&D tax credit
Tax losses carried forward - 31 December
2020
US$
22,886,605
5,916,468
7,166,281
-
35,969,354
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$6,834,177 at the year-end 2020 (2019:
US$4,348,455), which has not been recognised due to uncertainties regarding the recoverability of this
balance.
Tax effects of amounts which are not deductible in calculating taxable income are as follows:
Impairment of intercompany balances
Impairment of goodwill
Share based payments
Investor relations
Sundry items
9. LOSS PER SHARE
2020
US$
1,012,021
107,857
10,713
-
71
1,130,662
2019
US$
-
7,533
-
8,275
Basic and diluted loss per share is calculated by dividing the loss attributable to equity holders of the
company of US$8,757,919 (2019: US$2,470,222) by the weighted average number of Ordinary Shares
in issue during the year of 1,342,513,670 (2019: 1,201,906,951).
Basic and diluted loss per share are the same where the effect of any potential shares is anti-dilutive
and is therefore excluded.
61
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
10. INTANGIBLE ASSETS
Group
Cost
At 31 December 2018
Additions
At 31 December 2019
Additions
At 31 December 2020
Accumulated amortisation
At 31 December 2018
Amortisation charge for the year
At 31 December 2019
Impairment charge
Amortisation charge for the year
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
Goodwill
US$
-
-
-
567,668
Intellectual
property
US$
4,551,228
476,833
5,028,061
231,325
Timber
licences
US$
5,919,939
394,774
6,314,713
189,262
Total
US$
10,471,167
871,607
11,342,774
988,255
567,668
5,259,386
6,503,975
12,331,029
-
-
-
567,668
-
567,668
362
-
362
-
-
362
2,010,955
150,991
2,161,946
4,191,039
150,990
2,011,317
150,991
2,162,308
4,758,707
150,990
6,503,975
7,072,005
-
-
5,259,024
5,027,699
-
4,152,767
5,259,024
9,180,466
Goodwill:
Acquisition of wood processing and export business
On 31 March 2020, AEG announced that it had entered into an agreement with its joint venture partner
Renewable Logistics Systems LLC (“RLS”) whereby AEG acquired RLS’s joint venture interest in RES and
thereby secured 100% control and ownership of the sawmill and saw log export activities based at
AEG’s industrial site in Lumberton, North Carolina. As consideration, AEG and RLS agreed for AEG to
pay US $350,000. This was satisfied by the issuance to RLS of 64,863,412 new ordinary shares of 1p in
AEG on the closing date. In addition, AEG wrote off certain advances made to the earlier joint venture.
As a result, all assets previously associated with the joint venture, including plant and equipment,
inventory and goodwill (including customer contracts) were transferred to Active Energy Renewable
Power LLC, a wholly owned subsidiary of AEG. As a result, the Group recognized property plant &
equipment of US$ 240,623, inventory of US$24,092 and goodwill of US$567,668. Following losses from
these businesses during 2020, the impairment review at 31 December 2020 determined that the
goodwill should be fully impaired.
62
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
10. INTANGIBLE ASSETS (continued)
Intellectual property
Intellectual property comprises costs incurred to secure the rights and knowledge associated with the
CoalSwitch and PeatSwitch technologies. This asset is accounted for as an indefinite life asset and is
not amortised but is assessed for impairment at each balance sheet date.
Recoverability of intellectual property assets is dependent on successfully commercialising CoalSwitch,
which is subject to a number of uncertainties including the ability of the Group to access financial
resources to develop the projects and bring the product to economic maturity and profitability.
Commercial production of CoalSwitch has recently commenced and based upon forward projections
of production growth, management determined that no impairment was required. Management will
continue to monitor the recoverability of these assets.
Timber licences
Timber licences are accounted for as finite life assets and are depreciated over management’s estimate
of useful life.
Ukraine: The Group is party to a supply contract granted by the Lyubomi Forestry, which is the
administrator of the Lyubomi Forest in Ukraine. This contract was extended to October 2060. The
Group’s strategic focus is directed towards the development of CoalSwitch in the United States and
does not foresee having capital to allocate to this supply contract. Management will seek to sell the
rights to this supply contract, however the political situation in Ukraine is complicated and accordingly
an additional impairment has been raised to reduce the carrying value of this asset to US$nil.
