252743 Infrastrata Plc AR Cover Spread 2.75mm v1.qxp 06/01/2019 14:09 Page 1
United Kingdom Registered Office
200 Strand
London, WC2R 1DJ
Subsidiary
8 Portmuck Road
Islandmagee
Larne, Co Andrim,
Northern Ireland,
BT40 3TW
www.infrastrataplc.com
DEVELOPING STRATEGIC
ENERGY INFRASTRUCTURE
SOLUTIONS GLOBALLY
InfraStrata Plc
Annual Report & Financial Statements 2018
252743 Infrastrata Plc AR Cover Spread 2.75mm v1.qxp 06/01/2019 14:09 Page 2
Contents
01 Directors, secretary, advisers and
shareholder information
02 Chairman’s statement
03-09 Strategic Report
10-14 Report of the directors
15-17 Independent auditor’s report
18 Consolidated statement of
comprehensive income
19 Consolidated statement of
financial position
20 Company statement of
financial position
21 Consolidated statement of
changes in equity
22 Company statement of
changes in equity
23 Consolidated statement of
cash flows
24 Company statement of cash flows
25-40 Notes to the financial statements
Perivan Financial Print 252743
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CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Directors, secretary, advisers and shareholder information
Directors
Graham Victor Lyon (Non-Executive Chairman)
John MacInnes Wood (Chief Executive Officer)
Arun Suri Raman (Non-Executive Director)
Company secretary
Paul Stock
Registered office
Auditor
Tax advisers
Registrars
Nominated adviser and
joint broker
Joint broker
Solicitors
Bankers
200 Strand
London, WC2R 1DJ
Nexia Smith & Williamson Audit Limited
Onslow House, Onslow Street,
Guildford
Surrey, GU1 4TL
Smith & Williamson LLP
Onslow House, Onslow Street,
Guildford
Surrey, GU1 4TL
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
Allenby Capital Limited
5 St Helen’s Place
London, EC3A 6AB
SI Capital
46 Bridge Street
Godalming, GU7 1HL
Kerman & Co LLP
200 Strand
London, WC2R 1DJ
Bank of Scotland plc
33 Old Broad Street
London, EC2N 1HZ
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Chairman’s statement
The Company conducted several equity
capital market fundraises during the period
and, whilst dilutive to shareholders, they
enabled us to commence the FEED work. It
is recognised that funding will always remain
an issue until regular revenue is achieved.
The Company manages cash flow very
closely and reviews all options to progress
the Project whilst conserving cash.
Consistent with our corporate strategy of
exiting all exploration activities, we have,
since the financial year end, sold a small,
remaining royalty interest in certain
exploration assets that we had an
opportunity to monetise.
The Company has adopted the QCA code
for corporate governance, this
communicates the board’s aim in “doing the
right thing” for its shareholders and
stakeholders in the medium to long term. We
have improved our Investor Relations activity
and community relationships, and we will do
more as priorities allow. As we move into the
next phase of the Project commercialisation
before construction commences, we
continue to prioritise safety, the environment
and the wellbeing of all those working
with us. There is still much to do in the
Company. We have a committed board and
employees that can attract world class
contractors, capacity users and project
financiers. I continue to thank all our
stakeholders, investors, contractors and of
course our team.
We look forward to another positive year for
the Company.
Graham Lyon
Non-Executive Chairman
4 January 2019
It has been a privilege to serve as Chairman
of InfraStrata plc (the “Company”) since
November 2017 and it has been a
transformational year. I am delighted to be
writing the yearly statement once more
looking back at what we have achieved and
looking forward, moving into the next phase.
We are a very different organisation today
compared with a year ago and we are in a
very different position both technically and
commercially with the Islandmagee gas
storage project. The board appreciates the
patience of all shareholders and whilst we
have made considerable progress, there
remains much to do. During the year our
board has been redefined and we thank
past members and welcome the new. The
board is very active and not only provides
sound oversight but also supports the
Executive Management team wherever and
whenever needed. We should thank Adrian
Pocock for his time on the board, his
entrepreneurial spirit, drive and passion to
set up this journey. We also thank Karen
Campbell for her efforts on the board and
welcome Arun Raman. As a qualified
accountant, Arun now heads our Audit
committee, as well as bringing hands on
experience of commercialising and
operating gas storage facilities. Arun is a
great addition to the board. As recently
announced, Matt Beardmore has decided to
resign from the board due to extraneous
family issues reducing his ability to
undertake the travel and time commitments
required of a non-executive director. Matt
was an integral part of the board providing
invaluable support particularly in regard to
EU matters and we can still benefit from
Matt’s expertise as required. We will
continue to strengthen the board as the
Company develops.
The key to success, for us as a one project
company at present, is to have quality
executives able to deliver on strategy.
Execution is the key to success. To this end
we were very pleased that John Wood, a
very capable engineer with considerable
project delivery expertise, chose to join
InfraStrata first as COO and then as CEO.
John is an ‘engineer’s engineer’, and his
drive and commitment has enabled us to
deliver the Front End Engineering and
Design study, something the Company has
struggled to initiate in the past. John has
shown deep commitment to InfraStrata by
investing personally in the business.
Therefore, we have a board of three: one
executive and two active non-executives.
Whilst controlling overheads and G&A
expenditure, the need for a CFO became
very apparent and we were again pleased
that Andy Duncan agreed to join, initially on
a part-time basis. Andy has both a financial
and engineering background and over the
last decade his strong finance and
particularly project financing expertise has
been honed in several well-known banks. We
would be remiss in not recognising Judith
Tweed our local director of Islandmagee
Energy Limited. Her continued support and
focus on community matters is highly
appreciated. The three-man board, CFO and
Judith are fully committed to taking the
Company forwards and completing the
necessary actions to commence the
construction of the Islandmagee gas
storage project in County Antrim, Northern
Ireland (the “Project”). Delivery of the Project
is front and centre to our strategy of building
an energy focused infrastructure business.
Since I last wrote the Chairman’s statement,
the need for this Project has increased
further. Finally, it is now recognised that
energy security in Northern Ireland, and the
UK as a whole, is an issue that politicians
can no longer ignore. Gas storage at
Islandmagee is good for Northern Ireland,
good for the UK and good for the EU. We still
hold Project of Common Interest (PCI) status
with the EU and we have applied for further
grant funding. Brexit will not affect these
initiatives as the UK government has
confirmed that it will honour any EU grants
previously awarded. The UK government
guarantee scheme, run by the Infrastructure
Projects Authority, remains available to the
Company, if required.
We are now well into winter after an
unseasonably warm summer – how short
memories are, when the ‘Beast from the
East’ hit the UK in late February/early March
2018 and the National Grid issued a warning,
we were hours away from running out of
gas. Gas prices spiked to over 350 pence
per therm; significant multiples to the normal
price and an all-time high. Gas price
volatility has been increasing and it seems is
here to stay. The Project is not only essential
to provide gas rapidly when needed but is
also attractive commercially for capacity
owners and gas trading companies. The
combination of our planned fast cycle
storage facility and gas price volatility makes
our Project attractive to many capacity
users. We as a Company remain convinced
that the Project will not only provide
shareholders with a return on their
investment, capacity users a commercial
opportunity and good profits, and project
investors long term cash flow returns to
service their equity investments but also
importantly to provide security of energy
supply to the island of Ireland and the UK.
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CORPORATE
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CHAIRMAN’S
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REPORT
DIRECTORS’
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AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Strategic report
equipment required in Phase 1, the Project delivered an acceptable
Return on Investment (ROI) to potential equity providers.
Phase 1 in Figure 1 below envisages uni-directional flow of natural
gas through the SNIP from mainland UK (Moffatt) to Northern Ireland.
This current infrastructure offers adequate capacity for the 2 caverns
that are proposed to be commercialised in this phase.
For Phase 2, the pipeline export capacity is expected to rise to circa
22 mscm/d after the SNIP is enabled for reverse flow and the
accessible market includes mainland UK. An engineering study has
been undertaken and Mutual Energy (as operator) has agreed to fully
evaluate expediting these works after the Final Investment Decision
(FID) has been taken on Phase 1. The reversal of the South-North
Pipeline into the Republic of Ireland is also being considered by the
operator which will facilitate additional export capacity.
Phase 2 in Figure 1 indicates the reverse flow options, where the
circled items have already been the subject of engineering studies
and have been technically evaluated by the operator.
OPERATIONAL REVIEW – ISLANDMAGEE GAS STORAGE
PROJECT
Since joining the business firstly as a consultant, then as COO and
more recently as CEO, it has become clear to me that many
individuals have expended a lot of effort over the past decade to get
the Islandmagee gas storage project to its current position. I would
like to place on record my thanks to all involved.
Historically, the Company made significant progress on the Project
concept and technical feasibility but was unable to develop an
economic model that was attractive enough to secure equity and
debt funding. This year, our efforts have been focused predominantly
on commercialisation of the Project.
The Company has historically had a geological and technically-led
approach. Early in 2018, a Concept Feasibility Study by Costain
confirmed that the Project could be technically viable. However, the
economic and commercial viability of a project with a total gas
storage capacity of 450mcm is challenging when the daily
accessible market in Northern Ireland is only 7.3 mscm/d (Winter)
and 3.3 mscm/d (Summer).
The board quickly recognised that a new concept was required to
establish a commercially sustainable project. This was to undertake a
phased development approach. Therefore, Phase 1 would consist of
2 or possibly 3 caverns to be followed by Phase 2 which envisaged
developing the remaining 5-6 caverns as and when increased market
demand permitted. Increased market demand is expected to arise
via reversal of the Scotland Northern Ireland (gas) Pipeline (“SNIP”)
which is currently only incoming to Northern Ireland. The initial
models demonstrated that given the quantum of plant and
Fig 1 Diagrams extracted from the Costain “Gas Network Study 7408-0200-075-07-2004 REV R1”
(cid:2)
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Strategic report (continued)
In 2016, the Company was awarded a grant by the EU under the
Connecting Europe Facility (“CEF”) for 50% of the cost of FEED and
related in situ downhole testing for up to a maximum of €4.024m. An
advance payment of €1.6m (£1.4m) was received in July 2016 and
has since been held in a Euro denominated bank account and drawn
down to settle 50% of the FEED costs as the Project has progressed.
The balance of the grant is likely to be received from the EU during
Q2 2019 following completion of the EU audit of the FEED study. The
FEED study had initially been scheduled for 12 months but was
undertaken in less than 8 months. I wish to place on record my
sincere thanks to all concerned who helped us achieve this major
milestone within this highly compressed time frame.
After the close of the financial year (31 July 2018) and in advance of
the FEED outcome we submitted a substantial grant application for
£40m to the EU. All of our economic modelling work has assumed
that we will have no EU grant, so any potential award will be an
upside. Depending on the feedback to be received from the EU we
may resubmit a strengthened application with the now completed
FEED report to enhance our chances of success. In addition, we
have also established P90 (90% confidence interval) cost estimates
of £114m for Phase 1 and £151m for Phase 2 which, when modelled,
lead to enhanced project IRR returns and healthy cashflow
generation over the lifetime of the Project.
From a strategic perspective, it is our intention to be far more than
just a one project organisation. To that end we have adopted a
strategy that seeks to ensure the Company starts generating an
income in the mid-term to cover running costs at the plc level.
