ANNUAL REPORT
NAN
RT OPEL RAUN
UNTOCC AD
S
AND ACCOUNTS
AN
D
FOR THE YEAR ENDED 31 DECEMBER 2013
FOR THE YEAR ENDED 31 DECEMBER 2013
FOR THE YEAR ENDED 31 DECEMBER 2013
Stock code: RUR
WELCOME TO RURELEC PLC
WELCOME TO RURELEC PLC
WELCOME TO RURELEC PLC
WELCOME TO RURELEC PLC
RURELEC PLC IS AN OWNER,
RURELEC PLC IS AN OWNER,
RURELEC PLC IS AN OWNER,
RURELEC PLC IS AN OWNER,
RURELEC PLC IS AN OWNER,
RURELEC PLC IS AN OWNER,
RURELEC PLC IS AN OWNER,
OFROTAATREP O
ODN AREPOLE
EVED
DEVELOPER AND OPERATOR OF
ON CAPAAP CI YT
POWER GENERATION CAPACITY
WER GENERATTA IO
POW
TY
INTERNA
INTERNATIONALLY.
RNAAT
TIONALLLY
. Y
elec, is now
elec, is now
opdn agnireenign
opdn agnireenign
netnia m &snoitare
netnia m &snoitare
Originally focused on Latin America, Rur
Originally focused on Latin America, Rur
looking beyond Latin America following the acquisition
looking beyond Latin America following the acquisition
looking beyond Latin America following the acquisition
of Independent Power Corporation PLC (“IPC”), which
of Independent Power Corporation PLC (“IPC”), which
of Independent Power Corporation PLC (“IPC”), which
n esedivorp
n esedivorp
(“O&M”) services globally to thir
(“O&M”) services globally to thir
gover
business consists of the ownership and development
business consists of the ownership and development
business consists of the ownership and development
egional
of power generation facilities on national and r
of power generation facilities on national and r
egional
eas, selling wholesale electricity
eas, selling wholesale electricity
grids and in isolated ar
grids and in isolated ar
ough capacity
ough capacity
as a generator on commer
as a generator on commer
PPA
payments or power pur
payments or power pur
nments and multinationals. Rur
nments and multinationals. Rur
d parties including
d parties including
eements (“PP
cial terms, thr
chase agr
s main
s main
ecnan
ecnan
As”).
elec’
ent businesses include an operational plant
ent businesses include an operational plant
ent businesses include an operational plant
Chile
development of new plants in
and
a
Our curr
in Argentin
and Peru.
e about our
Read more about our
Read mor
e about our
strategy on page 04
strategy on page 04
Read more online at
www.rurelec.com
SUMMARY
2013
2012
10.9
9.7
EDS OPERATING PROFIT
£ million
A change in contracting terms
with CAMMESA results in a
12.4 per cent. increase
01
GROUP CASH POSITION
£3.8 million
LOSS PER SHARE
7.92p
NET ASSET VALUE PER SHARE
10.46p
567.3 MW OF NEW
BUILD PROJECTS
IN PROGRESS
272.3 MW
IN PERU
RUN-OF-
RIVER
HYDROS
255
5.3
12
CONTENTS
Strategic Report
Chairman’s Statement
At a Glance
Our Projects
Cochabamba Statement
to the Press
Chief Executive’s Review
of Operations
Business Review
Our Governance
Board of Directors
Directors’ Report
Corporate Governance
Statement
02
04
05
06
08
12
14
16
18
295 MW IN CHILE
TWO PROJECTS UNDER DEVELOPMENT
Our Financials
Independent Auditor’s Report
20
CHILE
UPDATE
PERU
UPDATE
Successful fi nancing
The construction of the 5.3 MW
Canchayllo plant and development of a
further 12 MW of new projects was made
possible by the successful fi nancing
with IIC and further equity funding from
Rurelec. Canchayllo is 95 per cent
completed with commercial operation
targeted for August 2014.
Arica and Central Illapa
A lot has been happening in Chile.
During the year we have purchased the
land, turbine and transformer for Arica.
Environmental approvals have been
received for both Arica and Central Illapa.
This allows us to commence construction
at Arica while fi nalising selection of a joint
venture partner for Central Illapa where
fi nancing is expected to be achieved by
Q4 2014.
Read more on
pages 04 and 05
Consolidated
Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Statement
of Financial Position
Parent Company Statement
of Financial Position
Consolidated Statement
of Cash Flows
Company Statement
of Cash Flows
Consolidated Statement
of Changes in Equity
Company Statement of
Changes in Equity
Notes to the
Financial Statements
21
22
23
24
25
26
27
28
29
t
r
o
p
e
R
c
g
e
t
a
r
t
i
www.rurelec.com S
02
02
CHAIRMAN’S STATEMENT
“THE OBJECTIVE
OF THE GROUP
IS TO OWN
AND OPERATE
A PORTFOLIO
OF GENERATING
ASSETS IN
DIFFERENT
COUNTRIES AND
OWNERSHIP
STRUCTURES”
Photograph: Gravel trap, Canchayllo, Peru.
Dear Shareholder
I hereby present the results of
Rurelec PLC (“Rurelec”) for the
fi nancial year ended
31 December 2013, my fi rst since
joining the Board in October 2013.
It has been a pivotal year for the
Company as the arbitration hearing
against Bolivia was completed
in April 2013, and although the
compensation award which was
announced by the Permanent Court
of Arbitration (“PCA”) in February
2014 was signifi cantly less than
management expected, it allows us
to look to the future away from the
shadow of Bolivia.
In doing so and in a bid to
diversify our business we acquired
Independent Power Corporation
PLC (“IPC”) in June 2013, a
company with an eighteen
year history of developing,
constructing and operating power
generation facilities for corporate
and government clients on four
continents. The acquisition has seen
us continue to switch from being a
pure owner of power plants to an
active developer and operator, both
in Latin America and elsewhere.
In October with my appointment
to the Board, Andrew Morris stood
down after three and a half years
as Non-Executive Chairman to take
over as Group Finance Director,
whilst Elizabeth Shaw has become
Executive Director Project Finance.
In addition, we are pleased to
welcome Brian Rowbotham to
the Board as Senior Independent
Non-Executive Director. Brian is a
qualifi ed Chartered Accountant and
brings with him extensive corporate
fi nance experience accumulated
through his time working in the City.
Strategy
The Group strategy is to seek
generation opportunities for small
to medium sized power plants in
countries where we can leverage
our signifi cant proven experience
of power plant development and
operation. We have concentrated on
the southern cone of South America
in Argentina, Chile and Peru in
recent years. However, we are also
looking at opportunities in Africa,
Europe and Asia where the addition
of the past experience of IPC has
been a critical development in the
year. The objective of the Group
is to own and operate a portfolio
of generating assets in a number
of different countries with differing
ownership structures. In this way
we minimise the country risk whilst
bringing in funding partners to
ensure that our capital is used in the
most effi cient way.
Further details of the operations
of the Company can be found in
the Chief Executive’s Review of
Operations.
I present the results of Rurelec PLC
for the fi nancial year ended
31 December 2013.
Group Results
The Group loss after tax for the
fi nancial year under review is
£39.2 million (2012: £3.1 million
loss). Most of the loss is due to the
low level of award in the arbitration
against the Government of Bolivia.
The carrying value of the Bolivian
entity was £51.5 million and was
reported as a receivable in the 2012
Report and Accounts. The amount
of the investment claimed under
Bilateral Investment Treaties, as
submitted to the Permanent Court
of Arbitration in The Hague, was
US$142.3 million and the Arbitration
proceedings were held in April 2013.
The award amount was for US$28.9
million (approximately £17.5 million)
plus interest from 1 May 2010 to
the date when the award was paid
leading to a write down of £29.5
million. In addiotion the Tribunal
representing the PCA decided not
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
Photograph: Construction of tunnel three
and collection chamber. Canchayllo, Peru.
03
Photograph: EdS in
Argentina.
to award costs to either side. The
cost of the Arbitration to Rurelec
was £4.9 million. The book loss for
the period is £34. 4 million in relation
to the Bolivian settlement.
In addition to this loss are the costs of
the Birdsong loan of US$15.45 million
taken out in July 2012 which relate to
interest on the loan and contingent
value rights related to the award from
Bolivian arbitration amounting to £3.9
million. The Birdsong loan was repaid
on 2 June 2014.
The Group fi gures also include a
loss attributed to the unrealised
foreign exchange losses from the
Argentinian operation of £3. 3 million.
The individual results for the
operations in Argentina, Peru, Chile
and for IPC are shown below.
Energia del Sur S.A.
Results
At the operating level, and therefore
based on 100 per cent of Energia
del S.A.’s (“EdS”) activities, the
gross operating profi t for the plant
in Comodoro Rivadavia for the year
was £10.9 million (2012: £9.7 million)
on revenues of £19.3 million (2012:
£26.5 million). In local currency terms
the revenues decreased to AR$167
million (2012: AR$192 million) whilst
the operating profi t was AR$115
million (2012: AR$70 million). The
increase in operating profi t was due
to the change in the contracting
terms with CAMMESA the buyer of
the power from the plant, whereby
the sales of spot power shows a
net payment for the power less the
costs of the gas to make the power.
The increase in the net loss for the
year in EdS of £4.2 million (2012:
£2. 4 million) was largely due to the
one-off write-back of interest payable
in 2012 on loans between EdS and
Patagonia Energy Limited which
is 50 per cent. owned by Rurelec
and the effects of a signifi cant
deterioration in the Peso exchange
rate.
Independent Power
Corporation PLC
IPC was acquired in June 2013
and has made a profi t for the year
of £2.1 million. The activities of the
company involve the development
work for new projects, the
supply of engineering services to
Group companies and also the
administration of the London offi ce.
The administration expenses for the
year were £1.1 million.
Rurelec Chile
The development operations in Chile
have incurred limited direct costs
in the year of £111,000. However,
we have purchased the land, the
turbine and transformer for the Arica
project at a cost of £4 million.
Development costs during the year
have been £1 million on both the
Central Illapa and Arica projects.
GROUP TURNOVER
£ million
GROUP AFTER TAX PROFIT/LOSS
ON CONTINUING OPERATIONS
£ million
15.1
13.5
13.4
1.8
(3.1)
(3.1)
2011
2012
2013
2011
2012
2013
(39.2)
Cascade Hydro Power
In Peru we have been constructing
the Canchayllo run-of-river hydro
plant since the end of 2012. The
value of the plant under construction
at the year-end is £5.7 million.
Rurelec has outstanding loans of
£5.8 million to the Cascade group
at the year end, whilst there is a
bank loan with the Corporacion
Interamericana de Inversion (“IIC”)
of £4.2 million and other loans of
£0.9 million. The other assets of
the Cascade group include £3.5
million of bonds held by IIC and the
Ministry of Minerals and Energy.
Outlook
In spite of the set back of the
disappointing judgment of the PCA
early in 2014 and the considerable
write-off against reserves which
this entails, the Board of Rurelec
is optimistic that the outlook for
the Group is good. We are now
active in Peru and Chile, two of
the strongest economies in Latin
America, and we are now in a
position to choose long-term equity
partners for both of those countries
with whom to share ownership of
our excellent projects. Receipts
from the sale of this equity will
both recycle funds of over US$30
million to Rurelec for us to reinvest
in other projects as well as enable
us to engage with regional partners
with whom to share the challenges
of building greenfi eld plants many
thousands of miles away from
the United Kingdom. Rurelec has
demonstrated its capability to grow
organically and by acquisition over
the last ten years. Now we can look
forward to accelerated roll-out of
new capacity with the saga of the
Bolivian nationalisation fi nally a thing
of the past.