Northern Alberta: In 2019 AEG sold a CoalSwitch licence to RMDE whereby the latter would have the
right to develop and sell CoalSwitch 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$5 for each
tonne of CoalSwitch produced. Management has determined that it is unlikely that royalty payments
under the licence agreement will accrue and has fully impaired the recorded value of the licence.
Should RMDE commence construction of a CoalSwitch facility, management will review the
impairment charge.
Newfoundland: The commercial cutting permits issued by the Provincial Government of Newfoundland
& Labrador contain gateway provisions which require certain volumes of timber to be cut, failing which
the permits can be forfeited. Owing to Covid-19 restrictions, the Group will not meet the required
thresholds. The Group has made application for an extension due to the circumstances, but there is
uncertainty whether this will be granted. Accordingly, the asset has been impaired in full. Should an
extension be granted the impairment charge will be reviewed.
63
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
11. PROPERTY, PLANT AND EQUIPMENT
Group
Cost
Land &
Buildings
US$
Plant and
equipment
US$
Furniture
and office
equipment
US$
Total
US$
At 31 December 2018
-
5,440,888
8,960
5,449,848
Revaluation of Land & Buildings
Additions
Disposals
At 31 December 2019
Additions
Assets acquired in the
acquisition of RES LLC
Disposals
Transfers
Foreign exchange differences
504,646
3,512,999
-
-
-
504,646
912,721
(1,106,593)
33,137
-
4,458,857
(1,106,593)
4,017,645
5,247,016
42,097
9,306,758
41,206
1,281,071
1,222
1,323,499
240,623
(5,614)
(12,031)
-
-
-
-
-
45,168
(33,137)
-
167
240,623
(5,614)
-
167
At 31 December 2020
4,281,829
6,573,255
10,349
10,865,433
Accumulated depreciation
At 31 December 2018
Charge for the year
Disposals
At 31 December 2019
Charge for the year
Transfers
Foreign exchange differences
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
-
54,000
-
54,000
111,977
-
165,977
65,000
5,428
(65,000)
5,428
201,198
39,740
-
246,366
8,960
6,627
-
15,587
33,486
(39,740)
116
9,449
73,960
66,055
(65,000)
75,015
346,661
-
116
421,792
4,115,852
6,326,889
900
10,443,641
3,963,645
5,241,588
26,510
9,231,743
Included within Plant and equipment are right-of-use assets with a cost of US$435,066, and
accumulated depreciation of US$108,767 which have been recognised for the first time upon adoption
of IFRS 16. There has been no impairment on these right-of-use assets. They relate to plant and
equipment in USA with a lease length of three years. See note 21 for further information.
Recoverability of plant and equipment assets is dependent on successfully commercialising
CoalSwitch, which is subject to a number of uncertainties including the ability of the Group to access
financial resources to develop the projects and bring the product to economic maturity and
profitability. Commercial production of CoalSwitch has recently commenced and based upon forward
projections of production growth, management determined that no impairment was required.
Management will continue to monitor the recoverability of these assets.