In order to further develop the potential of the Islandmagee site, we
have taken the decision to rebrand the Project subsidiary to
Islandmagee Energy Limited thereby not restricting ourselves to gas
storage only.
In addition to the current scope of work on which the FEED study
has recently been completed, we are evaluating several incremental
projects in relation to the Islandmagee site and surrounding areas.
Figure 2 below gives a snapshot of the potential opportunities that
we are currently evaluating.
Fig 2 Status of Phase 1 caverns 1&2, Phase 2 caverns 3-8 and potential additional phases.
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CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
STRATEGIC REVEW OF THE BUSINESS
In order for InfraStrata to achieve sustainable business growth and
deliver long term value to our shareholders, we need to ensure that
our business is not just a one project organisation. The key focus of
our business going forward will therefore be to develop and monetise
energy related global infrastructure projects with a working and cash
generating life of 20 – 40 years.
The model, whilst relatively simple, will allow us to continue to
enhance our balance sheet year on year. Income will be generated
from four main areas of operations; each new project may be
different and have specific issues that need to be critically assessed.
Therefore, individual technical and commercial models will be
developed to ensure that maximum value is derived from every
potential project. The four areas of expertise (shown in Figure 3) that
we hold and that we expect to lead to income generation and
incremental shareholder value are:
m Front End Project Development to FID (Final Investment Decision)
– carried equity interest
m Construction Management & Project Delivery – management fee
agreement
m Asset Operation, Management & Optimisation – management and
operations fee agreement
m Retained equity income generation – project profit sharing via
dividend distribution
Our strategic goal is to have numerous projects at various stages of
their respective lifecycles. The board will identify and assess projects
that substantially fit the following criteria:
l Energy infrastructure
l Key strategic requirement for the assets
l Political stability in the project location
l Long life operations of between 20 and 40 years
l Risk of development can be mitigated to an acceptable level
l State backed projects where grants for feasibility, design and
construction may be available.
Finally, when the business is sufficiently mature it will allow the board
to consider returning cash to shareholders whilst retaining sufficient
funds to invest in new value enhancing projects.
Fig 3 InfraStrata Vision, Income Generation Streams and Key Enablers
InfraStrata Plc Annual Report and Financial Statements 2018 x 05
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Strategic report (continued)
ISLANDMAGEE GAS STORAGE – PROJECT #1a
Much has been detailed in recent years in relation to the feasibility of
storing gas underground in salt caverns; it is not a new concept and
globally gas is stored in hundreds of salt caverns. The technical
evaluation that has been worked on for many years is the more
straight-forward part of commercialising our facility.
In order for the Final Investment Decision to be taken, the following
items need to be in place:
l Successful FEED Study and positive P90 cost outcomes
l EPC Tender Proposal from Construction Company
l Offtake Agreement from one or a consortium of Offtake Partners
Successful FEED Study and positive P90 Results
When I joined the business, we immediately began the process of
undertaking the FEED study, with the clear intention of completing it
within time and on budget. Accordingly, work scopes were clarified
and contracts were awarded to Costain for the surface works and
DEEP KBB for the sub-surface elements. With the significantly low
headcount within the Company and to ensure that our commercial
interests were protected, we engaged the services of, as owner’s
engineers, WSP for surface works and Atkins for sub-surface works.
The FEED works commenced in April 2018 and were successfully
completed in November 2018. The milestones shown in Figure 4
were set out prior to commencement and they were all achieved
ahead of schedule and either on or under budget.
l Project Equity Partner
l Project Debt Partner
Fig 4 Milestones that were completed during FEED contracts undertaken by Costain & DEEP KBB
FEED has been successful and duly delivered with a set of results that confirm there are no technical issues restricting the facility from being
constructed. As part of the FEED studies, a “P90” cost estimate has been undertaken for delivering the Project determined by probabilistic
analysis. P90 values are established to provide a high level of confidence (90% confidence) such that the Project outturn cost will have a 90%
chance to be below this estimate and a 10% chance above. The P90 estimate is consistent with the economic modelling undertaken on the
Project thus far. On this basis, the Company will proceed into the next phase of development with a high level of confidence from a technical,
cost and economic viewpoint.
Change from ranges used during
Caverns Economic Model FEED Estimate Economic modelling
Phase 1 (2 Caverns) £100 to £120m £114m +£14m to -£4m
Phase 2 (6 Caverns) £200 to £210m £151m -£49m to -£59m
Phase 1 & 2 (8 Caverns) £300 to £330m £265m -£30m to -£65m
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CORPORATE
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CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
EPC Tender Proposal
In May 2018 InfraStrata issued an expression of interest to a long list
of potential EPC (“Engineering, Procurement & Construction”)
Contract organisations. I am pleased to report that there was a return
from 28 interested parties. After the initial round of assessment this
list has now been reduced to 10 organisations. The full EPC tender
package was issued in December 2018, with the tender returns due
to be submitted in February 2019.
Offtake Agreement from one or a consortium of Offtake Partners
For several years, discussions have been taking place with potential
offtake partners in regard to utilising the storage capacity that will be
made available post construction. The challenge that every storage
operator has been facing until recently is that UKCS production
together with gas import capabilities into the UK have made it
economically unattractive to build new gas storage facilities. The
Rough gas storage facility in the North Sea, with a working volume of
circa 3,010 mcm, was until recently, the predominant asset that
enabled balancing of the UK gas network in periods of peak
demand in winter and over-supply in summer. The availability of an
existing facility, therefore offered very limited economic incentive to
build and monetise any new gas storage facilities
However, the situation has dramatically changed. UKCS gas
production is facing significant decline and is not able to contribute
more than 25%-30% of the UK’s annual gas requirement. The Rough
gas storage facility has now been permanently closed and is in the
process of being decommissioned. With the closure of Rough, the
UK has effectively lost 70% of its storage capacity. The current
situation has created a structural imbalance in the UK gas market in
which the UK now relies heavily on imports, through interconnectors
between the EU and UK / Norway and UK and, more recently, LNG
(liquefied natural gas) cargoes. The relative inflexibility and supply
risks to the UK are now manifesting themselves clearly; record high
winter and summer gas prices as observed during winter 2017/18
and summer 2018 respectively. Unusual weather events such as the
“Beast from the East” and the “Mini-Beast from the East” in spring
2018 exposed the inflexibility of and tightness in the UK gas market.
All of the above has now presented a unique opportunity; one that
enables the construction and effective monetisation of new gas
storage facilities in the UK. Market participants, i.e. producers,
traders, network operators and consumers, are all now willing to pay
for gas storage at rates that make these projects commercially viable.
To a large degree, there is now a clear realisation that underground
gas storage in-country is possibly the only method to provide
adequate security of supply given declining gas production,
variability of LNG cargoes and other connected nations having
similar increased gas demands of their own during periods of peak
demand.
Fig 5 Gas storage projects currently in operation and status of future planned facilities.
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Strategic report (continued)
With a 70% reduction in storage capacity following the closure of
Rough, the Islandmagee gas storage facility is the only new facility in
the UK that has successfully completed FEED and is construction
ready. In so far as the directors are aware, none of the other facilities
that have planning permission, as depicted in Figure 5 above, have
completed FEED. Therefore, the Company is at least 3 years ahead
of other facilities.
We are effectively in pole position to take advantage of these
changed market dynamics and successfully monetise the Project.
We are currently in discussions with six potential offtake partners. We
are further exploring the option of putting together a consortium of
offtake partners if this will enhance the value proposition for the
Company and our shareholders.
Project Equity Partner
Our Project is very attractive to funds requiring long life cash
generation (for example pension funds) given the length of operation
and the large cash generation potential. Various term sheets have
been received and are currently being evaluated. Each is very
different and needs further analysis work to bring it back to a neutral
base in order to undertake a fair and objective evaluation of all the
offers. Interest has not been limited to the UK alone and we have
term sheets from overseas institutional investors. Clearly, we need to
choose an equity partner who shares a common vision of the
Company becoming a leader in energy infrastructure over the next
few years.
Project Debt Partner
The Company is pre-qualified for the UK Government Guarantee
Scheme. The scheme supports project companies by providing an
additional source of liquidity should there be insufficient funding in
the commercial lending market. It does this by providing a
guarantee that can be used to support the additional debt.
The level of debt that the Project will require is being modelled
currently. Several potential equity project partners have indicated that
they may fund a substantial portion of Phase 1 of the Project and,
therefore, a large amount of debt finance may not be required.
Reaching a deal on the absolute level of equity finance will allow us
to fully engage on the debt element as required. Currently, we are
engaged in discussions with four banks who may fund either
individually or via a consortium in order to fund the debt portion of
Phases 1 & 2 of the Project.
OPERATIONAL REVIEW – FINANCE
The Group recognised cash revenues of £Nil (2017: £Nil).
Management and administrative expenses totalled £863,413 (2017:
£725,820). The Group incurred a loss of £963,413 (2017: loss of
£964,131). The loss for 2018 when added to the cumulative losses of
£27,725,224 brought forward leaves a retained loss of £28,272,541
to be carried forward. Management and administrative expenditure
are further analysed in note 4 to the financial statements.
Gross capital expenditure on the Islandmagee gas storage project
during the year ended 31 July 2018 was £1,378,069 (2017:
£475,188), comprising costs associated with the FEED and other
general Project costs. There was no Exploration and Evaluation
capital expenditure (2017: £6,902). All of the Company’s petroleum
exploration licence interests have now been assigned or relinquished
and no further expenditure is expected.
A historical potential liability from a 2017 loan facility from Baron Oil
Plc (‘Baron’) remains whereby Baron is entitled to receive an
additional £200,000 (the “Additional Payment”) in the event of a sale
or disposal by InfraStrata or its subsidiaries of substantially all of
their assets, which comprise interests in the Islandmagee project,
and/or a change in control of InfraStrata or its subsidiaries within two
years from the date of the loan agreement. In the event of a partial
disposal of InfraStrata’s or its subsidiaries’ interests in the
Islandmagee project (whereby InfraStrata and InfraStrata UK Limited
retain control of Islandmagee Energy Limited (“IMEL”)), the Additional
08 x InfraStrata Plc Annual Report and Financial Statements 2018
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
IMEL or the Islandmagee gas storage project during the two-year
period. The accounting treatment of this contingent settlement
financial liability is described in note 19 to the financial statements.
On 20 October 2017, the Company issued 125,000,000 shares of
0.01 penny at 0.4 pence each to raise £500,000 before expenses.
Further, on 30 January 2018 the Company issued another
125,000,000 shares of 0.01 penny at 0.3 pence each to raise
£375,000 before expenses. These shares were also accompanied by
62,500,000 warrants exercisable at 0.6p. Finally, on 10 April 2018 and
30 April 2018, the Company issued 266,265,387 and 119,151,279
shares respectively of 0.01 penny at 0.24 pence each to raise a total
of £925,000 before expenses. These shares were also accompanied
by 192,708,333 warrants exercisable at 0.48p. This last funding was
to provide matched funding to the grant provided by the EU and to
enable the Company to commence FEED for the Project.
During the year, the Company was able to utilise its shares as
consideration for services provided by contractors, management and
directors. The total number of shares issued in this respect was
18,482,353 at prices varying from 0.3p to 0.484p. In November 2018,
a further 3,253,660 shares were issued as consideration for services
provided by contractors at a weighted average price of 0.5694p.