I would like to congratulate the
executive team under Peter Earl’s
leadership for the persistent and
tireless way they pursued the
Bolivian settlement. Under extreme
pressure from outside sources
to settle early, they obtained a
pragmatic solution that now allows
us to continue to grow our business.
Colin Emson
Chairman
5 June, 2014
www.rurelec.com
t
r
o
p
e
R
c
g
e
t
a
r
t
S
i
04
AT A GLANCE
2
OUR STRATEGY:
INCREASE
SHAREHOLDER VALUE
1
RESUME DIVIDEND PAYMENTS
3
BECOME A FULL SERVICE
PROVIDER TO THE POWER INDUSTRY
Increase
shareholder value
The Group’s strategy is to increase
shareholder value through the
ownership and operation of modern,
low emission power generation
plants. With a diverse portfolio of
assets in some of the strongest
economies in Latin America we are
well positioned for growth, both in
Latin America and beyond, through
IPC our development and O&M
subsidiary.
Resume dividend
payments
Long term, Rurelec is committed
to pay dividends to shareholders
based on strong cash fl ows whilst
developing and constructing new
power generation capacity with
judicious use of project and local
subsidiary company debt.
Become a full service
provider to the
power industry
Through our subsidiary IPC and
its team, Rurelec can now earn
revenues from third party clients by
outsourcing our skilled global team
of engineers, fi nancial modellers,
environmental specialists and
operations and maintenance
services.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
CHILE
Termonor, Arica
CHILE
Mejillones, Antofagasta
Project Name: Termonor, Arica
Location: Parinacota, Arica
Capacity: 40 MW nominal with the potential to
increase to 140 MW
Technology: OCGT (potential for phase II
CCGT)
Equipment: One GE PG654 gas turbine
Fuel: Diesel (locally sourced)
Additional details: Parinacota is a 40 MW
greenfi eld thermal power plant development
in which Rurelec owns 100 per cent through
Termoeléctrica del Norte S.A.C. (“Termonor”),
the project development company. The project
has the potential to convert to a 140 MW
combined cycle power plant as part of its
second stage development.
Project Name: Central Illapa, Mejillones
Location: Mejillones, Antofagasta
Capacity: 256 MW nominal with the potential to
increase to 358 MW
Technology: OCGT (potential for phase II
CCGT)
Equipment: 701D Siemens gas turbines
Fuel: LNG (imported)
Additional details: Central Illapa is a 256 MW
open cycle Greenfi eld gas fi red power
development in which Rurelec owns 100 per
cent.
The project has the potential to convert to a
358 MW combined cycle power plant as part of
its second stage development.
PERU
Canchayllo,
Junin Province
PERU
Santa Rita,
Ancash Province
Project Name: Canchayllo
Location: Junin Province
Capacity: 5.3 MW
Technology: Run-of-River Hydro
Equipment: 2 horizontal Francis turbines
Additional details:
Canchayllo is one of six small hydros; Rurelec
is also developing three further small hydro
projects (6-18 MW each) in the same Junin
region: Huasicancha, Colca, Chilcay and two
others in Pasco region: (15 MW).
Project Name: Santa Rita
Location: Ancash Province
Capacity: 255 MW
Technology: Run-of-River Hydro
Equipment: Francis turbines
Additional details:
The project in Santa Rita is expected to be
tendered as part of the large hydro programme
ran by Proinversion early next year.
OUR PROJECTS
ARGENTINA
Energia del Sur,
Patagonia
BANGLADESH
Generation & Services
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)
Additional details: 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.
Rurelec has successfully used its experience
and skills in operating thermal plants in
Argentina and Bolivia to sponsor projects
outside of the Americas. As a result, a Rurelec
sponsored project of 108 MW in Chittagong in
partnership with Energypac Confi dence Power
Ventures. Construction is almost complete
and it is anticipated that commissioning will
commence in August.
Rurelec is hoping to develop a follow-on CCGT
project of some 400 to 500 MW in Bangladesh
operating on LNG as a clone of the two LNG
projects which it is now pursuing in Chile based
on the original engineering and feasibility work
completed by IPC.
3
4
Photograph:
On the way to
Mejillones.
05
1
2
Photograph:
Canchayllo Project.
4
t
r
o
p
e
R
c
g
e
t
a
r
t
S
i
www.rurelec.com
06
COCHABAMBA STATEMENT
TO THE PRESS
IMMEDIATELY AFTER THE
SIGNING IN COCHABAMBA
OF A FINAL AGREEMENT
WITH THE PLURINATIONAL
STATE OF BOLIVIA, PETER
EARL, CEO OF RURELEC,
ISSUED A PRESS
STATEMENT.
Photograph:
Transfer of share certifi cates which released
US$31.5 million in cash to Rurelec
As Chief Executive of Rurelec, I
would like to congratulate President
Morales and the negotiating team
led by Procurador Hector Arce in
arriving at a fi nancial compensation
deal which is very good indeed
for Bolivia. ENDE has acquired a
controlling stake in Guaracachi for
US $31.5 million dollars.
Guaracachi is a wonderful company
with the largest market share in
Bolivia and a collection of the best
gas turbines and engines in the
world including the country’s fi rst
combined cycle plant, which I had
the personal privilege to initiate.
Rurelec has always been a strong
supporter of Bolivia. Under the
presidency of Evo Morales we
constructed over 170 MW of new
capacity when all the other private
sector generators refused to install
even one MW. We are proud that
our investment in Bolivia since 2006
ensured the uninterrupted growth of
Bolivia and has contributed to the
amazing success of Bolivia today
as the continent’s highest growth
economy.
Bolivia is a country of talented
people and great natural resources.
I am personally proud that over the
last twenty one years of coming to
Bolivia, originally with UNDP and
later as CEO of Rurelec, that Bolivia
has prospered and is a far stronger,
more respected country than it was
in 1993.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
07
Photographs:
Guaracachi, Bolivia
My only sadness is that it has taken
so long to reach a settlement for
the nationalisation of Rurelec’s
shares in Guaracachi. I support the
right of every country to nationalise
strategic assets. However, to treat
loyal supporters of the Morales
Revolution with the bad treatment
we have experienced over the
last four years is unfair. We have
received compensation of less
than two times EBITDA and, before
the arrival of Procurador Arce, we
had no alternative but to go to
international arbitration when all we
wanted was a friendly negotiation
and a handshake from President
Morales. We are not enemies of
Bolivia but friends. However at times
we have not been treated that way,
and my shareholders in Britain will
take a great deal of convincing
before they invest any money in
Bolivia in future.
Nonetheless, I wish Bolivia well.
Britain helped Simon Bolivar to
achieve victory in the struggle
against colonial oppression. Britain
remains a close friend of Bolivia
today. I hope that in future I and
my hard working team of Britons
and Bolivians working together to
expand the power system of this
wonderful country will come to
be regarded as friends and loyal
supporters who contributed to the
economic success story of the
Morales Presidency.
Photograph: Signing of fi nal agreement in
Cochabamba 31 May 2014
www.rurelec.com
t
r
o
p
e
R
c
g
e
t
a
r
t
S
i
08
CHIEF EXECUTIVE’S
REVIEW OF OPERATIONS
“SHAREHOLDERS IN
BRITAIN WILL TAKE
A GREAT DEAL OF
CONVINCING BEFORE
THEY INVEST ANY MONEY
IN BOLIVIA IN FUTURE”
The year 2013 was perhaps the
most frustrating for the Board
and shareholders alike since
Rurelec came to the AIM Market
in 2004 as the fi rst AIM quoted
utility and power company. The
year was dominated by delays
in the process to achieve an
independent determination at the
PCA in The Hague of Rurelec’s
claim for compensation from the
Government of Bolivia for the May
2010 nationalisation of its Bolivian
generation assets.
The fi nal decision of the three man
arbitration tribunal was expected to
be handed down between October
and November 2013, and all of
Rurelec’s fi nancing arrangements
were geared to this court-led
timetable following the actual fi nal
Photograph: Guaracachi Power Plant, Bolivia.
hearing of the tribunal which took
place in early April 2013 in Paris.
Instead, the judgment was only
released in the early hours of
1 February 2014.
From the fi rst moment of the
nationalisation, when armed
military took over the Guaracachi
power plants early on May Day
2010, Rurelec had expected
compensation to be no less than
the pro rata book value of it s
Bolivian assets. That would have
suggested compensation of around
US$75 million before interest and
other adjustments, and this fi gure
has been constantly maintained
in the audited accounts of the
Rurelec Group. Incredibly, the
arbitration tribunal decided that
the fair market value of Rurelec’s
investment in Guaracachi as at 1
May 2010 was US$28.9 million.
This represented a sum of less than
two years of Guaracachi EBITDA,
as projected immediately prior to
the nationalisation for the full year
2011 following completion of the
Guaracachi combined cycle gas
turbine (“CCGT”) power plant.
Inclusive of interest to 31 January
2014, the full value of the PCA
award was US$35.5 million, roughly
the same price paid by Rurelec
in 2006 for its controlling stake in
Guaracachi before it added over
170 MW of new, high tech gas fi red
generation capacity and before
Rurelec had successfully doubled
the EBITDA of Guaracachi with the
installation of Bolivia’s fi rst CCGT
plant.
The PCA judgment did not award
costs to Rurelec even though
the judgment confi rmed that
Bolivia had failed to pay adequate
compensation for the expropriation
of Rurelec’s assets. The costs of the
arbitration were around
US$7 million. The net award to
Rurelec was thus only US$28.9
million before costs. One of the
three panellists on the tribunal
issued a minority report stressing
the inequity of not awarding us
costs but the two man majority view
prevailed.
As this annual report goes to print,
Bolivia has paid a discounted
sum of US$31.5 million to Rurelec
in full and fi nal settlement of the
award. With this matter behind
us we can concentrate all our
efforts in developing, funding and
constructing a portfolio of power
plants in a number of countries
using a range of renewable and high
technologies.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
Photograph: EdS, Argentina.
09
Photograph: EdS, Argentina.
Argentina
Operations at the power plant
continue to allow EdS to show an
excellent availability record. Gross
energy output was approximately
840 GWh (2012: 928 GWh) a fall
of 10.5 per cent due to a major
outage in November at which time
the steam turbine was stopped for
the fi rst time in three years. Ahead
of the outage the heat rate had
improved slightly to 8.43 MMBTU/
MWh (2012: 8.1).
During 2013 the Ministry of Energy
has enacted a number of changes
in the electricity sector largely driven
by the weak performance of the
distribution sector, the increase
in demand and the widening gap
between the offi cial and unoffi cial
exchange rates.