64
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
11. PROPERTY, PLANT AND EQUIPMENT (continued)
Company
Cost
At 31 December 2018, & 2019
Additions
Foreign exchange differences
At 31 December 2020
Accumulated depreciation
At 31 December 2018, & 2019
Depreciation charge for the year
Foreign exchange differences
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
12. INVESTMENTS IN SUBSIDIARIES
Company
Cost
At 31 December 2018
Additions
At 31 December 2019
Foreign exchange differences
At 31 December 2020
Provision for impairment
At 31 December 2018 & 2019 b/f
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
65
Furniture and
office
equipment
US$
8,960
1,222
167
10,349
8,960
373
116
9,449
900
-
US$
4,555,044
1,396,665
5,951,709
40,852
5,992,561
4,496,618
4,496,618
1,495,943
1,455,091
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
12. INVESTMENTS IN SUBSIDIARIES (continued)
At 31 December 2020 the Group held share capital and had a controlling interest in each of the following
companies:
Subsidiary undertaking
Country of
incorporation
Nature of business
AE Ukraine
Nikofeso Holdings Limited
AE Trading (EMEA) SarL Note 1
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
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
Corporate Services
Biomass for energy
development
Biomass for energy
development
Biomass for energy
development
Biomass for energy
development
Biomass for energy
development
Biomass for energy
development
Canada
United States Property Holding Company
United States
Biomass for energy
development
Wood processing and
distribution
Percentage
Holding
2020 2019
100
100
100
100
100
100
100
100
100
100
Note 1
100
89
89
100
100
99
99
76
76
76
100
76
100
100
100
1002
30
Renewable Energy Systems
United States
Note 1AEG Biopower Limited was dissolved on 29 September 2020 and AETrading (EMEA) SarL was being
wound up as of the date of this report.
Note 2AEG purchased the 70% remaining interest in RES from Renewable Logistics Systems LLC (“RLS”) on 31
March 2020 (See note 10). All lumber activities at Lumberton are now wholly controlled and operated by
Active Energy Renewable Power (“AERP”), a wholly owned subsidiary of AEG PLC.
66
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
13. LONG TERM LOANS
Carrying value at beginning of the year
Loans advanced during the year
Provision for impairment
Accrued interest
Carrying value at end of the year
Group
2020
US$
Group
2019
US$
-
-
-
-
-
-
-
-
-
-
Company
2020
US$
23,272,315
6,387,462
(8,662,410)
2,207,161
Company
2019
US$
17,372,234
3,562,889
-
2,337,192
23,204,528
23,272,315
Interest is accrued at a rate of 12 %, at the discretion of the Company, which is considered to be a
market rate. The loans have no set date of repayment.
An impairment was raised against loans made to AE Ukraine and Timberlands Int. Limited where
impairments have been raised against the respective Timber Licences.
14. OTHER FINANCIAL ASSETS
Group
2020
US$
Group
2019
US$
Company
2020
US$
Company
2019
US$
Fair value at beginning of the year
Shares purchased during the year
Fair value adjustment
Foreign exchange translation
1,470,639
-
(539,327)
752,215
132,705
1,470,639
-
563,947
21,772
(539,327)
752,215
132,795
563,947
21,772
Fair value at end of the year
931,312
1,470,639
931,312
1,470,639
Other financial assets consist of an unquoted equity instrument which is valued at fair value through
Other Comprehensive Income and classified as a non- current asset. The instrument is denominated in
Pound Sterling.
This asset is valued according to Level 3 inputs as defined by IFRS 13 and is therefore subject to
management’s judgement of unobservable inputs. Having revalued the asset in 2019, management
has determined that the best available information would support a reversal of the revaluation, and
continuing to hold the investment at acquisition price.
Management will continue to monitor this asset for indications of impairment.
67
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
15. INVENTORY
Raw materials
Finished goods
Total Inventory
16. TRADE AND OTHER RECEIVABLES
Group
2020
US$
167,993
69,513
237,506
Group
2019
US$
-
-
-
Company
2020
US$
-
-
Company
2019
US$
-
-
-
-
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. These assets are not interest
bearing and receipts occur over a short period and are subject to an insignificant risk of changes in
value.
Amounts advanced to JV partners
Amounts due from group companies
Other receivables
VAT
Prepayments
Corporation tax credit receivable
Group
2020
US$
-
-
74,155
-
54,362
142,238
Group
2019
US$
200,000
-
48,321
43,957
50,000
804,537
Company
2020
US$
-
-
-
-
-
-
Company
2019
US$
200,000
688,768
21,507
41,957
-
-
Total
270,255
1,146,815
-
954,232
Trade and other receivables that have not been received within the payment terms are classified as
overdue. As at 31 December 2020 trade receivables of US$nil (2019: US$nil) were overdue and
accordingly no impairment provisions have been raised (2019: US$nil). An analysis of the Group's trade
and other receivables classified as financial assets by currency is provided in note 25.