The Group’s cash and cash equivalents at 31 July 2018 were
£1,790,979 (2017 – £1,548,169) including approximately £916,294
(€1,042,743) as the balance of the €1.6 million received in advance
from the EU.
Since 31 July 2018, the following warrants have been exercised:
l On 24 August 2018, 10,416,666 warrants at 0.48p;
l On 29 August 2018, 5,833,333 warrants at 0.6p;
l On 29 August 2018, 4,166,666 warrants at 0.48p;
l On 4 September 2018, 4,166,666 warrants at 0.48p;
l On 29 November 2018, 18,617,666 warrants at 0.6p;
l On 6 December 2018, 333,333 warrants at 0.6p;
l On 11 December 2018, 1,049,000 warrants at 0.6p;
l On 14 December 2018 1,356,162 warrants at 0.48p;
l On 17 December 2018 4,693,466 warrants at 0.6p;
l On 2 January 2019 1,768,838 warrants at 0.48p;
l On 3 January 2019 6,139,867 warrants at 0.6p;
l On 3 January 2019 4,508,427 warrants at 0.48p;
l On 4 January 2019 5,000,000 warrants at 0.6p.
In total 68,050,090 warrants have been exercised, bringing the total
consideration received for warrants exercised to £376,640.45.
KEY PERFORMANCE INDICATORS
As a board, we seek to outline, monitor and successfully deliver
against each of the following Key Performance Indicators (‘KPIs’):
l Company strategy – short term and long term
l Strengthening of controls – operational, financial and commercial
l Raising finance – equity and debt
l Project specific KPIs
l HSE (health, safety and environment) compliance
l AIM and MAR (Market Abuse Regulation) related compliance
l Corporate filings in a timely manner
l Stakeholder engagement – shareholders, investors, landowners,
AIM advisers, brokers etc.
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DIRECTORS’
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AUDITOR’S
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FINANCIAL
STATEMENTS
Whilst we still have a lot of work to do to meet these KPIs, we are
regularly tracking them against the targets set by the board along
with clear plans put in place to meet these targets. All KPIs are
monitored, reviewed and discussed at the monthly board meetings in
order to keep the executive team aligned to the core objectives of
“doing the right thing” for increasing shareholder value.
PRINCIPAL RISKS & UNCERTAINTIES
The board is 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, project, 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. A robust process of risk
management and mitigation has been introduced into the business
and all risks associated with the Islandmagee Energy project have
been fully assessed.
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.
A deterioration of the capital markets may reduce our ability to raise
new equity funding. We work closely with our professional advisers
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 either through joint venture partners as 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, however this risk has been substantially reduced by
successfully completing the FEED works for the Project. 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.
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 communications 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 10 to 14.
Operational risks – damage to shareholder value, environment,
personnel or communities caused by operational failures
InfraStrata has restructured its board with relevant skills 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
John Wood
Chief Executive Officer
4 January 2019
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Report of the directors
for the year ended 31 July 2018
The directors have pleasure in presenting their report and audited financial statements for the year ended 31 July 2018.
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 1,103,911,035 ordinary shares are issued and fully paid (including all warrants exercised and fully paid at the date of
this report). Details of movements in share capital during the year are given in note 23 to the financial statements; post year end movements
are detailed in note 29.
RESULTS AND DIVIDENDS
Petroleum exploration and evaluation operations were classified as discontinued in 2017 and there was no activity relating to these operations
in 2018. The Group recognised cash revenue from continuing operations of £Nil (2017: £Nil). Management and administrative expenses
totalled £863,413 (2017: £895,404). The Group incurred a loss of £963,413 (2017: loss of £964,131). The loss for 2018 when added to the
cumulative losses of £27,725,224 brought forward and movements between reserves leaves a retained loss of £28,272,541 to be carried
forward.
The directors do not recommend the payment of a dividend (2017: £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 9.
DIRECTORS
The directors, who served during the year and subsequently, are detailed in the following table, which also highlights whether they are/were
executive positions or independent:
Executive Independent
G V Lyon (appointed 7 November 2017) 4
J Wood (appointed 27 June 2018) 4
A R Pocock (ceased 12 September 2018) 4
M P Beardmore (appointed 7 November 2017, resigned 18 December 2018) 4
A S Raman (appointed 26 July 2018) 4
P V Wale (resigned 9 November 2017) 4
K Campbell (appointed 9 November 2017, resigned 27 June 2018) 4
All directors benefit from the provisions of individual directors’ Personal Indemnity insurance policies. Premiums payable to third parties are
as described in note 6 to the financial statements. Some of the current directors have been granted share options in the Company and details
can be found in note 7 to the financial statements.
The directors of the Company at the date of this Annual Report and their abridged CVs are as follows:
Graham Lyon – Non-Executive Chairman
Graham is a senior energy, oil and gas executive with over 30 years' experience encompassing global technical, operational and commercial
leadership roles. Graham’s experience and track record of numerous leadership roles eminently qualifies him as suitable to lead the
InfraStrata board.
He is currently a Director of Soncer Limited, a private oil and gas leadership consulting firm, undertaking board and executive positions for
private and listed companies. He has actively led and advised on major M&A transactions and the financing and restructuring of companies
and projects throughout the world.
Graham is Executive Chairman at Comet Energy, a private Canadian oil and gas company and is Non-Executive Chairman of Pearland Energy,
a Nigerian oil and gas company. Graham also Chairs the Technical Advisory Committee and is a Board Adviser to Sirius Petroleum plc
(AIM: SRSP).
Graham has recently held a number of board level positions at private and listed companies including; Non-Executive Director at Tarbagatay
Munay LLP, a private Kazakhstani oil and gas company where he also chaired the Corporate Governance committee, Hawkley Oil & Gas
Limited (ASX: HOG), Range Resources Limited (AIM: RRL, ASX: RRS) where he chaired the Reserves committee and was a member of
Remuneration, Nomination and Corporate Governance committees, and MENA Hydrocarbons (TSX: MNH) as CEO. Before establishing Soncer,
Graham was Vice President of Petro-Canada (TSX: PCA), where he led business development for its international business unit, which was
formerly the international company Veba Oil and Gas GmbH. In his earlier technical career, he worked for Shell and Chevron.
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CHAIRMAN’S
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STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
John Wood – Chief Executive Officer
John has enjoyed a distinguished career within the oil and gas sector, holding senior posts with BAE Systems, and was more recently the
Global Head of Oil and Gas with Aurecon, a global engineering and advisory firm. He has successfully undertaken projects in Australia, the
USA, Africa, Europe and the UK, building up extensive experience delivering pre-FEED and FEED (Front End Engineering Design), FID (Final
Investment Decision) and EPC (Engineering, Procurement and Construction) contracts involving storage and infrastructure developments. Prior
to his appointment as Chief Executive Officer at InfraStrata plc, John worked as a consultant for the company, and was closely involved in
negotiating and agreeing FEED contracts for the Islandmagee gas storage facility with Costain, DEEP KBB and WSP, as well as the
appointment of Evan Passaris (Atkins) as a specialist in salt cavern gas storage. During that time, John managed all FEED related activities on
behalf of the company.
John is ideally suited to overseeing the operational areas of InfraStrata’s Islandmagee gas storage project, given his wealth of technical
experience across a wide range of similar developments. He is a well-known and highly respected industry professional and has extensive
experience of working with InfraStrata’s FEED partners.
Arun Raman – Non-Executive Director
Arun has spent the past 20 years within the commodities and infrastructure sector. While at Star Energy Group plc (now known as Petronas
Energy Trading Ltd.), he was responsible for commercialising its 10 BCF Humbly Grove Underground Gas Storage Project, including the
negotiation and commercial delivery of the Gas Storage Agreement with Vitol SA as the capacity offtake client. He also negotiated and
executed agreements with the National Grid in relation to physical gas flows between the Humbly Grove gas storage facility and the National
Transmission System. On the trading side, Arun set up trading desks for natural gas, power and carbon emissions for the group. Following on
from there, Arun was hired by Vitol Services Ltd. in London where he was actively trading carbon emissions and other commodities. He
specialises in commercial negotiations and monetising assets underpinned by commodity flows as well as trading of commodities around
such assets. Arun’s gas storage commercialisation experience will provide valuable insight as InfraStrata progresses with the Islandmagee
Project.
Arun is a qualified Chartered Accountant having completed his training with PricewaterhouseCoopers and Citibank N.A. in India. He has been
a member of the Institute of Chartered Accountants of India for the last 17 years post qualification, and also holds the designation of Certified
Internal Auditor awarded to him by the Institute of Internal Auditors, Florida, USA.
DIRECTORS’ EMOLUMENTS
The directors’ emoluments are disclosed in note 6 to the Financial Statements.
DIRECTORS AND SUBSTANTIAL SHAREHOLDINGS
The directors of the Company held the following beneficial shareholdings as at 4 January 2019.
Ordinary shares of 0.01p each Number %
John Wood 42,044,121 3.81
Graham Lyon 15,642,097 1.42
Arun Raman – –
The directors of the Company held the following beneficial shareholdings as at 31 July 2018.
Ordinary shares of 0.01p each Number %
Graham Lyon 8,988,519 0.87
Adrian Pocock 12,655,055 1.23
John Wood 34,017,935 3.29
Matthew Beardmore 6,666,192 0.65
Arun Raman – –
The Company has also received notification of the following interests in 3% or more of the Company’s issued share capital as at the date of
this report. The holdings and percentages presented are at the date of notification.
Ordinary shares of 0.01p each Number %
Michael Dawe 42,800,000 4.048
Stephen Jones 41,701,025 3.94
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Report of the directors (continued)
for the year ended 31 July 2018
CORPORATE GOVERNANCE
The UK Corporate Governance Code
The board recognises the importance of good corporate governance and has chosen to apply the QCA Code. The QCA Code was developed
by the Quoted Companies Alliance (the “QCA”), the independent membership organisation that champions the interests of small to mid-size
quoted companies, in consultation with a number of significant institutional small company investors, as a suitable corporate governance code
applicable to AIM companies.
As stated by the QCA, good corporate governance is about “having the right people (in the right roles), working together, and doing the right
things to deliver value for shareholders as a whole over the medium to long-term”. This is achieved through a series of decisions made by the
board, which needs to be kept dynamic, diverse and engender a consistent corporate culture throughout the InfraStrata plc group of
companies (the “Group”).
Our values are based on “Doing the right thing” for our people, suppliers, shareholders and other stakeholders. The board believes this is vital
to creating a sustainable, growing business and is a key responsibility of the Group. This culture supports the Group’s objectives to grow the
business through acquiring and retaining customers. It is the board’s job to ensure that the Group is managed for the long-term benefit of all
shareholders, with effective and efficient decision-making. Corporate governance is an important part of that job, reducing risk and adding
value to our business.
The board has adopted the QCA Code in line with the London Stock Exchange’s recent changes to the AIM Rules requiring all AIM-quoted
issuers to adopt and comply with a recognised corporate governance code.
The Board
At the financial year end the board comprised two executive directors and three 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 and it is expected that non-
executive directors undertake a minimum of 18 days a year including attending board meetings and sitting on committees. The board, through
the directors, maintains regular contact with its professional advisers to ensure that the board develops an understanding of the views of
major shareholders about the Company. The board also intends to review the performance of the team as a unit to ensure that the members of
the board collectively function in an efficient and productive manner. 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.
