EQTEC plc (Formerly REACT Energy plc)
Annual Report and Accounts 2017
1
EQTEC plc (Formerly REACT Energy plc)
Contents
Chairman and Chief Executive’s Report.....................................................
3
Directors ............................................................................................................. 5
Advisors and other information ...................................................................
Directors’ Report ..............................................................................................
Statement of the Directors’ Responsibilities...............................................
Corporate Governance Report .................................................... ...... .........
Independent Auditors’ Report..........................................................................
Consolidated statement of profit or loss .....................................................
Consolidated statement of other comprehensive income ......................
Consolidated statement of financial position..............................................
Consolidated statement of changes in equity.............................................
Consolidated statement of cash flows..........................................................
Company statement of financial position....................................................
Company statement of changes in equity...................................................
Company statement of cash flows................................................................
Notes to the consolidated financial statements..........................................
6
7
12
13
15
22
23
24
25
26
27
28
29
30
2
EQTEC plc (Formerly REACT Energy plc)
Chairman and Chief Executive’s Report
The Company presents the 2017 Annual Report, which is issued in conjunction with an Admission Document
which details the proposed acquisition (the “Acquisition”) of EQTEC Iberia SL (“EQTEC Iberia”), a
proposed placing of 246,153,847 new ordinary shares (the “Placing Shares”) at 0.65p per share (the “Placing
Price”), admission of the resulting Enlarged Share Capital to trading on AIM (the “Admission”) and a Notice
of Extraordinary General Meeting. The Admission Document will be posted to Shareholders at the same time
as this Annual Report.
The Board is pleased to inform Shareholders that terms have been agreed for the proposed acquisition of the
entire issued share capital of EQTEC Iberia, an engineering company founded in 1997 and headquartered in
Barcelona (Spain) specialising in the design, construction, operation and maintenance of power plants.
EQTEC Iberia is 66.99 per cent owned by EBIOSS, which currently also holds 50.03 per cent of EQTEC plc.
The total consideration for the Acquisition is £14 million which will be satisfied by the issue of 833,864,531
New Ordinary Shares on Admission. In addition, in order to fund the working capital needs of the Enlarged
Group and the continued development of its near term pipeline the Company is undertaking a Placing to raise
£1.6 million (before expenses) by the issue of the Placing Shares. Given the scale of the Acquisition, when
compared to the existing Group, the transaction is a Reverse Takeover under the AIM Rules and therefore
requires the Company to issue this new admission document and obtain shareholder approval for the
Acquisition. Under the Irish Takeover Rules (Rule 40) it is also a Reverse Takeover requiring that a circular be
posted to the Company’s Shareholders. Accordingly, the Acquisition is conditional, inter alia, on the approval
by shareholders of the resolutions to be proposed at the Extraordinary General Meeting (the “Resolutions”),
which is being convened for 11.30 a.m. on Wednesday 20th December 2017, notice of which is set out in the
enclosed Admission Document.
The Group was established with a view to take advantage of the growing opportunities in the clean energy
sector and is now a diversified renewable energy company with assets in the UK and Ireland. The Group, to
this point, focused on projects in the Biomass, Electricity and Heat sector in the UK. The Group also has
assets in the wind sector in Ireland and has focused on the delivery of projects from green field opportunities,
through the planning, grid and construction phases and into cash generating assets.
We believe that the Acquisition represents a transformational step in refocusing the Group’s strategy to the
Energy from Waste (“EfW”) market in the UK and Europe. Pursuant to the Acquisition the Enlarged Group
would combine EQTEC Iberia’s patented gasification technology with a strong pipeline of projects and solid
relations with some of the market leaders in the energy sector. Together with a combined experienced
management, resulting from the Acquisition, and solid knowledge in the UK and Europe of the renewable
energy marketplace, it will place the Enlarged Group in an advantageous position to become a leading
technology provider in the EfW sector using its progressive energy recovery technology.
The current project portfolio of the Company will be assessed and dealt with in light of the revised strategy as
set out in the Admission Document. The Company’s existing project pipeline which includes Newry Biomass
Limited will be converted where possible to use of Refuse Derived Fuel as the feedstock source in line with
EQTEC Iberia’s pipeline of UK based projects. The Company will not pursue the Enfield Biomass Limited
project under this revised strategy. The Company will seek to exit its Biomass Heat only projects in the UK
and its Wind Electricity Generation projects in Ireland as these are now seen as non-core. With this in mind
the Company is at the final stages of completing the disposal of the Pluckanes single wind turbine in Ireland.
In conjunction with the Acquisition, the Company is proposing to raise approximately £1.6 million, before
expenses, through the issue of the Placing Shares at the Placing Price. The Placing Shares will represent
approximately 18 per cent of the Enlarged Share Capital on Admission. The Placing and the Acquisition are
conditional upon, inter alia, the Resolutions being passed at the Extraordinary General Meeting and
Admission. On Admission, the Company will have a market capitalisation of approximately £8.8 million based
on the Placing Price.
3
EQTEC plc (Formerly REACT Energy plc)
Chairman and Chief Executive’s Report – continued
The Directors, having considered the advice provided to them by the Company’s Nominated Advisor consider that the
Acquisition is in the best interests of the Company and the Shareholders as a whole and unanimously recommend that
the Shareholders vote in favour of each of the Resolutions.
Should Shareholders not vote in favour of the Resolutions and/or Admission does not take place, the Directors believe
that the future sustainability and viability of the business is at serious risk in that EcoFinance and/or Altair have the
right to call in their respective loans. In light of recent history and the financial challenges faced by the business the
support of EcoFinance and Altair will be crucial to the progress of the business enterprise. However, the Directors are
highly confident that the shareholders will approve the Resolutions and that the Admission will take place.
Dermot O’Connell
Chairman
Gerry Madden
Chief Executive
4
EQTEC plc (Formerly REACT Energy plc)
Directors
Dermot O’Connell, Non-Executive Chairman
Dermot O'Connell is a former director of EQTEC’s shareholder, Farmer Business Developments plc. He joined the
Board as a Non-Executive Director in March 2011 and was appointed as Non-Executive Chairman in October 2011.
Gerry Madden, CEO
Gerry Madden has been in the role of Chief Executive of EQTEC plc since March 2011, having previously joined the
company in May 2007 as Finance Director. He previously set up and operated a corporate finance practice between
1998 and 2007, advising UK and Irish companies on corporate finance activities and business strategy. During this
period he also acted as a Non-Executive Director for companies in the technology, healthcare, retail and renewable
energy sectors. He originally worked for 16 years with international accountants KPMG and was auditor and adviser to
listed companies, multinationals and private companies operating in Ireland and internationally. He is a Fellow of the
Institute of Chartered Accountants in Ireland and is a graduate of University College Cork.
Brendan Halpin, Executive Director and Company Secretary
Brendan Halpin joined the Group in February 2006 as Financial Controller and joined the Board as Executive Director
in March 2011. Brendan is a Fellow of the Institute of Chartered Accountants in Ireland, having qualified as an
accountant with PricewaterhouseCoopers in 1998. His current responsibilities include inter alia, finance management,
project management and treasury functions.
5
EQTEC plc (Formerly REACT Energy plc)
Advisors and other information
Nominated Adviser
Northland Capital Partners Limited
60 Gresham Street
London EC2V 7BB
United Kingdom.
Corporate Brokers
VSA Capital Limited
New Liverpool House, 15-17 Eldon Street,
London EC2M 7LD,
United Kingdom.
Northland Capital Partners Limited
60 Gresham Street,
London EC2V 7BB,
United Kingdom.
Financial Public Relations
Luther Pendragon Limited
48 Gracechurch Street
London EC3V 0EJ,
United Kingdom.
Auditors
Grant Thornton,
Chartered Accountants and Statutory Audit Firm,
Molyneux House, Bride Street,
Dublin 8, Ireland.
Banks
Bank of Ireland,
32 South Mall, Cork,
Ireland.
Allied Irish Banks,
Main Street, Carrigaline,
Co. Cork, Ireland.
Solicitors
McEvoy Corporate Law
22 Fitzwilliam Place, Dublin 2,
Ireland.
Registrar
Link Asset Services, Link Registrars Limited,
2 Grand Canal Square, Dublin 2,
Ireland.
Registered Office
Building 1000, City Gate,
Mahon, Cork,
Ireland.
Company Registration Number
462861
6
EQTEC plc (Formerly REACT Energy plc)
Directors’ Report
The directors present their annual report and the audited financial statements of the company and its
subsidiaries, collectively known as ‘the Group’ for the financial year ended 30 June 2017.
Principal Activities
The principal activities of the Company and the Group are to identify, develop, build, own and operate
power plants in the UK and Ireland using clean energy technologies. The Group’s business strategy
remains one of focusing the Group’s resources on delivering projects to financial closure and managing
the implementation and operation of those projects. The intention is to retain a long-term income stream
linked to profits generated by projects in addition to receiving a development fee from third parties in
exchange for project equity. The Group has projects at an advanced stage that are ready to be developed,
and the development of these projects can be enabled by strategic partnerships and funding provided
from existing and third party investors.
Review of Business and Future Developments and Key Performance Indicators
A review of the Group’s business and future developments and key performance indicators is contained
in the Chairman and Chief Executive’s Report on pages 3 to 4.
Results and Dividends
The results for the year are set out on page 22. No dividends have been proposed by the directors (2016:
€Nil).
Principal Risks and Uncertainties
The Group has a risk management structure in place, which is designed to identify, manage and mitigate
business risk. Risk assessment and evaluation is an essential part of the Group’s internal control system.
Information about the financial risk management objectives and policies of the Group, along with
exposure of the Group to credit risk, liquidity risk and market risk, are disclosed in Note 5 of the notes to
the consolidated financial statements.
The Group is exposed to a number of other risks and uncertainties. These break into three categories:
1. General risks impacting the business.
2. Project development related risk.
3. Going concern – this is discussed in Note 3 of the financial statements.
General Risks
Electricity market
The Group’s plans are exposed to electricity market price risk through variations in the wholesale price of
electricity. The Group manages this risk by entering into long term power purchase agreements.
Legislative risk
The Group is exposed to adverse changes in legislation that may impact the income for renewable energy
power plants. The directors monitor possible changes to legislation and where possible engage in the
consultation process to safeguard the Group’s interests. Projected project revenues could be affected by
changes to the renewable legislation including for example; the number of Renewable Obligation
Certificates awarded per MWh of generation under the Renewable Obligation or price received under the
Feed in Tariff Contract for Difference (FiT CfD). Any negative changes to these projected revenues could
impact the ability of the Group to secure debt and equity for projects.
7
EQTEC plc (Formerly REACT Energy plc)
Directors’ Report – continued
Principal Risks and Uncertainties - continued
Liquidity
The cash requirements of the Group are forecast by the Board annually in advance and reviewed monthly
by management, enabling the Group’s cash requirements to be anticipated. The cash forecast includes
assumptions with respect to working capital, development spend and the timing of planning consents and
financial close of projects. Significant delays in these expected timings may lead to a requirement for
additional cash and impinge on going concern.
Project development risks
Site evaluation and procurement
Securing sites for the development of renewable energy power plants is a key requirement in further
developing the business. This relies upon the ability of the Group to locate, evaluate, select, develop and
realise appropriate opportunities, and to be able to negotiate and complete land agreements and related
access/connection agreements at a cost that allows profitable projects to be developed.
The Group manages these risks by continually reviewing a large number of sites in the UK and Ireland
such that it is not focused on any one particular landowner or location.
Planning and development consent
Once a site is secured, a planning and development consent is sought, together with any other necessary
permits to allow a renewable energy power plant to be constructed and operated. During this stage of the
process the Group is exposed to the following specific risks:
consents may be subjected to delays beyond the Group’s control, which may subsequently cause
the project to be delayed or aborted. There are no guarantees that any or all of the necessary
consents will be granted;
consents granted may be subject to conditions that affect the economic or operational viability of
the proposed project. These could in turn impact the Group’s ability to raise project finance, or
reduce the value of a project in the case of a sale;
delays or onerous planning conditions may lead to unforeseen costs which the Group may need
to raise finance for; and
legislative changes may influence the acceptability of the site or the economic viability of the
project.
The Group manages these risks through securing sites on which it believes it can secure planning and
development consent, employing suitably qualified and significantly experienced staff to manage the
consenting process and ensure compliance with the latest legislation, as well as ensuring maximum
engagement of local authorities and interested stakeholders from a very early stage.
The Group has significant experience of securing planning consents for renewable energy power plants
and knowledge of the important criteria involved. The Group uses this experience when selecting sites for
development.
8
EQTEC plc (Formerly REACT Energy plc)
Directors’ Report – continued
Principal Risks and Uncertainties - continued
Contract negotiation
This stage of the development process involves the negotiation of contracts for the construction of the
renewable energy plant, the sale of electricity and related products produced by the plant, the
procurement of fuel for the plant and the operation of the plant. This stage begins during the early stages
of the planning and development and concludes at the point of financial close. During this stage the
Group is exposed to the following specific risks in addition to those outlined above:
the ability to secure fixed price contracts for the construction of each power plant with the
required level of guarantees that allow project finance to be secured; and
significant changes to inflation impacting the costs of building and operating renewable energy
power plants and therefore the profitability of renewable energy power plants.
The Group manages these risks through soliciting bids from a number of different suppliers for the
equipment required to construct the plant and any other materials or equipment required to ensure the
plant can operate profitably.
Financial close
This stage relates to the crystallisation of the project into the construction stage. This may involve either
the sale of the project, in whole or part, or securing project finance enabling the project to be
constructed.
During this stage the Group is exposed to the additional risks:
the general availability of finance to fund the construction of power plants, and the level of
lending that can be secured;
changes to interest rates which may impact the cost of financing power projects;
the ability to secure equity on acceptable terms for the construction of projects once debt is in
place; and
depressed market for the sale of projects, leading to low prices or no willing buyers.
It is the Board’s view that once the project has planning and development consent, these risks are
mitigated by the potential to sell a project for at least its book value.
The Group has experience in negotiating financial arrangements for power plants and understands the
contract structures required to secure project finance. Additionally the Group has relationships with a
number of project finance banks, utility and large industrial companies allowing project finance or sale
discussions to be initiated.
Construction
This stage is reached once financing, both debt and equity, is secure and all project contracts are entered
into. During this stage the Group is exposed to the following specific risks:
cost overruns by contractors or claims made may result in a need for additional equity or debt
funding;
delays to the construction programme leading to higher than planned interest charges during
the construction programme and may delay the commencement of operating cash flows to fund
the Group’s on-going activities;
failure of the completed plant to operate as planned; and
supplier insolvency.
9
EQTEC plc (Formerly REACT Energy plc)
Directors’ Report – continued
Principal Risks and Uncertainties - continued
The Group seeks to mitigate these risks through the negotiation of fixed price contracts with reputable
contractors and by ensuring the financial plans include adequate levels of contingency to accommodate
cost overruns. Additionally, the Group seeks to appoint an owner’s engineer with significant experience
to oversee the project programme once construction commences.
Going Concern
The directors have assessed going concern. See Note 3 for further details.
Directors
The following directors held office during the financial year:
Dermot O’Connell
Gerard Madden
Brendan Halpin
Directors’ and Secretary’s Interests in Shares
The directors and secretary of EQTEC plc who held office at 30 June 2017 had the following interests in the
shares of the Company:
Number of
Ordinary
Shares at 30
June 2017
Number of
‘A’
Ordinary
Shares at 30
June 2017
Number of
Deferred ‘B’
Ordinary
Shares at 30
June 2017
Number of
Ordinary
Shares at 1
July 2016
Number of
‘A’ Ordinary
Shares at 1
July 2016
Number of
Deferred ‘B’
Ordinary
Shares at 1
July 2016
1,142,910
3,261,873
1,142,910
1,142,910
3,261,873
817,140
14,926,161
817,140
817,140
14,926,161
570,109
-
570,109
570,109
-
-
-
-
Brendan
Halpin
Gerry
Madden
Dermot
O’Connell
Remuneration Committee Report
The Group’s policy on senior executive remuneration is designed to attract and retain people of the
highest calibre who can bring their experience and independent views to the policy, strategic decisions and
governance of the Group.
