Company registration number: 06409712
InfraStrata plc
Annual Report &
Financial Statements
2016
Table of Contents
Directors, secretary, advisors and shareholder information
Chairman’s statement
Strategic Report
Report of the directors
Independent auditor’s report
Page
3
4-5
6-13
14-19
20-21
Consolidated statement of comprehensive income
22
Consolidated statement of financial position
Company statement of financial position
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated statement of cash flows
Company statement of cash flows
Notes to the financial statements
Letter from the Chairman with Notice of Annual General Meeting
Notice of AGM
Proxy Form with Notes
23
24
25
26
27
28
29-51
52-56
57-60
61-62
InfraStrata plc – Annual Report and Financial Statements 2016
2
Directors, secretary, advisors and shareholder information
Directors
Kenneth Maurice Ratcliff (Non-executive Chairman)
Stewart McGarrity (Joint Managing Director)
Anita Elizabeth Gardiner (Joint Managing Director)
Andrew David Hindle (Non-executive Director)
Maurice Edward Hazzard (Non-executive Director)
Company secretary
Walter Rookehurst Roberts
Registered office
Auditor
Tax advisors
Registrars
Nominated advisor and broker
Solicitors
Bankers
Blackstable House
Longridge
Sheepscombe
Stroud
Gloucestershire, GL6 7QX
Nexia Smith & Williamson
Statutory Auditor
1 Bishops Wharf, Walnut Tree Close
Guildford
Surrey, GU1 4RA
Smith & Williamson LLP
Chartered Accountants
1 Bishops Wharf, Walnut Tree Close
Guildford
Surrey, GU1 4RA
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
Allenby Capital Limited
3 St Helen’s Place
London, EC3A 6AB
Fieldfisher LLP
Riverbank House
2 Swan Lane
London, EC4R 3TT
Bank of Scotland plc
33 Old Broad Street
London, EC2N 1HZ
InfraStrata plc – Annual Report and Financial Statements 2016
3
Chairman’s Statement
Following a strategic review in the second half of 2015, InfraStrata has now completed the disposal of almost all of
its exploration assets and, whilst continuing to act in an administrative capacity until the transfer of responsibility to
operate certain licences has been completed, we will make no further financial commitments in respect of
exploration activities going into 2017. As previously announced, the entire focus of InfraStrata will be on delivery
of value to shareholders through the realisation of our gas storage project at Islandmagee.
Our last significant exploration activity was the drilling of the Woodburn Forest-1 well on licence PL1/10 for which
we completed the funding in January 2016. Drilling took place in May and June 2016, and whilst the drilling
operations reached the intended objectives no significant hydrocarbons were encountered and the well was
plugged and abandoned. InfraStrata was fully carried for the costs of the well and also secured very important
contributions to our cash flow requirements for 2016. These included £300,000 from Corallian Energy Limited as
proceeds for an interest in licence PL1/10, which was conditional on the well being funded, the recovery of
£252,481 of costs already incurred on the well under the associated farmout agreements and the operator
overheads recovered. It is unfortunate that the well was not a success for InfraStrata and its joint venture
partners, but these funds were in any event crucial to the continuation of our programme of work on the
Islandmagee gas storage project.
At Islandmagee, the feasibility phase of the project was completed via a salt core well programme in late 2015,
and during 2016 we worked closely with our advisors to explore options for monetisation of our interest in the
project. These options included direct investment into the project by third parties, risk sharing with contractors and
the potential sale of the entire project to a third party. The outcome of this exercise was a decision by the Board
that best value would be secured for our shareholders by taking the project through its next phase, the Front End
Engineering and Design (“FEED”), whilst concurrently embarking upon a commercialisation process. The purpose
of this approach would be to add sufficient certainty with regard to revenues, including contracted revenues where
possible, in order to support the overall project financing requirements necessary to seek to achieve a Final
Investment Decision (FID) prior to commencing full construction.
This decision was taken against a background where our long held views of the project’s viability have recently
been supported by positive changes in the fundamentals of the gas storage market as reflected in the Competent
Person Report on the project and the market potential announced in October 2016 and available on the
Company’s website.
Approximately half of the required funding for the £6 million FEED and commercialisation programme, to be
completed during 2017 subject to timely receipt of the necessary funding, was secured by a further EU grant
towards the FEED itself and loans from the selected FEED contractors. The grant from the EU under the
Connecting Europe Facility is for up to 50% of the cost of FEED and insitu downhole testing up to a maximum of
€4.024 million. The loans from the selected FEED contractors, of in aggregate up to £1.1 million based on a total
anticipated engineering budget of £4 million, will be secured on the assets of Islandmagee Storage Limited and
will be repayable with interest when the FID decision is made, or on 31 December 2018, whichever is earlier. Both
the EU grant and contractors loans are conditional upon securing the balance of funding required for the FEED.
Baron Oil plc has agreed to provide the Company with a secured working capital loan facility of up to £300,000,
sufficient to meet InfraStrata’s minimum level of corporate costs to the end of 2017 on a care and maintenance
basis. Further details of this loan and its terms can be found in note 29 to the financial statements. As of the date
of this report we are seeking the balance of the funding required, £3.0 million, to complete the FEED and
commercialisation programme, as well as to repay the new Baron Oil loan. The directors anticipate that this
additional funding can be secured through an equity fundraising in the first quarter of 2017. However the success
of such fundraising cannot be guaranteed.
It is proposed that the Company’s ordinary share capital be restructured to a par value of 0.01p at the forthcoming
AGM (the “Share Capital Reorganisation”) to facilitate access to the equity markets, given that the Company’s
ordinary shares are currently trading on AIM below the current par value of 1p. Further details of the Share
Capital Reorganisation can be found in the letter from the Chairman with the Notice of Annual General Meeting
which accompanies this Annual Report.
We have made significant progress towards restructuring our business in preparation for our work programme in
2017, including restructuring the interest of Mutual Energy Limited (“Mutual”) in the project such that our own
interest in the project has now increased from 65% to 90%. We are delighted that Mutual continues to be
committed to this strategically important project. We are in the process of restructuring the teams at InfraStrata
and Islandmagee Storage Limited over the coming months, to match the skill requirements for the next phase of
the project, as well as to appoint necessary advisers and technical consultants. The Board of InfraStrata will be
geared towards regulatory and corporate governance matters, with a focus on securing the funds to develop the
project. As part of this focus and to further reduce corporate overheads, InfraStrata will re-locate to Belfast in
January 2017, with all of its resources being dedicated to the project. Andrew Hindle has stepped down from his
role as CEO of InfraStrata effective 1 January 2017, but remains a Non-Executive Director of the Company.
Andrew, a Chartered Geologist, will continue to advise on the project in a technical capacity. Stewart McGarrity
and Anita Gardiner became Joint Managing Directors effective 1 January 2017, bringing vital and complementary
skills required for the execution of the next phase of the project.
InfraStrata plc – Annual Report and Financial Statements 2016
4
Chairman’s Statement
I would like to thank Andrew Hindle for his commitment and dedication to the development of InfraStrata’s projects
over many years and in very difficult market conditions. We look forward to Andrew’s continued substantive
involvement on the Islandmagee project and to the continued dedication of the other members of our
management team as we renew our focus on securing best value from the Islandmagee gas storage project.
Ken Ratcliff
Non-executive Chairman, 5 January 2017
InfraStrata plc – Annual Report and Financial Statements 2016
5
Strategic Report
STRATEGY AND BUSINESS MODEL
Strategic review and divestment of exploration assets
In the second half of 2015 we implemented a strategic review which resulted in the divestment of most of the
Group’s exploration and evaluation assets. This was in response to a very difficult market in which to secure new
funding for our exploration activities, following the very significant fall in oil prices since the summer of 2014, and
with upcoming commitments in 2016 the Board determined that a cash consideration and a retained interest in the
assets represented the best outcome for shareholders.
In November 2015 we entered into Sale & Purchase Agreements (“S&P Agreements”) to sell substantially all of
the Group’s oil and gas exploration interests, including its interest in its two associates, to two newly formed
special purpose vehicles Corallian Energy Limited (“Corallian”) and its subsidiary Osmington Holdings Limited
(“Osmington”). The initial disposal, covering the Group’s UK oil and gas exploration interests and the two
associates, Brigantes Energy Limited (“Brigantes”) and Corfe Energy Limited (“Corfe”) resulted in an immediate
cash inflow of £240,000. The Group also retained a Net Profits Interest (“NPI”) in the licences and the former
associates. Following this disposal, the Group now has no exposure to any future exploration costs, including cost
overruns, in these assets, but, through the NPIs, will participate in any future profits. The second disposal of a
10% interest each in licences PL1/10 and P2123 was completed in February 2016 following the completion of the
funding for the Woodburn Forest-1 Well on Licence PL1/10, generating a further cash inflow of £300,000.
InfraStrata’s business going forward
The focus of InfraStrata’s business is now the Islandmagee Gas Storage Facility (currently 90% owned) where we
have completed the feasibility study phase for the project and now turn to readying the project for full development
through progressing its Front End Engineering and Design (“FEED”) and the necessary steps towards a full
financing of the project.
We have a retained 10% interest in each of licences PL1/10 and P2123 but will not make any further
commitments to incur costs on these licences and seek to transfer our interests and operatorship to other parties
as soon as practicable. Our NPI instruments in licences P1918, P2222 and P2235 together with NPI interests in
Brigantes and Corfe also provide upside in the underlying exploration activities in the event of successful
exploration, but without a commitment to pay exploration costs on the assets disposed of.
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
KPIs
We endeavour to
develop projects in
accordance with project
schedules
Predetermined and agreed project
development schedules adhered to
including submission of planning
applications
We aim to manage
Group working capital
prudently
Management and control of working
capital ensuring liquidity as is necessary
Delivery of projects to sensible time
schedules. Submit and achieve
planning permission approvals in a cost
effective and timely manner
Management of working capital to
ensure liquidity to develop projects as
planned in development schedules
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:
Completed strategic re-positioning in light of challenges to funding exploration commitments – delivery of
divestment of most of exploration assets for a cash consideration plus carried interests.
Conclusion of formal grant agreement with European Commision for 50% of the cost of the Front End
Engineering and Design for the Islandmagee gas storage project.
Operated the drilling of the Woodburn Forest-1 exploration well on licence PL1/10.
Implementation of further changes to company project management and administration to reflect a Group
focussed on the Islandmagee gas storage project.
InfraStrata plc – Annual Report and Financial Statements 2016
6
Strategic Report
OPERATIONAL REVIEW – ISLANDMAGEE GAS STORAGE PROJECT
Outline
Islandmagee Storage Limited (“IMSL”) is a Northern Ireland registered company and is a joint venture between
InfraStrata UK Limited (“IS-UK”) a wholly-owned subsidiary of InfraStrata and Moyle Energy Investments Limited
(“Moyle”), part of the Mutual Energy group of companies.
In September 2016 we announced that we had increased our interest in the project from 65% to 90% effected by
the issue of new shares in IMSL which reduced Moyle’s interest from 35% to 10%. The transaction will mean that
at Final Investment Decision (“FID”) Moyle will no longer have to advance IMSL approximately £2 million plus
interest to enable IMSL to partially repay shareholders loans paid to date by IS-UK.
IMSL plans to create seven caverns, capable of storing up to a total of 420 million cubic metres of gas in Permian
salt beds approximately 1,400 metres beneath Larne Lough. The project has a number of 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. We believe that no other location on the island of Ireland is as suitable for the development of salt
cavern gas storage; Northern Ireland has a valuable geological asset, which, when developed for underground
salt cavern gas storage should make a significant contribution towards security of gas supplies to the wider
region, including the north and south of the island of Ireland and mainland Great Britain.
Ireland is dependent on gas for around 40% of its electricity generation, with the majority of the island’s gas
imported via a single pipeline from Scotland. The Islandmagee facility, when complete, is intended to store enough
gas to satisfy Northern Ireland’s current demand for around 50 days.
In October 2016 we announced the publication of a competent person report (the “CPR”) on the gas storage
market in the UK and a review of the revenue assumptions for InfraStrata’s economic model of the Islandmagee
gas storage project by The Energy Contract Company (“ECC”), a leading commercial consultancy in the global oil
and gas industry. The full report titled “The gas storage market in the UK and review of revenue assumptions in
economic model
the Company’s website,
www.infrastrata.co.uk, with a summary of its findings below.
Islandmagee gas storage project”
is available on
the
for
The revenue model for the project was based on assumptions of volatility and summer-winter price spreads by
Baringa Partners (“Baringa”), an independent business and technology consultancy, for InfraStrata. ECC
concluded that the underlying assumptions in the Baringa model are reasonable.
This revenue model formed the basis for InfraStrata determining the project’s cashflow over a 20 year period.
InfraStrata’s economic model assumes a capital expense and pre-operations operating expense of £308m in
aggregate, utilising 65% debt. InfraStrata has estimated the net present value (NPV) of the project to be £67m at
an 8% discount rate and £38m at a 10% discount rate. ECC did not review these NPV estimates.