The major impact of the changes
for EdS has been to remove the
obligation to pay for gas, thus
reducing turnover whilst increasing
gross margin. Since May the
dispatch centre, CAMMESA,
has been accounting for gas
consumption for the gas turbines
and the auxiliary fi ring of the
steam turbines reducing revenues
and expenditure. The average
notional cost of gas per MWh
generated was AR$118.36 (2012:
AR$108.25), in US$ terms the gas
cost has moved to US$21.50 per
MWh from US$23.7 in 2012. The
average price of electricity in peso
terms increased by 28.5 per cent
to AR$265.17 (2012: AR$206.40)
and by 7 per cent in dollar terms,
US$48.17 (2012: US$45.16) as
a result of the weakening of the
peso. The Res 220 contract is the
main driver of the strengthening
performance at the EBITDA level,
as the proportion of US$ based
revenue is boosted by the exchange
rate as well as the removal of gas
(a US$ expense) from the revenue
line and the increased proportion of
peso based expense. Turnover at
EdS during 2013 fell to AR$166.5
million from AR$192.2 million in
2012, which fi gure also included
AR$7.5 million in respect of the fi nal
CERs under the CAF/KfW contract.
No CERs were registered in 2013
as the low CER prices currently do
not cover the cost of registration.
Even so, gross margin increased
in peso terms to AR$115 million
from AR$70 million. Large foreign
exchange losses due to the impact
of the revaluation of US$ borrowings
arising from the weakening peso
exchange rate once again increased
the after tax loss. Cash fl ow was
strong, allowing EdS to remit US$6
million to the UK during the year,
Photograph: EdS,
Argentina.
EDS OUTPUT AND HEAT RATES
(MWh)
AVERAGE COST OF GAS
AVERAGE PRICE OF ELECTRICITY
1,000,000
800,000
600,000
400,000
200,000
h
W
M
0
12
11
10
9
8
7
6
5
4
/
h
W
M
U
T
B
M
M
120
100
80
60
$
R
A
40
25
24
23
22
21
275
250
225
200
$
S
U
20
$
R
A
175
60
55
50
45
40
$
S
U
35
2011
2012
2013
2011
2012
2013
2011
2012
2013
Gross Energy
Gross MMBTU/MWh
Average cost of gas per MWh AR$
Average cost of gas per MWh US$
Average price of electricity AR$
Average price of electricity US$
t
r
o
p
e
R
c
g
e
t
a
r
t
S
i
www.rurelec.com
10
CHIEF EXECUTIVE’S
REVIEW OF OPERATIONS
“WITH THE RECEIPT
OF ENVIRONMENTAL
APPROVAL WE ARE
NOW FINALISING THE
SELECTION OF A JOINT
VENTURE PARTNER FOR
OUR CENTRAL ILLAPA
PLANT IN CHILE”
however, the electricity sector is still
held back by cash fl ow restrictions
imposed as a result of the low
tariffs of the two largest electricity
distribution companies. CAMMESA
has struggled to maintain timely
payment of invoices to generators
since the middle of the year.
Exchange rates in Q4 saw
the biggest correction as the
Photograph: Canchayllo, Peru
Photograph: Canchayllo, Peru
Government fi nally allowed the
offi cial peso exchange rate to move
towards the unoffi cial exchange
rate. At the start of the year it was
AR$4.96 to the US$, by year-end
it was AR$6.2, which has been
relatively stable throughout the
fi rst half of 2014 after a 17 per
cent devaluation in January 2014.
The deterioration in the exchange
rate was having an impact on our
receivables, until a new directive
was brought in to compensate
generators for the impact for the late
payment of their invoices.
Chile
Arica
In April 2013 we took delivery of
the industrial frame GE 6B turbine
in Arica. Construction was delayed
when local interest groups objected
to the change in the environmental
approval. After a number of
intensive stakeholder meetings at
which the impact of the new plant
on the local area was fully discussed
the objections were assuaged.
However, in the meantime, a
review of the approval was put
through the Chilean legal system
and although the case was found
largely in our favour, the Supreme
Court did require the permit to be
reviewed once again by the local
environmental offi ce. Final approval
for the use of the gas turbine is
expected shortly. Construction
is expected to commence in the
second half of the year.
Central Illapa
Following receipt of the
environmental approval for the
Central Illapa plant using Siemens
701 DU turbines, Rurelec acquired
two refurbished turbines from IPSA
Group PLC in June 2013. Pending
the conclusion of project fi nancing
Rurelec is fi nalising the selection of a
joint venture partner for the project.
The selection of a partner and
the closing of bank fi nancing are
expected to be achieved in the latter
half of 2014.
Peru
During 2013 the construction of
the 5.3 MW Canchayllo project
continued apace. The successful
closing of the fi nancing of the
plant with IIC together with further
equity funding from Rurelec in
2014 has allowed to continue
of the construction of the 5.3
MW Canchayllo plant and the
development of a further 30 MW
of new projects. Although we were
able to submit the new projects
successfully for the new renewable
tender round in Q4, the slow pace
of the Bolivian arbitration process
has meant that we elected to fund
only one project to close a power
purchase agreement in this round.
The two other projects have had
to be held back for the next round
planned for later this year.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
11
“COMMERCIAL
OPERATION FOR
CANCHAYLLO, OUR
5.3 MW RUN-OF-
RIVER PLANT IN
PERU, TARGETED FOR
AUGUST 2014.”
At the present time, Canchayllo
is 95 per cent complete, with
commercial operation targeted
for August this year. Rurelec has
arranged additional funds to cover
cost overruns, largely due to
unforeseen geological conditions
found in the construction of the
power house, a 10 per cent
overspend in the waterways and
increased labour costs due to lack
of funds.
The overall cost per MW installed is
18 per cent over budget at
US$2.36 million per MW, and the
plant is fi nanced with 52 per cent
debt and 48 per cent equity. The
plant is still expected to be the fi rst
to commence operations of the
second renewables round. With
one of the lowest tariffs awarded,
the challenge now is to secure a
new PPA in order to improve returns
once the plant enters production.
The Canchayllo project has proved
challenging, but having gauged the
pricing correctly in the third tender
round, we can look forward to the
portfolio growing steadily both in
size and profi tability in future years.
Independent Power
Corporation
In June 2013 Rurelec completed
the acquisition of IPC, one of
the United Kingdom’s leading
power developers and the former
parent company of the original
Rurelec business. IPC’s team of
engineers, fi nancial modellers
and environmental specialists has
now been integrated within the
Rurelec Group giving Rurelec the
capability not only to manage its
own greenfi eld planning and project
supervision but also the ability to
earn revenues from third party
clients.
Photograph: Canchayllo, Peru
IPC is currently short-listed in
a government tender for the
construction of a new power plant
of 80 MW for GibElec in Gibraltar
as well as being retained as lead
developer on two dual fuel power
developments in Ghana. IPC is
also in advanced negotiations for
a similar third party project in Ivory
Coast and for the repowering of a
combined heat and power plant in
Russia.
After a tough and less than
satisfying year, we expect the future
to be better. We are working hard
to make sure that it really is.
Peter Earl
Chief Executive Offi cer
5 June, 2014
t
r
o
p
e
R
c
g
e
t
a
r
t
S
i
www.rurelec.com
12
BUSINESS REVIEW
“AFTER A TOUGH AND
LESS THAN SATISFYING
YEAR, WE EXPECT THE
FUTURE TO BE BETTER.
WE ARE WORKING HARD
TO MAKE SURE THAT IT
REALLY IS.”
In July 2005, the Company acquired
50 per cent. of the equity of
Patagonia Energy Limited (“PEL”),
which owns and operates, through
its wholly owned subsidiary EdS,
generating plant supplying electricity
in southern Patagonia, Argentina. In
June 2008, the Company acquired
the remaining 50 per cent. of PEL. In
June 2009, as part of the process of
raising additional equity, the Company
sold back 50 per cent. of PEL to the
former 50 per cent. owner of PEL.
In January 2006, the Company,
through its acquisition of Bolivia
Integrated Energy Limited (“BIE”),
acquired a controlling interest
Photograph:
Eds, Argentina
(50.00125 per cent.) in Guaracachi
which owns and operates
generating plant supplying electricity
in Bolivia.
On 1 May, 2010, the Bolivian
Government nationalised the
Group’s interest in Guaracachi
by expropriating the shares held
by the Group. On 13 May, 2010,
The Group initiated the process to
recover adequate compensation for
the Nationalisation under each of
the US and UK bilateral investment
treaties by notifying the relevant
governmental authorities that an
investment dispute had arisen.
As announced on 1 December,
2010, the Notice of Arbitration was
issued. A statement claim, including
a valuation of the Company’s
interest at US$142.3 million was
fi led with the PCA at The Hague on
1 March, 2012. On 9 April, 2013,
following representations from both
parties, the arbitration proceedings
closed and a decision was given
on 31st January 2014. The award
announced by the PCA in favour of
the Group was $28.9 million for its
assets that were nationalised along
with interest from 1st May 2010 at a
rate of 5.63331% per annum.
In July 2012, the Company arranged
a loan of $15.45m to provide
additional working capital and funds
for the acquisition of assets in Peru
and Chile. This loan was due to be
repaid on 31st December 2013 but
the term was extended and was
repaid on 2 June from the payment
of the award from the Bolivian
Government.
The assets acquired in Peru and
Chile comprise special purpose
project companies and accordingly,
the costs associated with acquiring
and developing these projects (Plant
under Construction – note 14) have
been accounted for on an asset
acquisition basis.
A more detailed review of the
business and future developments
is provided in the Chairman’s
Statement and the Chief Executive’s
review of operations.
Principal risks and
uncertainties
The principal risks and uncertainties
facing the Group, apart from the
construction risks involved in
building the hydro plant in Peru and
possible changes in demand and
pricing for electricity in the markets
in South America in which the
Group operates, relate to political
risk and uncertainties in the fi nancial
markets.
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
signifi cant political risk in areas in
which the Group operates. The
Group has sought to mitigate
this risk by diversifying the
countries in which it operates.
b. Financial markets – Whilst
project fi nance may be available
in the markets in which the
Group operates, the Group’s
expansion plans remain
dependent on raising project
fi nance from a combination
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
13
Photograph:
EdS, Argentina
year by construction in Peru of
the Canchayllo run-of river hydro
plant and by the purchase of
turbines for the two projects in
Chile.
ii. Operating effi ciency
Operating effi ciency is the
average operating effi ciency
of the generating plant owned
by Group companies. It can
be improved through the
installation of more thermally
effi cient turbines, refurbishment
activities or through conversion
to combined cycle operation.
No change was noted in the
operating effi ciency of the Group
in the year.
iii. Technical availability
Technical availability measures
when a plant is available for
dispatch. The measurement
method excludes time allowed
for planned maintenance
activities which occur at 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.
Average availability through the
year for our plant in Argentina
was 96 per cent, making the
plant one of the most reliable
in the Argentine interconnected
system.
The Strategic Report was approved
by the Board of Directors on 5th
June, 2014 and were signed on its
behalf by
P. Earl
Chief Executive
5 June, 2014
t
r
o
p
e
R
c
g
e
t
a
r
t
S
i
www.rurelec.com
of local partners and lending
institutions. The Group is seeking
to broaden it’s base of potential
partners and lending institutions.
i.
c. Exposure to foreign currency
– The Group’s activities are in
South America and therefore the
Group’s results will be affected
by exchange rate movements
and local infl ation rates.
