Fluence Corporation Limited
Annual Report
for the year ended 31 December 2018
Fluence Corporation Limited ABN 52 127 734 196
Annual Report - 31 December 2018
Contents
Corporate Directory
Directors' Report
Auditor's Independence Declaration
Financial Statements
Independent Auditor's Report
Shareholder Information
Page
1
2
48
49
109
116
Fluence Corporation Limited
Corporate Directory
Directors
Mr Richard Irving
Non-Executive Chairman
Mr Henry Charrabe
Managing Director and Chief Executive Officer (CEO)
Mr Peter Marks
Non-Executive Director
Mr Ross Haghighat
Non-Executive Director
Mr Robert Wale
Non-Executive Director (Ceased to be a director on 24
May 2018)
Dr Ramesh Rengarajan
Non-Executive Director
Mr Arnon Goldfarb
Non-Executive Director
Mr Paul Donnelly (appointed 20 July 2018)
Non-Executive Director
Company Secretary and Board Advisor
Mr Ross Kennedy
Registered Office
Principal Place of Business
Share Registry
Auditors
Solicitors
Bankers
Securities Quoted
Website
Level 3, 62 Lygon Street
Carlton VIC 3053
Australia
Phone: +61 (0)3 9824 5254
Fax: +61 (0)3 9822 7735
10 Bank Street
8th Floor
White Plains New York 10606
United States of America
Phone: +1 212 572 5700
Boardroom Pty Ltd
Level 12, 225 George Street,
Sydney, New South Wales, 2000, Australia
Phone: 1300 737 760 (local)
Fax: +61 (0)2 9290 9600 (international)
BDO East Coast Partnership
Tower 4, Level 18, 727 Collins Street,
Melbourne, Victoria, 3008, Australia
Lander & Rogers Lawyers
Level 12, Bourke place, 600 Bourke Street
Melbourne, Victoria, 3000, Australia
HSBC Bank Australia Limited
Melbourne, Victoria, Australia
Australian Securities Exchange
- Ordinary Fully Paid Shares (Code: FLC)
https://www.fluencecorp.com/investor-news/
Fluence Corporation Limited
1
Fluence Corporation Limited
Directors' Report
31 December 2018
The Directors present their report, together with the financial statements for the year ended 31 December 2018 of
Fluence Corporation Limited ("Fluence", the "Company" or the "Group").
Directors
The following persons held office as Directors of Fluence Corporation Limited during the financial year:
Mr Richard Irving, Non-Executive Chairman
Mr Henry Charrabe, Managing Director and Chief Executive Officer (CEO)
Mr Peter Marks, Non-Executive Director
Mr Ross Haghighat, Non-Executive Director
Mr Robert Wale, Non-Executive Director (Ceased to be a director on 24 May 2018)
Dr Ramesh Rengarajan, Non-Executive Director
Mr Arnon Goldfarb, Non-Executive Director
Mr Paul Donnelly, Non-Executive Director (appointed 20 July 2018)
Review of operations
1 Multiple milestones achieved in 2018
Fluence’s main goals for 2018 were to increase sales of Smart Products Solutions, expand its footprint in China, and
secure recurring revenue contracts. The Company was successful in achieving these goals:
•
•
•
Smart Products Solutions revenue in 2017 was US$10 million and in 2018 grew to US$22 million
In China, Fluence presence expanded to 26 partnerships covering 15 provinces and 26 installations
The Company has started to build a meaningful recurring revenue base, with secured average annual recurring
revenue of US$14.7 million at 31 December 2018 following the current construction phase: US$1.7 million from
Bahamas, US$3 million from Peru, and US$10 million from San Quintin
The Company also announced a 205% increase in revenue year-on-year to $101 million and significant improvement
in gross margin from 18% in 2017 to 34% in 2018. Gross margin and gross profit for 2018 included the benefit of a
reversal in onerous provision of US$11.1 million.
2 Notable successes include:
(i) Smart Products Solutions
•
•
•
•
Aspiral™ sales accelerating in China:
•
Exclusive partnership agreement with ITEST in Hubei Province signed in October 2018 with anticipated
Aspiral™ sales estimated at a minimum of US$45 million over three years
First bulk order of 35 Aspiral™ units received in December 2018 under the agreement with ITEST
•
• Repeat orders through Jiangsu Jinzi Environment Company
•
First sales through other Chinese local partners: Zhongzi Huaze, Glory Land (Beijing) Science & Technology
Co., Ltd and Hunan Aerospace Kaitian Environmental Technology Company Ltd
First Aspiral™ Project in the Philippines consisting of two Aspiral™ Smart Packaged wastewater treatment units
serving a residential development in Manila
First commercial Aspiral™ sale in the USA signed in August 2018. The Aspiral™ L + Ultrafiltration (UF) plant
designed for client WaterFleet, LLC (“WaterFleet”) will treat the sewage of an LNG worksite, and was
commissioned in January 2019
Strategic MABR sale in October 2018 to Orenco who are a large systems integrator in the USA with the MABR
modules to be incorporated into a wastewater treatment system for a mobile home park in Oregon
Fluence Corporation Limited
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Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Review of operations (continued)
2 Notable successes include: (continued)
•
An Aspiral™ demonstration unit at the Código Resource Recovery Center at Stanford University in California was
successfully deployed in early 2018 and has performed to expectations. In February 2019, the Company
announced that independent test results gathered from its Stanford, California demonstration plant have been
published and validate compliance of Fluence’s MABR technology with California’s Title 22 water recycling
legislation. This serves as a reference site to support further US sales
• NIROBOX™ successes:
• NIROBOX™ reference grew to include sites in Egypt, South Africa, Philippines, Caribbean, Mexico and
•
South America
Three NIROBOX™ Smart Packaged desalination plants which were delivered in Q4 2018 to a customer in
Egypt for US$7.6 million. The contract also includes an operating & maintenance contract providing recurring
revenues
• US$4.9 million NIROBOX™ Seawater & installation for Peru Build-Own-Operate-Transfer (BOOT) project
delivered in Q4 2018 with potential annual recurring revenues up to a total of US$5.0 million via Water
Purchase Agreements (assuming full plant capacity)
• NIROBOXTM inventory on hand at the start of the year was reduced
•
First BOOT project for a resort signed in Q2 2018 for the delivery of three NIROBOX™ to be deployed in
North Bimini, Bahamas. The ability to supply financing made the project more appealing for the customer and
added to Fluence’s recurring revenues
(ii) Recurring Revenue and Aftermarket
•
•
BOOT contract in Peru is expected to generate an estimated US$3.0 million in annual recurring revenue, with
billings anticipated to commence in the second half of 2019
Secured annual average recurring revenue of US$14.7 million at 31 December 2018 following the current
construction phase, with a weighted average contract duration of 24 years, and revenue contributions
commencing in FY2019
(iii) Custom-Engineered Solutions
•
•
•
•
The Company continued to progress discussions with the Federal Government of Ivory Coast for the turnkey
supply of a 150,000 m3/day surface-water treatment plan. As a result, a landmark €165 million commercial
agreement was signed in February 2019 and is conditional upon the arrangement of export credit financing, and
project commencement which Fluence is in the process of finalising
In Q2 2018 Fluence began construction of the US$48 million San Quintin, Mexico project. This has progressed to
plan, and revenues are being recognised over the 20-month term of the project. Following plant construction the
project will contribute an estimated US$10 million of recurring billings for 30 years after which ownership and
operation of the plant will be transferred to Comisión Estatal del Agua De Baja California
PDVSA Portugesa project in Venezuela is approaching completion. In FY2018 this contract generated revenue of
US$24.8 million, with a further US$1.2 million expected to be recognised in FY2019.
Fluence was awarded its first waste-to-energy harvesting project in Argentina in October 2018. The €1.7 million
solution to produce biogas, as well as electrical and thermal energy, was designed and built using anaerobic
digestion technology developed by Fluence
3 Operating in markets with attractive fundamentals
Water scarcity is increasing due to global economic development and climate change. Communities are being
challenged to come up with viable solutions to overcome this problem.
Fluence Corporation Limited
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Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Review of operations (continued)
3 Operating in markets with attractive fundamentals (continued)
Current centralised water treatment plants present major challenges to address this scarcity issue as they tend to be
landlocked, have aging infrastructure and increasingly cannot meet the demands for clean water. Moreover, such
centralised water treatment plants cannot be expanded easily, and upgrades are costly.
In response to these challenges, investment is being made in alternative decentralised solutions to address capacity
needs quickly and economically, and importantly meet growing regulatory requirements.
(i) Smart Products Solutions
Smart Products Solutions revenues grew from US$10 million in 2017 to US$22 million in 2018.
MABR - Aspiral™ / SUBRE
The expansion of Fluence into China, both through sales and manufacturing facilities, strongly positions the Company
to participate in the planned improvement in China’s rural wastewater treatment quality. The Chinese Government’s
current five-year plan is targeting, and provides finance for, an increase in wastewater treatment for remote rural
villages and at the same time to achieve Class 1A effluent discharge. With approximately 10% of rural wastewater
currently treated and the five-year plan’s target to reach 70% treatment of wastewater in China, Fluence’s Smart
Packaged Aspiral™ system featuring MABR technology is the lowest cost treatment alternative available in the
decentralised market, and simultaneously guarantees to consistently reach Class 1A effluent discharge standards.
The 15 provinces and districts in China highlighted are covered by current strategic partnerships
The successful demonstration plant with Chinese partner Hubei ITEST, enabled the execution of an exclusivity
agreement in October 2018 with anticipated Aspiral™ sales estimated at a minimum of US$45 million over the next
three years. The first two contracts under this partnership were booked in December with a total of 35 Aspiral™ units
to be deployed.
Fluence Corporation Limited
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Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Review of operations (continued)
3 Operating in markets with attractive fundamentals (continued)
In November 2018, Fluence announced a new partnership with environmental EPC firm Zhongzi Huaze and executed
a multi-unit Aspiral™ order. Six Aspiral™ units were delivered in December 2018 and commissioned in January 2019
- the first for Fluence in Jilin Province, a region subject to extreme cold climate with the temperature often dropping to
-30C.
Following the successful operation of the 3 pilot sites commissioned earlier in 2018, Fluence was endorsed by the
Yiyang City Government to help meet its future requirements under the Chinese Government 13th five-year plan. The
Company executed a contract with Hunan Aerospace Kaitian Environmental Technology Company Ltd. to deliver four
Smart Packaged Aspiral™ units, all of which were deployed in Hunan Province.
Fluence relationship with Jiangsu Jinzi Environment Company continued to strengthen through 2018 with the
awarding of further contracts. Fluence developed other partner agreements in China and in 2018 also secured first
sales through Zhongzi Huaze and Glory Land (Beijing) Science & Technology Co.
Outside of China, Fluence secured a contract for the first deployment of Aspiral™ Smart Packaged wastewater
treatment units in the Philippines in August 2018. The two units were for a residential development located in Manila.
Two Aspiral™ units were also manufactured for a customer in Ethiopia proving another new geography is well suited
for the validated wastewater treatment solution.
In August, Fluence achieved its first commercial sale of an Aspiral™ Smart Packaged Wastewater Treatment Plant in
the USA. The Aspiral™ L + Ultrafiltration (UF) plant was designed for WaterFleet and will treat up to 33,000 gallons
per day of sewage from an LNG worksite. The decentralised wastewater treatment plant, which can serve as a
mobile or permanent installation, will be relocated by WaterFleet as required to meet its treatment needs. Fluence is
confident that the project can lead to additional opportunities in the municipal and industrial decentralised wastewater
treatment market in the USA.
Fluence continued its efforts in the US, and in October 2018 its first MABR module sale was made to Orenco, a large
systems integrator in the State of Oregon. The integration of Fluence’s MABR modules into Orenco’s wastewater
treatment system will
increase existing system capacity and efficiency, while achieving high effluent quality that
meets regulatory requirements. Orenco evaluated several alternative solutions and concluded that Fluence’s MABR
is a more cost-effective solution as a result of higher water quality and lower operating costs.
The Aspiral™ S1 model demonstration unit at the Códiga Resource Recovery Center at Stanford University in
California, was successfully deployed in early 2018. The unit operated to expectations and on 11 February 2019
Fluence advised that independent test results had been published which validated compliance of Fluence’s MABR
technology with California’s Title 22 water recycling legislation.
Fluence’s first SUBRE contract for the retrofitting of the Ma’ayan Zvi large-scale centralised wastewater treatment
plant was completed and operational in Q4 2018. By incorporating MABR technology, the treatment plant’s capacity
is expected to increase by 15-20% while ensuring compliance with tighter nitrogen discharge rules, without the use of
any hazardous chemicals.
Fluence is actively quoting SUBRE (submerged MABR) projects for potential clients in China and in other key
markets and continues to focus on the full commercialisation of the product in the first half of 2019. The SUBRE
product is designed to be utilised both for retrofitting or upgrading existing, centralized wastewater treatment plants,
as well as in the construction of new wastewater treatment plants.
Fluence Corporation Limited
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Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Review of operations (continued)
3 Operating in markets with attractive fundamentals (continued)
NIROBOX™
In Q4 2018 Fluence secured a US$7.6 million NIROBOX™ SW Smart Packaged desalination plant order in Egypt.
These plants consist of 12 units which were already manufactured and in inventory, thus enabling very rapid
deployment. The plants are expected to be fully operational by Q2 2019 and supply 12,000 m3/day of potable water
to a large residential area along the Mediterranean coast. In addition, Fluence will sign a service contract to operate
and maintain the units.
In July 2018 Fluence secured a contract for the deployment of three NIROBOXTM units to resorts operated by Rav
Bahamas Limited. This is Fluence’s first BOOT contract in the Bahamas and will generate approximately US$1.7
million annually recurring billings for up to 15 years (subject to an earlier customer cash buyout option).
In Q4 2018 Fluence secured the rights to design, build and operate a US$8.4 million seawater desalination plant in
central Peru, including a 10-year Water Purchase Agreement (WPA) with an industrial client. The Plant will utilise 5
NIROBOX™ SW Smart Packaged desalination units that are already manufactured and in inventory. This plant is
expected to be operational in Q3 2019 and will generate an average of US$3.0 million of recurring annual billings
once operational. Negotiations for WPAs with additional industrial customers are ongoing. The plant is expected to
ultimately expand to 10 NIROBOX™ SW units and supplemental WPAs have the potential to increase annual
recurring billings from US$3 million to up to US$5 million at full plant capacity.
Other NIROBOX™ sales in 2018 include: two NIROBOX™ units sold to Jpark Island Resort & Waterpark, Cebu in
Mactan, Philippines producing potable water from seawater for consumption; two NIROBOX™ BW (brackish water)
units sold to the Municipality of Berazategui, in the province of Buenos Aires, to produce potable drinking water for
residents, who previously only had access to highly polluted well water.
(ii) Recurring Revenue and Aftermarket
In November 2018, Fluence secured a US$50 million non-recourse stand-by debt facility for project financing of Build,
Own, Operate and Transfer ("BOOT") projects, enhancing the Company’s ability to grow the recurring revenues
based on its Smart Products Solutions. The facility is provided by Generate Capital, a leading US-based
infrastructure investment firm. Fluence is expected to have access to this facility on a project-by-project basis for 3
years without any geographical limitation.
Recurring revenue opportunities are a key strategic focus for Fluence. The Company has started to build a
meaningful recurring revenue base, with secured average annual recurring revenue of US$14.7 million at 31
December 2018 - US$1.7 million from Bahamas, US$3 million from Peru, and US$10 million from San Quintin. Of
this, US$3 million is expected to flow into revenue in 2019 as certain project construction is completed and Fluence
commences management of the facilities.
(iii) Engineered Solutions and Other Products
Through 2018 Fluence continuing to progress discussions with the Federal Government of Ivory Coast for the turnkey
supply of a 150,000 m3/day surface-water treatment plant, to provide high-quality drinking water for more than one
million people following the signing of an exclusive Memorandum Of Understanding (MOU) in Q3 2017. Ultimately
this was signed in February 2019. However, it is conditional upon the arrangement of export credit financing, and
project commencement which Fluence is in the process of finalizing.
Fluence Corporation Limited
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Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Review of operations (continued)
3 Operating in markets with attractive fundamentals (continued)
In Q1 2018 Fluence achieved financial close on the US$48 million San Quintin, Mexico project and construction
commenced in Q3 2018. US$13.5 million revenue was recognised in FY2018, with the remainder to be recognised
over the 15-month construction period of the project. Fluence is building and will operate the seawater desalination
plant through a Special Purpose Vehicle (SPV) owned together with its local partners. The SPV will produce water for
the San Quintin area for the next 30 years, after which ownership and operation of the plant will be transferred to the
customer. As owner and operator of the plant, Fluence is also expected to receive an estimated average of US$10
million annually in recurring billings for 30 years after the plant begins operation.
Work is also ongoing for the Portugesa project in Venezuela under the umbrella of the PDVSA contract. The
Portugesa project involves a wastewater treatment solution for ethanol plants. In FY2018 this contract generated
revenue of US$24.8 million, with a further US$2.6 million expected to be recognised in 2019.
Fluence was awarded its first waste-to-energy harvesting project in Argentina in October 2018. The €1.7 million
solution to produce biogas, as well as electrical and thermal energy, was designed and built using anaerobic
digestion technology developed by Fluence. The project was delivered in November 2018 and serves as a valuable
reference site to secure further projects in this industry and throughout South America.
In August, Fluence announced a US$3.5 million contract to design and build a water treatment plant for a prominent
power plant in Buenos Aires, Argentina. Fluence and its local EPC partner were selected by the customer for this
project due to their expertise in treating complicated water sources to reuse quality, the system’s small footprint, and
the combination of lower capital investment required and operational efficiencies to be generated.
In June, Fluence received a €3.9M contract for a wastewater treatment and waste-to-energy system for its customer
ArcelorMittal, the world’s largest crude steel producer. Fluence will design and build these systems for ArcelorMittal’s
steel mill
in Ghent, Belgium, using innovative anaerobic digestion technology to produce biogas from off-gas
fermentation by-products. By adding waste-to-energy treatment to the system, the biogas produced will be used to
power the steel mill’s operations, which will in turn lower the overall operating costs.
In April, Fluence was awarded a contract to deliver a water treatment reuse system to Rosenblad Design Group, as
part of a larger project being installed in California. Fluence’s zero liquid discharge solution utilises ultrafiltration and
reverse osmosis equipment to treat brine for reuse. This system was delivered, installed and is expected to be
operational shortly.
In May 2018, Fluence unveiled its Aspiral™ Family of wastewater treatment solutions, based on its innovative
Membrane Aerated Biofilm Reactor (MABR) technology. AspiralTM is a modular solution that reduces aeration energy
consumption by up to 90% as compared to conventional wastewater treatment methods, making it ideal for small to
medium-sized installations.
In 2018 Fluence presented its products and technologies at WEFTEC18 in New Orleans, The Water Expo in Miami,
FENASAN in São Paulo, CWWA in Jamaica, Singapore International Water Week, the Sea Food Sustainability
Summit in Barcelona, IDA International Water Reuse and Recycling Conference in Valencia, CaribDA 2018 Biennial
Conference & Exposition in Curaçao, IFAT 2018 in Munich, the 2018 Arizona Water Conference. This investment of
time and resources provides visibility of the Fluence solutions amongst key decision makers and potential industry
partners.
Additionally, through Company presentations at these forums, Fluence’s team continues to be acknowledged as
thought leaders who are at the forefront in the provision and development of advanced water, wastewater and reuse
solutions. There is growing recognition by the industry in general of the need to look at decentralised solutions to help
solve the world’s water problems and there is strong interest amongst event organizers and participants to learn more
about Fluence’s innovative solutions.
Fluence Corporation Limited
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Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Review of operations (continued)
4
Strengthened management team
During the year, Fluence made a number of key appointments to its management team.
In March, Francesco Fragasso joined the Company as Chief Financial Officer (CFO). Most recently, Francesco
served as the CFO at Desalitech, a reverse osmosis technology company based in Boston, Massachusetts (USA).
Prior to his role at Desalitech, Francesco was the CFO for Nuvera Fuel Cells, Inc. part of Hess Corporation Group,
and spent more than 10 years in public accounting with Deloitte.
To strengthen global sales efforts and build on existing partner relationships, Fluence appointed Erik Arfalk to the
newly created role of Chief Marketing Officer (CMO). Erik has significant experience leading marketing teams for
global industrial companies, most recently as Vice President, Marketing & Communications in the US for Swedish
headquartered Atlas Copco. Prior to joining Atlas Copco, Erik worked for General Electric's Life Sciences division.
Erik is responsible for strategic marketing and communications across Fluence's global portfolio of water and
wastewater treatment solutions.
Anthony (Tony) Hargrave, B.Sc., MBA, was promoted from VP Global Operations to Chief Operating Officer in July
2018. Tony has an engineering background, as well as an MBA and almost 30 years of experience in the water and
wastewater industry internationally, particularly across Asia. Tony has lived and worked in China, India, Europe and
the USA. Having joined Fluence in May, Tony replaces Philippe Laval, who joined RWL Water in 2014 as VP of
Global Sales, and later Chief Operating Officer (COO) before becoming Fluence’s COO at the time of the merger in
2017.
In July 2018 Paul Donnelly, joined Fluence’s Board of Directors as a Non-Executive Director. Paul brings extensive
global capital markets experience gained over 23 years with Macquarie Group, with skills in capital markets and
infrastructure, that will support the Company’s future growth.
5 Review of financial results
Following the merger with RWL Water LLC on 14 July 2017, revenues for the 2017 financial year only include
revenue contributions from RWL Water LLC for the period from 14 July 2017 to 31 December 2017. Revenues for
2018 include a full year contribution from RWL Water LLC. Consequently, comparisons with financial results for 2018
are not particularly meaningful.
The Group has used United States Dollars (US$), as its presentation currency in the attached financial report, which
conform to IFRS accounting standards.
The revenue from ordinary activities for the twelve months ended 31 December 2018 was US$101.1 million (2017:
33.2 million) and the loss from ordinary activities after tax was US$62.8 million (2017: US$23.6 million). The loss for
the year includes a US$56.3 million non-cash goodwill write off. Excluding the goodwill write off the loss from ordinary
activities after tax was US$6.5 million.
Cost of sales for the twelve months ended 31 December 2018 increased to US$66.5 million (2017: US$27.2 million).
The Group’s net assets decreased by US$52.5 million to US$51.1 million during the twelve months to 31 December
2018.
The financial results for the year reflect a number of significant non-cash, accounting items including:
•
Impairment of Goodwill on acquisition of US$56.3 million - reducing net assets and increasing the loss for the
period;
• Reversal of provision for onerous contract during 2018 amounting to US$11.1 million - increasing Gross Profit;
Fluence Corporation Limited
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Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Information on directors
Richard Irving Non-Executive Chairman
Qualifications
B. Sc. (First class honours) in Electrical Engineering, Manchester University, UK
M. Sc. Electrical Engineering, Manchester University, UK
Experience and
expertise
Richard Irving is the Non-Executive Chairman of Fluence Corporation Limited. In January
2019 following the release of the Company’s results for 2018, Mr. Irving stepped down
from Executive Chairman to Non-Executive Chairman. Prior to Fluence Corporation
Limited, Mr. Irving served as Executive Chairman & Chairman of Emefcy Group Limited
from 2010.
Based in Silicon Valley, Richard co-founded Pond Venture Partners in 1997 and brings
over 30 years’ experience in venture capital, business management, marketing and
engineering in technology companies including AT&T Bell Labs, AMD, and Brooktree.
Richard has helped create over $3 billion in shareholder value through IPOs,
acquisitions, and private financings.
Past exits include LiveRail (Facebook), Gigle Networks (Broadcom), 4Home (Motorola
Mobility), Transitive (IBM), and Microcosm Communications (Conexant).
Richard also serves as a Venture Advisor to Samsung.
Other current public
company directorships
Former public company
directorships in last 3
years
None
None
Special responsibilities Non-Executive Chairman
Member of the Remuneration and Nomination Committee
Interest in shares
Interest in options
Richard has an indirect interest through Pond Venture Nominees III Limited in
36,264,579 shares and a direct interest in 1,000,000 shares, for a total of 37,264,579
shares in the Group.
