R u R e l e c P l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 1 FOcuSeD ON POWeR GeNeRATION IN lATIN AMeRIcA RuRelec Plc Annual Report and Accounts for the year ended 31 December 2011 Stock code: RUR 21528-04 30/05/12 Proof 5 RuRelec Plc Annual Report 2011 Rurelec PLC is a company incorporated in England & Wales established to develop, own and operate power generation capacity in the Southern Cone of Latin America. Rurelec is managed by a team with a strong track record in developing power projects worldwide and with considerable experience in the electricity sector in the region. Rurelec’s main business consists of the ownership and development of power generation facilities on the national grid and in isolated areas, selling electricity on commercial terms. Since listing on AIM in 2004, Rurelec has acquired interests in power generation operations in Bolivia (nationalised in 2010) and Argentina. Rurelec has also acquired development opportunities in Chile and Peru. ❯❯ For more information on Rurelec go to www.rurelec.com 21528-04 30/05/12 Proof 5 01 HigHligHts • Focus on increasing capacity following the successful fundraising of £18.0 million • Profit before tax from continuing operations £1.9 million (2010: £0.1 million) • Revenues increased 25 per cent. to £13.5 million (2010: £10.8 million) • Group borrowings of £1.7 million (2010: £13.7 million) • Guaracachi has been independently valued at US$142.3 million as the claim in the arbitration proceedings against Bolivia is lodged • Expansion into Peru and Chile • Earnings per share 0.47p (2010: loss 0.06p) • Net Asset Value per share 20.41p (2010: 31.38p) • Authority sought to buy back up to 25 per cent. of shares in issue Contents Our Performance At a Glance Chairman’s Statement Chief Executive’s Review of Operations Our Governance Board of Directors Directors’ Report Corporate Governance Statement 02 04 06 10 12 15 Our Financials Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income 17 18 19 Consolidated Statement of Financial Position 20 Parent Company Statement of Financial Position Consolidated Statement of Cash Flows Company Statement of Cash Flows 21 22 23 Consolidated Statement of Changes in Equity 24 Company Statement of Changes in Equity Notes to the Financial Statements 25 26 www.rurelec.comOur PerformanceOur GovernanceOur Financials21528-04 31/05/12 Proof 9 02 At A glAnCe Our current activities include operations in Argentina, development in Chile and Peru and pursuit of our claim against the Bolivian Government. Chile – Termonor, Arica • Location: Parinacota, Arica • Capacity: 38 MW nominal (increasing to 76 MW if second turbine is added) • Technology: OCGT (potential for phase II CCGT) • Equipment: One GE MS6001B gas turbine • Fuel: Diesel (locally sourced) Parinacota is a 38 MW Greenfield thermal power plant development in which Rurelec owns 50 per cent. through Termonor S.A.C. (“Termonor”), the project development company. The project has the potential to convert to a 136 MW combined cycle power plant as part of its second stage development. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 Peru – Cascade Hydro 03 • Project Names: Canchayllo/Santa Rita • Location: Junin Province/Ancash Province • Capacity: 4 MW/255 MW (1,424 GWh/annum) • Technology: Both Run-of-River Hydro • Equipment: 2 + horizontal Francis turbines 3 x vertical Francis turbines Rurelec has recently acquired a 50 per cent. interest in Cascade Hydro Limited (“Cascade”), a newly formed hydroelectric power development company focused on run-of-river projects. Argentina – Energia del Sur Bolivia – Guaracachi • Project Name: Santa Cruz/Aranjuez/Karachipampa/ San Matias • Location: Santa Cruz, Bolivia • Capacity: 420 MW/51.2 MW/15.5 MW/2.6 MW • Technology: Gas CCGT/Gas OCGT and Engines (Dual Fuel and Gas) Rurelec’s Bolivian subsidiary, Empresa Electrica Guaracachi, S.A. (“Guaracachi”), was nationalised by the Bolivian Government on 1 May, 2010. Not only is it the largest power producer in the country but whilst under Rurelecs’ control it was also the largest investor in new generation capacity under the presidency of Evo Morales. • Project Name: Energia del Sur/‘Comodoro’ • Location: Comodoro Rivadavia, Patagonia • Capacity: 136 MW • Technology: CCGT • Equipment: 2 + GE MS6001B gas turbines • Fuel: Natural Gas (locally sourced) Rurelec owns 50 per cent. of Energia del Sur S.A. (“EdS”), which owns and operates a 136 MW CCGT power plant in Southern Patagonia, Argentina. The conversion project is registered to earn Certified Emission Reduction credits (“CERs”) under the Clean Development Mechanism. www.rurelec.comOur PerformanceOur GovernanceOur Financials21528-04 31/05/12 Proof 9 04 CHAirmAn’s stAtement Andrew morris Chairman “The valuation of our former interest in Guaracachi has been set by the independent valuation expert at US$142.3 million, just under twice the notional value used in the accounts. In addition, and as a result of the support of shareholders and Sterling Trust in particular, the Group is now virtually debt free.” I am pleased to present the report of Rurelec is now the primary lender to EdS the results of Rurelec PLC (“Rurelec” and is in the process of restructuring the or the “Company”) for the year ended debt in order to accelerate payments 31 December, 2011. The past year has back to London. Indeed, since the capital seen the Group consolidate its position increase closed, Rurelec has received capital following the fundraising of £18 million, repayments of US$2.5 million from EdS. before expenses, in March 2011 and prepare to refocus on adding capacity. A Operating profit, before exchange welcome change from the torrid couple of adjustments, improved in Argentina from years that preceded. group results The profit after tax for the financial year under review is £1.8 million (2010: £15.7 £1.5 million to £2.4 million resulting in an increase in Group operating profit, after head office costs, from £0.4 million to £1.6 million. million). This figure compares with a 2010 loss after tax, for continuing operations of eds results At the operating level in Argentina, and £0.1 million. therefore based on 100 per cent. of EdS’s activities, EdS’s revenues increased to £27 Turnover during the year rose to £13.5 million (AR$180 million) this year (2010: million (2010: £10.8 million) and is based £21.7 million/AR$131 million). Gross solely on our 50 per cent. equity interest in operating profit also increased substantially, Energia del Sur S.A. (“EdS”) in Argentina. to £10.5 million (AR$70 million) (2010: £7.7 These figures include a full year of revenues million/AR$47 million). Exchange losses of from the Resolution 220 power purchase £2.6 million (2010: loss of £0.9 million) due contract. to weakness of the Argentine Peso reduced operating profits to £1.5 million (2010: profit As a result of the support of shareholders £2.3 million). and Sterling Trust in particular, the share issue in March last year went ahead as Inflation in Argentina and downward foreign described in the circular dated 11 March, exchange pressure on the peso have 2011 and the Group is now virtually eroded part of our margin on the Resolution debt free, with only £1.7 million of non- 220 power purchase agreement which shareholder borrowings at the operating company level. continues to provide us with a premium pricing on our incremental at EdS. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 05 Pictured: Energia del Sur 40 35 30 25 20 15 10 5 0 3 2 1 0 -1 -2 -3 -4 2009 2010 2011 Group turnover £ million 2009 2010 2011 Group after tax profit/loss on continuing operations £ million Update on Bolivian Arbitration Throughout 2011 the Executive Directors Pending receipt of any proceeds from the arbitration claim, expansion will be funded have been working with our legal advisers, from internally generated funds or through Freshfields Bruckhaus Deringer, preparing borrowings. the statement of claim in the arbitration proceedings against the Government of During 2012 we expect to be able to Bolivia. This was lodged with the Court announce additional capacity under on 1 March, 2012, and as expected the development in Chile and in Peru as our claim is substantially in excess of the presence on the ground in these two notional value used in these financial countries increases. Andrew morris Chairman 1 June, 2012 statements. The valuation of our former interest in Guaracachi has been set by the independent valuation expert at US$142.3 million, just under twice the notional value used in the accounts. As agreed in the procedural orders, the statement of claim is available to the public and we provide a copy in both English and Spanish on our website. The Government of Bolivia must publish their defence on or before 1 August, 2012. outlook In addition, the Directors have been looking to add new capacity to Rurelec’s operating business. We have announced the launch of initiatives to develop new assets in Peru and in Chile through our 50 per cent. interest in Cascade and Termonor, respectively. www.rurelec.comOur PerformanceOur GovernanceOur Financials21528-04 31/05/12 Proof 9 06 CHief exeCUtive’s review of oPerAtions Peter earl Chief Executive “This year we have expanded into Peru and Chile, replacing some of the generating capacity lost through the Bolivian nationalisation in 2010. At last we are looking to a future of growth and liquidity for Rurelec and I will welcome the day on which I can also announce a return to the payment of dividends from ordinary activities as the dramas of world events finally subside.” introduction 2011 was a year of consolidation and expansion for Rurelec. After the shocks CAMMESA delaying payment of the increase from July 2011. of the previous year, 2011 was the year in In March 2012 the Ministry of Energy which Rurelec substantially eliminated its announced that this capacity price increase borrowings and prepared the groundwork was formally cancelled, reducing revenues for a full and fair compensation claim by approximately US$2.4 million per against the Government of Bolivia at annum. This is regarded as a temporary the Permanent Court of Arbitration in suspension pending a wider review of spot The Hague. These actions have in turn market prices which we believe is long allowed Rurelec to begin the process of overdue. Resolution 220 income remains replacing the power generation capacity unaffected. which was lost through the May Day 2010 nationalisation of Guaracachi. Reported earnings in Argentina continue to A year in review Our 136 MW Argentine combined cycle be adversely affected by Peso weakness and by local inflation rates, salary inflation remains above 20 per cent. per annum, power plant at Comodoro Rivadavia in even though the official inflation rate is Patagonia has performed to the very high reported as 9.8 per cent. (March 2012). expectations which we had of it when it Recent changes to the foreign exchange was originally planned. EdS’s new plant control rules appear to be having the effect capacity has been meeting the predicted of increasing liquidity in the local banking increased demand for power in southern system, so we are redoubling efforts to Argentina with record levels of dispatch and refinance EdS in order to mitigate the the highest level of reliability of any plant in impact of foreign exchange variations on the southern wholesale electricity market. earnings. This in turn has meant increased cash flow from operations which has permitted EdS Inflation in Argentina and downward foreign to start paying down debt owed to Rurelec. exchange pressure on the peso have eroded part of our margin on the Resolution Overall operations at EdS have been 220 power purchase agreement which satisfactory. An increase in spot market continues to provide us with a premium capacity and operations and maintenance prices came in to effect in January 2011. pricing on our incremental capacity at EdS. Nonetheless, the past year has seen a solid However, cash releases from the business performance in Argentina and we continue have been less than expected due to to expect to operate at full plant capacity in the coming years. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 07 14 14 14 13 13 13 12 12 12 11 11 11 10 10 10 9 9 9 8 7 6 8 8 7 7 6 6 eds output And Heat rates 900,000 500,000 800,000 700,000 600,000 900,000 900,000 800,000 800,000 700,000 700,000 600,000 600,000 500,000 500,000 400,000 400,000 300,000 300,000 200,000 200,000 100,000 100,000 0 0 200,000 300,000 100,000 400,000 0 07 07 07 08 08 08 09 09 09 10 10 10 11 11 11 Gross Energy (MWh) Gross Energy (MWh) Gross Energy (MWh) Gross MMBTU/MWh Gross MMBTU/MWh Gross MMBTU/MWh Average cost of gas 120.00 120.00 120.00 100.00 100.00 100.00 80.00 80.00 80.00 60.00 60.00 60.00 40.00 40.00 40.00 20.00 20.00 20.00 0.00 0.00 0.00 07 07 07 08 08 08 09 09 09 10 10 10 11 11 11 Average cost of gas per MWh AR$ Average cost of gas per MWh AR$ Average cost of gas per MWh AR$ Average cost of gas per MWh US$ Average cost of gas per MWh US$ Average cost of gas per MWh US$ Average price of electricity 250.00 250.00 250.00 200.00 200.00 200.00 150.00 150.00 150.00 100.00 100.00 100.00 50.00 50.00 50.00 0.00 0.00 0.00 07 07 07 08 08 08 09 09 09 10 10 10 11 11 11 Average price of electricity AR$ Average price of electricity AR$ Average price of electricity AR$ Average price of electricity US$ Average price of electricity US$ Average price of electricity US$ 23.00 22.50 22.00 25.00 24.50 24.00 23.50 25.00 25.00 24.50 24.50 24.00 24.00 23.50 23.50 23.00 23.00 22.50 22.50 22.00 22.00 21.50 21.50 21.00 21.00 20.50 20.50 20.00 20.00 21.50 21.00 20.50 20.00 47.50 55.00 52.50 50.00 45.00 42.50 40.00 37.50 55.00 55.00 52.50 52.50 50.00 50.00 47.50 47.50 45.00 45.00 42.50 42.50 40.00 40.00 37.50 37.50 35.00 35.00 32.50 32.50 30.00 30.00 27.50 27.50 25.00 25.00 35.00 32.50 30.00 27.50 25.00 During 2011, Rurelec raised £16 million The Hague. The value of the claim for the of new funds by way of a capital increase expropriation of its controlling share stake to acquire the project loan provided by in Guaracachi and other associated assets Standard Bank in 2008 for the construction was assessed by independent valuation of the EdS combined cycle capacity. experts at US$142.3 million. Rurelec also raised a further £2 million of new capital by issuing Ordinary shares Previously, in a highly significant move, the in exchange for loans, thereby taking the Government of Bolivia had agreed to full overall capital increase to £18 million transparency relating to documents filed in and eliminating all of Rurelec’s bank the arbitration process and at the hearings, borrowings, loan notes and loans. This has which will now be held in public. Both left Rurelec in an almost unique position Rurelec and the Government of Bolivia are among global power companies of being bound by the decision of the arbitration almost completely ungeared other than in tribunal, which is not appealable on the the form of trade creditors at the operating merits. company level. In accordance with the process laid down EdS is currently looking to refinance part in the 2010 Arbitration Rules of the United of its loans to Rurelec by means of a peso Nation Commission on International Trade denominated loan at the EdS level. This Law (UNCITRAL) and the Tribunal’s rulings, loan is expected to complete before the if no earlier settlement is reached, the final year end and will reduce the quantum hearing of the arbitration panel following of debt which Rurelec will have lent to submission of all written submissions is the combined cycle project. At present now scheduled for April 2013. Given the Rurelec is owed, directly and indirectly, progress made in the expropriation claim some US$50 million by EdS. Recycling during 2011, we expect that the Bolivian this money back to Rurelec will allow us Government will pay compensation in full to use the funds released to buy into new which will enable the Rurelec Group to generation capacity in Chile and Peru. reinvest in replacement power generation assets in Latin America. Details of the claim The primary focus of management during have been posted on the Rurelec website. the year was preparing the very detailed information and financial models required In Bangladesh, discussions with regards to mount a serious claim for compensation to providing technical services for the against the Plurinational State of Bolivia construction of new generation capacity pursuant to the UK–Bolivia investment are ongoing, although no firm agreement treaty. This complex and laborious process has been reached at this stage. was undertaken with great determination by a Rurelec team operating out of London, Denver, Buenos Aires and Santa Cruz de la Sierra in Bolivia. It was complemented by a Freshfields legal team split between New York and Washington DC. On 2 February, 2012 Rurelec announced that it had submitted its Statement of Claim to the Permanent Court of Arbitration in www.rurelec.comOur PerformanceOur GovernanceOur Financials21528-04 31/05/12 Proof 9 08 CHief exeCUtive’s review of oPerAtions Pictured: View of Santa Rita project location View of Parinacota project location growth strategy The job of finding suitable projects has begun in Chile and Peru and at the end of 2011 we announced our first ever project in Peru, a small 4 MW run-of-river hydro plant at Canchayllo to be developed by Cascade Hydro. This was soon followed by the announcement of a 38 MW liquid fuel plant at Arica in northern Chile. In Peru, Rurelec has helped to establish a new, specialist hydroelectric power plant development and owning company. is 50 per cent. owned by Cascade Rurelec, although that percentage is likely to diminish through dilution as Cascade raises capital for new projects. Initially, however, Rurelec will be the sponsor of Canchayllo and other small hydros. This role of project manager, arranger and sponsor has allowed Cascade to win an important tender to acquire the 255 MW Santa Rita hydro project, a world scale hydro development. Rurelec’s track record in project development and its historical ties with the region’s development banks contributed to Cascade’s selection by Trading Emissions PLC in April 2012 as the new owner of Electricidad Andina SPA, the owner of the Santa Rita project. Cascade will be undertaking a small capital increase in 2012 with a view to a flotation in London and Lima in 2013 at which time Rurelec’s shareholders may be able to acquire shares directly as well as participate via Rurelec’s shareholding in Cascade. the most However, it is Chile which the Directors believe presents important opportunities for rapid expansion in the coming years. Northern Chile requires at least 2,300 MW of new clean tech capacity over the next five years and Rurelec is well placed to fill a large part of that requirement. This is as a result of cooperation in 2011 between Rurelec and Independent Power Corporation PLC (“IPC”), the leading UK power developer which is owned by Sterling Trust, Rurelec’s largest shareholder. IPC has spent the last two years preparing feasibility studies and competing in Chilean tenders held by international mining companies for new generation capacity. requires This early development allowed Rurelec to enter the Chilean market in a 38 MW diesel fired project in Arica which is now 50 per cent. owned by Rurelec and 50 per cent. by local Chilean partners, Invener and Enerbosch. Arica is the main Pacific sea port serving trade into and out of Bolivia. It is also where Chilean mining expansion reserve capacity for electricity to ensure grid stability transmission. The Arica project is therefore only a first phase for a wider expansion in 2012 as Rurelec seeks to win power contracts for new thermal plants in Arica, Iquique and Antofagasta with a view to owning and operating close to 1,000 MW of clean tech thermal generation based on LNG and liquid fuels to be operational by 2015. The first 38 MW of capacity at Arica is due on-line by the end of 2013. lost in addition to replacing outlook Peru and Chile are expected to be the two countries where Rurelec will own new capacity to replace the 540 MW of generation through nationalisation. capacity However, lost capacity, Rurelec has committed to use part of the proceeds of any Bolivian settlement to undertake a significant buy-back of Rurelec shares in order to reverse some of the equity dilution suffered by shareholders since the nationalisation of the Company’s Bolivian assets on 1 May, 2010. Such a buy- back will be subject to shareholder approval and can only occur once cash funds are received from Bolivia. In anticipation of that receipt in the near future, the Directors are now seeking the necessary authority to buy back up to 25 per cent. of Rurelec shares currently in issue. A resolution will be put to shareholders at this year’s annual general meeting to be held on 29 June, 2012. Shareholders have been extraordinarily patient since 2008 as Rurelec has suffered first the effects of the global financial crisis and then the unprovoked nationalisation of Company assets. Now at last we are looking to a future of growth and liquidity for the Company and I will welcome the day on which I can also announce a return to the payment of dividends from ordinary activities as the dramas of world events finally subside. Peter earl Chief Executive 1 June, 2012 RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 09 www.rurelec.comOur PerformanceOur GovernanceOur Financials21528-04 31/05/12 Proof 9 10 BoArd of direCtors Andrew morris Chairman and Non-Executive Director Peter eArl Chief Executive elizABetH sHAw Finance Director Andrew was appointed Chairman of Peter began his career at the Boston Elizabeth has been involved in the the Board 14 June, 2010 and he is also Consulting Group advising state-owned electricity sector since 1994 when she Chairman of the Audit and Nomination companies before becoming an investment joined Fieldstone Private Capital Group. committees. Andrew is currently the Finance banker best known for his demergers. He Between 1994 and 2000, as a Director of and Corporate Development Director of has acted on secondment to the World Fieldstone, she advised on a number of Advanced Plasma Power Limited where he Bank and United Nations Development mergers, acquisitions and disposals in the plays an important role in raising corporate Program where he advised governments on electricity industry, both in the UK and in investment into the business. He has also privatisations in Latin America and Eastern developing markets. She joined IPC as a been responsible for leading a number Europe. In 1995 he founded IPC which Director in 2000 where she is responsible of negotiations and teams for business has rapidly established itself as the United for business development and finance. She development to further enhance operations Kingdom’s leading developer and operator is also a Director of IPSA Group PLC. She and is fully conversant with all aspects of of power plants on four continents. He is a graduate of Exeter University. financial control and reporting. Andrew is is an Oxford University graduate and was a Fellow of the Chartered Association of a Kennedy Scholar and tutor at Harvard Certified Accountants. University. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 11 mike eyre Technical Director (resigned on 5 April, 2011) Mike is both a Chartered and European Engineer with over 33 years experience in project management and development in the power sector. As a CEGB engineer, Mike spent part of his early career on secondment to Eskom of South Africa. During the Privatisation of the UK electricity industry, he was Head of Engineering Quality with National Power. In 1996, he established a joint venture between National Power Plc and Lloyd’s Register, a project development and risk management business for IPP’s and the London Insurance industry. Mike was invited in 1997 by the UN Secretary General of the Rio Earth Summit to join the UN Emissions Trading Policy Forum. He is also a Director mArCelo BlAnCo Regional Director of Finance lArry CoBen Non-Executive Director Marcelo was, until 1 May, 2010, Finance Larry has extensive experience in the of IPSA Group PLC. Director of Guaracachi and was appointed international electricity sector, particularly in to the Company’s Board in October Latin America. He was a founder of Catalyst 2008. Marcelo graduated from Green Energy Corporation, which focused on Mountain College in the United States and alternative energy technologies. In the early subsequently gained an MBA from the 1990s he founded and managed Liberty sir roBin CHristoPHer kBe Cmg Non-Executive Director University of Belgrano in Argentina. He has Power Corporation. Currently Chairman (resigned on 23 February, 2011) extensive financial advisory experience and and CEO of Tremesis Energy LLC, he is has also held appointments in the Bolivian also a Director of NRG Energy and serves Sir Robin was a VSO volunteer in Bolivia Embassy in Argentina and as a consultant as Executive Director of the Sustainable in 1963/4 and British Ambassador to the World Bank and the United Nations Preservation Initiative, a not-for-profit to Argentina from 2000 to 2004. He Development programme. Over the last 11 organisation that preserves cultural heritage is Secretary General of GLF Global years, Marcelo has focused on the energy worldwide through locally based and owned Leadership Foundation. He is a trustee for sector, including a two year appointment as economic development. Larry received a The Brooke Hospital, Prospect Burma and Vice Minister of Electricity and Alternative BA in economics from Yale University and St. Matthew’s Children’s Fund (Ethiopia). Energies at the Bolivian Ministry of Public a J.D. from Harvard Law School before He is also an Hon. Fellow of the Institute for Works before being reappointed as Finance going on to an MA in Anthropology from the Study of the Americas (ISA) at London Director at Guaracachi in 2004. the University of Pennsylvania where he University. expects to gain his PhD in 2012. Larry is Chairman of the Remuneration Committee. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 12 direCtors’ rePort The Directors submit their annual report On 1 May, 2010, the Bolivian Government b) Financial markets – The current economic together with the audited financial statements nationalised the Group’s interest in conditions have affected the markets for for the year ended 31 December, 2011. Guaracachi by expropriating the shares held project finance. If these conditions continue Principal activities and business review The Company and the Group’s principal by the Group. On 13 May, 2010, The Group for a prolonged period, the Group may initiated the process to recover adequate experience difficulties in raising funds to compensation for the Nationalisation refinance its assets and to finance future activity is the acquisition, development and under each of the US and UK bilateral development plans. operation of power generation assets in investment treaties by notifying the relevant markets in Latin America. governmental authorities that an investment dispute had arisen. As announced on results and dividends The Group results for the year ended In addition, and as opportunities arise, the 1 December, 2010, the Notice of Arbitration 31 December, 2011 are set out in the Company acquires, refurbishes and sells was issued. A statement claim, including Consolidated Statement of Comprehensive power generation equipment to third parties. a valuation of the Company’s interest Income. at US$142.3 million was filed with the Since the Company’s admission to AIM in Permanent Court of Arbitration at The No dividend was paid during the year to August 2004, the Company has acquired Hague on 1 March, 2012. The arbitration 31 December, 2011 (2010: nil). interests in power generation operations in process is continuing. Bolivia and Argentina and, since the year- end, in Peru and Chile. In March 2011, the Company issued share capital Details of the issued share capital, together 200 million shares at 9 pence per share with changes during the year, are set out in In October, 2004, the Company acquired raising additional working capital of £17.7 note 20. There have been no changes since 100 per cent. of the equity of Energia para million net of expenses. This enabled the the year-end. Sistemas Aislados S.A. (“Energais”), a Group and the Company to reduce its company incorporated in Bolivia. borrowings from £13.7 million and £8.1 million respectively at 31 December, 2010 going concern As set out in note 1b to the financial In July 2005, the Company acquired to £1.7 million and £nil respectively at statements, the Directors have continued 50 per cent. of the equity of Patagonia 31 December, 2011. Energy Limited (“PEL”), which owns to adopt the “going concern” basis for the preparation of the financial statements since and operates, through its wholly owned Since the year-end, the Company has the Directors consider that the Company subsidiary EdS, generating plant supplying acquired operations in Peru and Chile. and the Group will have sufficient financial electricity in southern Patagonia, Argentina. resources available to continue trading for at In June 2008, the Company acquired the A more detailed review of the business least 12 months from the date of approval of remaining 50 per cent. of PEL. In June 2009, and future developments is provided in the financial statements. as part of the process of raising additional the Chairman’s Statement and the Chief equity, the Company sold back 50 per cent. Executive’s review of operations. of PEL to the former 50 per cent. owner of key performance indicators The Directors use a range of performance PEL. The principal risks and uncertainties facing indicators to monitor progress in the delivery In January 2006, the Company, through of the Group’s generating plant and possible actual performance against targets and to its acquisition of Bolivia Integrated Energy changes in demand and pricing for electricity aid management of the businesses. the Group, apart from the efficient operation of the Group’s strategic objectives, to assess Limited (“BIE”), acquired a controlling in the markets in South America in which interest (50.00125 per cent.) in Guaracachi the Group operates, relate to political risk Rurelec’s key performance indicators which owns and operates generating plant and the current uncertainties in the financial (“KPIs”) include both financial and non- supplying electricity in Bolivia. markets. financial targets which are set annually. a) Political risk – As evidenced by the decision in May 2010 by the Government of Bolivia to nationalise the Group’s interest in Guaracachi, there exists significant political risk in areas in which the Group operates. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 13 financial kPis Financial KPIs address operating profitability, non-financial kPis Non-financial KPIs address other important directors The following Directors served during the net asset value and earnings per share. technical aspects of the business, such as year: gross capacity, operating efficiency and i) Operating profitability availability. Operating profit excludes all non-operating costs, such as financing and tax expenses i) Gross capacity Andrew morris – Chairman and Non- Executive Director as well as one-off items and non-trading Gross capacity is the total generation Peter earl – Chief Executive items such as negative goodwill. The capacity owned by Group companies exclusion of these non-operating items and is affected by acquisitions, expansion elizabeth shaw – Finance Director provides an indication of the performance of programmes and disposals. the underlying businesses. ii) Operating efficiency marcelo Blanco – Regional Director of Finance ii) Net asset value Operating efficiency is the average operating Net asset value is calculated by dividing efficiency of the generating plant owned larry Coben – Non-Executive Director funds attributable to Rurelec’s shareholders by Group companies. It can be improved by the number of shares in issue. through the installation of more thermally iii) Earnings per share efficient turbines, refurbishment activities or through conversion to combined cycle Earnings per share provides a measure of the operation. overall profitability of the Group. It is defined mike eyre – Technical Director (resigned on 5 April, 2011) sir robin Christopher KBE CMG – Non- Executive Director (resigned on 23 February, as the profit or loss attributable to each iii) Technical availability 2011) Ordinary Share based on the consolidated Technical availability measures when a plant profit or loss for the year after deducting tax is available for dispatch. The measurement and minority interests. Growth in earnings method excludes time allowed for planned per share is indicative of the Group’s ability maintenance activities which occur at to identify and add value. regular intervals during the life of the unit plus an allowance for unplanned outages. Unplanned and forced outages in excess of the annual allowance will cause a reduction in the technical availability factor. directors’ interests The Directors’ beneficial interests in the shares of the Company were on the reference dates as stated below: A.J.S. Morris J.G. West L.S. Coben P.R.S. Earl E.R. Shaw 24.05.2012 31.12.2011 31.12.2010 350,000 n/a 500,000 750,000 275,000 350,000 n/a 500,000 750,000 275,000 100,000 2,370,230 n/a 250,000 275,000 www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 14 direCtors’ rePort significant shareholdings in the Company In addition to the shareholdings shown above, the Company is aware of the following interests of 3 per cent. or more in the issued ordinary share capital of the Company notifiable at 24 May, 2012, being the last practicable date for reporting this information. Sterling Trust Ltd* Nortrust Nominees Ltd HSBC Global Custody (Nominee) (UK) Ltd Vidacos Nominees Ltd Number of shares % holding 210,361,181 55,421,000 33,938,593 27,555,000 50.01 13.17 8.07 6.60 *26,325,962 shares are held in a nominee account with Forest Nominees Ltd. Policy and practice on payment of • select suitable accounting policies and The Directors are responsible for the suppliers It is the policy of all Group companies, with then apply them consistently; maintenance and integrity of the corporate • make judgments and accounting estimates and financial information included on the respect to suppliers, to: a) settle payment that are reasonable and prudent; Company’s website. Legislation in the United terms when agreeing the terms of each • state whether applicable IFRSs have Kingdom governing the preparation and transaction, b) ensure suppliers are made been followed, subject to any material dissemination of financial statements may aware of the terms of payment and c) pay in accordance with the contractual and legal departures disclosed and explained in the financial statements; differ from legislation in other jurisdictions. obligations. The Company’s average creditor • prepare the financial statements on payment period at 31 December, 2011 was the going concern basis unless it is Auditor The Auditor, Grant Thornton UK LLP, have 30 days (2010: 45 days). inappropriate to presume that the indicated their willingness to continue in risk management and objectives The financial risk management policies and Company will continue in business. office and a resolution concerning their reappointment will be proposed at the The Directors are responsible for keeping Annual General Meeting. objectives are set out in note 27. adequate accounting records that are sufficient to show and explain the Company’s On behalf of the Board directors’ responsibilities The Directors are responsible for preparing transactions and disclose with reasonable accuracy at any time the financial position the Directors’ Report, Annual Report and of the Company and enable them to ensure the financial statements in accordance with that the financial statements comply with susan laker Company Secretary applicable law and regulations. the Companies Act 2006. They are also 1 June, 2012 Company law requires the Directors to Company and hence for taking reasonable prepare financial statements for each steps for the prevention and detection of financial year. Under that law the Directors fraud and other irregularities. responsible for safeguarding the assets of the have to prepare the financial statements in accordance with International Financial In so far as the Directors are aware: Reporting Standards (IFRSs) as adopted by the European Union. Under company law Section 393, Companies Act 2006, the • there is no relevant audit information of which the Company’s auditors are Directors must not approve the financial unaware; and statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group • the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information for that period. In preparing these financial and to establish that the auditors are statements, the Directors are required to: aware of that information. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 15 CorPorAte governAnCe stAtement Policy statement The Board is committed to applying high Board Composition and independence The Board currently comprises five members shareholder relations The Group values the views of its standards of corporate governance and made up of a Non-Executive Chairman, three shareholders and recognises their interest in integrity to all our activities. The Company is Executive Directors and one Non-Executive the Group’s strategy and performance, Board not required by the rules of the AIM market Director. The Board is responsible for the membership and quality of management. of the London Stock Exchange to comply overall direction, strategic objectives and It therefore holds regular meetings with with the UK Corporate Governance Code key policies for reviewing performance of the and gives presentations to its institutional (June 2010) (the “Code”). However, the Company as well as approving major capital shareholders to discuss objectives. Board has been briefed on the Code and is expenditure, potential acquisitions and accountable to the Company’s shareholders financial matters. The Board meets regularly for good corporate governance and therefore and has a schedule of business reserved Corporate governance statement The Annual General Meeting (“AGM”) is seeks to comply with the Code in so far as is to it including raising new capital, entering used to communicate with private investors practicable as a smaller company. into financing facilities for projects, treasury with whom dialogue is encouraged. internal Controls The Directors are policies and approval of annual operating Additional information is supplied through budgets and monitoring of key risks. The the circulation of the interim report and responsible for the Board met five times during 2011. External the Annual Report and Accounts. The Group’s systems of internal control. Whilst advice is available to the Directors if they Company maintains up-to-date information no risk management process or systems consider it necessary. The Chairman and on the investor section of its website of internal control can completely eliminate Non-Executive Director met twice during the www.rurelec.com. the risk of material misstatement or loss, the financial year without the Executive Directors Group’s systems are designed to provide being present. the Directors with reasonable assurance Audit Committee The Audit Committee comprises Andrew that problems are identified in a timely The Chairman of the Board is Andrew Morris and Larry Coben who are both manner and dealt with appropriately. The Morris, who is also an Executive director of Non-Executive Directors and is chaired by Board considers that there have been no another company. The other Non-Executive Andrew Morris. Both Mr Morris, who is an substantial weaknesses in financial controls Director is Larry Coben. Both are regarded accountant, and Mr Coben have recent resulting in material loss, contingencies or by the Board as independent in character and relevant financial and commercial uncertainties and thus disclosable in the and judgement. experience. accounts. The Board has considered the need for an internal audit function and has The Executive Directors are Peter Earl, who The Committee’s remit is to review financial concluded that there is no current need for is Chief Executive, Elizabeth Shaw, who reporting practices, internal financial controls such a function. is Finance Director, and Marcelo Blanco, and internal and external audit policy who has special responsibility for regional including the appointment of the Company’s financing in Latin America. All Directors are Auditor. During the year, the Audit Committee involved in significant decisions. met twice to review the draft half year and annual financial statements. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 16 CorPorAte governAnCe stAtement remuneration Committee The Remuneration Committee comprises Larry share dealing Code The Company has a Share Dealing Code Coben and Andrew Morris and is chaired by which covers dealings by Persons Discharging Larry Coben. The Remuneration Committee Managerial Responsibilities (“PDMRs”). The reviews the remuneration policy for the Executive Company’s code complies with the provisions of Directors and for senior management. The the Code and restricts dealings in shares during Executive Directors determine the remuneration designated closed periods and at any time when arrangements for the Non-Executive Directors. they are in possession of unpublished price No Director may participate in decisions regarding sensitive information. his own remuneration. Details of the Directors’ remuneration can be found in Note 8c. Appointment of directors The Nomination Committee presently comprises statement of non-Compliance The Non-Executive Directors are all considered to be independent in character and judgement. However, in view of the size of the Board Andrew Andrew Morris as Chairman and Larry Coben. Morris currently chairs the Audit Committee as he The Committee is responsible for monitoring the has recent relevant financial experience although composition of the Board and meets to make the Company recognises that it is not able to recommendations to the Board on all new Board comply with the Code in this respect. susan laker Company Secretary 1 June, 2012 appointments and succession planning. The Board has not used external consultants in the appointment of Directors. All Directors are subject to re-election by shareholders every three years. Health, safety and environmental Protection Policy The Group is committed to compliance with all relevant laws and regulations and continues to assess its operations to ensure protection of the environment, the community and the health and safety of its employees. The Group maintains appropriate procedures to ensure that all activities are carried out in compliance with safety regulations, in a culture where the safety of personnel is paramount and which recognises environmental sustainability and respect for cultural and heritage issues. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 indePendent AUditor’s rePort to tHe memBers of rUreleC PlC 17 We have audited the financial statements of Rurelec PLC for the year ended 31 December, 2011 which comprise the consolidated income statement, consolidated statement of comprehensive income, the consolidated and parent company statements of financial position, the consolidated and company statements of cash flows, the consolidated and company statements of changes in equity and the related notes. 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. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. respective responsibilities of directors and Auditor As explained more fully in the Directors’ Responsibilities Statement set out in the Group Directors’ Report, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (“APB’s”) Ethical Standards for Auditors. scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/ private.cfm. Basis for qualified opinion on financial statements In the prior year, whilst we were able to conduct appropriate audit procedures on Rurelec PLC as a standalone company and its joint venture company, Energia Del Sur S.A. (“EdS”), we were unable to carry out sufficient audit procedures or obtain sufficient appropriate audit evidence in relation to the financial results of Empresa Electrica Guaracachi S. A. (“Guaracachi”) for the four months to 1 May, 2010 that have been consolidated into the 2010 financial statements. The audit evidence available to us was limited following the nationalisation of Guaracachi in May 2010 and the resulting change in local management. As a result of this we were unable to access the auditors’ working papers relating to Guaracachi, nor were we able to conduct alternative audit procedures, such as reviewing primary documentation prepared by Guaracachi for the prior year. Our audit opinion on the financial statements for the year ended 31 December, 2010 was modified accordingly. As the investment in Guaracachi was disposed of in the prior year there is no impact on the current period’s figures. However, our opinion on the current year’s financial statements is also modified because of the possible effect of this matter on the comparability of the current year’s figures and the corresponding figures. Qualified opinion on financial statements In our opinion, except for the possible effects on the corresponding figures of the matter described in the Basis for qualified opinion paragraph: • 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 December, 2011 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; • the parent company financial statements in have been properly prepared accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared the requirements of the Companies Act 2006. in accordance with emphasis of matter — discontinued operations We draw attention to the disclosure made in note 11 to the financial statements regarding the uncertain outcome of the parent company’s ability to recover the compensation of £47m for the nationalisation of Guaracachi. The ultimate outcome of this matter cannot presently be determined, and no provision for any adjustments that would result from a non-satisfactory settlement of the compensation has been made. opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Group Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or disclosures Directors’ remuneration specified by law are not made; or • certain of • we have not received all the information and explanations we require for our audit. Christopher smith Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London 1 June, 2012 www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 18 ConsolidAted inCome stAtement for the year ended 31 December 2011 Revenue Cost of sales Gross profit Administrative expenses Operating profit Finance income Finance expense Profit before tax Tax expense Profit/(loss) for the year from continuing operations Discontinued operations Trading profit Other income Profit from discontinued operations Profit for the year Attributable to: Owners of the parent Continuing operations Discontinued operations Non-controlling interests Earnings per share i) Result for the year Basic earnings per share Diluted earnings per share ii) Continuing operations Basic earnings per share Diluted earnings per share Notes 4 6 7 9 9 10 13 Year ended 31.12.11 Year ended 31.12.10 £’000 13,522 (7,903) 5,619 (4,883) 736 1,661 (500) 1,897 (141) 1,756 - - - £’000 10,835 (6,981) 3,854 (3,242) 612 631 (1,098) 145 (284) (139) 1,420 15,111 16,531 1,756 16,392 1,756 - 1,756 - 1,756 0.47p 0.47p 0.47p 0.47p (139) 15,821 15,682 710 16,392 7.34p 7.02p (0.06p) (0.06p) The notes on pages 26 to 48 form an integral part of these financial statements. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 19 ConsolidAted stAtement of ComPreHensive inCome for the year ended 31 December 2011 Profit for the year Other comprehensive income/(loss) for the year Exchange differences on translation of foreign operations Exchange differences on disposal of Guaracachi now realised Revaluation of CERs Total other comprehensive loss attributable to the owners of the parent Total comprehensive income for year Attributable to: Owners of the parent Non-controlling interests Notes Year ended 31.12.11 £’000 1,756 Year ended 31.12.10 £’000 16,392 (440) - (142) (582) 1,174 1,174 - 1,174 (126) (2,633) (191) (2,950) 13,442 12,732 710 13,442 The notes on pages 26 to 48 form an integral part of these financial statements. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 20 ConsolidAted stAtement of finAnCiAl Position for the year ended 31 December 2011 Assets Non-current assets Property, plant and equipment Intangible assets Trade and other receivables Deferred tax assets Current assets Inventories Trade and other receivables Compensation claim Cash and cash equivalents Total assets Equity and liabilities Shareholders’ equity Share capital Share premium account Foreign currency reserve Other reserves Retained earnings Total equity attributable to shareholders of Rurelec PLC Non-current liabilities Trade and other payables Tax liabilities Deferred tax liabilities Borrowings Current liabilities Trade and other payables Current tax liabilities Borrowings Total liabilities Notes 31.12.11 £’000 31.12.10 £’000 14 15 16a 17 18 16b 11 19 20 21a 22a 17 23a 21b 22b 23b 18,777 3,393 15,109 520 37,799 365 5,514 47,997 1,793 55,669 21,084 3,853 10,939 363 36,239 395 3,641 47,000 157 51,193 93,468 87,432 8,413 53,012 845 1,050 22,533 85,853 231 306 762 1,653 2,952 4,532 131 - 4,663 7,615 4,413 39,329 1,285 1,192 20,777 66,996 470 381 937 1,081 2,869 4,916 59 12,592 17,567 20,436 Total equity and liabilities 93,468 87,432 The financial statements were approved by the Board of Directors on 1 June, 2012 and were signed on its behalf by P. Earl (Chief Executive) and E. Shaw (Finance Director). The notes on pages 26 to 48 form an integral part of these financial statements. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 PArent ComPAny stAtement of finAnCiAl Position for the year ended 31 December 2011 21 Assets Non-current assets Investments Trade and other receivables Current assets Trade and other receivables Cash and cash equivalents Total assets Equity and liabilities Shareholders’ equity Share capital Share premium account Retained earnings Total equity Current liabilities Trade and other payables Loan note Borrowings Notes 31.12.11 £’000 31.12.10 £’000 25 16c 16d 19 20 21c 23c 23c 8,470 54,344 62,814 159 1,385 1,544 8,470 35,623 44,093 7,443 71 7,514 64,358 51,607 8,413 53,012 2,483 63,908 450 - - 450 4,413 39,329 (923) 42,819 644 2,500 5,644 8,788 Total equity and liabilities 64,358 51,607 The financial statements were approved by the Board of Directors on 1 June, 2012 and were signed on its behalf by P. Earl (Chief Executive) and E. Shaw (Finance Director). The notes on pages 26 to 48 form an integral part of these financial statements. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 22 ConsolidAted stAtement of CAsH flows for the year ended 31 December 2011 Cash flows from operating activities Cash (used in)/generated from operations Interest paid Taxation paid Net cash used in operating activities Cash flows from investing activities Purchase of plant and equipment Sale of plant and equipment Loans to joint venture company Cash in discontinued operation Net cash used in investing activities Notes 24 14 Year ended Year ended 31.12.11 £’000 31.12.10 £’000 (68) (500) (468) (1,036) (230) 177 (3,022) - (3,075) 1,209 (873) (369) (33) (1,199) - (59) (3,915) (5,173) Net cash outflow before financing activities (4,111) (5,206) Cash flows from financing activities Issue of shares (net of costs) Loan drawdowns Loan repayments Net cash generated from financing activities Increase/(decrease) in cash and cash equivalents Cash and cash equivalents at start of year Cash and cash equivalents at end of year 17,683 654 (12,590) 5,747 1,636 157 1,793 1,452 - (265) 1,187 (4,019) 4,176 157 The notes on pages 26 to 48 form an integral part of these financial statements. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 23 ComPAny stAtement of CAsH flows for the year ended 31 December 2011 Cash flows from operating activities Cash used in operations Interest paid Net cash used in operations Cash flows from investing activities Loans to joint venture company Net cash used in investing activities Notes 24 Year ended Year ended 31.12.11 £’000 31.12.10 £’000 (1,947) (236) (2,183) (6,044) (6,044) (881) (399) (1,280) (123) (123) Net cash outflow before financing activities (8,227) (1,403) Cash flows from financing activities Issue of shares (net of costs) Loan repayments Net cash generated from financing activities Increase in cash and cash equivalents Cash and cash equivalents at start of year Cash and cash equivalents at end of year 17,683 (8,142) 9,541 1,314 71 1,385 1,452 - 1,452 49 22 71 The notes on pages 26 to 48 form an integral part of these financial statements. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 24 ConsolidAted stAtement of CHAnges in eQUity for the year ended 31 December 2011 Foreign Share capital £’000 Share currency Retained Other premium reserve earnings reserves £’000 £’000 £’000 £’000 Non- controlling interest £’000 Total £’000 Total equity £’000 4,108 38,182 4,044 5,095 1,383 52,812 33,810 86,622 - 305 - 305 - - - - - - 1,220 (73) 1,147 - - - - - - - - - - - - - - 571 (2,633) 15,111 - - - - - - - (126) - - (191) - - (34,520) (34,520) 1,525 (73) - - 1,525 (73) 1,452 (34,520) (33,068) 571 12,478 (191) (126) 710 - - - 1,281 12,478 (191) (126) (2,759) 15,682 (191) 12,732 710 13,442 Group Balance at 1.1.10 Transactions with owners: Disposal Allotment of shares Share issue costs Total transactions with owners Profit for year Disposal Revaluation of CERs Exchange differences Total comprehensive income/(loss) Balance at 31.12.10 4,413 39,329 1,285 20,777 1,192 66,996 Balance at 1.1.11 4,413 39,329 1,285 20,777 1,192 66,996 Transactions with owners: Allotment of shares Share issue costs 4,000 14,000 - (317) Total transactions with owners 4,000 13,683 Profit for year Revaluation of CERs Exchange differences Total comprehensive income/(loss) - - - - - - - - - - - - - (440) - - - 1,756 - - - - - - (142) - 18,000 (317) 17,683 1,756 (142) (440) (440) 1,756 (142) 1,174 Balance at 31.12.11 8,413 53,012 845 22,533 1,050 85,853 - - - - - - - - - - 66,996 66,996 18,000 (317) 17,683 1,756 (142) (440) 1,174 85,853 The notes on pages 26 to 48 form an integral part of these financial statements. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 ComPAny stAtement of CHAnges in eQUity for the year ended 31 December 2011 25 Company Balance at 1.1.10 Transaction with owners Allotment of shares Share issue costs Total transactions with owners Loss for year Total comprehensive loss Balance at 31.12.10 Balance at 1.1.11 Transaction with owners Allotment of shares Share issue costs Total transactions with owners Profit for year Total comprehensive income Share capital £’000 Share premium £’000 Retained earnings £’000 Total equity £’000 4,108 38,182 600 42,890 305 - 305 - - 4,413 4,413 4,000 - 4,000 - - 1,220 (73) 1,147 - - 39,329 39,329 14,000 (317) 13,683 - - - - - (1,523) (1,523) (923) (923) - - - 3,406 3,406 2,483 1,525 (73) 1,452 (1,523) (1,523) 42,819 42,819 18,000 (317) 17,683 3,406 3,406 63,908 Balance at 31.12.11 8,413 53,012 The notes on pages 26 to 48 form an integral part of these financial statements. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 26 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 1 generAl informAtion, BAsis of PrePArAtion And new ACCoUnting stAndArds 1a general information Rurelec PLC is the Group’s ultimate parent company. It is incorporated and domiciled in England and Wales. The address of Rurelec’s registered office is given on the information page. Rurelec’s shares are traded on the AIM market of the London Stock Exchange PLC. The nature of the Group’s operations and its principal activities are the generation of electricity in South America. 1b Basis of preparation, including going concern The Company and the consolidated financial statements have been prepared in compliance with International Financial Reporting Standards (“IFRSs”) and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations as adopted by the European Union and company law applicable to companies reporting as at 31 December 2011. In 2010, the results of Guaracachi, which were consolidated in prior years, have been shown as discontinued operations in the Consolidated Statement of Comprehensive Income. A detailed review of the Group’s business activities and recent developments is set out in the Chairman’s Statement and the Chief Executive’s Report. As a result of the share issue in March 2011 and the improved trading performance of EdS, the Directors consider that the Company and the Group has sufficient working capital for at least the next 12 months and accordingly, the Directors continue to adopt the going concern basis in preparing these financial statements. 1c new accounting standards The Group has adopted the following new interpretations, revisions and amendments to IFRSs issued by the International Accounting Standards Board, which are relevant to and effective for the Group’s financial statements for the annual period beginning 1 January 2011: • IAS 1 Presentation of Financial Statements (Revised 2007) • Amendments to IFRS 7 Financial Instruments: Disclosures – improved disclosures about financial instruments • IFRS 8 Operating Segments The following new standards, amendments and interpretations are effective for the first time in these financial statements but none have had a material effect on the Group: • IAS 27 (revised) Consolidated Financial Statements • Amendment to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged Items • IFRIC 17 Distributions of Non-cash Assets to Owners • Revised IFRS 1 First-time Adoption of international Financial Reporting Standards • IFRIC 18 Transfer of Assets from Customers • Improvements to IFRSs (2009) • Group Cash-settled Share-based Payment Transactions (Amendments to IFRS 2) • Additional Exemptions for First-time Adopters (Amendments to IFRS 1) • IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011) • Amendment to IAS 32 Classification of Rights Issues (effective 1 February 2010) • IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments* (effective 1 July 2010) • Prepayments of a Minimum Funding Requirement – Amendments to IFRIC 14* (effective 1 January 2011) • Improvements to IFRS issued May 2010 (some changes effective 1 July 2010, others effective 1 January 2011) • Disclosures – Transfers of Financial Assets – Amendments to IFRS 7* (effective 1 July 2011) RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 27 standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the group in the 31 december 2011 financial statements At the date of authorisation of these financial statements certain new standards, amendments and interpretations to existing standards have been published but are not yet effective. The Group has not early adopted any of these pronouncements. The new Standards, amendments and Interpretations that are expected to be relevant to the Group’s financial statements are as follows: standard/interpretation IFRS 9 Content Financial instruments: Classification and measurement IFRS 10 IFRS 11* IFRS 12* IFRS 13* Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement IAS 19 (Revised June 2011)* Employee Benefits IAS 28 (Revised)* Investments in Associates and Joint Ventures Amendments to IFRS 7* Disclosures - Transfers of Financial Assets and Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 12* Deferred Tax: Recovery of Underlying Assets Amendments to IAS 1 Presentation of Items of Other Comprehensive Income Amendments to IAS 32* Offsetting Financial Assets and Financial Liabilities - *Not expected to be relevant to the Group. Applicable for financial years beginning on/after 1 January, 2015 1 January, 2013 1 January, 2013 1 January, 2013 1 January, 2013 1 January, 2013 1 January, 2013 1 July, 2011 1 January, 2012 1 July, 2012 1 January, 2014 ifrs 9, ‘financial instruments: Classification and measurement’ In November 2009, the Board issued the first part of IFRS 9 relating to the classification and measurement of financial assets. IFRS 9 will ultimately replace IAS 39. The standard requires an entity to classify its financial assets on the basis of the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and subsequently measures the financial assets as either at amortised cost or fair value. The new standard is mandatory for annual periods beginning on or after 1 January, 2013. ifrs 10 Consolidated financial statements IFRS 10 replaces the portion of IAS 27 ‘Consolidated and Separate Financial Statements’ that addresses the accounting for consolidated financial statements. It also includes the issues raised in SIC-12 ‘Consolidation — Special Purpose Entities’. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled, and therefore, are required to be consolidated by a parent, compared with the requirements that were in IAS 27. This standard becomes effective for annual periods beginning on or after 1 January, 2013. Amendments to iAs 1 Presentation of financial statements (iAs 1 Amendments) The IAS 1 Amendments require an entity to group items presented in other comprehensive income into those that, in accordance with other IFRSs: (a) will not be reclassified subsequently to profit or loss and (b) will be reclassified subsequently to profit or loss when specific conditions are met. It is applicable for annual periods beginning on or after 1 July, 2012. The Group’s management expects this will change the current presentation of items in other comprehensive income; however, it will not affect the measurement or recognition of such items. The Directors do not anticipate that the adoption of these standards and interpretations in future periods will have any material impact on the financial statements of the Group. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 28 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 2 sUmmAry of signifiCAnt ACCoUnting PoliCies 2.1 Basis of consolidation The Group financial statements consolidate the results of the Company and its 50 per cent. interest in EdS. The results for the prior year include, within ‘discontinued operations’, the Group’s 50.00125 per cent. interest in Empresa Electrica Guaracachi S.A. (“Guaracachi”) which was nationalised by the Bolivian Government on 1 May, 2010. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. Joint ventures are arrangements in which the Group has a long-term interest and shares control under a written contractual agreement. The Group reports its interests in jointly controlled entities using proportionate consolidation such that the Group’s share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line by line basis. Goodwill, or the excess of interest in acquired assets, liabilities and contingent liabilities over cost, arising on the acquisition of the Group’s interest in subsidiary or jointly controlled entities is accounted for in accordance with the Group’s accounting policy for goodwill arising on the acquisition of a subsidiary. Unrealised gains on transactions between the Group and subsidiary and joint venture entities are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiary and joint venture entities have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Acquisitions of subsidiaries and joint venture entities are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the acquired company, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the entity prior to acquisition. On initial recognition, the assets and liabilities of the acquired entity are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group’s accounting policies. Investments in subsidiaries and joint ventures are stated at cost in the balance sheet of the Company. 2.2 goodwill Goodwill representing the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is capitalised and reviewed annually for impairment. Goodwill is stated after separating out identifiable assets and liabilities. Goodwill is carried at cost less accumulated impairment losses. Any excess of interest in acquired assets, liabilities and contingent liabilities over cost (“negative goodwill”) is recognised immediately after acquisition through the income statement. 2.3 foreign currency translation The financial information is presented in pounds sterling, which is also the functional currency of the parent company. In the separate financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions (“spot exchange rate”). Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of remaining balances at year-end exchange rates are recognised in the income statement in administrative expenses. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 29 2 sUmmAry of signifiCAnt ACCoUnting PoliCies (ContinUed) In the consolidated financial statements, all separate financial statements of subsidiary and jointly controlled entities, originally presented in a currency different from the Group’s presentation currency, have been converted into sterling. Assets and liabilities have been translated into sterling at the closing rate at the balance sheet date. Income and expenses have been converted into sterling at the average rates over the reporting period. Any differences arising from this procedure have been charged/(credited) to the Foreign Currency Reserve. 2.4 income and expense recognition Revenue is recognised upon the performance of services or transfer of risk to the customer. Revenues represent the total amount receivable by the Group for electricity sales, excluding VAT. Electricity sales includes the income from the sale of electricity generated and the income received for keeping power plants operating and available for despatch into the grid as required. During the year under review and the prior year, no revenues were derived from the sale of equipment purchased with a view to subsequent resale. Operating expenses are recognised in the income statement upon utilisation of the service or at the date of their origin. All other income and expenses are reported on an accrual basis. 