In setting remuneration levels the Remuneration Committee takes into consideration the remuneration
practices of other companies of similar size and scope. A key philosophy is that staff must be properly
rewarded and motivated to perform in the best interests of the shareholders. Details of directors’
remuneration are included in Note 27 of the notes to the consolidated financial statements.
10
EQTEC plc (Formerly REACT Energy plc)
Directors’ Report – continued
Accounting Records
The directors believe that they have complied with the requirements of Sections 281 to 285 of the
Companies Act, 2014 with regard to the keeping of accounting records by employing persons with
appropriate expertise and by providing adequate resources to the financial function. The accounting
records are held at the Company's business address at Building 1000, City Gate, Mahon, Cork.
Subsequent Events
Details of events occurring since 30 June 2017 which impact on the Group are included in Note 28.
Disclosure of information to auditors
Each of the persons who are directors at the time when this Directors' report is approved has confirmed
that:
so far as that director is aware, there is no relevant audit information of which the Company's
auditors are unaware, and
that director has taken all the steps that ought to have been taken as a director in order to be
aware of any relevant audit information and to establish that the Company's auditors are aware of
that information.
Directors’ compliance statement
To ensure that the company achieved material compliance with its relevant obligations, the directors
confirm that they have:
drawn up a compliance policy statement setting out the company's policies respecting compliance
by the company with its relevant obligations.
put in place appropriate arrangements and structures that are designed to secure material
compliance with the company's relevant obligations.
conduct a review, during the financial year, of the arrangements and structures, referred to above.
Auditors
The auditors, Grant Thornton, Chartered Accountants and Statutory Audit Firm, continue in office in
accordance with Section 383(2) of the Companies Act, 2014.
Approved by the Board on 24 November 2017.
.
Dermot O’Connell
Chairman
Gerry Madden
Director
11
EQTEC plc (Formerly REACT Energy plc)
Statement of the Directors’ Responsibilities
The directors are responsible for preparing the Directors' Report and the financial statements in
accordance with applicable Irish law and regulations.
Irish company law requires the directors to prepare financial statements for each financial year which give
a true and fair view of the state of affairs for the Company. Under that law the directors have elected to
prepare the 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 assets, liabilities and financial
position of the Company as at the financial year end date and of the profit or loss of the Company for the
financial year and otherwise comply with the Companies Act, 2014.
In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state whether the financial statements have been prepared in accordance with applicable
accounting standards, identify those standards, and note the effect and the reasons for any
material departure from those standards; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Company will continue in business.
The directors are responsible for ensuring that the Company keeps or causes to be kept adequate
accounting records which correctly explain and record the transactions of the Company, enable at all times
the assets, liabilities, financial position and profit or loss of the Company to be determined with
reasonable accuracy, enable them to ensure that the financial statements and Directors’ Report comply
with the Companies Act 2014 and enable the financial statements to be audited. They are also responsible
for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities. Legislation in Ireland governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
Dermot O’Connell
Chairman
Date: 24 November 2017
Gerry Madden
Director
12
EQTEC plc (Formerly REACT Energy plc)
Corporate Governance Report
The Company is not subject to the Combined UK Corporate Governance Code applicable to companies
with full listing on the London Stock Exchange. The Company does however intend, so far as is
practicable and desirable, given the size and nature of the business, to follow the recommendations on
corporate governance for AIM companies (the ‘QCA Guidelines’) issued by the Quoted Companies
Alliance (‘QCA’).
The Board
The board of directors of the Company is responsible to shareholders for leadership in all aspects of the
business. The board comprises three members. One independent non-executive director contributes
individual experience from a diverse background. Two executive directors are responsible for the
implementation of all board decisions and oversee the management of the Group on a day-to-day basis.
In accordance with the articles of association, one-third of directors retire by rotation each year. Each
director must be subject to re-election at least every three years.
Role of the Board
The Company has adopted a schedule of matters reserved for consideration by the whole board,
including, for example: approval of the Group’s long-term objectives and commercial strategy; approval of
the annual operating and capital expenditure budgets of the Group (and any material changes thereto);
changes relating to the Group’s structure; major changes to the Group’s corporate structure; approval of
the Group’s annual report and accounts; approval of the dividend policy; major capital projects; changes
to the structure, size and composition of the board; determination of the remuneration for the directors,
the Company Secretary and executive management; division of responsibilities between the Chairman, the
Chief Executive and other executives of the board; and the making of political donations or political
expenditure.
The Board is also responsible for ensuring maintenance of sound systems of internal control and risk
management and the directors confirm that they continually review the effectiveness of the system of
internal control, covering all material controls including financial, operational and compliance controls and
risk management.
In accordance with QCA Guidelines, the board has established audit and remuneration committees, as
described below, and utilises other committees as necessary in order to ensure effective governance.
Audit Committee
The Company’s Audit Committee previously comprised Dermot O’Connell as the Chairman and Edward
Barrett. The Audit Committee currently consists of Dermot O’Connell and will continue to do so until
board numbers are increased. The Audit Committee meet at least two times a year at appropriate times in
the reporting and audit cycle and otherwise as required. The Finance Director normally attends meetings
of the Committee and the Chief Executive Officer attends as necessary. The external auditors are invited
to attend meetings of the Audit Committee on a regular basis.
13
EQTEC plc (Formerly REACT Energy plc)
Corporate Governance Report
Audit Committee - continued
The terms of reference for the Audit Committee include the following responsibilities:
Monitoring the integrity of the reported financial performance of the Group, including its
preliminary results announcement, annual report and interim report;
Reviewing the effectiveness of the Group’s internal financial controls;
Making recommendations to the board on the appointment and removal of the external auditors
and the audit fee; and
Monitoring the objectivity and independence of the external auditors.
Remuneration Committee
The Company’s Remuneration Committee previously comprised Edward Barrett as the Chairman and
Dermot O’Connell. The Remuneration Committee currently consists of Dermot O’Connell and will
continue to do so until board numbers are increased. The role of the Remuneration Committee is to
review the performance of the executive directors and other senior executives and to set the scale and
structure of their remuneration, including the implementation of any bonus arrangements, with due regard
to the interests of Ordinary Shareholders. The Remuneration Committee also administers and establishes
performance targets for share incentive schemes and determines the allocation of share incentives to
employees.
Nomination committee
The Company does not have a nomination committee. Any appointments to the Board are considered by
the Board as a whole.
In considering the appointment of a new director, the Board identifies the characteristics, qualities, skills
and experience that it believes would complement the overall balance and composition of the Board.
Relations with Shareholders
The Company believes that effective communication with shareholders is of utmost importance. It has an
established cycle for communicating trading results at the interim and year end stages and, as appropriate,
of providing business updates via the Regulatory News Service and press releases.
The Company makes information available through regulatory announcements and its interim and annual
reports. Copies of all such communications can be found on the Company website, www.eqtecplc.com.
The board has adopted a code for dealings in the Company’s securities by directors and applicable
employees, which conforms to the requirement of the AIM Rules (Share Dealing Code). The Company
will be responsible for taking all proper and reasonable steps to ensure compliance by the directors and
applicable employees with the Share Dealing Code and the AIM Rules. The Company complies with the
corporate governance obligations applicable to Irish registered public companies whose shares are quoted
on the AIM market of the London Stock Exchange.
Dermot O’Connell
Chairman
Date: 24 November 2017
Gerry Madden
Director
14
EQTEC plc (Formerly REACT Energy plc)
Consolidated statement of profit or loss
for the financial year ended 30 June 2017
Revenue
Cost of sales
Gross profit
Operating expenses
Administrative expenses
Impairment of property, plant and equipment
Impairment of amounts due under construction costs
Foreign currency gains/(losses)
Operating loss
Finance costs and income
Loss before taxation
Income tax
Loss for the year from continuing operations
Profit for the year from discontinued operations
Loss attributable to:
Owners of the company
Non-controlling interest
Basic loss per share:
From continuing operations
From continuing and discontinued operations
Diluted loss per share:
From continuing operations
From continuing and discontinued operations
Notes
8
9
15
18
10
12
13
25
14
14
14
14
2017
€
40,762
-
40,762
2016
€
46,188
-
46,188
(1,007,363)
(180,640)
(151,722)
42,096
(597,022)
(307,759)
-
(163,721)
(1,256,867)
(1,022,314)
(559,978)
(559,700)
(1,816,845)
(1,582,014)
-
(1,816,845)
24,575
-
(1,582,014)
41,970
(1,792,270)
(1,540,044)
(1,590,914)
(201,356)
(1,041,035)
(499,009)
(1,792,270)
(1,540,044)
2017
€ per share
2016
€ per share
(0.014)
(0.013)
(0.014)
(0.013)
(0.016)
(0.015)
(0.016)
(0.015)
The notes on pages 30 to 75 form part of these financial statements.
22
EQTEC plc (Formerly REACT Energy plc)
Consolidated statement of other comprehensive income
for the financial year ended 30 June 2017
Loss for the financial year
Other comprehensive loss
Items that may be reclassified
subsequently to profit or loss
Exchange differences arising on retranslation
of foreign operations
2017
€
2016
€
(1,792,270)
(1,540,044)
(389,829)
(603,466)
(389,829)
(603,466)
Total comprehensive loss for the financial year
(2,182,099)
(2,143,510)
Attributable to:
Owners of the company
Non-controlling interests
(1,815,266)
(366,833)
(1,327,723)
(815,787)
(2,182,099)
(2,143,510)
The notes on pages 30 to 75 form part of these financial statements.
23
EQTEC plc (Formerly REACT Energy plc)
Consolidated statement of financial position
At 30 June 2017
ASSETS
Non-current assets
Property, plant and equipment
Investments in associate and joint ventures
Financial assets
Total non-current assets
Current assets
Amounts due under construction contracts
Trade and other receivables
Cash and cash equivalents
Assets included in disposal group classified as held for resale
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Retained earnings/(deficit)
Equity/(capital deficiency) attributable to the owners of the
company
Non-controlling interests
Total equity
Non-current liabilities
Borrowings
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Liabilities included in disposal group classified as held for resale
Total current liabilities
Total equity and liabilities
Notes
15
16
16
18
19
20
25
21
21
22
2017
€
9,464,911
-
-
2016
€
9,524,726
-
-
9,464,911
9,524,726
-
293,482
286,769
580,251
150,847
137,108
193,741
481,696
1,344,503
1,426,519
1,924,754
1,908,215
11,389,665
11,432,941
17,563,409
28,678,913
(41,954,438)
4,287,884
1,377,947
17,453,246
21,863,190
(40,139,172)
(822,736)
1,639,780
5,665,831
817,044
23
893,622
3,379,621
893,622
3,379,621
24
23
25
1,143,755
2,606,203
3,749,958
5,366,550
694,880
6,061,430
1,080,254
1,174,846
4,830,212
7,236,276
11,389,665
11,432,941
The financial statements were approved by the Board of Directors on 24 November 2017 and signed on
its behalf by:
Dermot O’Connell
Chairman
Gerry Madden
Director
The notes on pages 30 to 75 form part of these financial statements.
24
EQTEC plc (Formerly REACT Energy plc)
Consolidated statement of changes in equity
for the financial year ended 30 June 2017
Balance at 1 July 2015
Conversion of debt into equity under
examinership settlement
Issue of equity under rights of equity kicker
Share issue costs
Loss for the financial year
Unrealised foreign exchange losses
Balance at 30 June 2016
Issue of ordinary shares in EQTEC plc (Note
21)
Change in ownership interest without a loss of
control (Note 23)
Conversion of debt into equity (Note 21)
Share issue costs
Loss for the financial year
Unrealised foreign exchange losses
Share
capital
€
Share premium
€
Retained earnings
€
Deficit attributable
to equity holders
of the parent
€
Non-
controlling
interests
€
Total
€
13,006,149
20,713,637
(38,811,449)
(5,091,663)
2,455,567
(2,636,096)
3,747,097
700,000
-
-
-
1,977,634
(700,000)
(128,081)
-
-
-
-
-
(1,041,035)
(286,688)
5,724,731
-
(128,081)
(1,041,035)
(286,688)
-
-
-
(499,009)
(316,778)
5,724,731
-
(128,081)
(1,540,044)
(603,466)
17,453,246
21,863,190
(40,139,172)
(822,736)
1,639,780
817,044
17,461
1,125,288
-
1,142,749
-
1,142,749
-
92,702
-
-
-
-
5,978,242
(287,807)
-
-
-
-
-
(1,590,914)
(224,352)
-
6,070,944
(287,807)
(1,590,914)
(224,352)
105,000
-
-
(201,356)
(165,477)
105,000
6,070,944
(287,807)
(1,792,270)
(389,829)
Balance at 30 June 2017
17,563,409
28,678,913
(41,954,438)
4,287,884
1,377,947
5,665,831
The notes on pages 30 to 75 form part of these financial statements.
25
EQTEC plc (Formerly REACT Energy plc)
Consolidated statement of cash flows
for the financial year ended 30 June 2017
Notes
2017
€
2016
€
Cash flows from operating activities
Loss for the financial year
Adjustments for:
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Impairment of amounts due from customers under construction contracts
Unrealised foreign exchange movements
Operating cash flows before working capital changes
Decrease/(Increase) in:
Amounts due from customers under construction contracts
Trade and other receivables
Increase in:
Trade and other payables
Cash used in operating activities - continuing operations
Finance costs
Net cash used in operating activities - continuing operations
Net cash generated from operating activities - discontinued operations
Cash used in operating activities
Cash flows from investing activities
Additions to property, plant and equipment
Net cash generated from/(used in) investing activities – continuing
operations
Net cash generated from investing activities – discontinued operations
Net cash generated from/(used in) investing activities
15
15
25
25
Cash flows from financing activities
Proceeds from borrowings
Loan issue costs
Proceeds from issue of ordinary shares
Share issue costs
Interest paid
(1,816,845)
(1,582,014)
24
180,640
151,722
20,706
138
307,759
(1,246)
(583,265)
(1,463,753)
(1,858,628)
(875)
(158,014)
-
134,099
206,464
160,354
(1,416,178)
559,978
(856,200)
124,298
(1,564,175)
559,700
(1,004,475)
154,069
(731,902)
(850,406)
-
-
11
11
(311,490)
(311,490)
15
(311,475)
293,000
(33,750)
1,142,690
(259,351)
(206,081)
2,101,631
(484,476)
-
(128,081)
(156,286)
Net cash generated from financing activities – continuing operations
Net cash used in financing activities – discontinued operations
25
936,508
(125,864)
1,332,788
(58,599)
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
Cash and cash equivalents included in disposal group
Cash and cash equivalents for continuing operations
810,644
1,274,189
78,753
112,308
323,649
211,341
402,402
(116,899)
323,649
(130,454)
285,503
193,195
20
25
20
Details of non-cash transactions are set out in Note 29 of the financial statements.
The notes on pages 30 to 75 form part of these financial statements.