Direct interest in:
950,000 Director options with an exercise price of A$1.20;
950,000 Director options with an exercise price of A$1.50
Contractual rights to
shares
Nil
Fluence Corporation Limited
10
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Information on directors (continued)
Henry Charrabé Managing Director & CEO
Qualifications
Mr. Charrabé received a B.A. from the Freie Universität in Berlin and Tel Aviv University.
He earned an M.A. in Political Science and an M.A. in International Economics and
Finance, both from Brandeis University, as well as an M.A. in Public Administration from
the John F. Kennedy School of Government at Harvard University.
Experience and
expertise
Henry Charrabé serves as the Managing Director and Chief Executive Officer of Fluence.
He brings more than a decade of experience in developing water management and
investment solutions to his role at the Group.
Prior to the establishment of Fluence, Mr. Charrabé served as President and Chief
Executive Officer of RWL Water from its inception in 2010 up to the time of the
acquisition by Emefcy Group Limited on 14 July 2017. During his tenure, Mr. Charrabé
was instrumental in establishing RWL Water as a global player through strategic
acquisitions and significant organic growth. Prior to RWL Water, Mr. Charrabé was a
senior executive at RSL Investments Corporation in the United States and Europe.
From 2003 to 2005, Mr. Charrabé served as Chief Operating Officer of W2W, an
electrocoagulation wastewater technology company.
Other current
directorships
Former directorships in
last 3 years
Nil
Nil
Special responsibilities Nil
Interest in shares
Nil
Interest in options
Direct interest in 11,191,336 Director options with an exercise price of A$0.93
Contractual rights to
shares
None
Fluence Corporation Limited
11
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Information on directors (continued)
Ross Haghighat Non-Executive Director
Qualifications
Experience and
expertise
B.Sc. and a Masters in Material Science in Organometallic Chemistry, Rutgers University
(USA). MBA, Boston College - Carroll School of Management (USA)
Ross Haghighat serves as a Non-Executive Director for Fluence Corporation. He has
over 30 years' of experience in the technology sector as founder or co-founder of half a
dozen companies with a combined shareholder value exceeding $4.5B.
With over 20 years' in operating and strategic roles and a decade in the investment
arena, he has helped to create a number of global enterprises in the private and public
space in the US, China, Australia and Europe. Mr. Haghighat was
Non-Executive Director of Emefcy Group Limited from 2015.
He serves as Chairman for Triton Systems Group - a Global Investment and Product
Venturing firm. He serves as a Director at Aduro Biotech a clinical stage biopharma
(Nasdaq: ADRO) and is Chairman of FRX Polymers, a specialty chemicals firm with
operations in the US, Europe, and China.
Other current
directorships
Aduro Biotech, Inc, Triton Systems, Inc, FRX Polymers, Inc, Redrock Biometrics, Inc.,
Angel Medical Systems, Inc.
Former directorships in
last 3 years
None
Special responsibilities Chair of the Remuneration and Nomination Committee
Member of the Audit and Risk Committee until 28 August 2018
Interest in shares
Direct interest in 500,000 shares
Interest in options
Direct interest in:
500,000 Director options with an exercise price of A$0.40;
700,000 Director options with an exercise price of A$1.20;
700,000 Director options with an exercise price of A$1.50.
Contractual rights to
shares
None
Fluence Corporation Limited
12
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Information on directors (continued)
Peter Marks Non-Executive Director
Qualifications
Experience and
expertise
B.Ec, LLB and Graduate Diploma in Commercial Law, Monash University, Melbourne,
Australia
MBA degree from the University of Edinburgh, Scotland (Scottish Business School)
Peter Marks serves as Non-Executive Director for Fluence Corporation. Mr. Marks has
over 30 years' of experience in corporate finance and investment banking, specialising in
capital raisings (for listed and unlisted companies), underwriting, IPOs, corporate
restructurings, and venture capital transactions with a focus on emerging technologies
and life sciences.
Furthermore, he has participated in over $3 billion in public and private capital raisings
and has served as an Executive and Non-Executive Director of many entities which have
been listed on the ASX, NASDAQ and AIM markets.
Other current
directorships
Prana Biotechnology Limited (listed on ASX and NASDAQ), Noxopharm Ltd, Nyrada Inc.
and Terragenic International Ltd
Former directorships in
last 3 years
Nil
Special responsibilities Member of the Remuneration and Nomination Committee
Chair of the Audit and Risk Committee.
Interest in shares
Indirect interest in 2,754,403 shares through Lampam Pty Ltd.
Interest in options
Direct interest in:
500,000 Director options with an exercise price of A$0.40;
700,000 Director options with an exercise price of A$1.20;
700,000 Director options with an exercise price of A$1.50.
Contractual rights to
shares
None
Robert Wale Non-Executive Director (Ceased to be a director on 24 May 2018)
Fluence Corporation Limited
13
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Information on directors (continued)
Dr Ramesh Rengarajan Non-Executive Director
Qualifications
Bachelor in Chemical Engineering from Annamalai University in India
Masters in Chemical Engineering from University of Akron in Ohio, USA
Doctorate in Chemical Engineering from University of Akron in Ohio, USA
Experience and
expertise
Dr. Ramesh serves as Non-Executive Director for Fluence Corporation. Currently he is a
partner at Eagletree Capital. Previously, Dr. Ramesh supported RWL Water’s efforts to
evaluate the best water treatment technologies and companies around the world.
Dr. Ramesh has held senior management positions at GE Water and Process
Technologies, including Chief Technology Officer (CTO), a role which he held for more
than four years. As CTO, Dr. Ramesh played a key role in the development and
implementation of the strategy that led to the creation of GE’s $2.5 billion global water
platform. While at GE, he also led the technology and engineering organisations for GE
Sensing, GE Security, and GE Fanuc. He also served on the board of GE’s Asia Pacific
American Forum.
In addition to his role at GE, Dr. Ramesh served in numerous senior management roles
over a two-decade career with A. Schulman, Inc., a global multi-billion-dollar specialty
chemicals manufacturer. He also served on the International Advisory Board for the
Ministry of Environment and Water, Government of Singapore from 2006-2016.
He currently serves on the board of Students2Science a non-profit organisation serving
inner-city schools by proving hands on lab training to teachers and students.
Other current
directorships
Nil
Former directorships in
last 3 years
Liqtech - (NYSE:LIQT)
Special responsibilities Nil
Interest in shares
Nil
Interest in options
Direct interest in 1,500,000 Director options with an exercise price of A$0.835
Contractual rights to
shares
None
Fluence Corporation Limited
14
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Information on directors (continued)
Arnon Goldfarb Non-Executive Director
Qualifications
Experience and
expertise
Arnon Goldfarb holds a B.Sc. in Chemistry from the Hebrew University, Jerusalem, Israel
and a M.Sc. in Ocean Engineering from University of Rhode Island, USA.
Arnon Goldfarb serves as Non-Executive Director for Fluence Corporation. Currently he
is a partner at Israel Cleantech Ventures and has significant entrepreneurial experience
and interests in chemistry, materials and industrial processes.
Until early 2011, Arnon served as CEO of TMB Water, a water project company active in
desalination, aquaculture and water treatment efforts in Israel and abroad, and the
predecessor to RWL Water. Prior to establishing TMB in 2001, Arnon spent 17 years with
Israel Chemicals Ltd., where he served as Corporate VP for Business Development and
Chairman of the R&D, Fertilisers and Chemicals, and Ceramics units. He was also a
director at ICL’s Israel Desalination Engineering (IDE) subsidiary as well as its potash,
phosphate and bromine subsidiaries.
Previously, Arnon worked in the oil and gas industry in Israel and the US as a production
and facilities engineer with Superior Oil and Israel National Oil Co., and as a production
and field manager for Israel’s Sadot natural gas field.
Arnon serves as Chairman of Atlantium Technologies, as well as on the boards of TGA, a
waste treatment facility, and TSP, a chemical company.
Other current
directorships
Atlantium, TGA and TSP (see above)
Former directorships in
last 3 years
Nil
Special responsibilities Nil
Interest in shares
Nil
Interest in options
Direct interest in:
750,000 Director options with an exercise price of A$1.20;
750,000 Director options with an exercise price of A$1.50.
Contractual rights to
shares
None
Fluence Corporation Limited
15
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Information on directors (continued)
Paul Donnelly Non-Executive Director (appointed 20 July 2018)
Qualifications
BSc (Hons) Chemistry, University of Southampton
Advanced Management Programme, Harvard Business School
Member of Institute of Chartered Accountants in England & Wales
Graduate Australian Institute of Company Directors
Experience and
expertise
Paul Donnelly serves as Non-Executive Director for Fluence Corporation. Mr. Donnelly is
an accomplished financial services executive with international experience across all
aspects of capital markets.
Mr. Donnelly is an Executive Director at Macquarie Capital, where he has served since
1995 in various roles, including President & CEO of Macquarie’s Canadian Operations,
and Global Head of Equity and Debt Capital Markets, among others.
Mr. Donnelly has a broad range of sector experience, both in Australia and
internationally, with particular skills in financial services, infrastructure and utilities. Over
his twenty five-year career, he has gathered deep transactional experience advising on
significant and complex transactions for leading Australian and international companies.
Other current
directorships
Melbourne Recital Centre
Former directorships in
last 3 years
Nil
Special responsibilities Member, Audit and Risk Committee (from 28 August 2018)
Interest in shares
Indirect interest in 500,000 shares held by Tres Petitbijou Pty Ltd ATF
Interest in options
Contractual rights to
shares
Nil
None
Company secretary
The Company Secretary is Ross Kennedy. Mr. Kennedy was appointed to the position of Company Secretary on 23
December 2015. Ross was previously Secretary and Executive General Manager of St Barbara Limited for ten years.
Ross is an experienced Company Secretary, holding the professional qualifications of Fellow Governance Institute of
Australia; Fellow Australian Institute of Company Directors; and Chartered Accountant.
Fluence Corporation Limited
16
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Meetings of directors
The number of meetings of the Group's Board of Directors (the "Board") and of each Board Committee held during
the year ended 31 December 2018, and the number of meetings attended by each Director were:
Fluence - for the year ended 31 December 2018
Mr Richard Irving
Mr Henry Charrabé **
Mr Ross Haghighat
Mr Peter Marks
Mr Robert Wale (Ceased to be a director on 24 May 2018)**
Dr Ramesh Rengarajan **
Mr Arnon Goldfarb **
Mr Paul Donnelly (appointed 20 July 2018)
Mr Ross Kennedy (Company Secretary and Audit Committee
member)
Full
Board
Meetings of committees
Remuneration
and
Nomination
Audit
A
16
16
16
16
8
12
16
6
16
B
16
16
16
16
8
16
16
7
16
A
-
-
2
3
-
-
-
2
3
B
-
-
3
3
-
-
-
2
3
A
-
-
1
1
-
-
-
-
-
B
1
-
1
1
-
-
-
-
-
A = Number of meetings attended
B = Number of meetings held during the time the Director held office or was a member of the committee during the
year
** = Not a member of a Board Committee
Environmental regulation
As a provider of water and wastewater treatment solutions, the Group is subject to environmental regulations in each
jurisdiction in which it operates. The MABR has demonstrated compliance to China Class 1A effluent standards as
well as to Title 22 Certification in California, USA. The consolidated entity is not subject to any other significant
environmental regulation under Australian Commonwealth or State law.
Remuneration report (Audited)
(a) Principles used to determine the nature and amount of remuneration
The Directors present the Fluence Corporation Limited 2018 remuneration report, outlining key aspects of our
remuneration policy and framework, and remuneration awarded this year.
Principles used to determine the nature and amount of remuneration
The objective of the Group's executive reward framework is to ensure reward for performance is competitive in
attracting and retaining talent and appropriate for the business results delivered. The framework aligns executive
reward with the achievement of strategic objectives and the creation of value for shareholders, and conforms to
generally accepted industry standards for remuneration. The Board ensures that executive reward satisfies the
following key criteria in accordance with good reward governance practices:
• Competitiveness to attract and retain talent;
• Reasonableness in terms of industry benchmarks;
•
•
•
Acceptability to shareholders;
Alignment of compensation incentives to business performance goals; and
Transparency.
Fluence Corporation Limited
17
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(a) Principles used to determine the nature and amount of remuneration (continued)
Principles used to determine the nature and amount of remuneration (continued)
Remuneration is aligned to shareholders’ interests and program participants’ interests as follows:
(a)
Alignment to shareholders' interests:
•
•
•
Achievement of strategic goals as a core component of plan design;
Include a focus for the CEO on growth in shareholder wealth, as measured by growth in the share
price and in time, delivering constant or increasing return on assets as well as focusing the executives
on key non-financial drivers of value; and
Attracts and retains high calibre executives.
(b)
Alignment to program participants' interests:
•
•
•
Rewards capability and experience;
Reflects competitive reward for successful execution of the business strategy and business
performance; and
Provides a clear structure for earning rewards.
In accordance with best practice corporate governance, the structure of Non-Executive Directors and executive
remuneration are separate.
Directors remuneration
Fees and payments to Non-Executive Directors reflect the demands and responsibilities of their role. Non-Executive
Directors'
fees and payments are reviewed annually by the Remuneration and Nomination Committee with
recommendations made to the full Board.
Concurrently, with the acquisition of RWL Water Group to form Fluence Corporation Limited on 14 July 2017, Mercer
Consulting was engaged to advise on remuneration for the Executive Chair and Non-Executive Director roles. Mercer
is regarded as one of the world’s largest remuneration benchmarking and consulting services companies. The firm
was engaged by the Remuneration and Nomination Committee to recommend Executive Chair and Non-Executive
Directors' fees, including Board Committee fees, are appropriate for the demands on being on the Board of a
developing and global technology business, and as benchmarked against market rates for comparable positions for
peer companies.
In early 2019, the Executive Chairman role transitioned to Non-Executive Chair.
The Board has determined that there will be no increase in Non-Executive Director fees for 2019.
This follows the same decision in 2018, such that Non-Executive Director fees are unchanged from the Mercer
Consulting recommendations in 2017.
The Executive Chair's fees for 2018 were determined in parallel to the fees of other Non-Executive Directors, and
also based on comparative roles in the external market. The Executive Chairman did not participate in any
discussions relating to the determination of his own remuneration.
In view of the growing and developing nature of the Company, Non-Executive Directors may also be engaged on
specific projects, on commercial arm’s length terms, where the executive team either does not have the same skill
sets or capacity. All such special purpose project arrangements are approved by the full Board with the relevant
Director abstaining.
than the Director Fee, Directors may receive share options but do not
Other
compensation.
receive other
incentives or
Fluence Corporation Limited
18
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(a) Principles used to determine the nature and amount of remuneration (continued)
Directors remuneration (continued)
ASX listing rules require the aggregate Non-Executive Directors remuneration be determined periodically by a
general meeting. The most recent determination on 12 July 2017 was that shareholders approved an aggregate
remuneration of US$ 767,000 (equivalent of AU$ 1,000,000).
Executive remuneration
The consolidated entity aims to reward executives with a level and mix of remuneration based on their position and
responsibility, which has both fixed and variable components.
The executive remuneration and reward framework has four components:
Base pay and non-monetary benefits;
Short-term performance incentives;
Share-based payments; and
•
•
•
• Other remuneration such as superannuation and long service leave.
The combination of these comprises the executive's total remuneration.
As mentioned earlier, executive remuneration levels were considered by reference to a detailed benchmarking review
of peer companies undertaken by Mercer Consulting in mid-2017.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, were reviewed by the
Remuneration and Nomination Committee based on the Mercer review following the acquisition of the RWL Water
Group to form Fluence Corporation Limited. The review also had regard to individual responsibilities, performance
and business unit performance.
During 2018 Fluence experienced a year of organisation re-structuring and re-design of strategic goals for each part
of the business. In view of these changes, and new appointments for most of the executive roles, the Board
determined that upon achievement of key corporate performance metrics for 2018, discretionary short-term incentives
will be payable to Executives, adjusted pro-rata for the number of quarters worked by each executive during the year.
In the latter part of 2018, ClearBridge Compensation Group, was engaged to design an Executive remuneration
system. The resulting recommendation adopted by the Board comprised a fixed base, a short-term incentive ("STI")
program incorporating Company and individual
targets and the continuing long-term incentive (“LTI”) program
incorporating equity-based compensation.
The STI program for 2019 is comprised of specific Company-wide targets and tailored individual targets to aligned to
specific areas of responsibility. Key Performance Indicators ("KPI's") include meeting or exceeding budget goals for
the year.
The LTI program is comprised of equity-based remuneration in the form of unlisted options. An employee option plan
was originally approved by shareholders on 17 November 2015. Options are awarded to executives as long-term
incentives aligned to shareholder wealth through the exercise price being calculated at a premium to volume
weighted average market price prior the date of grant. Appropriately structured LTI's also provide incentives to retain
talent.
Certain executive options are comprised of a 50% time vesting element and a 50% performance based vesting
element.
Fluence Corporation Limited
19
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(a) Principles used to determine the nature and amount of remuneration (continued)
Business performance in 2018 and executive remuneration
Fluence undertakes its activities on a global basis and employs staff across multiple geographies. As part of its
practice of recruiting and retaining staff of the highest calibre on a long-term basis, the Company is constantly
monitoring and developing compensation practices. As noted above, international benchmarking is used as an
important tool in setting remuneration practices. In view of the significant business development achievements during
2018 including revenue in excess of US$100 million, a significant reduction in EBITDA losses, strong business
growth in China and increasing sales of Smart Packaged Products, discretionary executive bonuses have been
awarded for 2018.
Consolidated entity performance and link to remuneration
The Remuneration and Nomination Committee is of
compensation will continue to increase shareholder wealth if maintained over the coming years.
the opinion that
the adoption of performance-based
As previously noted, key management personnel bonuses for the year 2019 will be considered by the Remuneration
and Nomination Committee and the Board on the basis of both the individual’s and consolidated entity’s performance
during the financial year.
Directors consider that the option program and the exercise prices provide incentives to management and Directors
which are aligned with the interests of shareholders to lift the value of the company in the medium term. Any
remuneration derived by employees from the employee option program is directly linked to the improved share price
performance of the consolidated entity relative to the exercise price determined at the time of the issue of the options.
(b) Details of remuneration
Amounts of remuneration (shown in USD)
The following tables show details of
the Group's executive key
management personnel for the current and previous financial year measured in accordance with the requirements of
the accounting standards.
the remuneration expense recognised for
Remuneration for the year ended 31 December 2017 has been split between the period from 1 January 2017 to 13
July 2017 and 14 July 2017 to 31 December 2017, reflecting the material change in the company on acquisition of
RWL Water Group.
Fluence Corporation Limited
20
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Directors and other key management personnel for 2018 consisted of:
• Richard Irving - Non-Executive Chairman
• Henry Charrabe - Managing Director and Chief Executive Officer (CEO)
• Peter Marks - Non-Executive Director
• Ross Haghighat - Non-Executive Director
• Robert Wale - Non-Executive Director (ceased to be a director on 24 May 2018)
• Ramesh Rengarajan - Non-Executive Director
• Arnon Goldfarb - Non-Executive Director
• Paul Donnelly - Non-Executive Director (appointed 20 July 2018)
• Francesco Fragasso - Chief Financial Officer (appointed 2 April 2018)
• Anthony Hargrave - Chief Operating Officer (appointed 16 May 2018)
• Erik Arfalk - Chief Marketing Officer (appointed 15 March 2018)
• Spencer Smith - Chief Legal Officer (determined as a key management personnel 1 January 2018)
• Philippe Laval - Chief Operating Officer (resigned on 31 August 2018)
• Robert Wowk - Chief Financial Officer (resigned on 31 May 2018)
Directors and other key management personnel for the period 1 January 2017 to 13 July 2017 consisted of:
• Richard Irving - Executive Chairman
• Eytan Levy - Managing Director and Chief Executive Officer (CEO)
• Peter Marks - Non-Executive Director
• Ross Haghighat - Non-Executive Director
• Robert Wale - Non-Executive Director
• Ross Kennedy - Company Secretary and Advisor to the Board
• Ronen Shechther - Chief Technology Officer
• Yaron Bar-Tal - Vice President of Engineering
• Lior Zitershpiler - Vice President of Finance
• Ilan Wilf - Vice President of Global Sales and Business Development
Directors and other key management personnel for the period 14 July 2017 to 31 December 2017 consisted of:
• Richard Irving - Executive Chairman
• Henry Charrabe - Managing Director and Chief Executive Officer (CEO)
• Eytan Levy - Executive Director (resigned 31 August 2017)
• Peter Marks - Non-Executive Director
• Ross Haghighat - Non-Executive Director
• Robert Wale - Non-Executive Director
• Ramesh Rangarajan - Non-Executive Director
• Arnon Goldfarb - Non-Executive Director
• Ross Kennedy - Company Secretary and Advisor to the Board
• Philippe Laval - Chief Operating Officer
• Robert Wowk - Chief Financial Officer
Fluence Corporation Limited
21
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Short-term benefits
Special
projects
$
Cash salary and fees
Total salary
and fees
$
Bonus
(Note 1)
$
Standard
$
Allowance
$
Post-employment
benefits
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payment
Equity settled
options
Total
$
$
$
$
$
900,000
900,000
186,846
110,613
107,533
89,686
89,686
52,358
38,801
675,523
-
-
-
-
-
-
-
-
-
-
900,000
900,000
144,122
144,122
255,232
255,232
186,846
110,613
107,533
89,686
89,686
52,358
38,801
675,523
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
694,793 1,994,147
694,793 1,994,147
70,743
52,126
52,126
257,589
162,739
159,659
89,811
9,096
179,497
98,782
-
52,358
64,864
103,665
338,766 1,014,289
2018
Executive
directors:
Henry Charrabé*
Total
Non-executive
directors:
Richard Irving
Peter Marks
Ross Haghighat
Ramesh
Rengajan
Arnon Goldfarb
Paul Donnelly
(appointed 20
July 2018
Robert Wale
Ceased to be a
director on 24
May 2018)
Total
Fluence Corporation Limited
22
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Short-term benefits
Special
projects
$
Cash salary and fees
Total salary
and fees
$
Bonus
$
Standard
$
Allowance
$
Post-employment
benefits
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payment
Equity settled
options
Total
$
$
$
$
$
204,271
181,250
174,167
295,000
233,328
205,002
1,293,018
2,868,541
-
-
-
-
-
-
-
-
204,271
74,229
-
181,250
174,167
295,000
233,328
205,002
1,293,018
2,868,541
51,051
39,600
66,375
100,000
-
331,255
475,377
-
-
-
-
-
-
255,232
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,575
329,075
17,540
31,610
36,959
113,209
-
249,841
245,377
398,334
446,537
205,002
249,893 1,874,166
1,283,452 4,882,602
2018
Other key
management
personnel:
Francesco
Fragasso*
Anthony
Hargrave*
Erik Arfalk*
Spencer Smith*
Philippe Laval
Robert Wowk
Total
Grand total
Fluence Corporation Limited
23
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
*Percentage of remuneration subject to performance in 2018 is as follows:
Name
Henry Charrabé
Francesco Fragasso
Anthony Hargrave
Erik Arfalk
Spencer Smith
Percentage
19.5%
30.2%
23.9%
22.6%
16.7%
Note 1 Some cash bonuses are dependent on meeting defined performance measures. The amount of bonus is determined having regard to the satisfaction of
performance measures. The amounts payable are determined at the end of each fiscal year by the Nomination and Remuneration Committee.
Name
Henry Charrabé
Cash bonus paid/payable
2018
11.5%
2017
Cash bonus forfeited
2017
2018
50%
88.5%
50%
Bonuses paid in the 2018 financial year were discretionary bonuses approved by the Board relating to corporate and operating performance.