The executive summary points in the CPR are as follows:
Most gas sold in the UK is used for space heating, so demand has always varied significantly from day to
day, due to temperature variations. In future these short term variations in demand should become
significantly greater. UK Government energy policy now emphasises the need to replace power
generation from fossil fuels with electricity generated from renewable sources, such as wind. As wind is
not consistent, gas fired generation will have to make up any deficit. Short term gas demand levels will
therefore vary increasingly, depending on whether the wind is blowing or not.
Many traditional means of meeting peak gas demand such as swing from offshore fields and interruptible
gas sales contracts have almost disappeared to be replaced by other sources of peak supply, such as
pipeline gas imports from the rest of Europe and LNG imports. However, there are drawbacks to reliance
on these sources in future. Historic data shows gas suppliers in the rest of Europe are reluctant to supply
the UK in cold winter conditions, if it means that they might be risking their own supply requirements.
There are also problems with LNG as a source of peak gas, as the long-time lags for the delivery of LNG
cargoes mean it is difficult for LNG producers and traders to react to short term high prices in the UK
market, which might have collapsed by the time a cargo arrives in the UK.
In continental Europe the traditional means of supplementing gas supplied to meet peak demand was
through the use of gas storage, which remains much less common in the UK. Gas storage levels in the
UK are very low compared to the rest of Europe. Average UK storage capacity is only equivalent to 6.4%
of annual demand in the UK compared to 25-35% in the other major European markets.
InfraStrata plc – Annual Report and Financial Statements 2016
7
Strategic Report
OPERATIONAL REVIEW – ISLANDMAGEE GAS STORAGE PROJECT (CONTINUED)
The situation in the UK has been exacerbated by recent technical problems on the Rough storage
facility, which has severely restricted injection this summer. There have also been problems on the
Hornsea storage facility. Both Rough and Hornsea, which account for almost 75% of UK gas storage
capacity, are now over 30 years old and their continuing availability in the longer term must be subject to
some doubt.
The cessation of injection at Rough this summer seems to have led to a surge in price volatility from late
August onwards. From October 2013 to July 2016 the Short term Gas Volatility Index averaged 34%.
However in the last month or so this has more than trebled to 126%. This surge in volatility has
potentially great significance for the Islandmagee project. Salt cavern storage projects such as
Islandmagee depend on short term volatility to enable the users to gain from injecting gas on low price
days and producing later on when prices have risen. The greater the volatility the more profitable the
project.
Overall the conclusion is that as a result of increased use of renewable generation, gas demand will
become even more variable on a short term basis in future. The existing means of meeting this variation
in demand may well be inadequate in future, so price volatility is likely to increase, perhaps significantly.
The strategic importance of the Islandmagee gas storage facility is recognised by the project being awarded
Project of Common Interest (“PCI”) status by the European Union. This status was first awarded in November
2013 and reconfirmed in November 2015 for a further two years. PCI status also means that the project benefits
from accelerated permitting procedures and improved regulatory conditions making it more attractive to investors.
In addition, a PCI can apply for significant financial support from the European Union’s Connecting Europe Facility
(“CEF”) including grants for both studies and works. A budget of €5.35 billion has been allocated under CEF for
2014-20 for PCI projects. Assistance may be in the form of direct grant or other forms of financial backing from
institutions such as the European Investment Bank. As detailed below, the project has already received grant
assistance for the 2015 salt core well programme and for the forthcoming FEED programme to be undertaken in
2017.
To date over £11 million has been expended on the project, to acquire 3D seismic data, drill a well to acquire salt
cores, undertake engineering design work, acquire rights on the full land assembly, and obtain planning
permission and other consents required to construct the project.
Salt Core Well programme
During 2015 a data gathering well (Islandmagee-1) was successfully drilled to a total depth of 1,753 metres,
obtaining wireline data and cores of the 185.8 metre Permian salt sequence encountered. Core samples were
sent to Germany to undertake laboratory analyses and the test results on the salt cores and rock mechanics have
now been incorporated into the subsurface and surface facility preliminary design and cost estimates for the
project have been updated. This £3.8m programme of work was co-funded by a €2.5 million grant from the CEF.
The overall results from the technical programme of work were positive and the objective to confirm the feasibility
of the development of an underground gas storage facility in salt caverns in this location was met.
In May 2015 the Company concluded a Convertible Loan Facility Agreement with Baron Oil Plc (“Baron”) under
which Baron provided a loan for €1.8 million (£1.4 million) to InfraStrata which was used as working capital to
bridge the receipt of the CEF grant, 70% of which amounting to €1.75 million (£1.3 million) was due upon
completion of the work and application for the balance. The balancing €1.75 million grant monies were received
from the EU in May 2016 and placed into an escrow arrangement as security for the loan. In August 2016 the loan
was repaid in full by release to Baron of the €1.75 million (£1,358,063) then held in escrow, a payment of €50,000
(£42,301) and a further payment of €160,904 (£136,134) for the interest on the loan at a fixed rate of 8% up to the
effective repayment date of 1 August 2016.
Baron had an accompanying option to convert the entire balance of the loan into an equity participation of 15% of
the share capital in IMSL. Under the terms of an amendment to the loan agreement in August 2016 Baron’s option
could be exercised until 31 March 2017 for a payment of £1,536,498, equivalent to the capital and interest repaid
on the loan. On 26 September 2016 we announced that the option has been further revised, so that Baron now
has an option to acquire the number of ordinary shares of 1p in InfraStrata that represents 16.666% of the
enlarged ordinary share capital of InfraStrata (from time to time) for a payment of £1,536,498, until 31 March
2017. Exercise of the option in full is conditional on InfraStrata having the requisite authorities under the
Companies Act 2006 to issue new ordinary shares in the Company. This is part of an ongoing programme of re-
structuring of the Company, as it seeks to focus entirely on the Islandmagee gas storage project.
InfraStrata plc – Annual Report and Financial Statements 2016
8
Strategic Report
OPERATIONAL REVIEW – ISLANDMAGEE GAS STORAGE PROJECT (CONTINUED)
2016 Monetisation process
During 2016 the Company organised an extensive monetisation process through Centrus Advisors LLP and VSA
Capital Ltd, both having been appointed in March 2016. A wide range of options were explored, from investment
into the project alongside the EU grant, risk sharing with contractors, or the sale of the entire project to a third
party.
As a result of the feedback from this process, together with the positive changes in the fundamentals of the gas
storage market and the supportive CPR announced in October 2016, the Board decided to restructure the
Company’s business with the goal of attracting the remaining risk capital required to take the project through to
FID. The restructuring has included increasing InfraStrata’s equity position from 65% to 90% in IMSL and seeking
to divest all the Company’s other remaining business interests, as announced in September 2016.
As part of a commercialisation process to run alongside the FEED in 2017, InfraStrata will seek to secure
contracts for storage capacity to support further project finance. During the monetisation process, the Company
had a number of discussions regarding the project with interested parties. The feedback at that time with respect
to investment in gas infrastructure was that it would be preferable for the FEED to be completed and for the
project to have sufficient certainty with regards to revenues, including pre-contracted revenues where possible, in
order to support the additional project finance that would be required.
2017 FEED and commercialisation programme
The next phase in the development of the project comprises the closely interrelated work streams associated with
the FEED (including associated insitu downhole testing) and the commercialisation process running concurrently
with the FEED to secure capacity contracts to support project finance.
In June 2016 we announced that we had concluded a further grant from the EU under the CEF for 50% of the cost
of FEED and insitu downhole testing up to a maximum of €4.024 million. An advance payment of 40% of the
maximum grant amounting to €1.6 million was received in July 2016 and has since been held in a Euro
denominated bank account pending completion of the remaining 50% funding required to both match the grant for
FEED and also to complete the commercialisation programme during 2017.
On 3 November 2016 we announced that following the completion of a tendering process, the Company had
selected FEED contractors for the project’s above-ground facilities and for the sub-surface elements. The FEED
will include a detailed plant design specification for the project, a detailed project plan and cost estimate. Both the
FEED contractors have an international reputation and have experienced working on many of the existing salt
cavern storage projects in the UK.
Both FEED contractors will provide loans in aggregate of up to £1.1m based on a total anticipated engineering
budget of £4m. These loans, which are subject to contracts being agreed and upon InfraStrata securing the
remaining funding for the FEED, will be repayable at the Final Investment Decision (“FID”), when a decision will
be made whether to proceed to construction, or on 31 December 2018, whichever is earlier. The loans will be
secured on the assets of IMSL and attract interest at 10 per cent. per annum, which will be rolled up and paid on
the loan repayment date. These will be repayable at the FID.
In addition to funding from the EU and the loans, further funding of approximately £3m is required to complete the
FEED and commercialisation process during 2017, inclusive of corporate project management costs, overheads,
external technical and commercial consultancy, working capital and bridging finance on the EU grant. The
bridging finance, which could be in the form of debt, is required to cover the timing of receipt of funds from the
European Commission grant which they pay in two stages: €1.6m of EU grant monies has already been received
by the Company with the balance receivable once the FEED work has been completed, which is targeted for the
end of 2017.
InfraStrata plc – Annual Report and Financial Statements 2016
9
Strategic Report
OPERATIONAL REVIEW – OIL & GAS EXPLORATION
County Antrim – Onshore PL1/10, Offshore P2123
Licence ownership
In November 2015 we signed an agreement, alongside Brigantes, with Ermine Resources Limited (“Ermine”)
whereby Ermine would acquire a 15% interest (paying 20% of the Woodburn Forest-1 well costs) in the PL1/10
licence, subject to the full well funding being completed. In January 2016 we announced that a series of Farmout
Agreements (“FOAs”) had been entered into by InfraStrata and Brigantes, both together and separately, which
together resulted in completion of the funding for Woodburn Forest-1 well. The additional new investors that
entered into FOAs for the remaining 45% are Tudor Hall Energy Limited (10%), Baron Oil Plc (10%), Horizon
Energy Partners Limited (formerly called Southwestern Resources Limited) (16%) and Petro River UK Limited
(9%). All the parties except Tudor Hall Energy Limited acquired corresponding interests in licence P2123. The
terms of the FOAs provided for reimbursement of costs already incurred on the Woodburn Forest-1 well and on
licence P2123, resulting in cash payments to InfraStrata totalling £252,481.
In order to facilitate the FOAs, the Company also signed a Supplemental Sale and Purchase Agreement with
Brigantes under which there was a transfer of a 5% interest in PL1/10 from Brigantes to InfraStrata, a 10%
interest in P2123 from InfraStrata to Brigantes and a payment of £86,459 in cash from Brigantes to InfraStrata.
Under the sale and purchase agreements with Corallian Energy Limited (“Corallian”) announced in November
2015, on completion of the Woodburn Forest-1 well funding 10% of InfraStrata’s remaining 20% interest in PL1/10
and a 10% interest in P2123 was to be assigned to Corallian, subject to the respective approvals of the
Department for Economy (“DfE”) and the Oil and Gas Authority (“OGA”), in return for a further payment to
InfraStrata by Corallian of £300,000 in cash.
Woodburn Forest-1 well
Permitted Development rights for the Woodburn Forest-1 well were granted in December 2013 and in February
2015 a ‘Consent to Drill’ was granted by DfE. A separate consent issued by the Northern Ireland Environment
Agency (Water Management Unit) under the Water (Northern Ireland) Order 1999, which regulates the well in
terms of surface water and groundwater impacts, was also granted in February 2015.
Site construction commenced on 10 March 2016 and drilling commenced on 15 May 2016. The well was drilled to
a depth of 2,000 metres and encountered two conventional sandstone reservoir intervals, the Triassic Sherwood
and the Lower Permian Sandstones. Wireline log analysis has calculated porosities of over 20% in the upper parts
of both the Sherwood and the Lower Permian Sandstones but both targets were water wet. Following completion
of the drilling, the well was plugged and abandoned and the rig released on 21 June 2016. The site was restored
in compliance with the Permitted Development.
Other exploration interests
Following the divestment of exploration assets to Corallian and its subsidiary Osmington Holdings Limited
(Osmington) completed in November 2015, InfraStrata has the following retained interests in the disposed exploration
assets:
Net profits interest (“NPI”) instruments in each of P1918 (Dorset – Offshore), P2222 (East Shetland
Basin – Offshore) and P2235 (Moray Firth – Offshore) of 0.5%, 0.5% and 1% respectively of the gross,
representing 4% of Corallian’s anticipated interest in the licences at the time of drilling the first well on the
licences; and
a 4% share of any future profits derived by Osmington from the 40% shareholdings in former associates
Brigantes and Corfe sold to Osmington, again in the form of NPI instruments. Corfe and Brigantes have
interests in licence P1918 and Brigantes has interests in PL1/10 and P2123.
No value has been ascribed to any of the NPI instruments retained in the Group’s statement of financial position
as at 31 July 2016, as it is not possible to determine a fair value for these instruments.
InfraStrata will remain as operator under the P1918 licence until the formal assignment of the licence interest to
Corallian has been approved in due course by OGA. However InfraStrata has no commitment to pay exploration
costs and is receiving a small income for services rendered during the interim period.
The licence administratorship on the P2222 and P2235 licences has been transferred to Corallian.
InfraStrata plc – Annual Report and Financial Statements 2016
10
Strategic Report
OPERATIONAL REVIEW – FUNDING
Financing
Gross capital expenditure on the Islandmagee gas storage project during the year to 31 July 2016 was £608,760,
most of which related to the completion of the salt core well programme.
