IN FRASTRATA plc
Annual Report & Financial Statements
2014
TABLE OF CONTENTS
• CHAIRMAN’S STATEMENT
• STRATEGIC REPORT
STRATEGY & BUSINESS MODEL
KEY PERFORMANCE INDICATORS
OPERATIONAL REVIEW – OIL & GAS EXPLORATION
OPERATIONAL REVIEW – GAS STORAGE DEVELOPMENT
OPERATIONAL REVIEW – FUNDING
PRINCIPAL RISKS & UNCERTAINTIES
• OPERATIONS OVERVIEW
• DIRECTORS, SECRETARY, ADVISORS
& SHAREHOLDER INFORMATION
• REPORT OF THE DIRECTORS
DIRECTORS OF THE COMPANY
CORPORATE GOVERNANCE
DIRECTORS’ RESPONSIBILITIES
• INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INFRASTRATA PLC
• FINANCIAL STATEMENTS
• NOTES TO THE FINANCIAL STATEMENTS
• LETTER FROM CHAIRMAN WITH NOTICE OF AGM
• NOTICE OF AGM
• PROXY FORM WITH NOTES
INFRASTRATA plc
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4-13
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5-9
9-11
11-12
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14-15
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18-19
20-21
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25-30
31-56
57-60
61-64
65-66
CHAIRMAN’S STATEMENT
I am pleased to report on a year that has seen material developments in each of our three key projects as we approach a position
where our exploration prospects move towards drilling on a fully-funded basis and our gas storage project can be de-risked and made
ready for the final investment decision. As the end of 2014 approaches we are well positioned to realise value in our projects through
an active drilling programme in the following twelve months.
During the course of the year there has been meaningful progress in each of our projects as we work towards the milestones capable
of yielding value to shareholders. Sustained difficulties in the capital markets and a lack of sentiment towards oil & gas exploration
generally have not made life particularly easy in the past twelve months but our dedicated executive team of Andrew Hindle and
Stewart McGarrity have worked tirelessly to ensure that significant progress has been made on each limb of our portfolio. Latterly,
I am extremely pleased to say, their efforts have been augmented by the appointment of Anita Gardiner who has joined us from BP
Gas Marketing and has made a significant early contribution to the executive effort.
With reference to our exploration activities, our strategy has been to farmout to partners such that we retain a material exploration
interest but only a minimal financial exposure. This strategy has been successfully deployed during the past and we now approach the
phase where we hope to deliver value to shareholders through the drilling of fully funded exploration wells in the next twelve months.
On PL1/10 in County Antrim we have introduced new partners Larne Oil and Gas Limited and, despite recent uncertainties over
the extent of their financial commitment, the Board anticipate that the Woodburn Forest well will be be fully funded. The well
is planned to commence in Q1 2015 subject to receiving approval from Northern Ireland Department of Enterprise, Trade and
Investment in response to our Application for Consent to Drill. This well will target a play estimated at 40 million barrels of oil
equivalent (“mmboe”) - net InfraStrata 11mmboe at 27.5% - and seek to de-risk over 450 mmboe of further potential upside.
In Dorset we have introduced new partners, Southwestern Resources Limited, who will carry the Company through a significant
seismic programme in early 2015 and then consider their option to assume a greater licence interest in exchange for the funding of
an exploration well later in the year. Prospective resources on the licence have been estimated at over 100 mmboe.
In addition to our principal exploration interests, the Group also has non-operated interests in exploration licences in Hampshire,
Dorset and the East Midlands through associated companies Corfe Energy Limited and Brigantes Energy Limited and has recently
been successful in the UK 28th Seaward Licensing Round where together with partners Carstone Exploration Limited we have been
offered block 3/11a in the East Shetland Basin.
In addition to our exploration activities the Company has also made significant progress in development of the Islandmagee Gas
Storage project in County Antrim, Northern Ireland. This project, held through our subsidiary Islandmagee Storage Limited, had
been identified by the European Commission as a Project of Common Interest and was then prequalified for UK Governmental debt
support. We have had to overcome the disappointment of BP Gas Marketing declining to take up an interest option in exchange for
funded drilling as they refocused their business strategy in early 2014. However, further to an application made in August, we have
been successful in securing European Commission grant funding, subject to conclusion of a formal grant agreement, for 50% of the
cost of a well to obtain a salt core sample and subsequent testing and engineering work. This is an enormous boost for the project
and our task is to ensure we deliver the other 50% (£2 million) of the funding through corporate funding, new financial partners or
a combination of both. Our intention is to realise value for shareholders from our interest in this project as soon as practicable. With
the well site already constructed our aim is to raise sufficient funds to drill this well using the same rig that will be booked for the
Woodburn Forest well.
Like many small exploration companies with no significant income streams, your Company is dependent upon not only direct
investment in our projects by joint venture partners but also additional funds from existing and new shareholders to meet working
capital requirements and provide flexibility for the future support of our projects. The Board continues to believe this to be an integral
part of long term delivery of shareholder value through success in our projects and we have prepared the accounts on the basis that
such support will continue for the foreseeable future.
Our progress in moving towards a position of delivering on each of our main projects, during a period of economic stringency and
increased regulation, is due to the skill and dedication of our small management team and I would like to take this opportunity to
thank them on the Board’s behalf for their continued effort and determination. To that I would like to add my appreciation of the
hard work and continued enthusiasm of all InfraStrata staff and thank our shareholders for their patience and support. I am sure
that all will share with me the disappointment of a depressed share price that I do not believe reflects the underlying value of the
Company.
In conclusion I confirm that although we continue to be reliant upon external factors, we remain confident in our stated strategy
and I trust that in twelve months’ time that I will be able to report further success in each of our projects and the monetising of our
interests at the appropriate time to the benefit of all shareholders.
Ken Ratcliff, Non-executive Chairman, 1 December 2014
INFRASTRATA plc
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STRATEGIC REPORT
STRATEGY AND BUSINESS MODEL
InfraStrata is focused on conventional oil and gas exploration in three operated licences within the United Kingdom, PL1/10
onshore and P2123 offshore County Antrim in Northern Ireland and P1918 offshore Dorset in Southern England. Our strategy is
to progress exploration activities under these existing licences up to and including the drilling of exploration wells and to pursue new
front-end capture opportunities in accordance with following principles:
•
Focus on the Company’s core expertise and experience in exploration of the UK Continental Shelf and as an operator which has
built very strong stakeholder relationships through the permitting process.
• Target high impact opportunities where successful drilling will make a very material impact upon the prospective returns to
•
shareholders within a relatively short period of time.
Fund exploration activities through farmout arrangements whereby material costs are borne by joint venture partners in return
for a working interest in the licence. In particular we seek to be fully funded by partners through drilling.
• Review strategy for each licence following successful drilling to determine the best way to secure value for shareholders –
including early monetisation.
• Build a portfolio of new exploration activities creating a future stream of opportunities to crystallise value for shareholders.
This strategy has been successfully deployed over the past four years as the Group has been awarded its operated licences in County
Antrim and Dorset and has successfully funded significant exploration costs such as seismic data acquisition and processing through
farmout agreements with joint venture partners whilst retaining a material working interest in each. The next step towards delivering
value for shareholders is the drilling of fully funded exploration wells in the next 12 months.
The Group also has non-operated interests in exploration licences in Hampshire, Dorset and East Midlands England through
associated companies Corfe Energy Limited (“Corfe”) and Brigantes Energy Limited (“Brigantes”) and has recently been successful
in the UK 28th Seaward Licensing Round where together with partners Carstone Exploration Limited we have been offered block
3/11a in the East Shetland Basin.
The Company is also engaged in the development of the Islandmagee Gas Storage project in County Antrim in Northern Ireland
through our subsidiary Islandmagee Storage Limited with a view to realising fair value for our interest in the project as soon as
practicable.
A detailed review of the Group’s business is provided below alongside our achievements against our key performance indicators and
our approach to managing the principal risks and uncertainties our business faces.
KEY PERFORMANCE INDICATORS
Key performance indicators (“KPIs”), both financial and non-financial, are used by the Board to monitor progress against
predetermined objectives and our strategy:
Objective
Definition
Strategy
We endeavour to develop projects in
accordance with project schedules
Predetermined and agreed project
development schedules adhered to
including submission of planning
applications
Delivery of projects to sensible time
schedules. Submit and achieve planning
permission approvals in a cost effective
and timely manner
We seek to identify new project
opportunities
Identify new project opportunities which
are expected to increase shareholder value
once development commences
Develop a balanced portfolio of projects
We aim to control general and
administrative costs keeping costs as low
as possible
Management and control of group general
and administrative costs
Maintain low cost of Group general and
administration expenditure and conserve
cash to the extent possible
We aim to prudently manage Group
working capital
Management and control of working
capital ensuring liquidity as is necessary
Management of working capital to ensure
liquidity to develop projects as planned in
development schedules
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INFRASTRATA plc
The KPIs are reported at Board meetings. Measurement entails analysing variance between expected and actual progress, financial
position and financial performance. Relevant performance measures since our last annual report include:
•
•
•
•
•
Funding of the forthcoming Woodburn Forest well on PL1/10 in County Antrim, Northern Ireland with the introduction of a
new partner Larne Oil and Gas Limited.
Submission of an Application for Consent to Drill the Woodburn Forest well. Following appointment of drilling engineers
Acona UK, design and procurement has progressed satisfactorily towards commencement of drilling in Q1 2015.
Funding of the 2015 seismic acquisition and re-processing programme on P1918 in Dorset with the introduction of a new
partner Southwestern Resources Limited who now have options to acquire further interests in the licence in return for a
commitment to funding the drilling of an exploration well in late 2015.
For the Islandmagee gas storage project, success in securing European Commission grant funding (subject to conclusion of a
formal grant agreement) for 50% of the cost of a well to obtain a salt core sample and subsequent testing and engineering work.
Subject to securing the remaining 50% funding (c.£2m) the well will be drilled as part of a joint drilling programme with the
Woodburn Forest well.
Secured a new development opportunity in the UK 28th Seaward Licensing Round where, together with partners Carstone
Exploration Limited, we have been offered block 3/11a in the East Shetland Basin by DECC under the terms of a promote
exploration licence.
• Continued prudent application of available cash resources. Working capital at the financial year end was £957,491. The cash
cost of management and administrative expenditure during the financial year was £1,126,481 (2013: £1,098,695). In January
2014 aggregate management cash salaries at that date were reduced by 15% including a 20% reduction in the salary of the Chief
Executive Officer. We estimate that our current annualised cash cost of management and administration, taking into account
anticipated operator overhead recoveries, is just over £1m.
OPERATIONAL REVIEW – OIL & GAS EXPLORATION
County Antrim – Onshore PL1/10
Outline
Petroleum Licence PL1/10 (Larne-Lough Neagh Basin) was awarded in March 2011 by the Northern Ireland Department of
Enterprise, Trade and Investment (“DETI”). The five year licence covers an area of 663 square kilometres over what the Company
believes is a highly prospective largely unexplored sedimentary basin.
The Larne-Lough Neagh Basin is a SW-NE trending Permo-Triassic Basin, overlying an older Carboniferous sequence. The basin
has historically received little attention from explorers, primarily due to the thick development of Palaeocene Antrim Flood Basalts
overlying the target horizons. This has been a barrier to effective seismic imaging but with the recent technological advances in data
processing, exploration in the basin is now entering an exciting phase. Only one exploration well has historically been drilled in
the centre of the basin covered by the PL1/10 licence, back in 1971, before any seismic data had been acquired. Drilling in the area
over the past 40 years has largely been for coal exploration and geothermal feasibility. However this has confirmed the development
of good sandstone reservoirs and seals within the thick Permo-Triassic sedimentary section. Oil-prone source rocks have been
identified on the margins of the Basin within the Carboniferous section, and gas-prone coals have also been mined to the west in
the Coalisland area, and along the North Antrim coast. The basin is also along trend from the Midland Valley of Scotland where oil
and gas prone rocks of Carboniferous age are well known. It is anticipated that in the more deeply buried areas of the Larne-Lough
Neagh Basin the Carboniferous will have been buried sufficiently to generate oil and possibly also gas.
During 2011 and 2012 InfraStrata undertook two seismic surveys acquiring over 400km of new 2D seismic data which revealed a
basin very similar in structural style to the prolific East Irish Sea Basin with a large number of undrilled structures. In March 2013,
the Company published a prospectivity review of the PL1/10 licence prepared by Merlin Energy Resources Limited, a geoscience
consultancy, which identified combined un-risked P50 prospective resources on the PL1/10 licence in the Triassic and Permian
sandstone reservoir intervals of over 450 mmboe.
INFRASTRATA plc
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STRATEGIC REPORT (CONTINUED)
OPERATIONAL REVIEW – OIL & GAS EXPLORATION (CONTINUED)
County Antrim – Onshore PL1/10 (continued)
Licence participants and Funding
Following its acquisition by Cairn Energy plc, Nautical Petroleum Limited (“Nautical”) withdrew from the PL1/10 licence and
agreement was reached for InfraStrata to acquire their 20% interest through the termination of a farmout agreement dating from
2011.
In July 2014, InfraStrata, together with joint venture partners Brigantes and Terrain Energy Limited (“Terrain”), entered into
an option agreement with Larne Oil and Gas Limited (“Larne”) with respect to acquiring licence interests in PL1/10 and the
adjacent offshore licence P2123. Larne exercised the option in September 2014. Larne is a wholly owned subsidiary of Larne Basin
Exploration LLC, a recently formed U.S. based investment company set up for the purpose of investing in oil and gas exploration in
the Larne Basin, Northern Ireland.
Under the terms of the agreement, Larne will fund a disproportionate share of the forthcoming Woodburn Forest exploration well to
earn its interest in the licence. Should the well cost exceed the Authorisation For Expenditure (“AFE”), which includes a contingency
of 10%, then all partners would pay their respective percentage share of such excess. However, InfraStrata has pre-existing farmout
agreements with partners Brigantes and Terrain with respect to the Woodburn Forest-1 well, which mean that any excess cost
accruing to its interest in the well would still be carried.
Subject to the approval for the licence interest assignments by DETI the licence interests in PL1/10 following the farmout
agreement would be:
InfraStrata (Operator)*
Larne
Brigantes (40% owned by InfraStrata)*
Terrain
*net InfraStrata 27.5% interest
20.83%
50.00% (see below)
16.67%
12.50%
The terms of the agreements with Larne and with existing partners Brigantes and Terrain required that the full value of the funds
required to drill the Woodburn Forest well be placed in an escrow account. To date Larne has been unable to fulfil this obligation
and has given notice that it expects now to be able to fund two thirds of its obligation. The partners have now entered into a
supplementary agreement which reduces Larne’s obligation to fund the escrow by one third and also reduces Larne’s prospective
licence interest by one third to 33.33%. All partners will now seek to secure additional investment in the project. InfraStrata does
not expect its existing net interest in the licence (27.5%) to be reduced as a result of these transactions. As a result of the terms of the
farmout to Larne and agreements with Terrain and Brigantes we are currently over carried in respect of the costs of the well and still
anticipate being fully carried through the well.
Development progress and Outlook
During the current financial year permission was confirmed under Permitted Development rights for the first PL1/10 exploration
well, Woodburn Forest-1, the first exploration well on the licence area since 1971. The well will target prospective resources estimated
by the joint venture at 40 mmboe (InfraStrata share 11 mmboe at 27.5%) within conventional Carboniferous, Permian and Triassic
sandstones. The Permitted Development rights provide a window for site clearing activities between September and February and the
Permitted Development rights require all construction and drilling activities to be completed within a 4 month window.
A Project Environmental Report and Application for Consent To Drill was submitted to DETI in the summer of 2014 and the
terms of the lease over the site have been agreed. The Consent to Drill and other remaining consents and approvals are expected
in time to commit to a fully funded drilling programme in Q1 2015. Under the terms of the licence, the joint venture must give
notification to DETI by March 2015 of its commitment to drilling the well.
Drilling engineers Acona UK were appointed in May 2014 and in addition to well planning and design have substantially completed
the procurement process for the rig, consumables and services for the drilling programme. RPS Consulting Engineers in Belfast
are undertaking the environmental support work. The actual commitment to the well will be made after all remaining consents and
approvals have been received.
Public information events attended by the project team were held in early November 2014.
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INFRASTRATA plc
County Antrim – Offshore P2123
The PL1/10 partners submitted an application for an adjacent prospective area in the UK 27th Seaward Licensing Round in 2012
and the licence was offered by the UK Department of Energy and Climate Change (“DECC”) in November 2013. Un-risked P50
prospective resources of 150 mmbo have been identified within the application area.
Larne will also be assigned a 33.33% interest in P2123 and, subject to the approval for the licence interest assignments by DECC
the licence interests in P2123 will be the same as for PL1/10 above. At completion of the agreement Larne will reimburse its share
of certain costs to existing partners. During 2015 the partners will undertake planning of the committed work programme under the
licence, to be completed by the end of the first licence term in January 2017.
Dorset – Offshore P1918
Outline
Petroleum licence P1918 comprises blocks 97/14, 97/15 and 98/11 and was awarded in February 2012 by DECC for a period of four
years.
Within and immediately adjacent to the licence area there are a number of active oil and gas seeps. A total of seven wells have
previously been drilled within the licence area, including the first UK offshore well in 1963 on Lulworth Banks in Block 97/14. Six of
these wells encountered oil or gas shows and three flowed oil or gas on test. The advances in technology and higher petroleum prices
mean that we are hopeful of being able to develop one or more of the existing discoveries profitably as a base from which to appraise
the full potential of the area. The prospective resources on the licence have been estimated by the joint venture at over 100 mmboe.
The focus for a first exploration well has been the offshore extension of the Purbeck Prospect, an anticline in the east of the licence,
up dip of the onshore well Southard Quarry-1, which encountered oil and gas shows within Jurassic and Triassic intervals. Only
the Sherwood was tested but failed to flow. The Purbeck Prospect immediately overlies the kitchen area for the giant Wytch Farm
oilfield. This large structure lies largely within Licence P1918. During the 2013 financial year InfraStrata reprocessed 156km of
onshore and offshore 2D data to further define the sub-surface target location. In June 2013, ocean divers collected gas samples from
an active gas seep above the Purbeck Prospect. Isotopic analysis of the gas indicates that the gas was generated at the base of the oil
window as expected.
A planning application for drilling and testing of the California Quarry-1 well was submitted to Dorset County Council (“DCC”)
in July 2013 and DCC granted planning permission for the well in December 2013, subject to conditions in the normal course of
business. The well will be drilled from onshore to offshore within licence P1918 and will target prospective resources, within licence,
estimated by the joint venture at 10 mmboe (net InfraStrata 6.84 mmboe at 68.4%). The planning conditions preclude construction
or drilling activities between March and September.
Licence participants and Funding
Following its acquisition by Cairn Energy plc, Nautical withdrew from the P1918 licence and agreement was announced in January
2014 that InfraStrata had acquired their 10% licence interest at no cost. InfraStrata intends to re-assign a 2% licence interest to
project partner Corfe, subject to DECC approval.
In June 2012 InfraStrata entered into agreements as part of which its licence interest in P1918 became subject to a net profits
interest (“NPI”) equivalent to 3.75% on the whole licence in favour of eCORP Oil & Gas UK Limited (“eCORP”). In March
2014 eCORP’s NPI in P1918 was cancelled (and InfraStrata UK Limited acquired the related preference shares held by eCORP in
subsidiary Portland Gas Limited) for a consideration of US$600,000 satisfied by the cancellation of the US$600,000 still payable
by eCORP under the terms of the June 2012 agreements. Also in March 2014, associated company Brigantes agreed to acquire
an 18% interest in licence P1918 for a consideration of US$600,000, subject to DECC approval. The combined effect of these
two transactions left InfraStrata in a cash neutral position as regards short term funding, and the removal of the NPI considerably
simplified the farmout process.
In October 2014, InfraStrata, together with joint venture partners Corfe and Brigantes entered into an agreement with Southwestern
Resources Limited (“Southwestern”) with respect to licence P1918. Southwestern is a subsidiary of DeHay Limited, is a UK based
company set up for the purpose of participating in oil and gas exploration and production in the UK.
Under the terms of the agreement, Southwestern will acquire a 10% interest in the P1918 licence, subject to DECC approval, in
return for funding 100% of the next £500,000 of expenditure on the licence and thereafter funding its own share. In addition, it has
been granted an exclusive option to acquire a further interest in the licence in return for funding future drilling activity.