Fluence Corporation Limited
24
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Short-term benefits
Special
projects*
$
Cash salary and fees
Total salary
and fees
$
Bonus
$
Standard
$
Allowance
$
Post-employment
benefits
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payment
Equity settled
options
Total
$
$
$
$
$
84,291
154,654
238,945
39,877
24,614
66,362
130,853
-
-
84,291
154,654
238,945
-
55,710
55,710
53,680
53,680
39,877
78,294
66,362
184,533
-
-
-
-
-
-
-
-
-
-
-
-
29,405
29,405
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
139,671
139,671
84,291
379,440
463,731
-
-
-
-
39,877
78,294
66,362
184,533
Emefcy 1-1-17
to 13-7-17
Executive
directors:
Richard Irving
Eytan Levy
Total
Non-executive
directors:
Peter Marks
Robert Wale
Ross Haghighat
Total
Fluence Corporation Limited
25
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Short-term benefits
Special
projects*
$
Cash salary and fees
Total salary
and fees
$
Bonus
$
Standard
$
Allowance
$
Post-employment
benefits
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payment
Equity settled
options
Total
$
$
$
$
$
44,478
105,286
101,589
62,400
94,203
407,956
777,754
23,006
-
-
-
-
23,006
76,686
67,484
105,286
101,589
62,400
94,203
430,962
854,440
-
25,912
26,323
20,565
24,678
97,478
153,188
-
-
-
-
-
-
-
-
20,677
16,480
10,921
15,779
63,857
93,262
-
-
-
-
-
-
-
-
-
-
-
-
-
-
67,484
-
151,875
-
149,267
4,875
97,136
3,250
254,333
119,673
127,798
720,095
267,469 1,368,359
Emefcy 1-1-17
to 13-7-17
Other key
management
personnel:
Ross Kennedy
Ronen Shechter
Yaron Bar-Tal
Lior Zitershpiler
Ilan Wilf
Total
Grand total
* Short-term cash salary and fee remuneration, classified as 'special projects', comprises remuneration paid to KMP's in relation to one-off, ad hoc projects
throughout the year. Such remuneration is not expected to re-occur in the future.
Fluence Corporation Limited
26
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Fluence
14-7-17 to
31-12-17
Short-term benefits
Post-employment
benefits
Cash salary and fees
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payments
Equity settled
options
Total
Standard
$
Special
projects*
$
Total salary
and fees
$
Bonus
$
Allowance
$
$
$
$
$
$
Executive
directors:
Richard Irving
Henry
Charrabé**
Total
Non-executive
directors:
Peter Marks
Robert Wale
Ross
Haghighat
Ramesh
Rengarajan
Arnon
Goldfarb
Total
88,253
335,189
423,442
52,019
42,796
52,018
44,688
23,790
215,311
-
-
-
-
-
-
-
-
-
88,253
335,189
423,442
52,019
42,796
52,018
44,688
23,790
215,311
-
300,000
300,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
17,795
17,795
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,142
124,395
249,883
902,867
286,025 1,027,262
26,631
79,313
78,650
122,109
24,899
76,917
43,574
88,262
-
174,417
23,790
389,728
Fluence Corporation Limited
27
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Amounts of remuneration (shown in USD) (continued)
Short-term benefits
Post-employment
benefits
Cash salary and fees
Superannuation
Long
service
leave
Long-term
benefits
Equity
settled
shares
Share-based
payments
Equity settled
options
Total
Standard
$
Special
projects*
$
Total salary
and fees
$
Bonus
$
Allowance
$
$
$
$
$
$
42,944
76,686
119,630
-
145,833
206,784
395,561
1,034,314
-
-
76,686
76,686
145,833
206,784
472,247
1,111,000
50,000
-
50,000
350,000
1,812,068
153,372
1,965,440
503,188
-
-
-
-
-
-
-
-
-
-
17,795
111,057
-
-
-
-
-
-
-
-
-
-
-
-
16,415
136,045
35,789
-
52,204
231,622
206,784
574,451
512,646 1,991,441
780,115 3,359,800
Fluence
14-7-17 to
31-12-17
Other key
management
personnel:
Ross
Kennedy
Phillippe
Laval**
Robert Wowk
Total
Grand total
Grand total
(1-1-17 to
31-12-17)
*Short-term cash salary and fee remuneration, classified as 'special projects', comprises remuneration paid to KMP's in relation to one-off, ad hoc projects
throughout the year. Such remuneration is not expected to re-occur in the future.
**Henry Charrabe and Phillippe Laval's percentage of remuneration subject to performance is 37.6% and 32.3% respectively.
Bonuses paid in the 2017 financial year were discretionary bonuses approved by the Board relating to corporate and operating performance.
Fluence Corporation Limited
28
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Issue of shares
The number of shares in the Group held during the period by each Director and other Key Management Personnel,
including their personally related parties, are set out below.
Balance at the
start of the
year
Received as
compensation
Options
exercised
Net change
other
Total
2018
Executive Directors
Henry Charrabé
Non-Executive Directors
Richard Irving*
Peter Marks *
Ross Haghighat*
Ramesh Rengarajan
Arnon Goldfarb
Robert Wale (ceased to be a director
on 24 May 2018)
Paul Donnelly (appointed 20 July 2018)
Key Management Personnel
Francesco Fragasso (appointed 2 April
2018)
Anthony Hargrave (appointed 16 May
2018)
Erik Arfalk (appointed 15 March 2018)
Spencer Smith (determined as KMP 1
January 2018)
Philippe Laval (resigned 31 August
2018)
Robert Wowk (resigned 31 May 2018)
-
36,264,579
2,254,403
-
-
-
-
-
38,518,982
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
500,000
500,000
-
-
-
-
2,000,000
-
-
-
-
-
-
-
Total
38,518,982
-
2,000,000
*An amount of US$473,744 was paid for options exercised during the year by the following Directors:
Name
Richard Irving
Ross Haghighat
Peter Marks
Amount paid
257,092
108,326
108,326
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37,264,579
2,754,403
500,000
-
-
-
-
40,518,982
-
-
-
-
-
-
-
40,518,982
Fluence Corporation Limited
29
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Issue of shares (continued)
2017
Executive directors
Richard Irving - see Note 2 below
Henry Charrabé (appointed 14 July
2017)
Eytan Levy (resigned 31 August 2017) -
see Note 1 below
Directors
Peter Marks *
Robert Wale
Ross Haghighat
Ramesh Rengarajan (appointed 14 July
2017)
Arnon Goldfarb (appointed 19
September 2017)
Key Management Personnel
Ross Kennedy
Ronen Schechter (1 January 2017
through 14 July 2017) - see Note 1
below
Yaron Bar-Tal (1 January 2017 through
14 July 2017) - see Note 1 below
Lior Zitershpiler (1 January 2017
through 14 July 2017) - see Note 1
below
Ilan Wilf (1 January 2017 through 14
January 2017)
Phillip Laval (Since 14 July 2017)
Robert Wowk (Since 14 July 2017)
Total
Balance at the
start of the
year
Received as
compensation
Options
exercised
Net change
other
Total
28,944,080
-
9,267,810
38,211,890
1,854,403
-
-
-
-
1,854,403
210,000
9,267,810
782,149
325,896
-
-
-
10,585,855
50,652,148
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,320,499
36,264,579
-
-
-
(9,267,810)
(1,947,311) 36,264,579
400,000
-
-
-
-
400,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,254,403
-
-
-
-
2,254,403
210,000
(9,267,810)
(782,149)
(325,896)
-
-
-
(10,375,855)
-
-
-
-
-
-
210,000
400,000
(12,323,166) 38,728,982
Note 1 A negative adjustment is shown where the person ceased to be a director or KMP during the year.
*An amount of US$44,320 was paid for options exercised during the year by Peter Marks.
Fluence Corporation Limited
30
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Issue of options
The number of options over ordinary shares in the Group held during the period by each Director and other Key Management Personnel, including their personally
related parties, are set out below. An Employee Option Plan was approved by shareholders on 17 November 2015. Refer to description of Long Term Incentives
under executive remuneration for details.
2018
Executive directors
Henry Charrabé
Directors
Richard Irving
Peter Marks
Ross Haghighat
Ramesh Rangarajan
Arnon Goldfarb
Robert Wale (Ceased to be a director on 24 May
2018)
Paul Donnelly (appointed 20 July 2018)
Balance at
start of year
Granted as
compensation
Option
expired /
exercised
Net change
other
Balance at
end of year
Vested &
Exercisable
Escrowed /
Unvested
11,191,336
11,191,336
2,900,000
2,400,000
2,400,000
1,500,000
-
2,000,000
-
11,200,000
-
-
-
-
(1,000,000)
(500,000)
(500,000)
-
-
-
-
-
-
1,500,000
-
-
1,500,000
-
-
(2,000,000)
(2,000,000)
-
(2,000,000)
-
-
-
-
-
-
-
11,191,336
11,191,336
2,941,557
2,941,557
8,249,779
8,249,779
1,900,000
1,900,000
1,900,000
1,500,000
1,500,000
-
-
8,700,000
-
500,000
500,000
-
-
-
-
1,000,000
1,900,000
1,400,000
1,400,000
1,500,000
1,500,000
-
-
7,700,000
Fluence Corporation Limited
31
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Issue of options (continued)
2018
Key Management Personnel
Francesco Fragasso (appointed 2 April 2018)
Anthony Hargrave (appointed 16 May 2018)
Erik Arfalk (appointed 15 March 2018)
Spencer Smith (determined as a KMP 1 January
2018)
Philippe Laval (resigned 31 August 2018)
Robert Wowk (resigned 31 May 2018)
Balance at
start of year
Granted as
compensation
Option
expired /
exercised
Net change
other
Balance at
end of year
Vested &
Exercisable
Escrowed /
Unvested
-
-
-
350,000
1,500,000
-
1,850,000
800,000
500,000
500,000
75,000
100,000
100,000
2,075,000
-
-
-
-
-
-
-
-
-
-
-
(1,600,000)
(100,000)
(1,700,000)
800,000
500,000
500,000
425,000
-
-
2,225,000
75,000
31,250
46,875
206,250
-
-
359,375
725,000
468,750
453,125
218,750
-
-
1,865,625
Total
24,241,336
3,575,000
(2,000,000)
(3,700,000)
22,116,336
4,300,932
17,815,404
Fluence Corporation Limited
32
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Issue of options (continued)
2017
Executive Directors
Richard Irving
Henry Charrabe (Since 14 July 2017)
Eytan Levy (resigned 31 August 2017)
Directors
Peter Marks
Robert Wale
Ross Haghighat
Ramesh Rangarajan (Since 14 July 2017)
Arnon Goldfarb (Since 19 September 2017)
Key Management Personnel
Ross Kennedy
Ronen Shechter
Yaron Bar-Tal
Lior Zitershpiler
Ilan Wilf
Philippe Laval (Since 14 July 2017)
Robert Wowk (Since 14 July 2017)
Balance at
start of year
Granted as
compensation
Option
Expired
Net change
other
Balance at
end of year
Vested &
Exercisable
Escrowed /
Unvested
1,000,000
-
4,000,000
5,000,000
1,900,000
11,191,336
1,000,000
14,091,336
-
-
-
-
-
-
(5,000,000)
(5,000,000)
2,900,000
11,191,336
-
14,091,336
1,000,000
699,458
-
1,699,458
1,900,000
10,491,878
-
12,391,878
1,400,000
500,000
1,000,000
-
-
2,900,000
200,000
-
265,768
177,178
1,500,000
-
-
2,142,946
1,400,000
1,500,000
1,400,000
1,500,000
-
5,800,000
500,000
-
-
-
-
1,500,000
-
2,000,000
(400,000)
-
-
-
-
(400,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(265,768)
(177,178)
(1,500,000)
-
-
(1,942,946)
2,400,000
2,000,000
2,400,000
1,500,000
-
8,300,000
700,000
-
-
-
-
1,500,000
-
2,200,000
1,000,000
250,000
1,000,000
-
-
2,250,000
-
-
-
-
-
93,750
-
93,750
1,400,000
1,750,000
1,400,000
1,500,000
-
6,050,000
700,000
-
-
-
-
1,406,250
-
2,106,250
Total
10,042,946
21,891,336
(400,000)
(6,942,946)
24,591,336
4,043,208
20,548,128
Fluence Corporation Limited
33
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Share-based payments granted as compensation during the year
For the period, options were issued to directors as approved by shareholders and to Key Management Personnel
under the Fluence Corporation Limited Employee Share Option Plan amended (2017). In accordance with AASB 2
Share Based Payments IGI 4, the tables include employee options agreed to be issued up to and including 31
December 2018. Commencing in 2018, options issued to Key Management Personnel vest 50% on a time basis in 16
equal quarterly increments subject to the employee continuing to be employed by the Group at the vesting date and
50% subject to meeting annual performance criteria.
Details of options granted to directors and other key management personnel as compensation during the reporting
period are as follows:
Fluence Corporation Limited
34
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Share-based payments granted as compensation during the year (continued)
2018
Executive Directors
Henry Charrabé
Non-Executive Directors
Richard Irving
Peter Marks
Ross Haghighat
Ramesh Rengarajan
Arnon Goldfarb
Paul Donnelly
Key Management
Personnel
Francesco Fragasso
Anthony Hargrave
Erik Arfalk
Spencer Smith
Philippe Laval
Robert Wowk
Grant date
No. of options
granted
No. of options
vested
Fair value per
option at grant
date
US$
Exercise price
AU$
Expiry date
Value of
options at
grant date
US$
-
-
-
-
-
-
31 July 2018
31 July 2018
-
26 March 2018
28 June 2018
26 March 2018
26 March 2018
10 January
2018
2 March 2018
-
-
-
-
750,000
750,000
-
800,000
500,000
500,000
75,000
100,000
100,000
-
-
-
-
-
-
-
-
75,000
31,250
46,875
75,000
100,000
100,000
-
-
-
-
-
0.0339
0.0240
-
0.1436
0.1100
0.1436
0.1426
0.1369
0.1055
-
-
-
-
-
1.20
1.50
-
-
-
-
-
-
31 July 2022
31 July 2022
-
0.48
25 May 2022
0.46 27 August 2022
25 May 2022
0.48
25 May 2022
0.48
0.58
0.53
11 March 2022
1 May 2022
-
-
-
-
-
25,425
18,000
-
114,880
55,000
71,800
10,695
13,690
10,550
Fluence Corporation Limited
35
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Share-based payments granted as compensation during the year (continued)
Fluence 14-7-17 to 31-12-17
Grant date
No. of options
granted
No. of options
vested
Fair value per
option at grant
date
US$
Exercise price
AU$
Expiry date
Executive directors
Richard Irving
Henry Charrabe
Non-executive directors
Peter Marks
Robert Wale
Ross Haghighat
14 July 2017
14 July 2017
31 May 2017
31 May 2017
14 July 2017
14 July 2017
14 July 2017
14 July 2017
14 July 2017
14 July 2017
950,000
950,000
5,595,664
5,595,664
700,000
700,000
750,000
750,000
700,000
700,000
Ramesh Rengarajan
(Appointed 14 July 2017)
Arnon Goldfarb (Appointed 19
September 2017)
14 July 2017
1,500,000
-
-
-
-
670,314
-
-
-
-
-
-
-
-
-
0.1809
0.1458
0.3202
0.2418
0.1809
0.1458
0.1809
0.1458
0.1809
0.1458
0.2495
-
Value of
options at
grant date
US$
171,860
138,533
1,791,760
1,353,072
126,633
102,077
135,679
109,368
126,633
102,077
1.20
1.50
0.93
0.93
1.20
1.50
1.20
1.50
1.20
1.50
13 July 2021
13 July 2021
25 May 2025
25 May 2025
13 July 2021
13 July 2021
13 July 2021
13 July 2021
13 July 2021
13 July 2021
0.835
13 July 2021
374,220
-
-
-
Fluence Corporation Limited
36
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
(b) Details of remuneration (continued)
Share-based payments granted as compensation during the year (continued)
Fluence 14-7-17 to 31-12-17
Grant date
No. of options
granted
No. of options
vested
Fair value per
option at grant
date
US$
Exercise price
AU$
Expiry date
Value of
options at
grant date
US$
Key Management Personnel
Philippe Laval
Robert Wowk
Ross Kennedy
31 May 2017
31 May 2017
-
14 July 2017
14 July 2017
750,000
750,000
-
250,000
250,000
89,844
-
-
-
-
0.3346
0.2596
-
0.1809
0.1458
0.85
0.85
-
1.20
1.50
25 May 2025
25 May 2025
-
13 July 2021
13 July 2021
250,966
194,676
-
45,226
36,456
Fluence Corporation Limited
37
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Richard Irving
Non-Executive Chairman
Name:
Title:
Agreement commenced: 18 December 2015. Mr Irving was previously Executive Chairman of Emefcy Limited
Term of agreement:
Details:
Open
Executive Chairman Director fees of US$186,846 (AU$250,000) fees per annum.
Remuneration is reviewed annually by the Remuneration and Nomination Committee
Name:
Title:
Agreement commenced: 18 December 2015
Term of agreement:
Details:
Ross Haghighat
Non-Executive Director
Open
Non-executive Director fees of US$89,686 (AU$120,000) per annum plus Chair of
Remuneration and Nomination Committee fees of US$11,958 (AU$16,000) per annum
and Member of Audit and Risk Committee fees of US$8,969 (AU$12,000) per annum paid
pro-rata to August 28 2018.
Name:
Title:
Agreement commenced: 12 May 2015
Term of agreement:
Details:
Peter Marks
Non-Executive Director
Open
Non-Executive Director fees of US$89,686 (AU$120,000) per annum plus Member of
Remuneration and Nomination Committee fees of US$8,969 (AU$12,000) per annum and
Chair of Audit and Risk Committee fees of US$11,958 (AU$16,000) per annum.
Remuneration is reviews annually by the Remuneration and Nomination Committee.
Name:
Title:
Agreement commenced: 5 April 2016
Term of agreement:
Details:
Robert Wale
Non-Executive Director (Ceased to be a director on 24 May 2018)
Closed
Non-Executive Director fees of US$89,686 (AU$120,000) per annum paid pro-rata to 24
May 2018.
Name:
Title:
Agreement commenced: 14 July 2017
Term of agreement:
Details:
Dr. Rengarajan Ramesh
Non-executive Director
Open
Non-executive director fees of US$89,686 (AU$120,000) per annum. Remuneration is to
be reviewed annually by the Remuneration and Nomination Committee.
Name:
Title:
Agreement commenced: 19 September 2017
Term of agreement:
Details:
Arnon Goldfarb
Non-executive Director
Open
Non-executive director fees of US$89,686 (AU$120,000) per annum. Remuneration is to
be reviewed annually by the Remuneration and Nomination Committee.
Fluence Corporation Limited
38
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Name:
Title:
Agreement commenced: 20 July 2018
Term of agreement:
Details:
Paul Donnelly
Non-executive Director
Open
Non-executive director fees of US$89,686 (AU$120,000) per annum paid pro-rata from
July 2018 plus Member of Audit and Risk Committee fees of US$8,969 (AU$12,000) per
annum paid pro-rata from August 2018. Remuneration is to be reviewed annually by the
Remuneration and Nomination Committee.
Name:
Title:
Agreement commenced: 26 May 2017
Term of agreement:
Details of remuneration:
Henry Charrabé
Managing Director and Chief Executive Officer
Initial two-year term followed by automatic one-year renewals.
Cash salary and
fees
US$600,000 (base
salary)
Bonuses and deferred
remuneration
US$300,000 (year-end deferred
remuneration annually)
Henry
Charrabé
Discretionary bonus of up to
US$75,000, payable annually
A cash bonus of up to 100% of
base salary for outperformance on
one or more of his performance
metrics for 2018
Other Benefits
Health insurance and other health
and welfare benefits for Mr.
Charrabé and his family (capped
at 30% of base salary)
Housing allowance of US$255,232
per annum
Employment Based Option Remuneration:
Number of options
granted
5,595,668
Grant date Exercise Price
Vesting Period
31 May
2017
AU$0.93
Options will vest and become exercisable in
equal instalments at the end of each
consecutive three (3) month period over
four (4) years, commencing on 26 May
2017 (Share Purchase Agreement signing
date).
Fluence Corporation Limited
39
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Performance Based Option Remuneration:
Number of options
granted
5,595,668
Grant date Exercise Price
Vesting Period
31 May
2017
AU$0.93
Options are exercisable in equal annual
instalments at the end of each consecutive
twelve (12)-month period over a four
(4)-year period commencing on the SPA
Signing Date.
Vesting of these options will be subject to
meeting performance criteria established by
the Board.
If there is a change in control of the Company, however, all of the then unvested options will immediately vest and
become exercisable. In addition, all of the options will expire on the earlier of 60 days after termination of Mr
Charrabé’s employment and the 8th anniversary of the SPA Signing Date.
Fluence Corporation Limited
40
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Name:
Title:
Agreement commenced: Mr Fragasso joined Fluence Corporation Limited on 2 April 2018
Notice period by either party of 60 days
Term of agreement:
Details of remuneration:
Francesco Fragasso
Chief Financial Officer
Cash salary and
fees
US$265,000 (base
salary)
Bonuses and deferred
remuneration
Discretionary bonus of up to 40%
of base salary
Francesco
Fragasso
Other Benefits
Health insurance for Mr. Fragasso
and his family
Employment Based Option Remuneration:
Number of
options granted
400,000
Grant date
Exercise price
Vesting period
26 March 2018
AU$0.48
Options will vest and become exercisable in
equal instalments at the end of each
consecutive three (3) months period over
four (4) years, commencing on 26 March
2018
Performance Based Option Remuneration:
Number of
options granted
400,000
Grant date
Exercise price
Vesting period
26 March 2018
AU$0.48
Options are exercisable in equal annual
instalments at the end of each consecutive
twelve (12) months period over four (4)
years period, commencing on 26 March
2018. Vesting of these options will be
subject to meeting performance criteria
established by the Board.
Fluence Corporation Limited
41
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Name:
Title:
Agreement commenced: Mr Hargrave joined Fluence Corporation Limited on 16 May 2018
Notice period by either party of 90 days
Term of agreement:
Details of remuneration:
Anthony Hargrave
Chief Operating Officer
Cash salary and
fees
US$300,000 (base
salary)
Bonuses and deferred
remuneration
Discretionary bonus
Anthony
Hargrave
Other Benefits
Health insurance for Mr. Hargrave
and his family
Employment Based Option Remuneration:
Number of
options granted
250,000
Grant date
Exercise price
Vesting period
28 June 2018
AU$0.46
Options will vest and become exercisable in
equal instalments at the end of each
consecutive three (3) months period over
four (4) years, commencing on 28 June
2018
Performance Based Option Remuneration:
Number of
options granted
250,000
Grant date
Exercise price
Vesting period
28 June 2018
AU$0.46
Options are exercisable as follows: 12.5%
on 31 January 2019, 75% in 3 equal
instalments on 31 January 2020, 31
January 2021 and 31 January 2022 with the
remaining 12.5% on 31 July 2022. Vesting
of these options will be subject to meeting
performance criteria established by the
Board.
Fluence Corporation Limited
42
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Name:
Title:
Agreement commenced: Mr Arfalk joined Fluence Corporation Limited on 15 March 2018
Term of agreement:
Details of remuneration:
Erik Arfalk
Chief Marketing Officer
Notice period by either party of 30 days
Erik Arfalk
Cash salary and
fees
US$220,000 (base
salary)
Bonuses and deferred
remuneration
Discretionary bonus of up to 25%
of base salary
Other Benefits
Health insurance for Mr. Arfalk and
his family
Employment Based Option Remuneration:
Number of
options granted
250,000
Grant date
Exercise price
Vesting period
26 March 2018
AU$0.48
Options will vest and become exercisable in
equal instalments at the end of each
consecutive three (3) months period over
four (4) years, commencing on 26 March
2018
Performance Based Option Remuneration:
Number of
options granted
250,000
Grant date
Exercise price
Vesting period
26 March 2018
AU$0.48
Options are exercisable in equal annual
instalments at the end of each consecutive
twelve (12) months period over four (4)
years period, commencing on 26 March
2018. Vesting of these options will be
subject to meeting performance criteria
established by the Board.