The carrying value of trade and other receivables approximates to fair value.
17. CASH AND CASH EQUIVALENTS
Group
2020
US$
Group
2019
US$
Company
2020
US$
Company
2019
US$
Cash at bank
999,631
397,323
811,901
360,622
999,631
397,323
811,901
360,622
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.
68
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
18. TRADE AND OTHER PAYABLES
Group
2020
US$
Group
2019
US$
Company
2020
US$
Company
2019
US$
Trade payables
Social security and other taxes
Accruals and deferred income
1,340,213
383,664
367,780
1,615,201
136,193
639,835
515,309
385,971
282,547
747,864
42,758
650,971
2,091,657
2,391,229
1,183,827
1,441,593
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 full balance of the trade and
other payables becomes due and payable within three months of the reporting date. These are
classified as financial liabilities on the balance sheet, and they are measured at amortised cost.
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 25.
The carrying value of trade and other payables approximates to fair value.
19. DEFERRED TAXATION
Deferred tax is calculated on temporary differences under the liability method using tax rates
applicable in the respective Group entities’ jurisdiction.
Group
At beginning of the year
Deferred tax liability recognised on revaluation of land & buildings
Reversal of temporary differences
At the end of the year
2020
US$
364,316
(2,790)
(211,387)
2019
US$
241,585
155,022
(32,291)
150,139
364,316
The deferred tax liability relates to temporary differences arising on the fair valuation of intangible
assets and land and buildings.
No provision for deferred tax assets 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.
69
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
20. LOANS AND BORROWINGS
The book value and fair value of loans and borrowings are as follows:
Group
Non-Current
Secured convertible debt
Unsecured loans
Current
Unsecured loans
Book value
2020
US$
Fair value
2020
US$
Book value
2019
US$
Fair value
2019
US$
21,914,723
190,828
21,914,723
190,828
18,190,732
-
18,190,732
-
22,105,551
22,105,551
18,190,732
18,190,732
21,772
21,772
108,850
108,850
Total loans and borrowings
22,127,323
22,127,323
18,299,582
18,299,582
Company
Non-Current
Secured convertible debt
Unsecured loans
Current
Unsecured loans
Book value
2020
US$
Fair value
2020
US$
Book value
2019
US$
Fair value
2019
US$
21,914,723
46,381
21,914,723
46,381
18,190,732
-
18,190,732
-
21,961,104
21,961,104
18,190,732
18,190,732
21,772
21,772
-
-
Total loans and borrowings
21,982,876
21,982,876
18,190,732
18,190,732
Secured convertible debt
The Company has issued secured convertible loan notes (“CLNs”) with a maturity date of 14 March
2022. The CLN were listed on the International Securities Exchange, with an 8% coupon payable
quarterly. The CLNs were denominated in Pound Sterling. The CLNs were secured by a pledge of the
entire Group’s assets.
During 2020 certain CLN holders received new CLNs in lieu of interest for £1.4 million (2019: £1.2
million), conversions of CLNs were £2.0 million (2019: £0.1 million) and new issues of CLN were
£1.9million (2019: £4.76 million). 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%.
At 31 December 2020, there were £10.5 million CLNs in issue with a conversion price of 3.295p, and a
further £7.9 million CLNs with a conversion price of 1.0p.
In February 2021, the Company announced that it had received conversion notices in respect of £16.6
million CLNs pursuant to which the Company subsequently issued 1,660,873,700 New Ordinary Shares
to the relevant CLN holders. Outstanding CLNs of £1.4 million were redeemed and a further £0.4
million of CLNs were cancelled to fully extinguish the CLN debt see note 29.
70
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
20. LOANS AND BORROWINGS (continued)
Unsecured loans
During the year the Group repaid US$0.1m of unsecured short-term loans and took out a further
US$0.2m.
The following table analyses the maturity of the unsecured loans. The amounts shown are
undiscounted and represent contractual cash-flows.