INFRASTRATA plc
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STRATEGIC REPORT (CONTINUED)
OPERATIONAL REVIEW – OIL & GAS EXPLORATION (CONTINUED)
Dorset – Offshore P1918 (continued)
Licence participants and Funding (continued)
Subject to the approval for the licence interest assignments by DECC, the licence interests will be as follows:
InfraStrata (Operator)*
Southwestern
Corfe (40% owned by InfraStrata)*
Brigantes (40% owned by InfraStrata)*
*net InfraStrata 68.40% interest
54.00%
10.00%
19.80%
16.20%
The initial £500,000 funding will include the cost of acquiring two new 2D seismic lines over the Purbeck Prospect, in order to
complete the well design for the proposed California Quarry-1 well and also undertaking a Pre-stack Depth Migration re-processing
of two offshore 3D seismic surveys in the north of block 98/11 acquired during 1992 and 1999.
The reprocessing of the offshore data will focus on the undeveloped Colter, Old Harry and Ballard Point discoveries. The largest of
these, the Colter Prospect, is located within a fault block immediately to the south of the giant Wytch Farm oilfield. The 98/11-3
well was drilled on the prospect in 1989 by Gas Council (Exploration) Ltd and encountered a 10.5 metres vertical oil column in the
Sherwood Sandstone with an oil-water-contact at a depth of 1,739 metres sub-sea. Reservoir quality is very similar to that observed
in Wytch Farm.
Southwestern has been granted an exclusive option until July 2015 to acquire a further 65% interest from InfraStrata and partners
on a pro-rated basis by funding 100% of the costs of an offshore exploration well in the P1918 licence. If the option were exercised,
InfraStrata’s net interest in P1918 would be 19%, with its costs carried through the drilling of the well.
In the event that Southwestern decides not to exercise the option to drill an offshore well for the first well, it has been granted an
option, until September 2015, to acquire a further 40% licence interest by funding 100% of the costs to drill the California Quarry-1
well. If this alternative option was exercised, InfraStrata’s net interest in P1918 would be 38%, with its costs carried through the
drilling of the well. Because the proposed California Quarry-1 well is an onshore to offshore well it is necessary for the area from
which a well is drilled to be held under a petroleum licence, either by InfraStrata or by a third party. The P1918 joint venture group
has applied for the required onshore area as part of the UK 14th Landward Licensing Round.
A well is required to be drilled by February 2016, the end of the first term of the licence, to retain P1918 into its second term.
Development progress and Outlook
Good progress has been made with the fulfilment of pre-start planning conditions for the California Quarry-1 well. Various licences
and consents will be required from a number of stakeholders, including the Environment Agency, DECC and the Health and Safety
Executive. Agreements with the landowner at the wellsite have been concluded.
The work programme in the first half of 2015 will focus on acquiring the two new 2D seismic lines over the Purbeck Prospect, in
order to complete the well design for the proposed California Quarry-1 well and the re-processing of offshore 3D seismic surveys in
block 98/11, both of which will be fully funded by Southwestern. This seismic programme will be completed with a view to drilling a
well on the licence in Q4 2015 subject to the options granted to Southwestern above.
A public information event attended by members of the project team was held in October 2014.
Non-operated exploration interests
The Company has non-operator exploration interests via its shareholdings in associated companies Corfe and Brigantes as follows:
• PEDL201 (Leicestershire) - Corfe 12.5% interest (net InfraStrata 5%)
• PEDL237/PL090 (Dorset) – Corfe 12.5% interest (net InfraStrata 5%)
• PEDL 070 (Hampshire) – Corfe and Brigantes combined 10% (net InfraStrata 4%). Avington field currently producing around
70 barrels of oil per day.
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INFRASTRATA plc
New exploration business
In April 2014, InfraStrata announced that it has entered into a New Ventures Exploration Joint Bidding Agreement with Carstone
Exploration Limited (“Carstone”).
Under the terms of the agreement, InfraStrata and Carstone will work together to identify early stage opportunities, drawing
upon the expertise and experience of each company. The partners will seek to grow an exploration portfolio in line with a focused
investment strategy aimed at high impact exploration opportunities excluding the existing core areas of InfraStrata in Northern
Ireland and Southern England.
In line with Infrastrata’s existing strategy, the exploration teams will work together to capture opportunities in lease rounds and
attract quality farm-in partners to fund exploration costs. Each company will hold 50% of the available licence interest in each
new venture. The joint venture team is based at InfraStrata’s head office. Carstone is a private independent petroleum exploration
company. The company was founded in 2014 by principals David Gaudoin, Donal O’Driscoll and John Robbins, who are very
experienced geoscientists, with an excellent track record of being members of teams which have discovered significant commercial oil
and gas accumulations over the past 30 years.
The first venture together is the UK 28th Seaward Licensing Round where an application was submitted to the DECC in April 2014
and in November 2014 the joint venture was offered block 3/11a in the East Shetland Basin by DECC and the partners intend to
accept the offer for the block under the terms of a promote exploration licence.
Block 3/11a contains the undeveloped Oulton oil discovery (3/11-1 and 1ST) estimated to contain approximately 16 million barrels
of recoverable oil. The discovery was made over 40 years ago by Amoco, and flowed in excess of 1000 barrels of 41 degrees API oil
per day on test from Jurassic Emerald sandstones. InfraStrata believes that the use of modern offshore technologies combined with
access to nearby infrastructure will enable Oulton to be successfully developed in the near future. InfraStrata and Carstone will now
work together to introduce one or more partners into the project to fund the next stage of the block evaluation and ultimately the
drilling of a new well to appraise the discovery.
OPERATIONAL REVIEW – GAS STORAGE DEVELOPMENT
Islandmagee project – County Antrim
Outline
Islandmagee Storage Limited (“IMSL”) is an independent Northern Ireland registered company and is a joint venture between a
wholly-owned subsidiary of InfraStrata plc (65% shareholder) and Moyle Energy Investments Limited, part of the Mutual Energy
group of companies (35% shareholder). During 2012, IMSL was granted planning permission for a natural gas storage facility at
Islandmagee, County Antrim and a Gas Storage Licence from the Utility Regulator.
IMSL plans to create seven caverns, capable of storing up to a total of 500 million cubic metres of gas in Permian salt beds
approximately 1,500 metres beneath Larne Lough. The project has unique advantages including being immediately adjacent to gas
and electrical infrastructure, the salt being at an optimum depth for gas storage and close to a water source for solution mining of the
salt to create the caverns. The project is also designed to access the extrinsic value of the gas storage market in the UK and Ireland by
being able to respond to short-term volatility.
The proposed gas storage facility will make a significant contribution to the security of gas supplies for the whole island of Ireland.
Ireland is dependent on gas for around 65% of its electricity generation with 90% of the island’s gas imported via a single pipeline
from Scotland. The facility, when complete, will store enough gas to satisfy Northern Ireland’s demand for around 60 days. Northern
Ireland has a target to generate 40% of electricity from renewables by 2020 – this will primarily be achieved through wind-powered
generation. A shift to renewable energy sources is likely to result in an increasing reliance on gas-fired power stations to support
the inherently intermittent supply from wind. Rapid cycle gas storage facilities, such as this planned project, will be important to
respond to the increasingly fluctuating demands for gas to fuel this electricity generation requirement. The estimated timescale for
the project is approximately seven years, with the first cavern becoming operational after five years.
INFRASTRATA plc
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STRATEGIC REPORT (CONTINUED)
OPERATIONAL REVIEW – GAS STORAGE DEVELOPMENT (CONTINUED)
Islandmagee project – County Antrim (continued)
Development progress and Outlook
The development of the project commenced in 2007 with the acquisition of 3D seismic data to image the Permian salt in the
Larne Lough area. During 2012, planning permission was granted for the project and a gas storage licence was issued by the Utility
Regulator. A wellsite was constructed in the summer of 2013. During 2014, a sub-surface agreement for lease was signed with The
Crown Estate and all other land rights required for the project were secured. Also during 2014, the project was granted marine
licences by the Department of Environment for the offshore elements of the project, including a discharge consent subject to the
composition of the Permian salt being verified by drilling a well to obtain a sample of the salt.
In October 2013, the project was granted a ‘Project of Common Interest’ (“PCI”) status by the European Commission. PCI status
means recognition by the European authorities that the Islandmagee gas storage project brings benefits not only to the Member
State in which it is located, but to a much wider area. It confirms the importance of the project at a European level. PCI status
also means that the project must be given priority and quick passage by relevant Member States in the permitting process, and
cooperation in its development. In addition, a PCI can apply for significant financial support from the European Union – this may be
in the form of direct grant or other forms of financial backing from institutions such as the European Investment Bank.
The project has also been ‘pre-qualified’ (deemed eligible for support) under the Treasury’s ‘UK Guarantee Scheme’ which is making
cover of up to £40 billion available to ensure that key infrastructural projects across all sectors in the UK, those that really ought to
go ahead, are not held back due to any difficulty in obtaining finance. Under the scheme the Government will guarantee a certain
proportion of the capital required to fund projects, so that banks can lend more freely in today’s risk-averse lending environment.
In January 2014 it was announced that BP Gas Marketing Limited (“BPGM”) who had been funding the development of the
project since January 2012 had decided not to take further part in the project following a review of its European wide gas assets
portfolio which determined that further investment in gas storage in Northern Ireland is no longer aligned with the portfolio’s
objectives. BPGM relinquished its option to acquire 50.495% of the shares of IMSL. Much was accomplished during our partnership
with BPGM. A total of approximately £5 million has been invested in the project since its inception including £2m by BPGM. This
does not include the cost of engineering studies estimated at US$1m paid for by BPGM but not charged to the project.
The next significant investment in the project is the drilling of a well (Islandmagee-1) to 1,650 metres depth to obtain cores
of the salt sequence and subsequently undertake further testing to confirm the depth, thickness, rock mechanical properties
and composition of the salt to finalise the preliminary design of the caverns and above ground plant. The aggregate cost of this
programme of work is approximately £4m. Procurement of the well is already well advanced and an Application for Consent To Drill
has submitted to DETI. The actual commitment to the well will be made after all consents and approvals have been received and full
funding has been secured.
In August 2014 IMSL, together with partners Mutual Energy Limited submitted an application to the European Commission for
a grant of up to 50% of the cost of the salt core well and associated testing and engineering work under the Connecting Europe
Facility, available to PCIs. In November 2014 the European Commission published a list of grant awards with IMSL receiving
assistance of up to Euros 2.5m (c.£2m) subject to conclusion of a formal grant agreement. We are now pursuing the £2m balance of
funding from a range of potential investors by way of an equity participation in IMSL.
In order to save on the total costs of drilling it is planned to drill the Islandmagee-1 well in Q1 2015 as part of the same drilling
programme as the Woodburn Forest-1 oil and gas exploration well, subject to being granted a Consent to Drill by DETI, and IMSL
completing the remainder of the funding.
InfraStrata believes the completion of the Islandmagee-1 well and subsequent testing and design programme will complete the
project’s feasibility stage and allow us to seek the developers who will make the Final Investment Decision (“FID”) to construct the
project at an estimated cost of £274m during 2016. We anticipate that FID will provide InfraStrata with the opportunity to monetise
our interest in the project.
Public information events attended by the project team were held in November 2014.
10
INFRASTRATA plc
Portland project - Dorset
In 2012 we reported that the poor seasonal gas storage market, a different market to that being targeted by the Islandmagee project,
meant that it is unlikely that the Portland gas storage project will be realised in the near term and we fully impaired our historical
investment in the project, with the exception of data obtained from seismic surveys and drilling which are key for the development of
the petroleum exploration play.
Our wholly owned subsidiary Portland Gas Transportation Limited continues to renew the gas pipeline construction authorisation
with DECC as a potential means of importing or exporting gas from Portland. InfraStrata continues to examine this and other
opportunities which may arise to realize some value from our historic investment in the project.
OPERATIONAL REVIEW - FUNDING
Financing
InfraStrata’s funding model for our projects is to manage risk for our shareholders by attracting investment from quality partners
and thereby minimising our own commitments to pay the costs of exploration and other project development costs. The success of
our projects and therefore the carrying value of the projects on InfraStrata’s statement of financial position are dependent not only
on the underlying economics of the projects but also on our continuing success in attracting such investment and we do not make
commitments to significant exploration expenditure in the absence of such investment.
Our share of exploration expenditure on our licences during the year to 31 July 2014 was £347,211 out of a total gross expenditure of
£605,574. These costs were mostly related to the planning, permitting and consultation processes as well as paying annual licence fees.
As detailed above we have now concluded farmout agreements which complete the funding of the Woodburn Forest-1 well costs
(PL1/10) and the seismic programme in Dorset (P1918) such that all significant exploration expenditure in the remainder of the
2015 financial year is fully funded.
As explained on page 6, Larne has been unable to date to fulfil its obligation to fund an escrow account with its share of the
Woodburn Forest well costs and the partners have now entered into a supplementary agreement which reduces Larne’s obligation
to fund the escrow by one third and also reduces Larne’s prospective licence interest by one third to 33.33%. All partners will now
seek to secure additional investment in the project. As a result of the terms of the farmout to Larne and agreements with Terrain and
Brigantes InfraStrata are currently over carried in respect of the costs of the well and still anticipate being fully carried through the
well.
In the event that Larne is unable to any extent to place the revised two thirds of its commitment into escrow and new investment is
not secured by the date on which the well construction and drilling programme is due to commence then there would be a shortfall
in the funding of the well. The licence partners have until 4 March 2015 to commit to the drilling of a well before the end of the
licence term on 4 March 2016. In the absence of such a commitment or an agreement by DETI to extend the date by which a
commitment to drill must be made, then the licence would need to be relinquished. Despite the uncertainties regarding Larne’s
funding of the escrow account and the need to secure new partners, the directors remain confident that the well will be fully funded
on or before 4 March 2015 being the last date a commitment to drill must be made if there is no extension to that date granted by
DETI.
The Group’s associated companies, Corfe and Brigantes are self-funded and therefore we have no commitments to fund exploration
costs on our non-operated exploration interests.
On the Islandmagee gas storage project gross capital expenditure during the year to 31 July 2014 was £255,292. Total contributions
received from BPGM during the financial year prior to their exit in January 2014 were £606,173 meaning that not only was the
expenditure during the year fully funded by BPGM but also that IMSL has funds which we anticipate will be sufficient to secure the
project until there is new funding to develop the project to the next stage. As explained in note 15 to the financial statements, no part
of the aggregate funding of £2,033,450 provided by BPGM is reimbursable to them and it has been transferred from non-controlling
interests to retained earnings.
The Company intends to raise £2m through a new equity fundraising to provide flexibility in the support of its projects generally
and intends to use these funds to underwrite £2m funding required by IMSL to drill the salt core well in anticipation of new direct
equity participation in IMSL being secured in due course. However, the success of any equity fundraising cannot be guaranteed and
the directors have therefore concluded that a material uncertainty exists with regard to the availability of funding to progress the
Islandmagee gas storage facility.
INFRASTRATA plc
11
STRATEGIC REPORT (CONTINUED)
OPERATIONAL REVIEW - FUNDING (CONTINUED)
Financing (continued)
Receipts from eCORP in relation to subscriptions for preference shares in our subsidiary Portland Gas Limited aggregated £367,474
(US$600,000) during the year. As explained above, in March 2014 we acquired all the issued preference shares in Portland Gas
Limited from eCORP and the net profits interest in favour of eCORP in licence P1918 was cancelled for a total consideration of
£361,012 (US$600,000), equivalent to the outstanding subscriptions due from eCORP at that time. As explained in note 13 to the
financial statements this resulted in a capitalisation to intangible exploration and evaluation assets of the same amount by way of
a transfer from trade and other receivables. Also in March we received £360,000 from Brigantes as consideration for the sale of an
18% interest in licence P1918, thereby leaving InfraStrata in a cash neutral position regarding short term funding as a result of these
transactions.
On 23 September 2013 the Company completed the Placing of 8,000,000 new ordinary 10p shares at 10p per share to raise
£800,000 before expenses.
The Group’s cash and cash equivalents at 31 July 2014 was £1,648,955 (2013 - £774,745) and net current assets were £957,491 (2013
- £5,008,801). The principal reason for the disparity in net current asset value is the reclassification of the gas storage development
assets as explained in note 15 to the financial statements.
As explained in note 2 to the financial statements the directors have prepared the accounts on the going concern basis which assumes
that the Group will continue in operational existence without significant curtailment of its activities for the foreseeable future.
Forward cash flow forecasts assume that all significant future exploration costs will continue to be funded by joint venture partners
and that the management and administrative costs of the Group will remain at current levels, consistent with the delivery of the
Group’s strategy and the management of challenges and risks associated with the Group’s development programmes. The cash flow
forecasts reflect that the Group requires an additional £600,000 to meet management and administrative costs and working capital
requirements till the end of December 2015.
The directors anticipate that additional funding can be generated through an equity fundraising. It is proposed that the Company’s
share capital be restructured to a par value of 1p at the forthcoming AGM to facilitate access to the equity markets given that the
Company’s shares are currently trading at or below par value; however, the success of any equity fundraising cannot be guaranteed
and the directors have concluded that at the date of this report a material uncertainty must therefore exist that may cast significant
doubt upon the Group’s ability to continue as a going concern.
Management and administration costs
Like other oil and gas exploration companies InfraStrata needs to be seen to be taking steps to ensure that cash spent on
management and administrative expenses is good value for money in light of the progress being made against programme, success
against key performance indicators and mitigation of the principal risks and uncertainties facing our business.
The remuneration committee sets salaries for individual members of the management team which are competitive, but not over
generous. There are no additional cash incentive elements attached to remuneration packages with incentivisation achieved through
the granting of share options being preferred as a means of conserving cash and aligning management rewards to the interests of
shareholders. Nevertheless in January 2014 changes were implemented which reduced aggregate management cash salaries by 15%
including a 20% reduction in the salary of the Chief Executive Officer to £200,000. In October 2014 our management team was
greatly strengthened by the appointment of a Commercial Development Director. Every member of the management team makes
an indispensable contribution to effective delivery of our strategy, performance against our key performance indicators and effective
management of the risks and uncertainties our business faces. We expect to recover an increased proportion of our management costs
from our partners by way of operator overhead recoveries as we progress the exploration programmes in 2015.
Administrative expenditure is further analysed in note 4 to the financial statements showing that the cash cost of management and
administrative costs in the year to 31 July 2014 was £1,126,482. We estimate that our current annualised cash cost of management
and administration, taking into account anticipated operator overhead recoveries, is just over £1m.
12
INFRASTRATA plc
PRINCIPAL RISKS & UNCERTAINTIES
The directors are responsible for the effectiveness of the Group’s risk management activities and internal control processes. As a
participant in the gas storage development and upstream oil & gas industries, the Group is exposed to a wide range of business
risks in the conduct of its operations. The Group is exposed to financial, operational, strategic and external risks which are further
described below. These risks are not exhaustive and additional risks or uncertainties may arise or become material in the future. Any
of these risks, as well as other risks and uncertainties in this document, could have a material effect on the Group’s business.
Strategic and external risks - failure to manage and grow the business while creating shareholder value
There is no assurance that the Group’s exploration and development activities will be successful. The directors seek to manage and
mitigate these risks by developing a balanced portfolio of projects, recruitment and retention of suitably skilled personnel, through
compliance with applicable legislation and careful management of cash resources and requirements.
The successful progression of the Group’s activities depends not only on technical success, but also on the ability of the Group to
obtain appropriate financing through equity financing, farm downs, disposing of interest in projects or other means. If the Group is
unable to obtain additional financing needed to fulfil its planned work programmes some interests may be relinquished and/or the
scope of operations reduced.
Deterioration of capital markets, particulary sentiment towards oil and gas exploration, may reduce our ability to raise new equity
funding. Group management works closely with our advisors and brokers to identify the optimum approach and timing to secure
new equity financing to provide working capital and flexibility in the way we fund our projects.
We place great emphasis on regular communication with shareholders including the release of announcements for the interim and
annual results and after significant developments. We seek to ensure that through such communication our shareholders are aware of
our strategy and operations and that management has their continuing support.