Number of meetings held during the 2018 financial year
Executive Directors
Adrian Pocock (ceased 12 September 2018)
John Wood (appointed 27 June 2018)
Non-Executive Directors
Peter Wale (resigned 9 November 2017)
Graham Lyon (appointed 7 November 2017)
Matt Beardmore (appointed 7 November 2017, resigned 18 December 2018)
Arun Raman (appointed 26 July 2018)
Karen Campbell (appointed 9 November 2017, resigned 27 June 2018)
Board
16
Audit
Committee
Remuneration
Committee
1
2
No. of
meetings
attended
No. of
meetings
attended
No. of
meetings
attended
16/16
1/1
2/2
14/14
11/14
–
9/13
1/1
–
–
–
1/1
–
1/1
–
–
–
2/2
2/2
–
2/2
Note that in the table above, the first figure denotes the number of meetings attended and the second figure denotes the number of meetings
eligible to attend.
Audit Committee
The members of the Audit Committee are currently Arun Raman (Chair) and Graham Lyon. For the financial period to which this Annual Report
relates, the members were comprised of Karen Campbell (Chair), Matt Beardmore and Adrian Pocock. There was one meeting of the Audit
Committee during the financial year which was attended by all members of the Committee. Senior representatives of the external auditor
attend these meetings if considered appropriate. The external auditor has unrestricted access to the Chairman of the committee.
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CHAIRMAN’S
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STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
CORPORATE GOVERNANCE (continued)
The role of the Audit Committee includes:
l Consideration of the appointment of the external auditor and the audit fee.
l Reviewing the nature, scope and results of the external audit.
l Monitoring the integrity of the financial statements and interim report.
l Discussing with the auditors any problems and reservations arising from the interim and final results.
l Reviewing the auditor’s management letter and management’s response.
l 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, Nomination and Corporate Governance Committee
The members of the Remuneration, Nomination and Corporate Governance Committee are currently Graham Lyon (Chair) and Arun Raman.
For the financial period to which this Annual Report relates, the members comprised Graham Lyon (Chairman), Matt Beardmore and Karen
Campbell. The committee met twice in the year to 31 July 2018.
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:
l Determining and recommending to the board the remuneration policy for the Chief Executive Officer and Executive Directors.
l Reviewing the design of share incentive plans for approval by the board and determining the annual award policy to Executive Directors
under existing plans.
The Committee remains acutely aware of the need to balance the financial performance of the Company with the need to maintain
incentivisation 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, which this year
is being held on 31 January 2019, is normally attended by all directors. Shareholders 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.infrastrataplc.com) 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 corporate governance and
operational information about the Group’s activities. Enquiries from shareholders on matters relating to their holdings 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.
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 a going concern basis which assumes that the Group will continue in operational
existence for the foreseeable future. As disclosed in the Strategic Report the Group is seeking funding for the Project in the form of equity
and/or debt. Discussions are currently ongoing with potential equity partners. Depending on the outcome and timing of such discussions, the
Group may need to raise near term funding to meet its working capital needs. The Board and executive management team continually monitor
both short term and long term commitments with the aim of developing and implementing funding arrangements accordingly and are
confident that the necessary funding will be available. Further details are given in 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.
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Report of the directors (continued)
for the year ended 31 July 2018
CORPORATE GOVERNANCE (continued)
Applicable 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 “CA 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 CA 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:
l select suitable accounting policies and then apply them consistently;
l make judgements and estimates that are reasonable and prudent;
l state whether they have been prepared in accordance with IFRSs as adopted by the EU; and
l 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 CA 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 Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
DISCLOSURE OF INFORMATION TO THE AUDITOR
In the case of each person who was a director at the time this report was approved: so far as the director was aware there was no relevant
audit information of which the Company’s auditor was unaware; and the director had taken all steps that the director ought to have taken as a
director to make himself or herself aware of any relevant 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 section 418 of the CA 2006.
AUDITOR
A resolution to re-appoint the Company’s auditor, Nexia Smith & Williamson Audit Limited, will be proposed at the Annual General Meeting to
be held on 31 January 2019.
On behalf of the board
J Wood
Director
4 January 2019
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CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Independent auditor’s report
to the members of InfraStrata plc
Opinion
We have audited the financial statements of InfraStrata plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 July
2018 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Financial
Position, the Consolidated and Parent Company Statements of Changes in Equity, and the Consolidated and Parent Statement of Cash Flows,
and the notes to the financial statements, including a summary of significant accounting policies. 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.
In our opinion:
l the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 July 2018 and of
the group’s loss for the year then ended;
l the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
l 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
l the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We
are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to SME listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Material uncertainty relating to going concern
We draw attention to note 2 in the financial statements, which indicates that as at 31 July 2018 and at the date of this report the group and
parent company were dependent upon the receipt of future funding to continue as going concerns. If such funding is not available, the group
and parent company may be unable to meet their liabilities as they fall due within the foreseeable future.
As stated in note 2, these conditions indicate that a material uncertainty exists that may cast significant doubt on the group’s and parent
company’s ability to continue as going concerns. Our opinion is not modified in respect of this matter.
Key Audit Matters
In addition to the matter described in the Material uncertainty relating to going concern section above we identified the key audit matters
described below as those that were of most significance in the audit of the financial statements of the current year. Key audit matters include
the most significant assessed risks of material misstatement, including those risks that had the greatest effect on our overall strategy, the
allocation of resources in the audit and the direction of efforts of the audit team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The two
key audit areas are related, and are therefore addressed together in this report.
Carrying value of the group’s development assets relating to the Islandmagee gas storage facility and the amounts due to the parent
company from its subsidiaries
Description of the risk
The carrying value of the proposed Islandmagee gas storage project (the “project”) of £7,479,690 and the balance of £8,831,740 due to the
parent company from its subsidiaries are significant in the financial statements of both the group and the parent company. As explained in
note 2 to the financial statements, in order for the board to take a positive final investment decision in relation to the project a number of
elements need to be in place, including project funding. If the group cannot obtain the funding required, and/or other required elements are
not in place, the carrying value of the project is likely to be impaired.
Moreover, assuming that the funding is received, the value of the project is dependent upon a number of estimates and factors. These include
the construction costs, the construction time frame, the amount and timing of the revenue to be earned from the project, as well as the
applicable cost of capital and discount rate. Adverse variations in these factors could result in the project becoming impaired in value.
Additionally, if the group and parent company are unable to continue as going concerns, it is likely that the project would be impaired in value.
As noted above, there is a material uncertainty regarding this.
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Independent auditor’s report (continued)
to the members of InfraStrata plc
If the project value is impaired, it is unlikely that the subsidiaries would be able to earn the funds required to repay the intercompany balances
owed.
The group’s impairment assessment is therefore significantly reliant upon judgement, due to the uncertainty caused by the factors noted
above.
Our response to the risk
We challenged the assumptions used in the client’s impairment assessment. As part of our procedures, we:
– reviewed the directors’ assumptions regarding the revenue to be earned over the course of the project against communications received
from third parties
– reviewed the directors’ assertions regarding the market appetite and potential life of the project against publicly available information
relating to the sector
– considered the appropriateness of the directors’ estimated construction costs and timeframe against the Concept Feasibility Study
prepared by Costain
– performed a sensitivity analysis on the discounted cash flow
– assessed the appropriateness of the discount rate used by the directors
– assessed whether the inherent uncertainties relating to the project were adequately disclosed in the financial statements
In performing our procedures, we used internal valuation specialists to assess the reasonableness of the discount rate applied.
Material uncertainties
The directors’ assessment is that no impairment is required to the project value and the balances due from the subsidiaries, but that conclusion
is depending upon the availability of future funding, as well as other uncertain events. Therefore, as more fully explained in Note 2, there are
material uncertainties regarding the carrying value of the project and the balances due from its subsidiaries to the parent company. The
financial statements do not include the impairment of the project or the impairment of the parent company’s balances due from its subsidiaries
that would result if the group were unable to raise such funds.
Our opinion is not modified in respect of this matter.
Our application of materiality
The materiality for the financial statements of the group as a whole was set at £380,000. This has been determined with reference to the
benchmark of the group’s net assets, which we consider to be one of the principal considerations for members of the company in assessing
the performance of the group. Materiality represents 5% of the group’s net assets as presented on the face of the Consolidated Statement of
Financial Position.
The materiality for the financial statements of the parent company as a whole was set at £304,000. This has been determined with reference to
the benchmark of the parent company’s net assets as the company exists primarily as a holding company for the group. Materiality represents
5% of net assets as presented on the face of the parent company Statement of Financial Position, capped at 80% of group materiality.
An overview of the scope of our audit
At the end of the year, the group comprised of three companies. We are appointed auditor and have performed audits of the financial
statements of each company. All the group’s assets and liabilities are located in the UK. All group entities have common management and
centralised processes and controls. Therefore our audit work was conducted solely in the UK.
Other information
The other information comprises the information included in the Annual Report and Financial Statements, other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
l the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
l the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
16 x InfraStrata Plc Annual Report and Financial Statements 2018
252743 InfraStrata Plc AR pp010-pp017.qxp 06/01/2019 14:01 Page 17
CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
l 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
l the parent company financial statements are not in agreement with the accounting records and returns; or
l certain disclosures of directors’ remuneration specified by law are not made; or
l we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, set out on pages 13 and 14, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the parent 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 parent 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 parent company and the parent company’s members as a body, for our audit work, for this report, or for the opinions we have
formed.
Guy Swarbreck
Senior Statutory Auditor,
for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
25 Moorgate
London
EC2R 6AY
5 January 2019
InfraStrata Plc Annual Report and Financial Statements 2018 x 17
252743 InfraStrata Plc AR pp018-pp024.qxp 06/01/2019 14:14 Page 18
Consolidated statement of comprehensive income
for the year ended 31 July 2018
Continuing operations
Revenue
Cost of sales
Gross profit
Management and administrative expenses
Operating loss
Finance expense
Finance income
Loss before taxation
Taxation
Loss for the year from continuing operations
(Loss) profit for the year from discontinued operations
(Loss) profit for the year attributable to the equity holders of the parent
Other comprehensive income
Total comprehensive (loss) profit 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
Notes
4
19
9
10
3
3
11
2018
£
–
–
2017
£
–
–
–
(863,413)
–
(725,820)
(863,413)
(100,000)
–
(725,820)
(58,000)
361
(963,413)
–
(783,459)
–
(963,413)
–
(783,459)
(180,672)
(963,413)
–
(964,131)
–
(963,413)
(964,131)
(0.15)p
–
(0.15)p
(0.30)p
(0.07)p
(0.37)p
18 x InfraStrata Plc Annual Report and Financial Statements 2018
252743 InfraStrata Plc AR pp018-pp024.qxp 06/01/2019 14:14 Page 19
CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Consolidated statement of financial position
as at 31 July 2018
Notes
2018
£
2017
£
13
14
15
19
17
19
20
21
18
19
19
19
23
24
25
26
7,479,690
–
440,100
–
6,591,302
–
440,100
42,000
7,919,790
7,073,402
222,491
42,000
1,790,979
98,718
100,000
1,548,169
2,055,470
1,746,887
(840,523)
(924,642)
(163,344)
(200,000)
(149,625)
(1,440,913)
–
–
(2,128,509)
(1,590,538)
(73,039)
(200,000)
156,349
(200,000)
7,646,751
7,029,751
10,919,117
15,719,784
8,988,112
6,847
285,432
(28,272,541)
10,853,460
14,297,307
8,988,112
616,096
–
(27,725,224)
7,646,751
7,029,751
Non-current assets
Intangible fixed assets:
Gas Storage Development
Exploration & Evaluation
Property, plant and equipment
Deferred liability
Total non-current assets
Current assets
Trade and other receivables
Deferred liability
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Grant received in advance
Short-term borrowings
Short-term financial liability
Total current liabilities
Net current (liabilities)/assets
Financial liability
Net assets
Shareholders’ funds
Share capital
Share premium
Merger reserve
Share based payment reserve
Warrant reserve
Retained earnings
Total equity
Company registration number: 06409712
Approved and authorised for issue by the board on 4 January 2019.