Group
At 31 December 2020
Unsecured loans
At 31 December 2019
Unsecured loans
Company
At 31 December 2020
Unsecured loans
At 31 December 2019
Unsecured loans
Up to
3 months
US$
Between
3 and 12
months
US$
Between 1
and 2
years
US$
Between 2
and 5
years
US$
Over 5
years
US$
Total
US$
-
21,772
58,468
43,179
89,181
212,600
108,850
-
-
-
-
108,850
Up to
3 months
US$
Between
3 and 12
months
US$
Between 1
and 2
years
US$
Between 2
and 5
years
US$
Over 5
years
US$
-
21,772
9,907
36,474
-
-
-
-
-
-
Total
US$
68,143
-
The carrying value of loans and borrowings approximates to fair value.
71
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
21. RIGHT-OF-USE ASSETS AND LIABILITIES
Group
Non-Current Asset – Plant and Equipment
Balance brought forward
Additions to leases during the year
Depreciation
Balance at year end
Lease liability
Balance brought forward
Additions to leases during the year
Interest expense on leases
Lease payments
Total lease liability
Current lease liability
Non-current lease liability
Total lease liability
2020
US$
-
435,066
(108,767)
326,299
-
435,066
36,242
(132,000)
339,308
136,891
202,417
339,308
2019
US$
-
-
-
-
-
-
-
-
-
-
-
-
There has been no impairment on these right-of-use assets which relate to plant and equipment in
USA with a lease length of three years.
Cash outflow for leases (IFRS16) financing activity
Group
Principal
Interest
Total cash outflow
2020
US$
95,758
36,758
132,000
2019
US$
-
-
-
The Company did not have any Right-Of-Use assets or lease liabilities.
72
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
22. CALLED UP SHARE CAPITAL
Allotted, called up and fully paid
2020
Number
Ordinary
shares of
0.01p each
2020
US$
2019
Number
Ordinary
shares of
1p each
2019
US$
At 1 January
Issue of shares
1,201,906,951
339,271,092
17,265,379
1,102,955
1,201,906,951
-
17,265,379
-
As at 31 December
1,541,178,043
18,368,334
1,201,906,951
17,265,379
This is split as follows between:
Ordinary shares
Deferred shares (0.99p each)
1,541,178,043
1,287,536,163
219,436
18,148,898
1,201,906,951
Total shares
18,368,334
17,265,379
-
17,265,379
On the 7 September 2020 the 1,287,536,163 Ordinary shares of 1p each in issue at that time were sub-
divided into the same number of New Ordinary Shares of 0.01p each and one Deferred share of 0.99p.
The Deferred Shares were not admitted to trading on AIM, carry no voting rights and are purchasable
at £1 in aggregate.
Following Equity placing and further Convertible Loan note conversions the Company had issued
shares of 1,541,178,043 at the end of December 2020. During 2020 the Company issued a net total of
339,271,092 Ordinary Shares for a total consideration of US$ 2.5m. During 2019 the Company did not
issue any shares.
23. 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 (2019: 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 2020 was 108,450,000 (2019: 123,001,619).
73
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
23. SHARE OPTIONS AND WARRANTS (continued)
The movements of warrants and share options during the period were as follows:
2020
Weighted
Average
Exercise
2020
Number of
Warrants
and Share
Options
2019
Weighted
Average
Exercise
2019
Number of
Warrants
and Share
Options
price
price
(UK pence)
(UK pence)
Outstanding at beginning of the year
Cancelled
Granted
Outstanding at end of the year
3.46
2.22
1.00
3.57
123,001,619
(19,551,619)
5,000,000
108,450,000
3.77
1.98
0.79
3.46
124,825,099
(36,823,480)
35,000,000
123,001,619
At 31 December 2020, the weighted average remaining contractual life of warrants and share options
exercisable was 4.29 years (2019 – 4.63 years). Total share options and warrants of 5,000,000 (2019:
35,000,000) were granted during the year at a weighted average exercise price of 1.0 pence (2019:
0.78 pence).
There was charge for equity settled share-based payments to employees and directors of US$56,382
(2019: US$368,851) in the income statement for the year ended 31 December 2020. During the year
ended 31 December 2020 no share options granted to employees or directors were cancelled and as
a result no credit to equity settled share-based payments was recognised during the year (2019:
US$nil).