In August 2015 the remaining £300,000 was drawn down on the Baron Convertible Loan Facility Agreement. The
balancing €1.75 million (£1,358,063) grant monies were received from the EU in May 2016 and placed into an
escrow arrangement as security for the loan and disclosed as restricted cash in the statement of financial
position. Subsequent to the year end in August 2016 the loan of €1.80 million (£1,400,364) was repaid in full by
release to Baron of the cash held in escrow, a payment of €50,000 (£42,301) and a further payment of €160,904
(£136,134) for the interest on the loan which had been accrued and capitalised to intangible gas storage
development costs at 31 July 2016.
Our share of expenditure on our oil and gas exploration licences during the year to 31 July 2016 was £43,158, mostly
related to farmout activities and our share of annual licence fees. We were fully carried through the drilling of the
Woodburn Forest-1 well and therefore did not incur any costs on our own account. The book value of the Group’s
intangible Exploration and Evaluation assets which were disposed of in November 2015, including interests in
P1918, P2222 and the Group’s interests in associated companies Brigantes and Corfe, were impaired such that
they equated to the immediate cash inflow of £240,000 from Corallian. The further receipt from Corallian of
£300,000 upon successful funding of the Woodburn Forest-1 well together with reimbursement of costs already
incurred of £252,481 under the terms of the Woodburn Forest-1 FOAs and a receipt of £86,459 from Brigantes in
relation to a licence interest sale to facilitate the FOAs, resulted in the Group recording a profit on disposal of
Exploration and Evaluation assets during the year to July 2016 totalling £453,945. The Company’s remaining 10%
interest in each of PL1/10 and P2123 is carried at a book value of £19,459 being the estimated proceeds from a
future disposal of these interests.
On 18 December 2015 the Company announced a placing to raise £450,625 (£421,963 after expenses) through
the issue of 36,050,000 new ordinary shares of 1p each in two tranches. The first tranche of 18,880,000 shares
were issued on 23 December 2015 and the second tranche of 17,170,000 shares was issued on 26 January 2016
following approval of shareholders at the Company’s annual general meeting on 26 January 2016 of resolutions to
provide authority to the Directors to issue and allot further new ordinary shares with exemption rights dis-applied.
On 2 February 2016, the Group concluded an agreement for the sharing, interpretation and integration of data in
respect of proprietary data in Northern Ireland acquired by InfraStrata for the Islandmagee gas storage project.
The consideration for sharing this data was £500,000 in cash which is accounted for as revenue in the
consolidated statement of comprehensive income. InfraStrata has recorded a profit for the year to 31 July 2016 of
£66,955 (2015 – loss of £6,106,070 after impairments totalling £6,072,785).
Excluding cash held in escrow and classified as restricted cash, the Group’s cash and cash equivalents at 31 July
2016 were £2,454,006 (2015 - £430,199) and net current assets were £542,336 (2015 - £42,122). Cash balances
at 31 July 2016 included €1.6 million (£1.35 million) EU grant received in advance in July 2016 and held in a Euro
denominated bank account pending completion of the remaining 50% funding required to match the grant and to
complete the commercialisation programme during 2017.
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.
On 5 January 2017 the Company entered into a secured loan agreement with Baron for a facility up to £300,000
to provide working capital for the Group. The loan is for a term of 12 months from the date of the loan agreement.
Baron is entitled, acting in its sole discretion, to extend the term of the loan agreement by an additional 12
months. The directors believe that the facility provides sufficient funding to meet InfraStrata’s minimum level of
management and administrative expenditure and to make the necessary payments in relation to the maintenance
of the Islandmagee gas storage for a period of 12 months to the end of December 2017, but not to undertake the
FEED and commercialisation programme.
The directors anticipate
the FEED and
commercialisation programme during 2017 and to repay the new Baron loan can be generated through an equity
fundraising in the first quarter of 2017. However the success of such fundraising cannot be guaranteed.
funding of £3.0m required
the additional
to complete
that
Following the completion of the FEED and commercialisation programme the project will be ready to move into
construction and delivery and at that time the Company will further evaluate the optimum way to structure the
funding of the initiation and delivery of that programme for our shareholders and will evaluate the available
sources of funding, including both debt and equity participation, to fund both the continuing operations of the
company and the commencement of construction. The full project construction is expected to be delivered over a
number of years at an aggregate cost of approximately £300 million and to be delivered on a phased basis.
InfraStrata plc – Annual Report and Financial Statements 2016
11
Strategic Report
OPERATIONAL REVIEW – FUNDING (CONTINUED)
The directors remain confident that the project is economically viable and that following the completion of the
FEED and commercialisation programme, the project should be capable of attracting further new investment for
the Company and the project. However the success of the Q1 2017 fundraising and a further fundraising following
FID are both uncertain. Should the Group not be successful in obtaining future funding for the Islandmagee gas
storage project or realising value for the project in excess of current book value, the Group’s capitalised project
development costs totalling £6,116,114 and amounts due to the Company from its subsidiaries amounting to
£5,873,052 may become impaired in value. In addition the Company may be unable to continue as a going
concern.
Project management and company administration costs
During 2016 every member of the management team was required to make an indispensable contribution to the
effective delivery of our projects, the performance against our key performance indicators and the effective
management of the risks and uncertainties our business faces. We have, however, continued to implement cost
reductions. Total management and administrative expenditure is further analysed in note 5 to the financial
statements, which shows that the cash cost of management and administrative costs in the year to 31 July 2016
was £853,850 (2015 - £1,065,161).
In October 2015 the Company implemented a Performance Incentive Scheme under which voluntary salary
reductions were taken in return for participation in the scheme. The scheme expired on 30 September 2016 with
no incentive payments being due.
Plans have been developed to restructure the teams at InfraStrata and IMSL in the coming months, to match the
skill requirements for the next phase of the project, as well as to appoint necessary advisers and technical
consultants.
The Board of InfraStrata will be geared towards regulatory and corporate governance matters, with a focus on
securing the funds to develop the project. As part of this focus and to minimise corporate overheads, InfraStrata
will re-locate to Belfast in January 2017, with all of its resources being dedicated to bringing the project to
construction. Andrew Hindle has stepped down from his role as CEO of InfraStrata effective 1 January 2017, but
will remain a Non-Executive Director of the Company. Andrew, a Chartered Geologist, will continue to advise on
the project in a technical capacity. Stewart McGarrity and Anita Gardiner became Joint Managing Directors
effective 1 January 2017, bringing vital and complementary skills required for the execution of the next phase of
the Project.
InfraStrata plc – Annual Report and Financial Statements 2016
12
Strategic Report
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 industry, 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.
Financing – the risk of not obtaining sufficient financing
Access to adequate working capital is critical to our ability to pursue our existing and future projects and to continue
as a going concern. We work closely with our advisors and brokers to identify the optimum approach and timing to
secure new equity financing to provide working capital.
The Group seeks to manage risk for our shareholders by attracting investment through quality partners where
possible thereby minimising our own commitments to pay project development costs. We do not make financial
commitments unless such funding has been secured through joint venture partners or otherwise new investment
in our projects or we have a high degree of confidence that it will be secured.
Strategic and external risks - failure to manage and grow the business while creating shareholder value
There is no assurance that the Group’s gas storage development will be successful. The directors have sought to
manage and mitigate the exploration risks by divesting substantially all of our exploration assets. We place a
premium on recruitment and retention of suitably skilled personnel, 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 or debt financing or disposing of interests in projects or via
other means.
A deterioration of the capital markets 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 14 to 18.
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 the operational risks of 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 project development 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
consultants and drilling engineering services. In this way we seek to mitigate the potential risk that we fail to be seen
to be acting in a socially responsible manner and/or fail to maintain good local community relations.
On behalf of the Board
Andrew Hindle,
5 January 2017
InfraStrata plc – Annual Report and Financial Statements 2016
13
Report of the Directors
for the year ended 31 July 2016
The directors have pleasure in presenting their report and audited financial statements for the year ended 31 July
2016.
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
At the date of this report 188,041,599 ordinary shares are issued and fully paid. Details of movements in share
capital during the year are given in note 23 to the financial statements
RESULTS AND DIVIDENDS
Petroleum exploration and evaluation operations have been classified as discontinued. The Group recognised cash
revenue from continuing operations of £500,000 (2015: £408,526). Administrative expenses totalled £932,635 (2015:
£1,144,393) of which £677,735 (2015: £757,473) was attributable to continuing operations. The Group generated a
profit of £66,955 (2015: loss of £6,106,070) including a profit of £244,569 (2015: loss of £5,758,228) from
discontinued operations. The profit for the current year is stated after crediting a profit on the disposal of Exploration
and Evaluation assets of £453,945. The loss in 2015 was after charging impairments of Exploration and Evaluation
assets and interests in associates of £3,577,659 and £2,459,126 respectively. The profit when added to the
cumulative losses of £26,828,048 brought forward leaves a retained loss of £26,761,093 to be carried forward.
The directors do not recommend the payment of a dividend (2015: £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 on page 13.
DIRECTORS
The directors, who served during the year and subsequently, were as follows:
K M Ratcliff
S McGarrity
A E Gardiner
A D Hindle
M E Hazzard
A Booth (resigned 11 November 2015)
InfraStrata plc – Annual Report and Financial Statements 2016
14
Report of the Directors
for the year ended 31 July 2016
DIRECTORS (continued)
All directors benefit from the provisions of individual directors’ Personal Indemnity insurance policies. Premiums
payable to third parties are as described in note 7 to the financial statements. The Company operates a share
option scheme and the particulars of share options granted to directors at 31 July 2016 are detailed in note 7 to
the financial statements.
Directors of the Company at the date of this Annual Report and their abridged CVs for their roles as at 31 July 2016
are as follows:
Ken Ratcliff (Non-Executive Chairman)
Ken Ratcliff, JP, BSc, FCA, is a Chartered Accountant with extensive finance and business experience. He was
formerly the 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.
Stewart McGarrity (Joint Managing Director)
Stewart McGarrity, BCom, CA, has 30 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 (Joint Managing 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.
Andrew Hindle (Non-Executive Director)
Andrew Hindle, BSc, MSc, PhD, FGS, CGeol, is a highly experienced geologist with over 30 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
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 was the Chief Executive of the Group from the demerger in 2008
till 1 January 2017. Andrew is also a director of Geofocus Limited and Toffee Limited.
from 1990
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.
InfraStrata plc – Annual Report and Financial Statements 2016
15
Report of the Directors
for the year ended 31 July 2016
DIRECTORS EMOLUMENTS
The directors’ emoluments are disclosed in note 7 to the Financial Statements.
DIRECTORS AND SUBSTANTIAL SHAREHOLDINGS
The directors of the Company held the following beneficial shareholdings as at 30 November 2016:
Ordinary shares of 1p each
Ken Ratcliff
Andrew Hindle
Stewart McGarrity
Anita Gardiner
Maurice Hazzard
Number
154,000
9,737,625
1,000,000
-
69,326
%
0.08
5.18
0.53
-
0.04
The Company has also received notification of the following interests in 3% or more of the Company’s issued
share capital at 30 November 2016. The holdings and percentages presented are at the date of notification.
Ordinary shares of 1p each
Legal & General Investment Management Ltd
AXA Investment Managers S.A.
Mark Abbott
Eugene Whyms
Peter V Wale
CORPORATE GOVERNANCE
Number
17,975,000
12,500,000
5,739,545
5,659,725
6,163,950
%
9.56
6.65
3.78
3.72
3.28
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 with the Code 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 three Executive Directors and two Non-executive directors
whose background and experience are relevant to the Company’s activities. 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 2016 financial year
16§
2
3
Executive Directors
Andrew Hindle
Stewart McGarrity
Anita Gardiner
Non-executive Directors
Ken Ratcliff
Maurice Hazzard
Alan Booth (resigned 11 November 2015)
No. of
meetings
attended
No. of
meetings
attended
No. of
meetings
attended
16
16
16
14
14
3
-
-
-
2
2
-
-
-
-
4
4
-
§ Of which two were with limited attendance as they were to finalise business already approved by all directors.
InfraStrata plc – Annual Report and Financial Statements 2016
16
Report of the Directors
for the year ended 31 July 2016
CORPORATE GOVERNANCE (continued)
Audit Committee
The Audit Committee met twice in the year to 31 July 2016. Its members currently are Ken Ratcliff (Chairman) and
Maurice Hazzard. 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 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) and Ken Ratcliff. The committee
met four times during the year. 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 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.
On 1 October 2015 the Company implemented a Performance Incentive Scheme under which voluntary salary
reductions were taken to preserve the Group’s cash resources. The scheme ended on 30 September 2016
without the crystallisation of any incentive payments under the scheme.
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 the executive team.
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.
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 regulatory and 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.
Allenby Capital Limited, the company’s Nominated Advisor and broker, actively researches the Company and its
business followed by research notes being issued.
InfraStrata plc – Annual Report and Financial Statements 2016
17
Report of the Directors
for the year ended 31 July 2016
CORPORATE GOVERNANCE (continued)
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
Strategic Report and the accounting policies in note 2 to the financial statements.
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; and
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.