Graham Lyon John Wood
Director Director
InfraStrata Plc Annual Report and Financial Statements 2018 x 19
Notes
2018
£
2017
£
14
15
19
17
19
20
21
18
23
24
25
26
–
–
–
–
–
–
42,000
42,000
9,053,400
42,000
1,671,002
7,211,230
100,000
1,545,779
10,766,402
8,857,009
(805,221)
(924,642)
(200,000)
(117,186)
(1,440,913)
–
(1,929,863)
(1,558,099)
8,836,539
(200,000)
7,298,910
(200,000)
8,636,539
7,140,910
10,919,117
15,719,784
8,466,827
6,847
285,432
(26,761,468)
10,853,460
14,297,307
8,466,827
616,096
–
(27,092,780)
8,636,539
7,140,910
252743 InfraStrata Plc AR pp018-pp024.qxp 06/01/2019 14:14 Page 20
Company statement of financial position
as at 31 July 2018
Non-current assets
Intangible exploration assets
Property, plant and equipment
Deferred liability
Total non-current assets
Current assets
Trade and other receivables
Deferred liability
Cash and cash equivalents
Total current assets
Current liabilities
Trade and other payables
Grant received in advance
Short-term financial liability
Total current liabilities
Net current assets
Financial liability
Net assets
Shareholders’ funds
Share capital
Share premium
Merger reserve
Share based payment reserve
Warrant reserve
Retained earnings
Total equity
Company registration number: 06409712
The company’s loss for the period was £284,784 (2017 loss: £214,325).
Approved and authorised for issue by the board on 4 January 2019.
Graham Lyon John Wood
Director Director
20 x InfraStrata Plc Annual Report and Financial Statements 2018
252743 InfraStrata Plc AR pp018-pp024.qxp 06/01/2019 14:14 Page 21
CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Consolidated statement of changes in equity
for the year ended 31 July 2018
Share
based
Share Share Merger payment Warrant Retained
capital premium reserve reserve reserve earnings
£ £ £ £ £ £
Total
equity
£
Balance at 31 July 2016 10,834,660 13,440,878 8,988,112 616,096 – (26,761,093)
Loss for the year – – – – – (964,131)
7,118,653
(964,131)
Total comprehensive profit for the year – – – – – (964,131)
Shares issued 18,800 921,200 – – – –
Share issue costs – (64,771) – – – –
(964,131)
940,000
(64,771)
Balance at 31 July 2017 10,853,460 14,297,307 8,988,112 616,096 (27,725,224)
Loss for the year – – – – – (963,413)
7,029,751
(963,413)
Total comprehensive loss for the year – – – – – (963,413)
(963,413)
Shares issued Note 23 65,657 1,824,073 – – – –
Share issue costs – (116,164) – – – –
Warrant issue – (285,432) – – 285,432 –
Share Option expense – – – 6,847 – –
Transfer on forfeiture of share options – – – (616,096) – 616,096
Due to Moyle Investments on first
gas storage (note 27) – – – – – (200,000)
1,889,730
(116,164)
–
6,847
–
(200,000)
Balance at 31 July 2018 10,919,117 15,719,784 8,988,112 6,847 285,432 (28,272,541)
7,646,751
InfraStrata Plc Annual Report and Financial Statements 2018 x 21
252743 InfraStrata Plc AR pp018-pp024.qxp 06/01/2019 14:14 Page 22
Company statement of changes in equity
for the year ended 31 July 2018
Share
based
Share Share Merger payment Warrant Retained
capital premium reserve reserve reserve earnings
£ £ £ £ £ £
Total
equity
£
Balance at 31 July 2016 10,834,660 13,440,878 8,466,827 616,096 – (26,878,454)
Loss for the year – – – – – (214,326)
6,480,007
(214,326)
Total comprehensive loss for the year – – – – – (214,326)
Shares issued 18,800 921,200 – – – –
Share issue costs – (64,771) – – – –
(214,326)
940,000
(64,771)
Balance at 31 July 2017 10,853,460 14,297,307 8,466,827 616,096 – (27,092,780)
Loss for the year – – – – – (284,784)
7,140,910
(284,784)
Total comprehensive loss for the year – – – – – (284,784)
(284,784)
Shares issued (Note 23) 65,657 1,824,073 – – – –
Share issue costs – (116,164) – – – –
Warrant issue – (285,432) – – 285,432 –
Share Option expense – – – 6,847 – –
Transfer on forfeiture of share options – – – (616,096) – 616,096
1,889,730
(116,164)
–
6,847
–
Balance at 31 July 2018 10,919,117 15,719,784 8,466,827 6,847 285,432 (26,761,468)
8,636,539
22 x InfraStrata Plc Annual Report and Financial Statements 2018
CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Consolidated statement of cash flows
for the year ended 31 July 2018
Note
2018
£
2017
£
Operating activities
Operating loss for the year
Depreciation
(Increase) decrease in trade and other receivables
Increase (decrease) in trade and other payables
Shares issued in lieu of fees
Exchange differences
Share option expense
Cash (used in) discontinued operations
Net cash (used in) continuing and discontinued operating activities
Investing activities
Interest received
Purchase of intangible assets:
Gas Storage Development
Exploration and Evaluation (discontinued)
Net cash (used in) generated from investing activities
Financing activities
Proceeds on issue of ordinary shares
Drawdown of short-term borrowings
Repayment of short-term borrowings
Net cash generated (used in) from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents consist of:
Cash at bank
(863,413)
–
(725,820)
644
(123,827) 1,083,854
690,952 (1,543,430)
–
82,027
–
(154,311)
89,750
(26,590)
6,847
–
(226,281) (1,257,036)
–
361
(1,378,069)
–
(475,188)
(6,902)
(1,378,069)
(481,729)
1,683,816
163,344
875,229
200,000
– (1,600,364)
1,847,160
(525,135)
242,810 (2,263,900)
1,548,169 3,812,069
1,790,979 1,548,169
20 1,790,979 1,548,169
1,790,979 1,548,169
Significant non-cash transactions
As disclosed in Note 19, in 2017 the Group recognised a financial liability in respect of contractual payments which may become due in any
future disposal of its assets and a corresponding deferred liability which has been amortised in that year and the current year.
In 2018 the Group entered into an obligation to pay Moyle Investments £200,000 on first storage of gas in recognition of the support by Moyle
of the gas storage project at Islandmagee.
These transactions are non-cash items and do not appear in the statement of cash flows.
InfraStrata Plc Annual Report and Financial Statements 2018 x 23
252743 InfraStrata Plc AR pp018-pp024.qxp 06/01/2019 14:14 Page 24
Company statement of cash flows
for the year ended 31 July 2018
Operating activities
Operating profit for the year
Depreciation
Increase in trade and other receivables
(Decrease) Increase in trade and other payables
Shares issued in lieu of fees
Exchange differences
Share option expense
Cash (used in) discontinued operations
Note
2018
£
2017
£
(184,784)
–
(2,131,796)
23,985
644
(161,380)
687,980 (1,514,391)
–
82,027
–
(154,311)
89,750
(26,590)
6,847
–
Net cash (used in) continuing and discontinued operating activities
(1,558,593) (1,723,426)
Investing activities
Interest received
Purchase of exploration intangible assets (discontinued)
Net cash (used in) generated from investing activities
Financing activities
Proceeds on issue of ordinary shares
Drawdown of short-term borrowings
Repayment of short-term borrowings
Net cash generated from (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Cash and cash equivalents consist of:
Cash at bank
–
–
–
361
(6,902)
(6,541)
875,229
1,683,816
200,000
–
– (1,600,364)
1,683,816
(525,135)
125,223 (2,255,102)
1,545,779 3,800,881
1,671,002 1,545,779
20 1,671,002 1,545,779
1,671,002 1,545,779
Significant non-cash transactions
As disclosed in Note 19, in 2017 the Group recognised a financial liability in respect of contractual payments which may become due in any
future disposal of its assets and a corresponding deferred liability which has been amortised in that year and the current year.
In 2018 the Group entered into an obligation to pay Moyle Investments £200,000 on first storage of gas in recognition of the support by Moyle
of the gas storage project at Islandmagee.
These transactions are non-cash items and do not appear in the statement of cash flows.
24 x InfraStrata Plc Annual Report and Financial Statements 2018
252743 InfraStrata Plc AR pp025-pp040.qxp 06/01/2019 13:14 Page 25
CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
Notes to the financial statements
for the year ended 31 July 2018
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 its
shares are admitted to trading on the AIM market of the London Stock Exchange. The Company’s registered office is 200 Strand, London,
England, WC2R 1DJ.
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 2018, 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
Discussions are currently ongoing with potential equity partners towards funding project and corporate costs. The directors have prepared
cash flow projections which indicate that, following completion of this funding, the Group and parent Company will have sufficient funds to
meet their corporate costs and the forecast equity contribution for the Islandmagee gas storage project (the “Project”) to the end of 2019.
On this basis the directors have prepared the financial statements on a going concern basis.
The next phase of the development of the Project is the co-ordinated assembly of the contracts and long term funding arrangements for the
Final Investment Decision to be made. These include a long-term Gas Storage Agreement with an offtaker, an EPC contract with a managing
contractor, and debt and equity financing. Only in the event that all of these elements are in place can the board confirm FID.
Under the terms of the EU Grant for FEED works, a report has been submitted to the EU in compliance with the terms of the Grant award, and
the activities undertaken will be subject to EU audit. Satisfaction of EU audit will release the balance of the EU funding to the Company.
Payment of this existing grant obligation is not expected to be affected by Brexit.
Should the Project not proceed with a positive FID as expected, the ability of the subsidiaries to repay inter-company debt due to the parent
Company would be in doubt.
The directors remain confident that the project is economically viable and following the successful completion of FEED, further funding 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 parent Company from its subsidiaries, the directors are of the opinion that these assets are not impaired
in value.
However, the success of the current fundraising is uncertain, as is the outcome of the FID. The directors have concluded that without
additional funding the group would be unable to meet its corporate and project costs and thus 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, or if the FID is not positive, the Group’s
capitalised project development costs totalling £7,479,690 and amounts due to the Company from its subsidiaries amounting to £8,831,740
may become impaired in value. A provision would be required for the future liabilities arising as a consequence of the Group ceasing business
and assets and liabilities currently classified as non-current would be reclassified as current.
Adoption of new and revised standards
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 considered to have a
material effect on the Group financial statements. IFRS 16 Leases has also been issued; as the Group currently has no material leases, this is
not expected to have a significant impact. The Group continues to assess the impact of the new standards on its financial statements.