The Company’s system of Corporate Governance is set out in the Report of the Directors on pages 20 to 21.
Financial risks - failure to meet financial obligations
The Group’s management manages risk for our shareholders by attracting investment through quality partners thereby minimising
our own commitments to pay the costs of exploration and other project development costs. We do not make financial commitments
to exploration costs unless such funding has been secured through joint venture partners or we have a high degree of confidence that
it will be secured. We seek to be fully funded before commitment to any drilling activity including the financial risk posed by delays
or other cost overruns during such drilling activity.
Access to adequate working capital is critical to our ability to pursue our existing and future projects and to continue as a going
concern. This is particularly important in circumstances where we are subjected to delays arising outside of our control such as may
be imposed through changes to the regulatory framework. We work closely with our advisors and brokers to identify the optimum
approach and timing to secure new equity financing to provide working capital.
Operational risks - damage to shareholder value, environment, personnel or communities caused by operational failures
InfraStrata attracts and retains a high quality management team to manage operational risks on our projects and ensure they are
progressed in the shortest possible timescales in a cost effective manner. We have built up our core competencies in oil and gas
exploration and have developed excellent relationships with government and public stakeholders in the geographical areas in which
we operate.
Our management team works alongside strong and experienced joint venture partners in all projects and is supported by a highly
effective network of carefully selected service delivery specialists such as environmental consults and drilling engineering services. In
this way we mitigate the risk that we fail to be seen to be acting in a socially responsible manner and/or failure to maintain good local
community relations.
On behalf of the Board
Andrew Hindle,
Chief Executive Officer
1 December 2014
INFRASTRATA plc
13
OPERATIONS OVERVIEW
14
INFRASTRATA plc
INFRASTRATA plc
15
DIRECTORS, SECRETARY, ADVISORS
AND SHAREHOLDER INFORMATION
Directors
Company secretary
Registered office
Principal office
Auditor
Tax advisors
Registrars
Nominated advisor and joint broker
Joint broker
Solicitors
Bankers
Kenneth Maurice Ratcliff (Non-executive Chairman)
Andrew David Hindle (Chief Executive Officer)
Stewart McGarrity (Finance Director)
Anita Elizabeth Gardiner (Commercial Development Director)
Maurice Edward Hazzard (Non-executive Director)
William Colvin (Non-executive Director)
Walter Rookehurst Roberts
Blackstable House
Longridge
Sheepscombe
Stroud
Gloucestershire, GL6 7QX
80 Hill Rise
Richmond
Surrey, TW10 6UB
Nexia Smith & Williamson
1 Bishops Wharf, Walnut Tree Close
Guildford
Surrey, GU1 4RA
Smith & Williamson LLP
1 Bishops Wharf, Walnut Tree Close
Guildford
Surrey, GU1 4RA
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TH
Arden Partners plc
125 Old Broad Street
London, EC2N 1AR
VSA Capital Limited
New Liverpool House
15-17 Eldon Street
London, EC2M 7LD
Field Fisher Waterhouse LLP
Riverbank House
2 Swan Lane
London, EC4R 3TT
Bank of Scotland plc
33 Old Broad Street
London, EC2N 1HZ
Investor and public relations
Buchanan Communications Limited
107 Cheapside
London, EC2V 6DN
16
INFRASTRATA plc
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 JULY 2014
The directors have pleasure in presenting their report and audited financial statements for the year ended 31 July 2014.
General
InfraStrata plc is incorporated and domiciled in England and Wales.
Health, safety and environment
There were no reportable health, safety or environmental incidents during the financial year.
Share capital
On 23 September 2013 the Company issued 8,000,000 new ordinary shares of 10 pence each at 10 pence per share to raise £800,000,
before expenses, to institutional and other shareholders. Following the placing, the Company has 99,491,599 ordinary shares in issue.
RESULTS AND DIVIDENDS
As explained in note 15 to the financial statements, following BPGM’s decision to withdraw from the Islandmagee gas storage
project and in compliance with International Financial Reporting Standards, the Group’s interest in the asset and liabilities of our
subsidiary IMSL are no longer classified as held for sale and have been reclassified under the appropriate heading on the Group’s
statement of financial position. The results attributable to the operations of IMSL are now classified as continuing activities and the
loss arising from IMSL in the year ended 31 July 2013 amounting to £197,298 has been reclassified as such. The aggregate funding
of £2,033,450 received from BPGM has been reclassified from non-controlling interests to retained earnings as no part of it is
refundable.
The Group recognised cash revenue of £17,764 (2013: £62,428) which arose from activities including operatorship income,
consulting and technical services. Administrative expenses totalled £1,331,350 (2013; £2,002,080). As detailed in note 4 to the
financial statements the 2013 total included payments under leases in relation to the gas storage project in Portland totalling
£750,000; these leases were terminated in May 2013.
The Group incurred a loss after tax of £1,246,701 (2013: £1,642,760). The loss for the year, the reclassification of BPGMs previous
non-controlling interest of £2,033,450 together with the losses of £21,508,727 brought forward leaves a retained loss of £20,721,978
to be carried forward.
The directors do not recommend the payment of a dividend (2013: £nil).
CHARITABLE AND POLITICAL DONATIONS
Portland Gas Trust is a charity which supports initiatives focusing on the environment, geology and education with its activities
centered on Portland, Dorset. In 2014 the Group supported the Trust by making a donation of £20,000. In 2013, the Group waived
loans to the Trust which amounted to £125,708. As these loans had previously been impaired, no expense was recognised in the year
in respect of them.
No donations were made for political purposes (2013: £nil).
RISK MANAGEMENT
The financial risk management objectives and policies of the Company in relation to the use of financial instruments, and the
exposure of the Company and its subsidiary undertakings to its main risks, credit risk and liquidity risk, are set out in note 22 to the
financial statements. The principal risks and uncertainties relating to the Group’s business and how we mitigate them are detailed in
the Strategic Report at page 13.
INFRASTRATA plc
17
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 JULY 2014 (CONTINUED)
DIRECTORS
The directors, who served during the year and subsequently, were as follows:
Executive Directors
A D Hindle
S McGarrity (appointed 25 September 2013)
A E Gardiner (appointed 28 October 2014)
C S Gouws (resigned 25 September 2013)
Non-executive Directors
K M Ratcliff
WR Roberts (resigned 28 October 2014)
M E Hazzard
W Colvin
The status of WR Roberts changed from Executive to Non-executive Director on 1 January 2014.
All directors benefit from the provisions of individual directors’ Personal Indemnity insurance policies. Premiums payable to third
parties are as described in note 6.
The Company operates a share option scheme and the particulars of share options granted to directors at 31 July 2014 are detailed
in note 6 to the financial statements. Since the year end options granted to those who are directors at the date of this report at an
exercise price of 10p per share, and exercisable one year after grant, are as follows:
Director
A D Hindle
S McGarrity
AE Gardiner
KM Ratcliff
ME Hazzard
W Colvin
Date of grant
19 September 2014
19 September 2014
13 October 2014
19 September 2014
19 September 2014
19 September 2014
Number
800,000
600,000
508,000
150,000
60,000
60,000
Directors of the Company at the date of this Annual Report and their abridged CVs are as follows:
Ken Ratcliff (Non-Executive Chairman)
Ken Ratcliff, JP, BSc, FCA, is a Chartered Accountant with extensive finance and business experience. He is currently College
Accountant at Epsom College and co-founder of Geokinetics Processing UK Limited, an oil and gas industry seismic contractor.
He was an audit manager with Touche Ross & Co in London before moving into accountancy and finance positions within the oil
and gas industry in 1978. Ken has previously held senior management positions with Ensign Geophysics Limited, Seismic Geocode
Limited, Tenneco Corporation and Merlin Geophysical Limited. He joined the Board in 2007 and became Chairman in October
2007. Ken has been a non-executive director of Egdon Resources plc since 2001.
Andrew Hindle (Chief Executive Officer)
Andrew Hindle, BSc, MSc, PhD, FGS, CGeol, is a highly experienced geologist with over 25 years worldwide experience. He
holds a degree in Geological Sciences gained in 1983 from Leeds University and, following a year with BP, gained a MSc. degree in
Petroleum Geology in 1985 from Aberdeen University. In 1998 he completed a PhD (part-time) through the Open University. He
received the J. C. “Cam” Sproule Memorial Award from the American Association of Petroleum Geologists in 1999. He worked for
Texaco from 1985 until 1996 on UK and international petroleum exploration and development projects, working overseas from 1990
to 1994. Subsequently, he worked for Anadarko Algeria Corporation from 1996 to 1997. In 1997 he became a founding director
of Egdon Resources plc and, following the demerger of Egdon and InfraStrata, remained a non-executive director of Egdon until
February 2011. Andrew has been the Chief Executive of the Group since 2005. Andrew is also a director of Geofocus Limited and
Toffee Limited.
18
INFRASTRATA plc
Stewart McGarrity (Finance Director)
Stewart McGarrity, BCom, CA, has 27 years of UK and international experience in both senior finance and commercial roles.
Following qualification as a Chartered Accountant, Stewart spent a number of years with Deloitte in Zimbabwe and Hong Kong
in senior audit and technical roles. Stewart then held a senior financial position with the Airport Authority in Hong Kong during
the construction and commercial development of Hong Kong International Airport. Since returning to the UK he has worked with
property investor and developer MEPC plc, based in London as Group Financial Controller and with tie Limited, in Edinburgh,
developing and maintaining the business case for Edinburgh Trams and other transport projects.
Anita Gardiner (Commercial Development Director)
Anita Gardiner, BA, MA, MCIPS graduated from Queens University, Belfast and started her career at the Prudential plc where she
worked in a number of commercial roles in procurement and supply chain, real estate and operations. She moved to BP in 2005 and
held various project and managerial positions in the UK and India, most recently as Business Development Manager for BP Gas
Marketing where she had responsibility for asset development and origination activities across Europe.
Maurice Hazzard (Non-Executive Director)
Maurice Hazzard, has extensive business experience in the oil and gas industry, particularly in large offshore projects. He has held
senior positions with Phillips Petroleum, Hamilton Bros. Oil & Gas Limited and Halyard Offshore Limited. Between 1979 and
1989 Maurice was responsible for development of the Energy Division of the Tung Group of companies, based in Hong Kong,
and during this period was Executive Chairman of Houlder Marine Drilling Limited. From 1989 to 1996 he was a consultant with
Maritime Audit & Technical Services Limited, consulting to the international offshore oil and marine services industry. From 1996
to 1999 he was Chairman and CEO of PD Systems International Limited, a UK electronics manufacturer. He is also non-executive
Chairman of Orbitron Technologies Limited, a software company.
William Colvin (Non-Executive Director)
William Colvin, BCom. CA, is a Chartered Accountant and has wide experience in the oil and gas, and healthcare sectors in senior
management and board positions of large corporations. He was Finance Director of British-Borneo Oil & Gas Plc from 1992
to 1999. From 1990 to 1992, William was Finance Manager/Director at Oryx UK Energy. From 1984 to 1989, he worked in a
variety of financial roles for Atlantic Richfield (ARCO) Inc. He qualified as a Scottish Chartered Accountant in 1982 and holds a
Bachelor of Commerce degree from the University of Edinburgh. William is currently a non-executive director of Energy XXI, the
independent oil & natural gas exploration and production company.
DIRECTORS’ EMOLUMENTS
The directors’ emoluments are disclosed in note 6 to the Financial Statements.
DIRECTORS AND SUBSTANTIAL SHAREHOLDINGS
The directors of the Company held the following beneficial shareholdings as at 30 November 2014:
Ordinary shares of 10p each
Ken Ratcliff
Andrew Hindle
Stewart McGarrity (appointed 25 September 2013)
Anita Gardiner (appointed 28 October 2014)
Maurice Hazzard
William Colvin
Number
104,000
7,422,625
-
-
19,326
272,727
The Company has received notification of the following interests in 3% or more of the Company’s issued share capital at 30
November 2014. The percentages presented are at the date of notification.
Ordinary shares of 10p each
JP Morgan Asset Management Holdings Inc.
Mark Abbott
Maven Income and Growth VCT 5 PLC
Calculus Nominees Limited
Alan Booth
Eugene Whyms
Number
15,516,600
6,294,806
2,974,013
1,858,950
3,000,000
3,159,725
INFRASTRATA plc
%
0.10
7.46
-
-
0.02
0.27
%
18.26
6.92
3.80
3.60
3.02
3.17
19
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 JULY 2014 (CONTINUED)
CORPORATE GOVERNANCE
The UK Corporate Governance Code
The directors recognise the value of the UK Corporate Governance Code (“the Code”) and whilst under the AIM rules compliance is
not required the directors have regard to the recommendations of the Code in so far as is appropriate for a public company of its size.
The Board
At the financial year end the Board was comprised of two Executive Directors and four Non-executive directors whose background
and experience are relevant to the Company’s activities. Following the year end Anita Gardiner joined the Board on 28 October
2014 as Commercial Development Director. At the same time Walter Roberts resigned as a director although he continues as the
Company Secretary. The directors are of the opinion that the Board has a suitable balance. The Board, through the directors, maintain
regular contact with its advisors and public relations consultants in order to ensure that the Board develops an understanding of
the views of major shareholders about the Company. All directors have access to the advice and services of the company secretary
who is responsible to the Board for ensuring that the Board procedures are followed and that the applicable rules and regulations
are complied with. In addition, the company secretary will ensure that the directors receive appropriate training as necessary. The
appointment and removal of the company secretary is a matter for the Board as a whole.
The table below contains details on the number of meetings held during the period and individual director attendance.
Board
Audit Committee
Remuneration
Committee
Number of meetings held during the 2014 financial year
7§
3
4
Executive Directors
Andrew Hindle
Stewart McGarrity
(appointed 25 September 2013
Craig Gouws
(resigned 25 September 2013)
Non-executive Directors
Ken Ratcliff
Maurice Hazzard
Walter Roberts
William Colvin
Number of
meetings
attended
Number of
meetings
attended
Number of
meetings
attended
7
6
1
6
4
7
6
-
-
-
3
-
-
3
-
-
-
4
4
-
4
§ Of which one was minimally attended as it was to finalise business already approved by all directors
Audit Committee
The Audit Committee met three times in the year to 31 July 2014. Its members are William Colvin (Chairman) and Ken Ratcliff.
Members of the committee attended all meetings either in person or by telephone. Senior representatives of the external auditors
attend these meetings if considered appropriate. The external auditor has unrestricted access to the Chairman of the committee.
The role of the Audit Committee includes:
• Consideration of the appointment of the external auditor and the audit fee.
• Reviewing the nature, scope and results of the external audit.
• Monitoring the integrity of the financial statements and interim report.
• Discussing with the Group’s auditors problems and reservations arising from the interim and final results.
• Reviewing the external auditor’s management letter and management’s response.
• Reviewing on behalf of the Board the Group’s system of internal control and making recommendations to the Board.
The Committee also keeps under review the necessity for establishing an internal audit function but considers that, given the size of
the Group and the close involvement of senior management in day-to-day operations, there is currently no requirement for such a
20
INFRASTRATA plc
function. Notwithstanding the absence of an internal audit function, the Committee keeps under review the effectiveness of the
Group’s internal controls and risk management systems.
Remuneration Committee
The members of the Remuneration Committee are Maurice Hazzard (Chairman), Ken Ratcliff and William Colvin. The committee
met four times during the year and the meeting was attended by all current members. The Group’s policy is to remunerate senior
executives fairly in such a manner as to facilitate the recruitment, retention and motivation of staff. The Remuneration Committee
recommends to the Board a framework for the remuneration of the Chairman, the Executive Directors and the senior management
of the Group.
The principal objectives of the Committee include:
• Determining and recommending to the Board the remuneration policy for the Chief Executive and Executive Directors.
• Reviewing the design of share incentive plans for approval by the Board and determining the annual award policy to Executive
Directors under existing plans.
The Committee recognises the continuing financial pressures on the Company and is appreciative of the contribution made by the
Chief Executive in taking a 20% reduction in salary. Salaries for Executive Directors have not been increased in aggregate for three
years now and no bonuses have been contemplated in the year under review. The Committee remains acutely aware of the need to
balance the financial performance of the Company with the need to maintain incentive and motivation for an executive which has
worked tremendously hard over the last year to achieve the position we are now in.
Nomination Committee
The Company has not established a Nomination Committee as the directors are of the opinion that such a committee is
inappropriate given the current size of the Company.
Relations with Shareholders
Communication with shareholders is given high priority and the Company therefore communicates regularly with shareholders
including the release of announcements for the interim and annual results and after significant developments. The Annual General
Meeting is normally attended by all directors. Shareholders, including private investors, are invited to ask questions on matters
including the Group’s operations and performance and to meet with the directors after the formal proceedings have ended.
Representatives of the Board, at least twice per year, together with the Company brokers go on road shows during which existing
and new investors are updated on Company affairs. The Company maintains a website (www.infraStrata.co.uk) for the purpose of
improving information flow to shareholders as well as potential investors. The website contains all press announcements and financial
reports as well as extensive operational information about the Group’s activities and enquiries from individual shareholders on
matters relating to their shareholdings and the business of the Group are welcomed. The Board encourages shareholders to attend the
Annual General Meeting, at which members of the Board are available to answer questions.
Arden Partners plc, the company’s Nominated Advisor and broker, actively researches the Company and its business followed by
research notes being issued.
Internal controls
The directors are responsible for the Group’s system of internal controls, the setting of appropriate policies on those controls, and
regular assurance that the system is functioning effectively and that it is effective in managing business risk. Internal control systems
are designed to meet the particular needs of the Group and to manage rather than eliminate the risk of failure to meet business
objectives. The internal controls cover financial, operational and compliance matters and are reviewed on an on-going basis.
The directors consider that the frequency of Board meetings and the information provided to the Board in relation to Group
operations assists the identification, evaluation and management of significant risks relevant to its operations on a continuous basis.
The Group’s internal controls can only provide reasonable and not absolute assurance against material misstatement or loss or the
risk of failure to meet business objectives. Having thus monitored risk management and internal control processes in place, the Board
considers that the Company’s internal control systems operated appropriately during the year and up to the date of signing of the
Annual Report and Financial Statements.
GOING CONCERN
The directors have prepared the financial statements on the going concern basis which assumes that the Group will continue in
operational existence for the foreseeable future. The basis of this assumption is detailed in the accounting policies in note 2 to the
financial statements.
INFRASTRATA plc
21
REPORT OF THE DIRECTORS
FOR THE YEAR ENDED 31 JULY 2014 (CONTINUED)
DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the Strategic Report, the Report of the Directors and the financial statements in
accordance with applicable law and regulations.
UK Company law requires the directors to prepare Group and Company financial statements for each financial year. Under that law
the directors have elected (as required by the rules of the AIM market of the London Stock Exchange) to prepare Group financial
statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”)
and have elected to prepare the Company financial statements in accordance with IFRS as adopted by the EU and as applied in
accordance with the provisions of the Companies Act 2006.
The Group financial statements are required by law and IFRS adopted by the EU to present fairly the financial position and
performance of the Group; the Companies Act 2006 provides in relation to such financial statements that references in the relevant
part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the Group and of the profit or loss of the group for that period.
In preparing each of the Group and Company financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and estimates that are reasonable and prudent;
•
•
state whether they have been prepared in accordance with IFRSs as adopted by the EU;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the
Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure
that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the InfraStrata
plc website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
DISCLOSURE OF INFORMATION TO THE AUDITOR
In the case of each person who was a director at the time this report was approved: - so far as the director was aware there was no
relevant audit information of which the Company’s auditor was unaware; and the director had taken all steps that the director ought
to have taken as a director to make himself or herself aware of any relevant information and to establish that the Company’s auditor
was aware of that information. This information is given and should be interpreted in accordance with the provisions of s418 of the
Companies Act 2006.
AUDITOR
A resolution to re-appoint the auditor, Nexia Smith & Williamson, will be proposed at the forthcoming Annual General Meeting.