InfraStrata plc – Annual Report and Financial Statements 2016
18
Report of the Directors
for the year ended 31 July 2016
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
audit 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
5 January 2017
InfraStrata plc – Annual Report and Financial Statements 2016
19
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 2016 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 30. 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 pages 18 and 19, 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 and express an opinion on 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 2016 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 £6,116,114 and the balances of £5,873,052
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
in 2017. The financial statements do not include the impairment of the Group’s development costs relating the
project or the impairment of the Company’s balances due from its subsidiaries that would result if the Group were
unable to raise such funds.
InfraStrata plc – Annual Report and Financial Statements 2016
20
Independent auditor’s report
to the members of InfraStrata plc
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 show that future funding is required in
2017 for the Group and the Company to continue to develop the Islandmagee project and to continue as going
concerns. If such funding is not available, 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.
Guy Swarbreck
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
5 January 2017
InfraStrata plc – Annual Report and Financial Statements 2016
21
Consolidated statement of comprehensive income
for the year ended 31 July 2016
Notes
2016
£
2015
£
Continuing operations
Revenue
Cost of sales
Gross profit
Management and administrative expenses
Operating loss
Finance income
Loss before taxation
Taxation
Loss for the year from continuing operations
Profit (loss) for the year from discontinued operations
Profit (loss) for the year attributable to the equity
holders of the parent
Other comprehensive income
Total comprehensive profit (loss) for the year
attributable to the equity holders of the parent
Basic and diluted earnings per share
Continuing operations
Discontinued operations
Continuing and discontinued operations
4
5
10
11
3
3
12
500,000
408,526
-
-
500,000
408,526
(677,735)
(757,473)
(177,735)
(348,947)
121
1,105
(177,614)
(347,842)
-
-
(177,614)
(347,842)
244,569
(5,758,228)
66,955
(6,106,070)
-
-
66,955
(6,106,070)
(0.10)p
0.14p
0.04p
(0.28)p
(4.72)p
(5.00)p
InfraStrata plc – Annual Report and Financial Statements 2016
22
Consolidated statement of financial position
as at 31 July 2016
Non-current assets
Intangible fixed assets:
Gas Storage Development
Exploration & Evaluation
Property, plant and equipment
Investments in associates
Total non-current assets
Current assets
Trade and other receivables
Grant receivable
Restricted cash
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Grant received in advance
Short-term convertible borrowings
Notes
14
15
16
17
18
19
19
20
21
19
19
2016
£
6,116,114
19,459
440,744
-
2015
£
5,704,951
429,139
440,453
600
6,576,317
6,575,143
1,182,572
-
1,358,063
2,454,006
300,408
1,066,306
-
430,199
4,994,641
1,796,913
(1,693,055)
(1,358,886)
(1,400,364)
(754,791)
-
(1,000,000)
Total current liabilities
(4,452,305)
(1,754,791)
Net current assets
Net assets
Shareholders’ funds
Share capital
Share premium
Merger reserve
Share based payment reserve
Retained earnings
542,336
42,122
7,118,653
6,617,265
23
24
25
10,834,660
13,440,878
8,988,112
616,096
(26,761,093)
10,474,160
13,379,415
8,988,112
603,626
(26,828,048)
Total equity
7,118,653
6,617,265
Company registration number: 06409712
Approved and authorised for issue by the Board on 5 January 2017
A Hindle
Director
S McGarrity
Director
InfraStrata plc – Annual Report and Financial Statements 2016
23
Company statement of financial position
as at 31 July 2016
Non-current assets
Intangible exploration assets
Property, plant and equipment
Investments
Total non-current assets
Current assets
Trade and other receivables
Grant receivable
Restricted cash
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Grant received in advance
Short-term convertible borrowings
Total current liabilities
Net current assets
Net assets
Shareholders’ funds
Share capital
Share premium
Merger reserve
Share based payment reserve
Retained earnings
Notes
15
16
17
18
19
19
20
21
19
19
23
24
25
2016
£
19,459
644
-
2015
£
280,877
353
600
20,103
281,830
7,049,850
-
1,358,063
2,442,818
5,377,201
1,066,306
-
256,192
10,850,731
6,699,699
(1,631,577)
(1,358,886)
(1,400,364)
(658,436)
-
(1,000,000)
(4,390,827)
(1,658,436)
6,459,904
5,041,263
6,480,007
5,323,093
10,834,660
13,440,878
8,466,827
616,096
(26,878,454)
10,474,160
13,379,415
8,466,827
603,626
(27,600,935)
Total equity
6,480,007
5,323,093
Company registration number: 06409712
Approved and authorised for issue by the Board on 5 January 2017
A Hindle
Director
S McGarrity
Director
InfraStrata plc – Annual Report and Financial Statements 2016
24
Consolidated statement of changes in equity
for the year ended 31 July 2016
Share
capital
£
Share
premium
£
Merger
reserve
£
Share
based
payment
reserve
£
Retained
earnings Total equity
£
£
Balance at 31 July 2014
9,949,160
11,920,219
8,988,112
530,410
(20,721,978)
10,665,923
Loss for the year
Total comprehensive loss for the year
-
-
-
-
Shares issued
525,000
1,459,196
Share based payments
-
-
-
-
-
-
-
(6,106,070)
(6,106,070)
-
-
73,216
(6,106,070)
(6,106,070)
-
-
1,984,196
73,216
Balance at 31 July 2015
10,474,160
13,379,415
8,988,112
603,626
(26,828,048)
6,617,265
Profit for the year
Total comprehensive profit for the year
-
-
-
-
Shares issued
360,500
61,463
Share based payments
-
-
-
-
-
-
-
-
-
12,470
66,955
66,955
66,955
66,955
-
-
421,963
12,470
Balance at 31 July 2016
10,834,660 13,440,878
8,988,112
616,096
(26,761,093)
7,118,653
InfraStrata plc – Annual Report and Financial Statements 2016
25
Company statement of changes in equity
for the year ended 31 July 2016
Share
capital
£
Share
premium
£
Merger
reserve
£
Share
based
payment
reserve
£
Retained
earnings Total equity
£
£
Balance at 31 July 2014
9,949,160
11,920,219
8,466,827
530,410
(26,467,225)
4,399,391
Loss for the year
Total comprehensive loss for
the year
-
-
-
-
Shares issued
525,000
1,459,196
Share based payments
-
-
-
-
-
-
-
-
-
73,216
(1,133,710)
(1,133,710)
(1,133,710)
(1,133,710)
-
-
1,984,196
73,216
Balance at 31 July 2015
10,474,160
13,379,415
8,466,827
603,626
(27,600,935)
5,323,093
Profit for the year
Total comprehensive profit for
the year
-
-
-
-
Shares issued
360,500
61,463
Share based payments
-
-
-
-
-
-
-
-
-
12,470
722,481
722,481
722,481
722,481
-
-
421,963
12,470
Balance at 31 July 2016
10,834,660
13,440,878
8,466,827
616,096
(26,878,454)
6,480,007
InfraStrata plc – Annual Report and Financial Statements 2016
26
Consolidated statement of cash flows
for the year ended 31 July 2016
Operating activities
Operating loss for the year
Depreciation
Increase in trade and other receivables
Increase (Decrease) in trade and other payables
Share option expense
Exchange differences
Cash (used in) discontinued operations
Notes
2016
£
(177,735)
167
(882,164)
938,264
12,470
33,301
(180,933)
2015
£
(348,947)
71
(155,585)
(81,496)
73,216
-
(381,340)
Net cash (used in) continuing and discontinued operating
activities
(256,630)
(894,081)
Investing activities
Interest received
Purchase of intangible assets:
Gas Storage Development
Exploration and Evaluation (discontinued)
Proceeds from Exploration and Evaluation assets (discontinued):
Disposals
Receipt of back costs under farmout agreements
Grants received
Purchase of equipment
121
1,105
(608,760)
(43,158)
626,459
252,481
2,689,852
(458)
(3,663,514)
(179,732)
-
-
533,694
(424)
Net cash generated from (used in) investing activities
2,916,537
(3,308,871)
Financing activities
Proceeds on issue of ordinary shares
Drawdown of short-term borrowings
421,963
300,000
1,984,196
1,000,000
Net cash generated from financing activities
721,963
2,984,196
Net increase (decrease) in cash and cash equivalents
3,381,870
(1,218,756)
Cash and cash equivalents at beginning of year
430,199
1,648,955
Cash and cash equivalents at end of year
3,812,069
430,199
Cash and cash equivalents consist of:
Restricted cash
Cash at bank
19
20
1,358,063
2,454,006
-
430,199
3,812,069
430,199
Significant non-cash transactions
As disclosed in note 19, at 31 July 2015 the Group had accrued £1,066,306 as the portion of the Grant from the
European Commission in respect of the Islandmagee gas storage project attributable to work done at that date.
This accrual is a non-cash item, as are the impairment charges of £28,443 (2015 – £6,072,785); therefore these
items do not appear in the statement of cash flows.
InfraStrata plc – Annual Report and Financial Statements 2016
27
Company statement of cash flows
for the year ended 31 July 2016
Operating activities
Operating profit (loss) for the year
Impairment of intercompany receivables
Depreciation
Increase in trade and other receivables
Increase (Decrease) in trade and other payables
Share option expense
Exchange differences
Cash (used in) discontinued operations
Notes
2016
£
2015
£
329,529
-
167
(1,870,246)
973,141
12,470
33,301
(180,933)
(753,475)
523,650
71
(3,361,643)
(122,029)
73,216
-
(381,340)
Net cash (used in) continuing and discontinued operating
activities
(702,571)
(4,021,550)
Investing activities
Interest received
Purchase of exploration intangible assets (discontinued)
Proceeds from Exploration and Evaluation assets (discontinued):
Disposals
Receipt of back costs under farmout agreements
Grants received
Purchase of equipment
121
(43,158)
626,459
252,481
2,689,852
(458)
1,105
(179,732)
-
-
533,694
(424)
Net cash generated from investing activities
3,525,297
354,643
Financing activities
Proceeds on issue of ordinary shares
Drawdown of short-term borrowings
421,963
300,000
1,984,196
1,000,000
Net cash generated from financing activities
721,963
2,984,196
Net increase (decrease) in cash and cash equivalents
3,544,689
(682,711)
Cash and cash equivalents at beginning of year
256,192
938,903
Cash and cash equivalents at end of year
3,800,881
256,192
Cash and cash equivalents consist of:
Restricted cash
Cash at bank
19
20
1,358,063
2,442,818
-
256,192
3,800,881
256,192
Significant non-cash transactions
As disclosed in note 19, at 31 July 2015 the Group had accrued £1,066,306 as the portion of the Grant from the
European Commission in respect of the Islandmagee gas storage project attributable to work done at that that
date. This accrual is a non-cash item and therefore does not appear in the in the statement of cash flows.
InfraStrata plc – Annual Report and Financial Statements 2016
28
Notes to the financial statements
for the year ended 31 July 2016
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 2016, 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
All future exploration costs associated with retained licence interests will continue to be funded by joint
venture partners.
The next phase of the development of the Islandmagee gas storage project is the completion of the FEED
and commercialisation programme which will take to the end of December 2017 at a total estimated cost
including all the Group’s financial commitments during that period of £6 million. Of that total £3m is being
met by a grant from the EU and loans from the selected FEED contractors leaving a further £3m additional
funding requirement.
On 5 January 2017 the Company entered into a secured loan agreement with Baron Oil plc for a facility of
up to £300,000 to provide working capital for the Group. This Loan is for a term of 12 months from the date
of the loan agreement. Baron is entitled, acting in its sole discretion, to extend the term of the loan
agreement by an additional 12 months. After preparing cash flow forecasts the directors have concluded
that this facility would provide sufficient funding to meet the Company’s minimum level of management and
administrative expenditure and to make necessary payments in relation to the maintenance of the
Islandmagee gas storage for a period of 12 months to the end of December 2017 but not to undertake the
FEED and commercialisation programme.
The directors anticipate that the additional funding of £3.0m required to complete the FEED and
commercialisation programme during 2017 and to repay the new Baron loan can be secured through an
equity fundraising in the first quarter of 2017. However the timing and success of such fundraising cannot
be guaranteed. After preparing cash flow forecasts, making enquiries and considering the loan facility from
Baron Oil plc and the intention to raise the additional funding as 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.
Following the completion of the FEED and commercialisation programme at the end of 2017 the project will
be ready to move into construction and delivery and at that time the Company will further evaluate the
optimum way to structure the funding of the initiation and delivery of that programme for our shareholders
and will evaluate the available sources of funding, including both debt and equity participation, to fund both
the continuing operations of the Company beyond December 2017 and the commencement of
construction. The full project construction is expected to be delivered over a number of years at an
aggregate cost of approximately £300 million and to be delivered on a phased basis.
The directors remain confident that the project is economically viable and that following the completion of
the FEED and commercialisation programme, further new investment for the Company and the project will
be secured. Having reviewed the value of gas storage assets in accordance with the principles set out
below, 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.
However the success of the 2017 fundraising is uncertain. 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 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, the Group’s capitalised project
development costs totalling £6,116,114 and amounts due to the Company from its subsidiaries amounting
to £5,873,052 may become impaired in value, 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.
InfraStrata plc – Annual Report and Financial Statements 2016
29
Notes to the financial statements
for the year ended 31 July 2016
2.