Furthermore, past experience
has shown that exchange
controls restrictions can
sometimes be applied and these
may have an impact on the
Group’s ability to repatriate funds
to the parent company. The
Group seeks to limit these risks
by raising funds in the currency
of the operating units.
d. Effi cient operation – The Group
has an effective maintenance
programme and has entered into
long term service agreements
to reduce these risks as
appropriate.
Key performance
indicators
The Directors use a range of
performance indicators to monitor
progress in the delivery of the
Group’s strategic objectives, to
assess actual performance against
targets and to aid management of
the businesses.
Rurelec’s key performance
indicators (“KPIs”) include both
fi nancial and non-fi nancial targets
which are set annually.
Financial KPIs
Financial KPIs address operating
profi tability, net asset value and
earnings per share.
Operating profi tability
Operating profi t excludes all
non-operating costs, such as
fi nancing and tax expenses as
well as one-off items and non-
trading items such as negative
goodwill. The exclusion of these
non-operating items provides an
indication of the performance of
the underlying businesses. The
Group made a loss in the year.
ii. Net asset value
Net asset value is calculated
by dividing funds attributable to
Rurelec’s shareholders by the
number of shares in issue. The
net assets of the Group reduced
in the year to 10.4 pence per
share. (2012: 19.3 pence per
share)
iii. Earnings per share
Earnings per share provide a
measure of the overall profi tability
of the Group. It is defi ned as
the profi t or loss attributable to
each Ordinary Share based on
the consolidated profi t or loss
for the year after deducting tax
and minority interests. Growth in
earnings per share is indicative
of the Group’s ability to identify
and add value. The Group made
a loss in the year.
Non-Financial KPIs
Non-fi nancial KPIs address other
important technical aspects of the
business, such as gross capacity,
operating effi ciency and availability.
i.
Gross capacity
Gross capacity is the total
generation capacity owned by
Group companies and is affected
by acquisitions, expansion
programmes and disposals. The
Group laid the foundations for
expanding the capacity in the
14
BOARD OF DIRECTORS
COLIN EMSON
Chairman and
Non-Executive Director
PETER EARL
Chief Executive Offi cer
Colin has been Executive Director of Robert Fraser
Group since 1979. He is a designated member of the
business consulting fi rm Robert Fraser & Partners LLP
and Co-founder of the specialist fi nance, insurance
broking and investment consultancy Emson & Dudley
in 1967. He has been Chairman and Director of Sterling
Trust Limited since 1988. Colin is also Chairman of the
Nominations Committee.
Peter began his career at the Boston Consulting Group
advising state-owned companies before becoming
an investment banker best known for his demergers.
He has acted on secondment to the World Bank
and United Nations Development Program where he
advised governments on privatisations in Latin America
and Eastern Europe. In 1995 he founded IPC which
has rapidly established itself as the United Kingdom’s
leading developer and operator of power plants on four
continents. He is an Oxford University graduate and was
a Kennedy Scholar and tutor at Harvard University.
ANDREW MORRIS
Group Finance Director
ELIZABETH SHAW
Executive Director Project
Finance
Former Chairman of Rurelec PLC. Previously he has
spent twelve years working in the renewable energy
sector most recently as Finance and Corporate
Development Director of Advanced Plasma Power
Limited where he played an important role in raising
corporate investment into the business. He has also
been responsible for leading a number of negotiations
and teams for business development to further enhance
operations and is fully conversant with all aspects of
fi nancial control and reporting. Andrew is a Fellow of the
Association of Chartered Certifi ed Accountants having
trained at Price Waterhouse Cooper and is a graduate
of the University of Newcastle upon Tyne.
Former Finance Director of Rurelec PLC. Elizabeth has
been involved in the electricity sector since 1994 when
she joined Fieldstone Private Capital Group. Between
1994 and 2000, as a Director of Fieldstone, she advised
on a number of mergers, acquisitions and disposals in
the electricity industry, both in the UK and in developing
markets. She joined IPC as a Director in 2000 where
she is responsible for business development and
fi nance. She is also a Director of IPSA Group PLC. She
is a graduate of Exeter University.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
15
MARCELO
BLANCO
Regional Finance Director
for Latin America
BRIAN
ROWBOTHAM
Senior Independent
Non-Executive Director
Marcelo was, until 1 May, 2010, Finance Director of
Guaracachi and was appointed to the Company’s
Board in October 2008. Marcelo graduated from
Green Mountain College in the United States and
subsequently gained an MBA from the University
of Belgrano in Argentina. He has extensive fi nancial
advisory experience and has also held appointments
in the Bolivian Embassy in Argentina and as a
consultant to the World Bank and the United Nations
Development programme. Over the last 11 years,
Marcelo has focused on the energy sector, including a
two year appointment as Vice Minister of Electricity and
Alternative Energies at the Bolivian Ministry of Public
Works before being reappointed as Finance Director at
Guaracachi in 2004.
Brian is the Senior Independent Non-Executive Director
and Chairman of the Audit Committee. He worked
as a Chartered Accountant with Deloitte and Touche.
He has extensive experience working in the City of
London, joined Teather and Greenwood in 1997 and
was involved as partner and then Finance Director in the
company’s fl otation on AIM and subsequent move to
the Offi cial List. He ran his own consultancy specialising
in turnarounds and start-ups until joining Hitchens,
Harrison & Co plc in January 2005. He left Hitchens,
Harrison & Co plc after its acquisition by Religare in
2008. Brian is a Fellow of the Institute of Chartered
Accountants in England and Wales.
LAWRENCE COBEN
Non-Executive Director
SUE LAKER
Company Secretary
Lawrence has extensive experience in the international
electricity sector, particularly in Latin America. He was a
founder of Catalyst Energy Corporation, which focused
on alternative every technologies. In the early 1990s
he founded and managed Liberty Power Corporation
and was CEO of Bolivian Power Company. Currently
Chairman & CEO of Tremisis Energy LLC, he is also
a Director of NRG Energy and serves as Executive
Director of the Sustainable Preservation Initiative,
a not-for-profi t organisation that preserves cultural
heritage worldwide through locally based and owned
economic development. Lawrence received a BA in
economics from Yale University and a J.D. from Harvard
Law School before going on to an MA and a PhD in
Anthropology from the University of Pennsylvania.
Lawrence is a Chairman of the Remuneration
committee.
An experienced power sector corporate lawyer and a
sinologist, who has advised on trade and legal affairs
relating to China, she is a graduate of the London
School of Oriental and African Studies where she
obtained a fi rst class honours degree in Chinese
followed by a Robert Sterling Clark fellowship to Taiwan
National University and a Kennedy Scholarship to
Harvard. She gained wide business experience in Asia
having been responsible for business development in
China for Racal Electronics Plc for a decade. She has
been working in the electricity sector since 1997.
e
c
n
a
n
r
e
v
o
G
r
u
O
www.rurelec.com
16
DIRECTORS’ REPORT
THE DIRECTORS SUBMIT
THEIR ANNUAL REPORT
TOGETHER WITH THE
AUDITED FINANCIAL
STATEMENTS FOR
THE YEAR ENDED
31 DECEMBER 2013.
Principal activities and
business review
The Company and the Group’s
principal activity is the acquisition,
development and operation of
power generation assets in markets
in Latin America.
In addition, and as opportunities
arise, the Company acquires,
refurbishes and sells power
generation equipment to third
parties.
Photograph:
EdS, Argentina
Since the Company’s admission to
AIM in August 2004, the Company
has acquired interests in power
generation operations in Bolivia and
Argentina and, during 2012, in Peru
and Chile.
Results and dividends
The Group results for the year
ended 31 December, 2013 are set
out in the Consolidated Statement
of Comprehensive Income.
No dividend was paid during the
year to 31 December, 2013
(2012: nil).
Share capital
Details of the issued share capital
are set out in note 21.
Going concern
As set out in note 1b to the fi nancial
statements, the Directors have
continued to adopt the “going
concern” basis for the preparation
of the fi nancial statements since
the Directors consider that the
Company and the Group will
have suffi cient fi nancial resources
available to continue trading for at
least 12 months from the date of
approval of the fi nancial statements.
Directors
The following Directors served
during the year:
Colin Emson – Chairman and
Non-Executive Director
(Appointed 16 October 2013)
Brain Rowbotham –
Non-Executive Director
(Appointed 16 October 2013)
Lawrence Coben –
Non-Executive Director
Peter Earl – Chief Executive
Andrew Morris – Group Finance
Director (Appointed 16 October
2013. Non-Executive Chairman
from 1 January 2013 to 15 October
2013)
Elizabeth Shaw – Executive
Director Project Finance
Marcelo Blanco – Regional
Director of Finance
Directors’ interests
The Directors’ benefi cial interests in the shares of the Company were on the
reference dates as stated below:
A.J.S. Morris
L.S. Coben
P.R.S. Earl
E.R. Shaw
Brian Rowbotham
31.05.2014
687,700
900,000
6,900,000
275,000
270,000
31.12.2013
687,700
900,000
6,900,000
275,000
270,000
31.12.2012
350,000
500,000
750,000
275,000
0
Signifi cant 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 notifi able at 31 May 2014, being the last practicable date
for reporting this information.
Sterling Trust Ltd
YF Finance Ltd
NUMBER OF SHARES
% HOLDING
303,092,303
96,565,166
53.989
17.201
The percentages shown are based on 561,387,586 shares in issue.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
Risk management
and objectives
The fi nancial risk management
policies and objectives are set out
in note 29.
Directors’ responsibilities
The Directors are responsible for
preparing the Strategic Report, the
Directors’ Report, Annual Report
and the fi nancial statements in
accordance with applicable law and
regulations.
Company law requires the Directors
to prepare fi nancial statements for
each fi nancial year. Under that law
the Directors have to prepare the
fi nancial statements in accordance
with International Financial
Reporting Standards (“IFRSs”) as
adopted by the European Union.
Under company law, the Directors
must not approve the fi nancial
statements unless they are satisfi ed
that they give a true and fair view
of the state of affairs and profi t or
loss of the Company and Group
for that period. In preparing these
fi nancial statements, the Directors
are required to:
• select suitable accounting policies
and then apply them consistently;
• make judgments and accounting
estimates that are reasonable and
prudent;
• state whether applicable IFRSs
have been followed, subject to
any material departures disclosed
and explained in the fi nancial
statements;
• prepare the fi nancial statements
on the going concern basis
unless it is inappropriate to
presume that the Company will
continue in business.
The Directors are responsible for
keeping adequate accounting
records that are suffi cient to
show and explain the Company’s
transactions and disclose with
reasonable accuracy at any time the
Photograph:
EdS, Argentina
17
fi nancial position of the Company
and enable them to ensure that the
fi nancial statements comply with the
Companies Act 2006. They are also
responsible for safeguarding the
assets of the Company and hence
for taking reasonable steps for the
prevention and detection of fraud
and other irregularities.
The Directors confi rm that:
• there is no relevant audit
information of which the
Company’s Auditor is unaware;
and
• the Directors have taken all steps
that they ought to have taken to
make themselves aware of any
relevant audit information and
to establish that the Auditor is
aware of that information. The
Directors are responsible for
the maintenance and integrity
of the corporate and fi nancial
information included on the
Company’s website. Legislation
in the United Kingdom governing
the preparation and dissemination
of fi nancial statements may
differ from legislation in other
jurisdictions.