On behalf of the Board
A Hindle
Director
1 December 2014
22
INFRASTRATA plc
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INFRASTRATA PLC
We have audited the financial statements of InfraStrata plc for the year ended 31 July 2014 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial Position, the Consolidated
and Parent Company Statements of Cash Flow, the Consolidated and Parent Company Statements of Changes in Equity, and the
related notes 1 to 32. The financial reporting framework that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union and as regards the parent Company financial statements,
as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement on page 22, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us
to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and the parent Company’s affairs as at 31 July 2014
and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and
the parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Emphasis of matter – carrying value of the Group’s development costs relating to the Islandmagee gas storage facility and the
amounts due to the Company from its subsidiaries
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made
in note 2 to the financial statements concerning the Group’s development costs relating to the proposed Islandmagee gas storage
facility with a carrying value of £3,641,437 and the balances due to the Company from its subsidiaries.
As described in note 2, to continue to develop the Group’s Islandmagee gas storage facility and to enable the Company to recover
balances due to it from its subsidiaries, the Group is dependent upon securing further funds. The financial statements do not include
the impairments that would result if the Group were unable to continue to raise such funds.
Emphasis of matter – carrying value of the Group’s license interest in License PL1/10
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of
the disclosure made in note 2 to the financial statements concerning the Group’s interest in the PL1/10 license, which has a carrying
value of £532,856 (comprising costs directly held and the Group’s share of capitalised costs incurred by the Group’s associate,
Brigantes Energy Limited).
As described in note 2, the license will have to be relinquished by 4 March 2015 unless either the Group can commit to undertaking
exploration drilling on the license by that date or the Northern Ireland Department of Enterprise, Trade and Investment agrees
to extend the date by which a commitment to drill must be made. The ability of the Group to commit to undertake the drilling is
dependent on the receipt of funding for the exploration well. The financial statements do not include the impairments that would
result if the funding is not received and the date is not extended.
INFRASTRATA plc
23
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INFRASTRATA PLC (CONTINUED)
Emphasis of matter – going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made
in note 2 to the financial statements concerning the Group’s and the Company’s ability to continue as going concerns. Financial
projections prepared by the directors that future funding is required within the forthcoming year in order for the Group and the
Company to continue as going concerns. The directors anticipate generating additional funding by way of an equity fundraising. If
such funding cannot be raised, the Group and Company would need to seek alternative sources of funding to enable them to meet
their liabilities as they fall due for the foreseeable future.
These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group and Company’s
abilities to continue as going concerns. The financial statements do not include the adjustments that would result if the Group and /
or Company were unable to continue as going concerns.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Report of the directors’ for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our
opinion:
•
adequate accounting records have not been kept by the parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
the parent Company financial statements are not in agreement with the accounting records and returns; or
•
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Andrew Bond
Senior Statutory Auditor,
for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
Walnut Tree Close
1 Bishops Wharf
Walnut Tree Close
Guildford, GU1 4RA
1 December 2014
24
INFRASTRATA plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 JULY 2014
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating loss
Finance income
Share of loss of Associates
Loss before taxation
Taxation
Loss for the year attributable to the equity holders of the parent
Other comprehensive income
Reclassification of funds received from BP Gas Marketing Limited
Total comprehensive profit/(loss) for the year attributable to the equity holders of
the parent
Basic and diluted earnings per share
Continuing operations
Notes
4
9
17
10
15
11
2014
£
17,764
-
17,764
2013
£
62,428
-
62,428
(1,331,350)
(2,002,080)
(1,313,586)
(1,939,652)
8,921
(82,961)
25,566
(43,862)
(1,387,626)
(1,957,948)
140,925
315,188
(1,246,701)
(1,642,760)
2,033,450
-
786,749
(1,642,760)
(1.27)p
(1.81)p
INFRASTRATA plc
25
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2014
Notes
2014
£
2013
£
Non-current assets
Intangible fixed assets:
Exploration & Evaluation
Gas Storage Development
Property, plant and equipment
Investments in associates
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Assets classified as held for sale
Total current assets
Current liabilities
Trade and other payables
Deferred income tax liabilities
Liabilities directly associated with assets classified as held for sale
Total current liabilities
Net current assets
Non-current liabilities
Deferred income tax liabilities
Net assets
Shareholders’ funds
Share capital
Share premium
Merger reserve
Share based payment reserve
Retained earnings
Attributable to owners of the parent
Non-controlling interests
Total equity
13
14
16
17
18
19
15
20
21
15
21
23
24
25
15
3,827,066
3,641,437
440,100
2,545,012
10,453,615
144,823
1,648,955
1,793,778
-
1,793,778
(836,287)
-
-
(836,287)
957,491
3,478,843
-
1,974
2,627,973
6,108,790
906,063
774,745
1,680,808
4,190,267
5,871,075
(533,236)
(179,478)
(149,560)
(862,274)
5,008,801
(745,183)
(706,630)
10,665,923
10,410,961
9,949,160
9,149,160
11,920,219
11,920,219
8,988,112
530,410
8,988,112
434,920
(20,721,978)
(21,508,727)
10,665,923
-
8,983,684
1,427,277
10,665,923
10,410,961
Company registration number: 06409712. Approved and authorised for issue by the Board on 1 December 2014
A Hindle
Director
26
S McGarrity
Director
INFRASTRATA plc
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 JULY 2014
Notes
2014
£
2013
£
Non-current assets
Intangible exploration assets
Property, plant and equipment
Investments
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Net current assets
Net assets
Shareholders’ funds
Share capital
Share premium
Merger reserve
Share based payment reserve
Retained earnings
Total equity
Company registration number: 06409712
Approved and authorised for issue by the Board on 1 December 2014
A Hindle
Director
S McGarrity
Director
13
16
17
18
19
20
23
24
25
101,145
113,934
-
600
1,974
600
101,745
116,508
4,139,208
938,903
5,078,111
(780,465)
4,297,646
4,399,391
3,874,202
730,372
4,604,574
(503,826)
4,100,748
4,217,256
9,949,160
9,149,160
11,920,219
11,920,219
8,466,827
530,410
8,466,827
434,920
(26,467,225)
(25,753,870)
4,399,391
4,217,256
INFRASTRATA plc
27
-
-
-
-
-
-
-
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2014
Share
capital
£
Share
premium
£
Share based
payment
reserve
£
Merger
reserve
£
Attributable
to the
owners of
the parent
£
Retained
earnings
£
Non-
controlling
interest
£
Total equity
£
Balance at 31 July 2012
9,099,160
11,920,219
8,988,112
333,735
(19,865,967)
10,475,259
475,689
10,950,948
Loss for the year
Total comprehensive loss for the year
Shares issued
Share based payments
BP Gas Marketing Limited - Islandmagee
Storage Limited option (note 15)
-
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
101,185
-
(1,642,760)
(1,642,760)
(1,642,760)
(1,642,760)
50,000
101,185
-
-
-
-
(1,642,760)
(1,642,760)
50,000
101,185
-
951,588
951,588
Balance at 31 July 2013
9,149,160
11,920,219
8,988,112
434,920
(21,508,727)
8,983,684
1,427,277
10,410,961
Loss for the year
Other comprehensive income
Total comprehensive profit for the year
-
-
-
Shares issued
800,000
Share based payments
BP Gas Marketing Limited - Islandmagee
Storage Limited option (note 15)
Reclassification of funds received from
BP Gas Marketing Limited (note 15)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
95,490
-
-
(1,246,701)
(1,246,701)
2,033,450
2,033,450
786,749
786,749
800,000
95,490
-
-
-
-
-
(1,246,701)
2,033,450
786,749
800,000
95,490
-
606,173
606,173
-
(2,033,450)
(2,033,450)
Balance at 31 July 2014
9,949,160
11,920,219
8,988,112
530,410
(20,721,978)
10,665,923
-
10,665,923
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 JULY 2014
Balance at 31 July 2012
Loss for the year
Total comprehensive loss for the year
Shares issued
Share based payments
Balance at 31 July 2013
Loss for the year
Total comprehensive loss for the year
Shares issued
Share based payments
Balance at 31 July 2014
Share
capital
£
Share
premium
£
Share based
payment
reserve
£
Merger
reserve
£
Retained
earnings
£
Total equity
£
9,099,160
11,920,219
8,466,827
333,735
(25,185,639)
4,634,302
-
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
101,185
(568,231)
(568,231)
(568,231)
(568,231)
-
-
50,000
101,185
9,149,160
11,920,219
8,466,827
434,920
(25,753,870)
4,217,256
-
-
800,000
-
-
-
-
-
-
-
-
-
-
-
-
95,490
(713,355)
(713,355)
(713,355)
(713,355)
-
-
800,000
95,490
9,949,160
11,920,219
8,466,827
530,410
(26,467,225)
4,399,391
28
INFRASTRATA plc
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JULY 2014
Net cash (used in) operating activities
Investing activities
Interest received
Purchase of exploration intangible assets
Purchase of gas storage intangible assets
Purchase of equipment
Proceeds from the disposal of exploration intangible assets
PGL preference shares receipts
Net cash generated from investing activities
Financing activities
Proceeds on issue of ordinary shares
Contribution from non-controlling interest
Cash inflow on reclassification of assets previously held for sale
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents consist of:
Notes
26
2014
£
2013
£
(702,407)
(2,249,084)
4,772
(347,211)
(255,292)
-
360,000
367,474
129,743
800,000
606,173
40,701
1,446,874
874,210
774,745
1,648,955
5,318
(146,128)
(754,390)
(368)
150,000
899,608
154,040
-
951,588
-
951,588
(1,143,456)
1,918,201
774,745
Cash at bank
19
£1,648,955
£774,745
Significant non-cash transactions
As disclosed in note 13, on 14 March 2014 eCORP’s Net Profits Interest in licence P1918 was cancelled (and InfraStrata
UK Limited acquired the related preference shares held by eCORP in Portland Gas Limited) for a non-cash consideration of
US$600,000 satisfied by the cancellation of the US$600,000 (£361,012) still payable by eCORP under the terms of the June 2012
agreements.
There were no significant non-cash transactions in the 2013 year.
INFRASTRATA plc
29
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 JULY 2014
Net cash (used in) operating activities
Investing activities
Interest received
Purchase of exploration intangible assets
Purchase of equipment
Proceeds from the disposal of exploration intangible assets
Net cash generated from investing activities
Financing activities
Proceeds on issue of ordinary shares
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents consist of:
Notes
26
2014
£
2013
£
(609,030)
(1,092,979)
4,772
(347,211)
-
360,000
17,561
800,000
800,000
208,531
730,372
938,903
5,245
(146,129)
(368)
150,000
8,748
-
-
(1,084,231)
1,814,603
730,372
Cash at bank
19
£938,903
£730,372
Significant non-cash transactions
There were no significant non-cash transactions in the year.
30
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 JULY 2014
1. GENERAL INFORMATION
InfraStrata plc is a company incorporated in England & Wales under the Companies Acts 2006 and is domiciled in the United
Kingdom and is listed on the AIM market of the London Stock Exchange.
2. ACCOUNTING POLICIES
The financial statements are based on the accounting policies set out below which have been consistently applied.
Basis of preparation
InfraStrata plc adopted International Financial Reporting Standards (IFRS) as adopted by the European Union effective in July
2014, as the basis for preparation of its financial statements. The financial information has been prepared under the historical cost
convention as modified by the revaluation of certain financial assets.
Going concern
As with other development companies which have no significant and consistent revenue streams, the Group will only be able
to advance its development programme if it has sufficient resources to do so. The Group generally seeks to farmout the costs of
exploration on its directly operated licences to manage risks and minimise funding requirements. Similarly the Group seeks new
equity partners in the gas storage project prior to committing to each stage of development.
In September 2014, the Company announced that Larne had exercised an option to acquire licence interests in PL1/10 and the
adjacent offshore licence P2123 subject to DETI and DECC approval respectively. The agreement provides that Larne will fund a
disproportionate share of the forthcoming Woodburn Forest-1 exploration well to earn its interest in the licence. The Company has
pre-existing farmout agreements with partners Brigantes and Terrain with respect to the Woodburn Forest-1 well, which mean that
any excess cost accruing to its interest in the well would still be carried.
The terms of the agreements with Larne and with existing partners Brigantes and Terrain required that the full value of the funds
required to drill the Woodburn Forest well be placed in an escrow account. To date Larne has been unable to fulfil this obligation and
has given notice that it expects now to be able to fund two thirds of its obligation. The partners have now entered into supplementary
agreements which reduce Larne’s obligation to fund the escrow by one third.
In the event that Larne is unable to any extent to place the revised two thirds of its commitment into escrow and new investment is
not secured by the date on which the well construction and drilling programme is due to commence then there would be a shortfall
in the funding of the well. The licence partners have until 4 March 2015 to commit to the drilling of a well before the end of the
licence term on 4 March 2016. In the absence of such a commitment or an agreement by DETI to extend the date by which a
commitment to drill must be made, then the licence would need to be relinquished. Despite the uncertainties regarding Larne’s
funding of the escrow account and the need to secure new partners, the directors remain confident that the well will be fully funded
on or before 4 March 2015 being the last date a commitment to drill must be made if there is no extension to that date granted by
DETI. However, the well funding cannot be guaranteed and the directors have therefore concluded that a material uncertainty exists
with regard to Group’s ability to retain the license.
In October 2014, the Company announced that it had entered into an agreement with Southwestern with respect to licence P1918
under which Southwestern will acquire a 10% interest in the P1918 licence, subject to DECC approval, in return for funding 100%
of the next £500,000 of expenditure on the licence and thereafter funding its own share. In addition Southwestern has been granted
an exclusive option to acquire a further interest in the licence in return for funding future drilling activity.
In November 2014 the European Commission published a list of grant awards with the Islandmagee gas storage facility receiving
grant assistance of up to Euros 2.5m (c£2m) towards the cost of well to obtain a salt core sample and carry out subsequent testing
and engineering activities, subject to conclusion of a formal grant agreement. The Company’s subsidiary IMSL is now pursuing the
£2m balance of funding from a range of potential investors by way of an equity participation in IMSL prior to making a financial
commitment to the well.
INFRASTRATA plc
31
NOTES TO THE FINANCIAL STATEMENTS
2. ACCOUNTING POLICIES (CONTINUED)
Going concern (continued)
Should the Group not be successful in obtaining future funding for its projects, capitalised project development costs and amounts
due to the Company from fellow subsdiaries amounting to £3,990,081 may become impaired in value. The directors are confident
that such funding will continue to be secured. With particular regard to the Islandmagee gas storage facility the Company intends
to raise £2m through a new equity fundraising to provide flexibility in the support of its projects generally and intends to use these
funds to underwrite £2m funding required by IMSL to drill the salt core well in anticipation of new direct equity participation in
IMSL being secured in due course. However, the success of any equity fundraising cannot be guaranteed and the directors have
therefore concluded that a material uncertainty exists with regard to the availability of funding to progress the Islandmagee gas
storage facility and to the recovery of amounts due from fellow subsidiaries.
Having reviewed the value of gas storage and exploration and evaluation assets in accordance with the principles on pages 34 and 35
and the value of balances due to the Company from its subsidiaries, the directors are of the opinion that these assets are not impaired
in value subject to the impact of the uncertainties regarding future funding referred to in the previous paragraphs.
On the 23 September 2013 the Company issued 8,000,000 new ordinary shares of 10 pence each at 10 pence per share to
institutional and other shareholders and raised £800,000 before costs. The proceeds of the Placing have improved the Company’s
statement of financial position and enable the Company to be flexible about the funding of exploration costs in advance of the
completion of the farm-out of exploration well costs.
The directors have prepared the financial statements on the going concern basis which assumes that the Group will continue
in operational existence without significant curtailment of its activities for the foreseeable future. Forward cash flow forecasts
assume that all significant future exploration costs will continue to be funded by joint venture partners and that the management
and administrative costs of the Group will remain at current levels, consistent with the delivery of the Group’s strategy and the
management of the challenges and risks associated with the Group’s development programmes. The cash flow forecasts reflect that
the Group requires an additional £600,000 to meet management and administrative costs and working capital requirements until the
end of December 2015.
The directors anticipate that additional funding can be generated through an equity fundraising. It is proposed that the Company’s
share capital be restructured to a par value of 1p at the forthcoming AGM to facilitate access to the equity markets given that the
Company’s shares are currently trading at or below par value; however, the success of any equity fundraising cannot be guaranteed.
After preparing cash flow forecasts, making enquiries and considering the uncertainties described above, the directors have a
reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For
these reasons, they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
However, the directors have concluded that a material uncertainty exists that may cast significant doubt upon the Group’s ability
to continue as a going concern and that, therefore, the Group may be unable to realise its assets and discharge its liabilities in the
normal course of business. Were the Group no longer a going concern, adjustments may be required to the carrying value of assets,
provision would be required for the future liabilities arising as a consequence of the Group ceasing business and assets and liabilities
currently classified as non-current would be reclassified as current.
Adoption of new and revised standards
At the date of approval of these financial statements, the following Standards and Interpretations which have not yet been applied in
these financial statements were in issue but not yet effective (and in some cases, had not yet been adopted by the EU) and that may
have an impact going forward:
IFRS 9 Financial Instruments: Recognition and measurement
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
IFRS 15 Revenue from Contacts with Customers
IAS 19 Employee benefits
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
The directors anticipate that all of the above standards and interpretations will be adopted in the Group’s financial statements in
future periods. Adoption of these standards is not expected to have a material impact on the Group.
32
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
Basis of consolidation
The financial information incorporates the financial information of the Company and entities controlled by the Company. Control
is achieved where the Company has power to govern the financial and operating policies of an investee entity so as to obtain benefits
from its activities.
Business combinations and goodwill
On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of
acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.
Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is
credited to profit or loss in the period of acquisition. Goodwill arising on consolidation is recognised as an asset and reviewed for
impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.
When a business combination is achieved in stages, the Group’s previously held equity interest in the acquiree is re-measured to fair
value at the acquisition date and the resulting gain or loss, if any, is recognised in profit or loss in the statement of comprehensive
income.
Non-controlling interests that are present ownership interests are recognised at the non-controlling interests proportionate share of
the recognised net assets, except that negative non-controlling interests are not recognised where the Group is obliged to bear the
non-controlling interests share of any net liabilities.
Oil and gas exploration joint ventures
The Group is engaged in oil and gas exploration and development which may lead to production through unincorporated joint
ventures. The Group accounts for its share at cost of the results and net assets of these joint ventures as jointly controlled assets
based on its percentage ownership of these joint ventures. In addition, where the Group acts as operator to the joint venture, the
gross liabilities and receivables (including amounts due to and from non-operating partners) of the joint venture are included in the
statement of financial position. Details of the Group’s oil & gas exploration joint ventures accounted for as jointly controlled assets
are provided in note 30.
Farm-outs in the exploration and evaluation phase
The Group does not record any expenditure made by the farminee on its account. In entering into a farm-out arrangement, any
costs previously capitalised in relation to the whole interest are re-designated as relating to the partial interest retained. Any cash
consideration received directly from the farminee is credited against costs previously capitalised in relation to the whole interest with
any excess accounted for by the farminor as a gain on disposal.
Interests in associates
The Group has interests in associates, which are entities over which the Group has significant influence but not control and which are
not joint ventures. The Group recognises its interest in associates using equity accounting. The financial statements of the associates
are prepared for the same reporting year as the parent company, using consistent accounting policies.
Disposal groups held-for-sale
Disposal groups are classified as assets held for sale when their carrying amount is to be recovered principally through a sale
transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if
their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.
If a disposal becomes no longer highly probable then the assets are subject to a review of their carrying value and, if necessary, are
written down to their recoverable amount. The assets are also reclassified from assets held for sale.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker
as required by IFRS 8 “Operating Segments”. The chief operating decision-maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the Board of directors.
INFRASTRATA plc
33
NOTES TO THE FINANCIAL STATEMENTS
2. ACCOUNTING POLICIES (CONTINUED)
Segment reporting (continued)
The accounting policies of the reportable segments are consistent with the accounting policies of the Group as a whole. Segment
profit or loss represents the profit or loss attributable to equity holders of the parent attributable to each segment. This is the measure
of profit that is reported to the Board of directors for the purpose of resource allocation and the assessment of segment performance.
When assessing segment performance and considering the allocation of resources, the Board of directors review information about
segment assets and liabilities.
Property plant and equipment
Property plant and equipment is stated at cost less accumulated depreciation and any recognised impairment loss. The initial cost of
an asset comprises its purchase price or construction cost and any costs directly attributable to bringing the asset into operation.
Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, using the straight-line method, once the
asset has been brought into use, on the following basis:
Office equipment
Freehold land
20-33%
0%
There is no depreciation to charge in respect of capitalised tangible gas storage inclusive of related and pipeline costs as the assets are
fully impaired.