26
EQTEC plc (Formerly REACT Energy plc)
Company statement of financial position
At 30 June 2017
ASSETS
Non-current assets
Investment in subsidiary undertakings
Total non-current assets
Current assets
Trade and other receivables
Cash and bank balances
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Retained earnings/(deficit)
Notes
2017
€
2016
€
16
4,409,954
1,772,676
4,409,954
1,772,676
19
20
292,631
271,567
454,806
191,927
564,198
646,733
4,974,152
2,419,409
21
21
17,563,409
47,612,993
(64,006,844)
17,453,246
40,797,270
(59,936,851)
Equity/(capital deficiency) attributable to the
owners of the company
1,169,558
(1,686,335)
Non-current liabilities
Borrowings
23
893,622
3,379,621
Total non-current liabilities
893,622
3,379,621
Current liabilities
Borrowings
Trade and other payables
Total current liabilities
Total equity and liabilities
23
24
2,606,203
304,769
589,880
136,243
2,910,972
726,123
4,974,152
2,419,409
The financial statements were approved by the Board of Directors on 24 November 2017 and signed on
its behalf by:
Dermot O’Connell
Chairman
Gerry Madden
Director
The notes on pages 30 to 75 form part of these financial statements.
27
EQTEC plc (Formerly REACT Energy plc)
Company statement of changes in equity
for the financial year ended 30 June 2017
Share capital
€
Share
premium
€
Retained
earnings
€
Total
€
Balance at 1 July 2015
13,006,149
39,647,716
(56,330,844)
(3,676,979)
Conversion of debt into equity under
examinership settlement
3,747,097
1,977,634
Issue of equity under rights of equity kicker
700,000
(700,000)
Share issue costs
-
(128,080)
-
-
-
5,724,731
-
(128,080)
Loss for the financial year (Note 30)
-
-
(3,606,007)
(3,606,007)
Balance at 30 June 2016
17,453,246
40,797,270
(59,936,851)
(1,686,335)
Issue of ordinary shares in EQTEC plc (Note
21)
17,461
1,125,288
Conversion of debt into equity (Note 21)
92,702
5,978,242
Share issue costs
-
(287,807)
-
-
-
1,142,749
6,070,944
(287,807)
Loss for the financial year (Note 30)
-
-
(4,069,993)
(4,069,993)
Balance at 30 June 2017
17,563,409
47,612,993
(64,006,844)
1,169,558
The notes on pages 30 to 75 form part of these financial statements.
28
EQTEC plc (Formerly REACT Energy plc)
Company statement of cash flows
for the financial year ended 30 June 2017
Cash flows from operating activities
Loss before taxation
Adjustments for:
Finance costs
Provision for impairment of investment in subsidiaries
Provision for impairment of trade and other receivables
Foreign currency losses arising from retranslation of
borrowings
Notes
2017
€
2016
€
(4,069,993)
(3,606,007)
559,978
2,883,009
(10,146)
559,675
2,445,939
269,906
334,944
(298,517)
Operating cash flows before working capital changes
(302,208)
(629,004)
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
Cash flows from financing activities
Proceeds from borrowings
Funds advanced to inter-company loans
Repayment of inter-company loan
Proceeds from issue of ordinary shares
Share issue costs
Loan issue costs
Interest paid
(164,808)
177,548
(371,583)
(314,873)
(289,468)
(1,315,460)
293,000
(578,265)
10,146
1,142,690
(259,351)
(33,750)
(206,082)
2,101,631
-
104,194
-
(128,081)
(484,476)
(156,261)
Net cash generated from financing activities
368,388
1,437,007
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial
year
78,920
191,381
121,547
69,834
Cash and cash equivalents at the end of the financial year
20
270,301
191,381
The notes on pages 30 to 75 form part of these financial statements.
29
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
1. GENERAL INFORMATION
EQTEC plc (formerly REACT Energy plc) (“the Company”) was incorporated in Ireland on 2 October
2008. The address of its registered office and principal place of business is Building 1000, City Gate, Mahon,
Cork, Republic of Ireland. These financial statements for the financial year ended 30 June 2017 consolidate
the individual financial statements of the Company and its subsidiaries (together referred to as ‘the Group’).
The principal activity of the Group is to identify, develop, build, own and operate renewable energy
electricity and heat generating power plants in the UK and Ireland. The Group focuses on both large and
small scale projects, providing flexibility to maximise existing land positions while diversifying development
and technology risks.
On 20 October 2008, the Company’s shares were admitted to trading on the London Stock Exchange’s
AIM market.
With effect from 6 February 2017, the name of the Company was changed from REACT Energy plc to
EQTEC plc.
On 17 July 2017, trading on AIM for the under-mentioned securities has been temporarily suspended,
pending an announcement and publication of an admission document (see Note 28 for detailed
information).
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRSs)
The Group applied for the first time certain amendments to the standards, which are effective for annual
periods beginning on or after 1 January 2016.
Amendments to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations (effective for annual periods
beginning on or after 1 January 2016, endorsed by the European Union on 24 November 2015). These
amendments have no effect on the Company as the Company has no acquisitions of interest in joint
operations during the financial year.
Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation (effective
for annual periods beginning on or after 1 January 2016, endorsed by the European Union on 2 December
2015). These amendments have no effect on the Company’s financial position of performance.
Amendments to IAS 27 Equity Method in Separate Financial Statements (effective for annual periods beginning
on or after 1 January 2016, endorsed by the European Union on 18 December 2015). These amendments
have no effect on the Company’s financial statements.
Annual Improvements to IFRSs 2012-2014 Cycle (effective for annual periods beginning on or after 1 January
2016, endorsed by the European Union on 15 December 2015). These amendments have no effect in the
Company’s financial position and performance.
Amendments to IAS 1 Disclosure Initiative (effective for annual periods beginning on or after 1 January 2016,
endorsed by the European Union on 18 December 2015). These amendments have no effect in the
Company’s financial position and performance.
Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities: Applying the Consolidation Exception (effective
for annual periods beginning on or after 1 January 2016; endorsed by the European Union on 22 September
2016). These amendments have no effect on the Company as the Company has no investment entities
applying the consolidation exception.
Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants (effective for annual periods beginning on or
after 1 January 2016; endorsed by the European Union on 23 November 2015). These amendments have
not effect to the Company as the Company does not have any bearer plants.
30
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING
STANDARDS (IFRSs) - continued
The following new and revised Standards and Interpretations have not been adopted by the Group, whether
endorsed by the European Union or not. The Group is currently analysing the practical consequences of the
new Standards and the effects of applying them to the financial statements. The related standards and
interpretations are:
IFRS 9 Financial Instruments and subsequent amendments (effective for annual periods beginning on or after
1 January 2018, endorsed by the European Union on 22 November 2016);
IFRS 15 Revenue from Contracts with Customers and subsequent clarifications
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS 11
‘Construction Contracts’, and several revenue-related Interpretations. The new standard establishes a
control-based revenue recognition model and provides additional guidance in many areas not covered in
detail under existing IFRSs, including how to account for arrangements with multiple performance
obligations, variable pricing, customer refund rights, supplier repurchase options, and other common
complexities. IFRS 15 is effective for reporting periods beginning on or after 1 January 2018;
IFRS 16 Leases (effective for annual periods beginning on or after 1 January 2019, not yet endorsed by the
European Union);
IFRS 17 Insurance Contracts (effective for annual periods beginning on or after 1 January 2021, not yet
endorsed by the European Union);
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture (effective on a prospective basis to a sale or contribution of assets occurring in annual periods
beginning on or after 1 January 2017, not yet endorsed by the European Union);
Amendments to IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses (effective for annual periods
beginning on or after 1 January 2017, not yet endorsed by the European Union);
Amendments to IAS 7 Disclosure Initiative (effective for annual periods beginning on or after 1 January 2017,
not yet endorsed by the European Union);
Amendments to IFRS 2 Classification and Measurement of Share-Based Payment Transactions (effective for annual
periods beginning on or after 1 January 2018; not yet endorsed by the European Union);
Amendments to IFRS 4 Applying IFRS 9 ‘Financial Instruments’ with IFRS 4 ‘Insurance Contracts’ (effective for
annual periods beginning on or after 1 January 2018; not yet endorsed by the European Union);
Annual Improvements to IFRS Standards 2014-2016 Cycle (effective for annual periods beginning on or
after 1 January 2018, not yet endorsed by the European Union);
Amendments to IAS 40 Transfers of Investment Property (effective for annual periods beginning on or after 1
January 2018, not yet endorsed by the European Union);
IFRIC 22 Foreign Currency Transactions and Advance Consideration (effective for annual periods beginning on or
after 1 January 2018, not yet endorsed by European Union); and
IFRIC 23 Uncertainty Over Income Tax Treatments (effective for annual periods beginning on or after 1 January
2019, not yet endorsed by the European Union);
The Group has not assessed the impact of the adoption of these standards and interpretations on its
financial statements on initial adoption.
31
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES
Basis of Preparation and Going Concern
The Group’s consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union (‘EU’) and effective at 30 June
2017 for all periods presented as issued by the International Accounting Standards Board.
The consolidated financial statements are prepared under the historical cost convention except for certain
financial assets and financial liabilities which are measured at fair value. The principal accounting policies
set out below have been applied consistently by the parent company and by all of the Company’s
subsidiaries to all periods presented in these consolidated financial statements.
The financial statements of the parent company, EQTEC plc have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European Union (‘EU’) effective at
30 June 2017 for all periods presented as issued by the International Accounting Standards Board and
Irish Statute comprising the Companies Act, 2014.
The Group incurred a loss of €1,792,270 (2016: €1,540,044) during the year, and had net current liabilities
of €2,905,458 (2016: €5,328,061) and net assets of €5,665,831 (2016: €817,044) at 30 June 2017.
Terms have been agreed for the proposed acquisition of the entire issued share capital of EQTEC Iberia
SL (“EQTEC Iberia”). The total consideration for the Acquisition is £14 million which will be satisfied by
the issuance of 833,864,531 New Ordinary Shares on Admission. In addition, in order to fund the
working capital needs of the Enlarged Group and the continued development of its near term pipeline the
Company is undertaking a Placing to raise £1.6 million (before expenses) by the issue of the Placing
Shares. Given the scale of the Acquisition, when compared to the existing Group, the transaction is a
reverse takeover under the AIM Rules and therefore requires the Company to issue a new admission
document and obtain Shareholder approval for the Acquisition. Under the Irish Takeover Rules (Rule 40)
it is also a Reverse Takeover requiring that a circular be posted to EQTEC shareholders. Accordingly, the
Acquisition is conditional, inter alia, on the approval by Shareholders of the Resolutions (as required by
the AIM Rules) to be proposed at the Extraordinary General Meeting, which is being convened for 11.30
a.m. on Wednesday 20th December 2017.
In conjunction with the Acquisition, the Company is proposing to raise approximately £1.6 million,
before expenses, through the issue of the Placing Shares at the Placing Price. The Placing Shares will
represent approximately 18 per cent of the Enlarged Share Capital on Admission. The Placing and the
Acquisition are conditional upon, inter alia, the Resolutions being passed at the Extraordinary General
Meeting and Admission of shares on AIM stock exchange.
The Directors have given careful consideration to the appropriateness of the going concern basis in the
preparation of the financial statements. The validity of the going concern basis is dependent upon the
approval by Shareholders of the Resolutions being passed at the Extraordinary General Meeting
approving the acquisition of EQTEC Iberia and placing of new shares in order to fund the working
capital needs of the Enlarged Group and the continued development of its near term pipeline The
Directors are highly confident that the shareholders will approve same and the Group will have adequate
resources to continue in operational existence for the foreseeable future. For these reasons the Directors
continue to adopt the going concern basis of accounting in preparing the financial statements. The
financial statements do not include any adjustments that would result if the Group was unable to continue
as a going concern.
32
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Basis of Preparation and Going Concern - continued
The Group continues to invest capital in developing and expanding its portfolio of clean energy projects.
The nature of the Group’s development programme means that the timing of funds generated from
developments is difficult to predict. Management have prepared financial forecasts to estimate the likely
cash requirements of the Group over the next 12 months. The forecasts include certain assumptions with
regard to the costs of ongoing development projects, overheads and the timing and amount of any funds
generated from developments. The forecasts indicate that during this period the Group will have funds to
continue with its activities and its planned development program.
Whilst the strategy is to build, own and operate plants, once a site has been secured and planning and
permitting obtained the Group would be in a position, if it so chose, to monetise the value of the project.
Basis of consolidation
The Group financial statements consolidate those of the parent company and all of its subsidiaries as of
30 June 2017. All subsidiaries have a reporting date of 30 June.
All transactions and balances between Group companies are eliminated on consolidation, including
unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-
group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a
Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted
where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are
recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. The
Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent
and the non-controlling interests based on their respective ownership interests.
Business combinations
The Group applies the acquisition method in accounting for business combinations. The consideration
transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date
fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which
includes the fair value of any asset or liability arising from a contingent consideration arrangement.
Acquisition costs are expensed as incurred. Assets acquired and liabilities assumed are generally measured
at their acquisition-date fair values.
Step Acquisitions
Business combination achieved in stages is accounted for using acquisition method at acquisition date.
The components of a business combination, including previously held investments are remeasured at fair
value at acquisition date and a gain or loss is recognised in the consolidated statement of profit or loss.
Profit or loss from discontinued operations
A discontinued operation is a component of the Group that either has been disposed of, or is classified as
held for sale. Profit or loss from discontinued operations comprises the post-tax profit or loss of
discontinued operations and the post-tax gain or loss resulting from the measurement and disposal of
assets classified as held for sale (see also policy on non-current assets and liabilities classified as held for
sale and discontinued operations below and Note 25).
33
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Investments in associates and joint ventures
Investments in associates and joint ventures are accounted for using the equity method. The carrying
amount of the investment in associates and joint ventures is increased or decreased to recognise the
Group’s share of the profit or loss and other comprehensive income of the associate and joint venture,
adjusted where necessary to ensure consistency with the accounting policies of the Group. When the
Group’s share of losses on an associate or a joint venture exceeds the Group’s interest in that associate or
joint venture (which includes any long-term interests that, in substance, form part of the Group’s net
investment in the associate or joint venture), the Group discontinues recognising its share of future losses.
Additional losses are recognised only to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate or joint venture.
Unrealised gains and losses on transactions between the Group and its associates and joint ventures are
eliminated to the extent of the Group’s interest in those entities. Where unrealised losses are eliminated,
the underlying asset is also tested for impairment.
Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Euro, which is also the functional currency of the
parent company.
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity,
using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange
gains and losses resulting from the settlement of such transactions and from the remeasurement of
monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or
loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using
the exchange rates at the transaction date), except for non-monetary items measured at fair value which
are translated using the exchange rates at the date when fair value was determined.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a
functional currency other than Euro are translated into Euro upon consolidation. The functional currency
of the entities in the Group has remained unchanged during the reporting period.
On consolidation, assets and liabilities have been translated into Euro at the closing rate at the reporting
date. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated
as assets and liabilities of the foreign entity and translated into Euro at the closing rate. Income and
expenses have been translated into Euro at the average rate over the reporting period. Exchange
differences are charged or credited to other comprehensive income and recognised in the currency
translation reserve in equity. On disposal of a foreign operation, the related cumulative translation
differences recognised in equity are reclassified to profit or loss and are recognised as part of the gain or
loss on disposal.
34
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Segment reporting
The Group has one operating segment: the power generation segment. In identifying this operating
segment, management generally follows the Group’s service lines representing its main products and
services.
Each operating segment is managed separately as each requires different technologies, marketing
approaches and other resources. All inter-segment transfers are carried out at arm’s length prices based on
prices charged to unrelated customers in standalone sales of identical goods or services.
For management purposes, the Group uses the same measurement policies as those used in its financial
statements. In addition, corporate assets which are not directly attributable to the business activities of any
operating segment are not allocated to a segment. This primarily applies to the Group’s central
administration costs and directors salaries.