Fluence Corporation Limited
43
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Remuneration report (Audited) (continued)
Service agreements (continued)
Name:
Title:
Agreement commenced: Mr Smith joined Fluence Corporation Limited on 31 May 2016
Term of agreement:
Details of remuneration:
Notice period by either party of 30 days
Spencer Smith
Chief Legal Officer
Spencer
Smith
Cash salary and
fees
US$260,000 (base
salary)
Bonuses and deferred
remuneration
US$35,000 (year-end deferred
remuneration annually)
Discretionary bonus
Other Benefits
Health insurance Mr. Smith and
his family
Employment Based Option Remuneration:
Number of
options granted
350,000
14 July 2017
AU$0.84
Grant date
Exercise price
Vesting period
Options will vest and become exercisable in
equal instalments at the end of each
consecutive three (3) months period over
four (4) years, commencing on 14 July 2017
Options are fully vested
75,000
26 March 2018
AU$0.48
[This concludes the Remuneration Report, which has been audited]
Fluence Corporation Limited
44
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Shares under option
Unissued ordinary shares
Unissued ordinary shares of Fluence Corporation Limited under option at the date of this report are as follows:
Date options granted
Expiry date
Issue price of shares
Number under option
18 December 2015
28 January 2016
11 April 2016
29 February 2016
29 February 2016
29 February 2016
29 February 2016
23 March 2016
23 March 2016
23 March 2016
23 March 2016
17 May 2016
17 May 2016
18 May 2016
18 May 2016
15 June 2016
25 July 2016
25 August 2016
23 September 2016
27 October 2016
1 November 2016
23 September 2016
9 February 2017
20 December 2016
9 February 2017
28 March 2017
8 March 2017
8 March 2017
5 May 2017
31 May 2017
31 May 2017
14 July 2017
14 July 2017
14 July 2017
14 July 2017
19 July 2017
1 July 2017
7 September 2017
14 September 2017
14 July 2017
10 January 2018
26 March 2018
28 June 2018
18 December 2019
31 January 2019
13 April 2020
23 December 2019
23 December 2019
28 February 2020
28 February 2020
23 March 2020
23 March 2020
12 April 2020
12 April 2020
16 May 2020
28 May 2020
18 May 2020
18 May 2021
31 May 2020
25 July 2020
25 August 2020
25 September 2020
26 October 2020
31 October 2020
9 November 2020
9 February 2021
20 December 2020
10 January 2021
4 March 2021
31 March 2019
31 March 2019
3 May 2021
25 May 2025
25 May 2025
13 July 2021
13 July 2021
13 July 2021
25 May 2025
14 July 2019
6 July 2021
30 September 2019
13 November 2021
10 September 2021
11 March 2022
25 May 2022
27 August 2022
AU 40 cents
AU 40 cents
AU 35 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 59 cents
AU 59 cents
AU 40 cents
AU 40 cents
AU 93 cents
AU 79 cents
AU 87 cents
AU 1.00 dollar
AU 1.07 dollars
AU 74 cents
AU 1.00 dollar
AU 1.00 dollar
AU 87 cents
AU 84 cents
AU 82 cents
AU 72 cents
AU 72 cents
AU 86 cents
AU 93 cents
AU 85 cents
AU 1.20 dollars
AU 1.50 dollars
AU 84 cents
AU 84 cents
AU 0.72 cents
AU 97 cents
AU 75 cents
AU 86 cents
AU 81 cents
AU 58 cents
AU 48 cents
AU 46 cents
2,000,000
1,940,000
500,000
431,473
431,473
100,000
100,000
75,000
75,000
50,000
50,000
400,000
100,000
1,000,000
1,000,000
1,000,000
250,000
325,000
200,000
350,000
500,000
200,000
350,000
75,000
25,000
1,000,000
2,000,000
1,000,000
175,000
11,191,336
347,389
3,850,000
3,850,000
1,500,000
350,000
300,000
100,000
750,000
1,140,000
3,800,000
180,000
1,375,000
500,000
Fluence Corporation Limited
45
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Shares under option (continued)
Unissued ordinary shares (continued)
Date options granted
Expiry date
Issue price of shares
Number under option
31 July 2018
31 July 2018
31 July 2022
31 July 2022
AU 1.20 dollars
AU 1.50 dollars
750,000
750,000
46,436,671
Insurance of officers and indemnities
(a)
Insurance of officers
The Group has indemnified the Directors and executives of the Group for costs incurred, in their capacity as a
Director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Group paid a premium in respect of a contract to insure the Directors and executives of
the Group against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
(b) Indemnity of auditors
The Group has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Group or any related entity against a liability incurred by the auditor.
During the financial year, the Group has not paid a premium in respect of a contract to insure the auditor of the Group
or any related entity.
Proceedings on behalf of the Group
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking
responsibility on behalf of the Group for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the year are set
out in Note 23 in the financial statements.
The board of Directors has considered the position and, in accordance with advice received from the audit committee,
is satisfied that the provision of the non-audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by
the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act
2001 for the following reasons:
•
•
all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality
and objectivity of the auditor
none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set
out on page 48.
Fluence Corporation Limited
46
Fluence Corporation Limited
Directors' Report
31 December 2018
(continued)
Rounding of amounts
The amounts contained in the directors’ report and in the financial report have been rounded to the nearest $1,000
(where rounding is applicable) under the option available to the Company under ASIC Corporations (Rounding in
Financial/Directors’ Report) Legislative Instrument 2016/191. The Company is an entity in which the Legislative
Instrument applies.
Corporate Governance Statement
In accordance with ASX listing Rule 4.10.3, the Group’s Corporate Governance Statements can be found on its
website https://www.fluencecorp.com/investor-news/.
For and on behalf of the Directors
Henry Charrabé
Managing Director & CEO
29 March 2019
New York
Fluence Corporation Limited
47
Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
DECLARATION OF INDEPENDENCE BY DAVID GARVEY TO THE DIRECTORS OF FLUENCE CORPORATION
LIMITED
As lead auditor of Fluence Corporation Limited for the year ended 31 December 2018, I declare that, to
the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Fluence Corporation Limited and the entities it controlled during the
period.
David Garvey
Partner
BDO East Coast Partnership
Melbourne, 29 March 2019
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Fluence Corporation Limited ABN 52 127 734 196
Annual report - 31 December 2018
Contents
Financial Statements
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors' Declaration
Independent Auditor's Report
Page
50
51
52
53
54
108
109
Fluence Corporation Limited
49
Fluence Corporation Limited
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2018
Revenues
Operating revenue
Other income
Testing
Expenses
Cost of sales
Research and development expenses
Sales and marketing expenses
General and administration expenses
Goodwill impairment
Other gains/(loss) - net
Finance income/(costs) - net
Loss before income tax
Income tax expense
Loss for the year
Loss for the year is attributable to:
Owners of Fluence Corporation Limited
Non-controlling interests
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations, net of tax
Total comprehensive income for the year
Total comprehensive income for the year is attributable to:
Owners of Fluence Corporation Limited
Non-controlling interests
Notes
3
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
100,873
250
101,123
33,083
105
33,188
3
3
3
14
3
3
5
19
19
(66,502)
(7,214)
(10,689)
(27,742)
(56,293)
4,436
521
(62,360)
(442)
(62,802)
(63,757)
955
(62,802)
(27,230)
(5,970)
(6,299)
(17,940)
-
283
1,087
(22,881)
(687)
(23,568)
(23,664)
96
(23,568)
(14,376)
(77,178)
(721)
(24,289)
(78,133)
955
(77,178)
(24,385)
96
(24,289)
Losses per share from continuing operations attributable to the ordinary
equity holders of the Group:
Basic loss per share
Diluted loss per share
6
6
(0.14)
(0.14)
(0.07)
(0.07)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes. All amounts are presented in US dollars.
Fluence Corporation Limited
50
Fluence Corporation Limited
Consolidated Statement of Financial Position
As at 31 December 2018
ASSETS
Current assets
Cash and cash equivalents
Other financial assets
Trade and other receivables
Inventories
Prepayments
Other assets
Total current assets
Non-current assets
Other receivables
Investments accounted for using the equity method
Deferred tax assets
Property, plant and equipment
Intangible assets
Concession arrangements asset
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Deferred revenue
Other financial liabilities
Total current liabilities
Non-current liabilities
Other liability
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Other reserves
Accumulated losses
Non-controlling interests
Total equity
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
Notes
7
7
8
9
11
8
12
5
13
14
10
11
15
16
17
15
15
5
16
18
20
19
38,741
2,417
33,514
18,866
4,049
67
97,654
10
484
1,208
14,846
5,603
18,830
3,159
44,140
75,153
4,786
26,684
18,538
3,876
2,873
131,910
260
495
1,921
7,114
60,167
-
2,790
72,747
141,794
204,657
48,845
368
853
4,092
25,898
-
80,056
9,301
532
838
10,671
90,727
51,067
185,126
(15,752)
(119,521)
49,853
1,214
51,067
27,811
1,145
72
27,711
38,173
1,000
95,912
2,595
1,671
878
5,144
101,056
103,601
156,898
(1,376)
(52,075)
103,447
154
103,601
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
All amounts are presented in US dollars.
Fluence Corporation Limited
51
Fluence Corporation Limited
Consolidated Statement of Changes in Equity
For the year ended 31 December 2018
Consolidated entity
Balance at 1 January 2017
Loss for the period
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Issue of ordinary shares, net of transaction costs
Issue of options
Non-controlling interests on acquisition of subsidiary
Balance at 31 December 2017
Adjustment on adoption of AASB 15
Adjustment on adoption of AASB 16
Adjustment on adoption of AASB 129
Restated balance at 1 January 2018
Loss for the period
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Issue of ordinary shares, net of transaction costs
Issue of options
Transactions with non-controlling interests
Balance at 31 December 2018
Contributed
equity
$'000
Notes
Other reserves
$'000
Accumulated
losses
$'000
Total
$'000
Non- controlling
interests
$'000
Total
equity
$'000
53,129
-
-
-
101,538
2,231
-
156,898
-
-
-
156,898
-
-
-
26,237
1,991
-
185,126
(655)
-
(721)
(721)
-
-
-
(1,376)
-
-
-
(1,376)
-
(14,376)
(14,376)
-
-
-
(15,752)
(28,411)
(23,664)
-
(23,664)
-
-
-
(52,075)
(407)
(328)
(2,954)
(55,764)
(63,757)
-
(63,757)
-
-
-
(119,521)
24,063
(23,664)
(721)
(24,385)
101,538
2,231
-
103,447
(407)
(328)
(2,954)
99,758
(63,757)
(14,376)
(78,133)
26,237
1,991
-
49,853
-
96
-
96
-
-
58
154
-
-
-
154
955
-
955
-
-
105
1,214
24,063
(23,568)
(721)
(24,289)
101,538
2,231
58
103,601
(407)
(328)
(2,954)
99,912
(62,802)
(14,376)
(77,178)
26,237
1,991
105
51,067
18
4
19
18
4
19
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. All amounts are presented in US dollars.
Fluence Corporation Limited
52
Fluence Corporation Limited
Consolidated Statement of Cash Flows
For the year ended 31 December 2018
Cash flows from operating activities
Receipt from customers
Payments to suppliers and employees
Royalties paid to Chief Scientist Office (Israel)
Receipt from restricted cash
Interest received
Interest and other costs of finance paid
Income taxes paid
Net cash (outflow) from operating activities
Cash flows from investing activities
Payment for purchases of plant and equipment
Funds transferred to term deposit
Proceeds from sale of property, plant and equipment
Proceeds from disposal of short-term deposits
Cash acquired as part of acquisition of RWL Water LLC
Acquisition of non-controlling interest in a subsidiary
Net cash (outflow) inflow from investing activities
Cash flows from financing activities
Proceeds from issues of ordinary shares
Proceeds from exercise of share options
Final payment to redeem a note from original vendor of Emefcy Ltd (Israel)
Contributions from non-controlling interests
Transactions costs related to issue of ordinary shares
Repayment of borrowings
Finance lease payments
Net cash inflow from financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
Notes
50,168
(102,695)
(23)
108
3,066
(353)
(154)
(49,883)
(2,848)
(780)
24
-
-
(1,803)
(5,407)
26,415
799
(1,000)
105
(977)
(519)
(1,631)
23,192
(32,098)
75,153
(4,314)
38,741
28,062
(56,395)
(67)
261
686
(144)
(870)
(28,467)
(3,717)
-
5
1,064
50,583
-
47,935
31,001
808
-
-
(476)
(634)
-
30,699
50,167
22,871
2,115
75,153
7
7
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. All
amounts are presented in US dollars.
Fluence Corporation Limited
53
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
1 Summary of significant accounting policies
(a) Corporate information
The Financial Report of Fluence Corporation Limited and its controlled entities (the “Group”) for the year ended 31
December 2018 was authorised for issue in accordance with a resolution of the Directors on the 29
day of March
2019.
th
Fluence Corporation Limited is a for profit listed public company limited by shares incorporated and domiciled in
Australia whose shares are publicly traded on the Australian Securities Exchange (“ASX”). The Group provides
fast-to-deploy, decentralised and packaged water and wastewater treatment solutions.
(b) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards
and interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001.
The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the
international accounting standards board.
The financial report has been prepared on an accruals basis and is based on historical costs, except for those assets
and liabilities measured at fair value. The financial report is presented in United States Dollars, which is the Group’s
presentation currency. All values are rounded to the nearest $1,000 (where rounding is applicable) under the option
available to the Company under ASIC Corporations (Rounding in Financial/Directors' Report) Legislative Instrument
2016/191. The Company is an entity in which the Legislative Instrument applies.
Management is required to make judgements, estimates and assumptions about carrying values of assets and
liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be reasonable under the circumstance, the results
of which form the basis of making the judgements. Actual results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
Judgements made by management in the application of Australian Accounting Standards that have significant effects
on the financial statements and estimates with a significant risk of material adjustments in the next year are
disclosed, where applicable, in the relevant notes to the financial statements (refer to Note 1 (ab)).
Accounting policies are selected and applied in a manner which ensures that the resulting financial
information
satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions
or other events is reported.
(i) Going concern
The financial statements have been prepared on a going concern basis, which contemplates continuity of normal
business activities and the realisation of assets and discharge of liabilities in the normal course of business.
Fluence Corporation Limited
54
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(b) Basis of preparation (continued)
(ii) New and amended standards adopted by the group
The Group has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period (refer to note
1(ac) for more information about first implementation of new standards). The Group have early adopted AASB 16
which is effective for periods beginning on or after 1 January 2019, with earlier adoption permitted if AASB 15
Revenue from Contracts with Customers has also been applied.
All other accounting standards adopted by the Group are consistent with the most recent Annual Report for the year
ended 31 December 2017.
(c) Comparatives
Where necessary comparatives have been reclassified for consistency with the current period disclosures.
(i) Revision to Appendix 4E Preliminary Final Report for the year ended 31 December 2018
AASB 16 Leases elimination of lease expenses previously included in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income in the Appendix 4E Preliminary Final Report for the year ended 31 December
2018 within ‘General and administration expenses' have been reclassified to 'Research and development expenses'
and 'Sales and marketing expenses' for a more accurate presentation.
As a result of this reclassification, for the year ending 31 December 2018, 'Research and development expenses'
have decreased $433,000 to $7,214,000, 'Sales and marketing expenses' have decreased $260,000 to $10,689,000
and "General and administration expenses" have increased $693,000 to $27,742,000.
Items related to the exchange differences from the management fees charged by the head office to the Group's
subsidiaries, previously included in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in
the Appendix 4E Preliminary Final Report for the year ended 31 December 2018 within 'Other gains/(losses) - net'
have been reclassified as 'Other reserves' in the Consolidated Statement of Financial Position for a more accurate
presentation of the Group's financial results for the year.
As a result of this reclassification, for the year ending 31 December 2018, 'Other gains/(loss) - net' have increased
$825,000 to $4,436,000.
The hyperinflation effect on equity previously included in the Consolidated Statement of Financial Position in the
Appendix 4E Preliminary Final Report within 'Other reserves' in the amount of $2,954,000 have been reclassified to
'Accumulated losses' for an accurate presentation of AASB 129 effect on equity.
This reclassification has affected the presentation of the Consolidated Statement of Changes in Equity. A new line
was added, 'Adjustment on adoption of AASB 129', $2,954,000. The Other comprehensive income has increased to
$(14,376,000).
Items previously included in the Consolidated Statement of Financial Position in the Appendix 4E Preliminary Final
Report for the year ended 31 December 2018 within 'Other non-current assets' have been separated into a newly
created category 'Concession arrangement assets' to provide a more accurate and detailed presentation of the
Group's financial position.
As a result of this reclassification, for the year ending 31 December 2018, 'Other non-current assets' have decreased
$18,830,000 to $3,159,000. The 'Concession arrangement assets' balance has been presented as $18,830,000.
The Deferred tax asset and Deferred tax liability balances in the Consolidated Statement of Financial Position have
been updated after the tax presentation for the Group has been finalised.
Fluence Corporation Limited
55
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(c) Comparatives (continued)
(i) Revision to Appendix 4E Preliminary Final Report for the year ended 31 December 2018 (continued)
As a result of this reclassification, for the year ending 31 December 2018, 'Deferred tax assets' have increased
$291,000 to $1,208,000 and 'Deferred tax liabilities' have increased $291,000 to $532,000.
The current portion of the AASB 16 lease liability previously included in the Consolidated Statement of Financial
Position in 'Other liabilities' under Non-current liabilities was reclassified to 'Trade and other payables' under Current
liabilities for the purpose of a more accurate presentation of the Group's Financial position.
As a result of this reclassification, for the year ending 31 December 2018, 'Trade and other payables' have increased
$1,319,000 to $48,845,000 and 'Other liabilities' decreased $1,319,000 to $9,301,000.
Items included in the Consolidated Statement of Cash Flows in the Appendix 4E Preliminary Final Report for the year
ended 31 December 2018 within 'Repayment of borrowings' and 'Proceeds from issues of ordinary shares' have been
reclassified to 'Contributions from non-controlling interests' to provide a more accurate presentation of the Group's
Cash flows from financing activities.
As a result of this reclassification, for the year ending 31 December 2018, 'Repayment of borrowings' has decreased
$51,000 to $(519,000), 'Proceeds from issues of ordinary shares' have decreased $1,000 to $26,415,000 and
'Contributions from non-controlling interests' have increased $52,000 to $105,000.
(d) Principles of consolidation
The consolidated financial statements incorporate all of the assets, liabilities and results of the parent company,
Fluence Corporation Limited, and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent
controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 27.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group
from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the
date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions
between Group entities are fully eliminated on consolidation.
Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity
of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly,
to the Group are presented as “non-controlling interests”.
The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are
the
entitled to a proportionate share of
non-controlling interests’ proportionate share of
to initial recognition,
non-controlling interests are attributed their share of profit or loss and each component of other comprehensive
income.
the subsidiary’s net assets on liquidation at either fair value or at
the subsidiary’s net assets. Subsequent
Non-controlling interests are shown separately within the equity section of the Statement of Financial Position and
Statement of Profit or Loss and Other Comprehensive Income.
(e) Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the
same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is
responsible for the allocation of resources to operating segments and assessing their performance.
Fluence Corporation Limited
56
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(f) Revenue recognition
Following the adoption of AASB 15 Revenue from Contracts with Customers, Revenue is recognised when goods or
services are transferred to a customer, in an amount that reflects the consideration to which the entity excepts to be
entitled in exchange to those goods or services. Before recognising revenue, the Group needs to identify the contract,
identify separate performance obligations, determine the transaction price, allocate the transaction price to the
performance obligations and recognise revenue as or when each performance obligation is satisfied. Performance
obligation can be satisfied at a point in time or over time (for more information regarding first implementation of AASB
15, refer to note 1(ac)).
Revenue related to construction or upgrade services under service concession arrangement is recognised over time,
consistent with the Group's accounting policy on recognising revenue on construction contracts. Operating or service
revenue is recognised in the period in which the services are provided by the Group. If the service concession
arrangement contains more than one performance obligation, then the consideration received is allocated with
reference to the relative stand-alone selling price of the services delivered.
(g) Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant
will be received, and the group will comply with all attached conditions. Note 15 provides further information on how
the group accounts for government grants.
Government grants are recognised in profit and loss on a systematic basis over the periods in which the entity
recognises expenses for the related costs for which the grants are intended to compensate.
Grants received from the Government of Israel that are required to be repaid by payment of royalties on sales
revenue or refunded if relevant conditions are not met are recorded as other payables (refer to Note 15 for further
details).
(h) Leases
Following the adoption of AASB 16 Leases, the Group recognises assets and liabilities for all leases with a term of
more than 12 months, unless the underlying asset is of low value. The Group recognises a right-of-use asset
representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease
payments. Right-in-use assets and lease liabilities are measured initially on a present value basis. The Group
recognises depreciation of the right-of-use asset and interest on the lease liability. Depreciation is on a straight-line
basis (for more information regarding first implementation of AASB 16, refer to note 1(ac)).
(i) Employee benefits
(i) Wages and salaries
Wages and salaries include non-monetary benefits, annual leave and long service leave. These are recognised and
presented in different ways in the financial statements:
•
•
•
The liability for annual leave and the portion of long service leave expected to be paid within twelve months is
measured at the amount expected to be paid.
The liability for long service leave and annual leave expected to be paid after one year is measured as the
present value expected future payments to be made in respect of services provided by employees up to the
reporting date.
The liability for annual leave and the portion of long service leave that has vested at the reporting date included in
the current provision for employee benefits.
Fluence Corporation Limited
57
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(i) Employee benefits (continued)
(i) Wages and salaries (continued)
•
The portion of long service leave that has not vested at the reporting date is included in the non-current provision
for employee benefits.
(ii) Share-based payments
Employees (including senior executives) of the Group receive remuneration in the form of share-based payments,
whereby employees render services as consideration for equity instruments (equity-settled transactions).
Equity-settled transactions
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an
appropriate valuation model, further details of which are given in Note 4.
That cost is recognised in employee benefits expense, together with a corresponding increase in equity (other capital
reserves), over the period in which the service and, where applicable, the performance conditions are fulfilled (the
vesting period). The cumulative expense recognised for equity-settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number
of equity instruments that will ultimately vest. The expense or credit in the Statement of Profit or Loss for a period
represents the movement in cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair
value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the
number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant
date fair value. Any other conditions attached to an award, but without an associated service requirement, are
considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to
an immediate expensing of an award unless there are also service and/or performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service
conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated
as vested irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance
and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value
of the unmodified award, provided the original terms of the award are met. An additional expense, measured as at the
date of modification, is recognised for any modification that increases the total fair value of the share-based payment
transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the
counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted
earnings per share.
(j) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the
aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any
non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the
non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net
assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the
acquiree.
Fluence Corporation Limited
58
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(j) Business combinations (continued)
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the
amount recognised for non-controlling interests and any previous interest held over the net identifiable assets
the aggregate
acquired and liabilities assumed).
consideration transferred, the Group reassesses whether it has correctly identified all of the assets acquired and all of
the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition
date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate
consideration transferred, then the gain is recognised in profit or loss.
the net assets acquired is in excess of
the fair value of
If
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the
Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets
or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is
disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation
when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the
relative values of the disposed operation and the portion of the cash-generating unit retained.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period,
based on new information obtained about the facts and circumstances that existed at the acquisition date. The
measurement period ends on either of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives
all the information possible to determine fair value.
(k)
Investment in associates and joint ventures
An associate is an entity over which the Group has significant influence. Significant influence is the power to
participate in the financial and operating policy decisions of the investee but is not control or joint control over those
policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the joint venture. Joint control
is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the
parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary to
determine control over subsidiaries.
The Group’s investments in its associate and joint venture are accounted for using the equity method.
Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying
amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint
venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying
amount of the investment and is not tested for impairment separately.
Fluence Corporation Limited
59
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(k)
Investment in associates and joint ventures (continued)
The Statement of Profit or Loss reflects the Group’s share of the results of operations of the associate or joint
venture. Any change in OCI of those investees is presented as part of the Group’s Other Comprehensive Income
(OCI). In addition, when there has been a change recognised directly in the equity of the associate or joint venture,
the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised
gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to
the extent of the interest in the associate or joint venture.
The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the
Statement of Profit or Loss outside operating profit and represents profit or loss after tax and non-controlling interests
in the subsidiaries of the associate or joint venture.