Basis of consolidation
The financial information incorporates the financial information of the Company and entities controlled by the Company. Control is achieved
where the Company has power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
Business combinations and goodwill
On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair values at the date of acquisition.
Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the
cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to profit or loss in the
period of acquisition. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually. Any
impairment is recognised immediately in profit or loss, and is not subsequently reversed. The financial effect of any change in ownership
interest of a subsidiary that does not result in a change in control is recognised in equity.
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.
InfraStrata Plc Annual Report and Financial Statements 2018 x 25
252743 InfraStrata Plc AR pp025-pp040.qxp 06/01/2019 13:14 Page 26
Notes to the financial statements (continued)
for the year ended 31 July 2018
2. Accounting policies continued
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.
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. Any grants that are received in advance of recognition are deferred.
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 substantively 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 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.
Operating leases
Rental costs under operating leases are charged on a straight-line basis over the lease term.
Share based payment transactions
Employees (including senior executives) of the Group receive part of their remuneration in the form of share-based payment transactions,
whereby employees render services as consideration for equity instruments (equity settled transactions).
26 x InfraStrata Plc Annual Report and Financial Statements 2018
252743 InfraStrata Plc AR pp025-pp040.qxp 06/01/2019 13:14 Page 27
CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
2. Accounting policies continued
The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award
(the vesting date). The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the
extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The
statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised as at the
beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is
conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that
all other performance conditions are satisfied.
Where 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 and short-term bank deposits with an original maturity of three months or less.
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest
rate method.
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual
arrangements entered into and the definitions of a financial liability and an equity instrument. Equity instruments issued by the Company are
recorded at the proceeds received, net of direct issue costs. 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.
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.
Judgements
Capitalisation of gas storage costs – note 13
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.
Estimates
Review of gas storage project asset carrying values– note 13
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% (2017: 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 (2017: 40 years). It is assumed that 100% (2017: 100%) of a project’s capacity will be sold from
the date that the capacity becomes operational.
InfraStrata Plc Annual Report and Financial Statements 2018 x 27
252743 InfraStrata Plc AR pp025-pp040.qxp 06/01/2019 13:14 Page 28
Notes to the financial statements (continued)
for the year ended 31 July 2018
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 continuing gas storage operations are located in Northern Ireland. In 2018 there
were no petroleum exploration activities. In 2017 exploration activities were classified as discontinued operations.
2018
Discontinued
Operations
-exploration
Total
£
Continuing operations – gas storage
Central
income
and costs
Total
Northern
Ireland
£
££
Revenue
Management & administrative expenses
Impairment of Exploration & Evaluation assets
Finance expense
Finance income
Pre and post tax loss for the year
Analysis of:
Assets by segment
Liabilities by segment
–
–
–
–
–
–
–
(673,567)
–
–
–
–
(189,846)
–
(100,000)
–
–
(863,413)
–
(100,000)
–
(673,567)
(289,846)
(963,413)
– 9,125,197
– (1,620,720)
850,063 9,975,260
(707,789) (2,328,509)
– 7,504,477
142,274 7,646,751
2017
Discontinued
Operations
-exploration
Total
£
Continuing operations – gas storage
Central
income
and costs
£
Northern
Ireland
£
Total
£
Revenue
Management & administrative expenses
Impairment of Exploration & Evaluation assets
Finance expense
Finance income
Pre and post tax loss for the year
Analysis of:
Assets by segment
Liabilities by segment
15,273
(169,584)
(26,361)
–
–
–
(541,942)
–
–
–
–
(183,878)
–
(58,000)
361
–
(725,820)
–
(58,000)
361
(180,672)
(541,942)
(241,517)
(783,459)
44,702 8,466,155
(44,702) (1,454,689)
309,432 8,775,587
(291,147) (1,745,836)
– 7,011,466
18,285 7,029,751
In 2017, cash flows relating to discontinued operations comprised net cash used in discontinued operations of £154,311, and net cash used in
investing activities of £6,902.
28 x InfraStrata Plc Annual Report and Financial Statements 2018
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CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
4.
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
Operating lease rentals – land and buildings
Project management & company administrative expenditure
Management & administrative expenditure paid in cash
Advisor costs relating to Islandmagee Storage
Advisor costs relating to Strategic Review and General Meeting
Non-cash items:
Share based payments, including share option charge
Exchange differences
Depreciation
Attributable to:
Continuing operations
Discontinued operations
5. 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, including share option charge
2018
£
2017
£
17,050
12,950
9,010
3,400
–
2,005
–
17,050
12,950
11,645
3,400
644
371
14,275
2018
£
2017
£
764,811
–
–
820,714
11,771
61,904
96,597
2,005
–
–
371
644
863,413
895,404
863,413
–
725,820
169,584
863,413
895,404
2018
Number
2017
Number
3
£
3
£
255,868
22,091
441
6,242
69,847
446,282
48,093
3,509
14,020
–
354,489
511,904
InfraStrata Plc Annual Report and Financial Statements 2018 x 29
252743 InfraStrata Plc AR pp025-pp040.qxp 06/01/2019 13:14 Page 30
Notes to the financial statements (continued)
for the year ended 31 July 2018
6. Directors’ and key management emoluments and compensation
Group and Company
2018
Salary
& fees Benefits
£ £
Executive Directors
John Wood (appointed 26 June 2018) 7,115 –
Adrian Pocock (ceased 12 September 2018) 80,000 –
Non-Executive Directors
Graham V Lyon (appointed 7 November 2017) 18,000 –
Matthew Beardmore (appointed 7 November 2017, resigned 18 December 2018) 21,667 –
Arun S Raman (appointed 26 July 2018) – –
Peter Wale (resigned 9 November 2017) 6,617 –
Karen Campbell (appointed 7 November 2017, resigned 26 June 2018) 21,400 –
Key Management
Andy Duncan (appointed 26 June 2018) 6,667 –
Share based
payments
£
Pension
£
Total
2018
£
–
–
142
125
7,257
80,125
15,000
25,000
8,000
15,000
–
–
–
–
–
–
133
400
33,000
46,667
–
14,617
36,400
6,800
224,866
6,847
11,585
243,298
Total
2017
£
7,404
85,642
107,680
105,385
2,468
28,385
13,979
350,943
–
42,314
393,257
161,466 –
63,000
Share option expense
Employers national insurance contributions
2017
Salary
& fees
£
Benefits
£
Pension
£
Executive Directors
Adrian Pocock (appointed 27 June 2017) 7,404
Andrew Hindle (ceased 27 June 2017) 82,305
Stewart McGarrity (ceased 27 June 2017) 105,010
Anita Gardiner (resigned 25 June 2017) 104,635
Non-Executive Directors
Peter Wale (appointed 27 June 2017) 2,468
Kenneth Ratcliff (ceased 27 June 2017)
Maurice Hazzard (ceased 27 June 2017) 28,385
13,979
–
3,337
2,670
750
–
–
–
344,186
6,757
Share based payment
Employers national insurance contributions
–
–
–
–
–
–
–
–
Aggregate emoluments above include an amount of £63,000 for the value of shares issued to former and current directors in recognition of
work performed beyond contracted roles and an expense of £6,847 relating to the share options granted to all directors of the Company on
19 February 2018. The share issues took place on 24 July 2018 and further detail is included in note 28 on Related Parties. Further detail of
share options is included in note 7 below.
Executive Directors and directors’ indemnity insurance premiums of £16,095 (2017: £15,914) were paid in respect of all directors. In July
2018, the Company established a company workplace pension scheme and all eligible employees were auto enrolled as required under
current legislation.
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CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
7. Share based payment plans
A share-based payment plan was created in the year ended 31 July 2008. All directors and employees are entitled to a grant of options
subject to the Board of Directors’ approval. The options do not have a cash settlement alternative. The options granted were Enterprise
Management Incentive share options for qualifying employees. These options have now lapsed following the departure of these employees.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.
2018
Number
2018
WAEP
£
2017
Number
Outstanding at the beginning of the year 6,379,167
Granted during the year 30,000,000
Forfeited during the year (6,379,167)
0.1807 6,379,167
–
–
0.01
0.1807
Outstanding at the end of the year 30,000,000
0.01 6,379,167
Exercisable at the end of the year –
– 6,379,167
2017
WAEP
£
0.1807
–
–
0.1807
0.1807
A total of 30,000,000 options over new ordinary shares of 0.01p each in the Company (“Options”) were granted to all the directors of the
Company on 19 February 2018, with G Lyon, A Pocock, M Beardmore and K Campbell receiving 7,500,000 Options each. After the reporting
period 7,500,000 options lapsed as a result of Adrian Pocock’s departure from the business on 12 September 2018.
The Options are subject to performance criteria and vest in tranches as follows:
– one third of Options held upon completion of the FEED;
– one third of Options held upon commencement of construction of the Project following a successful conclusion of the Financial Investment
Decision; and
– one third of Options held upon the date of first gas stored at the Project.
The Options vest immediately in the event of a sale of the Company, its subsidiary (subject to the Project comprising an asset of the
subsidiary) or the Project, and in customary “good leaver” circumstances.
Options are exercisable in three tranches noted above with estimated dates ranging from December 2018 through to end 2022 at a price of
1 penny per share (a premium of 270 per cent. to the closing share price on 16 February 2018). The options will expire after five years. The
weighted average remaining option life for the share options outstanding at 31 July 2018 is 5 years (2017: 4 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 and the following inputs: share price volatility of 105%, risk free interest rate of
1.1%, no dividends to be paid over the option lives, assumed early exercise when the share price exceeds twice the exercise price and no
directors leaving during the option life. The vesting conditions were not included in the model.
8. Retirement benefits
The Group operates a defined contribution retirement plan for all qualifying employees who wish to participate. The assets of the scheme are
held separately from those of the Group in funds under the control of independent trustees. The total cost charged to expenses of £441 (2017:
£3,509) 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
2018, employer and employee contributions of £Nil (2017: £Nil) due in respect of the current period had not been paid over to the scheme.
9.
Finance income
Interest on bank deposits
2018
£
–
2017
£
361
InfraStrata Plc Annual Report and Financial Statements 2018 x 31
252743 InfraStrata Plc AR pp025-pp040.qxp 06/01/2019 13:14 Page 32
Notes to the financial statements (continued)
for the year ended 31 July 2018
10.
Income tax
The major components of income tax expense for the years ended 31 July 2018 and 2017 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
b) A reconciliation between tax expense and the product of accounting loss from
continuing operations for the years ended 31 July 2018 and 2017 is as follows:
Accounting loss before tax from continuing operations
Loss on continuing activities multiplied by the standard rate of tax (19%; 2017: 19.67%)
Expenses not permitted for tax purposes
Tax losses carried forward
Items not subject to tax
2018
£
2017
£
–
–
–
–
–
–
–
–
–
–
(963,413)
(783,459)
(183,048)
–
183,048
–
(154,106)
11,535
142,571
–
–
–
The accounting loss from discontinued operations is £Nil (2017 – loss – £180,672). No tax charge / credit arises in 2018 or in 2017 due to
expenses not permitted for tax purposes and losses carried forward.
c) Factors that may affect the future tax charge
The Group has trading losses of £6,565,719 (2017: £5,700,467) which may reduce future tax charges. Future tax charges may also be
reduced by capital allowances on cumulative capital expenditure.