Revenue
Revenue arises from the sale of goods and the rendering of services. It is measured at the fair value of
consideration received or receivable, excluding sales taxes, and reduced by any rebates and trade discounts
allowed. The Group applies the revenue recognition criteria set out below to each separately identifiable
component of the sales transaction. The consideration received from these multiple-component
transactions is allocated to each separately identifiable component in proportion to its relative fair value.
Rendering of services
The Group generates revenues from after-sales service and maintenance, consulting, and construction
contracts for renewable energy systems. Consideration received for these services is initially deferred,
included in other payables, and is recognised as revenue in the period when the service is performed. In
recognising after-sales service and maintenance revenues, the Group determines the stage of completion
by considering both the nature and timing of the services provided and its customer’s pattern of
consumption of those services, based on historical experience. Where the promised services are
characterised by an indeterminate number of acts over a specified period of time, revenue is recognised on
a straight-line basis. Revenue from consulting services is recognised when the services are provided by
reference to the contract’s stage of completion at the reporting date in the same way as construction
contracts for renewable energy systems described below.
Construction contracts for renewable energy systems
Construction contracts for renewable energy systems specify a fixed price for the design, development
and installation of biomass systems. When the outcome can be assessed reliably, contract revenue and
associated costs are recognised by reference to the stage of completion of the contract activity at the
reporting date. Contract revenue is measured at the fair value of consideration received or receivable.
When the Group cannot measure the outcome of a contract reliably, revenue is recognised only to the
extent of contract costs that have been incurred and are recoverable. Contract costs are recognised in the
period in which they are incurred. In either situation, when it is probable that total contract costs will
exceed total contract revenue, the expected loss is recognised immediately in profit or loss.
A construction contract’s stage of completion is assessed by management by comparing costs incurred to
date with the total costs estimated for the contract (a procedure sometimes referred to as the cost-to-cost
method). Only those costs that reflect work performed are included in costs incurred to date. The gross
amount due from customers for contract work is presented within trade and other receivables for all
contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceeds
progress billings. The gross amount due to customers for contract work is presented within other
liabilities for all contracts in progress for which progress billings exceed costs incurred plus recognised
profits (less recognised losses).
35
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Revenue - continued
Interest and dividends
Interest income and expenses are reported on an accrual basis using the effective interest method.
Dividends, other than those from investments in associates and joint ventures, are recognised at the time
the right to receive payment is established.
Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service or as incurred.
Expenditure for warranties is recognised when the Group incurs an obligation, which is typically when the
related goods are sold.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset
are capitalised during the period of time that is necessary to complete and prepare the asset for its
intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and
reported in finance costs.
Profit or loss from discontinued operations
A discontinued operation is a component of the Group that either has been disposed of, or is classified as
held for sale. Profit or loss from discontinued operations comprises the post-tax profit or loss of
discontinued operations and the post-tax gain or loss resulting from the measurement and disposal of
assets classified as held for sale.
Goodwill
Goodwill represents the future economic benefits arising from a business combination that are not
individually identified and separately recognised. Goodwill is carried at cost less accumulated impairment
losses. Refer below for a description of impairment testing procedures.
Non-controlling interests
Non-controlling interests that are present ownership interest and entitle their holders to a proportionate
share of the entity’s net assets in the event of a liquidation may be initially measured either at fair value of
at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s
identifiable net assets. Other types of non-controlling interests are measured at fair value, or, when
applicable, on the basis specified in another IFRS.
Property, plant and equipment
Land and buildings and plant and equipment are initially recognised at acquisition cost or manufacturing
cost, including any costs directly attributable to bringing the assets to the location and condition necessary
for them to be capable of operating in the manner intended by the Group’s management. Leasehold
buildings, plant and equipment are subsequently measured at cost less accumulated depreciation and
impairment losses. Depreciation is recognised on a straight-line basis to write down the cost less estimated
residual value of leasehold buildings and plant and equipment. The following useful lives are applied:
• Leasehold buildings: 5-50 years
• Office equipment: 2-5 years
• Wind Turbine: 20 years
• Heat boilers: 15-20 years
Material residual value estimates and estimates of useful life are updated as required, but at least annually.
36
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Property, plant and equipment - continued
Gains or losses arising on the disposal of property, plant and equipment are determined as the difference
between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss
within other income or other expenses.
Leased assets
Finance leases
Management applies judgment in considering the substance of a lease agreement and whether it transfers
substantially all the risks and rewards incidental to ownership of the leased asset. Key factors considered
include the length of the lease term in relation to the economic life of the asset, the present value of the
minimum lease payments in relation to the asset’s fair value, and whether the Group obtains ownership of
the asset at the end of the lease term.
For leases of land and buildings, the minimum lease payments are first allocated to each component based
on the relative fair values of the respective lease interests. Each component is then evaluated separately
for possible treatment as a finance lease, taking into consideration the fact that land normally has an
indefinite economic life. The interest element of lease payments is charged to profit or loss, as finance
costs over the period of the lease.
Operating leases
All other leases are treated as operating leases. Where the Group is a lessee, payments on operating lease
agreements are recognised as an expense on a straight-line basis over the lease term. Associated costs,
such as maintenance and insurance, are expensed as incurred.
Impairment testing of goodwill and property, plant and equipment
For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely
independent cash inflows (cash-generating units). As a result, some assets are tested individually for
impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-
generating units that are expected to benefit from synergies of a related business combination and
represent the lowest level within the Group at which management monitors goodwill. Cash-generating
units to which goodwill has been allocated (determined by the Group’s management as equivalent to its
operating segments) are tested for impairment at least annually. All other individual assets or cash-
generating units are tested for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s (or cash-generating unit’s) carrying
amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-
in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-
generating unit and determines a suitable discount rate in order to calculate the present value of those
cash flows. The data used for impairment testing procedures are directly linked to the Group’s latest
approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset
enhancements. Discount factors are determined individually for each cash-generating unit and reflect
current market assessments of the time value of money and asset-specific risk factors.
Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to
that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the
cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications
that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the
asset’s or cash-generating unit’s recoverable amount exceeds its carrying amount.
37
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Financial instruments
Recognition, initial measurement and derecognition
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument and are measured initially at fair value adjusted for transaction costs,
except for those carried at fair value through profit or loss which are measured initially at fair value.
Subsequent measurement of financial assets and financial liabilities is described below.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial
liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and subsequent measurement of financial assets
For the purpose of subsequent measurement financial assets, other than those designated and effective as
hedging instruments, are classified into the following categories upon initial recognition:
•
•
•
•
loans and receivables
financial assets at fair value through profit or loss (FVTPL)
held-to-maturity (HTM) investments
available-for-sale (AFS) financial assets.
All financial assets except for those at FVTPL are reviewed for impairment at least at each reporting date
to identify whether there is any objective evidence that a financial asset or a group of financial assets is
impaired. Different criteria to determine impairment are applied for each category of financial assets,
which are described below.
All income and expenses relating to financial assets that are recognised in profit or loss are presented
within finance costs, finance income or other financial items, except for impairment of trade receivables
which is presented within other expenses.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. After initial recognition, these are measured at amortised cost using the
effective interest method, less provision for impairment. Discounting is omitted where the effect of
discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall
into this category of financial instruments.
Individually significant receivables are considered for impairment when they are past due or when other
objective evidence is received that a specific counterparty will default. Receivables that are not considered
to be individually impaired are reviewed for impairment in groups, which are determined by reference to
the industry and region of the counterparty and other shared credit risk characteristics. The impairment
loss estimate is then based on recent historical counterparty default rates for each identified group.
Financial assets at FVTPL
Financial assets at FVTPL include financial assets that are either classified as held for trading or that meet
certain conditions and are designated at FVTPL upon initial recognition. All derivative financial
instruments fall into this category, except for those designated and effective as hedging instruments, for
which the hedge accounting requirements apply.
38
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Financial instruments - continued
Financial assets at FVTPL - continued
Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair
values of financial assets in this category are determined by reference to active market transactions or
using a valuation technique where no active market exists.
HTM investments
HTM investments are non-derivative financial assets with fixed or determinable payments and fixed
maturity other than loans and receivables. Investments are classified as HTM if the Group has the
intention and ability to hold them until maturity.
HTM investments are measured subsequently at amortised cost using the effective interest method. If
there is objective evidence that the investment is impaired, determined by reference to external credit
ratings, the financial asset is measured at the present value of estimated future cash flows. Any changes in
the carrying amount of the investment, including impairment losses, are recognised in profit or loss.
AFS financial assets
AFS financial assets are non-derivative financial assets that are either designated to this category or do not
qualify for inclusion in any of the other categories of financial assets.
All AFS financial assets are measured at fair value. Gains and losses are recognised in other
comprehensive income and reported within the AFS reserve within equity, except for interest and
dividend income, impairment losses and foreign exchange differences on monetary assets, which are
recognised in profit or loss. When the asset is disposed of or is determined to be impaired, the cumulative
gain or loss recognised in other comprehensive income is reclassified from the equity reserve to profit or
loss. Interest calculated using the effective interest method and dividends are recognised in profit or loss
within finance income.
Reversals of impairment losses for AFS debt securities are recognised in profit or loss if the reversal can
be objectively related to an event occurring after the impairment loss was recognised. For AFS equity
investments impairment reversals are not recognised in profit loss and any subsequent increase in fair
value is recognised in other comprehensive income.
Classification and subsequent measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade and other payables and derivative financial
instruments.
Financial liabilities are measured subsequently at amortised cost using the effective interest method except
for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value
with gains or losses recognised in profit or loss (other than derivative financial instruments that are
designated and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in
profit or loss are included within finance costs or finance income.
Derivative financial instruments and hedge accounting
Derivative financial instruments are accounted for at FVTPL except for derivatives designated as hedging
instruments in cash flow hedge relationships, which require a specific accounting treatment. To qualify for
hedge accounting, the hedging relationship must meet several strict conditions with respect to
documentation, probability of occurrence of the hedged transaction and hedge effectiveness.
39
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Financial instruments - continued
Derivative financial instruments and hedge accounting - continued
All derivative financial instruments used for hedge accounting are recognised initially at fair value and
reported subsequently at fair value in the statement of financial position.
To the extent that the hedge is effective, changes in the fair value of derivatives designated as hedging
instruments in cash flow hedges are recognised in other comprehensive income and included within the
cash flow hedge reserve in equity. Any ineffectiveness in the hedge relationship is recognised immediately
in profit or loss.
At the time the hedged item affects profit or loss, any gain or loss previously recognised in other
comprehensive income is reclassified from equity to profit or loss and presented as a reclassification
adjustment within other comprehensive income. However, if a non-financial asset or liability is recognised
as a result of the hedged transaction, the gains and losses previously recognised in other comprehensive
income are included in the initial measurement of the hedged item.
If a forecast transaction is no longer expected to occur, any related gain or loss recognised in other
comprehensive income is transferred immediately to profit or loss. If the hedging relationship ceases to
meet the effectiveness conditions, hedge accounting is discontinued and the related gain or loss is held in
the equity reserve until the forecast transaction occurs.
Fair values
For financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which inputs to the fair value measurements are observable and the significance of the inputs to
the fair value measurement in its entirety, which are described as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: valuation techniques for which the lowest level of inputs which have a significant effect on the
recorded fair value are observable, either directly or indirectly
Level 3: valuation techniques for which the lowest level of inputs that have a significant effect on the
recorded fair value are not based on observable market data
Income taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised
in other comprehensive income or directly in equity.
Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively
enacted by the end of the reporting period. Deferred income taxes are calculated using the liability
method.
Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or
deductible temporary difference will be utilised against future taxable income. This is assessed based on
the Group’s forecast of future operating results, adjusted for significant non-taxable income and expenses
and specific limits on the use of any unused tax loss or credit.
Deferred tax liabilities are generally recognised in full, although IAS 12 ‘Income Taxes’ specifies limited
exemptions. As a result of these exemptions the Group does not recognise deferred tax on temporary
differences relating to goodwill, or to its investments in subsidiaries.
40
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term,
highly liquid investments maturing within 90 days from the date of acquisition that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of changes in value.
Non-current assets and liabilities classified as held for sale and discontinued operations
Non-current assets classified as held for sale are presented separately and measured at the lower of their
carrying amounts immediately prior to their classification as held for sale and their fair value less costs to
sell. However, some held for sale assets such as financial assets or deferred tax assets, continue to be
measured in accordance with the Group’s relevant accounting policy for those assets. Once classified as
held for sale, the assets are not subject to depreciation or amortisation.
Any profit or loss arising from the sale or remeasurement of discontinued operations is presented as part
of a single line item, profit or loss from discontinued operations (See also policy on profit or loss from
discontinued operations above).
Equity, reserves and dividend payments
Share capital represents the nominal (par) value of shares that have been issued. Share premium includes
any premiums received on issue of share capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income tax benefits.
Other components of equity
Other components of equity include a reserve for deferred consideration on the acquisition of businesses
by the Group.
Retained earnings include all current and prior period retained profits. All transactions with owners of the
parent are recorded separately within equity. Dividend distributions payable to equity shareholders are
included in other liabilities when the dividends have been approved in a general meeting prior to the
reporting date.
Share-based payments
All goods and services received in exchange for the grant of any share-based payment are measured at
their fair values.
Where employees are rewarded using share-based payments, the fair value of employees’ services is
determined indirectly by reference to the fair value of the equity instruments granted. This fair value is
appraised at the grant date and excludes the impact of non-market vesting conditions (for example
profitability and sales growth targets and performance conditions). All share-based remuneration is
ultimately recognised as an expense in profit or loss with a corresponding credit to retained earnings. If
vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based
on the best available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. Estimates are subsequently revised if there is any indication that the
number of share options expected to vest differs from previous estimates. Any adjustment to cumulative
share-based compensation resulting from a revision is recognised in the current period. The number of
vested options ultimately exercised by holders does not impact the expense recorded in any period.
Upon exercise of share options, the proceeds received, net of any directly attributable transaction costs,
are allocated to share capital up to the nominal (or par) value of the shares issued with any excess being
recorded as share premium.
41
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
3.
STATEMENT OF ACCOUNTING POLICIES - continued
Provisions, contingent assets and contingent liabilities
Provisions for legal disputes, onerous contracts or other claims are recognised when the Group has a
present legal or constructive obligation as a result of a past event, it is probable that an outflow of
economic resources will be required from the Group and amounts can be estimated reliably. Timing or
amount of the outflow may still be uncertain.
Restructuring provisions are recognised only if a detailed formal plan for the restructuring exists and
management has either communicated the plan’s main features to those affected or started
implementation. Provisions are not recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on
the most reliable evidence available at the reporting date, including the risks and uncertainties associated
with the present obligation. Where there are a number of similar obligations, the likelihood that an
outflow will be required in settlement is determined by considering the class of obligations as a whole.
Provisions are discounted to their present values, where the time value of money is material.
Any reimbursement that the Group is virtually certain to collect from a third party with respect to the
obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related
provision.
No liability is recognised if an outflow of economic resources as a result of present obligations is not
probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote.
4.
SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES
AND ESTIMATION UNCERTAINTY
When preparing the financial statements, management makes a number of judgements, estimates and
assumptions about the recognition and measurement of assets, liabilities, income and expenses.
Significant management judgements
The following are significant management judgements in applying the accounting policies of the Group
that have the most significant effect on the financial statements.
Going concern
As described in the basis of preparation and going concern in Note 3 above, the validity of the going
concern basis is dependent upon the Company sourcing finance required to develop projects. After
making enquiries and considering the matters referred to in Note 3, the Directors have a reasonable
expectation that the Company will source this financing and the Group will have adequate resources to
continue in operational existence for the foreseeable future. For these reasons the Directors continue to
adopt the going concern basis of accounting in preparing the financial statements.