The carrying values of property plant and equipment are reviewed for impairment when events or changes in circumstances indicate
that the carrying value may not be recoverable.
Gas storage research and development costs
Research expenditure, incurred when undertaking exploration activities for gas storage opportunities, is written off in the year in
which it is incurred.
Capitalisation and impairment of intangible gas storage assets
Costs of development of gas storage facilities are capitalised as intangible assets once it is probable that future economic benefits that
are attributable to the assets will flow to the Group and until consent to construct has been awarded, at which time the capitalised
costs are transferred to plant and equipment provided there being reasonable certainty of construction proceeding. The nature of
these costs includes all direct costs incurred in project development. No amortisation or depreciation is provided until the storage
facility is brought into commercial use.
An impairment test is performed annually and whenever events or circumstances arising during the development phase indicate
that the carrying value of a development asset may exceed its recoverable amount. The aggregate carrying value is compared against
the expected recoverable amount of the cash generating unit, generally by reference to the present value of the future net cash flows
expected to be derived from storage revenue. The present value of future cash flows is calculated on the basis of future storage prices
and cost levels as forecast at the statement of financial position date. Capitalisation of project rental costs are reviewed on a regular
basis and expensed when the physical progress on the project is in the directors’ opinion, significantly less than expected.
The cash generating unit applied for impairment test purposes is generally an individual gas storage facility. Where the carrying
value of the facility is greater than the present value of its future cash flows a provision is made. Any such provisions are charged to
cost of sales.
Oil & gas exploration and evaluation expenditure and assets
The Group accounts for oil & gas expenditure under the full cost accounting method.
Pre-licence costs (other than payments to acquire rights to explore) are those costs incurred prior to acquiring the rights to explore
and are charged directly to the statement of comprehensive income.
All costs incurred after the rights to explore an area have been obtained, such as geological, geophysical, data costs and other direct
costs of exploration and appraisal are accumulated and capitalised as exploration and evaluation assets (“E&E”).
34
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
E&E costs are not amortised prior to the conclusion of appraisal activities. If technical feasibility is demonstrated and commercial
reserves are discovered, then following development sanction, the carrying value of the relevant E&E asset will be reclassified as a
development and production asset, but only after the carrying value of the E&E asset has been assessed for impairment, and where
appropriate, its carrying value adjusted. Development assets will be depreciated on the unit production method.
If after completion of appraisal activities in an area, it is not possible to determine technical feasibility or commercial viability, then
the costs of such unsuccessful exploration and evaluation are written off to the statement of comprehensive income as a component
of costs of sales in the period the relevant events occur. The costs associated with any wells which are abandoned are fully amortised
when the abandonment decision is taken.
When oil or gas is sold from E&E assets, the carrying value of the E&E asset is reduced by the gross profit generated from the sale.
Investments
Investments in subsidiaries are stated at cost less provision for impairments.
Taxation
Tax expense represents the sum of the tax currently payable and any deferred tax. The taxable result differs from the net result as
reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in
other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using
tax rates that have been enacted or substantially enacted by the statement of financial position date. Deferred tax is the tax expected
to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting
profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the
Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each statement of financial postition date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is
calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.
Deferred tax is charged or credited to the statement of comprehensive income, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets
and liabilities on a net basis.
Foreign currency
Transactions in foreign currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each statement
of financial position date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates
prevailing on the statement of financial position date and gains or losses are taken to operating profit.
Leases
Leases are classified as finance leases or hire purchase lease contracts whenever the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. All other leases are classified as operating leases.
Rental costs under operating leases are charged on a straight-line basis over the lease term.
Share based payment transactions
Employees (including senior executives) of the Group receive part of their remuneration in the form of share based payment
transactions, whereby employees render services as consideration for equity instruments (equity settled transactions).
INFRASTRATA plc
35
NOTES TO THE FINANCIAL STATEMENTS
2. ACCOUNTING POLICIES (CONTINUED)
Share based payment transactions (continued)
The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the
award (the vesting date). 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 statement of comprehensive income charge or credit for a period represents the movement in cumulative
expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except
for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the
market condition is satisfied, provided that all other performance conditions are satisfied.
Where the terms of an equity settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any modification which increases the total fair value of the share based payment
arrangement, or is otherwise beneficial to the employee as measured at the date of modification.
Where an equity settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated
as a replacement award on the date that is granted, the cancelled and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph.
Retirement benefit costs
The Company has a defined contribution plan which requires contributions to be made into an independently administered fund.
The amount charged to the statement of comprehensive income in respect of pension costs reflects the contributions payable in the
year. Differences between contributions payable during the year and contributions actually paid are shown as either accrued liabilities
or prepaid assets in the statement of financial position.
Financial instruments
Financial assets and financial liabilities are recognised on the statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
Trade and other receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using
the effective interest method. A provision is established when there is objective evidence that the Group will not be able to collect
all amounts due. The amount of any provision is recognised in the statement of comprehensive income. Cash and cash equivalents
comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less.
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective
interest rate method.
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual
arrangements entered into and the definitions of a financial liability and an equity instrument. Equity instruments issued by the
Company are recorded at the proceeds received, net of direct issue costs.
Interest bearing bank loans, overdrafts and other loans are recorded at the proceeds received, net of direct issue costs. Finance costs
are accounted for on an accruals basis in the statement of comprehensive income using the effective interest method.
Revenue
Revenue is recognised as the fair value of the consideration received or receivable and represents the amounts receivable for services
delivered during the normal course of business. Revenue is recognised as the services are delivered.
Finance income
Finance income is recognised when it is probable that the economic benefits will flow to the group and the amount of income can
be measured reliably. Income is accrued on a time basis, by reference to the principal outstanding and the effective interest rate
applicable.
36
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
Judgements in applying accounting policies and key sources of estimation uncertainty
Amounts included in the financial statements involve the use of judgement and/or estimation. These estimates and judgements are
based on management’s best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual
results may differ from the amounts included in the financial statements. Information about such judgements and estimation is
contained in the accounting policies and/or the notes to the financial statements, and the key areas are summarised below.
Capitalisation of gas storage and exploration and evaluation project costs
The assessment of whether costs incurred on project exploration and evaluation should be capitalised or expensed involves judgement.
Any expenditure which is considered to relate to gas storage exploration research activities or where it is not probable that future
economic benefits will flow to the Group are expensed. Management considers the nature of the costs incurred and the stage of
project development and concludes whether it is appropriate to capitalise the costs. The key assumptions depend on whether rights to
explore an area have been obtained, the rock mechanical properties of the halite, the availability of a suitable site for construction of
the required facilities and the likelihood of gaining the relevant permissions.
Review of gas storage project asset carrying values
The assessment of capitalised project costs for any indications of impairment involves judgement. When facts or circumstances
suggest that impairment exists, a formal estimate of recoverable amount is performed and an impairment loss recognised to the
extent that the carrying amount exceeds recoverable amount. Recoverable amount is determined to be the higher of fair value
less costs to sell and value in use. The key assumptions are the net income expected to be generated from the facilities, the cost of
construction and the date from which the facilities become operational. Management assigns values and dates to these inputs after
taking into account market information, engineering design costing and the project programme. A discount rate of 8% is applied
in determining gas storage project net present values. Salt cavern gas storage projects are long term investments and cash flows are
therefore projected over periods greater than 5 years. Engineering design provides for a project life of 40 years. It is assumed that
100% of a project’s capacity will be sold from the date that the capacity becomes operational, therefore no cash flow growth is used
when performing cash flow projections.
Review of exploration and evaluation asset carrying values
IFRS 6 requires that exploration and evaluation assets be assessed for impairment when facts and circumstances suggest that the
carrying amount of an exploration and evaluation asset may exceed its recoverable amount. Management therefore consider annually
whether there are any such facts and circumstances and, if so, undertake an impairment review. In making the initial judgements,
management consider the outcome of exploration and evaluation activities to date and, in particular, data from any seismic surveys
and drilling activities. Management also consider the continuity of the license interests and market data, including oil and gas prices.
Where an impairment test is required, a comparison is made between the carrying value of the assets at the reporting date with the
expected discounted cash flow from the Group’s license interest. For the discounted cash flows to be calculated, management use
production profiles based on its best estimate of reserves and a range of assumptions, including oil/gas prices and discount rates.
Share based payments
The estimation of share based payment costs requires the selection of an appropriate valuation model and consideration as to the
inputs necessary for the valuation model chosen. The Group has made estimates as to the volatility of its own shares, the probable
life of options granted, and the time of exercise of those options. The model used by the Group is the Black-Scholes model. The key
assumptions are detailed in note 7.
Investments in associates
In order to establish whether an entity is a consolidated subsidiary, a joint venture or an associate, key areas of judgment include:
• Quantitative analysis of an entity including review of, amongst other factors, its capital structure, contractual terms, which
interests create or absorb variability, related party relationships and design of the entity.
• Rights of partners reflecting significant business decisions, including dispositions and acquisitions of assets.
• Board and management representation.
• Ability to make financing decisions.
• Operating and capital budget approvals and contractual rights of other parties.
INFRASTRATA plc
37
NOTES TO THE FINANCIAL STATEMENTS
3. SEGMENT INFORMATION
The directors have determined the Group’s operating segments by reference to the risk profile of the Group’s activities, which are
affected predominately by location of the Group’s assets. The Group’s head office is located in the United Kingdom with operations
located in Dorset and Northern Ireland. The segmental businesses activities are the development and construction of gas storage and
associated facilities, and petroleum exploration.
2014
Continuing activities
Revenue
Administrative expenses
Share of loss of associates
Finance income
Taxation
Analysis of:
Assets by segment
Liabilities by segment
Net assets per segment
Capital expenditure
Depreciation
2013
Continuing activities
Revenue
Administrative expenses
Share of loss of associates
Finance income
Taxation
Analysis of:
Assets by segment
Liabilities by segment
Net assets per segment
Capital expenditure
Depreciation
Southern England
Gas storage Exploration
Northern Ireland
Gas storage Exploration
Central
income and
overheads
Total
-
8,534
-
4,956
4,274
17,764
(195,559)
-
*(206,043)
-
(929,748)
(1,331,350)
-
(46,560)
4,149
-
107,276
33,649
-
-
-
(36,401)
-
(82,961)
-
-
4,772
8,921
-
140,925
(84,134)
(4,377)
*(206,043)
(31,445)
(920,702)
(1,246,701)
343,835
5,166,825
*4,445,373
1,273,612
1,017,749
12,247,394
(10,350)
(846,138)
*(35,564)
(622,380)
(67,039)
(1,581,471)
333,485
4,320,687
*4,409,809
651,232
950,710
10,665,923
-
-
250,324
*255,292
96,887
-
602,503
-
-
-
1,974
1,974
Southern England
Northern Ireland
Gas storage Exploration Gas storage Exploration
Central
income and
overheads
Total
49,311
3,421
-
4,327
5,369
62,428
(868,440)
-
*(197,298)
-
(936,342)
(2,002,080)
-
(24,134)
20,248
-
247,890
67,298
-
-
-
(19,728)
-
(43,862)
-
-
5,318
25,566
-
315,188
(550,991)
46,585
(197,298)
(15,401)
(925,655)
(1,642,760)
882,522
4,811,862
*4,190,267
1,301,803
793,412
11,979,866
(189,829)
(715,212)
*(149,560)
(383,980)
(130,324)
(1,568,905)
692,693
4,096,650
*4,040,707
917,823
663,088
10,410,961
-
-
33,394
*754,390
112,735
368
900,883
-
-
-
5,865
5,865
* The Group’s gas storage activities in Northern Ireland comprises the results, assets and liabilities of Islandmagee Storage Limited which was classified as held for sale
at 31 July 2013 but has now been reclassified as explained note 15. The net loss attributable to Islandmagee Storage Limited is now classified as relating to continuing
activities in both years presented.
38
INFRASTRATA plc
4. PROFIT OR LOSS BEFORE TAXATION
Fees payable to the Group’s auditor and its associates:
- for the audit of the Company’s annual financial statements
- for the audit of the Company’s subsidiaries
- other services relating to taxation
- all other services
Depreciation
Profit on the disposal of intangible assets (note)
Net foreign exchange loss
Operating lease rentals – land and buildings
Research costs
NOTES TO THE FINANCIAL STATEMENTS
2014
£
19,450
20,300
13,050
6,550
1,974
-
58,903
30,000
-
2013
£
18,400
20,300
23,000
3,750
5,865
(49,945)
46,280
780,000
10,376
Note: During the year to 31 July 2013 the Company sold a 5% interest in PL1/10 to Brigantes Energy Limited for cash
consideration of £150,000 and a carry of 5% of the costs of the initial well. The transaction gave rise to a profit on disposal of £49,945
(Company: £83,242).
Administrative expenditure
2014
£
2013
£
Management & administrative expenditure paid in cash
1,126,482
1,098,695
Non-cash items:
Share options expense
Exchange differences
Depreciation
Shares issued in lieu of salary
Profit on sale of assets
Expenses of share issue
Pre-licence costs written off
Portland gas storage lease costs
5. EMPLOYEE INFORMATION
Average number of Executive Directors and staff
Staff costs for the above persons and Non-executive Directors were:
Wages and salaries
Social security costs
Defined contribution pension plan expenditure
Share based payments
INFRASTRATA plc
95,490
58,903
1,974
-
-
42,784
5,717
-
1,331,350
101,185
46,280
5,865
50,000
(49,945)
-
-
750,000
2,002,080
2014
2013
Number
Number
6
£
610,328
71,368
61,352
95,490
838,538
6
£
629,580
75,178
57,238
101,185
863,181
39
NOTES TO THE FINANCIAL STATEMENTS
6. DIRECTORS’ AND KEY MANAGEMENT EMOLUMENTS AND COMPENSATION
Group and Company
2014
Executive directors
Andrew Hindle
Stewart McGarrity (appointed 25 September 2013)
Craig Gouws (resigned 25 September 2013)
Non-executive directors
Ken Ratcliff
Walter Roberts
Maurice Hazzard
William Colvin
Share based payment attributable to directors
Employers national insurance contributions
Salary & fees
Bonus
Benefits
Pension
£
£
£
£
Total
2014
£
200,000
119,683
16,203
37,905
46,901
15,000
15,000
450,692
-
-
-
-
-
-
-
-
2,754
1,343
-
202,754
5,000
126,026
298
1,000
17,501
-
1,875
39,780
3,111
2,500
52,512
-
-
-
-
15,000
15,000
7,506
10,375
468,573
75,581
53,698
597,852
Andrew Hindle’s salary was reduced to £200,000 per annum with effect from 1 August 2013.
Walter Roberts became a non-executive director with effect from 1 January 2014. During the year fees for legal services totalling
£15,614 were paid to Pinnacle Energy Limited, a company in which Walter Roberts is both a director and shareholder.
2013
Executive directors
Andrew Hindle
Craig Gouws
Walter Roberts
Non-executive directors
Ken Ratcliff
Maurice Hazzard
William Colvin
Share based payment attributable to directors
Employers national insurance contributions
Salary & fees
Bonus
Benefits
Pension
£
£
£
£
Total
2013
£
250,000*
121,800
79,160
35,250
15,000
15,000
516,210
-
-
-
-
-
-
-
2,610
-
252,610
1,815
11,280
134,895
4,110
11,280
94,550
-
-
-
4,395
39,645
125
15,125
-
15,000
8,535
27,080
551,825
79,033
61,863
692,721
*During the year to 31 July 2013, Andrew Hindle agreed to reduce his cash remuneration for 12 months by the sum of £50,000 and
in return he was issued 500,000 ordinary shares.
40
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
Aggregate emoluments above include amounts for the value of options to acquire ordinary shares in the Company granted or held by
directors. Details of Enterprise Management Incentive and other options held by directors at 31 July 2014 are as follows:
Number
Exercise price
£
Exercise from
Exercise to
Granted 22 July 2013
Stewart McGarrity
Granted 1 January 2013
Andrew Hindle
Walter Roberts
Ken Ratcliff
William Colvin
Maurice Hazzard
Granted 25 January 2008
Andrew Hindle
Walter Roberts
Ken Ratcliff
Maurice Hazzard
518,918
0.10
22 July 2014
22 July 2024
956,022
458,891
143,403
57,361
57,361
43,859
43,859
21,929
21,929
0.1046
31 December 2013
31 December 2021
0.1046
31 December 2013
31 December 2021
0.1046
31 December 2013
31 December 2021
0.1046
31 December 2013
31 December 2021
0.1046
31 December 2013
31 December 2021
2.28
2.28
2.28
2.28
1 January 2011
31 December 2017
1 January 2011
31 December 2017
1 January 2011
31 December 2017
1 January 2011
31 December 2017
No options were exercised by Directors in 2014 or 2013.
Key man insurance premiums of £1,595 (2013: £1,940) were paid for Executive Directors and directors’ indemnity insurance
premiums of £15,370 (2013: £19,425) were paid in respect of all directors. Two Executive and one Non-executive Director
participate in the Group Stakeholder Pension Plan under which Group Life Cover is offered.
7. SHARE BASED PAYMENT PLANS
A share based payment plan was created in the year ended 31 July 2008. All directors and employees are entitled to a grant of options
subject to the Board of directors’ approval. The options do not have a cash settlement alternative. The options granted are Enterprise
Management Incentive share options for qualifying employees.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during
year.
2014
Number
2014
WAEP
£
Outstanding at the beginning of the year
3,637,167
0.2415
Granted during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
-
-
3,637,167
3,637,167
-
-
0.2415
0.2415
INFRASTRATA plc
2013
Number
352,407
3,284,760
-
3,637,167
352,407
2013
WAEP
£
1.50
0.1046
-
0.2415
1.50
41
NOTES TO THE FINANCIAL STATEMENTS
7. SHARE BASED PAYMENT PLANS (CONTINUED)
The weighted average remaining vesting period for the share options outstanding at 31 July 2014 is zero years (2013: 0.47 years). The
range of exercise prices for options outstanding at the end of the year was £0.10 - £2.28. The weighted average remaining option life
for the share options outstanding at 31 July 2014 is 7 years (2013: 8 years).
The fair value of equity settled options granted is estimated as at the date of the grant using a Black-Scholes model, taking into
account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used to
value the options issued up to 31 July 2014.
Expected volatility (%)
Risk free interest rate
Weighted average contractual life of option (years)
Expected dividend yield
Exercise price of options (£)
Weighted average share price (£)
35%
0.5%
10
Nil
0.10-0.14
0.1061
The expected volatility reflects the assumption that the historical volatility of a sample of oil and gas companies is indicative of future
trends for InfraStrata plc, which may not necessarily be the actual outcome. The expected life of the options is based on directors’ best
estimate and may not necessarily be indicative of the patterns that may occur.
8. RETIREMENT BENEFITS
The Group operates a defined contribution retirement plan for all qualifying employees who wish to participate. The assets of the
scheme are held separately from those of the Group in funds under the control of independent trustees.
The total cost charged to expenses of £61,352 (2013: £57,328) represents contributions payable to the scheme by the Group at rates
specified in the rules of the scheme for the year. As at 31 July 2014, employer and employee contributions of £5,624 (2013: £5,758)
due in respect of the current period had not been paid over to the scheme, the payment was made on the 8 August 2014 (2013: 30
August 2013).
9. FINANCE INCOME
Interest on bank deposits
Unwinding of discount on other financial assets
2014
£
4,772
4,149
8,921
2013
£
5,318
20,248
25,566
42
INFRASTRATA plc
10. INCOME TAX
The major components of income tax expense for the years ended 31 July 2014 and 2013 are:
NOTES TO THE FINANCIAL STATEMENTS
2014
£
2013
£
a) Income tax recognised in profit or loss
Current income tax charge/(credit)
Adjustments in respect of current income tax of previous years
Total current corporation tax
Deferred tax charge/(credit)
- origination and reversal of timing differences
- change of rate of tax
Total current deferred tax
-
-
-
(96,446)
(44,479)
(140,925)
-
-
-
(247,888)
(67,300)
(315,188)
b) A reconciliation between tax expense and the product of accounting loss from continuing operations
for the years ended 31 July 2014 and 2013 is as follows:
Accounting loss before tax from continuing operations
(1,387,626)
(1,957,948)
Loss on continuing activities multiplied by the standard rate of tax (22.33%; 2013: 23.67%)
(309,857)
(463,381)
Expenses not permitted for tax purposes and pre-trading expenditure
Other timing differences
Tax losses carried forward
Items not subject to tax
Income tax credit reported in the profit or loss relating to continuing operations
c) Factors that may affect the future tax charge
67,773
-
242,084
140,925
140,925
72,029
-
391,352
315,188
315,188
The Group has trading losses of £3,939,974 (2013: £2,957,132) which may reduce future tax charges. Future tax charges may also be
reduced by capital allowances on cumulative capital expenditure.