Options and warrants outstanding at 31 December 2020 were exercisable as follows:
Exercise price range (Pence, US cents in brackets)
2020
2019
Number
15,000,000
20,000,000
5,000,000
7,500,000
-
13,450,000
20,500,000
2,000,000
4,500,000
20,500,000
Number
15,000,000
20,000,000
-
7,500,000
19,047,619
13,450,000
20,500,000
2,000,000
4,500,000
20,500,000
-
504,000
108,450,000
123,001,619
0.5p (0.657 cent)
1.000p (1.315 cent)
1.000p (1.26 cent)
1.500p (2.023 cent)
1.750p (2.360 cent)
3.000p (4.047cent)
4.500p (6,281 cent)
5.000p (6.745 cent)
6.000p (8.094 cent)
8.500p (11.863 cent)
20.000p (26.982 cent)
At the end of the year
The above disclosures apply to both the Company and the Group.
74
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
23. SHARE OPTIONS AND WARRANTS (continued)
JSOP awards
Under the Joint Share Ownership Plan (“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.
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
2020 (2019:US$nil). The share-based payment charge for the year is US$nil (2019: US$nil) related to
the JSOP awards.
75
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
24. RESERVES
The following describes the nature and purpose of each reserve within equity:
Reserve
Share premium
Merger reserve
Description and purpose
Amounts subscribed for share capital in excess of nominal value.
Difference between fair value and nominal value of shares issued to acquire
90% or more interest in subsidiaries.
Foreign exchange reserve Gains/losses arising on retranslating the net assets of overseas operations
into US Dollars.
Own shares held reserve
Cost of own shares held by the employee benefit trust, the JSOP trust or
the company as shares held in escrow.
Convertible debt and
warrant reserve
Equity component of the convertible loan and the fair value of equity
component of warrants issued that do not form part of a share-based
payment.
Revaluation reserve
Increase in valuation of land and buildings to reflect updated valuations.
Retained earnings/
Accumulated loss
Cumulative net gains and losses recognised in the consolidated statement
of comprehensive income.
25. NOTE SUPPORTING THE STATEMENT OF CASH FLOWS
Reconciliation of loss before taxation to cash outflows from operating activities
Group
Loss for the year
Adjustments for:
Share based payment expense
Depreciation
Amortisation of intangibles
Impairment of intangible assets
Loss on disposal of PP&E
Foreign currency translations
Finance expenses
Income tax
Increase in inventories
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash (outflow)/inflow from operating activities
2020
US$
(8,757,919)
56,382
346,661
150,990
4,758,707
-
(56,080)
1,403,316
(214,176)
(2,312,119)
(213,414)
589,449
633,524
(1,302,560)
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
76
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
25. NOTE SUPPORTING THE STATEMENT OF CASH FLOWS (continued)
Company
(Loss)/Profit for the year
Adjustments for:
Share based payment expense
Depreciation
Impairment of intercompany loans
Foreign currency translations
Finance income
Finance expenses
Increase in trade and other receivables
(Decrease)/increase in trade and other
payables
Net cash (outflow)/ inflow from operating
activities
Non-cash transactions are excluded from cash flows.
Cash to Net debt reconciliation.