No balance is recognised due to the uncertainty of future results.
11. Earnings per share
2018
£
2017
£
(Loss) profit
The (loss) profit for the purposes of basic and diluted loss per share being the net (loss) profit
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
(963,413)
–
(963,413)
(783,459)
(180,672)
(964,131)
647,957,629
259,405,983
Basic and diluted earnings per share
Continuing operations (0.15)p (0.30)p
Discontinued operations – (0.07)p
Continuing and discontinued operations (0.15)p (0.37)p
For 2018 and 2017, the share options were not dilutive as a loss was incurred in both years.
12. Loss attributable to InfraStrata plc
The loss for the period dealt with in the financial statements of InfraStrata plc was £284,784 (2017 £214,326). As provided by s408 of the
Companies Act 2006, no statement of comprehensive income is presented in respect of InfraStrata plc.
32 x InfraStrata Plc Annual Report and Financial Statements 2018
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CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
13.
Intangible assets – Gas Storage Development
Cost
At 1 August 2016
Additions
Grant accrual during year (note 18)
At 31 July 2017
Additions
Grant accrual during year (note 18)
Net book value
At 31 July 2018
Group
£
Company
£
6,116,114
475,188
–
6,591,302
1,378,069
(489,681)
7,479,690
–
–
–
–
–
–
Capitalised finance costs
Additions during the year to 31 July 2018 include capitalised finance costs totalling £Nil (2017 – £16,002).
Capital and other commitments
In the event that the project does not proceed to development IMEL 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 (2017: £100,000). At 31 July 2018 the Group had
capital commitments with the principal FEED contractors of £3,712,375 (2017: £Nil) relating to the FEED project, of which £2,454,105 was not
provided for in the financial statements.
14.
Intangible assets – Exploration & Evaluation
Cost
At 1 August 2016
Additions
Disposals
Impairments
At 31 July 2017
Additions
Disposals
Impairments
Net book value
At 31 July 2018
Group
£
Company
£
19,459
6,902
–
(26,361)
19,459
6,902
–
(26,361)
–
–
–
–
–
–
–
–
–
–
The Company had a retained Net Profits Interest in each of exploration licences P1918, P2222 and P2235 at 31 July 2018. No value was
ascribed to the Net Profits Interests retained on each of the licence interests as it was not possible to determine a reliable fair value for these
instruments at that time. These assets were sold after the year end – see note 29.
15. Property, plant and equipment
Group
Cost
At 1 August 2016
Additions
Written-off
At 31 July 2017
Additions
At 31 July 2018
Depreciation
At 1 August 2016
Charge for the year
Written-off
At 31 July 2017 and 31 July 2018
Net book value
At 31 July 2018
At 31 July 2017
Freehold
land
£
Office
equipment
£
Total
£
440,100
–
–
440,100
–
440,100
83,776
–
(83,776)
–
–
–
523,876
–
(83,776)
440,100
–
440,100
–
–
–
440,100
440,100
83,132
644
(83,776)
83,132
644
(83,776)
–
–
–
–
440,100
440,100
InfraStrata Plc Annual Report and Financial Statements 2018 x 33
252743 InfraStrata Plc AR pp025-pp040.qxp 06/01/2019 13:14 Page 34
Notes to the financial statements (continued)
for the year ended 31 July 2018
Company
Cost
At 1 August 2016
Written-off
At 31 July 2017 and 31 July 2018
Depreciation
At 1 August 2016
Charge for the year
Written-off
At 31 July 2017 and 31 July 2018
Net book value
At 31 July 2018
At 31 July 2017
Freehold
land
£
Office
equipment
£
Total
£
–
–
–
–
–
–
–
–
18,630
(18,630)
18,630
(18.630)
–
–
17,986
644
17,986
644
18,630
18,630
–
–
–
–
Investments
16.
Company
Investment in subsidiaries
2018
£
2017
£
Cost
Balance at 1 August 2017 and 31 July 2018 15,247,011
15,247,011
Impairment
Balance at 1 August 2017 and 31 July 2018 (15,247,011)
(15,247,011)
Net book value
Balance at 31 July 2018 –
–
Investment in subsidiaries
The Company’s subsidiary undertakings at 31 July 2018, all of which are wholly owned, are as follows:
InfraStrata UK Limited Holding and corporate England
InfraStrata UK Limited owns the following subsidiary undertakings:
Islandmagee Energy Limited (“IMEL”) Sub surface gas storage developer Northern Ireland
InfraStrata UK Limited’s registered office address is 200 Strand, London, England, WC2R 1DJ. Islandmagee Energy Limited’s registered office
address is 8 Portmuck Road, Islandmagee, Larne, Co Antrim, Northern Ireland, BT40 3TW.
In December 2017, the Company’s wholly-owned subsidiary, InfraStrata UK Limited increased its ownership in IMEL from 90% to 100% by
acquiring the remaining 10% interest from Moyle Energy Investments Limited.
The Company has impaired its investment in InfraStrata UK Limited and loan receivable from InfraStrata UK Limited as required.
17. Trade and other receivables
Group
2018
£
Group
2017
£
Company
2018
£
Company
2017
£
Amounts due from Group undertakings –
Trade receivables –
Other receivables 198,538
Prepayments 23,953
– 8,831,740 7,113,671
44,702
–
31,549
197,707
21,308
23,953
44,702
32,708
21,308
222,491
98,718 9,053,400 7,211,230
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.
34 x InfraStrata Plc Annual Report and Financial Statements 2018
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CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
18. Grants received in advance
In May 2016, the Company signed a 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. An advance of 40% of the maximum grant amounting to €1.6 million was received and held in a Euro denominated bank account
(included in Cash and cash equivalents in the statement of financial position).
At 31 July 2018 €557,257 of this grant had been drawn down by the Company, in accordance with the drawdown criteria set by the European
Commission. At the prevailing year end exchange rate the cash balance included in the statement of financial position is £916,294 (2017:
£1,432,408) and the grant received in advance is £924,642 (2017: £1,440,913).
19. Financial liabilities
Group
2018
£
Group
2017
£
Company
2018
£
Company
2017
£
Current liabilities
Baron Loan 200,000
Costain Loan 163,344
363,344
–
–
–
200,000
–
200,000
–
–
–
Non-current liabilities
Baron Loan –
Moyle Investments 200,000
200,000
–
–
200,000
200,000
–
200,000
200,000
200,000
200,000
Baron Loan
Following repayment and cancellation of a loan with Baron Oil dated 5 January 2017 loan, Baron remains entitled to receive an additional
£200,000 in the event of a sale or disposal by InfraStrata or its subsidiaries, IMEL and InfraStrata UK, of substantially all of their assets, which
comprise interests in the Islandmagee gas storage project, and/or a change in control of InfraStrata, IMEL or InfraStrata UK, within two years
from the date of the loan agreement.
Under IAS 39 – Financial Instruments the Company is required to recognise the fair value of this contingent settlement financial liability at
inception and to subsequently recognise the liability at its amortised cost. The full liability of £200,000 is now recognised as a short-term
financial liability in the consolidated statement of financial position, as this liability will expire in January 2019.
At inception, IAS 39 requires that the liability initially recognised be deferred thus creating a corresponding asset which is amortised as an
expense to the consolidated statement of comprehensive income the over the two year period from 5 January 2017.
Amortisation for the year ended 31 July 2018 of £100,000 has been classified as a finance expense in the statement of comprehensive
income. The remaining asset of £42,000 continues to be recognised as a deferred liability, but is now classed entirely within current assets as
it will be fully amortised within twelve months of this report.
Costain Loan
In April 2018, IMEL concluded a Secured Development Loan Agreement with Costain Oil, Gas & Process Limited (“Costain”). Costain is the
principal contractor in the FEED programme and in return for its services to IMEL, it agreed to provide a secured loan so as to facilitate the
further development of the Islandmagee gas storage project. The loan is secured on the assets of Islandmagee Energy Limited. At 31 July
2018 the Costain loan required to be repaid, together with accrued interest of 10% per annum, on the earlier of FID being taken to proceed
with the Project; or any sale of IMEL or the Project itself; or 31 July 2019. The loan terms were amended on 25 September 2018 to change the
backstop date from 31 July 2019 to 31 December 2019.
At 31 July 2018, IMEL had drawn down £163,344 of this loan and this is disclosed as short-term borrowings in the Group accounts.
Moyle Investments
In December 2017, the Company’s wholly-owned subsidiary, InfraStrata UK Limited increased its ownership in IMEL from 90% to 100% by
acquiring the remaining 10% interest from Moyle Energy Investments Limited at par value. In recognition of the support by Moyle of the gas
storage project at Islandmagee, InfraStrata plc will pay Moyle £200,000 on first storage of gas.
20. Cash and cash equivalents
Group
2018
£
Group
2017
£
Company
2018
£
Company
2017
£
Cash at bank 1,790,979 1,548,169 1,671,002 1,545,779
The directors consider that the carrying amount of these assets approximates their fair value. The credit risk on liquid funds is limited because
the counter-parties are banks with high credit ratings.
InfraStrata Plc Annual Report and Financial Statements 2018 x 35
252743 InfraStrata Plc AR pp025-pp040.qxp 06/01/2019 13:14 Page 36
Notes to the financial statements (continued)
for the year ended 31 July 2018
21. Trade and other payables
Trade creditors 560,803
Preference shares (note 23) 12,500
Other taxation and social security 7,474
Other creditors 13,135
Accruals 246,611
Group
2018
£
Group
2017
£
71,889
12,500
18,949
–
46,287
Company
2018
£
555,822
12,500
7,474
–
229,425
Company
2017
£
64,935
12,500
18,949
–
20,802
840,523
149,625
805,221
117,186
The directors consider that the carrying amount of trade and other payables approximates to their fair value.
22. Financial assets and liabilities
The Group and Company’s financial instruments comprise cash and cash equivalents, long and 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 staff.
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.
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:
Group
2018
£
Group
2017
£
Company
2018
£
Company
2017
£
70,349
Trade and other receivables 26,978
Due from subsidiary undertakings –
– 8,831,740 7,113,671
Cash and cash equivalents 1,790,979 1,548,169 1,671,002 1,545,779
26,978
70,349
The reconciling items between the trade and other receivables presented above and that presented in note 17 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 £17,910
(2017: £15,482).
As disclosed in note 19, the Group and Company’s long-term borrowings at 31 July 2018 bear interest at a fixed rate of 10% per annum.
Foreign currency risk
At 31 July 2018, €1.04million (£916,294) of the funds 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. Euro suppliers are being paid directly from the Euro account to reduce foreign
currency risk and otherwise drawdown amounts are converted into sterling using the best available market rates. Entitlement to draw down
from the Euro grant is subject to strict criteria set by the EU and this is closely monitored before any transactions take place.
The currency risk disclosures are as follows:
Group
2018
Euros
Group
2017
Euros
Cash and cash equivalents £916,294
Grant received in advance (£947,357)
Trade payables and accruals (£114,060)
£1,432,408
(£1,440,913)
–
The book value of financial assets and liabilities disclosed is considered to be equal to fair value.
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CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
22. Financial assets and liabilities continued
Liquidity risk
The total carrying value of Group and Company financial liabilities is disclosed in note 19 (financial liability) and in note 21 (trade and other
payables). The Company seeks to issue share capital, gain loan funding and/or dispose of assets when external funds are required. The
reconciling items between the contractual maturities presented below and that presented in notes 19 and 21 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.