Determination of functional currency
The determination of a company’s functional currency often requires significant judgement where the
primary economic environment on which it operates may not be clear. The Company’s financial
statements are presented in Euro, the primary economic environment of the Company.
Control assessment in a business combination.
As disclosed in Note 17, the Group owns 50.02% of the voting rights in Newry Biomass Limited. One
other company owns the remaining voting rights. Management has reassessed its involvement in Newry
Biomass Limited in accordance with IFRS 10’s revised control definition and guidance and has concluded
that it has control of Newry Biomass Limited.
42
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
4.
SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES
AND ESTIMATION UNCERTAINTY - continued
Assets held for disposal
In April 2017, Reforce Energy Limited (“Reforce”), a wholly-owned subsidiary of the Company, entered
into a heads of agreement (“Heads of Agreement”) with a private limited company incorporated and
registered in Ireland ("Buyer"), wherein the Buyer is willing to buy all the issued shares of Pluckanes
Windfarm Limited, a wholly owned subsidiary of Reforce subject to the agreement and signature by the
parties of a detailed legally binding acquisition agreement, which is the Share Purchase Agreement. The
Buyer and Reforce are in the process of negotiating a definitive Share Purchase Agreement. Operations of
Pluckanes Windfarm Limited are classified as a disposal group held for sale. The Board considered the
subsidiary to meet the criteria to be classified as held for sale at that date for the following reasons:
Pluckanes Windfarm Limited is available for immediate sale and can be sold to the buyer in its
current condition.
The actions to complete the sale were initiated and expected to be completed within one year
from the date of initial classification.
A potential buyer has been identified and negotiations as at the reporting date are at an advance
stage.
For more details on the discontinued operation, refer to Note 25.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and
measurement of assets, liabilities, income and expenses is provided below. Actual results may be
substantially different.
Impairment of goodwill and non-financial assets
Determining whether goodwill and non-financial assets are impaired requires an estimation of the value in
use of the cash generating units to which the assets have been allocated. The value in use calculation
requires the directors to estimate the future cash flows to arise from the cash-generating unit and a
suitable discount rate in order to calculate present value. Where the actual cash flows are less than
expected, a material impairment may arise. The total property, plant and equipment impairment during
the year as included in Note 15 amounted to €180,640 (2016: €307,759).
Recoverability of amounts due under construction contracts
The directors considered the recoverability of the Group’s balances due under construction contracts
which is included in the balance sheet at 30 June 2017 at €Nil (2016: €150,847). The directors have
reviewed the relevant costs incurred to date and expected costs for completion. They have also been in
contact with the ultimate beneficiaries of the construction contracts and have considered the ability of
these customers to have the relevant facilities available to pay for these contracts. Based on these reviews,
the directors are satisfied that an impairment cost of €151,722 (2016: €Nil) should be recognised at the
balance sheet date.
43
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
4.
SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES
AND ESTIMATION UNCERTAINTY - continued
Provision for impairment of financial assets
Determining whether the carrying value of financial assets has been impaired requires an estimation of the
value in use of the investment in subsidiaries and joint venture vehicles. The value in use calculation
requires the directors to estimate the future cash flows expected to arrive from these vehicles and a
suitable discount rate in order to calculate present value. After reviewing these calculations, the directors
are satisfied that a net impairment cost of €Nil (2016: €Nil) should be recognised in the group accounts
and €2,872,863 (2016: €2,711,584) should be recognised in the Company accounts of EQTEC plc. Details
of this impairment are set out in Note 16.
Allowances for impairment of trade receivables
The Group estimates the allowance for doubtful trade receivables based on assessment of specific
accounts where the Group has objective evidence comprising default in payment terms or significant
financial difficulty that certain customers are unable to meet their financial obligations. In these cases,
judgment used was based on the best available facts and circumstances including but not limited to, the
length of relationship. At 30 June 2017, provisions for doubtful debts amounted to €Nil which represents
0% of trade receivables at that date (2016: € Nil– 0%).
Deferred tax assets
Deferred tax is recognised based on differences between the carrying value of assets and liabilities and the
tax value of assets and liabilities. Deferred tax assets are only recognised to the extent that the Group
estimates that future taxable profits will be available to offset them.
Useful lives of depreciable assets
The annual depreciation charge depends primarily on the estimated lives of each type of asset and, in
certain circumstances, estimates of fair values and residual values. The directors annually review these
asset lives and adjust them as necessary to reflect current thinking on remaining lives in light of
technological change, prospective economic utilisation and physical condition of the assets concerned.
Changes in asset lives can have significant impact on depreciation charges for the period. It is not practical
to quantify the impact of changes in asset lives on an overall basis, as asset lives are individually
determined, and there are a significant number of asset lives in use. The impact of any change would vary
significantly depending on the individual changes in assets and the classes of assets impacted.
Fair value measurement
Management uses valuation techniques to determine the fair value of financial instruments (where active
market quotes are not available) and non-financial assets. This involves developing estimates and
assumptions consistent with how market participants would price the instrument. Management bases its
assumptions on observable data as far as possible but this is not always available. In that case management
uses the best information available. Estimated fair values may vary from the actual prices that would be
achieved in an arm’s length transaction at the reporting date.
44
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
4.
SIGNIFICANT MANAGEMENT JUDGEMENT IN APPLYING ACCOUNTING POLICIES
AND ESTIMATION UNCERTAINTY - continued
The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair
value on a recurring basis at year-end.
30 June 2017
Financial assets
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Trade and other payables
Investor loans
Bank overdrafts
30 June 2016
Financial assets
Amounts due from customers
under construction contracts
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Trade and other payables
Investor loans
Business Expansion Scheme
(“BES”) Shares
Bank overdrafts
Level 1
€
-
286,769
-
-
(1,266)
285,503
Level 2
€
293,482
-
(1,143,755)
(3,498,559)
-
(4,348,832)
Level 3
€
-
-
-
-
-
-
Total
€
293,482
286,769
(1,143,755)
(3,498,559)
(1,266)
(4,063,329)
Level 1
€
Level 2
€
Level 3
€
Total
€
-
150,847
-
193,741
137,108
-
-
-
(5,366,550)
(3,968,955)
-
(546)
193,195
(105,000)
-
(9,152,550)
-
-
-
-
-
-
-
-
150,847
137,108
193,741
(5,366,550)
(3,968,955)
(105,000)
(546)
(8,959,355)
5.
FINANCIAL RISK MANAGEMENT
Financial risk management objectives and policies
The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk, interest rate risk and
foreign currency exchange risk.
The Group’s financial risk management programme aims to manage the Group’s exposure to the
aforementioned risks in order to minimise the potential adverse effects on the financial performance of
the Group. The Group seeks to minimise the effects of these risks by monitoring the working capital
position, cash flows and interest rate exposure of the Group. There is close involvement by members of
the Board of Directors in the day-to-day running of the business.
45
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
5.
FINANCIAL RISK MANAGEMENT - continued
Many of the Group’s transactions are carried out in Pounds Sterling. The Group’s exposure to price risk is
not a significant risk as the Company does not currently hold a portfolio of securities which may be
materially impacted by a decline in market values.
Credit risk
The Group’s maximum exposure to credit risk is represented by the balance sheet amount of each
financial asset:
Amounts due from customers under construction contracts
Trade and other receivables
Cash and cash equivalents
2017
€
-
293,482
286,769
2016
€
150,847
137,108
193,741
The Group’s credit risk is primarily attributable to its amounts due from customers under construction
contracts and to its trade and other receivables.
The amounts due from customers under construction contracts represents the total costs incurred to date
on the Group’s projects less recognised losses to date. These customers are jointly controlled entities in
which the Group is a 50% partner. The directors of the Group are in constant contact with the other
partners of the jointly controlled entities. The Group’s exposure to credit risk arises from the failure of
the ultimate customer to raise the appropriate finance, with a maximum exposure equal to the carrying
amount of the related costs.
The Group has adopted procedures in extending credit terms to customers and in monitoring its credit
risk. The Group’s exposure to credit risk arises from defaulting customers, with a maximum exposure
equal to the carrying amount of the related receivables. Provisions are made for impairment of trade
receivables when there is default of payment terms and significant financial difficulty. On-going credit
evaluation is performed on the financial condition of accounts receivable at operating unit level at least on
a monthly basis.
The Group does not have significant risk exposure to any single counterparty. Concentration of credit risk
to any other counterparty did not exceed 5% of gross monetary assets at any time during the financial
year. The Group defines counterparties as having similar characteristics if they are related parties.
Exposure to credit risk on cash deposits and liquid funds is monitored by directors. Cash held on deposit
is with financial institutions in the Ba rating category of Moody’s. The directors are of the opinion that the
likelihood of default by a counter party leading to material loss is minimal.
Liquidity risk
The Group’s liquidity is managed by ensuring that sufficient facilities are available for the Group’s
operations from diverse funding sources. The Group uses cash flow forecasts to regularly monitor the
funding requirements of the Group. The Group’s operations are funded by cash generated from financing
activities, borrowings from banks and investors and proceeds from the issuance of ordinary share capital.
46
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
5.
FINANCIAL RISK MANAGEMENT - continued
The table below details the maturity of the Group’s liabilities as at 30 June 2017:
Trade and other payables
Investor loans
Bank overdrafts
Notes
24
23
23
Up to 1
year
€
1 – 5
years
€
After 5
years
€
1,143,755
2,604,937
1,266
-
893,622
-
3,749,958
893,622
-
-
-
-
Total
€
1,143,755
3,498,559
1,266
4,643,580
The table below details the maturity of the Group’s liabilities as at 30 June 2016:
Trade and other payables
Investor loans
BES Shares
Bank overdrafts
Up to 1 year 1 – 5 years
Notes
24
23
23
23
€
5,366,550
589,334
105,000
546
€
-
3,379,621
-
-
After 5
years
€
-
-
-
-
Total
€
5,366,550
3,968,955
105,000
546
6,061,430
3,379,621
-
9,441,051
Interest rate risk
The primary source of the Group’s interest rate risk relates to bank loans and other debt instruments.
The interest rates on these assets and liabilities are disclosed above.
Bank borrowings and other debt instruments (excluding amounts in the disposal group) amounted to
€3,499,825 and €4,074,501 in 2017 and 2016, respectively.
The interest rate risk is managed by the Group by maintaining an appropriate mix of fixed and floating
rate borrowings. The Group does not engage in hedging activities. Bank loans and certain debt
instruments are arranged at floating rates which are mainly based upon EURIBOR and the prime lending
rate of financial institutions thus exposing the Group to cash flow interest rate risk. The other remaining
debt instruments were arranged at fixed interest rates and expose the Group to a fixed cash outflow.
These bank loans and debt instruments are mostly medium-term to long-term in nature. Interest rates on
loans received from investors and shareholders are fixed in some cases while others are a fixed percentage
greater than current prime lending rates. ‘Medium-term’ refers to bank loans and debt instruments
repayable between 2 and 5 years and ‘long-term’ to bank loans repayable after more than 5 years.
The sensitivity analysis below has been determined based on the exposure to interest rates for non-
derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is
prepared assuming that the amount of the liability outstanding at the end of the year was outstanding for
the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to
key management personnel and represents management’s assessment of the reasonably possible changes
in interest rates.
47
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
5.
FINANCIAL RISK MANAGEMENT - continued
Interest rate risk -continued
If interest rates have been 50 basis points higher/lower and all other variables were held constant, the
Group’s loss for the year ended 30 June 2017 would increase/decrease by €5,158 (2016: decrease/increase
by €5,584). This is mainly attributable to the Group’s exposure to interest rates on its variable rate
borrowings, which are primarily included in the disposal group. The Group’s sensitivity to interest rates
has decreased during the current year mainly due to the reduction in variable rate debt instruments.
Foreign exchange risk
The Group is exposed to future changes in the Sterling relative to the Euro. These risks are managed by
monthly review of Sterling denominated monetary assets and monetary liabilities and assessment of the
potential exchange rate fluctuation exposure. The Group’s exposure to foreign exchange risk is not actively
managed. Management will reassess their strategy to foreign exchange risk in the future.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities
at the end of the reporting period are as follows:
Sterling
Liabilities
Assets
2017
€
3,785,023
2016
€
3,622,703
2017
€
508,574
2016
€
74,909
The following table details the Group’s sensitivity to a 10% increase and decrease in the Euro against
Sterling. 10% is the sensitivity rate used when reporting foreign currency risk internally to key
management personnel and represents management’s assessment of the reasonably possible change in
foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the year-end for a 10% change in foreign currency rates.
The sensitivity analysis includes external loans as well as loans to foreign operations within the Group
where the denomination of the loan is in the currency other than the currency of the lender or the
borrower. A positive number below indicates an increase in profit and other equity where the Euro
strengthens 10% against Sterling. For a 10% weakening of the Euro against Sterling, there would be a
comparable impact on the loss and other equity, and the balances below will be negative.
Profit or loss
Sterling Impact
2016
€
358,363
2017
€
330,954
The Group’s sensitivity to foreign currency has increased during the current year mainly due to the rise in
the Euro to sterling exchange rates as a result of the British decision to exit the EU in June 2016.
Market risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange
rates and interest rates, which are detailed above. There has been no change to the Group’s exposure to
market risks or the manner in which it manages and measures the risk.
6.
CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Group manages its capital to ensure that the Group is able to continue as a going concern while
maximising the return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the company consists of financial liabilities, cash and cash equivalents and equity
attributable to the equity holders of the parent company.
The Group’s management reviews the capital structure on a periodic basis. As part of the review,
management considers the cost of capital and risks associated with it. The Group’s overall strategy on
capital risk management is to continue to improve the ratio of debt to equity.
48
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
6.
CAPITAL MANAGEMENT POLICIES AND PROCEDURES - continued
The gearing ratio of the Group for the year presented is as follows:
Debt
Cash and bank balances
Net debt
Equity
Net debt to equity ratio
30 June 2017
€
3,499,825
(286,769)
3,213,056
4,287,884
30 June 2016
€
4,074,501
(193,741)
3,880,760
(822,736)
75%
(472%)
Debt is defined as financial liabilities and borrowings of the Group while equity includes all capital,
reserves and retained earnings attributable to equity holders of the parent.
The movement in the net debt to equity ratio is as a result of the conversion of €6.07 million of debt into
equity.
7.
SEGMENT INFORMATION
Information reported to the chief operating decision maker for the purposes of resource allocation and
assessment of segment performance focuses on the products and services sold to customers. The Group’s
reportable segment under IFRS 8 Operating Segments is as follows:
Power Generation: Being the development and operation of renewable energy electricity and heat
generating plants;
The chief operating decision maker is the Chief Executive Officer.
49
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
7.
SEGMENT INFORMATION - continued
Information regarding the Group’s reportable segment is presented below.
The following is an analysis of the Group’s revenue and results from continuing operations by reportable
segment:
Segment Revenue
2016
€
2017
€
Segment Profit/(Loss)
2016
€
2017
€
Power Generation
Total from continuing
operations
40,762
40,762
45,996
(258,004)
(94,659)
45,996
(258,004)
(94,659)
Central administration costs and directors’ salaries
Impairment of property, plant and equipment
under
Impairment
construction contracts
Foreign currency losses/(gains)
Finance costs
amounts
due
of
(708,597)
(180,640)
(151,722)
42,096
(559,978)
(456,175)
(307,759)
-
(163,721)
(559,700)
Loss before taxation (continuing operations)
(1,816,845)
(1,582,014)
Revenue reported above represents revenue generated from jointly controlled entities and external
customers. Inter-segment sales for the year amounted to €Nil (2016: €Nil). Included in revenues in the
Power Generation Segment are revenues of €40,762 (2016: €45,996) which arose from sales to GG Eco
Energy Limited, an associate undertaking of EQTEC plc. This represents 100% (2016: 100%) of total
revenues in the year.