2020
US$
(6,733,779)
56,382
373
5,326,430
281,370
(1,326,585)
1,365,474
(1,030,335)
(471,542)
2019
US$
1,105,751
368,850
-
-
722,054
-
1,744,188
3,940,843
(5,267,287)
(259,366)
2,528,309
(1,761,243)
1,201,865
Cash and cash equivalents
Borrowings
Convertible loan notes
Right-Of-Use Lease Liability
Net Debt
Group
2020
US$
999,631
(212,600)
(21,914,723)
(339,308)
Group
2019
US$
397,323
(108,850)
(18,190,732)
-
Company
2020
US$
811,901
(68,153)
(21,914,723)
-
Company
2019
US$
360,622
-
(18,190,732)
-
(21,467,000)
(17,902,259)
(21,170,975)
(17,830,110)
Cash and liquid investments
Fixed rate instruments
999,631
(22,466,631)
397,323
(18,299,582)
811,901
(21,982,876)
360,622
(18,190,732)
Net Debt
(21,467,000)
(17,902,259)
(21,170,975)
(17,830,110)
77
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
25. NOTE SUPPORTING THE STATEMENT OF CASH FLOWS (continued)
Net Debt Reconciliation for the Group
Cash and
cash
equivalents
US$
Borrowings
US$
Convertible
loan notes
US$
Right-Of-
Use lease
Liability
US$
Total Debt
US$
Net Debt
US$
397,323
597,775
4,533
(108,850)
(212,600)
-
(18,190,732)
(1,467,778)
(125,917)
-
95,758
-
(18,299,582)
(1,584,620)
(125,917)
(17,902,259)
(986,845)
(121,384)
-
-
-
-
-
-
-
(494,249)
354,159
108,850
(108,850)
(1,881,356)
-
-
-
-
-
-
(494,249)
(494,249)
354,159
354,159
-
-
(1,881,356)
(1,881,356)
999,631
(212,600)
(21,914,723)
(339,308)
(22,466,631)
(21,467,000)
-
(435,066)
(435,066)
(435,066)
Net debt at 1
January 2020
Cashflows
FX adjustments
Interest accrual
for CLN to be
issued
Equity adjustment
non-cash
CLN issued in lieu
of borrowings
New loan notes in
lieu of interest
New lease
agreements
Net Debt at 31
December 2020
Net Debt Reconciliation for the Company
Cash and
cash
equivalents
US$
Borrowings
US$
Convertible
loan notes
US$
Right-Of-
Use lease
Liability
US$
360,622
451,779
(500)
-
(68,153)
-
(18,190,732)
(1,467,778)
(125,917)
-
-
-
-
-
-
-
-
(494,249)
354,159
(108,850)
(1,881,356)
-
-
-
-
-
-
-
Total Debt
US$
Net Debt
US$
(18,190,732)
(1,530,203)
(131,645)
(17,830,110)
(1,078,424)
(132,145)
(494,249)
(494,249)
354,159
354,159
(108,850)
(108,850)
(1,881,356)
(1,881,356)
811,901
(68,153)
(21,914,723)
-
(21,982,876)
(21,170,975)
Net debt at 1
January 2020
Cashflows
FX adjustments
Interest accrual
for CLN to be
issued
Equity adjustment
non-cash
CLN issued in lieu
of borrowings
New loan notes
in lieu of interest
Net Debt at 31
December 2020
78
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
26. 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
Advanced to joint venture partners
Amounts due from group companies
Other receivables
Group
2020
US$
999,631
-
-
74,155
Group
2019
US$
397,323
200,000
-
48,321
Company
2020
US$
Company
2019
US$
811,901
-
360,622
200,000
23,204,528 23,961,083
21,507
-
Financial investments
Total financial assets
Financial liabilities
1,073,786
645,644
24,016,429 24,543,212
931,312
1,470,639
931,312
1,470,639
2,005,098
2,116,283
24,947,741 26,013,861
Group
2020
US$
Group
Company
Company
2019
US$
2020
US$
2019
US$
Financial liabilities at amortised cost
Trade payables
Other current liabilities
Loans and Borrowings
1,340,213
150,000
22,466,631
1,615,201
-
18,299,582
515,309
-
747,864
-
21,982,876 18,190,732
Total financial liabilities
23,956,844
19,914,784
22,498,185 18,938,596
79
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
26. 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 unquoted equity instrument disclosed in Other Financial Assets is recorded at carrying value, which
is classified as level 3. The carrying value of Other Financial Assets approximates to fair value.