Accounting policies (continued)
Adoption of new and revised standards
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers have been adopted by
the EU and minor changes to other standards arising from annual improvements have been issued but are
yet to be adopted. None of these standards are expected to have a material effect on the Group financial
statements. IFRS 16 Leases has also been issued and may have an impact on the Group financial
statements, as leases it may require future payments made under operating leases to be capitalised. The
Group will assess the impact of the new standard in the Group in due course.
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.
Oil and gas exploration joint operations
The Group is engaged in oil and gas exploration and development which may lead to production through
unincorporated joint operations. The Group accounts for its share at cost of the results and net assets of
these joint operations as jointly controlled assets based on its percentage ownership of these joint
operations. In addition, where the Group acts as operator to the jointly controlled operation, the gross
liabilities and receivables (including amounts due to and from non-operating partners) of the jointly
controlled operation are included in the statement of financial position. Details of the Group’s oil & gas
exploration joint operations accounted for as jointly controlled assets are provided in note 28.
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
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.
InfraStrata plc – Annual Report and Financial Statements 2016
30
Notes to the financial statements
for the year ended 31 July 2016
2.
Accounting policies (continued)
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. 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%
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.
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, including any directly attributable finance costs. No
amortisation or depreciation is provided until the storage facility is available for 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.
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”).
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.
InfraStrata plc – Annual Report and Financial Statements 2016
31
Notes to the financial statements
for the year ended 31 July 2016
2.
Accounting policies (continued)
Oil & gas exploration and evaluation expenditure and assets (continued)
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.
Government grants
Government grants are recognised only when there is reasonable assurance that the Group will comply
with the conditions attaching to the grant and that the grants will be received. Capital grants are recognised
to match the related development expenditure and are deducted in arriving at the carrying value of the
related assets.
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 position 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.
InfraStrata plc – Annual Report and Financial Statements 2016
32
Notes to the financial statements
for the year ended 31 July 2016
2.
Accounting policies (continued)
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).
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 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, other receivables and cash and cash equivalents 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, short-term bank deposits with an original maturity of three
months or less, and cash held in escrow (“restricted cash”). Restricted cash relates to amounts held in
escrow which may only be used to repay the Baron Oil loan.
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. Convertible financial instruments denominated in foreign currencies are not treated as
compound financial instruments on initial recognition or subsequently, including when the repayment of the
instrument is agreed at a specific sterling rate using funds held in escrow.
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.
InfraStrata plc – Annual Report and Financial Statements 2016
33
Notes to the financial statements
for the year ended 31 July 2016
2.
Accounting policies (continued)
Data licensing
Revenue from licensing of data to other parties is recognised in full upon the delivery of the data to the
licensee.
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 costs
The assessment of whether costs incurred on gas storage development should be capitalised or expensed
involves judgement. Any expenditure 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 it is probable that the expenditure will result future economic benefits that are attributable to the
assets.
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.
Net profit interests
The Group holds net profit interests in certain assets. Judgement is needed to assess if a reliable estimate
of value of the NPIs can be made. As the NPIs relate to companies which have yet to generate a profit or
early stage exploration assets, the directors have determined that no reliable estimate can be made and
therefore no value is attributed to the NPIs.
InfraStrata plc – Annual Report and Financial Statements 2016
34
Notes to the financial statements
for the year ended 31 July 2016
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. In both years presented petroleum exploration activities have been
classified as discontinued operations.
2016
Discontinued operations – exploration
Continuing operations – gas storage
Revenue
Management & administrative expenses
Profit on disposal of Exploration & Evaluation
assets
Impairment of Exploration & Evaluation assets
Finance income
Taxation
Northern
Ireland
Southern
England
Total
£
61,150
(254,900)
453,945
(28,443)
-
-
£
12,817
-
-
-
-
-
£
73,967
(254,900)
453,945
(28,443)
-
-
Northern
Ireland
£
500,000
(494,146)
Central
income and
costs
£
-
(183,589)
-
-
-
-
-
-
121
-
Total
£
500,000
(677,735)
-
-
121
-
231,752
12,817
244,569
5,854
(183,468)
(177,614)
Analysis of:
Assets by segment
Liabilities by segment
1,429,879
(1,414,935)
67,687
(11,282)
1,497,566
(1,426,217)
9,266,058
(2,922,841)
807,334
(103,247)
10,073,392
(3,026,088)
14,944
56,405
71,349
6,343,217
704,087
7,047,304
Cash flows from discontinued operations
Cash flows arising from discontinued operations comprise net cash used in discontinued operations £180,933
(2015: £381,340), and net cash received from investing activities £835,782 (2015: net cash used in investing
activities £179,732)
2015
Discontinued operations – exploration
Northern
Ireland
Southern
England
Total
Revenue
Management & administrative expenses
Impairment of Exploration & Evaluation
assets
Share of loss of associates
Impairment of interest in associates
Finance income
Taxation
£
4,929
(331,646)
-
(24,754)
(1,234,006)
-
-
£
651
(55,274)
(3,577,659)
(24,532)
(1,261,120)
-
745,183
£
5,580
(386,920)
(3,577,659)
(49,286)
(2,495,126)
-
745,183
Continuing operations – gas storage
Northern
Ireland
£
400,000
(506,193)
Central
income and
costs
£
8,526
(251,280)
-
-
-
-
-
-
-
-
1,105
-
Total
£
408,526
(757,473)
-
-
-
1,105
-
Analysis of:
Assets by segment
Liabilities by segment
232,180
(464,596)
247,212
(68,540)
479,392
(533,136)
7,491,517
(1,081,957)
401,147
(139,698)
7,892,664
(1,221,655)
(1,585,477)
(4,172,751)
(5,758,228)
(106,193)
(241,649)
(347,842)
(232,416)
178,672
(53,744)
6,409,560
261,449
6,671,009
InfraStrata plc – Annual Report and Financial Statements 2016
35
Notes to the financial statements
for the year ended 31 July 2016
4.
Revenue
Revenue comprises:
Licensing of seismic data
Other income
5.
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
Net foreign exchange loss (gain)
Operating lease rentals – land and buildings
Project management & company administrative expenditure
Management & administrative expenditure paid in cash
Advisor costs relating to Islandmagee Storage
Non-cash items:
Share options expense
Exchange differences
Depreciation
Pre-licence costs written off
Attributable to:
Continuing operations
Discontinued operations
6.
Employee information
Average number of Executive Directors and staff
Staff costs for the above persons and Non-executive Directors:
Wages and salaries
Social security costs
Defined contribution pension plan expenditure and other costs
Other staff costs
Share based payments
2016
£
500,000
-
2015
£
400,000
8,526
500,000
408,526
2016
£
20,000
10,000
23,660
3,825
167
23,180
30,000
2016
£
853,850
41,520
12,470
23,180
167
1,448
2015
£
20,440
20,300
21,300
3,825
71
(1,476)
30,000
2015
£
1,065,161
-
73,216
(1,476)
71
7,421
932,635
1,144,393
677,735
254,900
757,473
386,920
932,635
1,144,393
2016
Number
2015
Number
5
£
467,848
54,111
10,412
14,710
12,470
5
£
614,265
73,216
33,177
14,014
73,126
Staff costs before recoveries and capitalisation
559,551
807,798
InfraStrata plc – Annual Report and Financial Statements 2016
36
Notes to the financial statements
for the year ended 31 July 2016
7.
Directors’ and key management emoluments and compensation
Group and Company
2016
Executive Directors
Andrew Hindle
Stewart McGarrity
Anita Gardiner
Non-executive directors
Ken Ratcliff
Maurice Hazzard
Alan Booth (resigned 11 November 2015)
Share based payment
Employers national insurance contributions
Benefits
Pension
Salary &
fees
£
121,667
113,333
112,748
29,969
11,875
4,167
£
3,684
2,947
834
-
-
-
Total
2016
£
£
-
-
1,587
125,351
116,280
115,169
-
-
-
29,969
11,875
4,167
393,759
7,465
1,587
402,811
9,928
48,235
460,974
On 1 October 2015 the Company implemented a Performance Incentive Scheme under which voluntary
salary reductions were taken to preserve the Group’s cash resources. The scheme ended on 30 September
2016 without the crystallisation of any incentive payments under the scheme.
2015
Executive Directors
Andrew Hindle
Stewart McGarrity
Anita Gardiner (appointed 28 October 2014)
Non-executive directors
Ken Ratcliff
Maurice Hazzard
Alan Booth (appointed 21 January 2015)
William Colvin (resigned 31 January 2015)
Walter Roberts (resigned 28 October 2014)*
Share based payment
Employers national insurance contributions
Salary &
fees
£
185,000
142,860
101,835
37,590
15,000
7,500
9,500
4,269
Benefits
Pension
£
3,612
2,893
676
-
-
-
-
-
£
-
3,000
4,557
1,719
-
-
-
-
Total
2015
£
188,612
148,753
107,068
39,309
15,000
7,500
9,500
4,269
503,554
7,181
9,276
520,011
58,120
70,923
649,054
* During 2015 fees for legal services totalling £22,052 were paid to Pinnacle Energy Limited, a company in
which Walter Roberts is both a director and shareholder.
InfraStrata plc – Annual Report and Financial Statements 2016
37
Notes to the financial statements
for the year ended 31 July 2016
7. Directors’ and key management emoluments and compensation (continued)
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 2016 are as follows:
Granted 13 Oct 2014
Anita Gardiner
Granted 18 Sep 2014
Andrew Hindle
Stewart McGarrity
Ken Ratcliff
Maurice Hazzard
Granted 22 July 2013
Stewart McGarrity
Granted 1 Jan 2013
Andrew Hindle
Ken Ratcliff
Maurice Hazzard
Granted 25 Jan 2008
Andrew Hindle
Ken Ratcliff
Maurice Hazzard
Number
Exercise
price
£
Exercise from
Exercisable to
508,000
0.10
13 Oct 2015
31 Dec 2023
800,000
600,000
150,000
60,000
0.10
0.10
0.10
0.10
19 Sep 2015
19 Sep 2015
19 Sep 2015
19 Sep 2015
31 Dec 2023
31 Dec 2023
31 Dec 2023
31 Dec 2023
518,918
0.10
22 Jul 2014
22 Jul 2024
956,022
143,403
57,361
0.1046
0.1046
0.1046
31 Dec 2013
31 Dec 2013
31 Dec 2013
43,859
21,929
21,929
2.28
2.28
2.28
1 Jan 2011
1 Jan 2011
1 Jan 2011
31 Dec 2021
31 Dec 2021
31 Dec 2021
31 Dec 2017
31 Dec 2017
31 Dec 2017
No options were exercised by Directors in 2016 or 2015.
Key man insurance premiums of £Nil (2015: £798) were paid for Executive Directors and directors’ indemnity
insurance premiums of £15,624 (2014: £15,370) were paid in respect of all directors. Since October 2015
none of the directors have participated in the Group Stakeholder Pension Plan.
8.
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 the year.
Outstanding at the beginning of the year
Granted during the year
Forfeited during the year
Outstanding at the end of the year
2016
Number
6,379,167
-
-
6,379,167
2016
WAEP
£
0.1807
-
-
0.1807
2015
Number
3,637,167
2,742,000
-
6379,167
2015
WAEP
£
0.2415
0.1000
-
0.1807
Exercisable at the end of the year
6,379,167
0.1807
3,637,167
0.2415
The weighted average remaining vesting period for the share options outstanding at 31 July 2016 is zero
years (2015: 0.06 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 2016
is 5 years (2015: 6 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.
InfraStrata plc – Annual Report and Financial Statements 2016
38
Notes to the financial statements
for the year ended 31 July 2016
8.
Share based payment plans (continued)
The following table lists the inputs to the model used to
value the options issued in 2015:
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%
8
Nil
0.10
0.1061
The expected volatility reflected the assumption that the historical volatility of a sample of similar companies
was 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.
9.
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 £10,412 (2015: £33,177) 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 2016, employer and employee contributions of £585 (2015: Nil) due in respect of the current
period had not been paid over to the scheme.
10.
Finance income
Interest on bank deposits
2016
£
121
2015
£
1,105
InfraStrata plc – Annual Report and Financial Statements 2016
39
Notes to the financial statements
for the year ended 31 July 2016
11.
Income tax
2016
£
2015
£
The major components of income tax expense for the years ended 31
July 2016 and 2015 are:
a) Income tax recognised in profit or loss
Continuing operations
Current income tax charge/(credit)
Adjustments in respect of current income tax of previous years
Total Current tax
Deferred tax charge/(credit)
-
origination and reversal of timing differences
Total deferred tax
-
-
-
-
-
-
-
-
-
-
Discontinued operations
The tax credit of £745,183 attributed to discontinued operations in the 2015 year (note 3) represented a
deferred tax credit arising from the reversal of a timing differences in relation to an intangible exploration
asset which was impaired to net selling price during the year.
b) A reconciliation between tax expense and the product of
accounting loss from continuing operations for the years ended
31 July 2016 and 2015 is as follows:
Accounting loss before tax from continuing operations
(177,614)
(347,842)
Loss on continuing activities multiplied by the standard rate of tax
(20%; 2015: 20.67%)
Expenses not permitted for tax purposes and pre-trading expenditure
Tax losses carried forward
Items not subject to tax
(35,524)
2,527
67,693
(34,696)
(71,899)
28,911
113,623
(70,635)
-
-
The profit on discontinued activities is not subject to tax (2015 – the difference between the tax credit and
the loss on discontinued activities arises from items not subject to tax).
c) Factors that may affect the future tax charge
The Group has trading losses of £5,313,719 (2015: £4,322,290) which may reduce future tax charges.