Auditor
The Auditor, Grant Thornton UK LLP,
have indicated their willingness to
continue in offi ce and a resolution
concerning their reappointment will
be proposed at the Annual General
Meeting.
On behalf of the Board
Susan Laker
Company Secretary
5 June, 2014
Photograph:
Canchayllo, Peru
e
c
n
a
n
r
e
v
o
G
r
u
O
www.rurelec.com
18
CORPORATE GOVERNANCE STATEMENT
to be disclosed in the accounts. The
Board has considered the need for
an internal audit function and has
concluded that there is no current
need for such a function.
Board Composition and
Independence
The Board currently comprises
seven members made up of a
Non-Executive Chairman, four
Executive Directors and two Non-
Executive Directors. The Board is
responsible for the overall direction,
strategic objectives and key policies
for reviewing performance of the
Company as well as approving
major capital expenditure, potential
acquisitions and fi nancial matters.
The Board meets regularly and has
a schedule of business reserved
to it including raising new capital,
entering into fi nancing facilities
for projects, treasury policies
and approval of annual operating
budgets and monitoring of key risks.
The Board met eight times during
2013. External advice is available
to the Directors if they consider
it necessary. The Chairman and
Non-Executive Directors met twice
during the fi nancial year without the
Executive Directors being present.
The Chairman of the Board is Colin
Emson, who is also an Executive
Director of a number of other
companies. The Non-Executive
Directors are Brian Rowbotham
and Larry Coben, both of whom
are regarded by the Board as
independent in character and
judgement.
The Executive Directors are Peter
Earl, who is Chief Executive,
Elizabeth Shaw, who is Executive
Director Project Finance, Andrew
Morris who is Group Finance
Director and Marcelo Blanco, who
has special responsibility for regional
fi nancing in Latin America. All
Directors are involved in signifi cant
decisions.
The Board received appropriate
information and a formal agenda
before each Board meeting.
The Company has in place
appropriate procedures to deal with
confl icts of interest.
The Company maintains Directors
and Offi cers liability insurance
against any claims which may be
made against the Directors and
Offi cers of the Company.
Shareholder Relations
The Group values the views of its
shareholders and recognises their
interest in the Group’s strategy and
performance, Board membership
and quality of management. It
therefore holds regular meetings
with and gives presentations to its
institutional shareholders to discuss
objectives.
Corporate Governance
Statement
The Annual General Meeting
(“AGM”) is used to communicate
with private investors with whom
dialogue is encouraged. Additional
information is supplied through the
circulation of the interim report and
the Annual Report and Accounts.
The Company maintains up-to-date
information on the investor section
of its website www.rurelec.com.
Audit Committee
The Audit Committee comprises
Brian Rowbotham as Chairman of
the Committee, Colin Emson and
Lawrence Coben who are all Non-
Executive Directors.
Brian Rowbotham is an accountant
and Colin Emson and Lawrence
Coben have recent and relevant
fi nancial and commercial experience.
The Committee’s remit is to review
fi nancial reporting practices, internal
fi nancial controls and internal and
external audit policy including the
appointment of the Company’s
Auditor. During the year, the Audit
Photograph:
Canchayllo, Peru
Policy Statement
The Board is committed to applying
high standards of corporate
governance and integrity to all
our activities. The Company is
not required by the rules of the
AIM market of the London Stock
Exchange to comply with the UK
Corporate Governance Code (the
“Code”) and the Board recognises
that it does not do so. However,
the Board has been briefed on the
Code and is accountable to the
Company’s shareholders for good
corporate governance and therefore
seeks to comply with the Code in
so far as appropriate for a company
of its size.
Internal Controls
The Directors are responsible for
the Group’s systems of internal
control. Whilst no risk management
process or systems of internal
control can completely eliminate
the risk of material misstatement
or loss, the Group’s systems are
designed to provide the Directors
with reasonable assurance that
problems are identifi ed in a timely
manner and dealt with appropriately.
The Board considers that there have
been no substantial weaknesses in
fi nancial controls resulting in material
loss, contingencies or uncertainties
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
19
Photograph: Canchayllo, Peru
Statement of Non-
Compliance
The Non-Executive Directors are
both considered to be independent
in character and judgement. The
Non-Executive Chairman is a
related party in that he is also the
Chairman of the largest shareholder
but in other respects the Company
complies with the Code in so far
as appropriate for an AIM listed
company. The Board recognises
that it does not comply with the
Code.
Susan Laker
Company Secretary
5 June, 2014
Committee met twice to review the
draft half year and annual fi nancial
statements.
Remuneration Committee
The Remuneration Committee
comprises Lawrence Coben as
Chairman of the Committee, Colin
Emson and Brian Rowbotham.
The Remuneration Committee
reviews the remuneration policy
for the Executive Directors and
for senior management. The
Executive Directors determine the
remuneration arrangements for
the Non-Executive Directors. No
Director may participate in decisions
regarding his own remuneration.
Details of the Directors’
remuneration can be found in
note 8c.
Appointment of Directors
The Nomination Committee
presently comprises Colin Emson as
Chairman, Brian Rowbotham and
Lawrence Coben. The Committee
is responsible for monitoring the
composition of the Board and
meets to make recommendations
to the Board on all new Board
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 in
accordance with the Company’s
Articles of Association.
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.
Share Dealing Code
The Company has a Share Dealing
Code which covers dealings by
Persons Discharging Managerial
Responsibilities (“PDMRs”). The
Company’s code complies with the
provisions of the Code and restricts
dealings in shares during designated
closed periods and at any time
when they are in possession
of unpublished price sensitive
information.
e
c
n
a
n
r
e
v
o
G
r
u
O
www.rurelec.com
20
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF RURELEC PLC
Matters on which we
are required to report by
exception
We have nothing to report in respect
of the following matters where the
Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records
have not been kept by the parent
company, or returns adequate for
our audit have not been received
from branches not visited by us;
or
• the parent company financial
statements are not in agreement
with the accounting records and
returns; or
• certain disclosures of Directors’
remuneration specified by law are
not made; or
• we have not received all the
information and explanations we
require for our audit.
Christopher Smith
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
5 June, 2014
Scope of the audit of the
fi nancial 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.
Opinion on fi nancial
statements
In our opinion, the fi nancial
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 2013 and of the
Group’s profi t for the year then
ended;
• have been properly prepared
in accordance with IFRSs as
adopted by the European Union;
• have been prepared in
accordance with the requirements
of the Companies Act 2006.
Opinion on other matter
prescribed by the
Companies Act 2006
In our opinion the information
given in the Group Strategic
Report and Directors’ Report for
the financial year for which the
financial statements are prepared
is consistent with the financial
statements.
We have audited the financial
statements of Rurelec PLC for the
year ended 31 December, 2013
which comprise the consolidated
and parent company statements of
financial position, the consolidated
income statement, consolidated
statement of comprehensive
income, 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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
CONSOLIDATED INCOME
STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2013
21
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Other expense
Finance income
Finance expense
(Loss)/profit before tax
Tax expense
(Loss)/profit for the year attributable to owner of the company
Earnings per share
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
NOTES
4
6
7
9
a,b,c
10
10
11
12
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
15,093
(5,805)
9,288
(8,109)
1,269
(41,581)
2,200
(1,272)
(39,384)
189
(39,195)
(7.92p)
(7.92p)
13,373
(8,386)
4,987
(3,979)
1,008
(3,895)
3,281
(2,940)
(2,546)
(598)
(3,144)
(0.75p)
(0.75p)
i
l
s
a
c
n
a
n
F
r
u
O
i
www.rurelec.com
22
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2013
(Loss)/profit for the year
Other comprehensive income/(loss) for the year
Items that will subsequently Reclassified to Profit & Loss
Exchange differences on translation of foreign operations
Total other comprehensive loss
NOTES
YEAR ENDED
31.12.13
£’000
(39,195)
YEAR ENDED
31.12.12
£’000
(3,144)
(934)
(934)
(1,443)
(1,443)
Total comprehensive (loss)/income for year attributable to owners of the company
(40,129
(4,587)
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2013
23
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, Interest & Dividends Receivable on Award
Cash and cash equivalents
Total assets
Equity and liabilities
Shareholders’ equity
Share capital
Share premium account
Foreign currency reserve
Share option reserve
Other reserves
Retained earnings
Total equity attributable to shareholders of Rurelec PLC
Non-controlling interests
Total equity
Non-current liabilities
Tax liabilities
Deferred tax liabilities
Borrowings
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Total liabilities
Total equity and liabilities
NOTES
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
14
15
16a
17
18a
16b
19
20
21
22
24a
17
25a
23b
24b
25b
39,158
4,959
16,809
341
61,267
227
9,831
19,126
3,750
32,935
18,487
3,168
15,376
389
37,420
494
4,797
51,473
6,122
62,886
94,202
100,306
11,145
67,369
(1,532)
107
1,050
(19,949)
58,190
8,413
53,012
(598)
46
1,050
19,389
81,312
142
224
58,332
81,536
18
420
1,499
1,938
8,883
466
24,583
33,932
35,870
210
568
1,301
2,079
4,325
53
12,313
16,691
18,770
94,202
100,306
The financial statements were approved by the Board of Directors on 5 June, 2014 and were signed on its behalf by
P. Earl (Chief Executive) and A. Morris (Group Finance Director).
www.rurelec.com
l
i
s
a
c
n
a
n
F
r
u
O
i
24
PARENT COMPANY STATEMENT
OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2013
Assets
Non-current assets
Investments
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Equity and liabilities
Shareholders’ equity
Share capital
Share premium account
Share option reserve
Retained earnings
Total equity
Current liabilities
Trade and other payables
NOTES
31.12.13
£’000
31.12.12
£’000
26
16c
18b
16d
20
21
22
23c
16,743
42,287
59,030
16,195
34
21
16,250
18,988
40,397
59,385
—
162
4,502
4,664
75,280
64,049
11,145
67,369
107
(8,486)
70,135
5,145
5,145
8,413
53,012
46
1,879
63,350
699
699
Total equity and liabilities
75,280
64,049
The financial statements were approved by the Board of Directors on 5 June, 2014 and were signed on its behalf by