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 cash and cash equivalents are denominated in the following
currencies:
US Dollar
UK Pound sterling
Euro
Group
2020
US$
727,890
271,651
90
999,631
Group
2019
US$
267,529
125,873
3,921
397,323
Company
2020
US$
670,169
141,650
82
Company
2019
US$
261,311
99,303
8
811,901
360,622
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
2020
US$
27,218
46,937
74,155
Group
2019
US$
46,507
1,814
48,321
Company
2020
US$
-
-
-
Company
2019
US$
-
21,507
21,507
80
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
26. 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
Ukrainian Hryvnia
Group
2020
US$
956,617
523,596
10,000
1,490,213
Group
2019
US$
867,337
747,864
-
1,615,201
Company
2020
US$
-
515,309
-
515,309
Company
2019
US$
-
747,864
-
747,864
The effect of a 5 per cent strengthening of the US Dollar at the reporting date on the foreign
denominated net financial instruments carried at that date would, all variables held constant, would
have resulted in an increase in net assets by US$9,762 (2019: increase in net assets by US$24,734). 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 20.
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 16.
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.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the payments associated
with the group’s convertible loan notes. As disclosed in note 29, in 2021, the entire convertible loan
note balance was converted or redeemed, to reduce the liquidity risk associated with this instrument.
The Group retains operational liquidity risk, with material uncertainties identified surrounding going
concern (see note 1) as the Group starts to commercialise CoalSwitch. During this period there is a risk
that the Group will encounter difficulty in meeting its financial obligations as they fall due.
81
ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
26. FINANCIAL INSTRUMENTS (continued)
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 debt
instruments. 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 bank loans at 31 December 2020 of US$212,600 (2019: US$nil). As of 31 December 202
there were US$24,943,681 convertible loan notes (undiscounted) in issue (2019: US$20,190,995). 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.
27. RELATED PARTY DISCLOSURES
Details of Director's remuneration are given in the Directors’ Remuneration Report.
In 2019 the Group entered into a joint venture arrangement with Renewable Logistics Systems LLC
(“RLS”), to develop saw log exports at AEG’s Lumberton site. In March 2020, AEG purchased the
remaining 70% of the equity from RLS (see note 10). This agreement was in addition to an existing
rental agreement between RLS and the Group. Antonio Esposito holds a 30% interest in RLS via his
wife, Lisa Esposito.
During 2020, the Group paid $10,000 to Zimmfor Management Services for services related to the
Newfoundland and Labrador cutting permit. This company is owned by Jason Zimmermann.
Transactions between the Company and its subsidiaries, which are related parties to the Company,
have been eliminated on consolidation.
The Company’s intercompany receivable balances at the year-end were as follows:
Amounts due from Group companies
28. CAPITAL COMMITMENTS
2020
US$
23,204,528
2019
US$
23,796,415
Capital commitments at 31 December 2020 were $750,000 for the purchase of CoalSwitch equipment
(2019: US$nil).
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ACTIVE ENERGY GROUP PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
29. SUBSEQUENT EVENTS
The key business developments since 31 December 2020 were as follows:
•
In January 2021, Advanced Biomass Solutions Plc, a subsidiary of the Company, completed and
drew upon a debt facility of £550,000. The debt instrument is repayable within twelve months
based on monthly capital repayments following a four-month repayment holiday. Initiation fees
of 7% were payable, and interest is charged at 10% p.a. payable quarterly in arrears. The Company
has provided a corporate guarantee as security.
In February 2021, the convertible loan note (“CLN”) holders agreed to either convert their CLN’s
or have them redeemed. Furthermore, the CLN holders agreed to a release of the securities held
over the Companies assets in favour of the CLN holders. At the same time the Company raised
£7.0 million in a fundraising (before expenses), principally to progress the construction of the
Lumberton CoalSwitch reference plant. At the time of reporting the CLN obligation has been fully
extinguished. The shares in issue at the reporting date were 3,902,051,743, compared to
1,541,178,043 at 31 December 2020;
•
• On 20 May 2021, the Company announced its joint venture arrangement with Player Design Inc.
(“PDI”). Under the JV, AEG and PDI will jointly own and operate a CoalSwitch plant in Ashland,
Maine. The plant has been completed and is in production and will supply CoalSwitch for the
PacifiCorp trial burn.
30. ULTIMATE CONTROLLING PARTY
In the opinion of the directors there is no one ultimate controlling party.
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