2.5 dividends Dividends paid/receivable are recognised on a cash paid/cash received basis. No dividends were paid or received during the year (2010: nil). 2.6 Borrowing costs All borrowing costs are expensed as incurred except where the costs are directly attributable to specific construction projects, in which case the interest cost is capitalised as part of those assets. 2.7 Property, plant and equipment Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. No depreciation is charged during the period of construction. All operational buildings and plant and equipment in the course of construction are recorded as plant under construction until such time as they are brought into use by the Group. Plant under construction includes all direct expenditure and may include capitalised interest in accordance with the accounting policy on that subject. On completion, such assets are transferred to the appropriate asset category. Repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of major renovations and overhauls is included in the carrying amount of the assets where it is probable that the economic life of the asset is significantly enhanced as a consequence of the work. Major renovations and overhauls are depreciated over the expected remaining useful life of the work. Depreciation is calculated to write down the cost less estimated residual value of all property, plant and equipment other than freehold land by equal annual instalments over their estimated useful economic lives. The periods generally applicable are: Buildings Plant and equipment 25 to 50 years 3 to 15 years Material residual values are updated as required, but at least annually. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. 2.8 impairment of tangible and intangible assets At each balance sheet date, the Group reviews the carrying amount of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 30 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 2 sUmmAry of signifiCAnt ACCoUnting PoliCies (ContinUed) Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the income statement. 2.9 taxation Current income tax assets and liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the period. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement or through the statement of changes in equity. Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. However, in accordance with the rules set out in IAS 12, no deferred taxes are recognised in respect of non-tax deductible goodwill. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are provided for in full with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided that they are enacted or substantially enacted at the balance sheet date. Deferred tax is provided on differences between the fair value of assets and liabilities acquired in an acquisition and the carrying value of the assets and liabilities of the acquired entity and on the differences relating to investments in subsidiary and joint venture companies if the difference is a temporary difference and is expected to reverse in the foreseeable future. Changes in deferred tax assets and liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity. 2.10 financial assets The Group’s financial assets include cash and cash equivalents, loans and receivables. Cash and cash equivalents include cash at bank and in hand as well as short term highly liquid investments such as bank deposits. Loans and receivables are non-derivative financial assets with fixed or determinable payment dates that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. Receivables are measured initially at fair value and subsequently remeasured at amortised cost using the effective interest method, less provision for impairment. Any impairment is recognised in the income statement. Trade receivables are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the asset’s carrying amount and the present value of estimated cash flows. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 31 2 sUmmAry of signifiCAnt ACCoUnting PoliCies (ContinUed) 2.11 financial liabilities Financial liabilities are obligations to pay cash or other financial instruments and are recognised when the Group becomes a party to the contractual provisions of the instrument. All transaction costs are recognised immediately in the income statement. A financial liability is derecognised only when the obligation is extinguished, that is when the obligation is discharged, cancelled or expires. Bank and other loans are raised for support of long-term funding of the Group’s operations. They are recognised initially at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method. Finance charges, including premiums payable on settlement or redemption, and direct issue costs are charged to the income statement on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. 2.12 inventories Inventories comprise spare parts and similar items for use in the Group’s plant and equipment. Inventories are valued at the lower of cost and net realisable value on a first in, first out basis. 2.13 Cers CERs (Carbon Emission Reduction credits) are recognised at fair value on acquisition of a subsidiary, associate or joint venture company and are revalued by reference to an active market at each balance sheet date. A liability is recognised in respect of any payments received for CERs in advance of their generation. CERs arising subsequent to an acquisition are credited to the revenue in the period that they are generated. 2.14 shareholders’ equity Equity attributable to the shareholders of the parent company comprises the following: “Share capital” represents the nominal value of equity shares. “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. “Foreign currency reserve” represents the differences arising from translation of investments in overseas subsidiaries. “Retained earnings” represents retained profits. “Other reserves” comprises unrealised revaluations of plant and machinery and Carbon Emission Reduction credits. 2.15 Pensions During the year under review, the Group did not operate or contribute to any pension schemes (2010: nil). 2.16 segment reporting In identifying its operating segments, management follows the Group’s geographic locations. The activities undertaken by segments are the generation of electricity in their country of incorporation within South America. Each of the operating segments is managed separately as the rules and regulations vary from country to country. The measurement policies used by the Group for segment reporting under IFRS 8 are the same as those used in the financial statements. 3 key AssUmPtions And estimAtes When preparing the financial statement, management make a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities income and expenses. The actual results may differ from the judgements, estimates and assumptions made and will seldom equal the estimated results. The areas which management consider are likely to be most affected by the significant judgements, estimates and assumptions on recognition and measurement of assets, liabilities, income and expenses are: a) Useful lives of depreciable assets – management review, with the assistance of external expert valuers, the useful lives of depreciable assets at each reporting date. Actual results, however, may vary due to changes in technology and industry practices. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 32 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 3 key AssUmPtions And estimAtes (ContinUed) b) Impairment – management review tangible and intangible assets at each balance sheet date to determine whether there is any indication that those assets have suffered an impairment loss. This review process includes making assumptions about future events, circumstances and operating results. The actual results may vary from those expected and could therefore cause significant adjustments to the carrying value of the Group’s assets. c) Deferred tax assets and liabilities – there exists an element of uncertainty regarding both the timing of the reversing of timing differences and the tax rate which will be applicable when the reversing of the asset or liability occurs. d) The amount which will be recovered from the claim for compensation following the Nationalisation of the Group’s interest in Guaracachi. Further details are set out in note 11. 4 segment AnAlysis Management currently identifies the Group’s two geographic operating segments, Argentina and the head office in the UK, as operating segments as further described in the accounting policy note. These operating segments are monitored and strategic decisions are made on the basis of segment operating results. The following tables provide an analysis of the operating results, total assets and liabilities, capital expenditure and depreciation for 2011 and 2010 for each geographic segment. The main customer (accounting for over 90 per cent. of revenues) in Argentina is a body which is subject to supervision by the Government electricity regulator. a) 12 months to 31.12.2011 Revenue Cost of sales Gross profit Administrative expenses Profit/(loss) before exchange adjustments Exchange (loss)/gain Operating profit/(loss) Finance income Finance expense (Loss)/profit before tax Tax (expense)/income (Loss)/profit for the year from continuing operations Total assets Total liabilities Capital expenditure Depreciation Argentina £’000 13,522 (7,903) 5,619 (3,265) 2,354 (1,325) 1,029 - (2,119) (1,090) (560) (1,650) 27,496 16,156 230 786 Bolivia £’000 - - - - - - - - - - - - 47,997 - - - UK £’000 - - - (716) (716) 423 (293) 3,517 (237) 2,987 419 3,406 17,975 450 - - Consolidation adjustments £’000 - - - - - - - (1,856) 1,856 - - - - (8,991) - - Total £’000 13,522 (7,903) 5,619 (3,981) 1,638 (902) 736 1,661 (500) 1,897 (141) 1,756 93,468 7,615 230 786 RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 33 4 segment AnAlysis (ContinUed) b) 12 months to 31.12.2010 Revenue Cost of sales Gross profit Administrative expenses Profit/(loss) before exchange adjustments Exchange (loss)/gain Operating profit/(loss) Finance income Finance expense Profit/(loss) before tax Tax credit/(expense) (Loss)/profit for the year from continuing operations Total assets Total liabilities Capital expenditure Depreciation Argentina £’000 10,835 (6,981) 3,854 (2,345) 1,509 (350) 1,159 1,035 (474) 1,720 (285) 1,435 32,711 18,967 1,199 618 Bolivia £’000 - - - (50) (50) - (50) - - (50) - (50) 47,312 1 - - UK £’000 - - - (1,042) (1,042) 545 (497) (404) (624) (1,525) 1 (1,524) 7,409 8,788 - - Consolidation adjustments £’000 - - - - - - - - - - - - (7,320) - - Total £’000 10,835 (6,981) 3,854 (3,437) 417 195 612 631 (1,098) 145 (284) (139) 87,432 20,436 1,199 618 5 exCHAnge rAte sensitivity AnAlysis The Group’s electricity generating assets are located in Argentina and as a result, the Group’s reported results are affected by currency movements. The key exchange rates applicable to the results were as follows: i) Closing rate AR$ to £ US$ to £ ii) Average rate AR$ to £ US$ to £ 31.12.11 31.12.10 6.65 1.55 6.61 1.60 6.15 1.54 6.06 1.55 If the exchange rate of sterling at 31 December 2011 had been stronger or weaker by 10 per cent. with all other variables held constant, shareholder equity at 31 December 2011 would have been £2.0 million (2010: £1.4 million) lower or higher than reported. If the average exchange rate of sterling during 2011 had been stronger or weaker by 10 per cent. with all other variables held constant, the profit for the year, would have been £0.2 million (2010: £0.1 million) higher or lower than reported. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 34 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 6 Cost of sAles Expenditure incurred in cost of sales is as follows: Cost of fuel Depreciation Maintenance Other 7 AdministrAtive exPenses Expenditure incurred in administrative expenses is as follows: Payroll and social security Services, legal and professional Office costs and general overheads Audit and non-audit services1 Exchange losses/(gains)2 Year ended Year ended 31.12.11 £’000 31.12.10 £’000 6,556 786 327 234 7,903 5,950 631 365 35 6,981 Year ended Year ended 31.12.11 £’000 31.12.10 £’000 2,093 199 1,634 55 3,981 902 4,883 1,553 843 986 55 3,437 (195) 3,242 1 Audit and non-audit services include £30,000 paid to the auditors for the audit of the Company and the Group financial statements and £5,000 paid to the Company’s auditors for non-audit professional services provided to the Company in connection with the review of overseas activities. Fees paid to other auditors, in respect of the audit of joint venture companies, amounted to £20,000 (2010: £20,000). 2 The exchange losses (2010: gains) have arisen primarily of borrowings in Argentina which are US$ denominated. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 35 8 emPloyee Costs a) Group Aggregate remuneration of all employees and Directors, including social security costs The average number of employees in the Group, including Directors, during the year was as follows: Management Operations Total b) Company Aggregate remuneration of all employees and Directors, including social security costs The average number of employees in the Company, including Directors, during year was as follows: Management Year ended 31.12.11 £’000 2,093 Year ended 31.12.10 £’000 1,553 Number Number 15 27 42 £’000 397 14 19 33 £’000 380 Number 6 Number 7 c) Directors’ remuneration The total remuneration paid to the Directors, including national insurance, was £322,000 (2010: £301,000). The total remuneration of the highest paid Director was £99,000 (2010: £68,000). P. Earl M. Eyre E. Shaw J. West Sir R. Christopher A. Morris M. Blanco L. Coben Total Year ended Year ended 31.12.11 £’000 31.12.10 £’000 99 43 87 - - 56 15 22 59 68 68 22 19 44 21 - 322 301 www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 36 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 9 finAnCe inCome And exPense Inter-group interest1 Interest paid/payable on bank borrowings and loans Year ended 31.12.11 Year ended 31.12.10 £’000 1,661 500 £’000 631 1,098 1 Inter-group interest arises on loans by the Company to its 50 per cent. owned joint venture companies (PEL and EdS). The loans by the Company to PEL and EdS exceed the loans of the other 50 per cent. shareholder by £14.2 million (2010: £9 million). Interest on inter-group loans has been charged at rates of between 8 per cent. and 12 per cent. Sensitivity analysis arising from changes in borrowing costs is set out in note 23. 10 tAx exPense The relationship between the expected tax expense at the basic rate of 26 per cent. (31 December 2010: 28 per cent.) and the tax expense actually recognised in the income statement can be reconciled as follows: Result for the year before tax Standard rate of corporation tax in UK Expected tax charge Group relief surrender by joint venture company Adjustment for different basis of calculating overseas tax UK losses carried forwards Adjustment in respect of prior year Actual tax (income)/expense Comprising: Current tax expense Deferred tax (net credit) Total (income)/expense Year ended 31.12.11 £’000 1,897 26% 493 (216) (136) - - 141 409 (268) 141 Year ended 31.12.10 £’000 145 28% 41 - 38 426 (221) 284 301 (17) 284 RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 37 11 ComPensAtion ClAim Book value of claim 31.12.11 £’000 47,997 31.12.10 £’000 47,000 As detailed in the 2010 Report and Accounts, on 1 May 2010 the Bolivian Government nationalised by force Rurelec’s controlling interest in Guaracachi. The Bolivian book value of the net assets of Guaracachi, together with declared but unpaid dividend for 2009, is not less than £47.0 million and has been used for accounting purposes only and does not represent fair market value of the investment to be claimed under Bilateral Investment Treaties. The actual amount claimed, as submitted to the Permanent Court of Arbitration in The Hague, is $142.4 million. The increase from £47.0 million to £48.0 million represents costs incurred in preparing and submitting the claim for compensation to the Permanent Court of Arbitration in The Hague. 12 Holding ComPAny’s resUlt for tHe yeAr As permitted by Section 408 of the Companies Act 2006, the holding company’s income statement is not shown separately in the financial statements. The profit for the year was £3.4 million (2010: loss £1.5 million). 13 eArnings Per sHAre Basic loss per share is calculated by dividing the loss for the period attributable to shareholders by the weighted average number of shares in issue during the period. For diluted loss per share, the weighted average number of shares is adjusted to assume conversion of all dilutive potential ordinary shares. There were no outstanding options or warrants to acquired shares at the year-end and therefore there was no difference between the basic and diluted earnings per share. Average number of shares in issue i) Result for the year Profit attributable to equity holders of the parent Basic earnings per share Diluted earnings per share ii) Continuing operations Profit/(loss) attributable to equity holders of the parent from continuing operations Basic earnings per share Diluted earnings per share Year ended 31.12.11 Year ended 31.12.10 371,356,437 213,520,135 £1.8m 0.47p 0.47p £1.8m 0.47p 0.47p £15.7m 7.34p 7.02p £(0.1m) (0.06p) (0.06p) www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 38 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 14 ProPerty, PlAnt And eQUiPment a) Group Cost at 1 January 2010 Disposal of Guaracachi Exchange adjustments Additions Reclassification Cost at 31.12.10 Exchange adjustments Additions Disposals Cost at 31.12.11 Depreciation at 1 January 2010 Disposal of Guaracachi Exchange adjustment Charge for year Depreciation at 31.12.10 Exchange adjustment Charge for the year Depreciation at 31.12.11 Net book value – 31.12.11 Net book value – 31.12.10 Land £’000 4,636 (4,530) (1) - - 105 (6) - (13) 86 - - - - - - - - 86 105 Plant and equipment £’000 Plant under construction £’000 103,153 (81,078) (232) 1,199 167 23,209 (1,733) 230 (166) 21,540 14,227 (12,598) (17) 618 2,230 (167) 786 2,849 18,691 20,979 48,783 (48,616) - - (167) - - - - - - - - - - - - - - - Total £’000 156,572 (134,224) (233) 1,199 - 23,314 (1,739) 230 (179) 21,626 14,227 (12,598) (17) 618 2,230 (167) 786 2,849 18,777 21,084 i) All property, plant and equipment is located in Argentina. The value of property, plant and equipment recognised upon the initial acquisition of 50 per cent. of EdS in Argentina in 2005 was £4.2 million. This amount included a negative fair value adjustment of £0.5 million resulting from a professional valuation carried out at the date of the acquisition. The value of property, plant and equipment recognised upon the acquisition of the remaining 50 per cent. of EdS in June 2008 was £19.7 million. This included a positive fair value adjustment of £5.0 million based on the Directors’ estimate of the fair value of the plant under construction. Following the sale of 50 per cent. of EdS in June 2009, the fair value adjustment of £5.0 million was been reduced to £2.5 million. b) Company – The Company had no property, plant and equipment. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 39 15 intAngiBle Assets At 1 January 2010 Fair value adjustment on sale of CERs At 31 December 2010 Fair value adjustment on sale of CERs At 31 December 2011 Goodwill £’000 3,168 - 3,168 - 3,168 CERs £’000 950 (265) 685 (460) 225 Total £’000 4,118 (265) 3,853 (460) 3,393 Goodwill represents 50 per cent. of the difference between the Group’s share of the fair value of the net identifiable assets acquired and the consideration transferred on the acquisition of 50 per cent. of PEL in June 2008. The Group tests goodwill and other intangible assets annually or more frequently if there are indications that the intangible asset might be impaired. The recoverable amounts are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the future cash flows, which are based on management projections, taking into account experience, expected revenues and operating margins, and the discount rate applied to those cash flows. The discount rate applied is 15 per cent. CERs (Carbon Emission Reduction credits) represent the fair value of the CERs in EdS. In June 2008, following the acquisition of the outstanding 50 per cent. of EdS, the value of the CERs was based on the Directors’ estimate of the discounted value of the expected future income. During 2009, In a prior year, EdS entered into a contract under which EdS is required to deliver, in 2012, 475,000 CERs at a fixed price of €11.18 per CER. In addition, EdS agreed an advanced payment, which was paid in February 2010, in respect of 172,350 CERs. The carrying value at 31 December, 2011 of £225,000 represents 50 per cent. of the discounted value of the remaining CERs. 16 trAde And otHer reCeivABles 16a Group – non-current Trade receivables1 Amounts due from joint venture companies2 Other receivables and prepayments3 31.12.11 £’000 31.12.10 £’000 374 14,182 553 15,109 123 8,992 1,824 10,939 1 Non-current trade receivables includes £37,000 (2010: £123,000) of retentions by the Electricity Regulator in Argentina (which is expected to be either released or contributed towards ongoing capital projects) and £337,000 (2010: £nil) of trade receivables which are not expected to be received within the next 12 months. 2 Amounts due from joint venture companies represent 50 per cent. of the excess of the amounts lent by the Company, in excess of the amounts lent by the other 50 per cent. shareholder, to PEL and EdS, including credit support provided to suppliers of EdS. Interest on these amounts has been accrued at rates of between 8 per cent. and 12 per cent. per annum. 3 Other receivables includes £nil (2010: £1.5 million) of input VAT which has been paid by EdS and is recoverable as a deduction against future VAT liabilities and £0.6 million (2010: £0.3 million) of income tax paid by EdS which is expected to be recovered as an offset against future profits. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 40 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 16 trAde And otHer reCeivABles (ContinUed) 16b Group – current Trade receivables Other receivables and prepayments Other receivables and prepayments includes £479,000 (2010: nil) of VAT recoverable by EdS. 16c Company – non-current Amounts owed by subsidiary companies Amounts owed by joint venture companies Bolivian arbitration costs 31.12.11 31.12.10 £’000 4,456 1,058 5,514 £’000 2,801 840 3,641 31.12.11 31.12.10 £’000 20,902 32,445 997 54,344 £’000 20,890 14,733 - 35,623 The amounts owed by subsidiary companies are non-interest bearing, unsecured and payable on demand but are not expected to be fully received within the next twelve months. Included within amounts due by subsidiary companies is an inter-company loan of £20.6 million which was supported by the Group’s investment in Guaracachi and which the Directors consider will be recovered in full as part of the compensation claim against the Bolivian Government. The amounts owed by subsidiary and joint venture companies are interest bearing at rates of between 8 per cent. and 12 per cent. and are payable on demand but are not expected to be fully received within the next twelve months. £11.2 million is secured by a first charge against the assets of EdS. The Bolivian arbitration costs represent legal and professional expenses incurred in preparing and submitting the claim for compensation to the Permanent Court of Arbitration in The Hague. 16d Company – current Amounts due from joint venture companies (in 2011, included in “non-current” – see 16c above) Other receivables and prepayments 31.12.11 £’000 - 159 159 31.12.10 £’000 7,424 19 7,443 The £nil (2010: £7.4 million) due from joint venture companies is unsecured, interest free and payable on demand. All trade and other receivables are unsecured, with the exception of the £11.2 million referred to in 16c above, and are not past their due by dates. The fair values of receivables are not materially different to the carrying values shown above. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 41 17 deferred tAx a) Asset at 1 January 2011 Exchange translation Disposal of Guaracachi Credited to tax expense Asset at 31 December 2011 The Group deferred tax asset arises principally from tax losses carried forward in Argentina. b) Liability at 1 January 2011 Disposal of Guaracachi Exchange translation (Credited)/charged to tax expense Liability at 31 December 2011 31.12.11 £’000 363 (24) - 181 520 31.12.11 £’000 937 - (88) (87) 762 31.12.10 £’000 1,722 (3) (1,449) 93 363 31.12.10 £’000 2,299 (1,274) (12) (76) 937 The Group deferred tax liability arises from deferred tax provisions on the fair value adjustments arising on the acquisition of 50 per cent. of PEL. 18 inventories Spare parts and consumables Spare parts and consumables are valued at cost. 19 CAsH And CAsH eQUivAlents a) Group Cash and short-term bank deposits b) Company Cash and short-term bank deposits 31.12.11 31.12.10 £’000 365 £’000 395 31.12.11 £’000 31.12.10 £’000 1,793 1,385 157 71 Cash and short-term bank deposits are held, where the balance is material, in interest bearing bank accounts, accessible at between 1 and 30 days’ notice. The effective average interest rate is less than 1 per cent. The Group holds cash balances to meet its day-to-day requirements. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 42 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 20 sHAre CAPitAl In issue, called up and fully paid 31.12.11 £’000 31.12.10 £’000 420,671,505 ordinary shares of 2p each (2010: 220,671,505) 8,413 4,413 reconciliation of movement in share capital Balance at 1 January 2010 Allotment in May 2010 Allotment in September 2010 Balance at 31 December 2010 Allotment in March 2011 Balance at 31 December 2011 Number 205,421,505 11,000,000 4,250,000 220,671,505 200,000,000 420,671,505 £’000 4,108 220 85 4,413 4,000 8,413 The prices per share of the allotments referred to above were: May and September 2010: 10 pence, and March 2011: 9 pence. The difference between the total consideration arising from shares issued and the nominal value of the shares issued has been credited to the share premium account. Costs associated with the allotments have been debited to the share premium account. There have been no changes in the issued share capital of the Company since the balance sheet date. 21 trAde And otHer PAyABles a) Group – non-current CER liability1 b) Group – current Trade payables Accruals c) Company – current Trade payables Accruals 31.12.11 £’000 31.12.10 £’000 231 470 3,482 1,050 4,532 118 332 450 3,565 1,351 4,916 234 410 644 1 The future CER liability represents the present value of CERs which were sold by EdS in 2009 for delivery between 2010 and 2012 and which had not been delivered at 31 December 2011. The liability is credited to the income statement as the CERs are generated. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 43 22 tAx liABilities a) Group – non-current 31.12.11 31.12.10 £’000 306 £’000 381 This relates to an agreement reached with the tax authorities in Argentina in 2009 in respect of a claim for tax on the capitalisation of a loan in earlier years before the Group had an interest in EdS which has been deemed taxable by the tax authorities. The tax is payable in equal quarterly instalments with the final instalment due in August 2019. The total liability outstanding at 31 December 2011 was £360,000 (31 December 2010: £440,000) of which £306,000 (31 December 2010: £381,000) is due in more than 12 months. The current portion of the liability is included within note 21. b) Group – current UK corporation tax 23 Borrowings a) Group – non-current Loan from CAMMESA1 b) Group – current Loan note2 Loan from CAMMESA1 Bank loans – EdS3 Other loans4 Group – total borrowings The Group’s borrowings are repayable as follows: 2012 (at 31.12.10 – 2011) 2013 (at 31.12.10 – 2012) 2014 to 2016 (at 31.12.10 – 2013 to 2015) c) Company – current Loan note2 Other loans4 Company – total borrowings 31.12.11 31.12.10 £’000 131 £’000 59 31.12.11 £’000 31.12.10 £’000 1,653 1,081 - - - - - 1,653 - 506 1,147 1,653 - - - 2,500 517 3,931 5,644 12,592 13,673 12,592 521 560 13,673 2,500 5,644 8,144 www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 44 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 23 Borrowings (ContinUed) The Company’s borrowings are repayable as follows: 2012 (31.12.10 – 2011) 2012 (31.12.11 – 2012) 31.12.11 £’000 31.12.10 £’000 - - - 5,644 2,500 8,144 1 CAMMESA, the Argentine wholesale market administrator, has advanced funds to EdS to support capital expenditure. The loan bears interest at 7 per cent. per annum. The loan is repayable in instalments with the final repayment due in July 2016. 2 The loan note was repaid in full in March 2011. 3 The EdS bank loan was repaid in full in April 2011. 4 Other loans were repaid in full in March and April 2011. sensitivity analysis to changes in interest rates: If interest rates on the Group’s borrowings during the year had been 0.5 per cent. higher or lower with all other variables held constant, the interest expense and pre-tax profits would have been £25,000 lower or higher than reported. sensitivity analysis to changes in exchange rates: The Group’s external borrowings are denominated in AR$. As a result, the liability to the Group’s lenders will change as exchange rates change. The Group’s borrowings are substantially related to specific electricity generating assets and therefore the effect on the net equity of the Group is limited. The overall effect on the Group’s net equity which would arise from changes in exchange rates is set out in note 5 above. The effect on borrowings alone if exchange rates weakened or strengthened by 10 per cent. with all other variables held constant would be to reduce or increase the value of the Group’s borrowings and equity by £0.2 million (2010: £0.7 million). 24 reConCiliAtion of Profit Before tAx to CAsH generAted from oPerAtions a) Group Profit for the year before tax Net finance (income)/expense Adjustments for: Depreciation Unrealised exchange losses/(gains) in joint venture companies Movement in working capital: Change in trade and other receivables Change in trade and other payables Cash (used in)/generated from operations Year ended Year ended 31.12.11 £’000 31.12.10 £’000 1,897 (1,161) 786 790 (2,025) (355) (68) 145 467 618 (224) 1,103 (900) 1,209 RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 45 Year ended 31.12.10 £’000 (1,524) 1,028 (545) 12 148 (881) 31.12.11 £’000 2,987 (3,281) (309) (1,147) (197) (1,947) 31.12.11 31.12.10 £’000 8,470 £’000 8,470 24 reConCiliAtion of Profit Before tAx to CAsH generAted from oPerAtions (ContinUed) Year ended b) Company Profit/(loss) for the year before tax Net finance (income)/expense Adjustments for: Unrealised exchange gains on loans Movement in working capital: Change in trade and other receivables Change in trade and other payables Cash used in operations 25 investments Balance at 31 December 2011 The Company held the following investments: i) 50 per cent. (2010: 50 per cent.) of the issued share capital of Patagonia Energy Limited (“PEL”), a company registered in the British Virgin Islands under registration number 620522. PEL owns 100 per cent. of the issued share capital of Energia del Sur S.A. (“EdS”), a company registered in Argentina. EdS is a generator and supplier of electricity to the national grid in Argentina. ii) 100 per cent. (2009: 100 per cent.) of the issued share capital of Bolivia Integrated Energy Limited (“BIE”), a company registered in the British Virgin Islands, under registration number 510247. Until 1 May 2010, BIE owned, through an intermediary holding company, 50.00125 per cent. of the issued share capital of Empresa Electrica Guaracachi S.A. (“Guaracachi”), a company registered in Bolivia. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 46 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 26 finAnCiAl risk mAnAgement The Group is exposed to a variety of financial risks which result from both its operating and investing activities. The Group’s risk management is coordinated to secure the Group’s short to medium-term cash flows by minimising its exposure to financial markets. The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant risks to which the Group is exposed are described below: a) foreign currency risk The Group is exposed to translation and transaction foreign exchange risk. Foreign exchange differences on retranslation of these assets and liabilities are taken to the profit and loss account of the Group. The Group’s principal trading operations are based in South America and as a result the Group has exposure to currency exchange rate fluctuations in the principal currencies used in South America. The Group also has exposure to the US$ and the € as a result of borrowings denominated in these currencies. b) interest rate risk Group funds are invested in short-term deposit accounts, with a maturity of less than three months, with the objective of maintaining a balance between accessibility of funds and competitive rates of return. c) Capital management policies and liquidity risk The Group considers its capital to comprise its ordinary share capital, share premium, accumulated retained earnings and other reserves. The Group’s objective when maintaining capital is to safeguard the entity’s ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders. The Company meets its capital needs primarily by equity financing. The Group sets the amount of capital it requires to fund the Group’s project evaluation costs and administration expenses. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. The Company and Group do not have any derivative instruments or hedging instruments. It has been determined that a sensitivity analysis will not be representative of the Company’s and Group’s position in relation to market risk and therefore, such analysis has not been undertaken. d) Credit risk Generally, the maximum credit risk exposure of financial assets is the carrying amount of the financial assets as shown on the face of the balance sheet (or in the detailed analysis provided in the notes to the financial statements). Credit risk, therefore, is only disclosed in circumstances where the maximum potential loss differs significantly from the financial asset’s carrying value. The Group’s trade and other receivables are actively monitored to avoid significant concentrations of credit risk. e) fair values In the opinion of the Directors, there is no significant difference between the fair values of the Group’s and the Company’s assets and liabilities and their carrying values and none of Group’s and the Company’s trade and other receivables are considered to be impaired. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 47 26 finAnCiAl risk mAnAgement (ContinUed) The financial assets and liabilities of the Group and the Company are classified as follows: 31 december 2011 Group Company Fair value through profit Borrowings Loans and payables and at amortised Fair value through profit Borrowings Loans and payables and at amortised and loss receivables and loss receivables Trade and other receivables > 1 year Trade and other receivables < 1 year Cash and cash equivalents Trade and other payables > 1 year Trade and other payables < 1 year Borrowings > 1 year Borrowings < 1 year Totals 31 december 2010 £’000 - - - - - - - - £’000 15,109 5,514 1,793 - - - - cost £’000 - - - (231) (4,532) (1,653) - £’000 - - - - - - - - £’000 54,344 159 1,385 - - - - cost £’000 - - - - (450) - - 22,416 (6,416) 55,888 (450) Group Company Fair value through profit Borrowings Loans and payables and at amortised Fair value through profit Borrowings Loans and payables and at amortised and loss receivables £’000 - - - - - - - - £’000 10,939 3,641 157 - - - - 14,737 cost £’000 - - - (470) (4,916) (1,091) (12,592) (19,069) and loss receivables £’000 - - - - - - - - £’000 35,623 7,443 71 - - - - 43,137 cost £’000 - - - - (644) - (8,144) (8,788) Trade and other receivables > 1 year Trade and other receivables < 1 year Cash and cash equivalents Trade and other payables > 1 year Trade and other payables < 1 year Borrowings > 1 year Borrowings < 1 year Totals 27 CAPitAl Commitments The Group had outstanding capital commitments of £0.1 million (2010: £0.2 million). 28 Contingent liABilities EdS has entered into a long-term maintenance agreement with a third party who provides for the regular service and replacement of parts of two turbines. The agreement runs until 2022. The Group’s 50 per cent. share of the total payable under the agreement until the year 2022 amounts to US$7.3 million/£4.7 million (2010: US$8 million/£5 million). In the event that EdS wish to terminate the agreement before 2022, a default payment would become payable. The Group does not anticipate early termination and therefore no provision has been made in this regard. www.rurelec.com21528-04 31/05/12 Proof 9Our PerformanceOur GovernanceOur Financials 48 notes to tHe finAnCiAl stAtements for the year ended 31 December 2011 29 relAted PArty trAnsACtions During the year the Company and the Group entered into material transactions with related parties as follows: a) Company i) Paid £0.12 million to Independent Power Corporation PLC (“IPC”) under a “Shared Services Agreement”. P.R.S. Earl and E.R. Shaw are Directors of IPC and IPC is a wholly owned subsidiary of Sterling Trust Ltd, a shareholder in the Company. ii) Repaid loans of £1.1 million to IPC. iii) Paid salaries to key management amounting to £0.36 million (2010: £0.35 million). iv) Repaid borrowings of EdS of £7.9 million. v) Charged interest on loans to its joint venture companies (PEL and EdS) amounting to £2 million and £1.5 million respectively. Loans by the Company to PEL and EdS at the year-end amounted to £11.2 million and £16.6 million respectively. In addition, the Company has provided £4.6 million of support to creditors of EdS. Interest on these loans has been accrued at rates of between 8 per cent. and 12 per cent. b) group None. 30 Post BAlAnCe sHeet dAte events Since the year-end, the Group has, through joint venture companies, made investments in Peru and Chile. Further details are set out in the Chief Executive’s Review of Operations. RuRelec Plc Annual Report 201121528-04 31/05/12 Proof 9 www.rurelec.com cOMPANY INFORMATION Directors A.J.S. Morris (Non-Executive Chairman) L. Coben (Non-Executive) M. Blanco P.R.S. Earl E.R. Shaw Secretary S.A. Laker company number 4812855 Solicitors Squire, Sanders & Dempsey (UK) LLP 7 Devonshire Square Cutlers Gardens London EC2M 4YH Brokers XCap Securities Plc 24 Cornhill London EC3V 3ND Registered office and business address 5th Floor Nominated Adviser Daniel Stewart and Company Ltd Becket House 36 Old Jewry London EC2R 8DD Public Relations Blythe Weigh Communications Ltd Southbank House Black Prince Road London SE1 7SJ Prince Consort House 27–29 Albert Embankment London SE1 7TJ Auditor Grant Thornton UK LLP Registered Auditors Chartered Accountants Grant Thornton House Melton Street Euston Square London NW1 2EP Bankers Coutts & Co 440 Strand London WC2R 0QS 21528-04 30/05/12 Proof 5 R u R e l e c P l c A n n u a l R e p o r t a n d A c c o u n t s 2 0 1 1 RuRelec Plc Prince Consort House 27–29 Albert Embankment London SE1 7TJ United Kingdom Tel: +44 (0) 20 7793 5610 Fax: +44 (0) 20 7793 7654 www.rurelec.com 21528-04 30/05/12 Proof 5