The financial statements of the associate or joint venture are prepared for the same reporting period as the Group.
When necessary, adjustments are made to bring the accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss
on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is
objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the
Group calculates the amount of impairment as the difference between the recoverable amount of the associate or
joint venture and its carrying value, and then recognises the loss as ‘Share of profit of an associate and a joint
venture’ in the Statement of Profit or Loss.
Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and
recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or
joint venture upon loss of significant influence or joint control and the fair value of the retained investment and
proceeds from disposal is recognised in profit or loss.
(l)
Impairment of non financial assets
Impairment exits when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which
is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal
calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or
observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a
Discounted Cash Flow (DCF) model.
The cash flows are derived from the budget for the next five years and do not include restructuring activities that the
Group is not yet committed to or significant future investment that will enhance the performance of the assets of the
Cash Generating Unit (CGU) being tested.
The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future
cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill and
other intangibles with indefinite useful lives recognised by the Group.
(m) Cash and cash equivalents
Cash and short-term deposits in the consolidated statement of financial position comprise cash at bank and in hand
and short-term deposits with an original maturity of three months or less.
For the purposes of the consolidated statement of cash flow, cash and cash equivalents consist of cash and cash
equivalents as defined above.
(n) Other financial assets
Cash and short-term deposits in the consolidated statement of financial position comprise cash at bank and in hand
and short-term deposits with an original maturity of more than three months.
Fluence Corporation Limited
60
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(n) Other financial assets (continued)
Restricted cash that is invested in highly liquid deposits, which are used mainly as security for guarantees provided to
lessors of office and production premises, bid bonds and performance guarantees.
(o) Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost, less any
appropriate provision for estimated irrecoverable amounts.
A provision for impairment is made when there is objective evidence that the Group will not be able to collect the
debts. The criteria used to determine that there is objective evidence that an impairment loss has occurred include
whether the Financial Asset is past due and whether there is any other information regarding increased credit risk
associated with the Financial Asset. Bad debts which are known to be uncollectible are written-off when identified.
(p) Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that
is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the consolidated entity and the cost of the item can be measured reliably. The carrying
amount of the replaced part is derecognised. AII other repairs and maintenance are charged to profit or loss during
the reporting period in which they are incurred.
Depreciation on plant and equipment is calculated using the straight-line method to allocate their cost or revalued
amounts, net of their residual values, over their estimated useful lives, as follows:
25-50 years
Buildings
Over the shorter of the term of the lease or useful life of an asset
Leasehold improvements
4-17 years
Production equipment
Office furniture and equipment
3-17 years
Computers and peripheral equipment 3-15 years
Vehicles
5-7 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is
greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds the carrying amount. These are included in
profit or loss.
(q) Inventories
Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost
comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure,
the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual
items of
inventory on basis of First in-First out (FIFO). Costs of purchased inventory are determined after deducting rebates
and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated
costs of completion and the estimated costs necessary to make the sale.
Fluence Corporation Limited
61
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(r) Foreign currency translation
(i) Functional Currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (‘the functional currency’). The financial statements of
Fluence Corporation Limited (the parent entity of the Group) are measured in Australian Dollars (AU$) which is that
entity’s functional currency.
(ii) Presentation Currency
The consolidated financial statements are presented in US Dollars (US$), which is the Group’s presentation currency.
(iii) Translation and balances
Transactions in foreign currencies are converted to the functional currency at the exchange rate at the date of the
transaction. Amounts payable to and by the Group outstanding at reporting date and denominated in foreign
currencies have been converted to local currency using rates prevailing at the end of the financial year. All exchange
differences are taken to profit or loss.
(iv) Group companies
The results of foreign subsidiaries and the parent entity are translated to US Dollars at the exchange rate at the date
of the transaction. Assets and liabilities of foreign subsidiaries and the Australian parent are translated to US Dollars
at exchange rates prevailing at balance date. All
resulting exchange differences are recognised in other
comprehensive income and in the foreign currency translation reserve in equity.
(v) Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences on translation of foreign controlled
subsidiaries. Amounts are reclassified to profit or loss when the investment is disposed of.
(s)
Income tax
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except where the deferred income
tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting loss nor taxable profit or loss.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised
except where the deferred income tax asset relating to the deductible temporary differences arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of transaction,
affects neither the accounting loss nor taxable profit or loss.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax
asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
Fluence Corporation Limited
62
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(t) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except:
• where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as
applicable; and
receivables and payables are stated with the amount of GST included.
•
Cash flows arising from operating activities are included in the consolidated statement of cash flow on a gross basis
(i.e. including GST) and the GST component of cash flows arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and
contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. The net
amount of GST recoverable from or payable to, the taxation authority is included as part of the receivables or
payables in the Consolidated Statement of Financial Position.
(u) Intangible assets
Intangible assets are initially measured at cost. Following initial recognition, intangible assets are carried at cost less
lives of intangible assets are
any accumulated amortisation and any accumulated impairment losses. The useful
assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful
life and
assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation
period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial
year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a
change in an accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in
profit or loss in the expense category consistent with the function of the intangible asset.
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable
net assets of the acquired subsidiary at the date of acquisition.
Goodwill arising from acquisitions of subsidiaries, tested at least annually for impairment and carried at cost less
accumulated impairment losses. Any impairment is recognised immediately in the statement of profit or loss or other
comprehensive income. Subsequent reversals of impairment losses for goodwill are not recognised.
(ii) Research and development
Research costs are expensed as incurred.
An intangible asset arising from development expenditure on an internal project is recognised only when the Group
can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale,
its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits,
the availability of resources to complete the development and the ability to measure reliably the expenditure
attributable to the intangible asset during its development.
Following initial recognition of the development expenditure, the cost model
carried at cost
capitalised is amortised over the period of expected benefits from the related project.
less any accumulated amortisation and accumulated impairment
is applied requiring the asset to be
losses. Any expenditure so
The carrying value of an intangible asset arising from development expenditure is tested for impairment annually
when the asset is not available for use, or more frequently when an indication of impairment arises during the
reporting period.
Fluence Corporation Limited
63
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(u) Intangible assets (continued)
(ii) Research and development (continued)
Amortisation commences when the assets are ready for use.
(iii) Concession asset
An intangible asset arising from a concession arrangement. The group recognises an intangible asset to the extent
that it receives a right to charge users over the life of arrangement for the use of the asset. The intangible asset is
measured initially at cost. The intangible assets will be amortised over the useful life of the arrangement and will be
measured at cost less any accumulated amortisation and accumulated impairment losses.
The carrying value of an intangible asset arising from development expenditure is tested for impairment annually
when the asset is not available for use, or more frequently when an indication of impairment arises during the
reporting period.
(v)
Impairment of non-financial assets
The carrying values of non-financial assets 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 carrying amount exceeds its recoverable
amount. Recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows that are largely independent of the cash inflows from other assets or groups of assets (cash-generating
units). Non-financial assets that suffer impairment are tested for possible reversal of the impairment whenever events
or changes in circumstances indicate that the impairment may have reversed.
Impairment exists when the carrying value of an asset exceeds its estimated recoverable amount. The asset is then
written down to its recoverable amount.
(w) Trade and other payables
Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided to
the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make
future payments in respect of the purchase of these goods and services.
(x) Contributed equity
Ordinary shares are classified as equity. Any transaction costs arising on the issue of ordinary shares are recognised
directly in equity as a reduction (net of tax) of the share proceeds received.
(y) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Where applicable, provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of the time value of money and the risks specific to the liability.
Onerous contracts
An onerous contract is considered to exist where the Group has a contract under which the unavoidable cost of
meeting the contractual obligations exceed the economic benefits estimated to be received. Present obligations
existing under onerous contracts are recognised as a provision to the extent that the present obligations exceed the
benefits estimated to be received.
Fluence Corporation Limited
64
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(z) Earnings per share
Basic earnings per share is calculated as net profit or loss attributable to members, adjusted to exclude costs of
servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any
bonus element.
Diluted earnings per share is calculated as net profit or loss attributable to members, adjusted for:
•
•
•
costs of servicing equity (other than dividends);
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been
recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of
potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential
ordinary shares, adjusted for any bonus element.
(aa) Concession asset
A financial asset arising from a concession arrangement. The Group recognises a financial asset to the extent that it
receives an unconditional contractual right to receive a specified or determinable amount of cash or another financial
asset in return for constructing or upgrading a public sector asset, and then operating and maintaining the asset for a
specified period of time. The financial asset is measured at fair value. The financial asset is reduced when amounts
are received.
(ab)Significant Accounting Estimates and Assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of
future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of certain assets and liabilities within the next annual reporting period are:
(i) Fair Value of Financial Liability
The Group assessed the fair value of the financial milestone payments and government grant liabilities, which
incorporate a number of key estimates and assumptions. For further details, please refer to note 15 Trade and other
payables and other liabilities.
Income tax
(ii)
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for
anticipated tax audit issues based on the Group's current understanding of the tax law. Where the final tax outcome
of these matters is different from the carrying amounts, such differences will
impact the current and deferred tax
provisions in the period in which such determination is made.
(iii) Share-based payment transactions
Under AASB 2 Share Based Payments, the consolidated entity must recognise the fair value of shares granted to
directors, employees and consultants as remuneration as an expense on a pro-rata basis over the vesting period in
profit or loss with a corresponding adjustment to equity.
The consolidated entity provides benefits to employees (including directors) of the consolidated entity in the form of
share-based payment transactions, whereby employees render services in exchange for shares or rights over shares
("equity-settled transactions").
Fluence Corporation Limited
65
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(ab)Significant Accounting Estimates and Assumptions (continued)
(iii) Share-based payment transactions (continued)
Estimating fair value of share-based payment transactions requires determination of the most appropriate valuation
model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most
appropriate inputs to the valuation model including the expected life of the share option or appreciation right, volatility
and dividend yield and making assumptions about them. For the measurement of the fair value of equity-settled
transactions with employees at the grant date, the Group uses a binominal model for the options. The assumptions
and models used for estimating fair value for share-based payment transactions are disclosed in Note 4 - People
costs.
(iv) Fair value measurement hierarchy
The consolidated entity is required to classify all assets and liabilities, measured at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1:
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable
judgement is required to determine what is significant to fair value and therefore which category the asset or liability is
placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These
include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on
unobservable inputs.
Impairment of non financial assets
(v)
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which
is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal
calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or
observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a
Discounted Cash Flow (DCF) model. The cash flows are derived from the budget for the next five years and do not
include restructuring activities that the Group is not yet committed to or significant future investments that will
enhance the performance of the assets of the Cash Generating Units (CGU) being tested. The recoverable amount is
sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate
used for extrapolation purposes. These estimates are most relevant to goodwill and other intangibles with indefinite
useful lives recognised by the Group. Refer to Note 14 for further detail.
(vi) Revenue recognition over time
The value of work performed using percentage completion method is used to determine revenue recognition on
contracts where revenue is recognised over time. This measurement is an accounting judgment as management
uses judgement to estimate costs incurred to date as a percentage of total estimated costs.
(vii) PDVSA
In December 2014, Fluence Argentina entered into significant work agreements with PDVSA Agricola (PDVSA), a
wholly owned company by the Venezuelan government. These work agreements consisted of a series of purchase
orders (POs) from PDVSA (the 'PDVSA contract'), for detailed engineering and supply of water and wastewater
treatment systems and composting systems for five ethanol production plants in Venezuela. In relation to those work
agreements, Fluence Argentina received an advance collection of approximately US$95 million in June 2015.
Fluence Corporation Limited
66
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(ab)Significant Accounting Estimates and Assumptions (continued)
(vii) PDVSA (continued)
During March 2016, PDVSA rescinded the original work agreements. During that period, Fluence Argentina had
invested significant amounts in the engineering design of the projects. In January 2017, PDVSA expressed its
intention to continue with the plant named "Portuguesa", at a project value of US$45 million. As of 31 December
2018, that project was still being performed by Fluence Argentina at 95% of completion. The remainder of the
Portuguesa project is expected to be completed in early 2019 with residual revenue recognition of US$1.2 million.
During 2018, the Company recognised revenues in the amount of US$24.8 million related to Portuguesa, and it had
recognised approximately US$33 million in prior years (US$15.2 million related Portuguesa and US$17.8 million
related the rescinded POs). The Company also recognised variable consideration in relation to the PDVSA contract
during the year resulting from rescinded purchase orders. Further, an onerous contract provision originally recognised
in 2016, was reassessed in light of the progress of the project. It was determined that it was no longer probable that
an outflow of resources will be required post 31 December 2018 and that remaining the provision of US$11.3m was
released to cost of sales in 2018.
Consistent with prior years, the revenues were recognised at the historic exchange rate determined at the date of
inception of the project in accordance with IFRIC 22, Foreign Currency Transactions and Advance Consideration.
However, Argentina was declared a hyperinflationary economy from 1 July 2018, which therefore required the
application of AASB 129 Financial Reporting in Hyperinflationary Economies for 2018. This resulted in
hyperinflationary adjustments to all
items in the profit and loss and all non-monetary assets and liabilities in the
accounts of Fluence Argentina. This resulted in a downward adjustment of US$5.5 million to revenue generated from
the Portuguesa project. Post hyperinflationary adjustments, total revenue recognised in relation to the Portuguesa
project and variable consideration from rescinded purchase orders in 2018 was US$24.8 million.
liability relating to the unspent advanced
In Note 17 ‘Deferred Revenue’, the Company has included a residual
payment at 31 December 2018.
In accordance with IFRIC 22 Foreign Currency Transactions and Advance
Consideration the residual liability is translated into Argentine Pesos at the historical exchange rate as of June 2015,
and after adjusting for the impact of hyperinflation, the residual deferred revenue liability is a non-monetary liability of
approximately US$25.9 million.
The residual liability for unspent funds has been recognised as at 31 December 2018 as a current liability (refer to
note 17 Deferred revenue). Management are currently unable to determine when future project work will be
requested from this customer and the scope of this work. This means this liability may change depending on the final
negotiation that PDVSA and the Company will hold, and where the outcome may differ from the amounts booked by
the Company. In any case the residual liability will not exceed the unspent advanced payment.
(ac) New and amended standards adopted by the group
AASB 9: Financial Instruments
AASB 9 addresses the classification, measurement and derecognition of financial
instruments, to introduce new
hedge accounting requirements including changes to hedge effectiveness testing, treatment of hedging costs, risk
components that can be hedged and disclosures. The standard also introduces a new expected-loss impairment
model that requires more timely recognition of expected credit losses.
During the year the Group has assessed the impact of AASB 9 on the financial statements. The assessment
concluded that the current accounting treatment of financial instruments of the Group is in line with the requirements
of AASB 9. Consequently, there is no material impact on 2018 results.
AASB 15: Revenue from Contracts with Customers
Fluence Corporation Limited
67
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(ac) New and amended standards adopted by the group (continued)
AASB 15 establishes a comprehensive framework for determining the timing and quantum of revenue recognised. It
replaces AASB 118 Revenue, AASB 111 Construction Contracts and related interpretations. The core principle is that
revenue must be recognised when goods or services are transferred to a customer, in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. This could be at a
point in time or over time.
During the year the Group has assessed their revenues and identified the impact of AASB 15 on the financial
statements. This included identifying the material contracts entered into by the Group, identifying the performance
obligations, determining the transaction price, allocating the transaction price to the performance obligations and
recognising revenue as, or when, each performance obligation is satisfied.
The assessment identified an impact on revenue:
(1)
Revenue recognition at a point in time or over time -
The majority of the Group’s revenue is from projects that require significant engineering design, procurement of
equipment and construction to deliver a functioning facility or asset. These contracts are usually known as
Engineering, Procurement and Construction (EPC) contracts or equipment sales. Revenue on EPC contracts was
previously recognised over time in accordance with previous accounting standards.
AASB 15 states that an entity transfers control of a good or service over time and, therefore, satisfies a performance
obligation and recognises revenue over time, if one of the following criteria is met:
a. the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the
entity performs;
b. the entity’s performance creates or enhances an asset (for example, work in progress) that the customer controls
as the asset is created or enhanced; or
c. the entity’s performance does not create an asset with an alternative use to the entity and the entity has an
enforceable right to payment for performance completed to date.
As work is performed on the assets being constructed are controlled by the customer, and have no alternative use for
Fluence, with the Group having a right to payment for performance to date, the performance obligation is fulfilled over
time and as such revenue is recognised over time.
The Group has identified a small number of contracts that do not meet the above criteria. Revenue in relation to these
projects is recognised at a point in time under AASB15. Under the previous accounting standard this revenue would
have been recognised over time. The total impact on 2017 and 2018 revenue is a reduction of $(232,000) and gain of
$706,000, respectively.
(2)
Separate performance obligation -
Some of the Group’s contracts includes separate performance obligations that were not identified as such according
to the previous accounting treatment. These performance obligations are mainly warranties provided to the client as
part of the contract. AASB 15 distinguishes between two types of warranty:
a. Assurance Warranty - warranty that simply provides assurance the product complies with agreed-upon
specifications.
b. Service Warranty - warranty that provides a service that can be purchased by the customer in addition to the
assurance warranty.
Fluence Corporation Limited
68
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(ac) New and amended standards adopted by the group (continued)
The impact of service warranty included in the contracts in 2017 and 2018 on revenue is a reduction of $(94,000) and
a gain of $37,000, respectively.
(3)
Incremental costs to obtain a contract -
AASB 15 states that a company shall recognise as an asset the incremental costs of obtaining a contract with a
customer if the entity expects to recover those costs. The incremental costs of obtaining a contract are those costs
that a company incurs to obtain a contract with a customer that it would not have incurred if the contract had not been
obtained, such as sales commissions and finder fees. The impact of these incremental costs to obtain a contract on
2017 and 2018 revenues was a reduction of $(320,000) and $(102,000), respectively.
Revenue recognised over
time and should be
recognised at a point in time
Revenue includes a
separate performance
obligation
2018
$'000
2017
$'000
2018
$'000
2017
$'000
Revenue includes
incremental costs to
obtain a contract
2017
2018
$'000
$'000
Revenue
abc
706
(232)
37
(94)
(102)
(320)
The Group has adopted AASB 15 using the cumulative effect method, with the effect of initially applying this standard
recognised at the date of initial application (i.e. January 1, 2018). Accordingly, the information presented for 2017 has
is presented, as previously reported, under AASB 118, AASB 111 and related
not been restated -
interpretations.
i.e.
it
AASB 16: Leases
AASB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all
leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee will recognise a
right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its
obligation to make lease payments. Depreciation on the asset and interest on the liability will be recognised.
The Group have assessed the impact of the implementation of AASB 16 on 2018 results as follows:
Asset
Accumulated depreciation
Asset, net
Current liability
Non-current liability
Equity
December 31, 2018
$’000
abc
8,750
(1,640)
7,110
1,319
6,026
328
The adoption of AASB 16 resulted in adjustment to the opening balance of accumulated losses at 1 January 2018 by
$328,000.
Depreciation expenses
Interest expenses
2018
$'000
a
1,674
264
Fluence Corporation Limited
69
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
1 Summary of significant accounting policies (continued)
(ac) New and amended standards adopted by the group (continued)
AASB 129: Financial Reporting in Hyperinflationary
During the first half of 2018, the Argentine Peso devalued significantly which led the Argentinian government to
declare a hyperinflation economy in the country. As a result, from 1 January 2018, the Group applied “AASB 129 -
Financial Reporting in Hyperinflationary Economies” with regard to the Argentinian entity. AASB 129 applies to the
financial statements of companies whose functional currency is the currency of a hyperinflation economy. The
Coefficient for December 2018 was 184.2552.
Based on the hyperinflation economy declared, the Group reassessed the functional currency of its Argentinian entity
which concluded it to be the Argentinian Peso (no change since last assessment).
AASB 129 requires remeasurement of non-monetary items, equity and contracts and all Profit and Loss items,
denominated in foreign currencies by applying an inflation index that reflects general price developments in the
hyperinflation period. This index was published by the Argentinian government during January 2019.
The treatment in accordance with AASB 129 had the following impact on the Group’s Statement of Profit or Loss and
Other Comprehensive Income and the Statement of Financial Position:
Statement of Profit and Loss or Other Comprehensive Income -
Revenues
Cost of sales
Sales and marketing expenses
General and administration expenses
Other gains/(loss) - net
Finance income/(costs) - net
Statement of Financial Position -
2018
$'000
a
(17,226)
(2,523)
(185)
(279)
(6)
(486)
31 December 2018
$'000
$1.00
843
(9,534)
(2,954)
Property, plant and equipment
Deferred revenue
Equity
2 Segment information
Segment disclosure replicates the manner in which the Managing Director and Chief Operating Decision Maker
(CODM) monitors the business performance.
The Group's operating segments are:
• Operating Units (OUs) - These are defined as the operating entities of the Group that earn revenues and incur
expenses that are reviewed by the CODM and their discrete financial information is available. OUs' include the
Group's entities in Argentina, Italy, Israel, USA, China and Middle East. The OUs are aggregated into a single
operating segment on the basis that the OUs are similar in each of the following respects:
Fluence Corporation Limited
70
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
2 Segment information (continued)
•
•
•
•
•
nature of the products and services;
nature of the production processes;
type or class of customer for their products and services;
methods used to distribute their products or provide their services; and
nature of the regulatory environment
• Product and Innovation Group (P&I) - Defined as the Research and Development vehicle of the Group.
2018
Segment revenue
Operating revenue and other income
Segment expense
Segment depreciation and amortisation
expense
Goodwill impairment
Share of profits of associates
Write off of inventories
Segment expense
Unallocated expenses - corporate
Segment results
Assets
Investments in associates
Segment assets
Unallocated assets - corporate
Liabilities
Segment liabilities
Unallocated liabilities - corporate
Acquisitions of non-current assets
2018
Operating
Units
$'000
Production
and
Innovation
$'000
Intersegment
Elimination
$'000
Total
$'000
100,722
100,722
1,588
1,588
(1,187)
(1,187)
101,123
101,123
(1,886)
(56,293)
38
(172)
(103,556)
-
(161,869)
(61,147)
484
115,184
-
115,668
(81,178)
-
(81,178)
4,087
(860)
-
-
-
(11,995)
-
(12,855)
(11,267)
-
9,006
-
9,006
(8,663)
-
(8,663)
733
The Americas
$'000
-
-
-
-
22,661
-
22,661
21,474
-
(1,383)
-
(1,383)
3,004
-
3,004
-
Rest of the
World
$'000
(2,746)
(56,293)
38
(172)
(92,890)
(11,862)
(163,925)
(62,802)
484
122,807
18,212
141,503
(86,837)
(3,599)
(90,436)
4,820
Total
$'000
Other information
External sales revenue by geographical segment
Property, plant and equipment by geographical segment
62,525
5,514
38,598
9,332
101,123
14,846
Fluence Corporation Limited
71
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
2 Segment information (continued)
2017
Segment revenue
Operating revenue and other income
Segment expense
Segment depreciation and amortisation expense
Share of profits of associates
Write off of inventories
Segment expense
Unallocated expenses - corporate
Segment result
Assets
Investments in associates
Segment assets
Unallocated assets - corporate
Liabilities
Segment liabilities
Unallocated liabilities - corporate
Acquisitions of non-current assets
2017
Operating
Units
$'000
Production
and
Innovation
$'000
Intersegment
Elimination
$'000
Total
$'000
33,850
33,850
(327)
(29)
24
(32,754)
-
(33,086)
764
495
163,677
-
164,172
(90,635)
-
(90,635)
3,320
1,097
1,097
(1,759)
(1,759)
33,188
33,188
(343)
-
-
(13,191)
-
(13,534)
(12,437)
-
6,687
-
6,687
(3,930)
-
(3,930)
995
The Americas
$'000
-
-
-
3,621
-
3,621
1,862
-
(40)
-
(40)
281
-
281
-
Rest of the
World
$'000
(670)
(29)
24
(42,324)
(13,757)
(56,756)
(23,568)
495
170,324
33,838
204,657
(94,284)
(6,772)
(101,056)
4,315
Total
$'000
Other information
External sales revenue by geographical segment
Property, plant and equipment by geographical segment
18,697
3,022
14,491
4,092
33,188
7,114
Unallocated expenses
Other corporate expenses
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
(11,862)
(13,757)
Fluence Corporation Limited
72
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
2 Segment information (continued)
Unallocated assets
Cash and cash equivalents
Other assets
Unallocated liabilities
Trade and other payables
Other liabilities
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
14,003
4,209
18,212
28,768
5,070
33,838
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
(2,126)
(1,473)
(3,599)
(5,772)
(1,000)
(6,772)
Intersegment transactions
Intersegment transactions are made at market rates. Intersegment transactions are eliminated on consolidation.