The Government has announced a reduction in the corporation rate to 20% to be in force for 2015/16 which has been substantively
enacted.
The Group’s potential charge to tax arising from its investments in the associates is dependent on the source of future inflows to the
Group. Inflows arising from the partial or complete disposal by way of sale are not expected to be subject to tax. The Group has no
current expectation of receiving distributions of profits from these investments in the foreseeable future and therefore no deferred tax
liability arises.
11. EARNINGS PER SHARE
(Loss)/profit
2014
£
2013
£
The (loss) for the purposes of basic and diluted loss per share being the net loss attributable to equity shareholders
Continuing operations
Number of shares
(1,246,701)
(1,642,760)
Weighted average number of ordinary shares for the purposes of basic earnings per share
98,307,952
91,055,983
Basic and diluted earnings per share
Continuing operations
(1.27)p
(1.81)p
For 2014 and 2013, the share options were not dilutive as a loss was incurred.
INFRASTRATA plc
43
NOTES TO THE FINANCIAL STATEMENTS
12. LOSSES ATTRIBUTED TO INFRASTRATA PLC
The loss for the period dealt with in the financial statements of InfraStrata plc was £713,355 (2013: £568,231). As provided by s408
of the Companies Act 2006, no statement of comprehensive income is presented in respect of InfraStrata plc.
13. INTANGIBLE ASSETS - EXPLORATION & EVALUATION
Cost
At 1 August 2012
Additions
Disposals
At 31 July 2013
Additions
Acquisition of net profits interest from eCORP (see footnote 1 below)
Group
£
Company
£
3,399,473
146,128
(66,758)
3,478,843
347,211
361,012
34,564
146,128
(66,758)
113,934
347,211
-
Disposal of interest in P1918 to associate (see footnote 2 below)
(360,000)
(360,000)
Net book value
At 31 July 2014
3,827,066
101,145
Note 1: In June 2012 InfraStrata entered into agreements as part of which its licence interest in P1918 became subject to a net profits
interest (“NPI”) equivalent to 3.75% on the whole licence in favour of eCORP Oil & Gas UK Limited (“eCORP”). On 14 March
2014 eCORP’s NPI in P1918 was cancelled (and InfraStrata UK Limited acquired the related preference shares held by eCORP in
our subsidiary Portland Gas Limited) for a consideration of US$600,000 satisfied by the cancellation of the US$600,000 (£361,012)
still payable by eCORP under the terms of the June 2012 agreement.
Note 2: On 17 March 2014, associated company Brigantes agreed to acquire an 18% interest in licence P1918 for a consideration of
US$600,000 (£360,000 received), subject to DECC approval.
14. INTANGIBLE ASSETS - GAS STORAGE DEVELOPMENT
Group
£
Company
£
Cost
Reclassified on 24 January 2014 (note 15)
Additions subsequent to reclassification
At 31 July 2014
Net book value
At 31 July 2014
3,585,643
55,794
3,641,437
3,641,437
-
-
-
-
Until 24 January 2014, the gas storage development costs were classified as held for sale. Additions in the year prior to that date were
£199,498.
44
INFRASTRATA plc
15. RECLASSIFICATION OF ASSETS PREVIOUSLY HELD FOR SALE
NOTES TO THE FINANCIAL STATEMENTS
In January 2012 the Company entered into an agreement with BPGM regarding the acquisition of an equity interest in IMSL
owned by a subsidiary of InfraStrata plc (65%) and Moyle Energy Investments Limited (35%). The equity interest was to arise
through the exercise of an option by BPGM to acquire a 50.495% holding in the equity of IMSL, effected by the issue of new shares.
As consideration, BPGM was funding appraisal activities under a Joint Appraisal Agreement (“JAA”) and the option would have
been triggered following the drilling of a well to be funded by BPGM. From inception of this agreement the assets and liabilities
of IMSL were classified as held for sale on the basis BPGM’s option would vest and IMSL would then cease to be a subsidiary.
Cumulative receipts from BPGM under the JAA were classified as Non-controlling interests as a component of equity in the Group
statement of financial position.
Following a strategic review of its European wide gas assets portfolio BPGM determined that it will not be taking any further
participation in the project. On 24 January 2014 agreement was reached with BPGM on the terms of settlement of the JAA and the
relinquishment of its option to acquire shares of IMSL. No element of the amounts paid or payable by BPGM under the JAA or
the terms of the settlement are repayable to BPGM. Since the sale of IMSL is no longer highly probable, the assets and liabilities of
IMSL have, with effect from 24 January 2014, been reclassified under the appropriate heading in the Group’s statement of financial
position and the balance of amounts paid and payable by BPGM at that date amounting to £2,033,450 has been transferred from
Non-controlling interests to Retained earnings. The assets and liabilities of IMSL classified as held for sale at 31 July 2013 and the
amounts reclassified on 24 January 2014 are presented below.
Freehold land
Intangible fixed assets:
Gas Storage Development
Trade & other receivables
Cash & cash equivalents
Assets previously held for sale
Trade & other payables
Liabilities previously directly associated with assets classified as held for sale
24 January
2014
Reclassified
£
31 July
2013
£
440,100
440,100
3,585,643
3,386,145
522,964
40,701
4,589,408
(39,596)
(39,596)
4,549,812
190,730
173,292
4,190,267
(149,560)
(149,560)
4,040,707
The loss arising from the operations of IMSL in the year 31 July 2013 amounting to £197,298 which was previously classified as
arising from discontinued operations has now been reclassified as arising from continuing operation in the consolidated statement of
comprehensive income.
In the event that the project does not proceed to development IMSL would have an obligation to reinstate the area of the well-pad
which has already been constructed. This is a contingent liability estimated at £100,000.
INFRASTRATA plc
45
NOTES TO THE FINANCIAL STATEMENTS
16. PROPERTY, PLANT AND EQUIPMENT
Group
Cost
At 1 August 2012
Additions
Disposals
At 31 July 2013
Additions
Reclassified from held for sale (note 15)
At 31 July 2014
Depreciation
At 1 August 2012
Charge for the year
Disposals
At 31 July 2013
Charge for the year
At 31 July 2014
Net book value
At 31 July 2014
At 31 July 2013
Company
Cost
At 1 August 2012
Additions
At 31 July 2013
Additions
At 31 July 2014
Depreciation
At 1 August 2012
Charge for the year
At 31 July 2013
Charge for the year
At 31 July 2014
Net book value
At 31 July 2014
At 31 July 2013
46
Freehold property
£
Office equipment
£
-
-
-
-
-
440,100
440,100
-
-
-
-
-
-
440,100
-
87,028
368
(4,502)
82,894
-
-
82,894
79,557
5,865
(4,502)
80,920
1,974
82,894
-
1,974
Freehold property
£
Office equipment
£
-
-
-
-
-
-
-
-
-
-
-
-
17,380
368
17,748
-
17,748
10,227
5,547
15,774
1,974
17,748
-
1,974
INFRASTRATA plc
Total
£
87,028
368
(4,502)
82,894
-
440,100
522,994
79,557
5,865
(4,502)
80,920
1,974
82,894
440,100
1,974
Total
£
17,380
368
17,748
-
17,748
10,227
5,547
15,774
1,974
17,748
-
1,974
17. INVESTMENTS
Group
Investment in associates
At 1 August
Share of losses
Elimination of inter-company profit
At 31 July
Total investments at the end of the year
NOTES TO THE FINANCIAL STATEMENTS
2014
£
2013
£
2,627,973
(82,961)
-
2,545,012
2,545,012
2,705,131
(43,862)
(33,296)
2,627,973
2,627,973
The Group has 40% interests (2013: 40%) in both of Corfe Energy Limited and Brigantes Energy Limited which are involved in
hydrocarbon exploration. The associates are private companies, incorporated in England and Wales and are not listed on any public
exchanges.
The following table summarises the Group’s share of the assets and liabilities of each of these associates as recorded in each associates’
audited financial statements made up to 31 July 2014 and after making adjustments to align the accounting policies of the associates
with those of the Group:
Corfe Energy Limited
Long-term asset
Current assets
Current liability
Long-term liability
Group’s share of net assets of associates
Brigantes Energy Limited
Long-term asset
Current assets
Current liability
Long-term liability
Group’s share of net assets of associates
2014
£
690,470
95,074
(10,729)
(1,600)
773,215
2014
£
704,676
91,200
(6,567)
(1,600)
787,709
2013
£
613,276
215,101
(10,392)
(1,210)
816,775
2013
£
510,813
319,835
(7,411)
(1,210)
822,027
INFRASTRATA plc
47
NOTES TO THE FINANCIAL STATEMENTS
17. INVESTMENTS (CONTINUED)
The revenue and net loss of each of these associates as recorded in each associates’ audited financial statements made up to 31 July
2014 and after making adjustments to align the accounting policies of the associates with those of the Group:
Corfe Energy Limited
Revenue
Total loss for the year
Group’s share of losses
Group’s share of other comprehensive income
Brigantes Energy Limited
Revenue
Total loss for the year
Group’s share of losses
Group’s share of other comprehensive income
Company
Investment in subsidiaries and associates
Cost
2014
£
72,775
96,378
46,560
-
2014
£
72,771
66,082
36,401
-
2014
£
2013
£
96,052
70,073
24,134
-
2013
£
96,296
55,006
19,728
-
2013
£
Balance at 1 August 2013 and 31 July 2014
15,247,611
15,247,611
Impairment
Balance at 1 August 2013 and 31 July 2014
(15,247,011)
(15,247,011)
Net book value
Balance at 31 July
Investment in subsidiaries
600
600
The Company’s subsidiary undertakings at 31 July 2014, all of which are wholly owned unless indicated otherwise, are as follows:
Principal undertaking
Country of incorporation
InfraStrata UK Limited
Holding and corporate
England
InfraStrata UK Limited owns the following subsidiary undertakings:
Islandmagee Storage Limited (65% owned)
Sub surface gas storage developer
Northern Ireland
Portland Gas Limited
Holding company
England
Portland Gas Storage Limited
Sub surface gas storage developer
England
Portland Gas Transportation Limited
Gas storage pipeline developer
England
48
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
Under the terms of a preliminary shareholder agreement entered into by InfraStrata UK Limited and Moyle in January 2010, Moyle
acquired a 35% interest in Islandmagee Storage Limited but InfraStrata UK Limited continues to assume one hundred percent of the
risks and rewards of ownership of Islandmagee Storage Limited (including voting rights) until such time as Moyle settles its share of
the intercompany loan to Islandmagee Storage Limited. Therefore InfraStrata plc includes 100% of the results, assets and liabilities of
Islandmagee Storage Limited in its financial statements.
The Company has fully impaired its investment in InfraStrata UK Limited investment and loan receivable from InfraStrata UK
Limited. The impairments in 2012 followed the impairment of the Portland Gas Limited project.
Investment in associates - Company
Balance at beginning and end of the year
2014
£
600
2013
£
600
The company owns 40% (2013: 40%) of the issued share capital of the following companies, both of which are incorporated in
England and are involved in oil and gas exploration:
Corfe Energy Limited
Brigantes Energy Limited
18. TRADE AND OTHER RECEIVABLES
Amounts due from Group undertakings
Trade receivables
Other receivables
Prepayments
Group
2014
£
-
14,188
78,467
52,168
144,823
Group
2013
£
Company
2014
£
Company
2013
£
-
3,990,081
3,791,796
20,149
854,061
31,853
906,063
18,619
78,340
52,168
38,159
12,500
31,747
4,139,208
3,874,202
An element of the Company and Group’s credit risk is attributable to its trade and other receivables. Based on prior experience
and an assessment of the current economic environment, the directors did not consider any provision for irrecoverable amounts was
required and consider that the carrying amounts of these assets approximates to their fair value.
19. CASH AND CASH EQUIVALENTS
Group
2014
£
Group
2013
£
Company
2014
£
Company
2013
£
Cash at bank
1,648,955
774,745
938,903
730,372
The directors consider that the carrying amount of these assets approximates their fair value. The credit risk on liquid funds is limited
because the counter-parties are banks with high credit ratings.
INFRASTRATA plc
49
408,963
12,500
28,231
54,132
503,826
Group
2013
£
706,630
179,478
886,108
Group
2013
£
NOTES TO THE FINANCIAL STATEMENTS
20. TRADE AND OTHER PAYABLES
Trade creditors
Preference shares (note 23)
Other taxation and social security
Accruals
Group
2014
£
695,507
12,500
14,087
114,193
836,287
Group
2013
£
424,669
12,500
28,231
67,836
533,236
Company
2014
£
Company
2013
£
680,303
12,500
17,895
69,767
780,465
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
21. DEFERRED TAX
Deferred income tax liabilities in relation to:
Intangible assets (recovered in more than 12 months)
Financial assets (recovered within 12 months)
The gross movement on the deferred tax account is as follows:
Group
2014
£
745,183
-
745,183
Group
2014
£
At 1 August
886,108
1,201,296
Credited to the statement of comprehensive income
Reversal of timing differences
Change of tax rate
At 31 July
(96,446)
(44,479)
(140,925)
745,183
(247,888)
(67,300)
(315,188)
886,108
Deferred tax has been calculated at rates of 20% (2013: 21% - 23%) which are the rates which have been substantively enacted and
which are expected to be applicable when the underlying assets are forecast to be recovered.
50
INFRASTRATA plc
22. FINANCIAL ASSETS AND LIABILITIES
NOTES TO THE FINANCIAL STATEMENTS
The Group and Company’s financial instruments comprise financial assets, cash and cash equivalents and items such as trade payables
and other receivables which arise directly from the Group’s operations. The Group’s operations expose it to a variety of financial risks
including credit risk, liquidity risk, interest rate risk and foreign currency exchange risk. Given the size of the Group, the directors
have not delegated the responsibility of monitoring financial risk management to a subcommittee of the board. The objectives of
the financial instrument policies are to reduce the Group and Company’s exposure to financial risk. The policies set by the board
of directors are implemented by the Company’s finance department. The Group is also indirectly exposed to risks arising from its
interests in its associates. The Group is not required to give detailed information relating to these risks.
Credit risk
The credit risk on liquid funds is limited because the Group and Company policy is to only deal with counter parties with high credit
ratings and more than one institution is utilised to deposit cash holdings. The Group held funds in Bank of Scotland and Investec
bank accounts during the last two years; at year end all of the funds were held in Bank of Scotland and Investec accounts. In the
directors’ view there is a low risk of one of the banks holding the Groups funds at year end failing in the foreseeable future. As at 31
July 2013, the Group was also exposed to the credit risk in relation to the eCORP receivable of £780,341.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the
reporting date was:
Trade and other receivables
Due from subsidiary undertakings
Cash and cash equivalents
Group
2014
£
92,655
-
1,648,955
Group
2013
£
800,490
-
774,745
Company
2014
£
18,619
3,990,081
938,903
Company
2013
£
38,159
3,791,796
730,372
The reconciling items between the trade and other receivables presented above and that presented in note 18 and 19 are VAT
receivable, prepayments and the discount to fair value. No receivables are past due but not impaired.
Interest rate risk
The Company and Group is exposed to interest rate risk as a result of positive cash balances, denominated in sterling, which earn
interest at a variable rate. These attract interest at rates that vary with bank interest rates. Cash at bank at floating rates consisted of
money market deposits which earn interest at rates set in advance from periods of 1-3 months by reference to Sterling LIBOR. An
effective interest rate increase or decrease by 1% on the cash and cash equivalents balance at year end would result in a before tax
financial effect of an increase or decrease of £16,489 (2013: £7,747).
Foreign currency risk
The Group is exposed to foreign currency rate risk as a result of United States Dollar denominated bank balances and certain trade
payables and, in 2013, the eCORP receivable. The Group and Company did not enter into any arrangements to hedge these risks, as
the directors did not consider the exposure to be significant given the short term nature of the balances. The Group and Company
will review this policy as appropriate in the future. As at 31 July 2014, if the United States dollar had weakened or strengthened
10% against sterling with all other variables held constant, the Group’s net loss and equity would have decreased or increased by £83
(2013: £71,038).
The currency risk disclosures are as follows:
Trade and other receivables
Cash and cash equivalents
Trade and other payables
INFRASTRATA plc
Group
2014
USD
Group
2013
USD
-
£780,341
£119,304
£118,469
-
-
51
NOTES TO THE FINANCIAL STATEMENTS
22. FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
Foreign currency risk (continued)
The book value of financial assets and liabilities disclosed is considered to be equal to fair value.
Liquidity risk
The Group and Company policy is to actively maintain a mixture of long-term and short-term deposits that are designed to ensure it
has sufficient available funds for operations. The total carrying value of Group and Company financial liabilities is disclosed in note
20 (trade and other payables). The Company issues share capital when external funds are required. The reconciling items between the
contractual maturities presented below and that presented in notes 20 are taxes. The following table shows the contractual maturities
of the Group’s and Company’s financial liabilities, all of which are measured at amortised cost.
Within one month
More than one month less than one year
Group
2014
£
69,527
625,980
Group
2013
£
275,309
366,755
Company
2014
£
54,323
625,980
Company
2013
£
96,341
366,766
23. SHARE CAPITAL AND REDEEMABLE PREFERENCE SHARES
Ordinary shares of 10 pence each
At 31 July 2012
Issue of shares
At 31 July 2013
Issue of shares
At 31 July 2014
Allotted, called up, and fully paid
Number
90,991,599
500,000
91,491,599
8,000,000
99,491,599
£
9,099,160
50,000
9,149,160
800,000
9,949,160
Redeemable preference shares of £1 each (classified as liabilities)
Allotted and part called
At 31 July 2014, 2013 and 2012
Number
50,000
£
12,500
On 23 September 2013 the Company issued 8,000,000 new ordinary shares of 10 pence each at 10 pence per share to raise £800,000,
before expenses, to institutional and other shareholders. Following the placing, the Company has 99,491,599 ordinary shares in issue.
Preference shares
The preference shares carry the right to an annual dividend out of distributable profits of 0.00001% per annum on the amount for the
time being paid up on each such share and do not carry any voting rights. The Company may redeem the shares at any time by giving
preference shareholders one week’s notice. Preference shareholders may require the Company to redeem their shares at any time by
giving six months notice. In each case, any redemption is at par and is subject to the provisions of the Companies Act. The preference
shares are treated as short-term liabilities and included within trade payables.
Objectives, policies and processes for managing capital
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to achieve
its operational objectives.
52
INFRASTRATA plc
NOTES TO THE FINANCIAL STATEMENTS
The Group defines capital as being share capital plus reserves. The Board of directors monitors the level of capital as compared to the
Group’s forecast cash flows and long term commitments and when necessary issues new shares. Dilution of existing shareholder value
is considered during all processes which may result in an alteration of share capital in issue.
Ordinary share capital in issue is managed as capital and the redeemable preference shares in issue are managed as current liabilities.
The Group is not subject to any externally imposed capital requirements.
24. MERGER RESERVE
Company
The merger reserve arose on the demerger of the Portland Gas Group of companies from Egdon Resources Plc when the Company
issued shares at a premium to their nominal value on acquisition of InfraStrata UK Limited. The reserve is not distributable.
Group
The merger reserve represents the difference between the nominal value of the shares issued on the demerger and the combined share
capital and share premium of InfraStrata UK Limited at the date of the demerger.
25. SHARE BASED PAYMENT RESERVE
The reserve for share based payments is used to record the value of equity settled share based payments awarded to employees and
transfers out of this reserve are made upon the exercise or expiration of the share awards.
The transfer in of £95,490 (2013: £101,185) relates to the share option expense for the year. There were no options forfeited or
exercised during the year (2013: £nil). For further information on the share based payment scheme see note 7.