P. Earl (Chief Executive) and A. Morris (Group Finance Director).
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
25
Cash flows from operating activities
Cash used in 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
Repayments from/(loans to) joint venture company
Net cash used in investing activities
NOTES
28
14
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
(1,942)
(1,271)
189
(3,024)
(7,944)
—
3,840
(4,104)
(2,267)
(252)
(587)
(3,106)
(3,320)
—
629
(2,691)
Net cash outflow before financing activities
(7,128)
(5,797)
Cash flows from financing activities
Issue of shares (net of costs)
Deferred Consideration
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
—
—
4,756
—
4,756
(2,372)
6,122
(3,750)
—
—
10,126
—
10,126
4,329
1,793
6,122
i
l
s
a
c
n
a
n
F
r
u
O
i
www.rurelec.com
26
COMPANY STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2013
Cash flows from operating activities
Cash used in operations
Interest paid
Net cash used in operations
Cash flows from investing activities
Investments in Assets
Investment in and loans to subsidiaries and joint venture company
Loan repayments by joint venture company
Loan from subsidiary
Net cash generated from/(used in) in investing activities
NOTES
28
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
5,783
—
5,783
—
(14,104)
3,840
—
(10,264)
(3,243)
—
(3,243)
—
(4,793)
1,257
9,896
6,360
Net cash inflow/(outflow) before financing activities
(4,481)
3,117
Cash flows from financing activities
Issue of shares (net of costs)
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
—
—
—
(4,481)
4,502
21
—
—
—
3,117
1,385
4,502
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
27
SHARE
CAPITAL
£’000
SHARE
PREMIUM
£’000
FOREIGN
CURRENCY
RESERVE
£’000
SHARE
OPTION
RESERVE
£’000
RETAINED
EARNINGS
£’000
OTHER
RESERVES
£’000
NON-
CONTROLLING
INTEREST
£’000
TOTAL
£’000
TOTAL
EQUITY
£’000
Balance at 1.1.12
8,413
53,012
845
— 22,533
1,050
85,853
— 85,853
Transactions with owners
Issue of share options
Non-controlling interest
Total transactions with
owners
Loss for year
Exchange differences
Total comprehensive loss
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1,443)
(1,443)
46
—
46
—
—
—
—
—
—
(3,144)
—
(3,144)
—
—
—
—
—
—
46
—
46
(3,144)
(1,443)
(4,587)
—
224
46
224
224
270
— (3,144)
— (1,443)
— (4,587)
Balance at 31.12.12
8,413
53,012
(598)
46
19,389
1,050
81,312
224
81,536
Transactions with owners
Issue of share
2,732
14,357
Issue of share options
Non-controlling interest
Total transactions with
owners
—
—
—
—
2,732
14,357
Loss for year
Exchange differences
Total comprehensive loss
—
—
—
—
—
—
—
—
—
—
—
(934)
(934)
—
61
—
61
—
—
—
—
— 17,089
— 17,089
—
—
61
—
—
(82)
61
(82)
— 17,150
(82)
17,068
— (39,337)
—
—
— (39,337)
—
(934)
— (39,337)
— (40,271)
— (39,337)
—
(934)
— (40,271)
Balance at 31.12.13
11,144
67,369
(1,532)
107
(19,948)
1,050
58,190
142
58,332
l
i
s
a
c
n
a
n
F
r
u
O
i
www.rurelec.com
28
COMPANY STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
SHARE
CAPITAL
£’000
8,413
SHARE
PREMIUM
£’000
53,012
SHARE
OPTION
RESERVE
£’000
—
RETAINED
EARNINGS
£’000
2,483
Balance at 1.1.12
Transactions with owners
Issue of share options
Total transactions with owners
Loss for the year
Total comprehensive loss
—
—
—
—
—
—
—
—
Balance at 31.12.12
8,413
53.012
Transactions with owners
Issue of share
Issue of share options
Total transactions with owners
Loss for the year
Total comprehensive loss
2,732
—
2,732
—
—
14,357
—
14,357
—
—
TOTAL
EQUITY
£’000
63,908
46
46
(604)
(604)
—
—
(604)
(604)
1,879
63,350
—
—
—
(10,364)
(10,364)
17,089
61
17,150
(10,364)
(10,364)
46
46
—
—
46
—
61
61
—
—
Balance at 31.12.13
11,145
67,369
107
(8,486)
70,135
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
NOTES TO THE FINANCIAL STATEMENTS
29
FOR THE YEAR ENDED 31 DECEMBER 2013
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 2013. The Directors have continued to adopt
the going concern basis for the preparation of these financial statements since 2 June 2014 the Group received US$31.5 million from
the Government of Bolivia in full settlement of the Bolivian arbitration and also settled the full amount of the outstanding Birdsong loan of
US$25.9 million.
1c New accounting standards
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
IFRS 10
IFRS 11
IFRS 12*
IAS 28 (Revised)*
Amendments to IAS 32*
Content
Financial instruments: Classification and measurement
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Investments in Associates and Joint Ventures
Offsetting Financial Assets and Financial Liabilities
* Not expected to have a material impact on the Group.
Applicable for financial
years beginning on/after
1 January, 2015
1 January, 2014
1 January, 2014
1 January, 2014
1 January, 2014
1 January, 2014
IFRS 9, ‘Financial instruments: Classifi cation 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, 2015.
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, 2014.
IFRS 11 Joint Arrangements
IFRS 11 supersedes IAS 31 ‘Interests in Joint Ventures’ (IAS 31). It aligns more closely the accounting by the investors with their rights
and obligations relating to the joint arrangement. In addition, IAS 31’s option of using proportionate consolidation for joint ventures has
been eliminated.
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.com
l
i
s
a
c
n
a
n
F
r
u
O
i
30
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
2 Summary of signifi cant accounting policies
2.1 Basis of consolidation
The Group financial statements consolidate the results of the Company, its 50 per cent interest in EdS, its 100 per cent interest in
entities in Chile and in Peru.
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 Fair Value of consideration, 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 acquisition 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 statement of financial position 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 statement of financial position 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 fair
value 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 within ‘other expense’.
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 reporting 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 recognised in other comprehensive income and
accumulated in the Foreign Currency Reserve.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
31
2.4 Income and expense recognition
Revenue represents amounts receivable for goods or services provided in the normal course of business, net of trade discounts, VAT
and other sales-related taxes, and excluding transactions with or between Group companies. Revenues from the sale of electricity
are recorded based upon output delivered at rates specified under contract terms or prevailing market rates as applicable. Revenue is
recognised on the supply of electricity when a contract exists and supply has taken place. Revenue received for keeping power plants
operating and available for dispatch into the grid as required is recognised on a straight-line basis over the contractual period. 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
(2012: 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 are 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.
i
l
s
a
c
n
a
n
F
r
u
O
i
www.rurelec.com
32
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
2.8 Impairment of tangible and intangible assets
At each reporting date, the Group reviews the carrying amount of its property, plant and equipment 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.
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 reporting 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 reporting 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 and Accounts for the year ended 31 December 2013
Stock code: RUR
33
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 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.
“Share option reserve” represents the fair value of options granted and outstanding at the year-end.
“Retained earnings” represents retained profits.
“Other reserves” comprises unrealised revaluations of plant and machinery.
2.14 Pensions
During the year under review, the Group did not operate or contribute to any pension schemes (2012: nil).
2.15 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 makes 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 considers 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 reviews, with the assistance of external expert valuers, the useful lives of depreciable
assets at each reporting date. This review includes consideration of the book value of plant under construction which at the year-end
amounted to £9.8 million. Actual results, however, may vary due to changes in technology and industry practices.
www.rurelec.com
i
l
s
a
c
n
a
n
F
r
u
O
i
34
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
b) Impairment – management reviews 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. Details of the assumptions underlying management’s forecasts for the Group’s
main Cash-Generating Unit (“CGU”) are set out in note 15.
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) Asset acquisitions – where the Group acquires assets or a company which is not considered to be a business as defined by IFRS 3,
the transaction is accounted for as an asset acquisition and not a business combination.
e) The compensation claim is judged to be an asset due to the fact that an inflow of future economic benefit is virtually certain in
accordance with the Bilateral Investment Treaties. The compensation asset is measured at cost (plus legal fees and interest) because,
although a successful claim is virtually certain, management cannot reliably determine the fair value of these cash flows as there is a
significant variability in the range of possible outcomes. Accordingly, and by analogous reference to IAS 39, the asset is recorded at cost.
4 Segment Analysis
Management currently identifies the Group’s four geographic operating segments—Argentina, Chile, Peru 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 2013
and 2012 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 31.12.2013
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit/(loss) from operations
Other expense
Foreign exchange losses
Finance income
Finance expense
Loss before tax
Tax credit/(expense)
Loss for the year
Total assets
Total liabilities
Capital expenditure
Depreciation
ARGENTINA
£’000
9,651
(4,186)
5,465
(4,278)
1,187
—
(3,761)
—
(1,819)
(4,393)
218
(4,174)
15,741
22,169
221
435
CHILE
£’000
—
—
—
(55)
(55)
—
(55)
—
(3)
(113)
—
(113)
944
1,701
1,786
—
PERU
£’000
—
—
—
(475)
(475)
—
197
186
(219)
(311)
(29)
(340)
6,499
6,869
5,934
4
UK
£’000
5,442
(1,619)
3,823
(3,211)
612
—
(504)
3,857
(12,218)
(8,253)
—
(8,255)
78,441
6,199
16,195
5
BOLIVIA
£’000
—
—
—
—
—
(38,314)
—
(198)
—
(38,512)
—
(38,512)
(1,729)
—
—
—
CONSOLIDATION
ADJUSTMENTS
£’000
—
—
—
—
—
—
856
(1,645)
12,987
12,198
—
12,198
(5,694)
(1,068)
—
—
TOTAL
£’000
15,093
(5,805)
9,288
(8,019)
1,269
(38,314)
(3,267)
2,200
(1,272)
(39,384)
189
(39,195)
94,202
35,870
24,136
444
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
35
b) 12 months to 31.12.2012
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit/(loss) from operations
Other expense
Foreign exchange (loss)/gain
Finance income
Finance expense
(Loss)/profit before tax
Tax (expense)/income
Loss for the year
Total assets
Total liabilities
Capital expenditure
Depreciation
ARGENTINA
£’000
13,248
(8,386)
4,862
(2,936)
1,926
(670)
(1,027)
—
(2,000)
(1,771)
(598)
(2,369)
21,991
12,849
238
729
CHILE
£’000
—
—
—
—
—
—
—
—
—
—
—
—
2,188
604
2,188
—
PERU
£’000
—
—
—
—
—
—
—
—
—
—
—
—
3,593
193
894
—
UK
£’000
125
—
125
(1,043)
(918)
(825)
(1,373)
4,869
(2,438)
(685)
—
(685)
21,061
12,695
—
—
BOLIVIA
£’000
—
—
—
—
—
—
—
—
—
—
—
—
51,473
—
—
—
CONSOLIDATION
ADJUSTMENTS
£’000
—
—
—
—
—
—
—
(1,588)
1,498
(90)
—
(90)
—
(7,571)
—
—
TOTAL
£’000
13,373
(8,386)
4,987
(3,979)
1,008
(1,495)
(2,400)
3,281
(2,940)
(2,546)
(598)
(3,144)
100,306
18,770
3,320
729
5 Exchange rate sensitivity analysis
The key exchange rates applicable to the results were as follows:
i) Closing rate
AR$ (Argentine Peso) to £
US$ to £
CLP (Chilean Peso) to £
PEN (Peruvian Sol) to £
ii) Average rate
AR$ (Argentine Peso) to £
US$ to £
CLP (Chilean Peso) to £
PEN (Peruvian Sol) to £
31.12.13
31.12.12
10.7073
1.6488
866
4.55
10.54
1.64
863
4.51
7.92
1.62
773
4.12
7.19
1.62
770
4.12
If the exchange rate of sterling at 31 December 2013 had been stronger or weaker by 10 per cent with all other variables held constant,
shareholder equity at 31 December 2013 would have been £0.9 million (2012: £1.5 million) lower or higher than reported.