Trading losses carried forward include £783,523 in respect of expenses in relation to gas storage
development which were previously classified as pre-trading expenses for reporting purposes but which
were treated as trading expenses in the relevant company’s tax return. Future tax charges may also be
reduced by capital allowances on cumulative capital expenditure.
InfraStrata plc – Annual Report and Financial Statements 2016
40
Notes to the financial statements
for the year ended 31 July 2016
12. Earnings per share
Profit (Loss)
The profit (loss) for the purposes of basic and diluted loss per share
being the net loss attributable to equity shareholders
Continuing operations
Discontinued operations
Continuing and discontinued operations
Number of shares
Weighted average number of ordinary shares for the purposes of:
Basic earnings per share
Basic and diluted earnings per share
Continuing operations
Discontinued operations
Continuing and discontinued operations
2016
£
2015
£
(177,614)
244,569
66,955
(347,842)
(5,758,228)
(6,106,070)
172,318,503
122,217,627
(0.10)p
0.14p
0.04p
(0.28)p
(4.72)p
(5.00)p
For 2015, the share options were not dilutive as a loss was incurred. For 2016 the share options were not
dilutive as the exercise price on all options in issue was in excess of the average price of the Company’s
shares throughout the year.
13.
Profit (Loss) attributable to InfraStrata plc
The profit for the period dealt with in the financial statements of InfraStrata plc was £722,481 (2015 loss:
£1,133,710). As provided by s408 of the Companies Act 2006, no statement of comprehensive income is
presented in respect of InfraStrata plc.
14.
Intangible assets – Gas Storage Development
Group
£
Company
£
Cost
At 1 August 2014
Additions
Grant received (note 19)
Grant accrual during year (note 19)
At 31 July 2015
Additions
Grant accrual during year (note 19)
Net book value
At 31 July 2016
Capitalised finance costs
3,641,437
3,663,514
(533,694)
(1,066,306)
5,704,951
608,760
(197,597)
6,116,114
-
-
-
-
-
-
-
-
Additions during the year to 31 July 2016 include capitalised finance costs totalling £135,843 (2015 -
£14,145).
Capital and other commitments
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 an unrecognised contingent liability
estimated at £100,000 (2015: £100,000). At 31 July 2016 the Group had capital commitments of £Nil (2015:
£218,000) relating to the project.
InfraStrata plc – Annual Report and Financial Statements 2016
41
Notes to the financial statements
for the year ended 31 July 2016
15.
Intangible assets – Exploration & Evaluation
Cost
At 1 August 2014
Additions
Disposals
Impairments (see footnote below)
At 31 July 2015
Additions
Disposals
Impairments (see footnote below)
Net book value
At 31 July 2016
Group
£
Company
£
3,827,066
101,145
179,732
-
(3,577,659)
179,732
-
-
429,139
280,877
43,158
(424,395)
(28,443)
43,158
(276,133)
(28,443)
19,459
19,459
On 13 November 2015, the Company entered into agreements to dispose of its interests in exploration
licences P1918, P2222 and P2235 for a cash consideration and a retained Net Profits Interest in each licence
interest. The carrying value of the Group’s interest in these licences at 31 July 2015 was impaired such that
the net book value equated to the attributable net sales proceeds of £239,400 with the balance representing a
20% interest in each of licences PL1/10 and P2123. No value has been ascribed to the Net Profits Interests
retained on each of the licence interests as it is not possible to determine a reliable fair value for these
instruments. The agreements also contained conditions, principally the completion of the farm-out and drilling
of the Woodburn Forest-1 well, under which a 10% interest in each of licences PL1/10 and P2123 would be
disposed of for a further consideration of £300,000. The conditions were met and the disposals completed.
After impairment the net book value at 31 July 2016 is equal to the estimated net sale proceeds that would
arise from a disposal of the Company’s remaining 10% interests in licences P2123 and PL1/10.
InfraStrata plc – Annual Report and Financial Statements 2016
42
Notes to the financial statements
for the year ended 31 July 2016
16.
Property, plant and equipment
Group
Cost
At 1 August 2014
Additions
At 31 July 2015
Additions
At 31 July 2016
Depreciation
At 1 August 2014
Charge for the year
At 31 July 2015
Charge for the year
At 31 July 2016
Net book value
At 31 July 2016
At 31 July 2015
Company
Cost
At 1 August 2014
Additions
At 31 July 2015
Additions
At 31 July 2016
Depreciation
At 1 August 2014
Charge for the year
At 31 July 2015
Charge for the year
At 31 July 2016
Net book value
At 31 July 2016
At 31 July 2015
InfraStrata plc – Annual Report and Financial Statements 2016
Freehold
property
£
Office
equipment
£
440,100
-
82,894
424
Total
£
522,994
424
440,100
-
83,318
458
523,418
458
440,100
83,776
523,876
-
-
-
-
-
82,894
71
82,965
167
82,894
71
82,965
167
83,132
83,132
440,100
644
440,744
440,100
353
440,453
Freehold
property
£
Office
equipment
£
-
-
-
-
-
-
-
-
-
-
-
-
Total
£
17,748
424
18,172
458
17,748
424
18,172
458
18,630
18,630
17,748
71
17,819
167
17,748
71
17,819
167
17,986
17,986
644
353
644
353
43
Notes to the financial statements
for the year ended 31 July 2016
17.
Investments
Group
Investment in associates
At 1 August
Disposals
Share of losses
Impairments (see note below)
At 31 July
Total investments at the end of the year
2016
£
600
(600)
-
-
-
-
2015
£
2,545,012
-
(49,286)
(2,495,126)
600
600
Until November 2015 the Group held 40% interests in both of Corfe Energy Limited and Brigantes Energy
Limited which are involved in hydrocarbon exploration. Both are private companies, incorporated in England
and Wales and are not listed on any public exchanges.
In November 2015 the Company entered into agreements to dispose of its interests in both Corfe Energy
Limited and Brigantes Energy Limited for a cash consideration and a retained Net Profits Interest in future
profits derived from the disposed shareholding in each company. The carrying value of the Company’s
interest in these associates at 31 July 2015 was impaired such that it equated to the attributable net sales
proceeds of £600 which were received in November 2015.
No value has been ascribed to the Net Profits Interests retained on each of the interests in these associates
as it is not possible to determine a reliable fair value for these instruments.
Company
Investment in subsidiaries and associates
Cost
Balance at 1 August 2015
Disposals
2016
£
2015
£
15,247,611
(600)
15,247,611
-
Balance at 31 July 2016
15,247,011
15,247,611
Impairment
Balance at 1 August 2015 and 31 July 2016
Net book value
Balance at 31 July
Investment in subsidiaries
(15,247,011)
(15,247,011)
-
600
The Company’s subsidiary undertakings at 31 July 2016, all of which are wholly owned unless indicated
otherwise, are as follows:
InfraStrata UK Limited
Holding and corporate
England
InfraStrata UK Limited owns the following
subsidiary undertakings:
Islandmagee Storage Limited (65% owned*)
Portland Gas Limited
Portland Gas Storage Limited
Portland Gas Transportation Limited**
Sub surface gas storage developer Northern Ireland
Holding company
Sub surface gas storage developer
Gas storage pipeline developer
England
England
England
InfraStrata plc – Annual Report and Financial Statements 2016
44
Notes to the financial statements
for the year ended 31 July 2016
17.
Investments (continued)
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 when the construction and operation of the facility is certain or when the
current shareholders’ interests in the project are monetised. Therefore InfraStrata plc includes 100% of the
results, assets and liabilities of Islandmagee Storage Limited in its financial statements.
* Subsequent to the end of the reporting period in September 2016 InfraStrata UK Limited increased its
interest in Islandmagee Storage Limited from 65% to 90% effected by the issue of new shares in
Islandmagee Storage Limited which reduced Moyle’s interest from 35% to 10%. The transaction will mean
that when the construction and operation of the facility is certain or when the current shareholders’ interests
in the project are monetised Moyle will no longer have to advance IMSL approximately £2 million plus interest
to enable IMSL to partially repay shareholders loans paid to date by InfraStrata UK Limited.
** Subsequent to the end of the reporting period on 20 September 2016, Portland Gas Transportation Limited
was dissolved. The company had no assets or liabilities.
The Company has impaired its investment in InfraStrata UK Limited and loan receivable from InfraStrata UK
Limited as required. The impairments in 2012 followed the impairment of the Portland Gas Limited project.
Investment in associates
As disclosed above, in November 2015 the Company’s 40% interests in both of Corfe Energy Limited and
Brigantes Energy Limited were disposed of for a cash consideration of £600 which equated to the carrying
value of these investments at cost. The results of the associates for the period August 2015 to November
2015 were insignificant individually and in aggregate and are not recognised in the consolidated income
statement.
No value has been ascribed to the Net Profits Interests retained on each of the interests in these associates
as it is not possible to determine a reliable fair value for these instruments.
18.
Trade and other receivables
Amounts due from Group undertakings
Trade receivables
Other receivables
Prepayments
Group
2016
£
-
1,104,115
37,587
40,870
Group
2015
£
-
-
220,043
80,365
Company
2016
£
5,873,052
1,104,115
37,462
35,221
Company
2015
£
5,085,527
-
216,921
74,753
1,182,572
300,408
7,049,850
5,377,201
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. Grants and short-term borrowings
Grant receivable / restricted cash
The Grant receivable balance of £1,066,306 at 31 July 2015 represented an accrual of a grant receivable
from the European Commission’s Connecting Europe Facility in relation to the Islandmagee gas storage
project. During 2015 the associated work programme was complete successfully at an aggregate cost of
approximately £3.8 million. 30% of the maximum grant amounting to €750,000 (£533,694) was received in
May 2015 and the remaining €1.75 million, the maximum available, (£1,358,063) was received in May 2016
and placed into an escrow arrangement as security for most of the €1,800,000 short-term convertible
borrowings from Baron Oil plc. The amount placed in escrow is disclosed as restricted cash on the Group
and Company statements of financial position.
InfraStrata plc – Annual Report and Financial Statements 2016
45
Notes to the financial statements
for the year ended 31 July 2016
19. Grants and short-term borrowings (continued)
Grant received in advance
In May 2016 the Company signed a further grant agreement with the European Commission’s Connecting
Europe Facility in relation to the Islandmagee gas storage project for a maximum of €4.024 million or up to
50% of the costs of Front End Engineering and Design (“FEED”) for the project. 40% of the maximum grant
amounting to €1.6 million (£1,331,886) was received on 1 July 2016. At 31 July 2016 the €1.6 million
(£1,358,886) was held in a Euro denominated bank account pending completion of the remaining 50%
funding required to match the grant.
Short-term convertible borrowings
On 30 April 2015, the Company concluded a €1.8 million Convertible Loan Facility Agreement with Baron Oil
Plc (“Baron”) for the purposes of providing bridge finance until receipt of the €1.75 million balancing grant for
the data gathering well to obtain salt cores and subsequently undertake testing and engineering design work
from the European Commission. The loan was drawn-down as Sterling fixed at £1.3 million and was subject
to an interest rate of 8%.
In August 2016 the loan of €1.8 million (£1,400,364) was repaid in full by release to Baron of the €1.75
million (£1,358,063) then held in escrow, a payment of €50,000 (£42,301) and a further payment of €160,904
(£136,134) for the interest on the loan at a fixed rate of 8% up to the effective repayment date of 1 August
2016.
Baron had an accompanying option to convert the entire balance of the loan into an equity participation of
15% of the share capital in IMSL. Subsequent to the end of the reporting period in August 2016, the terms
were amended such that Baron’s option could be exercised until 31 March 2017 for a payment of
£1,536,498, equivalent to the capital and interest repaid on the loan. On 26 September 2016 the option was
further revised, so that Baron now has an option to acquire the number of ordinary shares of 1p in InfraStrata
that represents 16.666% of the enlarged ordinary share capital of InfraStrata (from time to time) for a
payment of £1,536,498, until 31 March 2017.
The borrowings were initially secured by a debenture over the assets of InfraStrata UK Limited which
included the Group’s interest in the share capital of IMSL but this security was released when the balancing
€1.75 million grant was received and placed in escrow.
20.
Cash and cash equivalents
Group
2016
£
Group
2015
£
Company
2016
£
Company
2015
£
Restricted cash
Cash at bank
1,358,063
2,454,006
-
430,199
1,358,063
2,442,818
-
256,192
3,812,069
430,199
3,800,881
256,192
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.
21.