26. CASH (USED IN) OPERATIONS
Group
Operating loss for the year
Depreciation
Exchange differences on eCORP debtor
Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
Share option expense
Shares issued in lieu of salary or bonus
Profit on sale of assets
Net working capital change in Islandmagee Storage Limited
prior to reclassification
Cash (used in) operating activities
2014
£
2013
£
(1,313,586)
(1,939,652)
1,974
56,004
103,863
263,455
95,490
-
-
5,865
46,890
62,432
(372,514)
101,185
50,000
(49,945)
90,393
(153,345)
(702,407)
(2,249,084)
INFRASTRATA plc
53
NOTES TO THE FINANCIAL STATEMENTS
26. CASH (USED IN) OPERATIONS
Company
Operating loss for the year
Depreciation
(Increase) in trade and other receivables
Increase/(Decrease) in trade and other payables
Share option expense
Shares issued in lieu of salary or bonus
Profit on sale of assets
Cash (used in) operating activities
27. OPERATING LEASE COMMITMENTS
2014
£
(718,127)
1,974
(265,006)
276,639
95,490
-
-
2013
£
(573,476)
5,547
(238,183)
(354,810)
101,185
50,000
(83,242)
(609,030)
(1,092,979)
Future minimum rentals payable under non-cancellable operating leases as at 31 July are as follows:
Amounts due:
Within one year
Land and buildings
2014
£
Land and buildings
2013
£
15,000
15,000
Operating lease payments represent rentals payable by the Group for office premises. The office premises lease rentals are fixed for
5 years and the escalation clause is linked to market rates agreed between the landlord and tenant. The lease provides for a break
clause at the fifth anniversary of the lease which was on 30 October 2012, exercisable at the Company’s option. The landlord and the
Company agreed on 16 May 2012 that there will be no rent review and that either party may terminate the lease at any time on or
after 30 October 2012 by serving six months written notice.
28. OTHER COMMITMENTS
Portland Gas Storage Limited entered into a Section 106 deed of agreement relating to the development of the gas storage facility
on the Isle of Portland on 13 June 2012 which supersedes the original deed of agreement dated 17 June 2008.
On first material operation of the development of the gas storage facility gas pipeline block value at Osmington, Dorset, Portland
Gas Storage Limited covenants:
• To work with the Portland Gas Trust to complete the Engine Shed refurbishment at a cost of approximately £2,000,000.
• On completion of the Engine Shed to pay to the Portland Gas Trust a sum of £100,000 per annum for a period of not less than
twenty years.
• To pay to the Portland Gas Trust a sum of not less than £350,000 to fund projects on the gas storage pipeline route and
Portland.
• The Portland project has been mothballed.
54
INFRASTRATA plc
29. RELATED PARTY TRANSACTIONS
NOTES TO THE FINANCIAL STATEMENTS
InfraStrata plc leases the Group’s head office from Toffee Limited, a company of which Andrew Hindle is a director and shareholder.
A fair market rent paid during the period was £45,000 (2013: £45,000). The balance outstanding at 31 July 2014 was £nil (2013:
£nil).
The Group has related party relationships with its associates. Amounts owed by associates at 31 July 2014 were £3,600 (2013:
£3,122) and amounts owed to associates at 31 July 2014 were £87,149 (2013: £600).
Company
The Company has related party relationships with its subsidiaries and associates in the course of normal operations.
InfraStrata plc recovered overhead and technical support costs from InfraStrata UK Limited of £181,264 (2013: £184,560), Portland
Gas Storage Limited of £120,000 (2013: £180,000) and Islandmagee Storage Limited of £181,264 (2013: £184,465).
The balances outstanding at 31 July 2014, which are not secured, are provided in the following table.
Related party
Subsidiaries
InfraStrata UK Limited
Portland Gas Storage Limited
Islandmagee Storage Limited
Associates
Corfe Energy Limited
Brigantes Energy Limited
Amounts owed by related parties
£
Amounts owed to related parties
£
11,061,347
118,535
704,872
1,800
1,800
-
-
-
48,452
38,697
The balances outstanding at 31 July 2013, which are not secured, are provided in the following table.
Related party
Subsidiaries
InfraStrata UK Limited
Portland Gas Storage Limited
Islandmagee Storage Limited
Associates
Corfe Energy Limited
Brigantes Energy Limited
Amounts owed by related parties
£
Amounts owed to related parties
£
10,878,289
72,289
735,901
-
3,122
-
-
-
300
300
The amounts due from Group undertakings in note 18 are stated net of an impairment provision of £7,894,673 (2013: £7,894,673)
relating to InfraStrata UK Limited.
INFRASTRATA plc
55
NOTES TO THE FINANCIAL STATEMENTS
30. JOINTLY CONTROLLED OIL & GAS EXPLORATION ACTIVITIES
Group and Company
Exploration Licences
Country
Licence
Field name
Operator
Net interest
Northern Ireland
Northern Ireland
England
PL1/10
P2123
P1918
Larne-Lough Neagh Basin
InfraStrata
Larne-Lough Neagh Basin
InfraStrata
English Channel
InfraStrata
27.5%
27.5%
76.0%
The Company has entered into agreements with partners whereby the Company’s share of initial exploration costs are wholly or
partly covered by the partners, therefore the company has incurred net expenditure to the extent of £347,211 (2013: £146,128) in
developing its share of the assets.
Joint Bidding Agreement
On 28 March 2014 the Company entered into a New Ventures Exploration Joint Bidding Agreement with Carstone. Under the
terms of the agreement InfraStrata and Carstone will work together to identify early stage opportunities where the principals of each
company have expertise and experience. Each company bears its own costs in relation to the agreement and will hold 50% of the
available licence interest in each new venture. During the year ended 31 July 2014 costs totalling £5,717 incurred by the Company in
relation to the agreement was written off as pre-licence costs.
31. EVENTS AFTER THE REPORTING PERIOD
In September 2014, the Company announced that Larne had exercised an option to acquire licence interests in PL1/10 and the
adjacent offshore licence P2123 subject to DETI approval. The agreement provides that Larne will fund a disproportionate share
of the forthcoming Woodburn Forest-1 exploration well to earn its interest in the licence. The Company has pre-existing farmout
agreements with partners Brigantes and Terrain with respect to the Woodburn Forest-1 well, which mean that any excess cost
accruing to its interest in the well would still be carried.
The terms of the agreements with Larne and with existing partners Brigantes and Terrain required that the full value of the funds
required to drill the Woodburn Forest well be placed in an escrow account. To date Larne has been unable to fulfil this obligation and
has given notice that it expects now to be able to fund two thirds of its obligation. The partners have now entered into supplementary
agreements which reduce Larne’s obligation to fund the escrow by one third.
In October 2014, Southwestern entered into an agreement with respect to licence P1918. Under the terms of the agreement,
Southwestern will acquire a 10% interest in the P1918 licence, subject to DECC approval, in return for funding 100% of the next
£500,000 of expenditure on the licence and thereafter funding its own share. In addition, it has been granted an exclusive option to
acquire a further interest in the licence in return for funding future drilling activity.
In August 2014 IMSL, together with partners Mutual Energy Limited submitted an application to the European Commission for
a grant of up to 50% of cost of the salt core well and associated testing and engineering work under the Connecting Europe Facility,
available to PCIs. On 21 November 2014 the European Commission published a list of grant awards with IMSL receiving assistance
of up to Euros 2.5m (c.£2m) subject to conclusion of a formal grant agreement.
In November 2014 the Company together with partners Carstone was offered block 3/11a in the East Shetland Basin by DECC in
the UK 28th Seaward Licensing Round.
32. CONTROL OF THE GROUP
There is no ultimate controlling party of InfraStrata plc.
56
INFRASTRATA plc
LETTER FROM THE CHAIRMAN WITH
NOTICE OF ANNUAL GENERAL MEETING
Directors:
Kenneth Ratcliff (Non-executive Chairman)
Andrew Hindle (Chief Executive Officer)
Anita Gardiner (Commercial Development Director)
Stewart McGarrity (Finance Director)
William Colvin (Non-executive Director)
Maurice Hazzard (Non-executive Director)
Dear Shareholder,
1. Introduction
Registered Office:
Blackstable House
Longridge
Sheepscombe
Stroud
GL6 7QX
3 December 2014
Notice of the Company’s forthcoming annual general meeting to be held on Wednesday 21 January 2015 (“AGM” or “Annual
General Meeting”) appears on the following pages.
As in previous years your Board is not recommending the payment of a dividend.
2. Resolutions to be proposed at the AGM
Ordinary Business
Annual Report and Accounts (Resolution 1)
A copy of the annual report and accounts (together with the Directors’ and Auditors’ reports on the annual report and accounts) for
the Company for the financial year ended 31 July 2014 (the “Accounts”) has been sent to you with this document. Shareholders will
be asked to receive the Accounts at the Annual General Meeting.
Re-appointment of Auditors (Resolution 2)
The Company is required at each general meeting at which accounts are presented to appoint auditors to hold office until the
next such meeting. Nexia Smith & Williamson Audit Limited have indicated their willingness to continue in office. Accordingly,
Resolution 2 proposes their re-appointment as auditors of the Company to hold office from the conclusion of the Annual General
Meeting until the conclusion of the next annual general meeting of the Company at which accounts are laid, and authorises the
Directors to determine their remuneration.
Retirement by Directors (Resolutions 3 to 5)
Anita Gardiner who was appointed as Commercial Development Director on 28 October 2014, retires as required by the Articles
and offers herself for re-election. I and Maurice Hazzard are the Directors retiring by rotation this year and each of us offers himself
for re election. All members of the Board are required to submit themselves for re-election at least once every three years. Brief
biographical details of each of the Directors appear on pages 18 to 19 of the Accounts.
Share Capital Reorganisation
The mid-market price of the Existing Ordinary Shares as at the close of business on 2 December 2014 (the last practicable day prior
to the publication of this letter) was 6.625p. The Ordinary Shares have since February 2014 been trading on AIM at a price below
their nominal value of 10p per share. The issue of new shares by a UK company at a price below their nominal value is prohibited by
UK company law and accordingly the ability of the Company to raise funds by way of the issue of further equity has been inhibited.
Should the share price remain below the nominal value of the shares then the inability to raise additional funds by way of an equity
issue will constrain the Company’s financial flexibility.
Accordingly, the Directors are seeking shareholders’ authority to implement the Share Capital Reorganisation to create a differential
between the nominal value of the Ordinary Shares and their market price to facilitate future share issues.
To give effect to the Share Capital Reorganisation, the current Articles of Association of the Company will need to be amended to
make changes to allow for the creation of the Deferred Shares arising on the Share Capital Reorganisation becoming effective. These
amendments will also require shareholders’ approval at the General Meeting.
INFRASTRATA plc
57
LETTER FROM THE CHAIRMAN WITH NOTICE OF ANNUAL GENERAL MEETING
Details of the proposed Share Capital Reorganisation and the proposed amendments to the Articles are set out below as my
comments on Resolutions 8 and 9, but Resolutions 6 and 7 need to accommodate the alternative outcomes of the shareholders’ vote
on the Share Capital Reorganisation.
The proposed timetable for the Share Capital Reorganisation, and the definitions used in relation to the Share Capital
Reorganisation are set out at the foot of this letter.
Authority of Directors to Allot Shares (Resolution 6)
The authority given to the Directors to allot further shares in the capital of the Company requires the prior authorisation of the
shareholders in general meeting under section 551 Companies Act 2006. Upon the passing of Resolution 6, pursuant to paragraph
(A) of the Resolution, the Directors will have authority to allot shares up to a maximum of £3,316,386 (which is approximately one
third of the current issued share capital as at 2 December 2014, being the latest practicable date before the publication of this Letter)
or, following the Share Capital Reorganisation becoming effective, £331,638.60 (which will represent approximately one-third of the
issued share capital following the Share Capital Reorganisation becoming effective).
In addition, in accordance with the guidance from the Association of British Insurers (“ABI”) on the expectations of institutional
investors in relation to the authority of directors to allot shares, upon the passing of Resolution 6, the Directors will have authority
(pursuant to paragraph (B) of the Resolution) to allot an additional number of ordinary shares up to a maximum of £3,316,386
(which is approximately a further third of the current issued share capital as at 2 December 2014, being the latest practicable date
before the publication of this Letter) or, following the Share Capital Reorganisation becoming effective, £331,638.60 (which will
represent approximately one-third of the issued share capital following the Share Capital Reorganisation becoming effective).
However, the Directors will only be able to allot those shares for the purposes of a rights issue in which the new shares are offered to
existing shareholders in proportion to their existing shareholdings.
As a result, if Resolution 6 is passed, the Directors could allot shares representing up to two-thirds of the current issued share capital
pursuant to a rights issue.
To the extent not already expired, the authorities conferred by Resolution 6 will expire immediately following the next Annual
General Meeting or, if earlier, on 31st January 2016.
Disapplication of Pre-emption Rights (Resolution 7)
If the Directors wish to exercise the authority under Resolution 6 and offer unissued shares (or sell any shares which the Company
may purchase and elect to hold as treasury shares) for cash, the Companies Act 2006 requires that unless shareholders have given
specific authority for the waiver of the statutory pre-emption rights, the new shares be offered first to existing shareholders in
proportion to their existing shareholdings. In certain circumstances, it may be in the best interests of the Company to allot new
shares (or to grant rights over shares) for cash without first offering them to existing shareholders in proportions to their holdings.
Resolution 7 would authorise the Directors to do this by allowing the Directors to allot shares for cash (i) by way of a rights
issue (subject to certain exclusions), (ii) by way of an open offer or other offer of securities (not being a rights issue) in favour of
existing shareholders in proportions to their shareholdings (subject to certain exclusions) and (iii) to persons other than existing
shareholders up to an aggregate nominal value of £1,989,831 (which represents approximately 20% of current issued share capital
as at 2 December 2014, being the latest practicable date before the publication of this Letter), or, following the Share Capital
Reorganisation becoming effective, £198,983.10 (which will represent approximately 20% of the issued share capital following the
Share Capital Reorganisation becoming effective). If given, to the extent not already expired, the authorities conferred by Resolution
7 will expire on the conclusion of the next Annual General Meeting or, if earlier, on 31st January 2016.
For this purpose the ABI recommendation aimed predominantly at premium-listed companies on the LSE main list is 5%, although
it is generally recognised that for smaller companies and those on AIM this may be too restrictive. The nature of our business and the
critical phase of so many of the projects in which we are involved, which can both be expected to require up front investment and can
take a long time to develop fully means that your Board considers 5% to be insufficient. Consequently I would ask that you approve
a 20% disapplication of pre-emption rights to provide your Board with the flexibility to pursue such opportunities without incurring
the costs of a rights issue or the need to market part of the investment opportunity to third parties.
Share Capital Reorganisation (Resolutions 7 & 8)
As at 2 December 2014, being the latest practicable date prior to the publication of this letter, the total issued share capital of the
Company was £9,949,159.90 divided into 99,491,599 Existing Ordinary Shares.
58
INFRASTRATA plc
LETTER FROM THE CHAIRMAN WITH NOTICE OF ANNUAL GENERAL MEETING
Share Capital Reorganisation (Resolutions 7 & 8) (continued)
In order to effect the Share Capital Reorganisation, the Existing Ordinary Shares of 10 pence will be subdivided into 1 New
Ordinary Share of 1 penny each and 9 Deferred Shares of 1 penny each.
Terms used in this section of my letter to you and the timetable for the Share Capital Reorganisation appear at the foot of this letter.
Ordinary Shares
As a consequence of the Share Capital Reorganisation, each shareholder’s holding of New Ordinary Shares will immediately
following the Share Capital Reorganisation becoming effective be the same as the number of Existing Ordinary Shares held by them
on the Record Date. Each shareholder’s proportionate interest in the Company’s issued ordinary share capital will remain unchanged
as a result of the proposed Share Capital Reorganisation.
The New Ordinary Shares will continue to carry the same rights as are attached to the Existing Ordinary Shares.
The last day of trading on AIM in the Existing Ordinary Shares is expected to be 21 January 2015.
If approved, following the Share Capital Reorganisation, and assuming no further shares are issued between 2 December 2014 (being
the latest practicable date prior to the publication of this letter) and the Record Time, the Company’s issued ordinary share capital
will comprise 99,491,599 New Ordinary Shares and 895,424,391 Deferred Shares.
Assuming that the Share Capital Reorganisation is approved, existing share certificates representing Existing Ordinary Shares will
continue to be valid in respect of the New Ordinary Shares. No share certificates will be issued in respect of the New Ordinary
Shares.
Shareholders who hold their entitlement to Existing Ordinary Shares in uncertificated form through CREST are expected to have
their CREST accounts adjusted to reflect their entitlement to New Ordinary Shares on 22 January 2015.
Deferred Shares
The Deferred Shares created will be effectively valueless as they will not carry any rights to vote or any dividend rights. In addition,
holders of Deferred Shares will only be entitled to a payment on a return of capital or on a winding up of the Company after each of
the holders of Ordinary Shares has received a payment of £10,000,000 on each such share. The Deferred Shares will not be admitted
to trading on AIM and will not be transferable without the prior written consent of the Board. No share certificates will be issued
in respect of the Deferred Shares, nor will CREST accounts of shareholders be credited in respect of any entitlement to Deferred
Shares.
Changes to the Articles of Association (Resolution 9)
In connection with the Share Capital Reorganisation, the Company also proposes to amend its Articles of Association to include the
rights and restrictions attaching to the Deferred Shares, as set out above.
3. Recommendation
Your Directors consider the Resolutions to be proposed at the AGM to be in the best interests of the Company and its shareholders
as a whole. Consequently, the Directors recommend shareholders to vote in favour of the Resolutions as they intend to do in respect
of their own beneficial holdings totalling 7,818,678 Ordinary shares (representing 7.86 per cent. of the Company’s issued share
capital as at the date of this Letter).
A form of proxy is included for use at the AGM. Forms of proxy should be completed, signed and returned as soon as possible and in
any event so as to be received by Capita Asset Services at PXS1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF not less than 48
hours prior to the time appointed for the holding of the AGM on 21 January 2015.
Completion of a proxy form will not prevent you from attending the AGM in person if you so wish.
Yours sincerely,
Ken Ratcliff
Non-executive Chairman
INFRASTRATA plc
59
LETTER FROM THE CHAIRMAN WITH NOTICE OF ANNUAL GENERAL MEETING
SHARE CAPITAL REORGANISATION DEFINITIONS AND TIMETABLE
Definitions
AIM
the market operated by the London Stock Exchange;
AIM Rules
the rules for AIM companies as issued by the London Stock Exchange plc, from time to time;
Deferred shares
the Deferred Shares of 1p each arising from the Share Capital Reorganisation having the rights set
out in the New Articles;
Existing Ordinary Shares
the existing issued ordinary shares of 10p each in the capital of the Company;
New Articles
the articles of association of the company as amended by Resolution 9 set out in the Notice of
AGM;
New Ordinary shares
the new ordinary shares of 1p each in the share capital of the Company resulting from the Share
Capital Reorganisation;
Ordinary Shares
Record Time
prior to the Share Capital Reorganisation, the Existing Ordinary Shares and, thereafter, the New
ordinary Shares;
6.00 p.m. on 21 January 2015 (or any other time and date as the Directors in their absolute
discretion may determine);
Share Capital Reorganisation
the proposed reorganisation to be effected by subdividing each Existing Ordinary Share into 1
New Ordinary Share and 9 Deferred Shares.
Expected Timetable
Event
Date
Latest time and date for receipt of Forms of Proxy for the Annual General meeting
11.30 a.m. 19 January 2015
Time and date of Annual General meeting
11.30 a.m. 21 January 2015
Latest time and date for dealings on AIM in Existing Ordinary Shares
5.00 p.m. 21 January 2015
Record Time for the Share Capital Reorganisation
New Ordinary Shares credited to CREST accounts
Notes
6.00 p.m. 21 January 2015
8.00 a.m. 22 January 2015
1. Each of the times and dates in the above timetable is based on current expectations and is subject to change. If any of the
above times and/or dates change, the revised times and/or dates will be notified to shareholders by announcement through a
Regulatory Information Service.