The accounting policies of the reportable segments are the same as the Group’s accounting policies
described in Note 3. Segment profit or loss represents the profit or loss earned by each segment without
allocation of central administration costs and directors’ salaries, other operating income, share of profit or
loss of jointly controlled entities, profit on disposal of jointly controlled entities, interest costs, interest
income and income tax expense. This is the measure reported to the chief operating decision maker for
the purpose of resource allocation and assessment of segment performance.
50
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
7.
SEGMENT INFORMATION - continued
Other segment information:
Depreciation and
amortisation
2017
€
Power Generation – continuing
operations
24
Additions to non-current
assets
2017
€
2016
€
672,079
5,320,952
2016
€
138
In addition to the depreciation and amortisation reported above, impairment losses of €180,640 (2016:
€307,759) were recognised in respect of property, plant and equipment. These impairment losses were
attributable as follows: Power Generation Segment, €180,640 (2016: € 307,759).
The Group operates in two principal geographical areas: Republic of Ireland (country of domicile), and
the United Kingdom. The Group’s revenue from continuing operations from external customers and
information about its non-current assets* by geographical location are detailed below:
Revenue from Associates and
External Customers
2017
€
-
40,762
40,762
2016
€
-
46,188
46,188
Non-current assets*
2017
2016
€
-
9,464,911
€
-
9,524,726
9,464,911
9,524,726
Republic of Ireland
United Kingdom
*Non-current assets excluding goodwill, financial instruments and investment in jointly controlled entities.
The management information provided to the chief operating decision maker does not include an analysis
by reportable segment of assets and liabilities and accordingly no analysis by reportable segment of total
assets or total liabilities is disclosed.
51
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
8.
REVENUE
An analysis of the Group’s revenue for the year (excluding interest revenue), from continuing and
discontinued operations, is as follows:
Revenue from the generation of wind
Revenue from the generation of heat
Revenue from consultancy fees
associated with the generation of heat
9.
ADMINISTRATIVE EXPENSES
Employee expenses
Office and operating expenses
Marketing expenses
Professional fees (including release of
accruals)
Depreciation of property, plant &
equipment
Travel and subsistence
Provision against other receivables
Other miscellaneous expenses
Examinership and reorganisation costs
Regulatory expenses
10. FINANCE COSTS AND INCOME
Finance Costs
Interest on loans, bank facilities and
overdrafts
Interest on Revenue liabilities
Continuing
2017
€
-
-
2016
€
-
192
Discontinued
2017
€
2016
€
178,862
-
200,675
-
40,762
45,996
-
-
40,762
46,188
178,862
200,675
Continuing
Discontinued
2017
€
448,993
198,233
2,233
239,035
2016
€
451,423
85,894
1,525
34,631
2017
€
-
37,358
-
4,832
2016
€
-
37,453
-
4,800
24
138
72,866
73,134
44,085
4,024
4,787
-
65,949
49,863
40,071
2,837
(150,842)
81,482
-
-
59
-
-
-
-
58
-
-
1,007,363
597,022
115,115
115,445
Continuing
Discontinued
2017
€
2016
€
2017
€
2016
€
559,978
-
559,508
192
39,183
-
43,275
-
559,978
559,700
39,183
43,275
Finance Income
Interest receivable on bank deposits
-
-
11
15
52
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
11. EMPLOYEE DATA
Employee costs (including executive directors):
Salaries
Social insurance costs
Average number of employees (including executive directors)
Company
Average number of employees (including executive directors)
2017
€
2016
€
386,500
41,378
386,000
35,796
427,878
421,796
No.
No.
3
2
3
2
Capitalised employee costs in the financial year amounted to €Nil (2016: €Nil).
12. LOSS BEFORE TAXATION
Loss before taxation on continuing operations is stated after
charging/(crediting):
Depreciation of property, plant and equipment (Notes 7 and 9)
(Gain)/loss on foreign exchange
Directors’ remuneration: for services as directors (Note 27)
for other services (Note 27)
Impairment losses of amounts due under construction contracts
Impairment losses of property, plant and equipment
charged to profit and loss (Note 15)
Auditor’s remuneration:
Audit of group accounts
Tax advisory services
2017
€
2016
€
24
(42,096)
18,000
336,000
151,722
138
163,721
28,000
335,500
-
180,640
307,759
2017
€
40,000
11,000
2016
€
37,500
10,000
51,000
47,500
53
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
13. TAX EXPENSE
Tax expense comprises:
Current tax expense
Deferred tax expense
Adjustment for prior periods
Tax credit
Loss before taxation
2017
€
2016
€
-
-
-
-
-
-
-
-
2017
€
2016
€
(1,792,270)
(1,540,044)
Applicable tax 12.50% (2016: 12.50%)
(224,034)
(192,506)
Effects of:
Amortisation & depreciation in excess of capital allowances
Expenses not deductible for tax purposes
Losses carried forward
Actual tax expense
9,111
15,950
198,973
9,826
38,470
144,210
-
-
The tax rate used for 2017 and 2016 reconciliation above is the corporate rate of 12.5% payable by
corporate entities in Ireland on taxable profits under tax law in that jurisdiction.
14. LOSS PER SHARE
Basic loss per share
From continuing operations
From discontinued operations
Total basic loss per share
Diluted loss per share
From continuing operations
From discontinued operations
From continuing and discontinued operations
2017
€ per share
(0.014)
0.001
(0.013)
2016
€ per share
(0.016)
0.001
(0.015)
(0.014)
0.001
(0.013)
(0.016)
0.001
(0.015)
54
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
14. LOSS PER SHARE- continued
The loss and weighted average number of ordinary shares used in the calculation of the basic and diluted
loss per share are as follows:
Loss for year attributable to equity holders of the parent
Profit for the year from discontinued operations used in the
calculation of basic earnings per share from discontinued
operations
Losses used in the calculation of basic loss per share from
continuing operations
Weighted average number of ordinary shares for
the purposes of basic loss per share
Weighted average number of ordinary shares for
the purposes of diluted loss per share
2017
€
(1,590,914)
2016
€
(1,041,035)
24,575
41,970
(1,615,489)
(1,083,005)
118,378,906
69,684,580
118,378,906
69,684,580
Dilutive and anti-dilutive potential ordinary shares
The following potential ordinary shares were excluded in the diluted earnings per share calculation as they
were anti-dilutive.
Share warrants in issue
Convertible loans in issue
Total anti-dilutive shares
2017
2016
39,088,960
10,000,000
49,088,960
35,245,833
9,166,667
44,412,500
55
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
15. PROPERTY, PLANT &
EQUIPMENT
Cost
At 1 July 2015
Additions
Foreign currency adjustment
At 30 June 2016
Held for sale or included in disposal
group (Note 25)
At 30 June 2016
At 1 July 2016
Additions
Foreign currency adjustment
Held for sale or included in disposal
group (Note 25)
Office
equipment
€
Wind
Turbine
€
Construction
in Progress
€
Total
€
-
166
(16)
150
-
150
150
-
(9)
1,453,759
3,565
-
8,773,680
5,320,786
(1,917,063)
10,227,439
5,324,517
(1,917,079)
1,457,324
12,177,403
13,634,877
(1,457,324)
-
(1,457,324)
-
12,177,403
12,177,553
1,457,324
-
-
12,177,403
672,079
(744,745)
13,634,877
672,079
(744,754)
-
(1,457,324)
-
(1,457,324)
At 30 June 2017
141
-
12,104,737
12,104,878
Accumulated depreciation
At 1 July 2015
Impairment
Charge for the year
Foreign currency adjustment
At 30 June 2016
Held for sale or included in disposal
group (Note 25)
At 30 June 2016
At 1 July 2016
Charge for the year
Impairment
Foreign currency adjustment
Held for sale or included in disposal
group (Note 25)
At 30 June 2017
Carrying amount
At 30 June 2016
At 30 June 2017
109,046
-
73,134
-
2,916,549
307,759
-
(571,606)
3,025,595
307,759
73,272
(571,619)
182,180
2,652,702
2,835,007
(182,180)
-
(182,180)
-
2,652,702
2,652,827
182,180
72,866
-
-
2,652,702
-
180,640
(193,516)
2,835,007
72,890
180,640
(193,524)
(255,046)
-
(255,046)
-
2,639,826
2,639,967
-
9,524,701
9,524,726
-
9,464,911
9,464,911
-
-
138
(13)
125
-
125
125
24
-
(8)
-
141
25
-
56
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
15. PROPERTY, PLANT & EQUIPMENT - continued
The Group carried out a review of the recoverable amount of property held by the Power
Generation operating segment at 30 June 2017. The review led to recognition of an impairment
loss of €180,640 (2016: €307,759), which has been recognised in profit or loss. The recoverable
amount of the assets has been determined on the basis of their fair value, less costs to sell.
The impairment losses have been shown separately in the consolidated statement of profit or loss.
16. FINANCIAL ASSETS
Investment in associate
Details of the Group’s interests in associated undertakings at 30 June 2017 is as follows:
Name of associated
undertaking
Country of
incorporation
Shareholding
Principal activity
GG Eco Energy Limited
United Kingdom
30%
Operator of biomass
heat generating projects
Summarised financial information in respect of the Group’s interests in associated undertakings is as
follows:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net liabilities
2017
€
1,308,600
128,580
(1,511,115)
(612,253)
2016
€
1,510,448
118,885
(1,670,973)
(460,948)
(686,188)
(502,588)
Group’s share of net assets of associated entities
-
-
Total revenue
Total expenses
Total loss for the period
2017
€
2016
€
534,478
(750,929)
611,136
(853,828)
(216,451)
(242,692)
Group’s share of profits of associated undertakings
-
-
The investment in GG Eco Energy Limited is accounted for using the equity method in accordance with
IAS 28.
57
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
16. FINANCIAL ASSETS – continued
Company
Investment in subsidiary undertakings
At beginning and at end of period
Loans to subsidiary undertakings
At 1 July
Loans advanced as part of examinership process
Funds advanced to/(repaid by) subsidiary undertakings
Repayment of examinership loans
Assignment of debt from Newry Biomass
Provision for impairment of investment in subsidiaries
Provision for impairment of intercompany loans related to
examinership
Foreign currency adjustment
At 30 June
Total
2017
€
-
2016
€
-
1,772,676
-
518,607
(10,146)
5,150,226
(2,883,009)
2,382,505
2,658,304
(8,651)
(95,543)
-
(268,840)
10,146
(148,546)
(2,442,744)
(452,355)
4,409,954
1,772,676
4,409,954
1,772,676
On 24 July 2015, EQTEC plc and its related companies exited the examination process. As part of the
Scheme of Arrangement approved by the High Court to allow the exit, the Company issued 37,470,972 new
Ordinary Shares to creditors of the Company and related companies through a debt for equity conversion.
This required intercompany loans of €2,658,304 to be issued to certain related companies to allow for the
issue of shares to the creditors of those related companies. These loans are interest-free and have no fixed
date of repayment. These loans were fully provided for at year-end.
58
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
17.
INTERESTS IN SUBSIDIARIES
Details of EQTEC plc subsidiaries at 30 June 2017 are as follows:
Name
Newry Biomass No. 1 Limited
Country of
incorporation
Republic of Ireland
Shareholding
100%
Principal activity
Investment company
React Biomass Limited
Republic of Ireland
100%
Investment company
Reforce Energy Limited
Republic of Ireland
100%
Pluckanes Windfarm Limited
Republic of Ireland
100%
Grass Door Limited
United Kingdom
100%
Renewable energy
development company
Generation of electricity
through wind
Developer & operator of
biomass heat generating
projects
Newry Biomass Limited
Northern Ireland
50.02%
Energy utility company
Enfield Biomass Limited
United Kingdom
100%
Energy utility company
Moneygorm Wind Turbine
Limited
Eqtec No. 1 Limited (formerly
React Energy No. 1 Limited)
Republic of Ireland
100%
Dormant company
Republic of Ireland
100%
Investment company
Plymouth Biomass Limited
United Kingdom
100%
Energy utility Company
Clay Cross Biomass Limited
United Kingdom
90%
Energy utility company
Altilow Wind Turbine Limited
Republic of Ireland
100%
Generation of electricity
through wind
The shareholding in each company above is equivalent to the proportion of voting power held.
The registered office for all of the above companies is Building 1000, City Gate, Mahon, Cork, except for
Enfield Biomass Limited, Plymouth Biomass Limited and Grass Door Limited, whose registered office is
c/o Origen Capital LLP, 26 Dover Street, London W1S 4LY, England; Newry Biomass Limited, whose
registered office is c/o CGDM, 27 Patrick Street, Newry, Co. Down BT35 8EB, Northern Ireland; and
Clay Cross Biomass Limited, whose registered office is Larkfleet House, Southfields Business Park,
Falcon Way, Bourne, Lincolnshire PE10 0FF, England.
59
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
18. CONSTRUCTION CONTRACTS
Contracts in progress at the balance sheet date:
Construction costs incurred plus recognised
profits less recognised losses to date
Less payments received in advance
Recognised and included in the financial statements
as amounts due:
From customers under construction contracts
To customers under construction contracts
2017
€
2016
€
-
-
150,847
-
-
150,847
2017
€
-
-
2016
€
150,847
-
-
150,847
At 30 June 2017, retentions held by customers for contract work amounted to €Nil (2016: €Nil).
Advances received from customers for contract work amounted to €Nil (2016: €Nil).
An impairment loss of €151,722 (2016: €Nil) was recognised for amounts due under construction
contracts during the financial year.
60
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
19. TRADE AND OTHER RECEIVABLES
Group
Trade receivables
Allowance for impairment of trade receivables
VAT receivable
Payments on account
Prepayments
Corporation tax
Other receivables
2017
€
-
-
2016
€
-
-
-
-
1,324
35,385
210,987
96
45,690
15,711
37,490
39,143
96
44,668
293,482
137,108
The following table shows an analysis of trade receivables split between past due and within terms
accounts. Past due is when an account exceeds the agreed terms of trade, which are typically 60 days.
Within terms
Past due more than one month but less than two months
Past due more than two months
2017
€
-
-
-
2016
€
-
-
-
-
-
Included in the Group’s trade receivables balance are debtors with carrying amount of €Nil (2016: €Nil)
which are past due at year end and for which the Group has not provided.
The Group does not hold any collateral over these balances. No interest is charged on overdue
receivables. The quality of past due not impaired trade receivables is considered good. The carrying
amount of trade receivables approximates to their fair values.
The Group’s policy is to recognise an allowance for doubtful debts of 100% against all receivables over
120 days because historical experience has been that trade receivables that are past due beyond 120 days
are not recoverable. Allowances for doubtful debts are recognised against trade receivables between 60
days and 120 days based on estimated irrecoverable amounts determined by reference to past default
experience of the counterparty and an analysis of the counterparty’s current financial position.
61
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
19. TRADE AND OTHER RECEIVABLES - continued
In determining the recoverability of a trade receivable, the Group considers any changes in the credit
quality of the trade receivable from the date credit was initially granted up to the end of the current
reporting period. The concentration of the credit risk is limited due to the customer base being large and
unrelated, and the fact that no one customer holds balances that exceeds 10% of the gross assets of the
Group. The maximum exposure risk to trade and other receivables at the reporting date by geographic
region, ignoring provisions, is as follows:
Ireland
United Kingdom
2017
€
-
-
-
2016
€
-
-
-
Other receivables relate to deposits on rental contracts amounting to €3,360 (2016: €2,338) and payments
on account related to shares of €42,330 (2016: €42,330). The aged analysis of other receivables is within
terms.
There is no concentration of credit risk with respect to receivables as disclosed in Note 5 under credit
risk.