3 Operating revenue and expenses
Operating revenue
Space
Contract revenue
Revenues on equipment sales
Revenues on EPC contracts
Service concession arrangements revenue
Space
Service revenue
Revenues on services
Other
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
45,866
27,749
20,847
94,462
3,699
2,712
6,411
17,795
11,113
578
29,486
2,199
1,398
3,597
100,873
33,083
Fluence Corporation Limited
73
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
3 Operating revenue and expenses (continued)
Research and development
Materials
Salaries and other employee related expenses
Professional fees
Travel and entertainment
Occupancy
Depreciation
Other
Sales and marketing
Salaries and other employee related expenses
Marketing activities
Travel and entertainment
Professional fees
Occupancy
Other
General and administration
Salaries and other employee related expenses
Professional fees
Depreciation
Bad debt
Director expense
Travel and entertainment
Office expenses
Import and export expenses
Insurance
Bank charges
Maintenance
Occupancy
Other
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
4,093
2,153
210
227
-
205
326
7,214
3,238
2,129
216
4
179
193
11
5,970
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
5,639
2,639
1,124
466
-
821
10,689
3,488
1,293
886
197
38
397
6,299
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
9,961
5,987
2,554
2,229
1,761
1,396
1,076
852
689
368
255
-
614
27,742
5,018
7,991
329
185
1,196
918
568
34
250
263
251
496
441
17,940
Fluence Corporation Limited
74
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
3 Operating revenue and expenses (continued)
Other gains/(loss) - net
Foreign exchange gain / (loss)
Fair value adjustment for shares in trust
Withholding taxes
Increase in provisions
Loss from investments accounted for using the equity method
Other
Finance income/(costs) - net
Interest income
Fund valuation loss
Interest expense
Project financing and other
Aggregate expenses
Aggregate depreciation and amortisation expenses
Aggregate employee benefits expense
4 People costs
(a) Share-based payments
Employee Option Plan
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
5,255
-
(686)
(94)
38
(77)
4,436
2,856
(2,006)
(215)
(286)
(29)
(37)
283
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
3,066
(1,947)
(407)
(191)
521
1,514
-
(89)
(338)
1,087
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
2,937
29,120
688
14,858
A share option plan has been established by the consolidated entity and approved by shareholders at a general
meeting, whereby the consolidated entity may, at the discretion of the Board of Directors, grant options over ordinary
shares in the Group to certain key management personnel of the consolidated entity. The options are issued for nil
consideration and are granted in accordance with performance guidelines established by the Remuneration and
Nomination Committee.
Set out below are summaries of options granted under the plan:
Fluence Corporation Limited
75
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
4 People costs (continued)
(a) Share-based payments (continued)
Employee Option Plan (continued)
2018
Grant/change
date
Expiry
Date
Exercise
Price
a
Opening balance
Options vested during the year
10/1/18
10/1/18
2/3/18
26/3/18
28/6/18
18/7/18
18/7/18
30/7/18
31/7/18
31/7/18
31/7/18
31/7/18
31/7/18
27/8/18
27/8/18
23/10/18
12/12/18
17/12/18
31/12/18
31/12/18
11/3/22
11/3/22
1/5/22
25/5/22
27/8/22
31/12/20
31/12/20
31/7/18
1/5/22
31/7/18
31/7/18
31/7/22
31/7/22
16/12/18
16/12/19
25/5/25
16/12/18
16/12/18
10/9/21
10/9/21
A$0.58
A$0.58
A$0.53
A$0.48
A$0.46
A$0.95
A$1.10
A$0.30
A$0.53
A$0.30
A$0.64
A$1.20
A$1.50
A$0.30
A$0.40
A$0.85
A$0.30
A$0.30
A$0.81
A$0.81
Closing balance
Granted
Exercised
Vested
66,759,872
(9,788,644)
100,000
80,000
100,000
1,375,000
500,000
-
-
-
-
-
-
750,000
750,000
-
-
-
-
-
-
188,000
-
-
-
-
-
-
(499,999)
-
-
-
-
-
(500,000)
(500,000)
-
(1,000,000)
(1,000,000)
-
-
70,602,872 (13,288,643)
8,211,381
12,730,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,941,631
Cancelled /
Reversed
Balance at
the end of the
year
(4,192,946)
52,778,282
-
-
-
-
-
(1,500,000)
(1,000,000)
-
(100,000)
(1,440,001)
(500,000)
-
-
-
-
(1,152,611)
-
-
(992,000)
-
(10,877,558)
100,000
80,000
100,000
1,375,000
500,000
(1,500,000)
(1,000,000)
(499,999)
(100,000)
(1,440,001)
(500,000)
750,000
750,000
(500,000)
(500,000)
(1,152,611)
(1,000,000)
(1,000,000)
(992,000)
188,000
46,436,671
The opening balance has been adjusted to reflect the exercise, vesting and cancellation of options issued in the prior
period. Refer to note Contributed equity for details.
(i) Fair value of options granted
For the options granted during the current financial year, the valuation model inputs used to determine the fair value
at the grant date are outlined below. The expected volatility reflects the assumption that the historical volatility is
indicative of future trends, which may also not necessarily be the actual outcome.
Fluence Corporation Limited
76
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
4 People costs (continued)
(a) Share-based payments (continued)
Employee Option Plan (continued)
(i) Fair value of options granted (continued)
Share price at
Grant date
a
10/1/18
2/3/18
26/3/18
26/3/18
28/6/18
31/7/18
31/7/18
Expiry Date
grant date Exercise Price Dividend yield
11/3/22
1/5/22
25/5/22
25/5/22
27/8/22
31/7/22
31/7/22
A$0.520
A$0.043
A$0.470
A$0.470
A$0.400
A$0.385
A$0.385
A$0.58
A$0.53
A$0.48
A$0.48
A$0.46
A$1.20
A$1.50
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Risk-free
interest rate
Fair value at
grant date
2.30
2.28
2.31
2.31
2.25
2.25
2.25
0.1369
0.1055
0.1436
0.1426
0.1100
0.0339
0.0240
The weighted average remaining contractual life of options outstanding at year-end was 3.10 years.
The fair value of the options granted to employees is considered to represent the value of the employee services
received over the vesting period.
The weighted average fair value of options granted during the year was $0.1341. These values were calculated using
the binomial lattice, based on the Cox, Ross Rubinstein (1979) method applying the following inputs:
Weighted average exercise price: $0.64
Expected share price volatility: 52%
Since listed for trading on ASX in December 2015, the Group's share price was quite volatile with a wide range of
trading volumes. Therefore, the expected volatility was determined based on two years of weekly historical stock
returns.
(a) Expenses arising from share-based payment transactions
Share based payment expense
Consultant Share based payments
Employee Share based payments
Director Share based payments
(b) Key Management Personnel Disclosures
Compensation
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
74
823
1,094
1,991
992
588
651
2,231
The aggregate compensation made to directors and other members of key management personnel of the Group is
set out below:
Fluence Corporation Limited
77
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
4 People costs (continued)
(b) Key Management Personnel Disclosures (continued)
Compensation (continued)
Short-term employee benefits
Post-employment benefits
Share based payments
Consolidated entity
31 December
2018
$
31 December
2017
$
3,599,150
-
1,283,452
4,882,602
2,468,628
111,057
780,115
3,359,800
The above Key Management Personnel disclosures represents the remuneration of Key Management Personnel
defined in the Remuneration Report and paid or payable for the 12 months ended 31 December 2018 and 31
December 2017.
For more information on Key Management Personnel Compensation disclosed under the Corporations Act 2001,
please refer to Remuneration Report contained under Directors’ Report.
5 Income tax
(a)
Income tax expense
The components of tax expense comprise:
Current tax
Current tax
Adjustments for current tax of prior periods
(Increase)/decrease in deferred tax assets
Increase/(decrease) in deferred tax liabilities
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
(18)
715
(1,139)
(442)
(687)
-
-
(687)
Fluence Corporation Limited
78
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
5 Income tax (continued)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax
space
Prima facie tax on profit from ordinary activities
Tax losses carried forward
Tax expense - Fluence Italy S.R.L.
Tax expense - Fluence Israel Ltd
Tax expense - Fluence Argentina
Tax expense - other
Income tax expense
(c) Deferred tax balances
(i) Deferred tax assets
The balance comprises temporary differences attributable to:
Tax losses
Unrealised foreign exchange gain/loss
Accrued WIP
Accrued licence fee
Other accruals
Doubtful debts provision
Annual leave provision
Other
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
(62,360)
(22,881)
(18,708)
18,708
(111)
(152)
(110)
(69)
(442)
6,864
(6,864)
(338)
(68)
(281)
-
(687)
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
184
1
19
361
107
-
60
476
1,208
1,133
114
142
276
30
47
64
115
1,921
Fluence Corporation Limited
79
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
5 Income tax (continued)
(c) Deferred tax balances (continued)
(ii) Deferred tax liabilities
The balance comprises temporary differences attributable to:
Unrealised foreign exchange gain/loss
WIP
Intangibles
Fixed assets
(d) Unrecognised deferred tax assets
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
4
238
-
290
532
55
949
667
-
1,671
A few of the Group's subsidiaries have been accumulating losses in the past years. The consolidated balance of the
tax losses carried forward as of 31 December 2018 was $29,568,000 (2017: $24,952,000).
6 Loss per share
(a) Basic loss per share
Consolidated entity
31 December
2018
$
31 December
2017
$
Loss attributable to the ordinary equity holders of the Group
(0.14)
(0.07)
(b) Diluted loss per share
Consolidated entity
31 December
2018
$
31 December
2017
$
Loss attributable to the ordinary equity holders of the Group
(0.14)
(0.07)
(c) Reconciliation of earnings used in calculating earnings per share
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
Loss attributable to the ordinary equity holders of the Group used in calculating basic
earnings per share:
From continuing operations
(62,802)
(23,568)
Fluence Corporation Limited
80
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
6 Loss per share (continued)
(d) Weighted average number of shares used as the denominator
Consolidated entity
2017
2018
Number
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted loss per share
439,535,108
319,728,992
7 Cash and cash equivalents, Other financial assets, Cash Flows
(a) Cash and cash equivalents
Cash and cash equivalents
(b) Other financial assets
Restricted cash
Short term deposits
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
38,741
38,741
75,153
75,153
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
1,538
879
2,417
1,674
3,112
4,786
Fluence Corporation Limited
81
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
7 Cash and cash equivalents, Other financial assets, Cash Flows (continued)
(c) Cash flow information
Loss before income tax
Adjustment for:
Depreciation and amortisation expenses
Share based payments expense
Impairment loss
Bad debt expense
Warranty provision
Inventory reserve
Loss on disposal of property, plant and equipment
Share of loss of associates and joint ventures
Provision for losses
Post-employment benefit expense
Fair value adjustment on shares in trust
Finance costs - net
Foreign exchange differences
(Increase)/decrease in restricted cash
(Increase) in trade and other receivables
(Increase) in inventory
(Increase) in prepaid expenses
(Increase) in concession arrangement assets
(Increase)/decrease in other current and non-current assets
Increase in trade and other payables
Increase/(decrease) in deferred revenues
Cash generated from operations
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
(62,360)
(22,881)
2,937
1,991
56,293
2,229
1,008
172
21
(38)
(11,347)
29
-
2,192
(5,255)
108
(5,708)
(394)
(717)
(20,947)
2,061
21,656
(33,814)
(49,883)
688
2,231
-
185
52
(24)
(22)
29
409
(1,350)
2,006
(2,019)
(1,382)
(1,593)
(31,106)
(15,654)
(3,827)
-
(5,638)
12,578
38,851
(28,467)
Fluence Corporation Limited
82
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
8 Trade and other receivables
Current receivables - Trade receivables
Contract receivables
Contract unbilled receivables
Provision for impairment - contract receivables
Current receivables - Other receivables
GST receivable
Income tax receivable
Other taxes receivable
Government grants to be received
Other receivables
Non-current receivables
Long-term receivables
Provision for impairment - long-term receivables
Additional information on contract debtors
Total contract debtors
Total contract liabilities
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
15,176
17,882
(3,211)
29,847
2,631
529
406
-
101
3,667
15,456
8,161
(1,927)
21,690
3,211
582
984
70
147
4,994
33,514
26,684
1,223
(1,213)
10
1,531
(1,271)
260
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
29,847
(29,040)
807
21,690
(4,186)
17,504
Contract assets are balances due from customers under long-term contracts as work is performed and therefore a
contract asset is recognised over the period in which the performance obligation is fulfilled. This represents the
Group's right to consideration for the products and services transferred to date. Amounts are generally reclassified to
contract receivables when this have been invoiced to the customer.
Contract assets were recognised as a result of the application of AASB15. Refer to Note 1(ac): new and amended
standards adopted by the group, where the effects of the initial application of AASB15 have been detailed.
Fluence Corporation Limited
83
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
9 Inventories
Raw materials - at cost
Work in progress - at cost
Finished goods - at net realisable value
10 Concession asset
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
9,217
6,151
3,498
18,866
4,079
13,924
535
18,538
The Group have three concession service arrangements on hand as of 31 December 2018:
•
•
•
In July 2018 the Group entered into a service concession arrangement in the Bahamas to build a seawater
desalination potable treatment plant. The onsite execution and construction started in October 2018 and is
expected to be completed in April 2019. Under the terms of the agreement, the Group will operate the
desalination plant and provide water to the grantor for a period of 15 years. The Group will be responsible for any
maintenance services required during the concession period. The Group does not expect major repairs to be
necessary during the concession period.
The grantor will provide the Group a guaranteed minimum annual payment for each year that the desalination
plant will be in operation. At the end of the concession period, the desalination plant will become the property of
the grantor and the Group will have no further involvement in its operation or maintenance requirements. For the
year ended 31 December 2018, the Group has recognised revenue of $2.9 million on the construction of the
desalination plant. The revenue recognized represents the fair value of the construction services provided in
constructing the desalination plant and are recognised as a concession asset.
In January 2016 the Group entered into a service concession arrangement in Mexico to build and operate a
desalination plant. The construction started in October 2018 and is expected to be completed by September
2020. Under the terms of the agreement, the Group will operate and maintain the plant and will sell water to the
grantor for a period of 30 years. The grantor will provide the Group a guaranteed minimum annual payment for
each year that the Desalination plant will be in operation to cover the investment. Additionally, the Group has
received the right to charge fees for water consumed from the desalination plant, which the Group will collect and
retain. At the end of the concession period, the desalination plant will be transferred and will become the property
of the grantor and the Group will have no further involvement in its operation or maintenance requirements. For
the year ended 31 December 2018, the Group has recognised revenue of $13.1 million on the construction of the
Desalination plant. The revenue recognised represents the fair value of the construction services provided in
constructing the desalination plant. The Group recognised an intangible asset and a financial asset received as
consideration for providing construction services of $2 million and $11.1 million, respectively. The intangible asset
represents the right to charge users a fee for use of the desalination plant. The financial asset represents an
unconditional contractual right to receive a specified amount of cash.
In November 2018 the Group acquired a company holding a concession service arrangement to build a
desalination plant in Peru for a period of 10 years. The Group started construction in March 2018. The
construction is expected to be completed in November 2019. The Group will operate and maintain the
desalination plant and will sell water to the client for a period of 10 years. At the end of the concession period, the
desalination plant will remain in the Group's custody and the agreement might be extended or transferred to a
new client. For the year ended 31 December 2018, the Group has recognised revenue of $4.8 million on the
construction of the desalination plant. The revenue recognised represents the fair value of the construction
services provided in constructing the desalination plant and were recognised as a concession asset.
Fluence Corporation Limited
84
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
10 Concession asset (continued)
a
Current concession asset
Non-current concession asset
11 Other assets
a
Current assets
Shares in trust to acquire non-controlling interests
Other
a
Non-current assets
Construction bond
Incremental costs asset
Other
Consolidated entity
31 December 31 December
2017
$'000
-
-
-
2018
$'000
-
18,830
18,830
Consolidated entity
31 December 31 December
2017
$'000
2018
$'000
-
67
67
2,178
695
2,873
Consolidated entity
31 December 31 December
2017
$'000
2018
$'000
2,400
300
459
3,159
2,400
-
390
2,790
Fluence Corporation Limited
85
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
12 Investments accounted for using the equity method
a
Name of entity
E.T.G.R Water
Infrastructure
Management
RWL WATER
MEXICO, S DE RL DE
CV.
Quoted fair value / Carrying
Amount
31 December 31 December
2017
$'000
2018
$'000
Place of
business/
country of
incorporation
% of
ownership
interest
Nature of
relationship
Measurement
method
Israel
50%
Associate Equity method
Mexico
49% Joint Venture Equity method
484
-
484
428
67
495
As of 31 December 2018, the Group holds 50% interest in E.T.G.R Water Infrastructure Management partnership and
a 49% interest in RWL WATER MEXICO, S DE RL DE CV. These investments contributed $38,000 to Fluence
Corporation Limited gain, which is included in 'Other gains/(loss) - net' in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income.
Fluence Corporation Limited
86
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
13 Property, plant and equipment
Consolidated entity
At 1 January 2018
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 31 December 2018
Opening net book amount
Adoption of AASB 16
Adoption of AASB 129
Additions
Disposals
Depreciation charge
Exchange differences
Closing net book amount
At 31 December 2018
Cost
Accumulation depreciation
Net book amount
Buildings and
Leasehold
improvements
$'000
Production
equipment
$'000
Office
furniture and
equipment
$'000
Land
$'000
Computers
and
peripheral
equipment
$'000
Vehicles
$'000
Right of use
assets
$'000
Total
$'000
77
-
77
77
-
7
114
-
-
(4)
194
194
-
194
4,777
(1,313)
3,464
3,464
-
759
1,015
-
(382)
(1,369)
3,487
4,830
(1,343)
3,487
4,099
(2,037)
2,062
2,062
-
12
1,018
-
(288)
(178)
2,626
5,019
(2,393)
2,626
1,331
(782)
549
549
-
14
76
(19)
(149)
(24)
447
1,303
(856)
447
2,438
(1,730)
708
708
-
15
476
-
(344)
(123)
732
2,789
(2,057)
732
835
(581)
254
254
-
36
104
(26)
(68)
(50)
250
760
(510)
250
-
-
-
-
8,962
-
-
-
(1,674)
(178)
7,110
8,750
(1,640)
7,110
13,557
(6,443)
7,114
7,114
8,962
843
2,803
(45)
(2,905)
(1,926)
14,846
23,645
(8,799)
14,846
Fluence Corporation Limited
87
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
13 Property, plant and equipment (continued)
Consolidated entity
At 1 January 2017
Cost or fair value
Accumulated depreciation
Net book amount
Year ended 31 December 2017
Opening net book amount
Business acquisition
Additions
Disposals
Depreciation charge
Exchange differences
Closing net book amount
At 31 December 2017
Cost or fair value
Accumulated depreciation
Net book amount
Buildings and
Leasehold
improvements
$'000
Production
equipment
$'000
Office
furniture and
equipment
$'000
Land
$'000
Computers
and
peripheral
equipment
$'000
Vehicles
$'000
Right of use
assets
$'000
Total
$'000
-
-
-
-
76
-
-
-
1
77
77
-
77
39
(6)
33
33
1,373
2,069
-
(60)
49
3,464
4,777
(1,313)
3,464
1,255
(331)
924
924
300
1,040
-
(144)
(58)
2,062
4,099
(2,037)
2,062
83
(52)
31
31
209
350
-
(56)
15
549
248
(197)
51
51
611
229
(3)
(207)
27
708
1,331
(782)
549
2,438
(1,730)
708
-
-
-
-
324
29
(15)
(67)
(17)
254
835
(581)
254
-
-
-
-
-
-
-
-
-
-
-
-
-
1,625
(586)
1,039
1,039
2,893
3,717
(18)
(534)
17
7,114
13,557
(6,443)
7,114
Fluence Corporation Limited
88
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
14 Intangible assets
Consolidated entity
Year ended 31 December 2017
Opening net book amount
Business acquisition
Additions
Amortisation charge
Currency translation differences
Closing net book amount
Year ended 31 December 2018
Opening net book amount
Additions
Impairment loss (i)
Amortisation charge
Currency translation differences
Closing net book amount
Capitalised
development
costs
$'000
Capitalised
concession
asset
$'000
Goodwill
$'000
Total
$'000
-
56,293
-
-
-
56,293
56,293
-
(56,293)
-
-
-
2,134
-
-
(167)
241
2,208
2,208
-
-
(138)
(158)
1,912
-
1,225
598
-
(157)
1,666
1,666
2,017
-
-
8
3,691
2,134
57,518
598
(167)
84
60,167
60,167
2,017
(56,293)
(138)
(150)
5,603
Impairment tests for goodwill
(i)
Goodwill and intangible assets with an indefinite useful life are not subject to amortisation and are tested annually for
impairment or more frequently if events or changes in circumstances indicate that they might be impaired.
Other intangible assets are reviewed 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 carrying amount
exceeds its recoverable amount.
Intangibles have been allocated to three Cash Generating Units (CGUs) for impairment testing as follows:
• Israel Business Unit
• Italy Business Unit
• All other Business Units that include the Group's operations mostly in Argentina, USA and UAE
The Directors have conducted an overall review of their Value in Use model at 30 June 2018 and have determined
the Goodwill to be fully impaired for all three Cash Generating Units (CGU's) the Goodwill was attributed to. An
impairment of $56,293,000 has been recognised in the Financial Statements for the year ended 31 December 2018.
Movement in Goodwill by CGU for the twelve months ended 31 December 2018:
CGU
Balance of goodwill
Israel Business Unit
Italy Business Unit
Other Business Units
Total
31 December 2017
$'000
30,898
6,103
19,292
56,293
Goodwill impairment
For the 12 months ended
31 December 2018
$'000
Balance of goodwill
31 December 2018
$'000
(30,898)
(6,103)
(19,292)
(56,293)
-
-
-
-
Fluence Corporation Limited
89
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
14 Intangible assets (continued)
(ii) Capitalised concession asset
Please refer to the Note 1 'Summary of significant accounting policies', (aa) 'Investments and other financial assets'.
15 Trade and other payables and other liabilities
Current
Trade payables
Accrued payroll liabilities
Accrued project expenses
Payable to non-controlling interests (i)
Government grants (ii)
Lease liability (iii)
Other accruals
Other financial liabilities
Acquisition milestone 2 payable (iv)
Non-current
Government grants (ii)
Lease liability (iii)
Other liabilities
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
10,558
2,919
29,040
300
1,852
1,319
2,857
48,845
-
-
2,982
6,026
293
9,301
16,580
1,216
4,186
4,318
-
-
1,511
27,811
1,000
1,000
2,402
-
193
2,595
(i) Payable to non-controlling interests
In May 2017, the agreement was reached between RWL Water LLC Group (RWL) and the non-controlling interests
owners of its subsidiary in Argentina that RWL would buy out the remaining 30% ownership share and become the
sole owner of its subsidiary in Argentina. The deal was contingent upon the Emefcy Group acquisition of RWL, which
took place on 14 July 2017. The consideration paid to non-controlling interests was determined as $4,618,000 and
included three components: $300,000 payable in cash; $4,018,000 payable when the shares issued by Fluence
corporation in relation to this transaction are sold; and $300,000 as contingent consideration, payable when the
certain performance conditions are met. The cash portion of the consideration was paid in July 2017, leaving
$4,318,000 unpaid as of 31 December 2017. The shares issued by Fluence corporation in relation to this transaction
were sold in January 2018 and $4,018,000 was paid to non-controlling interests as per agreement. The balance of
$300,000 remained unpaid as of 31 December 2018.