If the average exchange rate of sterling during 2012 had been stronger or weaker by 10 per cent with all other variables held constant,
the profit for the year would have been £0.4 million (2011: £0.2 million) higher or lower than reported.
www.rurelec.com
i
l
s
a
c
n
a
n
F
r
u
O
i
36
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
6 Cost of sales
Expenditure incurred in cost of sales is as follows:
Cost of fuel
Depreciation
Maintenance
Cost of Equipment and ancillary costs
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
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
3,021
435
730
1,475
144
5,805
6,962
729
486
—
209
8,386
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
3,370
497
4,065
87
8,019
2,256
447
1,216
60
3,979
1
Audit and non-audit services include £75,300 paid to the Auditor for the audit of the Company and the Group fi nancial statements and £nil paid to the
Company’s Auditor for non-audit professional services provided to the Company in connection with the review of overseas activities (2012: £6,000).
Fees paid to other auditors, in respect of the audit of joint venture companies, amounted to £11,500 (2012: £20,000).
8 Employee costs
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
Development
Administration
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
31.12.13
£’000
3,370
YEAR ENDED
31.12.12
£’000
2,256
NUMBER
NUMBER
12
17
7
24
60
£’000
409
15
30
45
£’000
442
NUMBER
6
NUMBER
6
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
37
c) Directors’ remuneration, including social security costs
The total remuneration paid to the Directors was £615,000 (2012: £292,000). The total remuneration of the highest paid Director was
£230,000 (2012: £107,000). Other emoluments paid were health insurance costs, there were no bonuses, pension costs or share
based payments paid during the year (2012: nil)
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
P. Earl
E. Shaw
A. Morris
M. Blanco
L. Coben
C. Emson
B. Rowbotham
Total
9 a) Other expense
Carbon Emission Reduction adjustment1
Loan arrangement fees2
Foreign exchange losses3
Total
Base Salary/Fee Inc.
Social Security
226
157
88
95
30
6
6
608
Other Emoluments
4
3
—
—
—
—
—
7
Total
230
160
88
95
30
6
6
615
Total
107
79
50
28
28
—
—
292
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
—
—
3,268
3,268
670
825
2,400
3,895
1
In 2009, EdS contracted to sell Carbon Emission Reduction (CER) credits over a four year period 2009 to 2012. The number of CERs actually
generated was less than the original forecast and the £670,000 charge in the prior year represent the adjustment arising from this reduction.
2 Loan arrangement fees relate to the arrangement fees charged in connection with the US$15.45 million set out in note 25.
3 Foreign exchange losses have arisen in Argentina on US$ denominated loans and in the UK on US$ denominated receivables.
9 b) Other expense
Loss on Bolivia settlement
Loss on settlement of Claim – Bolivia1
Arbitration Costs2
Total
YEAR ENDED
31.12.13 £’000
YEAR ENDED
31.12.12 £’000
29,455
4,929
34,384
—
—
—
1.
2.
The loss on the settlement with the Plurinational Government of Bolivia has been arrived at further to the agreement in April 2014 from meetings held
between the senior management of Rurelec plc and the Attorney General of Bolivia. The agreed settlement is US$31.5 million or £19.1 million which
is made up of £17.5 million compensation claim and interest of £1.6 million. The carrying value of the claim, excluding interest and reimbursement of
costs, as at 31 December 2012 was £47.0 million and therefore the loss was £29.5 million.
The arbitration costs were not awarded to Rurelec and so £4.9 million has been taken as a charge in 2013, in 2012 these costs had been shown as a
debtor from the claim.
www.rurelec.com
l
i
s
a
c
n
a
n
F
r
u
O
i
38
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
9 c) Other expense
Birdsong Loan Expense
Interest Payable to Birdsong Loan1
Birdsong loan participation expense – CVR costs2
Accrued lender costs in 20143
Total
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
2,327
1,299
303
3,929
244
1,860
—
2,104
1
Interest on the Birdsong loan of US$15.45 million has been shown in the table above and accrued until May 2014.
2 The Birdsong loan included a contingent value right which amounted to 15 per cent of the Bolivian claim plus interest.
3 The Birdsong lender charges for extending the loan past 31st December 2013 have been accrued in 2013.
10 Finance income & Expense
Inter-group interest received/receivable1
Interest accrued on Bolivian claim2
Total interest income
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
2,399
(199)
2,200
1,501
1,780
3,281
Interest paid/payable on bank borrowings and loans3
(1,272)
(2,860)
1
2
3
Inter-group interest arises on loans by the Company to its 50 per cent owned joint venture companies (PEL and EdS). The loans by the Company
to PEL and EdS exceed the loans of the other 50 per cent shareholder by £13.5 million (2012: £14.4 million). Interest on inter-group loans has been
changed at rates of between 8 per cent and 19 per cent.
The settlement of the Bolivian claim includes interest of £1.58 million on the settlement from May 2010, being the date that the assets were nationalised,
up to the payment date in May 2014. The effective interest rate for this amount on the award of £17.5 million (US$ 28.9 million) is a rate of 2.14 per
cent. This has let to a write down of £0.2 million of the interest accrual in 2013.
Interest paid/payable includes interest on bank borrowings and other loans in Peru and Argentina whilst excludes interest accrued on the US$15.45
million loan referred to in note 25, however the amount shown for 2012 included accrued interest on the loan of £578,000. The details of amounts due
under the loan are shown in note 25
Sensitivity analysis arising from changes in borrows costs is set out in note 25.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
39
11 Tax expense
The relationship between the expected tax expense at the basic rate of 23.75 per cent. (31 December 2012: 24 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 credit/(charge)
Adjustment for non-tax expense
Group relief surrender by joint venture company
Adjustment for different basis of calculating overseas tax
Actual tax expense
Comprising:
Current tax expense
Deferred tax (net credit)
Total expense
YEAR ENDED
31.12.13
£’000
(39,384)
23.75%
9,354
(8,166)
-
(997)
189
136
53
189
YEAR ENDED
31.12.12
£’000
(2,546)
24%
611
-
74
(1,283)
(598)
(626)
28
(598)
12 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.
Average number of shares in issue
Effect of dilution – share options outstanding
Result for the year
(Loss)/profit attributable to equity holders of the parent
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
YEAR ENDED
31.12.13
YEAR ENDED
31.12.12
494,993,260
420,671,505
19,525,000
19,525,000
£(39.2m)
(7.92p)
(7.92p)
£(3.1m)
(0.75p)
(0.75p)
There is no difference between the Basic and Diluted loss per share as there was a loss in the year and therefore the outstanding
options were anti-dilutive.
13 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 loss for the year was £10.4 million (2012: £0.6 million).
www.rurelec.com
l
i
s
a
c
n
a
n
F
r
u
O
i
40
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
14 Property, plant and equipment
LAND
£’000
PLANT AND
EQUIPMENT
£’000
PLANT UNDER
CONSTRUCTION
£’000
a) Group
Cost at 1.1.12
Exchange adjustments
Additions
Cost at 31.12.12
Exchange adjustments
Additions
Cost at 31.12.13
Depreciation at 1.1.12
Exchange adjustments
Charge for the year
Depreciation at 31.12.12
Exchange adjustments
Charge for the year
Depreciation at 31.12.13
Net book value – 31.12.13
Net book value – 31.12.12
86
(14)
—
72
(19)
72
125
—
—
—
—
—
125
72
21,540
(3,392)
238
18,386
(4,661)
16,418
30,142
2,849
(525)
729
3,053
(1,977)
444
1,520
28,621
15,333
Operating property, plant and equipment is located in Argentina.
Plant under construction comprises plant in Chile (£3.7 million) and Peru (£6.7 million).
b) Company
The Company had no property, plant and equipment.
15 Intangible assets
At 1 January 2013
Fair value adjustment on Goodwill and intangibles
At 31 December 2013
At 31 December 2012
—
—
3,082
3,082
(321)
7,649
10,409
—
—
—
—
—
10,409
3,082
GOODWILL
£’000
3,168
1,791
4,959
3,168
TOTAL
£’000
21,626
(3,406)
3,320
21,540
(5,000)
24,134
40,678
2,849
(525)
729
3,053
(1,977)
444
1,520
39,158
18,487
TOTAL
£’000
3,168
1,791
4,959
3,168
a) Goodwill represents 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 and the acquisition of 100 per cent of IPC in June
2013 including intangibles.
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 (for a period of 5 years) which are based on the most recent financial projections
prepared for each Cash Generating Unit (“CGU”). The projections incorporate management’s assumptions regarding revenue volumes,
revenue prices, operating costs, including gas and forecast growth and are based on historical experience and current information. A
long term discount rate, derived from market data on comparable interest rates in the local markets in which the Group operates, is then
applied to the projected future cash flows. The equity discount rate applied is 13 per cent (2012 - 14 per cent).
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
41
The following specific assumptions in respect of the Group’s main CGU in Argentina include:
i)
Resolution by no later than 2018 of the current foreign currency issues in Argentina which presently restrict the outflow of certain
types of debt
ii) No adverse change in the gas price relative to the Government’s set price tariff
iii) Existing contracts run their expected life and are renewed on terms no less favourable than the existing terms
iv) Operating costs remain stable
v) No major plant disruptions occur
vi) Maintenance expenditure remains in line with past experience
vii) Any period over and above the forecast period of 5 years assumes nil growth other than that applicable to inflation.
The assumptions in respect of the IPC CGU include the financial close and payment of development fees to IPC from the development
company for developments in Chile and Peru, whilst also including engineering fees and recharge of expenses. The costs of the group
that are charged into IPC are well known and are shown to rise at a reasonable inflationary rate of 3 per cent and expansionary rate of
an additional 7 per cent per annum. The goodwill impairment test has been completed and shows no need for any impairment. Indeed
the brand value of IPC and its experience over 20 years in the South American market supports the intangible assets shown within the
IPC financial statements.
The amount of goodwill that has been included in the intangible asset is £1,276,621.
IPC has been active in the development, financing and construction of power generation plants in South America, Asia, Africa and
Europe for 19 years and has customer bases in these markets which Rurelec did not have prior to this business combination. The
Group can ascribe separate identifiable intangible assets in some of these markets where Rurelec has not been active over the past
years. The direct cashflow basis has been used as the methodology to assess the value of the separate markets from Rurelec’s
established market in South America.
The main addition to the revenue streams are the engineering fees and costs reimbursement plus development fees outside South
America. The effect is that the NPV of the separate markets can be valued at £514,000 which values the Goodwill and Intangibles at
£1,791,000 with the goodwill element being £1,276,621.
b) IPC for the period up to acquisition had Revenues of £1,354k and Profit of £749k. For the full year Revenues were £5,604k and
Profits were £2,108k.
c) Costs relating to the acquisition of IPC were £201k and these have been recognised as an expense and included in administrative
costs. All issue costs were recognised as an expense.
d) IPC’s gross contractual amounts of trade and other receivables were £46k and £1,510k respectively.
16 Trade and other receivables
a) Group – non-current
Trade receivables1
Amounts due from joint venture companies2
Other receivables and prepayments3
31.12.13
£’000
535
15,399
875
16,809
31.12.12
£’000
556
14,441
379
15,376
1
2
3
Non-current trade receivables includes £22,297 (2012: £211,000) of retentions by the Electricity Regulator in Argentina (which is expected to be either
released or contributed towards ongoing capital projects) and £513,000 (2012: £345,000) of trade receivables which are not expected to be received
within the next 12 months.
Amounts due from joint venture companies represent 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 18 per cent per annum.