Company
Amounts due from subsidiary undertakings
Allowance for impairment of balances
Prepayments
Corporation Tax
VAT Receivable
Other receivables
2017
€
109,381
(49,723)
59,658
185,975
96
1,212
45,690
2016
€
446,143
(51,857)
394,286
10,936
96
4,820
44,668
292,631
454,806
The concentration of credit risk in the individual financial statements of EQTEC plc relates to amounts
due from subsidiary undertakings. The directors have reviewed these balances in the light of the
impairment review carried out on the investments by EQTEC plc in its subsidiaries.
The directors considered the future cash flows arising from subsidiaries and are satisfied that the
appropriate impairment has been applied to these balances.
62
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
20. CASH AND CASH EQUIVALENTS
For the purposes of the cash flow statement, cash and cash equivalents include cash on hand and in banks
and bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the cash flow
statement can be reconciled to the related items in the balance sheet as follows:
2017
€
286,769
(1,266)
285,503
2016
€
193,741
(546)
193,195
116,899
130,454
402,402
323,649
271,567
(1,266)
191,927
(546)
270,301
191,381
Group
Cash and bank balances
Bank overdrafts (Note 23)
Cash and cash equivalents included in a disposal group held for
resale (Note 25)
Company
Cash and bank balances
Bank overdrafts (Note 23)
21. EQUITY
Share Capital
At 30 June 2016
Ordinary shares of €0.10 each
Deferred ordinary shares of
€0.40 each
Deferred convertible “A”
ordinary shares of €0.01 each
Authorised
Number
200,000,000
Allotted and
called up
Number
75,140,494
Authorised
€
20,000,000
Allotted and
called up
€
7,514,049
200,000,000
22,370,042
80,000,000
8,948,017
10,000,000,000
99,117,952
100,000,000
991,180
At 30 June 2017
Authorised
Number
Allotted and
called up
Number
Authorised
€
17,453,246
Allotted and
called up
€
Ordinary shares of €0.001 each
12,561,091,094
185,303,229
12,561,091
185,303
Deferred ordinary shares of
€0.40 each
Deferred “B” Ordinary Shares
of €0.099 each
Deferred convertible “A”
ordinary shares of €0.01 each
200,000,000
22,370,042
80,000,000
8,948,017
75,140,494
75,140,494
7,438,909
7,438,909
10,000,000,000
99,117,952
100,000,000
991,180
17,563,409
63
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
21. EQUITY-continued
The holders of the ordinary shares are entitled to participate in the profits or assets of the Company (by
way of payment of any dividends, on a winding up or otherwise) and are entitled to receive notice, attend,
speak and vote at general meetings of the Company. Each ordinary share equates to one vote at meetings
of the company.
The holders of the deferred convertible “A” ordinary shares are entitled to participate pari passu with
ordinary shareholders in the profits or assets of the Company on a winding-up, up to an amount equal to
the par value paid in respect of such deferred convertible “A” ordinary shares, but are not entitled to
participate in the profits or assets of the Company (by way of payment of any dividends or otherwise).
The holders of the deferred convertible “A” ordinary shares are not entitled to receive notice, attend,
speak and vote at general meetings of the Company.
The holders of the deferred ordinary shares and the deferred “B” ordinary shares are not entitled to
participate in the profits or assets of the Company (by way of payment of any dividends, on a winding up
or otherwise) and are not entitled to receive notice, attend, speak and vote at general meetings of the
Company.
The Company was incorporated on 2 October 2008 with an initial authorised share capital of
€100,000,000 divided into 100,000,000 ordinary shares of €1.00 each of which 38,100 ordinary shares of
€1.00 each fully paid up were issued. On 14 October 2008 the ordinary shares were subdivided so that
each ordinary share had a nominal value of €0.10 each as opposed to the previous nominal value of €1.00
each. On 3 December 2010, the trading denomination of the Company’s ordinary shares of €0.10 each
changed from Euro to pounds sterling. This does not affect the nominal valuation of the shares. On 6
February 2017 the ordinary shares were further subdivided so that each ordinary share had a nominal
value of €0.001 each as opposed to the previous nominal value of €0.10 each.
Share Premium
Proceeds received in excess of the nominal value of the shares issued during the year have been included
in share premium, less registration and other regulatory fees.
Company Share Premium
The share premium included in the consolidated and company statement of financial position is different
by €18,934,079 due to the reverse acquisition of the Group which occurred on 13 October 2008. The
reverse acquisition resulted to a reverse acquisition reserve which has been netted off against the share
premium in the consolidated statement of financial position.
Movements in the year to 30 June 2017
On 6 February 2017, the Company approved by an Extraordinary General Meeting, a share capital
reorganisation which resulted in the existing ordinary shares of €0.10 each being divided and reclassified
as one new ordinary share of €0.001 each and one Deferred “B” ordinary share of €0.099 each.
On 6 February 2017, EBIOSS Energy AD assigned the benefit of the €5,150,226 debt due to EQTEC’s
50.02% subsidiary, Newry Biomass Limited, to EQTEC plc. EQTEC plc then issued 78,210,000 ordinary
shares of €0.001 each, at a premium of €0.0649 per share, to EBIOSS Energy AD in settlement of this
debt.
On 20 February 2017, EQTEC plc raised £500,000 (€585,000 before expenses) through the placing of
10,000,000 ordinary shares of €0.001 each in the capital of the Company.
On the same day, EBIOSS Energy AD agreed to convert €585,000 of its existing debt facility into
10,000,000 ordinary shares of €0.001 each (See Note 23).
64
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
21. EQUITY-continued
Movements in the year to 30 June 2017 - continued
On 9 March 2017, EQTEC plc raised £485,000 (€557,750 before expenses) through the placing of
7,461,538 ordinary shares of €0.001 each in the capital of the Company.
On the same day, EBIOSS Energy AD agreed to convert €335,717, being the balance of its existing debt
facility (including accrued interest) into 4,491,197 ordinary shares of €0.001 each (See Note 23).
Share Warrants
The following share warrants were in existence and remain unexercised as at 30 June 2017:
Detail
Number
Grant Date
Expiry Date
Exercise Price
(GBP)
Fair Value
at Grant
Date
(GBP)
Origen Capital
Partners LLP
re Altair SLN
(Note 23)
Nirvana
Capital Ltd re
Ecofinance
SLF (Note 23)
Strand Hanson
Limited
3,150,000
14/07/2015
13/07/2022
£0.10
35,300,000
14/07/2015
13/07/2022
£0.10
1,533,505
06/02/2017
05/02/2022
£0.0533
39,983,505
£-
£-
£-
22. NON-CONTROLLING INTERESTS
Balance at beginning of year
Change in ownership interest without a loss of control (Note 23)
Share of loss for the year
Unrealised foreign exchange losses
2017
€
1,639,780
105,000
(201,356)
(165,477)
2016
€
2,455,567
-
(499,009)
(316,778)
1,377,947
1,639,780
65
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
23. BORROWINGS
Group
Current liabilities
At amortised cost
Bank overdrafts
8% loan facility
7.5% convertible secured loan note
Financial liabilities carried at FVTPL
BES Shares
Non-current liabilities
At amortised cost
7.5% convertible secured loan note
15% secured loan facility
Company
Current liabilities
Bank overdrafts
8% loan facility
7.5% convertible secured loan note
Non-current liabilities
7.5% convertible secured loan note
15% secured loan facility
2017
€
2016
€
3
2
4
2
1
3
2
2
1
1,266
-
2,604,937
2,606,203
-
-
2,606,203
-
893,622
893,622
€
1,266
-
2,604,937
2,606,203
-
893,622
893,622
546
589,334
-
589,880
105,000
105,000
694,880
2,518,259
861,362
3,379,621
€
546
589,334
-
589,880
2,518,259
861,362
3,379,621
Borrowings at amortised cost
1. 15% Secured Loan Note Facility
On 15 July 2015, the Board of EQTEC plc announced that it had raised £1,000,000 (before expenses)
through a Secured Loan Facility (“SLF”). EcoFinance, a group which sources finance for renewable
energy projects, has provided the SLF. The SLF is at a fixed rate of 15% per annum, the interest on which
will be paid monthly in arrears. The SLF is for a five-year term and the principal together with any
accrued interest will be repayable by a bullet repayment at the end of the term. The SLF is secured by
mortgage debentures, cross guarantees and share pledges over EQTEC and its subsidiary companies.
66
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
23. BORROWINGS – continued
1. 15% Secured Loan Note Facility – continued
The carrying amount of the SLF at 30 June 2017 is as follows:
€
Proceeds from the issue of the SLF 1,416,631
Less: Transaction costs (445,519)
Net proceeds 971,112
Accreted transaction costs 174,729
Currency gains on retranslation (252,219)
Carrying amount of SLF at 30 June 2017 893,622
The face value of the SLF at 30 June 2017 is €1,138,259 (2016: €1,205,945).
2. 7.5% convertible secured loan note
On 24 July 2015, as part of the Scheme of Arrangement announced on 14 July 2015 as approved by the
High Court in Dublin, the existing secured debt held by Altair Group Investment Limited (“Altair” or
“the Secured Creditor”), comprising the 9% Secured Loan Note of £1.5 million issued in 2014 and the
Examinership financing facility of €500,000, was refinanced by way of a new two-year 7.5% £2 million
Convertible Secured Loan Note (“CSLN”), repayable in July 2017, and is secured by the same security
package granted in favour of EcoFinance. This is governed by an inter-creditor deed under which the SLF
security plus interest and costs shall rank in priority to the CSLN security plus interest and costs. Under
the terms of the CSLN, the Secured Creditor has the right to convert up to £1 million into new Ordinary
Shares at £0.10.
The carrying amount of the CSLN at 30 June 2017 is as follows:
€
Amounts rolled up from previous facilities
2,742,430
Additional proceeds issued on CSLN 110,000
Less: Transaction Costs (131,565)
Net Proceeds 2,720,865
Accreted Interest 365,425
Accreted Transaction Costs 129,266
Currency gains on retranslation (610,619)
Carrying amount of CSLN at 30 June 2017 2,604,937
The face value of the CSLN at 30 June 2017, including accrued interest, is €2,607,236 (2016: €2,586,340).
The CSLN was due for repayment on 14 July 2017. On 17 July 2017, EQTEC announced that it had
entered into a standstill agreement with Altair whereby Altair has consented, inter alia, to extend the
repayment date of the CSLN from 14 July 2017 to the earlier of three business days following the
completion of the acquisition of the share capital of EQTEC Iberia SL or 31 October 2017.
During the period prior to the revised repayment date, EQTEC and Altair will seek to agree further
changes to the terms of the CSLNs. In the event that Completion does not occur by 31 October 2017, all
sums due under the CSLNs, including accrued interest, will be payable immediately, unless Altair and the
Company have agreed new terms. On 31 October 2017, the repayment date was further extended to 31
December 2017.
67
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
23. BORROWINGS - continued
3. 8% Loan Facility
On 8 January 2016, (subsequently amended in March 2016), the Company announced that it had secured
a €750,000 Facility from EBIOSS. The Company may use the proceeds from the Facility for the
continuing investment in its portfolio of biomass gasification projects in the UK, and for working capital
for the Group.
The key terms of the Facility are as follows:
quantum of €750,000, which may be drawn down in three equal monthly instalments of
€250,000;
interest rate of 8% per annum on outstanding capital balances, which will accrue and be repaid in
full on repayment of the Facility;
proceeds from the Facility, which is unsecured, will be, other than in respect of the second
tranche of €250,000, used solely to fund development costs associated with the Company’s
identified biomass gasification projects in the UK;
drawdown of the Facility will be subject to the agreement of the Company and EBIOSS; and
from 7 January 2017, EBIOSS may, at any time, demand that the Company repays the drawn
down proportion of the Facility plus accrued interest. The Company may, at any time, elect to
repay the Facility plus accrued interest.
The full amount of the facility of €750,000 was drawn down by 12 December 2016. On 12 December
2016, it was announced that EQTEC and EBIOSS had agreed to amend the terms of the Facility such
that the Facility has been increased from €750,000 to €1,350,000, with the additional €600,000 to be used
for the working capital needs of the Company, and that the date that EBIOSS may demand repayment of
the Facility has been extended from 7 January 2017 to 7 January 2018. Any subsequent drawdowns of the
additional €600,000 will be made as and when required to minimise finance costs. A further €118,000 was
drawn down on the revised facility in December 2016-January 2017.
On 20 February 2017, EBIOSS Energy AD agreed to convert €585,000 of its existing debt facility into
10,000,000 ordinary shares of €0.001 each. (See Note 21).
On 9 March 2017, EBIOSS Energy AD agreed to convert €335,717, being the balance of its existing debt
facility (including accrued interest) into 4,491,197 ordinary shares of €0.001 each. (See Note 21).
A balance of €482,000 remains undrawn on the above facility. There are no outstanding balances with
respect to this facility at 30 June 2017.
Borrowings at FVTPL
4. BES Shares
As part of the acquisition of Reforce Energy Limited and subsidiaries, the Group took responsibility over
105,000 “B” Ordinary Shares of €1 each issued by Reforce Energy Limited as part of the Business
Expansion Scheme in Ireland. As part of this scheme, Newry Biomass No. 1 Limited entered into a put
and call option agreement, dated 20 December 2012, whereby Newry Biomass No. 1 Limited may be
required to purchase the outstanding “B” Ordinary Shares in Reforce Energy Limited at a price to be
agreed with between Newry Biomass No. 1 Limited and the holders of the “B” Ordinary Shares in
Reforce Energy Limited. The option may be exercised on any date between 1 January 2017 and 31 March
2017. The put option was not exercised in this time frame and as there is no obligation, upon the expiry
of the put option, for the Group to purchase the outstanding “B” Ordinary Shares in Reforce Energy
Limited, this has resulted in a change of ownership interest without a loss of control and the Company
has transferred €105,000 from financial liabilities to non-controlling interests in 2017. The call option is
still in situ, however, it is not the intention of the Company, at this time, to exercise same.
68
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
24. TRADE AND OTHER PAYABLES
Group
VAT payable
Trade payables
Other payables
Accruals
PAYE & social welfare
2017
€
11,096
729,395
128,244
258,944
16,076
2016
€
3,459
4,971,691
112,948
262,207
16,245
1,143,755
5,366,550
The carrying amount of trade and other payables approximates fair value. All trade and other payables fall
due within one year. Included in trade and other payables at 30 June 2017 is a liability of €650,000 related
to the purchase of biomass gasifier equipment for the repowering of the Newry Biomass project (2016:
€5,092,317).
Trade and other creditors are payable at various dates in accordance with the suppliers’ usual and
customary credit terms. Corporation tax and other taxes including social insurance are repayable at various
dates over the coming months in accordance with the applicable statutory provisions.
Company
Trade payables
PAYE & social welfare
Accruals
2017
€
78,988
14,684
211,097
2016
€
6,752
14,832
114,659
304,769
136,243
The carrying amount of trade and other payables approximates fair value. All trade and other payables fall
due within one year.
25. DISPOSAL GROUP CLASSIFIED AS HELD FOR RESALE AND DISCONTINUED
OPERATIONS
The Group is in negotiations with certain parties with respect to the sale of its subsidiary, Pluckanes
Windfarm Limited, which is involved in the generation of electricity through wind. The disposal is
consistent with the Group’s long-term policy to focus its activities as a technology solution company for
waste gasification to energy projects. The disposal is expected to be complete in Q4 2017.
Consequently, assets and liabilities allocable to Pluckanes Windfarm Limited were classified as a disposal
group. Revenues and expenses, gains and losses relating to the discontinuation of this subgroup have been
eliminated from profit or loss from the Group’s continuing activities and are shown as a single line item
on the face of the statement of profit or loss.
The combined results of the discontinued operations included in the loss for the year are set out below.