Group
2018
£
Group
2017
£
Company
2018
£
Company
2017
£
Trade & other payables
Within one month 560,803
More than one month less than one year –
Financial liability (Note 19)
Within one month –
More than one month less than one year 363,344
More than one year 200,000
71,889
–
555,822
–
64,395
–
–
–
–
–
200,000
200,000
–
–
–
23. Share capital and redeemable preference shares
Share capital classed as equity
2018 2017
Number £ Number £
Ordinary shares of 0.01p 1,032,607,285 103,261 376,041,599 37,604
Deferred shares of 1p 895,424,391 8,954,244 895,424,391 8,954,244
Second deferred shares of 0.01p 18,616,118,301 1,861,612 18,616,118,301 1,861,612
10,919,117 10,853,460
Allotted, called up and fully paid
Ordinary shares
1p Ordinary Shares 0.01p Ordinary Shares Total
Number £ Number £ £
At 31 July 2016 188,041,599 1,880,416 – – 1,880,416
Share subdivision (188,041,599) (1,880,416) 188,041,599 18,804 (1,861,612)
Issue of 0.01p Ordinary shares – – 188,000,000 18,800 18,800
At 31 July 2017 – – 376,041,599 37,604 37,604
Issue of 0.01p Ordinary Shares 656,565,686 65,657 65,657
At 31 July 2018 – – 1,032,607,285 103,261 103,261
Allotted, called and fully paid
Deferred Shares
1p Deferred Shares 0.01p Second Deferred Shares Total
Number £ Number £ £
At 31 July 2016 895,424,391 8,954,244 – – 8,954,244
Share subdivision – – 18,616,118,301 1,861,612 1,861,612
At 31 July 2017 and 31 July 2018 895,424,391 8,954,244 18,616,118,301 1,861,612 10,815,856
Redeemable preference shares of £1 each
(classified as liabilities)
Allotted called up and part paid
Number £
At 31 July 2018, 2017 and 2016 50,000 12,500
On 20 October 2017, the Company issued 125,000,000 shares of 0.01 penny at 0.4 pence each to raise £500,000 and incurred expenses of
£42,414. Further, on 30 January 2018 the Company issued another 125,000,000 shares of 0.01 penny at 0.3 pence each to raise £375,000,
with expenses of £27,500. These shares were also accompanied by 62,500,000 warrants exercisable at 0.6p. Finally, on 10 April 2018 and
30 April 2018, the Company issued 266,265,387 and 119,151,279 shares of 0.01 penny at 0.24 pence each to raise a total of £925,000 with
expenses of £46,250. These shares were also accompanied by 192,708,333 warrants exercisable at 0.48p.
At various dates through the year, 14,030,304 shares were issued to directors at a market value of £63,000 (see note 6) and 7,118,716 shares
were issued to suppliers in respect of fees due extinguishing liabilities of £26,750.
Details of share issues post year end are given in note 29.
InfraStrata Plc Annual Report and Financial Statements 2018 x 37
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Notes to the financial statements (continued)
for the year ended 31 July 2018
23. Share capital and redeemable preference shares continued
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.
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.
A share-based payment plan was created in the year ended 31 July 2008 and the options granted were Enterprise Management Incentive
share options for qualifying employees. These options have now lapsed following the departure of these employees and there was a transfer
out of £616,096 from the share based payment reserve to reflect this during the year.
There were 30,000,000 new options issued in February 2018, details of which are included in note 7. An expense of £6,847 was charged to
the P&L in respect of these options and the same value transferred in to the share based payment reserve.
For further information on the share based payment scheme see note 7.
26. Warrant reserve
The reserve for warrants was created during the year and used to record the fair value of warrants issued, as described in note 23. The fair
value of the warrants was calculated using the Black-Scholes methodology, with the following inputs:
– Share price volatility – 105%
– Warrant life – January 2018 issue – 1 year; April 2018 issue – 3 years
– Future dividends over the life of the warrants – none
– Risk free interest rate – based on return on 5 year gilts at the date of issue – 1 to 1.1%
– Early exercise – assumed when the share price is expected to be twice the warrant exercise price
The volatility was determined by reference to past volatility over a period similar to the warrant lives.
27. Reconciliation of liabilities arising from financing activities
Group
Short term liabilities
Baron Loan – –
Costain Loan – 163,344
–
200,000
200,000
163,344
Non-current liabilities
Baron Loan 200,000 –
Moyle Investments – –
200,000
(200,000)
–
–
200,000
200,000 163,344
200,000
–
563,344
As at
1 August 2017
Cash-flows
Non-cash
movement
Transfer
As at
31 July 2018
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CORPORATE
INFORMATION
CHAIRMAN’S
STATEMENT
STRATEGIC
REPORT
DIRECTORS’
REPORT
AUDITOR’S
REPORT
FINANCIAL
STATEMENTS
27. Reconciliation of liabilities arising from financing activities continued
The non-cash movement relates to the obligation to pay Moyle Investments £200,000 on first storage of gas in recognition of the support by
Moyle of the gas storage project at Islandmagee. The cost of this is written off directly in Group equity.
Company
As at
1 August 2017
Cash-flows
Non-cash
movement
Transfer
As at
31 July 2018
Short term liabilities
Baron Loan – –
–
200,000
200,000
Non-current liabilities
Baron Loan 200,000 –
Moyle Investments – –
200,000
(200,000)
–
–
200,000
200,000 –
200,000
–
400,000
The non-cash movement relates to the obligation to pay Moyle Investments £200,000 on first storage of gas in recognition of the support by
Moyle of the gas storage project at Islandmagee. The asset arising on the recognition of this liability was an increase in the inter-company
balance due from Islandmagee Energy Limited’s immediate parent company.
28. Related party transactions
The executive services of Graham Lyon are provided through Soncer Limited, a private Oil and Gas leadership consulting firm, in which
Graham is sole Director. The executive fees paid during the period were £16,000 and the balance outstanding at 31 July 2018 was £2,400
including VAT.
Prior to his employment in June 2018, the consultancy services of John Wood were provided through Teramar Limited, in which John is sole
Director. Consulting and advisory fees including expenses during the period were £48,000 and the balance outstanding at 31 July 2018 was
£nil.
Prior to his employment as Chief Financial Officer in June 2018, the consultancy services of Andy Duncan were provided through Semper
Consulting Limited, in which Andy is Director. Consulting and advisory fees including expenses during the period were £28,000 and the
balance outstanding at 31 July 2018 was £nil.
Prior to her employment in June 2018, the advisory and non-executive services of Judith Tweed were provided through her sole trader
business St Ronans, based in Islandmagee. Advisory and non-executive fees including expenses during the period were £10,947. The
balance outstanding at 31 July 2018 was £nil.
Company
The Company has related party relationships with its subsidiaries in the course of normal operations. InfraStrata plc recovered overhead,
technical and project management costs from Islandmagee Energy Limited (formerly Islandmagee Storage Limited – see note 29) of £660,946
(2017: £520,513). Gross balances due to/from subsidiaries were £Nil (2017: £Nil) / £17,250,063 (2017: £15,531,994). The amounts due from
Group undertakings, which are unsecured, are stated net of an impairment provision of £8,418,323 (2017: £8,418,323).
29. Events after the reporting period
Since the 31 July 2018, the following warrants have been exercised:
– On 24 August 2018, 10,416,666 warrants at 0.48p;
– On 29 August 2018, 5,833,333 warrants at 0.6p;
– On 29 August 2018, 4,166,666 warrants at 0.48p;
– On 4 September 2018, 4,166,666 warrants at 0.48p;
– On 29 November 2018, 18,617,666 warrants at 0.6p;
– On 6 December 2018, 333,333 warrants at 0.6p;
– On 11 December 2018, 1,049,000 warrants at 0.6p;
– On 14 December 2018 1,356,162 warrants at 0.48p;
– On 17 December 2018 4,693,466 warrants at 0.6p;
– On 2 January 2019 1,768,838 warrants at 0.48p;
– On 3 January 2019 6,139,867 warrants at 0.6p;
– On 3 January 2019 4,508,427 warrants at 0.48p;
– On 4 January 2019 5,000,000 warrants at 0.6p.
In total 68,050,090 warrants have been exercised, bringing the total consideration received for warrants exercised to £376,640.45.
In August 2018, Adrian Pocock stepped down from the Chief Executive position in favour of John Wood. After a period of handover, Mr Pocock
subsequently left the Company on 12 September 2018. The Chairman’s Statement and the Strategic Report note activities since the financial
year close of 31 July 2018.
On 25 September 2018 the repayment date of the Costain loan facility was amended from 31 July 2019 to 31 December 2019.
InfraStrata Plc Annual Report and Financial Statements 2018 x 39
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Notes to the financial statements (continued)
for the year ended 31 July 2018
29. Events after the reporting period continued
In October 2018 the Company changed the name of its gas storage project company Islandmagee Storage Limited, which is owned 100% by
InfraStrata, to Islandmagee Energy Limited.
On 2 October 2018 InfraStrata plc disposed of its net profits interests in three offshore UK oil and gas licences (the “Net Profits Interests”) to
Westmount Energy Limited for a consideration of £100,000. No value was previously ascribed to the net profits interests in the Company’s
financial statements.
On 29 October 2018 InfraStrata plc’s 100% owned subsidiary, Islandmagee Energy Limited exercised some historic options to purchase land
that is required to progress the Islandmagee gas storage project (the “Project”).
Lot Number Purchase Price
1 £116,000.00
1.1 £66,000.00
2 £88,000.00
5 £210,000.00
5.1 73,802.00
Completion Date
15.04.19
15.04.19
15.04.19
Completed 31.12.18
Completed 31.12.18
The Company’s existing cash resources were used to finance the purchase of lots 5 and 5.1 and in conjunction with its discussions for the
next phase of Project funding, the Company is exploring new sources of finance for those lot acquisitions due for completion by 15 April 2019.
In November 2018, 3,253,660 shares were issued as consideration for services provided by contractors at a weighted average price of 0.5694p.
On 24 December 2018, the Company incorporated Islandmagee Energy Hub limited as a new wholly-owned subsidiary of InfraStrata UK Limited.
30. Control of the Group
There is no ultimate controlling party of InfraStrata plc.
40 x InfraStrata Plc Annual Report and Financial Statements 2018
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Contents
01 Directors, secretary, advisers and
shareholder information
02 Chairman’s statement
03-09 Strategic Report
10-14 Report of the directors
15-17 Independent auditor’s report
18 Consolidated statement of
comprehensive income
19 Consolidated statement of
financial position
20 Company statement of
financial position
21 Consolidated statement of
changes in equity
22 Company statement of
changes in equity
23 Consolidated statement of
cash flows
24 Company statement of cash flows
25-40 Notes to the financial statements
Perivan Financial Print 252743
252743 Infrastrata Plc AR Cover Spread 2.75mm v1.qxp 06/01/2019 14:09 Page 1
United Kingdom Registered Office
200 Strand
London, WC2R 1DJ
Subsidiary
8 Portmuck Road
Islandmagee
Larne, Co Andrim,
Northern Ireland,
BT40 3TW
www.infrastrataplc.com
DEVELOPING STRATEGIC
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InfraStrata Plc
Annual Report & Financial Statements 2018