Fluence Corporation Limited
90
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
15 Trade and other payables and other liabilities (continued)
(ii) Government Grant Liability
The Group participates in programs sponsored by the Office of the Chief Scientist (“OCS”) of Israel, for the support of
research and development projects. In exchange for the Chief Scientist's participation in the programs, the Group is
required to pay royalties to the Chief Scientist at a rate between 3% and 4.5% of sales to end customers of products
developed with funds provided by the Chief Scientist, if and when such sales are recognised. As of December 31,
2018 and 2017, the Group recognised a liability to the OCS in the amount of $4,628,000 and $2,305,000 respectively
for the obligation for future royalty payments. The recognition of a liability for the Group to repay the grants from
future royalty payments is based on its estimation at the end of each year. The discounted rate used by the Group for
the liability is 13.9%. As of 31 December 2018, royalties of $38,000 have been paid.
The Group has also participated in programs sponsored by the Ministry of National Infrastructures (“MNI”) of Israel,
for the support of research and development projects. In exchange for the MNI's participation in the programs, the
Group is required to pay royalties to the MNI at a rate of 5% of the sales to end customers of products developed with
funds provided by the MNI, if and when such sales are recognised. As of 31 December 2018 and 2017, the Group
recognised a liability to the MNI in the amount of $206,000 and $97,000 respectively. The exceptions of the Group to
pay the grants are based on its estimation at the end of each year. The discounted rate used by the Group for the
liability is 13.9%. As of 31 December 2018, royalties of $99,000 have been paid.
(iii) AASB 16 lease liability
In 2018, the Group implemented AASB 16. The liability of $7,345,000 arising from the implementation of this new
standard represents the Group obligation to make lease payments.
(iv) Acquisition milestone 2 payable
As a part of the transaction between Emefcy Group Limited and Emefcy Limited (Israel) in December 2015, a
maximum liability of $2million is payable to a shareholder of Emefcy Limited (Israel) on completion of the acquisition
in lieu of receiving shares in Emefcy Group Limited subsequent to the satisfaction of the two commercial milestones.
The First Milestone was achieved and paid in 2016. The Second Milestone was achieved at the end of the year 2017
and in 2018.
16 Provisions
Current
Employee benefits
Provision - onerous contracts (i)
Warranty provision
Other provisions
Non-current
Employee benefits
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
1,469
-
1,299
1,324
4,092
838
838
2,362
23,656
300
1,393
27,711
878
878
Fluence Corporation Limited
91
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
16 Provisions (continued)
Consolidated entity
Current
At 1 January 2018
Additions
Reversal
Utilised
Currency translation differences
Total
Non-current
At 1 January 2018
Additions
Reversal
Utilized
Currency translation differences
Employee
benefits
$'000
Warranty
$'000
Onerous
contracts
$'000
Other
$'000
Total
$'000
2,362
-
-
(690)
(203)
1,469
878
58
-
(29)
(69)
838
300
1,008
-
-
(9)
1,299
23,656
-
(11,126)
(221)
(12,309)
-
-
-
-
-
-
-
-
-
-
-
-
-
1,393
345
-
(428)
14
1,324
-
-
-
-
-
-
27,711
1,353
(11,126)
(1,339)
(12,507)
4,092
878
58
-
(29)
(69)
838
(i) Onerous contract
In 2016, prior to the acquisition of RWL Water by Fluence (previously Emefcy) on 14 July 2017, RWL Water
recognised a provision for onerous contract from a specific project they entered into in 2015. At 31 December 2018,
and upon this project being close to completion, the Group reviewed the amount of the provision. Based on the
progress of this project it was assessed that it is no longer probable that an outflow of resources will be required post
31 December 2018, and that the provision should be reversed.
Onerous contract provision -
Onerous contract provision
31 December 2018 31 December 2017
$'000
$'000
a
-
23,656
The onerous provision in the amount of $11,347,000 was released to cost of sales in the Consolidated Statement of
Profit or Loss and Other Comprehensive Income in the 31 December 2018 financial year.
17 Deferred revenue
Deferred revenue
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
25,898
38,173
Deferred revenue represents remaining pre-payments made primarily by one large customer upon entering into a
multi-year contract with the Group in 2015. The balance decreased as the work was largely completed in FY2018,
with some residual work to be completed in 2019 (refer to note (ab)(vii) for more information).
Fluence Corporation Limited
92
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
18 Contributed equity
Ordinary shares
Options
Share capital
31 December
2018
No.
31 December
2017
No.
31 December
2018
$'000
31 December
2017
$'000
537,375,296
46,436,671
583,811,967
435,368,167
52,778,282
488,146,449
179,047
6,079
185,126
152,810
4,088
156,898
(a) Ordinary Shares - Fully Paid
Number of shares
$'000
Opening balance 1 January 2017
Shares issued to acquire RWL Water LLC group
Private placement at AU$0.84 per share
Private placement at AU$0.84 per share
Shares issued for non-controlling interests buyout
Exercise of options
Issue of deferred consideration shares
Transaction costs arising on share issue
Deferred consideration shares to be issued - Milestone 2
Shares to be issued - RWL Water LLC group acquisition (subject
to holdback)
Balance 31 December 2017
Opening balance 1 January 2018
Shares issued for Milestone 2
Shares issued for RWL Water LLC group acquisition, previously
subject to holdback
Private placement at AU$0.37 per share
Shares issued pursuant to a Share Purchase plan announced on
26 October 2018 at AU$0.37 per share
Exercise of options
Transaction costs arising on share issue
Balance 31 December 2018
Notes
(i)
(i)
257,051,054
80,400,000
30,537,848
16,309,001
6,245,264
2,225,000
18,511,027
411,279,194
-
3,988,973
20,100,000
435,368,167
Number of shares
411,279,194
3,988,973
20,100,000
89,455,295
9,051,835
3,499,999
537,375,296
-
537,375,296
51,271
65,828
20,000
10,900
4,018
802
-
152,819
(9)
-
-
152,810
$'000
152,810
-
-
23,987
2,428
799
180,024
(977)
179,047
(i) Transaction costs relating to share issues
Under AASB 132, incremental costs that are directly attributable to issuing new shares should be deducted from
equity. The share issue expense relates to costs directly attributable to the issuing of new shares, costs associated
with the listing have been deducted from equity.
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in
proportion to the number of shares held. At shareholder meetings, each ordinary share is entitled to one vote when a
poll is called; otherwise each shareholder has one vote on a show of hands.
Fluence Corporation Limited
93
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
18 Contributed equity (continued)
(b) Options
2017
w
Opening balance
Unlisted options issued to employees
Unlisted options issued to consultants
Unlisted options issued to directors
Exercised options
Cancelled options
Balance at 31 December 2017
2018
w
Opening balance
Unlisted options issued to employees
Unlisted options issued to consultants
Unlisted options issued to directors
Reversal of unlisted options issued to employees
Reversal of unlisted options issued to consultants
Exercised options
Cancelled options
Balance at 31 December 2018
Number of options
18,742,946
19,978,336
10,250,000
6,032,000
(2,225,000)
-
52,778,282
Number of options
52,778,282
2,243,000
100,000
1,500,000
(992,000)
(2,040,001)
(3,499,999)
(3,652,611)
46,436,671
(c) Summary of all unlisted options in existence
The general terms and conditions of the options are detailed in the Directors' Report.
Date options granted
Expiry date
Issue price of shares
Number under option
18 December 2015
28 January 2016
11 April 2016
29 February 2016
29 February 2016
29 February 2016
29 February 2016
23 March 2016
23 March 2016
23 March 2016
23 March 2016
17 May 2016
17 May 2016
18 May 2016
18 May 2016
15 June 2016
25 July 2016
25 August 2016
23 September 2016
27 October 2016
1 November 2016
23 September 2016
18 December 2019
31 January 2019
13 April 2020
23 December 2019
23 December 2019
28 February 2020
28 February 2020
23 March 2020
23 March 2020
12 April 2020
12 April 2020
16 May 2020
28 May 2020
18 May 2020
18 May 2021
31 May 2020
25 July 2020
25 August 2020
25 September 2020
26 October 2020
31 October 2020
9 November 2020
AU 40 cents
AU 40 cents
AU 35 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 30 cents
AU 40 cents
AU 59 cents
AU 59 cents
AU 40 cents
AU 40 cents
AU 93 cents
AU 79 cents
AU 87 cents
AU 1.00 dollar
AU 1.07 dollars
AU 74 cents
AU 1.00 dollar
2,000,000
1,940,000
500,000
431,473
431,473
100,000
100,000
75,000
75,000
50,000
50,000
400,000
100,000
1,000,000
1,000,000
1,000,000
250,000
325,000
200,000
350,000
500,000
200,000
Fluence Corporation Limited
94
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
18 Contributed equity (continued)
(iii) Summary of all unlisted options in existence (continued)
Date options granted
Expiry date
Issue price of shares
9 February 2017
20 December 2016
9 February 2017
28 March 2017
8 March 2017
8 March 2017
5 May 2017
31 May 2017
31 May 2017
14 July 2017
14 July 2017
14 July 2017
14 July 2017
19 July 2017
1 July 2017
7 September 2017
14 September 2017
14 July 2017
10 January 2018
26 March 2018
28 June 2018
31 July 2018
31 July 2018
9 February 2021
20 December 2020
10 January 2021
4 March 2021
31 March 2019
31 March 2019
3 May 2021
25 May 2025
25 May 2025
13 July 2021
13 July 2021
13 July 2021
25 May 2025
14 July 2019
6 July 2021
30 September 2019
13 November 2021
10 September 2021
11 March 2022
25 May 2022
27 August 2022
31 July 2022
31 July 2022
AU 1.00 dollar
AU 87 cents
AU 84 cents
AU 82 cents
AU 72 cents
AU 72 cents
AU 86 cents
AU 93 cents
AU 85 cents
AU 1.20 dollars
AU 1.50 dollars
AU 84 cents
AU 84 cents
AU 72 cents
AU 97 cents
AU 75 cents
AU 86 cents
AU 81 cents
AU 58 cents
AU 48 cents
AU 46 cents
AU 1.20 dollars
AU 1.50 dollars
Number under option
350,000
75,000
25,000
1,000,000
2,000,000
1,000,000
175,000
11,191,336
347,389
3,850,000
3,850,000
1,500,000
350,000
300,000
100,000
750,000
1,140,000
3,800,000
180,000
1,375,000
500,000
750,000
750,000
46,436,671
19 Non-controlling interests
a
Opening Balance at 1 January 2017
Contributed equity
Profit for the year attributable to non-controlling interests
Closing Balance at 31 December 2017
a
Opening Balance at 1 January 2018
Contributed equity
Profit for the year attributable to non-controlling interests
Closing Balance at 31 December 2018
Consolidated entity
31 December
2017
$'000
-
58
96
154
Consolidated entity
31 December
2018
$'000
154
105
955
1,214
The group has four subsidiaries with non-controlling interests, none of which are material to the group.
Fluence Corporation Limited
95
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
19 Non-controlling interests (continued)
(i) Desaladora Kenton SA de CV, Mexico was founded in December 2015 by RWL Water LLC group ('RWL') and
Mexican partners in order to invest in the project to build, finance, operate and transfer (BOT) a seawater desalination
plant in San Quintin, Baja California, Mexico. RWL holds the 51% ownership share in Desaladora Kenton SA de CV.
(ii) Constructora Kenton SA de CV, Mexico was founded in May 2016 by RWL and Mexican partners in order to act
as the EPC contractor for the project to build, finance, operate and transfer (BOT) a seawater desalination plant in
San Quintin, Baja California, Mexico. RWL holds the 51% ownership share in Constructora Kenton SA de CV.
(iii) RWL acquired the 70% share in Acquavit Ltda., Brazil in March 2017. Acquavit Ltda. delivers water and
wastewater treatment projects to industrial and municipal clients. The company has expertise in advanced oxidation,
disinfection processes, membrane systems, ion exchange systems, water and wastewater treatment units, and water
reuse systems.
(iv) In October 2018 the Group formed a new entity The International Company for Water Services and Infrastructure
S.A.E. in Egypt to supply the desalination plants to projects owned by the Egyptian Ministry of Housing. The Group
holds 75% share in this entity.
20 Other reserves
Foreign currency translation reserve
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
(15,752)
(1,376)
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences on translation of foreign controlled
subsidiaries. Amounts are reclassified to profit or loss when the investment is disposed of.
21 Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk
and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of
the Group. The Group uses different methods to measure different types of risk to which it is exposed.
The Board provides principles for overall risk management, as well as policies covering specific areas, such as
foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.
(a) Market risk
(i) Foreign exchange risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk
through foreign exchange rate fluctuations.
Foreign exchange rate risk arises from future commercial transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the Group’s functional currency.
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the reporting
date are as follows:
Fluence Corporation Limited
96
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
21 Financial risk management (continued)
(a) Market risk (continued)
(i) Foreign exchange risk (continued)
Consolidated entity
ILS
$'000
EUR
$'000
31 December 2018
ARS
AUD
$'000
$'000
RMB
$'000
BRL
$'000
Assets
Liabilities
1,759
(3,846)
(2,087)
5,700
(6,085)
(385)
10,894
(400)
10,494
4,809
(309)
4,500
3,410
(1,919)
1,491
2,342
(536)
1,806
A strengthening or weakening of 10% of the United States Dollar against the following currencies would have an
equal and opposite effect on loss after tax and equity as outlined below. The analysis assumes that all other
variables, in particular interest rates, remain constant.
The use of 10% was determined based on the analysis of ILS, EUR, AUD, ARS, BRL and RMB change, on an
absolute value basis, between 31 December 2018 and 31 December 2017. The average change of these currencies
within this period was approximately 10%.
w
Australian Dollar (AUD)
Argentina Peso (ARS)
Israeli New Shekel (ISL)
Euro (EUR)
Brazilian Real (BRL)
Renminbi (RMB)
2018
+10%/-10%
$'000
1,049/(1,049)
450/(450)
(209)/209
(38)/38
181/(181)
149/(149)
2017
+10%/-10%
$'000
24/(24)
417/(417)
(527)/527
(574)/574
-
3/(3)
Interest rate risk
(ii)
The Group is exposed to interest rate risks via the cash and cash equivalents that it holds. Interest rate risk is the risk
that a financial
instruments value will fluctuate as a result of changes in market interest rates and the effective
weighted average interest rates on classes of financial assets and financial liabilities.
Instruments with cash flow risk
Cash and cash equivalents
Consolidated entity
31 December
2018
$'000
31 December
2017
$'000
38,741
75,153
An increase or decrease of 1% in interest rates at the reporting date would have the following increase/ (decrease)
effect on after tax loss and equity. The analysis assumes that all other variables remain constant.
The use of 1% was determine based on analysis of the US Federal Funds rates change, on an absolute value basis,
between December 2016, December 2017 and December 2018. The average change of rate was 0.7%.
Fluence Corporation Limited
97
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
21 Financial risk management (continued)
(a) Market risk (continued)
(ii)
Interest rate risk (continued)
w
Cash and cash equivalents
(b) Credit risk
2018
+1%/-1%
$'000
396/(396)
2017
+1%/-1%
$'000
799/(799)
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group. The Group closely monitors the activities of its counterparties and controls the access to its intellectual
property which enables it to ensure the prompt collection of customers’ balances. The Group’s main financial assets
are cash and cash equivalents as well as trade and other receivables and represent the Group’s maximum exposure
to credit risk in connection with its financial assets. Trade and other receivables are carried on the balance sheet net
of bad and doubtful debt provisions estimated by management based on prior year experience and an evaluation of
prevailing economic circumstances. Wherever possible and commercially practical the Group holds cash with major
financial institutions in various regions.
Maturity profile
The table below analyses the consolidated entity’s financial assets into relevant maturity groupings based on the
aging profile at the reporting date. The amounts disclosed in the table are the aging profiles of trade and other
receivables for the Group.
Contractual maturities of financial assets
At 31 December 2018
Trade receivables
Other receivables
Contractual maturities of financial assets
At 31 December 2017
Trade receivables
Other receivables
Less than
6 months
$'000
Greater
than 6
months
$'000
Total
contractual
cash flows
$'000
11,730
101
11,831
235
10
245
11,965
111
12,076
Less than
6 months
$'000
Greater
than 6
months
$'000
Total
contractual
cash flows
$'000
11,173
217
11,390
2,356
260
2,616
13,529
477
14,006
Impairment of financial assets
In relation to the impairment of financial assets, AASB 9 requires an expected credit loss model as opposed to an
incurred credit loss model under AASB 139. The expected credit loss model requires the Group to account for
expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial
assets. In other words, it is no longer necessary for a credit event to have occurred before credit losses are
recognised.
Fluence Corporation Limited
98
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
21 Financial risk management (continued)
(b) Credit risk (continued)
Impairment of financial assets (continued)
In particular, AASB 9 requires the Group to measure the loss allowance for a financial instrument at an amount equal
to the lifetime expected credit losses (ECL) if the credit risk of that financial instrument has increased significantly
since initial recognition, or if the financial
instrument is a purchased or originated credit-impaired financial asset.
However, if the credit risk on a financial instrument has not increased significantly since initial recognition (except for
a purchased or originated credit-impaired financial asset), the Group is required to measure the loss allowance for
that financial
instrument at an amount equal to 12-months ECL. AASB 9 also requires a simplified approach for
measuring the loss allowance at an amount equal to lifetime ECL for trade receivables, contract assets and lease
receivables in certain circumstances.
The Group recognises a loss allowance for expected credit losses on investments in debt instruments that are
measured at amortised cost, amounts due from customers, as well as on loan commitments and financial guarantee
contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk
since initial recognition of the respective financial instrument.
Low credit risk financial instruments
Some financial instruments are considered low credit risk due to contracts held with certain counterparties, including
government organisations with strong capacity to meet contractual cash flow obligations in the near term and not
expected to be affected by changes in economic and business conditions.
Measuring movements in credit risk
The Group have developed a sophisticated approach to periodically reviewing each contract. The Group measures its
credit risk through credit assessment criteria and use risk mitigation actions to manage credit risk.
The Group uses the following credit assessment criteria:
•
•
Exposure - The magnitude of credit exposure indicates the extent to which the Group is exposed to the risk of
loss in the event of the counterparty default. Credit exposure can be minimized through avoiding engagement
with only several counterparties in the same geographical area, background checks on new customers, establish
credit limits, use credit and political risk insurance, etc.
Probability of default (PD) - the likelihood of a default over a particular time horizon. It provides an estimate of the
likelihood that a counterparty will be unable to meet its contractual obligations. PD can be minimized by
developing a credit score for each counterparty by using historical information such as financial statements or use
external rating agencies and developing a standard process to handling overdue accounts.
The Company considers the probability of default upon initial recognition of the asset and whether there has been a
significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a
significant increase in credit risk the Company compares the risk of a default occurring on the asset as at the
reporting date with the risk of default as at the date of initial recognition. In making this assessment, the Group
considers both quantitative and qualitative information that
including historical
experience and forward-looking information that is available without undue cost or effort. Forward-looking information
considered includes the future prospects of the industries in which the Group’s debtors operate, obtained from
economic expert
think-tanks and other similar
organisations, as well as consideration of various external sources of actual and forecast economic information that
relate to the Group’s core operations. In particular, the following information is taken into account when assessing
significant movements in credit risk:
financial analysts, governmental bodies,
is reasonable and supportable,
relevant
reports,
•
•
•
internal credit rating;
external credit rating (as far as available);
actual or expected significant adverse changes in business, financial or economic conditions that are expected to
cause a significant change to the counterparty’s ability to meet its obligations;
Fluence Corporation Limited
99
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
21 Financial risk management (continued)
(b) Credit risk (continued)
Impairment of financial assets (continued)
•
•
•
actual or expected significant changes in the operating results of the counterparty;
significant increases in credit risk on other financial instruments of the same counterparty;
significant changes in the value of the collateral supporting the obligation or in the quality of third-party
guarantees or credit enhancements;
significant changes in the expected performance and behaviour of the counterparty, including changes in the
payment status of counterparties in the Group and changes in the operating results of the counterparty;
•
• macroeconomic information such as market interest rates and growth rates; and,
•
political condition of the region where the counterparty is located.
Definition of default
The Group considers the following as constituting an event of default for internal credit risk management purposes as
historical experience indicates that receivables that meet either of the following criteria are generally not recoverable.
•
•
if there is a material breach of financial covenants by the counterparty and this is not expected to be remedied in
the foreseeable future; or
information developed internally or obtained from external sources indicates that the counterparty is unlikely to
pay its creditors, including the Group, in full (without taking into account any collaterals held by the Group).
Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is
significantly past due unless the Group has reasonable and supportable information to demonstrate that a more
lagging default criterion is more appropriate.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future
cash flows of
is credit-impaired includes
observable data about the following events:
financial asset have occurred. Evidence that a financial asset
that
•
•
•
a breach of contract, such as a default or past due event;
it is becoming probable that the borrower will enter bankruptcy or other financial reorganization; or
the disappearance of an active market for that financial asset because of financial difficulties.
Write-off policy
The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial
difficulty and there is no realistic prospect of recovery, e.g. when the counterparty has been placed under liquidation
or entered into bankruptcy proceedings. Financial assets written off may still be subject to enforcement activities
under the Group’s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are
recognised in profit or loss.
(c) Liquidity risk
Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due.
Prudent liquidity risk management implies maintaining sufficient cash balances and access to equity funding when
needed.
Maturity profile
The table below analyses the consolidated entity’s financial liabilities into relevant maturity groupings based on the
remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the
contracted undisclosed cash flows.
Fluence Corporation Limited
100
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
21 Financial risk management (continued)
(c) Liquidity risk (continued)
Maturity profile (continued)
Contractual maturities of financial liabilities
At 31 December 2018
Trade and other payables and other liabilities
Borrowings
At 31 December 2017
Trade and other payables and other liabilities
Borrowings
Other financial liabilities
Greater
than 6
months
$'000
Total
contractual
cash
flows
$'000
Less than
6 months
$'000
40,896
108
41,004
17,250
260
17,510
58,146
368
58,514
27,499
1,043
1,000
29,542
2,907
102
-
3,009
30,406
1,145
1,000
32,551
Non-recourse debt facility
Fluence holds a US$50 million non-recourse stand-by debt facility for project financing of Build, Own, Operate and
Transfer ("BOOT") projects, enhancing the Company’s ability to grow the recurring revenues based on its Smart
Products Solutions. The facility is provided by Generate Capital, a leading US-based infrastructure investment firm.
Fluence is expected to have access to this facility on a project-by-project basis for 3 years without any geographical
limitation.
(d) Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern
and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an
optimal capital structure, the Group may issue new shares or reduce its capital, subject to the provisions of the
Group's constitution. The capital structure of the Group consists of equity attributed to equity holders of the Group,
comprising contributed equity, reserves and accumulated losses. By monitoring undiscounted cash flow forecasts
and actual cash flows provided to the Board by the Group's Management the Board monitors the need to raise
additional equity from the equity markets.
(i) Loan covenants
The Group doesn't have any loan facilities as of 31 December 2018 that require to comply with the covenants.
22 Recognised fair value measurements
Fair value hierarchy
All assets and liabilities for which fair value is measured or disclosed are categorised according to the fair value
hierarchy as follows:
•
•
•
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly or indirectly; and
Level 3 - Inputs for the assets or liability that are not based on observable market data (unobservable inputs).
Fluence Corporation Limited
101
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
22 Recognised fair value measurements (continued)
Fair value hierarchy (continued)
2018
a
Recurring fair value measurements
Financial liabilities
Government grant liability
2017
a
Recurring fair value measurements
Financial liabilities
Acquisition milestone 2 payable
Government grant liability
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
Level 1
$'000
Level 2
$'000
-
-
-
-
-
-
4,834
4,834
Level 3
$'000
1,000
2,402
3,402
4,834
4,834
Total
$'000
1,000
2,402
3,402
Disclosed fair values
The group also has assets and liabilities which are not measured at fair value, but for which fair values are disclosed
in the notes to the financial statements.