The comparative profit and cash flows from discontinued operations have been re-presented to include
those operations classified as discontinued in the current year.
69
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
25. DISPOSAL GROUP CLASSIFIED AS HELD FOR RESALE AND DISCONTINUED
OPERATIONS – continued
Profit for the year from discontinued operations
Revenue (Note 8)
Administrative Expenses (Note 9)
Operating Profit
Finance Costs (Note 10)
Finance Income (Note 10)
Profit from discontinued operations before tax
Tax Expenses
Profit for the year from discontinued operations
(attributable to owners of the Company)
2017
€
178,862
(115,115)
63,747
(39,183)
11
24,575
-
2016
€
200,675
(115,445)
85,230
(43,275)
15
41,970
-
24,575
41,970
Cash flows generated by Pluckanes Windfarm Limited for the periods under review are as
follows:
Cash flows from discontinued operations
Operating activities
Investing activities
Financing activities
2017
€
124,298
11
(125,864)
2016
€
154,069
15
(58,599)
Net cash flows (used in)/generated from discontinued
operations
(1,555)
95,485
The carrying amount of assets and liabilities in this disposal group are summarised as follows:
Assets classified as held for resale:
Non-current assets:
Property, plant and equipment
Current assets:
Trade and other receivables
Cash and cash equivalents (Note 20)
2017
€
2016
€
1,202,278
1,275,144
25,326
116,899
20,921
130,454
Assets classified as held for resale
1,344,503
1,426,519
Liabilities classified as held for resale:
Current liabilities:
Borrowings
Trade and other payables
1,030,250
50,004
1,116,250
58,596
Liabilities classified as held for resale
1,080,254
1,174,846
The directors of the Company expect that the fair value less costs to sell Pluckanes Windfarm Limited
will be higher than the aggregate carrying amount of the related assets and liabilities. Therefore, no
impairment loss was recognised on reclassification of the assets and liabilities as held for resale.
70
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
26. DEFERRED TAXATION
A deferred tax asset has not been recognised at the balance sheet date in respect of trading tax losses. Due
to the history of past losses, the company has not recognised any deferred tax asset in respect of tax losses
to be carried forward which are approximately €11.1 million at 30 June 2017.
27. RELATED PARTY TRANSACTIONS
The Group’s related parties include its joint venture and key management. In addition, on 6 February
2017, EBIOSS Energy AD (“EBIOSS”) became a 50.03% holder of the share capital of the Company.
Transactions with EBIOSS
As disclosed in note 23.3 above, EBIOSS entered into an 8% loan facility with the Company on 8 January
2016. Amounts advanced by EBIOSS during the year amounted to €293,000 (2016: €575,000). Finance
costs recognised in the income statement in respect of loans from EBIOSS amounted to €38,383 (2016:
€14,334). On 20 February 2017, EBIOSS Energy AD agreed to convert €585,000 of its existing debt
facility into 10,000,000 ordinary shares of €0.001 each (See Note 21). On 9 March 2017, EBIOSS Energy
AD agreed to convert €335,717, being the balance of its existing debt facility (including accrued interest)
into 4,491,197 ordinary shares of €0.001 each (See Note 21).
During the year ended 30 June 2017, the Group purchased €57,909 (2016: €5,092,317) of biomass gasifier
equipment for the Newry Biomass project from EBIOSS. At 30 June 2017, €Nil was payable to EBIOSS
with respect to this purchase (2016: €5,092,317). On 6 February 2017, EBIOSS assigned the benefit of the
€5,150,226 debt due to EQTEC’s 50.03% subsidiary, Newry Biomass Limited, to EQTEC plc. EQTEC
plc then issued 78,210,000 ordinary shares of €0.001 each, at a premium of €0.0649 per share, to EBIOSS
Energy AD in settlement of this debt (See Note 21).
During the year ended 30 June 2017, the Group purchased €650,000 (2016: €Nil) of biomass gasifier
equipment for the Newry Biomass project from EQTEC Iberia SL, a related undertaking of EBIOSS. At
30 June 2017, €650,000 was payable to EQTEC Iberia SL with respect to this purchase (2016: €Nil).
Transactions with key management personnel
Key management of the Group are the members of EQTEC plc’s board of directors. Key management
personnel remuneration includes the following expenses:
Fees/
Salary/
Exps
€’000
250
85
24
359
Other
Pension
Bonus
€’000
€’000
€’000
Gain on
share
options
€’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2017
€’000
2016
€’000
250
85
24
359
250
85
22
357
Directors
Gerry Madden
Brendan Halpin
Dermot O’Connell
Total
At 30 June 2017, directors’ remuneration unpaid (including past directors) amounted to €32,000 (2016:
€26,000).
Details of each director’s shareholding that were in office at the year-end are shown in the Directors’
Report.
71
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
27. RELATED PARTY TRANSACTIONS - continued
Transactions with associate undertakings
During the year ended 30 June 2017, sales of €40,762 were made to associate undertakings (2016:
€45,996). Included in trade and other receivables at 30 June 2017 is balances of €Nil due from associate
undertakings (2016: €Nil).
28. EVENTS AFTER THE BALANCE SHEET DATE
Update on Newry Biomass Project
The Company announced on 6 July 2017 in relation to the Newry Biomass project that it continues to
work towards exporting electricity to the grid by the revised deadline of 31 March 2018 ("deadline")
agreed with Ofgem. EQTEC remains in regular dialogue with the local authority to confirm its application
for a planning amendment following the decision made to repower the project using EBIOSS Energy
SE's ("EBIOSS") gasification technology.
EQTEC continues to provide the local authority with information in relation to the planning amendment
and the Company hopes to successfully conclude this process in the near term, so that it is able to can
commence the necessary Civil, Electrical and Mechanical works in order to meet the deadline of 31 March
2018. However, should there be a continued delay in receiving the amended planning permission, it is
likely that the Company will not be able to meet the 31 March 2018 deadline for the repowering of the
project. As a result, the Company has started to consider contingency plans for the project.
The contingency plans take into account the Company's revised business strategy to focus on taking
advantage of the significant opportunities in the Energy from Waste sector using, among other things,
Refuse Derived Fuel ("RDF"). The contingency plans being considered include the possibility of
converting the plant from using wood biomass to RDF. The Company would, in this event, seek to
monetise the value of equipment already on site through the sale of this equipment to other projects the
Company is seeking to develop together with its major shareholder EBIOSS.
Potential acquisition of EQTEC Iberia
On 17 July 2017, the Company announced that it has entered into non-binding heads of terms ("Heads of
Terms") with Inava Ingenieria de Analisis SL ("Inava") and the Company's majority shareholder EBIOSS
Energy SE ("EBIOSS") (together the "Sellers"), pursuant to which EQTEC will acquire the entire issued
share capital of EQTEC Iberia SRL ("EQTEC Iberia") (the "Proposed Transaction").
The Company and the Sellers have entered into the Heads of Terms, pursuant to which the Company
will, subject to, inter alia, the completion of due diligence, the entry into definitive documentation and
shareholder approval, acquire the entire issued share capital of EQTEC Iberia, through the issue of new
Ordinary Shares to the Sellers ("Consideration Shares"). The number of Considerations Shares to be
issued is still to be agreed but is expected to be a minimum of, in aggregate, 556,000,000 new Ordinary
Shares.
The Proposed Transaction, if completed, will therefore constitute a RTO under the AIM Rules and in
accordance with Rule 14 of the AIM Rules, will require the publication of an AIM admission document
setting out, inter alia, details of the Proposed Transaction ("Admission Document") and approval of
shareholders of the Company in a general meeting to be convened by the Company. In addition, as
EBIOSS is a substantial shareholder in the Company, the Proposed Transaction will also represent a
related party transaction pursuant to Rule 13 of the AIM Rules.
72
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
28. EVENTS AFTER THE BALANCE SHEET DATE - continued
Potential acquisition of EQTEC Iberia - continued
The Proposed Transaction is also expected to be conditional on, inter alia, EQTEC raising sufficient
funds, which is expected to comprise a placing of new Ordinary Shares ("Placing"), to provide working
capital for the enlarged group as well as fund the enlarged group's pipeline of projects.
Extension of the Altair Loan Notes
On 17 July 2017, the Company also announced that it has reached agreement with Altair Group
Investment Limited ("Altair") to extend the repayment of the £2.0 million, 7.5% Convertible Secured
Loan Notes ("CSLNs") issued by the Company, from 14 July 2017 to the earlier of three business days
following the completion of the Proposed Transaction ("Completion") or 31 October 2017 (“the
Standstill Period”).
During the period prior to the revised repayment date, the Company and Altair will seek to agree further
changes to the terms of the CSLNs. In the event that Completion does not occur by 31 October 2017, all
sums due under the CSLNs, including accrued interest, will be payable immediately, unless Altair and the
Company have agreed new terms.
Convertible Loan 17 July 2017
On 17 July 2017, the Company also announced that it had entered into an agreement with an existing
shareholder (the "Lender"), pursuant to which the Lender has agreed to make an interest free unsecured
loan of £300,000 to EQTEC (the "Convertible Loan"). Such loan will convert into new Ordinary Shares
on the earlier of the date of Completion and 31 October 2017 (the "Longstop Date").
Where the Convertible Loan converts on the date of Completion, the Conversion Shares shall be issued at
a 10% discount to the price at which any such shares are issued to investors pursuant to the Placing (the
"Placing Price"). Where the Convertible Loan converts on the Longstop Date, the Conversion Shares
shall be issued at a 10% discount to the mid-market closing price of an Ordinary Share on the trading day
immediately prior to the Longstop Date (the "Market Price").
On the date of conversion of the Convertible Loan the lender will also be granted warrants to subscribe
for such number of new Ordinary Shares ("Warrants") as is equal to the number of Conversion Shares
issued. The Warrants will be exercisable for a period of two years from the date of grant at a price of
either 150% of the Placing Price or 150% of the Market Price, depending on the applicable conversion
event.
Convertible Loan 16 October 2017
On 16 October 2017, the Company announced that it has entered into agreements pursuant to which an
existing lender (the "Existing Lender") and a new lender (the "New Lender") have agreed to make interest
free unsecured loans of an aggregate amount of £225,000 to EQTEC (the "Convertible Loans"). Such
loans will convert into new Ordinary Shares on the earlier of the date of Completion (as defined above)
and 31 December 2017 (the Longstop Date"). The Company will also grant warrants over Ordinary
Shares ("Warrants") to the lenders at the time of conversion of the Convertible Loans.
73
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
28. EVENTS AFTER THE BALANCE SHEET DATE - continued
Convertible Loan 16 October 2017 - continued
The Company and the Existing Lender, who is an existing shareholder of the Company, are parties to a
loan agreement dated 17 July 2017 (the "Original Loan Agreement") pursuant to which the Existing
Lender has lent the Company £300,000. The Company and the Existing Lender have agreed to terminate
the Original Loan Agreement and have entered into a new agreement pursuant to which the parties have
agreed the original £300,000 is treated as having been advanced pursuant to the terms of that agreement
and the Existing Lender has agreed to make an additional £200,000 loan to the Company on 19 October
2017. The Company has also entered into an agreement with the New Lender, who is not an existing
Shareholder of the Company, pursuant to which the New Lender has agreed to make a £25,000 loan to
the Company on 19 October 2017.
The Convertible Loans are unsecured and non-interest bearing. The Convertible Loans will convert into
Conversion Shares on the earlier of the date of Completion and 31 December 2017 (the “Longstop
Date”). The Convertible Loans will automatically convert into the Conversion Shares at 0.065 pence per
share.
On the date of conversion of the Convertible Loans the lenders will also be granted Warrants for such
number of new ordinary shares as is equal to the number of Conversion Shares issued. The Warrants will
be exercisable for a period of two years from the date of grant. The exercise price of the Warrants will be
2.2 pence per share if the conversion event is Completion or 1.5 pence per share if the Convertible Loans
convert on the Longstop Date.
Extension of the Altair Loan Notes
On 31 October 2017, Altair agreed with the Company the following:
(i)
to extend the Standstill Period until 31 December 2017 and, accordingly, it agrees to forbear from
exercising its rights and remedies under the CSLNs until the expiry of the Standstill Period;
(ii) to extend the date for payment of the CSLNs to the expiry of the Standstill Period; and
(iii) that conditional on Admission becoming effective on or before the expiry of the Standstill Period,
Altair agrees to further extend the date for payment of the CSLNs together with accrued interest
thereon until 14 July 2020 (“Extension Date”) subject to the following terms:
(A) that the interest rate set out in the CSLNs shall be increased from 7.5% to the rate of 15% per
annum for the period between (but excluding) 31 October 2017 and the Extension Date on the
outstanding principal amount of the Notes;
(B) that in the event that the Company repays the entire amount due under the CSLNs in full prior
to the Extension Date the interest set above shall be reduced as follows:
1.
if the CSLNs are repaid in full between 1 November 2017 and 30 April 2018 the
interest rate shall be 9% per annum; and
if the CSLNs are repaid in full between 1 May 2018 and 31 October 2019 the interest
rate shall be 12% per annum.
2.
In consideration of Altair's agreement to the extension of the payment of the Notes, the Company agrees
that, conditional on Admission:
(i)
the Company shall pay £300,000 to Altair within five business days following Admission in
satisfaction of accrued interest on the Notes;
(ii) the Company will amend the Instrument to provide that up to £1 million of outstanding principal
amount of the Notes may be converted at the election of Altair into new ordinary shares in the
Company (“Ordinary Shares”) at a 10% discount to the price at which such shares are issued to
investors pursuant to the fundraising undertaken in connection with Admission (“Placing Price”);
74
EQTEC plc (Formerly REACT Energy plc)
Notes to the consolidated financial statements
for the financial year ended 30 June 2017
28. EVENTS AFTER THE BALANCE SHEET DATE – continued
Extension of the Altair Loan Notes - continued
(iii) the Company will grant Altair with warrants over Ordinary Shares at an exercise price of 150% of the
Placing Price (“Exercise Price”), exercisable for five years from the date of grant. The number of
Ordinary Shares subject to the warrant will be such number which, when multiplied by the Exercise
Price, equals £1 million.
29. NON-CASH TRANSACTIONS
During the year, the Group entered into the following non-cash investing and financing activities which
are not reflected in the consolidated statement of cash flows:
On 6 February 2017, EBIOSS Energy AD assigned the benefit of the €5,150,226 debt due to
EQTEC’s 50.02% subsidiary, Newry Biomass Limited, to EQTEC plc. EQTEC plc then issued
78,210,000 ordinary shares of €0.001 each, at a premium of €0.0649 per share, to EBIOSS
Energy AD in settlement of this debt (See Note 21).
On 20 February 2017, EBIOSS Energy AD agreed to convert €585,000 of its existing debt facility
into 10,000,000 ordinary shares of €0.001 each. On 9 March 2017, EBIOSS Energy AD agreed to
convert €335,717, being the balance of its existing debt facility (including accrued interest) into
4,491,197 ordinary shares of €0.001 each (See Notes 21 and 23).
In 2017, the Company purchased additional gasifier equipment amounted to €650,000 to be paid
in subsequent year.
In 2017, the Group changed its ownership interest without a loss of control resulting in a transfer
of €105,000 from financial liabilities to non-controlling interests. The transaction happened upon
the expiry of the option agreement which is further detailed in Note 23.
30. COMPANY PROFIT AND LOSS
As a consolidated group income statement is published, a separate income statement for the parent
company is omitted from the group financial statements by virtue of section 304(2) of the Companies
Act, 2014. The Company’s loss for the financial year was €4,069,993 (2016: €3,606,007).
31. APPROVAL OF FINANCIAL STATEMENTS
These consolidated financial statements were approved by the Board of Directors on 24 November 2017.
75