2. All references in this document to times are to London times.
60
INFRASTRATA plc
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the Annual General Meeting of InfraStrata plc (the “Company”) will be held at the offices of Buchanan
Communications Limited, 107 Cheapside, London, EC2V 6DN, United Kingdom on Wednesday 21 January 2015 at 11.30 a.m.,
for the purpose of passing the following Resolutions, of which Resolutions 1 to 6 will be proposed as Ordinary Resolutions and
Resolutions 7 to 9 will be proposed as Special Resolutions:
Ordinary Resolutions:
1. To receive the report of the Directors and the audited accounts of the Company for the year ended 31 July 2014, together with
the report of the Auditors on those audited accounts.
2. That Nexia Smith & Williamson Audit Limited be and are hereby reappointed as auditor of the Company to hold office from
the conclusion of this meeting until the conclusion of the next meeting at which accounts are laid before the meeting, at a
remuneration to be determined by the Directors.
3. To re-elect Anita Gardiner as Director who retires pursuant to article 87 of the Company’s articles of association and who, being
eligible, offers herself for re election.
4. To re-elect Kenneth Ratcliff as Director who retires pursuant to article 92 of the Company’s articles of association and who,
being eligible, offers himself for re election.
5. To re-elect Maurice Hazzard as Director who retires pursuant to article 92 of the Company’s articles of association and who,
being eligible, offers himself for re election.
6. To consider and, if thought fit, to pass the following Resolution as an ordinary resolution:
THAT the Directors be and they are hereby generally and unconditionally authorised in accordance with section 551
Companies Act 2006 (CA 2006) to exercise all the powers of the Company to allot shares in the Company and to grant
rights to subscribe for, or to convert any security into, shares in the Company:
(A)
(i) up to an aggregate nominal amount of £3,316,386; and
(ii) subject to and with effect from the subdivision referred to in Resolution 8 in this Notice of Annual
General Meeting (the “Share Capital Reorganisation”) becoming effective, in substitution for the authority
granted by sub-paragraph (A)(i) of this Resolution but without prejudice to any prior exercise of such
authority, up to an aggregate nominal amount of £331,638.60; and
(B)
(i) comprising equity securities (within the meaning of section 560 CA 2006) up to a further aggregate
nominal amount of £3,316,386 in connection with an offer by way of a rights issue:
(1)
(2)
to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
to holders of other equity securities as required by the rights of those securities or as the Directors
otherwise consider necessary,
(ii) subject to and with effect from the Share Capital Reorganisation becoming effective, in substitution for
the authority granted by sub-paragraph (B)(i) of this Resolution but without prejudice to any prior exercise
of such authority, comprising equity securities (within the meaning of section 560 CA 2006) up to a further
aggregate nominal amount of £331,638.60 in connection with an offer by way of a rights issue:
(1)
(2)
to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
to holders of other equity securities as required by the rights of those securities or as the Directors
otherwise consider necessary,
and so that that Directors may impose any limits or restrictions and make any arrangements which they consider
necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical
problems in, or under the laws of, any territory or the requirements of any regulatory body or stock exchange or any other
matter (including any such problems arising by virtue of equity securities being represented by depositary receipts).
The authorities conferred on the Directors under paragraphs (A) and (B) above shall, in so far as they have not previously
expired, expire at the conclusion of the next annual general meeting of the Company after the passing of this Resolution
or 31 January 2016, whichever is the earlier save that the Company may before such expiry make an offer or agreement
which would or might require shares to be allotted or rights to subscribe for, or to convert any security into, shares to be
granted after such expiry and the Directors may allot shares or grant rights to subscribe for, or to convert any security
into, shares (as the case may be) in pursuance of such an offer or agreement as if the authority conferred hereby had not
expired.
INFRASTRATA plc
61
NOTICE OF ANNUAL GENERAL MEETING
Special Resolutions:
7. To consider and, if thought fit, to pass the following resolution as a special resolution:
THAT, subject to the passing of Resolution 6 above the Directors be and they are hereby empowered pursuant to section
570 CA 2006 to allot equity securities (within the meaning of section 560 CA 2006) for cash pursuant to the authority
conferred by Resolution 6, as if section 561 CA 2006 did not apply to any such allotment, provided that this power shall
be limited:
(A)
to the allotment of equity securities in connection with an offer of equity securities (but in the case of the
authorities granted under paragraph (B) of Resolution 6, by way of a rights issue only):
(i)
(ii)
to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings; and
to holders of other equity securities as required by the rights of those securities or as the Directors
otherwise consider necessary,
and so that the Directors may impose any limits or restrictions and make any arrangements which they
consider necessary or appropriate to deal with any treasury shares, fractional entitlements, record dates, legal,
regulatory or practical problems in, or under the laws of, any territory or the requirements of any regulatory
body or stock exchange or any other matter (including any such problems arising by virtue of equity securities
being represented by depositary receipts); and
(B)
to the allotment (otherwise than under paragraph (A) of this Resolution 7):
(i)
(ii)
prior to the Share Capital Reorganisation becoming effective, of equity securities up to an aggregate
nominal amount of £1,989,831; and
with effect from the Share Capital Reorganisation becoming effective, of equity securities up to an
aggregate nominal amount of £198,983.10,
and shall, in so far as they have not previously expired, expire at the conclusion of the next annual general meeting of the
Company after the passing of this Resolution or 31 January 2016, whichever is the earlier, except that the Company may
before such expiry make an offer or agreement which would or might require equity securities to be allotted after such
expiry and the Directors may allot equity securities in pursuance of such offer or agreement as if the power conferred
hereby had not expired.
8. To consider and, if thought fit, to pass the following resolution as a special resolution:
THAT, subject to and conditional on the admission of the New Ordinary Shares (as defined below) to trading on the
AIM Market of the London Stock Exchange plc becoming effective and on Resolution 9 set out in the notice of General
Meeting being passed without amendment each existing ordinary share of 10 pence each (each an “Existing Ordinary
Share”) that are in issue as at 6.00 p.m. on 21 January 2015 (or such other time as the Directors may determine) (the
“Record Time”) be subdivided into one ordinary share of 1 penny each (each a “New Ordinary Share”) and 9 deferred
shares of 1 penny each (“Deferred Shares”), each having the rights and being subject to restrictions set out in the articles
of association of the Company as amended by Resolution 9 below.
9. To consider, and if thought fit, to pass the following resolution which is proposed as a special resolution:
That the existing articles of association of the Company be amended by:
(A)
(B)
the addition in Article 2 of the following definition: ““Deferred Shares” means deferred shares of 1p each in the
capital of the Company having such rights are stated as attaching thereto in Article 175.”
the deletion of the definition “Ordinary Share” in Article 2 and its replacement with the following definition
““Ordinary Share” means an ordinary share of 1 penny each in the capital of the Company”;
62
INFRASTRATA plc
NOTICE OF ANNUAL GENERAL MEETING
(C)
the addition of a new Article 175 as follows:
“175 Deferred Shares
The rights attaching to the Deferred Shares shall be as follows:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
The Deferred Shares shall confer no right to participate in the profits of the Company;
on a winding-up or a return of capital, the assets of the Company available for distribution following the
distribution of assets shall be applied in paying to the holders of the Deferred Shares the nominal capital
paid up or credited as paid up on such Deferred Shares only after paying to the holders of the ordinary
shares the nominal capital paid up or credited as paid up on the Ordinary Shares held by them respectively,
together with the sum of £10,000,000 on each Ordinary Share;
the holders of the Deferred Shares shall not be entitled to any further right of participation in the assets of
the Company;
the holders of the Deferred Shares shall not be entitled to receive notice of any general meeting of the
Company or to attend, speak or vote at any such meeting;
the Deferred Shares shall not be listed on any stock exchange nor shall any share certificate be issued in
respect of such shares. The Deferred Shares shall not be transferable except in accordance with Article 175
(viii)(b) below or with the written consent of the Board;
the Company may from time to time create, allot and issue further shares, whether ranking pari passu
with or in priority to the Deferred Shares, and on such creation, allotment or issue any such further shares
(whether or not ranking in any respect in priority to the Deferred Shares) shall be treated as being in
accordance with the rights attaching to the Deferred Shares and shall not involve a variation of such rights
for any purpose or require the consent of the holders of the Deferred Shares;
the reduction by the Company of the capital paid up on the Deferred Shares and the cancellation of such
shares shall be in accordance with the rights attaching to the Deferred Shares and shall not involve a
variation of such rights for any purpose and the Company shall be authorised at any time to reduce its
capital (subject to the confirmation of the court in accordance with the CA 2006) without obtaining the
consent of the holders of the Deferred Shares;
(vii)
the Company has the irrevocable authority at any time to do all or any of the following without obtaining
the sanction of the holder or holders of the Deferred Shares:
(A)
(B)
(C)
(D)
to appoint any person to execute on behalf of any holder of Deferred Shares a transfer of all
or any part thereof and/or an agreement to transfer the same (without making any payment
therefor) to such person as the directors may determine (whether or not an officer of the
Company) and who is willing to accept the same;
to purchase all or any of the Deferred Shares in accordance with the CA 2006 Act without
obtaining the consent of the holders thereof and in consideration of the payment to each of
the holders whose shares are purchased of an amount equal to one penny in respect of all the
Deferred Shares then being purchased by the Company;
for the purposes of any such purchase under Article 175 (viii)(B) above, to appoint any person
to execute, as his or its attorney and agent, on behalf of any holder of Deferred Shares a
contract for the sale to the Company of any such Deferred Shares held by him or it; and
to cancel all or any of the same so purchased under Article 175 (viii)(B) above in accordance
with the CA 2006 Act.”
Dated 3rd December 2014
By Order of the Board
Walter Roberts
Secretary
INFRASTRATA plc
Registered Office:
Blackstable House
Longridge
Sheepscombe
Stroud
GL6 7QX
63
NOTICE OF ANNUAL GENERAL MEETING
1. A member is entitled to appoint one or more proxies to exercise all or any of the member’s rights to attend, speak and vote
on his/her behalf at the meeting. A proxy need not be a member of the Company. If a member appoints more than one proxy
to attend the meeting, each proxy must be appointed to exercise the rights attached to a different share or shares held by the
member. If a member wishes to appoint more than one proxy and so requires additional proxy forms, the member should contact
Capita Asset Services on 0871 664 0300 if calling within the United Kingdom or +44 20 8639 3399 if calling from outside the
United Kingdom. Lines are open 8:30am – 5:30pm Mon–Fri. Calls to the helpline from within the United Kingdom cost 10
pence per minute (including VAT) from a BT landline. Other service providers’ costs may vary. Call to the helpline from outside
the United Kingdom will be charged at applicable international rates. Calls may be recorded and monitored for security and
training purposes. A form of proxy for use by members at the Annual General Meeting accompanies this notice.
2. To be effective, the form of proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially
certified copy of such authority, must be received by post or (during normal business hours only) by hand at the office of the
Company’s Registrars, being Capita Asset Services at PXS1, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4ZF,
not less than 48 hours, excluding non-business days, before the time of the holding of the meeting or any adjournment thereof.
3. Completion and return of the proxy form does not preclude a member from attending and voting at the meeting in person.
4.
In the case of joint shareholders, where more than one of the joint holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint
shareholders appear in the Company’s register of members in respect of the joint holding (the first-named being the most
senior).
5. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the
6.
7.
8.
cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy
appointment received after the relevant cut-off time will be disregarded. If you submit more than one valid proxy appointment,
the appointment received last before the latest time for the receipt of proxies will take precedence.
In order to revoke a proxy instruction you will need to inform the Company by sending notice in writing clearly stating your
intention to revoke your proxy appointment to the Company’s Registrars, being Capita Asset Services at PXS1, The Registry,
34 Beckenham Road, Beckenham, Kent BR3 4ZF. In the case of a member which is a company, the revocation notice must
be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any
power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power or
authority) must be included with the revocation notice. The revocation notice must be received by the Company no later than 48
hours, excluding non-business days, before the time of the holding of the meeting or any adjournment thereof. If you attempt to
revoke your proxy appointment but the revocation is received after the time specified then your proxy appointment will remain
valid. If you have appointed a proxy and attend the meeting in person, your proxy appointment will automatically be terminated.
In accordance with the permission in Regulation 41(1) of The Uncertificated Securities Regulations 2001 (SI 2001 No. 3755),
only those holders of ordinary shares who are registered on the Company’s share register at 18.00 hours on 19 January 2015 shall
be entitled to attend the above Annual General Meeting (or, in the case of an adjourned meeting, 18.00 hours on the day which
is two days before the adjourned meeting) and to vote in respect of the number of shares registered in their names at that time.
Changes to entries on the share register after 18.00 hours on 19 January 2015 shall be disregarded in determining the rights of
any person to attend and/or vote at the Annual General Meeting.
If the Chairman, as a result of any proxy appointments, is given discretion as to how the votes the subject of those proxies are to
be cast and the voting rights in respect of those discretionary proxies, when added to the interests in the Company’s securities
already held by the Chairman, result in the Chairman holding such number of voting rights that he has a notifiable obligation
under the Disclosure and Transparency Rules, the Chairman will make the necessary notifications to the Company and the
Financial Services Authority. As a result, any member holding 3% or more of the voting rights in the Company who grants
the Chairman a discretionary proxy in respect of some or all of those voting rights and so would otherwise have a notification
obligation under the Disclosure and Transparency Rules, need not make a separate notification to the Company and the
Financial Services Authority.
9. Copies of the service agreements and letters of appointment between the Company and its Directors will be available for
inspection at the registered office of the Company during usual business hours on any weekday (Saturdays, Sundays and Bank
Holidays excluded) until the date of the meeting and also on the date and at the place of the meeting from half an hour before
the meeting until the conclusion of the meeting.
64
INFRASTRATA plc
PROXY FORM
INFRASTRATA PLC
Proxy Form for use by Shareholders at the Annual General Meeting (“AGM”) of
InfraStrata plc (the “Company”) to be held at the offices of Buchanan Communications Limited,
107 Cheapside, London, EC2V 6DN, United Kingdom on Wednesday 21 January 2015 at 11.30 a.m.
Please read the Notice of the AGM and the accompanying notes carefully before completing this Proxy Form.
As a Shareholder of the Company you have the right to attend, speak at and vote at the AGM. If you cannot, or do not
want to attend the AGM, but still want to vote, you can appoint someone to attend the AGM and vote on your behalf.
That person is known as a “proxy”. You can use this Proxy Form to appoint the Chairman of the AGM, or someone else,
as your proxy. Your proxy does not need to be a Shareholder of the Company.
I/We,
being a Shareholder/Shareholders of InfraStrata plc, appoint the Chairman of the AGM or
(in BLOCK CAPITALS please)
(see note 1) as my/our proxy to attend and, on a poll, to vote for me/us and on my/our behalf as indicated below at the
AGM and at any adjournment thereof (see notes below).
Please clearly mark the boxes below to instruct your proxy how to vote.
ORDINARY RESOLUTIONS
For
Against
Vote witheld
Discretionary
1. To receive the Report and Accounts
for the year ended 31 July 2014
2. To re-appoint Nexia Smith &
Williamson Audit Limited as auditors
at a remuneration to be determined by
the Directors
3. To re-elect Anita Gardiner
4. To re-elect Kenneth Ratcliff
5. To re-elect Maurice Hazzard
6. To grant the directors authority to
allot shares on the basis set out in the
Notice of AGM
SPECIAL RESOLUTIONS
7. To disapply pre-emption rights on
the basis set out in the Notice of AGM
8. To affect the Share Capital
Reorganisation
9. To amend the Articles to include the
deferred share rights
Signature(s) ........................................................................................... (see note 8) Date ........................................ 20.........
Please complete and send this proxy form to Capita Asset Services, PXS1, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4ZF.
INFRASTRATA plc
65
NOTES TO PROXY FORM
1. A proxy need not be a member of the Company but must attend the meeting to represent you. If you wish to appoint as a proxy
a person other than the Chairman of the AGM, please delete the words “the Chairman of the AGM” and insert the name of the
other person. All alterations made to this Proxy Form must be initialled by the signatory. If you sign and return this Proxy Form
with no name inserted in the box, the Chairman of the AGM will be deemed to be your proxy. If the proxy is being appointed
in relation to less than your full voting entitlement, please enter the number of shares in relation to which they are authorised
to act as your proxy. If left blank your proxy will be deemed to be authorised in respect of your full voting entitlement (or if this
Proxy Form has been issued in respect of a designated account for a shareholder, the full voting entitlement for that designated
account).
2. To be effective, this Proxy Form (together with any power of attorney or other authority (if any) under which it is signed, or a
notarially certified copy of such authority) must be received by post or (during normal business hours only) by hand at the office
of the Company’s Registrars, being Capita Asset Services at PXS1, The Registry, 34 Beckenham Road, Beckenham, Kent BR3
4ZF, by no later than 11.30 a.m. on 19 January 2015.
3. You are entitled to appoint more than one proxy provided that each proxy is appointed to exercise rights attached to a different
share or shares held by you. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint
more than one proxy, (an) additional Proxy Form(s) may be obtained by contacting the Registrars helpline on +44 (0)871 664
0300 (calls cost 10p per minute plus network extras) or you may photocopy this form. Please indicate next to the proxy holder’s
name the number of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking the box
provided if the proxy instruction is one of multiple instructions being given. All forms must be signed and should be returned
together in the same envelope.
4. Completion and return of this Proxy Form will not prevent you from attending in person and voting at the AGM should you
5.
subsequently decide to do so.
If you wish your proxy to cast all of your votes “For” or “Against” a resolution you should insert an “X” in the appropriate box.
If you wish your proxy to cast only certain votes “For” and certain votes “Against”, insert the relevant number of shares in the
appropriate box. In the absence of instructions, your proxy may vote or abstain from voting as he or she thinks fit on the specified
resolution and, unless instructed otherwise, may also vote or abstain from voting as he or she things fit on any other business
(including on a motion to amend a resolution to propose a new resolution or to adjourn the AGM) which may properly come
before the AGM.
7.
6. The “Vote Withheld” option is provided to enable you to instruct your proxy to abstain from voting on a particular resolution. A
“Vote Withheld” is not a vote in law and will not be counted in the calculation of the proportion of the votes “For” or “Against” a
resolution. The “Discretionary” option is provided to enable you to give discretion to your proxy to vote or abstain from voting on
a particular resolution as he or she thinks fit.
In accordance with the permission in Regulation 41 of the Uncertificated Securities Regulations 1001 (SI 2001 No. 3755), only
those holders of ordinary shares who are registered on the Company’s share register at 1800 hours on 19 January 2015 shall be
entitled to attend the above AGM (or 1800 hours on the day which is two days before the day of any adjourned meeting) and to
vote in respect of the number of shares registered in their names at that time. Changes to entries on the share register after 1800
hours on 19 January 2015 shall be disregarded in determining the rights of any person to attend and/or vote at the AGM.
8. This Proxy Form must be signed by the shareholder or his/her attorney. Where the shareholder is a corporation, the signature
must be under seal or signed by a duly authorised representative stating their capacity (e.g. Director, secretary). In the case of
joint shareholders, any one shareholder may sign this Proxy Form or may vote in person at the Meeting. If more than one joint
shareholder is present at the AGM either in person or by proxy, that one of them whose name stands first in the register of
members in respect of the share shall alone be entitled to vote (whether in person or by proxy) in respect of it.
9. To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the
cut-off time for receipt of proxy appointments (see above) also apply in relation to amended instructions; any amended proxy
appointment received after the relevant cut-off time will be disregarded.
10. In order to revoke a proxy instruction you will need to inform the Company by sending notice in writing clearly stating your
intention to revoke your proxy appointment to Company’s Registrars, being Capita Asset Services at PXS1, The Registry,
34 Beckenham Road, Beckenham, Kent BR3 4ZF. In the case of a member which is a company, the revocation notice must
be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any
power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy of such power
or authority) must be included with the revocation notice. The revocation notice must be received by the Company no later
than 48 hours before the time of the holding of the meeting or any adjournment thereof. If you attempt to revoke your proxy
appointment but the revocation is received after the time specified then your proxy appointment will remain valid. If you have
appointed a proxy and attend the meeting in person, your proxy appointment will automatically be terminated.
11. If you submit more than one valid proxy appointment in respect of the same share or shares, the appointment received last before
the latest time for the receipt of proxies will take precedence. If the Company is unable to determine which was received last,
none of the proxy appointments in respect of that share or shares shall be valid.
66
INFRASTRATA plc
InfraStrata plc
80 Hill Rise
Richmond
Surrey
TW10 6UB
www.infrastrata.co.uk