Trade and other payables
Trade creditors
Preference shares (note 24)
Other taxation and social security
Accruals
Group
2016
£
550,253
12,500
707,331
422,971
Group
2015
£
Company
2016
£
Company
2015
£
596,481
12,500
23,928
121,882
548,403
12,500
707,643
363,031
582,075
12,500
23,928
39,933
1,693,055
754,791
1,631,577
658,436
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
InfraStrata plc – Annual Report and Financial Statements 2016
46
Notes to the financial statements
for the year ended 31 July 2016
22. Financial assets and liabilities
The Group and Company’s financial instruments comprise cash and cash equivalents, short-term borrowings
and items such as trade and other receivables and trade and other payables which arise directly from the
Group’s operations. The Group’s operations expose it to a variety of financial risks including credit risk,
interest rate risk, foreign currency exchange risk and liquidity 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. To November 2015, the Group was 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. With the exception of the funds held in an escrow account and classified as
restricted cash at 31 July 2016, the Group has held all funds in Bank of Scotland during the last two years. In
the directors’ view there is a low risk of the bank holding the Group’s funds at year end failing in the
foreseeable future.
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
Restricted cash
Cash and cash equivalents
Group
2016
£
1,141,702
-
1,358,063
2,454,006
Group
2015
£
61,075
-
-
430,199
Company
2016
£
1,141,577
5,873,052
1,358,063
2,442,818
Company
2015
£
60,949
5,085,527
-
256,192
The reconciling items between the trade and other receivables presented above and that presented in note
18 are VAT receivable and prepayments. No receivables are past due but not impaired.
Interest rate risk
The Company and Group are exposed to interest rate risk as a result of positive cash balances, denominated
in sterling and in euros, which earn interest at variable rates. Any surplus cash is held on deposit with Bank
of Scotland. 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 £24,540 (2015: £4,302).
As disclosed in note 19, the Group and Company’s short-term borrowings at 31 July 2016 bore interest at a
fixed rate of 8% and subsequent to the year-end were repaid in full with interest.
Foreign currency risk
The Group is exposed to foreign currency rate risk as a result of Euro denominated bank balances, the grant
receivable during 2015, part of the Baron loan and, to the extent that the it is repayable, the grant received in
advance in 2016.
As disclosed in note 19, the Group and Company’s short term borrowings (with a nominal value of €1.8
million) at the year-end were repaid from a €1.75 million European Commission grant receipt lodged in
escrow (and converted to sterling on receipt) and disclosed as restricted cash on the Group and Company
statements of financial position, and by a payment of €50,000, plus accrued interest. The directors did not
consider the foreign exchange exposure on the €50,000 payment plus accrued interest to be significant.
At 31 July 2016, €1.6 million (£1,358,886) received in advance in respect of a grant for the FEED study on
Islandmagee gas storage project was held in a Euro denominated bank account pending completion of the
remaining 50% funding required to match the grant. The value of the amount received will be converted into
sterling when the match funding has been secured to pay for suppliers on the FEED study in sterling.
InfraStrata plc – Annual Report and Financial Statements 2016
47
Notes to the financial statements
for the year ended 31 July 2016
22. Financial assets and liabilities (continued)
The currency risk disclosures are as follows:
Cash and cash equivalents
Grant Receivable
Cash and cash equivalents
Grant received in advance
Short term convertible borrowings and accrued interest
Group
2016
USD
£1,046
Euros
-
£1,350,781
(£1,358,886)
(£178,435)
Group
2015
USD
£885
Euros
£1,066,306
-
-
(£1,014,145)
The book value of financial assets and liabilities disclosed is considered to be equal to fair value.
Liquidity risk
The total carrying value of Group and Company financial liabilities is disclosed in note 21 (trade and other
payables) and in note 19 (short-term borrowings). The Company seeks to issue share capital or dispose of
assets when external funds are required. The reconciling items between the contractual maturities presented
below and that presented in notes 21 and 19 are taxes and accruals. The following table shows the
contractual maturities of the Group’s and Company’s financial liabilities, all of which are measured at
amortised cost.
Trade & other payables
Within one month
More than one month less than
one year
Short term Borrowings
Within one month
More than one month less than
one year
Group
2016
£
Group
2015
£
Company
2016
£
Company
2015
£
550,253
63,344
548,403
49,568
-
533,137
-
533,137
1,400,364
-
1,300,364
-
-
1,000,000
-
1,000,000
23.
Share capital and redeemable preference shares
10p Ordinary Shares
£
Number
1p Ordinary Shares
£
Number
1p Deferred Shares
£
Number
Total
£
Allotted, called and fully paid
At 31 July 2014
99,491,599
9,949,160
-
-
-
-
9,949,160
Share
subdivision
Issue of £0.01
ordinary shares
-
At 31 July 2015
Issue of £0.01
Ordinary shares
At 31 July 2016
(99,491,599)
(9,949,160)
99,491,599
994,916
895,424,391
8,954,244
-
-
-
-
-
-
52,500,000
525,000
-
-
525,000
-
151,991,599
1,519,916
895,424,391
8,954,244
10,474,160
-
36,050,000
360,500
-
-
360,500
-
188,041,599
1,880,416
895,424,391
8,954,244
10,834,660
InfraStrata plc – Annual Report and Financial Statements 2016
48
Notes to the financial statements
for the year ended 31 July 2016
23.
Share capital and redeemable preference shares (continued)
Redeemable preference shares of £1 each
(classified as liabilities)
At 31 July 2016, 2015 and 2014
Allotted called up and part paid
Number
£
50,000
12,500
On 21 January 2015, following approval at the Company’s AGM, the existing ordinary shares of 10 pence
each were subdivided into 1 New Ordinary Share of 1 penny and 9 Deferred Shares of 1 penny each. The
Deferred Shares do not carry any rights to vote or any dividend rights. The Deferred Shares will not be
admitted to AIM and holders will only be entitled to a payment on return of capital or winding up of the
Company after each of the holders of the Ordinary Shares has received a payment of £10,000,000 on each
such share.
On 23 February 2015, following approval at a General Meeting of the Company, the Company issued
52,500,000 new Ordinary Shares of 1 penny each at 4 pence per share to raise £2,100,000, before
expenses, to institutional and other shareholders. The expenses of the issue totalled £115,804.
On 18 December 2015 the Company announced a placing to raise £450,625 through the issue of 36,050,000
new ordinary shares of 1p each in two tranches. The first tranche of 18,880,000 shares were issued on 23
December 2015 and the second tranche of 17,170,000 shares was issued on 26 January 2016 following
approval of shareholders at the Company’s annual general meeting on 26 January 2016 of resolutions to
provide authority to the Directors to issue and allot further new ordinary shares with exemption rights dis-
applied. The expenses of the issue totalled £28,662.
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.
Authorised share capital
The Company’s articles do not specify an authorised share capital.
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.
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.
InfraStrata plc – Annual Report and Financial Statements 2016
49
Notes to the financial statements
for the year ended 31 July 2016
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 £12,470 (2015: £73,216) relates to the share option expense for the year. There were no
options forfeited or exercised during the year (2015: £nil). For further information on the share based
payment scheme see note 8.
26. Operating lease commitments
Future minimum rentals payable under non-cancellable operating leases as at 31 July are as follows:
Amounts due:
Within one year
Land and
buildings
2016
£
Land and
buildings
2015
£
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. Subsequent to the end of the reporting period the
Company served notice under the lease which will terminate in January 2017.
27.
Related party transactions
Group and Company
InfraStrata plc leases the Group’s head office from Toffee Limited, a company of which Andrew Hindle is a
director and shareholder. The rent and service charges paid during the period were £32,500 (2015:
£45,000). The balance outstanding at 31 July 2016 was £nil (2015: £nil).
Company
The Company has related party relationships with its subsidiaries and associates in the course of normal
operations. InfraStrata plc recovered overhead, technical and project management costs from Islandmagee
Storage Limited of £468,539 (2015: £552,744). Gross balances due to/from subsidiaries were £207,732
(2015: £182,465) / £14,499,107 (2015: £13,683,316). The amounts due from Group undertakings, which
are unsecured, are stated net of an impairment provision of £8,418,323 (2015: £8,418,323).
InfraStrata plc – Annual Report and Financial Statements 2016
50
Notes to the financial statements
for the year ended 31 July 2016
28.
Jointly controlled oil & gas exploration activities
At 31 July 2016 the Group and Company held in interests in the following exploration licences:
Country
Licence
Field name
Operator
Northern Ireland
Northern Ireland
PL1/10
P2123
Larne-Lough Neagh Basin
Larne-Lough Neagh Basin
InfraStrata
InfraStrata
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.
29. Events after the reporting period
In August 2016 the Baron loan of €1.8 million was repaid in full by release to Baron of the €1.75 million
(£1,358,063) then held in escrow, a payment of €50,000 (£42,301) and a further payment of €160,904
(£136,134) for the interest on the loan at a fixed rate of 8% up to the effective repayment date of 1 August
2016. Baron had an accompanying option to convert the entire balance of the loan into an equity
participation of 15% of the share capital in IMSL. The terms were amended such Baron’s option could be
exercised until 31 March 2017 for a payment of £1,536,498, equivalent to the capital and interest repaid on
the loan. On 26 September 2016 we announced that the option has been further revised, so that Baron now
has an option to acquire the number of ordinary shares of 1p in InfraStrata that represents 16.666% of the
enlarged ordinary share capital of InfraStrata (from time to time) for a payment of £1,536,498, until 31 March
2017.
In September 2016 InfraStrata UK Limited increased its interest in Islandmagee Storage Limited from 65% to
90% effected by the issue of new shares in Islandmagee Storage Limited which reduced Moyle’s interest from
35% to 10%. The transaction will mean that when the construction and operation of the facility is certain or
when the current shareholders’ interests in the project are monetised Moyle will no longer have to advance
IMSL approximately £2 million plus interest to enable IMSL to partially repay shareholders loans paid to date
by InfraStrata UK Limited.
On 5 January 2017 the Company entered into a secured loan facility agreement with Baron Oil plc (“Baron”).
Under the terms of the Loan Agreement, Baron will provide a loan facility of up to £300,000 to InfraStrata (the
“Loan”), which will be applied towards InfraStrata’s working capital requirements. The Loan is for a term of 12
months from the date of the Loan Agreement. Baron is entitled, acting in its sole discretion, to extend the term
of the Loan Agreement by an additional 12 months. The Loan will convert to an on-demand facility, repayable
at any time following Baron's demand, with effect from 30 April 2017 in the event that £3.0m of further funding
has not been received by the Company on or prior to that date. The Loan is subject to an interest rate of 6% of
the funds drawn down, which is payable monthly in advance (rising to 9% in a payment default situation).
Baron will also receive an additional £200,000 (the “Additional Payment”) in the event of a sale or disposal by
InfraStrata of substantially all of its assets, which now comprise its interest in the Project, and/or a change in
control of InfraStrata within two years from the entering into of the Loan Agreement. In the event of a partial
disposal of InfraStrata’s interest in the Project (whereby InfraStrata retains control of Islandmagee Storage
Limited (“IMSL”), the company through which it holds its 90% interest in the Project) the Additional Payment
will be reduced to £100,000, with the remaining £100,000 payable in the event of a subsequent disposal or
change in control of InfraStrata during the two years. The Additional Payment is payable in the above
scenarios regardless of whether the Loan has been repaid during this period or is still in use.
The Loan is secured by, inter alia: (i) a first-ranking debenture over the undertakings and assets of InfraStrata
UK Limited ("InfraStrata UK"), the wholly owned subsidiary of the Company which owns 90% of IMSL; and (ii)
charges over shares in InfraStrata UK (granted by the Company) and IMSL (granted by InfraStrata UK). The
Loan can be repaid by InfraStrata in full at any time during its term, which would lead to the release of the
security arrangements.
The terms of the Loan Agreement contain a number of customary representations and warranties, information
undertakings, and general covenants, which include a negative pledge restricting the Company and
InfraStrata UK's ability to grant further security over their assets. The terms of the Loan Agreement also
impose certain obligations and restrictions on InfraStrata and InfraStrata UK, including, inter alia, restrictions
on acquisitions and joint ventures, further borrowing and guarantees. The Loan Agreement contains a number
of events of default, which includes, inter alia, the suspension or cancellation of trading of the Company’s
ordinary shares on AIM, subject to a seven day remedy period.
30. Control of the Group
There is no ultimate controlling party of InfraStrata plc.
InfraStrata plc – Annual Report and Financial Statements 2016
51
Letter from the Chairman with Notice of Annual General
Meeting
Directors:
Kenneth Ratcliff
Anita Gardiner
Stewart McGarrity
Andrew Hindle
Maurice Hazzard
Dear Shareholder,
1. Introduction
(Non-executive Chairman)
(Joint Managing Director)
(Joint Managing Director)
(Non-executive Director)
(Non-executive Director)
Registered Office:
Blackstable House
Longridge
Sheepscombe
Stroud
GL6 7QX
6th January 2017
Notice of the Company’s forthcoming annual general meeting to be held on Tuesday 31 January 2017 (“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 Auditor’s reports on the annual report
and accounts) for the Company for the financial year ended 31 July 2016 (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 Auditor (Resolution 2)
The Company is required at each general meeting at which accounts are presented to appoint an auditor 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 auditor 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 and 4)
Andrew Hindle and Anita Gardiner are the Directors retiring by rotation this year and each of them offers
themself 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 page 15 of the Accounts.