Due to their short-term nature, the carrying amount of trade and other receivables, trade and other payables and
provisions are assumed to approximate their fair values because the impact of discounting is not significant.
Valuation techniques and assumptions used to derive Level 3 fair values recognised in the financial
statements
The fair value of the government grant liability is determined by the expected time period that the grant liability is to
be repaid from the royalty stream from future revenue discounted over time at a rate of 13.9% (2017: 13.9%)
Reconciliation of Level 3 fair value movements
The following table sets out the movements in Level 3 fair values for recurring measurements.
Opening Balance at 1 January 2017
Payment
Adjustment to fair value of liability
Closing Balance at 31 December 2017
Payment
Adjustment to fair value of liability
Currency translation differences
Closing Balance at 31 December 2018
Government grant
$'000
111
1,224
67
1,111
2,402
23
2,448
(39)
4,834
Fluence Corporation Limited
102
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
23 Remuneration of auditors
Audit and other assurance services
Audit and review of financial statements - BDO East Coast Partnership
Audit and review of financial statements - BDO related practices
Overruns from prior years audits
Audit and review of financial statements - Mazars
a
Other services
BDO - Non-assurance services (i)
Mazars - Non-assurance services (ii)
Consolidated entity
2018
$
232,000
246,857
23,000
-
501,857
32,410
-
32,410
2017
$
159,092
159,800
-
302,118
621,010
159,571
40,689
200,260
(i) BDO non-assurance relate to the provision of services in connection with the acquisition and tax related services.
(ii) Mazars non-assurance services relate to the provision of tax related services.
24 Commitments and Contingent Liabilities
(a) Commitments
(i) As at 31 December 2018 the group provided bank guarantees for fulfilment of a lease commitment, for bid bonds
and for performance guarantees for its projects in the amount of $2,864 thousands (2017: $4,226 thousands).
(ii) The Group has a government grant liability of $4,834 thousands for more details refer to Note 15 - Trade and
other payables and other liabilities.
(b) Contingent liabilities
The Group was subject to a claim during the year. The Directors will vigorously defend this claim and are confident
that it will be successfully defended.
25 Related party transactions
Parent entity
Fluence Corporation Limited is the legal parent entity in the consolidated entity.
Subsidiaries
Interests in subsidiaries are set out in note 27.
Key management personnel
Disclosures relating to key management personnel are set out in note 4 and the remuneration report in the directors'
report.
Fluence Corporation Limited
103
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
25 Related party transactions (continued)
Loans to/from related parties
Fluence Israel Limited has a long-term receivable from its associate, ETGR Water Infrastructure Management in the
amount of $65,000, on which the interest receivable is accrued at $5,000. Fluence Israel Limited also has a balance
payable to its non-controlling interests, Libra Ingenieros Civiles SA de CV and RJ Ingenieria of $64,000 and
$154,000, on which the interest payable was accrued at $10,000 and $31,000 for the year 2018.
Other than the issue of shares and options, no other related party transactions have been entered into between key
management personnel and the Group during the financial year 2018 and 2017.
Other transactions with related parties
Fluence Corporation LLC engaged the former sole member's management company, RSL Management, to process
the payroll for a number of Fluence Corporation LLC employees during the transition period, which ended in
December 2017. There is no remaining liability in 2018. Fluence Corporation LLC also paid approximately $223,000
for consulting services provided by the former CFO for the year 2018, of which approximately $37,000 was accrued
as of 31 December 2018.
Fluence Corporation LLC had the liability to pay to the non-controlling interest parties for the buyout of their
ownership share in Fluence Argentina. The liability of $4,018,000 was paid in January 2018. The remailing liability of
$300,000 accrued as of 31 December 2018 was paid in January 2019.
Fluence Italy S.R.L leases its operating facilities from TMR Immobiliare S.r.l. (TMR), which is an Italian private limited
liability company in which two employees (former minority shareholders of the company) are members. The lease
requires Fluence Italy to pay an annual rent in twelve monthly instalments plus all management expenses of the
property and the cost of utilities. Rent paid on this lease was approximately $122,000 for the year 2018. The balance
future commitment is approximately $58,000 for the year 2019.
Fluence USA Inc. leases its Ohio sales office from Bear Cabin 14 LLC, (“Bear Cabin”), a limited liability company in
which the majority stockholder is an RWL Water USA employee. The lease, renewed in September 2012 for 12
months, requires Fluence USA to pay a monthly base rent. Rent paid on this lease was approximately $24,000 for the
year 2018. The balance future commitment is $16,000 for the year 2019.
Fluence USA Inc. purchases goods from Waste Water Depot, LLC, a limited liability company in which an employee
of Fluence USA is the member. Goods and services purchased were approximately $92,000 for the year 2018. The
balance payable is $41,000 as of 31 December 2018.
Fluence Corporation Limited
104
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
26 Parent entity financial information
Summary financial information
The functional currency of the parent entity is Australian Dollars. The individual Financial Statements for the parent
entity show the following aggregate amounts:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Reserves
Accumulated losses
Total Equity
Loss for the period
Total comprehensive loss
31 December
2018
$'000
AUD
31 December
2017
$'000
AUD
-
15,633
73,260
896
918
215,611
13,410
(156,679)
72,342
(104,926)
(104,926)
-
31,125
130,759
2,107
7,270
178,054
(2,812)
(51,753)
123,489
(41,197)
(41,197)
Fluence Corporation Limited
105
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
26 Parent entity financial information (continued)
Summary financial information (continued)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity has not entered into any guarantees in the current or prior financial year in relation to debts of its
subsidiaries.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group as disclosed in note 1.
Contractual commitments and Contingent Liabilities
At 31 December 2018 Fluence Corporation Limited had no contractual commitment and contingent liabilities.
27 Subsidiaries
Name
Parent Entity
Fluence Corporation Limited
Subsidiaries of Fluence Corporation Limited
Emefcy Limited (Israel)
Emefcy Hong Kong Limited
Subsidiaries of Emefcy Hong Kong Limited
Emefcy China Limited
Subsidiaries of Fluence Corporation Limited
Fluence Corporation LLC
Subsidiaries of Fluence Corporation LLC
Nirosoft Trading (1987) Limited
Fluence Investments Limited
Subsidiaries of Investments Limited
RWL Desal Holding
Desaladora Kenton
Fluence Israel Limited
Subsidiaries of Israel Limited
VIC Water Systems
Nirosoft Industries Limited
Nirosoft Australia Limited
Nirosoft Cyprus Limited
Nirosoft Industries Limited - Chile Branch
Nirosoft Industries Limited - Sucursal Colombia
Central America SA de CV
S.D.L Technologies Limited
Constructora Kenton SA de CV
ETGR Water Infrastructure Management
RWL Water Mexico
Fluence Argentina
Subsidiaries of Fluence Argentina
Acquavit Ltd
Fluence Middle East
Fluence Italy S.R.L
Subsidiaries of Fluence Italy S.R.L
RWL Water France
Place of
incorporation
Ownership
interest 2018
Ownership
interest 2017
Australia
Israel
Hong Kong
China
USA
Israel
United Kingdom
Mexico
Mexico
Israel
Australia
Cyprus
Australia
Cyprus
Chile
Colombia
Central America
Israel
Mexico
Israel
Mexico
South America
Brazil
UAE
Italy
France
N/A
100%
100%
100%
100%
100%
100%
100%
51%
100%
100%
N/A
N/A
100%
N/A
100%
100%
100%
51%
50%
49%
100%
70%
100%
100%
100%
N/A
100%
100%
100%
100%
100%
100%
100%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
50%
49%
100%
70%
100%
100%
100%
Fluence Corporation Limited
106
Fluence Corporation Limited
Notes to the Consolidated Financial Statements
31 December 2018
(continued)
27 Subsidiaries (continued)
Name
Fluence USA Inc.
Fluence Investments LLC
Subsidiaries of Fluence Investments LLC
International Company for Water Services and
Infrastructure S.A.E.
Fluence BOOT Finance LLC
Place of
incorporation
Ownership
interest 2018
Ownership
interest 2017
USA
USA
Egypt
USA
100%
100%
75%
100%
100%
N/A
N/A
N/A
28 Events occurring after the reporting period
On 27 February 2019 the Company signed a landmark €165 million commercial agreement with the Federal
Government of Ivory Coast for the turnkey supply of a 150,000 m3/day surface-water treatment plant (the “ IC Plant”).
The commercial agreement still needs to reach financial close, which is conditional upon a number of events
including the arrangement of export credit financing, which Fluence is in the process of finalising and procurement of
land for IC Plant. Fluence is in advanced discussions to arrange third party financing for the Government of Ivory
Coast via a loan from Israel Discount Bank. The project has the support of the state of Israel through its Export Credit
Agency (ASHRA). Following Financial Close, which is expected to occur during Q3 2019, construction of the IC Plant
will then commence, with completion occurring within 24 months thereafter.
Subject to Finance Close and Project Commencement, Fluence expects that this contract will contribute revenues of
up to US$20 million in 2019, US$80 million in 2020, with the balance of the contract value to be recognised in 2021.
This will significantly increase Fluence’s contracted backlog for each of these years. Progress payments are expected
to be made on a quarterly basis, and project financing will be further supported by a specific working capital facility.
Fluence Corporation Limited
107
Fluence Corporation Limited
Directors' Declaration
31 December 2018
In the Directors' opinion:
(a)
the Financial Statements and notes set out on pages 49 to 107 are in accordance with the Corporations Act
2001, including:
(i)
(ii)
complying with Australian Accounting Standards,
mandatory professional reporting requirements, and
the Corporations Regulations 2001 and other
giving a true and fair view of the consolidated entity's financial position as at 31 December 2018 and
of its performance for the year ended on that date, and
(b)
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become
due and payable.
Note 1(b) confirms that the Financial Statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
This declaration is made in accordance with a resolution of Directors.
Henry Charrabé
Managing Director and CEO
29 March 2019
New York
Fluence Corporation Limited
108
Tel: +61 3 9603 1700
Fax: +61 3 9602 3870
www.bdo.com.au
Collins Square, Tower Four
Level 18, 727 Collins Street
Melbourne VIC 3008
GPO Box 5099 Melbourne VIC 3001
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Fluence Corporation Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Fluence Corporation Limited (the Company) and its subsidiaries
(the Group), which comprises the consolidated statement of financial position as at 31 December 2018,
the consolidated statement of profit or loss and other comprehensive income, the consolidated
statement of changes in equity and the consolidated statement of cash flows for the year then ended,
and notes to the financial report, including a summary of significant accounting policies and the
directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 31 December 2018 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
BDO East Coast Partnership ABN 83 236 985 726 is a member of a national association of independent entities which are all members of BDO Australia Ltd
ABN 77 050 110 275, an Australian company limited by guarantee. BDO East Coast Partnership and BDO Australia Ltd are members of BDO International Ltd,
a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved
under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Argentinian economic environment and impact
of hyperinflation
How the matter was addressed in our audit
The Fluence Group operates a subsidiary in
Argentina, Fluence Argentina S.A. The functional
currency of Fluence Argentina is the Argentinian
Peso (ARS).
On 1 July 2018, Argentina was declared a
hyperinflationary economy by the International
Monetary Fund requiring the Company to
mandatorily adopt AASB 129 Financial Reporting
in Hyperinflationary Economies.
The Accounting Standard requires a restatement
approach whereby financial information within
the Argentinian subsidiary is adjusted by applying
a general price index to reflect a more
meaningful measure of value at year end.
This has been determined as a key audit matter
due to the complex calculations and disclosures
involved in the financial statements in
accordance with the requirements of AASB 129
Financial Reporting in Hyperinflationary
Economies.
Note 1(ac) to the financial statements contains
the accounting policy for hyperinflation and the
financial reporting impact of the restatement.
Our audit procedures included but were not
limited to:
Assessing Management’s determination of
the functional currency of Fluence Argentina
as the Peso (ARS) in accordance with AASB
121 The Effects of Changes in Foreign
Exchange Rates.
Evaluating the hyperinflation adjustment
calculations prepared by Management.
Reviewing the judgements and assumptions
made by Management during the application
of the requirements of AASB 129.
Engaging our component auditors in
Argentina to also audit Management’s
hyperinflation calculations.
Assessing the relevance and adequacy of
disclosures within the financial statements.
Carrying value of goodwill
How the matter was addressed in our audit
Australian Accounting Standards require an
annual assessment of impairment of goodwill.
Our audit procedures included but were not
limited to:
The Directors reassessed the carrying value of
goodwill at half year 30 June 2018 and made the
decision that the entire balance was impaired. An
impairment of $56.3m was recognised.
This is considered a key audit matter due to the
quantum of the impairment and the degree of
estimation and significant judgement involved.
Note 1(u) to the financial statements contains
the accounting policy for the intangible assets;
Note 1(ab) contains a summary of key accounting
estimates relating to goodwill; and Note 14
Intangible assets details the impairment of
goodwill.
Reviewing the methodology and assumptions
contained in management’s goodwill
impairment model.
Engaging our internal valuation experts to
assess whether Management’s impairment
model was appropriately determined.
Challenging key underlying assumptions,
including cash flow forecasts, forecast
growth rates, discount rate and terminal
value.
Reviewing the disclosures on the impairment
assessment in the financial report to ensure
compliance with AASB 136 Impairment of
Assets.
Audit strategy for overseas operations
How the matter was addressed in our audit
The Group’s structure comprises significant
overseas operations which necessitates the
requirement for engagement of component
auditors to mitigate the risk associated with
delivering an audit in a location and regulatory
environment other than Australia.
The accounting policy for consolidation as
described in Note 1(d), ‘Principles of
consolidation’, and details on the controlled
entities as disclosed in Note 27 of the
accompanying financial report are the basis of
this key audit matter.
Our audit procedures included but were not
limited to:
Gaining an understanding of the Group, its
components and the environment they
operate in, in order to identify the risks of
material misstatement to the Group
financial report.
Designing, implementing, monitoring and
executing a global audit strategy with
appropriate protocols and quality control
review mechanisms to ensure that it was
performed in accordance with the audit
plan.
Engaging component auditors from BDO-
member firms. As part of this we:
―
Evaluated their understanding of the
ethical requirements and ensured they
were competent and independent.
―
Issued audit instructions and
timetables to our component teams
and subsequently reviewed their
reporting deliverables.
― Undertook a quality control review of
component auditor’s working papers.
Discussing with the component auditors:
― The business and audit activities that
were significant to the group audit
through regular teleconferences
throughout the audit.
― The susceptibility of the component
auditor’s financial information to
material misstatement from fraud and
error.
Recognition of revenue – Adoption of AASB 15
Revenue from Contracts with Customers and
AASB 1059 Service Concession Arrangements
How the matter was addressed in our audit
Fluence has adopted AASB 15 Revenue from
Contracts with Customers at 1 January 2018.
Our audit strategy to address the risks included
but were not limited to:
AASB 1059 Service Concession Arrangements is
also applicable to Fluence’s B.O.T (‘Build,
Operate, Transfer’) contracts.
The adoption of AASB 15 includes a transitional
adjustment to opening retained earnings.
Revenue recognition was identified as a key audit
matter due to the significance of revenue to the
financial report and the degree of judgement and
estimation required by Management including the
identification of the discrete performance
obligations within each contract and the timing
and quantum of revenues to be recognised where
the project related performance obligation is
satisfied over time.
Revenue is also a default fraud risk in accordance
with Australia Auditing Standards.
Assessing the Group's accounting policy for
revenue to ensure it has been correctly
formulated in accordance with the
Australian Accounting Standards.
Obtained and tested a sample of contracts
across all material locations and evaluated
and verified the significant judgements and
estimates made by Management in applying
AASB 15 and AASB 1059 to specific
contracts and separable performance
obligations of contracts. Procedures
included reading relevant terms and
conditions, testing percentage of
completion calculations and inputs,
including actual costs incurred and forecast
costs to complete.
Performed revenue cut-off procedures and
analytical review of revenues.
The accounting policy for revenue recognition is
described in Note 1(f), ‘Revenue recognition’,
and details of revenue are disclosed in Note 3 of
the accompanying financial report are the basis
of this key audit matter.
Reviewing the disclosures regarding
revenue recognition to ensure compliance
with AASB 15 Revenue from Contracts with
Customers and AASB 1059 Service
Concession Arrangements.
PDVSA Contract Revenue and Costs
How the matter was addressed in our audit
In February 2015, RWL Water Argentina accepted
a series of purchase orders (P.O.s) from PDVSA
(the ‘PDVSA contract’), the agricultural arm of
Venezuela’s state-owned oil and natural gas
company, for detailed engineering and supply of
water and wastewater treatment systems and
composting systems for five ethanol production
plants in Venezuela. Although 4 of the 5 Purchase
Orders were subsequently rescinded in 2017, the
Portuguesa portion of the project was continued.
The status of the Portuguesa portion of the PDVSA
contract, being 95% complete as at 31 December
2018, has been a significant focus of the audit
and materially impacts:
Revenue and costs recognised during the year
relating to the Portuguesa portion of the
contract
The Company’s residual liability relating to
the unspent advanced payment from PDVSA
Release of an onerous contract provision
liability
Disclosure of the above items
A significant focus of our audit has also included
an assessment of the cancellation of certain P.O.s
within the PDVSA contract in prior years,
including ensuring that related project costs and
revenue had been correctly accounted for, and
recognition of revenue related to variable
consideration in relation to rescinded purchase
orders.
Overlaying the above is the impact of foreign
exchange, hyperinflation and Management’s
assessment of Fluence Argentina’s functional
currency as the Argentinian Peso (ARS).
The following procedures were performed with
the assistance of our BDO Argentina team:
Assessed the accuracy, classification and
disclosure of the residual liability for
unspent advanced funds for the PDVSA
contract.
Obtained and assessed an independent
engineering expert’s report in order to
validate the stage of completion of the
project as at 31 December 2018.
Engaged our IFRS technical team to assess
the financial reporting impact of the
previously cancelled Purchase Orders as a
contract modification. This in turn
impacted the foreign exchange rate and
hyperinflation coefficient applied to the
revenue recognised in FY18 in relation to
the PDVSA contract.
Reviewed independent legal advice (expert
in Venezuelan law) obtained by the
Company to validate the allocation of the
transaction price between various
performance objectives including variable
consideration.
Verified the release of the onerous
contract provision in FY18 including the
related disclosure.
Performed detailed testing of the foreign
exchange and hyperinflation determination
of the revenue recognition and
measurement of the residual liability
relating to the unspent advance payment
as at 31 December 2018 including an
assessment of the related disclosure.
Assessing the relevance and adequacy of
disclosures within the financial statements.
In light of the inherent uncertainty as to whether
future project work will be requested due to the
political situation in Venezuela this also
necessitates detailed consideration of the
accounting treatment of all the above items and
the appropriate disclosure.
The accounting policy for revenue recognition is
described in Note 1(f), ‘Revenue recognition’;
Note 1(ab) contains a summary of key accounting
estimates relating to PDVSA and details of
revenue are disclosed in Note 3 of the
accompanying financial report are the basis of
this key audit matter.
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 31 December 2018, but does not include
the financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 17 to 44 of the directors’ report for the
year ended 31 December 2018.
In our opinion, the Remuneration Report of Fluence Corporation Limited, for the year ended 31
December 2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO East Coast Partnership
David Garvey
Partner
Melbourne, 29 March 2019
Fluence Corporation Limited
Additional information for the 2018 Annual Report
The shareholder information set out below was applicable as at 3 April 2019.
A. Distribution of equity securities
Analysis of numbers of ordinary shareholders by size of holding:
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-99,999,999,999
Totals
Holders
553
1,096
651
1,421
297
4,018
Shares
152,332
3,064,460
5,221,594
49,422,330
479,514,580
537,375,296
Based on the Fluence closing share price on April 3, 2019 of A$0.515, there were 503 holders of less than a marketable
parcel of ordinary shares.
A total of 100,500,000 shares were held in escrow on April 3, 2019 and are due to be released from escrow on 14 July 2019.
All issued ordinary shares carry one vote per share.
B. Equity security holders
Twenty largest equity security holders
The names of the twenty largest registered holders of Ordinary Fully Paid Ordinary Shareholders are listed below:
Name
RSL INVESTMENTS CORPORATION
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
POND VENTURES NOMINEES 111 LIMITED
CITICORP NOMINEES PTY LIMITED
RSL CAPITAL LLC
EMPLOYEE EQUITY ADMINISTRATION PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
PLAN B VENTURES I LLC
ESOP MANAGEMENT & TRUST SERVICES LTD
JAGEN PTY LTD
MR HAO JING
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
PLAN B VENTURES II LLC
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
JOHN W KING NOMINEES PTY LTD
DR STUART LLOYD PHILLIPS & MRS FIONA JANE PHILLIPS
DR STUART LLOYD PHILLIPS & MRS FIONA JANE PHILLIPS
MS QUNYAN WU
PYXIS HOLDINGS PTY LTD
NATIONAL NOMINEES LIMITED
Total Securities of Top 20 Holdings
Total Securities of remaining shareholders
Total of Securities
Balance as at
03-04-2019
%
131,037,848
24.38%
52,888,133
36,264,579
26,494,373
22,864,865
14,166,593
12,346,150
12,104,532
11,739,928
11,644,393
9,100,000
8,174,639
7,902,619
7,709,889
5,563,909
9.84%
6.75%
4.93%
4.25%
2.64%
2.30%
2.25%
2.18%
2.17%
1.69%
1.52%
1.47%
1.43%
1.04%
4,677,500
0.87%
3,550,541
2,656,941
2,600,000
2,400,000
0.66%
0.49%
0.48%
0.45%
385,887,432
71.81%
151,487,864
28.19%
537,375,296
100.00%
116
B. Equity security holders
(continued)
Options (not listed)
Class of options
Total number
granted
Number of
holders
Lowest
exercise
price
Highest
exercise
price
Earliest expiry
date
Latest expiry date
Director Options
25,091,855
8
$0.35
$1.50
16 December 2019 25 May 2015
Issued under the
Company’s
ESOP
15,584,804
237
$0.30
$1.50
23 December 2019 25 May 2025
Unlisted Options 1,050,000
2
$0.72
$0.75
14 July 2019
30 September 2019
Total
41,726,659
247
Share options do not carry the right to vote.
C. Substantial holders
Substantial holders in the company, based on the latest notices received from them, are set out below:
RSL INVESTMENTS CORPORATION and RSL
CAPITAL LLC
WATERMARK SERVICES, LLC as the investment
manager of each of 2020 FOUNDATION, INC and
SPARK INVESTMENTS, LLC
POND VENTURES NOMINEES 111 LIMITED and
RICHARD IRVING
Total Number of Shares Held by Substantial
Shareholders
Number held
Percentage
157,226,714
29.38%
47,832,656
37,264,579
8.90%
7.08%
242,323,949
45.10%
117
Shareholder enquiries
Shareholders with enquiries about their shareholdings should contact the share registry:
Boardroom Pty Ltd
Level 12, 225 George Street, Sydney, NSW, 2000, Australia
Telephone: 1300 737 760 (local), +61 2 9290 9600 (international)
Email: enquiries@boardroomlimited.com.au
Change of address, change of name, consolidation of shareholdings
Shareholders should contact the Share Registry to obtain details of the procedure required for any of these
changes.
Annual report
Shareholders do not automatically receive a hard copy of the Company's Annual Report unless they notify the
Share Registry in writing. An electronic copy of the Annual Report can be viewed on the company's website:
www.fluencecorp.com
Tax file numbers
It is important that Australian resident Shareholders, including children, have their tax file number or exemption
details noted by the Share Registry.
CHESS (Clearing House Electronic Subregister System)
Shareholders wishing to move to uncertified holdings under the Australian Securities Exchange CHESS system
should contact their stockbroker.
Uncertified share register
Shareholding statements are issued at the end of each month that there is a transaction that alters the balance
of an individual/company's holding.
Company Secretary
The name of the Company Secretary is Mr Ross Kennedy.
Registered office
The address of the registered office is Level 3, 62 Lygon Street, Carlton Victoria 3053, Australia.
Phone: + 61 3 9824 5254
Stock exchange listing
Quotation has been granted for all the ordinary shares of the Group on all member exchanges of the Australia
Securities Exchange Limited.
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