Share Capital Reorganisation
The mid-market price of the Company’s Ordinary Shares as at the close of business on 5 January 2017 (the last
practicable day prior to the publication of this letter) was 0.45p. The Ordinary Shares have since late November
2016 been trading on AIM at a price below their nominal value of 1 penny 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 at the Annual General Meeting to implement a
proposed reorganisation to create a differential between the nominal value of the Company’s 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 Second Deferred Shares (in addition to the
current Deferred Shares arising on the Share Capital Reorganisation becoming effective. These amendments to
the current Articles of Association will also require shareholders’ approval at the Annual General Meeting.
InfraStrata plc – Annual Report and Financial Statements 2016
52
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 7 and 8, but Resolutions 5 and 6 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 on page 566.
Authority of Directors to Allot Shares (Resolution 5)
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 5, pursuant to paragraph (A) of the Resolution, the Directors will have authority to allot shares up
to a maximum of £2,193,806.12 (which is approximately 116.67% of the current issued share capital as at 5
January 2017, being the latest practicable date before the publication of this Letter) or, following the Share
Capital Reorganisation becoming effective, £21,938.06 (which will represent approximately 116.67% of the
issued share capital following the Share Capital Reorganisation becoming effective). This level of share authority
is sought by the Directors in order to provide flexibility to finance the Company in the future as required.
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 5,
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 £626,805.33 (which is approximately a further third of the current issued
share capital as at 5 January 2017 being the latest practicable date before the publication of this Letter) or,
following the Share Capital Reorganisation becoming effective, £6,268.05 (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 5 is passed, the Directors could allot shares representing up to approximately 150% of
the current issued share capital pursuant to a rights issue.
To the extent not already expired, the authorities conferred by Resolution 5 will expire immediately following the
next Annual General Meeting or, if earlier, on 31 January 2018.
Disapplication of Pre-emption Rights (Resolution 6)
If the Directors wish to exercise the authority under Resolution 5 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 6 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
£1,880,415.99 (which represents approximately 100% of current issued share capital as at 5 January 2017,
being the latest practicable date before the publication of this Letter) or, following the Share Capital
Reorganisation becoming effective, £18,804.16 (which will represent approximately 100% 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 6 will expire on the conclusion of the next Annual General
Meeting or, if earlier, on 31 January 2018. This level of share authority is sought by the Directors in order to
provide flexibility to finance the Company in the future as required.
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 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 as last year, you approve a 100% 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.
Disapplication of Pre-emption Rights in respect of the revised option granted to Baron Oil plc on 18
August 2016 (Resolution 7)
On 26 September 2016, the Company announced a revision to an option that had been previously granted to
Baron Oil plc, whereby this option was revised so that Baron Oil plc had an option to acquire the number of
ordinary shares of 1p in InfraStrata that represents 16.666% of the enlarged ordinary share capital of InfraStrata
InfraStrata plc – Annual Report and Financial Statements 2016
53
Letter from the Chairman with Notice of Annual General
Meeting
(from time to time) for a payment of £1,536,498, until 31 March 2017. InfraStrata’s announcement of 26
September 2016 stated that the requisite authorities under the Companies Act 2006 to issue new ordinary
shares in the Company to allow the exercise of this option, would be sought at the Company's next general
meeting of shareholders (or earlier if required).
Resolution 7 would authorise the Directors to issue and allot shares for cash, pursuant to the exercise of the
revised option granted to Baron Oil plc on 25 September 2016, up to an aggregate nominal value of £313,390.13
(which represents approximately 16.666% of current issued share capital as at 5 January 2017, being the latest
practicable date before the publication of this Letter), or, following the Share Capital Reorganisation becoming
effective, £3,133.90 (which will represent approximately 16.666% of the issued share capital following the Share
Capital Reorganisation becoming effective).
Share Capital Reorganisation (Resolution 8)
As at 5 January 2017, being the latest practicable date prior to the publication of this letter, the total issued
ordinary share capital of the Company was £1,880,415.99 divided into 188,041,599 Existing Ordinary Shares of
1 penny each.
In order to effect the Share Capital Reorganisation, the Existing Ordinary Shares of 1 penny will be subdivided
into 1 New Ordinary Share of 0.01 penny each and 99 Second Deferred Shares of 0.01 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 31 January 2017.
If approved, following the Share Capital Reorganisation, and assuming no further shares are issued between 5
January 2017 (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 188,041,599 New Ordinary Shares and in addition
895,424,391 Deferred Shares and 18,616,118,301 Second 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 31
January 2017.
Second Deferred Shares
The Second Deferred Shares created will be effectively valueless as they will not carry any rights to vote or any
dividend rights. The Second Deferred Shares will rank pari passu with the Deferred Shares. Holders of Second
Deferred Shares, along with holders of the 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 Second 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 Second Deferred Shares, nor will CREST accounts of shareholders be credited in respect of any
entitlement to Second 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 Second 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
InfraStrata plc – Annual Report and Financial Statements 2016
54
Letter from the Chairman with Notice of Annual General
Meeting
Resolutions as they intend to do in respect of their own beneficial holdings totalling 10,960,951 Ordinary shares
(representing 5.83 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 31
January 2017.
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 – Annual Report and Financial Statements 2016
55
Letter from the Chairman with Notice of Annual General
Meeting
Definitions
AIM
AIM Rules
Deferred shares
SHARE CAPITAL REORGANISATION
DEFINITIONS AND TIMETABLE
the market operated by the London Stock Exchange;
the rules for AIM companies as issued by the London Stock Exchange plc,
from time to time;
the Deferred Shares of 1p each arising from the share capital reorganisation
which took place on 21 January 2015 and having the rights set out in the
Articles;
Existing Ordinary Shares
the existing issued ordinary shares of 1 penny each in the capital of the
Company;
New Articles
the articles of association of the company as amended by Resolution 8 set out
in the Notice of AGM;
New Ordinary shares
the new ordinary shares of 0.01p 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 (or any other time and date as the Directors in their absolute
discretion may determine);
Second Deferred shares
the Second Deferred Shares of 0.01p each arising from the Share Capital
Reorganisation having the rights set out in the New Articles;
Share Capital
Reorganisation
the proposed reorganisation to be effected by subdividing each Existing
Ordinary Share into 1 New Ordinary Share and 99 Second 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. 27 January 2017
Time and date of Annual General meeting
11.30 a.m. 31 January 2017
Latest time and date for dealings on AIM in Existing Ordinary Shares
4.30 p.m. 31 January 2017
Record Time for the Share Capital Reorganisation
Admission of the New Ordinary Shares to trading on AIM and crediting
of CREST accounts
6.00 p.m. 31 January 2017
8.00 a.m. 1 February 2017
Notes
1
2
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.
All references in this document to times are to London times.
InfraStrata plc – Annual Report and Financial Statements 2016
56
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 Allenby Capital Limited, 3 St Helen’s Place, London EC3A 6AB, United Kingdom on Tuesday 31
January 2017 at 11.30 a.m., for the purpose of passing the following Resolutions, of which Resolutions 1 to 5 will
be proposed as Ordinary Resolutions and Resolutions 6 to 9 will be proposed as Special Resolutions:
Ordinary Resolutions:
1.
2.
3.
4.
5.
To receive the report of the Directors and the audited accounts of the Company for the year ended 31
July 2016, together with the report of the Auditor on those audited accounts.
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.
To re-elect Andrew Hindle as Director who retires pursuant to article 92 of the Company’s articles of
association and who, being eligible, offers himself for re-election.
To re-elect Anita Gardiner as Director who retires pursuant to article 92 of the Company’s articles of
association and who, being eligible, offers herself for re-election.
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 £2,193,806.12; 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
£21,938.06; and
(B)
(i) comprising equity securities (within the meaning of section 560 CA 2006) up to a
further aggregate nominal amount of £626,805.33 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 £6,268.05
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 2018, 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 – Annual Report and Financial Statements 2016
57
Notice of Annual General Meeting
Special Resolutions:
6.
To consider and, if thought fit, to pass the following resolution as a special resolution:
THAT, subject to the passing of Resolution 5 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 5, 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 5, 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 6):
(i)
(ii)
prior to the Share Capital Reorganisation becoming effective, of equity securities
up to an aggregate nominal amount of £1,880,415.99; and
with effect from the Share Capital Reorganisation becoming effective, of equity
securities up to an aggregate nominal amount of £18,804.16
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 2018, 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.
7.
To consider and, if thought fit, to pass the following resolution as a special resolution:
THAT, subject to the passing of Resolution 5 above the Directors be and they are hereby empowered pursuant to
section 571 CA 2006 to allot equity securities (within the meaning of section 560 CA 2006) for cash
pursuant to the authority conferred by Resolution 5, as if section 561 CA 2006 did not apply to any such
allotment, provided that this power shall be limited:
(A)
to the issue and allotment :
(i)
(ii)
prior to the Share Capital Reorganisation becoming effective, of equity securities
up to an aggregate nominal amount of £313,390.13 pursuant to the exercise of
the revised option granted to Baron Oil plc on 25 September 2016; and
with effect from the Share Capital Reorganisation becoming effective, of equity
securities up to an aggregate nominal amount of £3,133.90 pursuant to the
exercise of the revised option granted to Baron Oil plc on 25 September 2016
The authorities conferred on the Directors under paragraph (A) above shall, in so far as they have not previously
expired, expire on 31 March 2017.
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 1 penny each (each an “Existing Ordinary Share”) that are in issue as at
6.00 p.m. on 31 January 2017 (or such other time as the Directors may determine) (the “Record
Time”) be subdivided into one ordinary share of 0.01 penny each (each a “New Ordinary Share”)
and 99 deferred shares of 0.01 penny each (“Second 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:
InfraStrata plc – Annual Report and Financial Statements 2016
58
Notice of Annual General Meeting
That the existing articles of association of the Company be amended by:
(A)
(B)
the addition in Article 2 of the following definition: “"Second Deferred Shares" means deferred
shares of 0.01p each in the capital of the Company having such rights are stated as attaching
thereto in Article 176.”
the deletion of the definition “Ordinary Share” in Article 2 and its replacement with the following
definition ““Ordinary Share” means an ordinary share of 0.01 penny each in the capital of the
Company”;
(C)
the addition of a new Article 176 as follows:
"176 Second Deferred Shares
The rights attaching to the Second Deferred Shares shall be as follows:
(i)
(ii)
The Second Deferred Shares shall confer no right to participate in the profits of the
Company;
Save that the nominal capital paid up or credited as paid up on the Deferred Shares
being 1 penny each and the nominal capital paid up or credited as paid up on the
Second Deferred Shares being 0.01 penny each, the Deferred Shares and the Second
Deferred Shares shall rank pari passu and the provisions set out in Article 175 shall
apply equally to both of them."
Dated 6th January 2017
By Order of the Board
Walter Roberts
Secretary
Notes:
Registered Office:
Blackstable House
Longridge
Sheepscombe
Stroud
GL6 7QX
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 0371 664
0330 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 12 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
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.
6.
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.
InfraStrata plc – Annual Report and Financial Statements 2016
59
Proxy Form InfraStrata plc
7.
8.
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 close of business on
27 January 2017 shall be entitled to attend the above Annual General Meeting (or, in the case of an adjourned meeting,
close of business 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 close of business on 27
January 2017 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.
(Incorporated and registered in England and Wales under the Companies Act 1985 (as amended) with registered number
6409712)
InfraStrata plc – Annual Report and Financial Statements 2016
60
Proxy Form InfraStrata plc
(“AGM”) of
Proxy Form
InfraStrata plc (the “Company”) to be held at the offices of Allenby Capital Limited, 3 St Helen’s Place,
London EC3A 6AB, United Kingdom on Tuesday 31 January 2017 at 11.30 a.m.
for use by Shareholders at
the Annual General Meeting
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, ................................................................................................................................... (in BLOCK
CAPITALS please)
being a Shareholder/Shareholders of InfraStrata plc, appoint the Chairman of the AGM or ...................................................
............................................................................................................ ....................................................................................
(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 withheld
Discretionary
1
2
3
4
5
To receive the Report and
Accounts for the year ended
31 July 2016
To re-appoint Nexia Smith &
Williamson Audit Limited as
auditor at a remuneration to be
determined by the Directors
To re-elect Andrew Hindle
To re-elect Anita Gardiner
To grant the directors authority to
allot shares on the basis set out in
the Notice of AGM
SPECIAL RESOLUTIONS
6
7
8
9
To disapply pre-emption rights on
the basis set out in the Notice of
AGM
To disapply pre-emption rights to
allow the issue and allotment of
shares pursuant to the exercise of
the revised option granted to
Baron Oil plc on 25 September
2016, on the basis set out in the
Notice of AGM
To affect the Share Capital
Reorganisation
To amend the Articles to include
the Second Deferred Share rights
Signature(s) .............................................................................................. (see note 8) Date ........................................... 20…
Notes:
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
InfraStrata plc – Annual Report and Financial Statements 2016
61
Proxy Form InfraStrata plc
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
3
4
5
6
7
8
9
10
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 27 January 2017.
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 12p 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.
Completion and return of this Proxy Form will not prevent you from attending in person and voting at the AGM should
you 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.
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 close of business
on 27 January 2017 shall be entitled to attend the above AGM (or at close of business 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 at close of business on 27 January 2017 shall be disregarded
in determining the rights of any person to attend and/or vote at the AGM.
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.
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.
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.
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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.
InfraStrata plc – Annual Report and Financial Statements 2016
62