Other receivables comprise £379,125 (2012: £379,000) of income tax paid by EdS which is expected to be recovered as an offset against future profi ts.
www.rurelec.com
i
l
s
a
c
n
a
n
F
r
u
O
i
42
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
b) Group – current
Trade receivables
Other receivables and prepayments
Other receivables and prepayments includes £921,000 of VAT recoverable in Peru.
c) Company – non-current
Amounts owed by subsidiary companies1
Amounts owed by joint venture companies2
The amounts by subsidiary companies include:
31.12.13
£’000
31.12.12
£’000
3,043
6,788
9,831
31.12.13
£’000
16,851
25,436
42,287
3,267
1,530
4,797
31.12.12
£’000
7,608
32,789
40,397
1
2
Loans to subsidiaries in Chile (£6.2 million) and Peru (£5.7 million) are repayable on demand. The loans to Chile are currently non-interest bearing. The
loans to Chile and Peru bear zero per cent interest at rates.
The amounts owed by joint venture companies are interest bearing at rates of between 8 per cent and 18 per cent and are repayable on demand but
are not expected to be fully received within the next 12 months. £7.7 million (2012: £10.7 million) is secured by a fi rst charge against the assets
of EdS.
d) Company – current
Other receivables and prepayments
31.12.13
£’000
31.12.12
£’000
34
34
162
162
All trade and other receivables are unsecured, with the exception of the £7.7 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.
17 Deferred tax
a) Asset at 1 January 2013
Exchange translation
(Debited)/Credited to tax expense
Asset at 31 December 2013
The Group deferred tax asset arises principally from tax losses carried forward in Argentina.
b) Liability at 1 January 2013
Exchange translation
Credited to tax expense
Liability at 31 December 2013
31.12.13
£’000
31.12.12
£’000
389
(101)
53
341
520
(83)
(48)
389
31.12.13
£’000
31.12.12
£’000
568
(148)
—
420
762
(174)
(20)
568
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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
43
18 Inventories
a) Group – Inventories
Spare pars and consumables
Spare parts and consumables are valued at cost
b) Parent Company – Inventories
Inventories
31.12.13
£’000
31.12.12
£’000
227
494
31.12.13
£’000
16,195,
31.12.12
£’000
—
Inventories comprises of two Siemens 701DU Turbines acquired from IPSA in June 2013, these will be sold to Central Illapa SA for use
in Chile during 2014.
19 Compensation claim
Book value of claim
31.12.13
£’000
19,126
31.12.12
£’000
51,473
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,
was not less than £47.0 million and was reported in the 2012 Report and Accounts. The amount of the investment claimed under
Bilateral Investment Treaties as submitted to the Permanent Court of Arbitration in The Hague, was US$142.3 million and the Arbitration
proceedings were held in April 2013. The award amount was for US$28.9million plus interest from 1 May 2010 to the date when the
award is paid. As at 31 January the interest amounted to US$6.6 million making the total amount due to Rurelec in settlement of the
claim US$35.5million or £21.5million. The Tribunal representing the Permanent Court of Arbitration decided not to award costs to either
side. The costs of the Arbitration to Rurelec were £4.9 million.
After further negotiations with the Plurinational State of Bolivia at the end of April 2014 the total payment to be received by Rurelec
would be $31.5 million or £19.1 million. This is a total loss of £34.6 million on the carrying value of the assets as at 31st December 2013
being a loss of £29.5 million on the underlying assets and £5.1 million on the legal fees and accrued interest.
Further details and information on this claim can be found in the Chief Executive Officer’s Review of Operations.
20 Cash and cash equivalents
a) Group
Cash and short-term bank deposits
b) Company
Cash and short-term bank deposits
31.12.13
£’000
31.12.12
£’000
3,750
21
6,122
4,502
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. Included within the Group and the Company’s balance at 31 December 2012 was $2.15 million of cash held in a blocked
account pending payment of a deposit on plant being shipped to Chile, this was settled in 2013.
www.rurelec.com
i
l
s
a
c
n
a
n
F
r
u
O
i
44
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
21 Share capital
In issue, called up and fully paid
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
557,236,492 ordinary shares of 2p each (2012: 420,671,505)
11,145
8,413
Reconciliation of movement in share capital
Balance at 1 January 2012
Allotment in June 2013
Balance at 31 December 2013
NUMBER
420,671,505
136,564,987
557,236,492
£’000
8,413
2,732
11,145
The allotment in June 2013 was at 12.5 pence per share. 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 allotments are debited
to the share premium account.
22 Share option reserve
Balance at 1 January 2013
Fair value of options granted during the year
Balance at 31 December 2013
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
46
61
107
—
46
46
In March 2012, the Company introduced a share option plan and granted options over 19,525,000 shares at 9.5p per share. Of these
options, 3,875,000 were exercisable from the date of grant. 5,216,667 options vested in 2013, the remuneration committee approved
50 per cent vesting of these, the remaining 50 per cent are dependent of performance targets being met or being waived at a future
date. The remaining 10,433,333 shares vest in two equal tranches in March 2013 and March 2015 and are subject to performance
targets.
The Black–Scholes option pricing model has been used to calculate the fair value of options granted during the year. Expected volatility
in the share price has been based on 20 per cent.
All of the options granted to directors vest in the three equal tranches and are subject to performance criteria, as referred to above.
Options granted to the directors which were outstanding at the year-end:
A. Morris
P. Earl
E. Shaw
M. Blanco
L. Coben
31.12.13
NUMBER OF
SHARES
1,000,000
5,000,000
4,000,000
2,000,000
650,000
31.12.12
NUMBER OF
SHARES
1,000,000
5,000,000
4,000,000
2,000,000
650,000
No options were exercised during the year and the total number of options outstanding at the year-end was 19,525,000.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
23 Trade and other payables
a) Group – non-current
CER liability
b) Group – current
Trade payables
Accruals
c) Company – current
Trade payables
Accruals
24 Tax liabilities
a) Group – non-current
Tax due in Argentina
b) Group – current
UK corporation tax
P.A.Y.E in the UK
VAT in UK
Tax due in Argentina
Other taxes due in Argentina principally VAT
P.A.Y.E. in Peru
45
31.12.13
£’000
31.12.12
£’000
—
—
8,417
466
8,883
5,084
61
1,921
31.12.13
£’000
18
31.12.13
£’000
—
29
11
56
343
27
466
2,373
1,952
4,325
526
173
699
31.12.12
£’000
210
31.12.12
£’000
—
—
—
53
—
—
53
This liability for tax due in Argentina relates to an agreement reached with the tax authorities 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 2013 was £191,000 (2012: £263,000).
www.rurelec.com
i
l
s
a
c
n
a
n
F
r
u
O
i
46
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
25 Borrowings
a) Group – non-current
Loan from CAMMESA1
Other loans2
b) Group – current
Loan from CAMMESA1
Other loans2
Group – total borrowings
The Group’s borrowings are repayable as follows:
Within 1 year
In more than 1 year, but less than 2 years
In more than 2 years, but less than 3 years
In more than 3 years
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
877
622
1,499
1,516
23,067
24,583
26,082
1,301
—
1,301
316
11,997
12,313
13,614
24,583
11,313
311
311
877
462
316
523
26,082
13,614
1
2
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 fi nal repayment due in July 2016.
Other loans comprise a loan of US$15.45 million, plus accrued interest, to Birdsong Overseas Limited, a wholly owned subsidiary of Rurelec PLC. The
loan was arranged in July 2012 in order to provide additional working capital for the Group’s expansion in Chile and Peru and the costs of the Bolivian
litigation. The loan was repayable by 31 December 2013 secured by a fi rst charge on the proceeds from the Bolivian Arbitration claim and the assets
of Birdsong Overseas Limited. In December 2013 the term of the loan was extended to 30 April 2014. It was also extended a second time on 1 May
2014. Under the terms of the loan, the loan provider is entitled to a portion of the proceeds recovered in relation to the fi nal settlement of the award, in
connection with the Bolivian arbitration. The portion of the proceeds payable to the loan provider is dependent upon a number of variables, including
the length of time to recover such proceeds and the quantum of the proceeds. The minimum amount payable became 15 per cent of the proceeds
recovered after 1January 2014 and based on the carrying value of the claim (see note 19), the portion of the proceeds which the lender will be entitled
to receive amounts US$5.2 million and accordingly has been accrued at 31 December 2013. Interest on the loan is payable at 12 per cent per annum
up to 31st December 2013 and 24 per cent thereafter.
Sensitivity analysis to changes in interest rates:
If interest rates on the Group’s borrowings during the year had been 0.5 per cent higher or lower with all other variables held constant,
the interest expense and pre-tax profits would have been £1.3 million lower or higher than reported.
Sensitivity analysis to changes in exchange rates:
The Group’s external borrowings are denominated in AR$ and US$. 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 £1.2 million (2012: £1.2 million).
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
47
26 Investments
Cost at 1 January 2013
Additions during 2012
Investment in Cascade Hydro Limited
Investment in Termoelectrica del Norte SA
Investment in Central Illapa SA
Investment in Independent Power Corp PLC
Reduction in Investment in Birdsong
Reduction in Investment in Energia para Sistemas Aislados SA
Balance at 31 December 2013
At the year-end the Company held the following investments:
YEAR ENDED
31.12.13
£’000
18,998
—
269
4,190
33
4,000
(10,455)
(292)
16,743
YEAR ENDED
31.12.12
£’000
8,470
10,528
—
—
—
—
—
—
18,998
1
2
3
4
5
6
7
8
50 per cent (2012: 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.
100 per cent (2012: 100 per cent) of the issued share capital of Birdsong Overseas Ltd (“BOL”), a company registered in the British Virgin Islands, under
registration number 688032. BOL owns 100 per cent 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. During 2013 BOL made a loss of £6.8 million due to the
accounting for the Bolivian Arbitration Award received in January 2014.
100 per cent (2012: 70 per cent) of the issued share capital of Cascade Hydro Limited (CHL), a company registered in England and Wales under
registration number 7640689. CHL owns, through intermediate holding companies, 100 per cent interest in Electricidad Andina S.A. and 93 per cent of
Empresa de Generacion Electrica Canchayllo S.A.C., both being companies registered in Peru. During 2013 CHL acquired the remaining 30 per cent
minority stake by way of an exchange of shares. The minority shareholders received 1,737,116 new Rurelec shares for their holdings in CHL, issued at a
price of 12.5 pence per share, an aggregate consideration of £217,139.
100 per cent (2012: 100 per cent) of Cochrane Power Limited, a company registered in England and Wales under registration number 8220905.
Cochrane Power Limited owned at the year-end, through intermediate holding companies, 100 per cent interest in Central Illapa S.A. and 100 per cent
interest in Termoelectrica del Norte S.A., both being companies registered in Chile.
100 per cent (2012: 100 per cent) of Central Illapa SA, a company registered in Chile under registration number 76.14535-9 and owner of the Illapa 255
MW project.
100 per cent (2012: 100 per cent) Termoelectrica del Norte SA, a company registered in Chile under registration number 76.043.067-6 and owner
of the Arica project. The investment during the year has been in the turbine and a transformer during the year plus development costs of the project
totalling £4.2 million.
100 per cent (2012: 100 per cent) of Energia para Sistemas Aislados SA a company registered in Bolivia under registration number 107782. The
investment in this company in Bolivia of £292,000 has been written down to zero in the year because the assets have been incorporated within the
overall settlement with the Plurinational State of Bolivia with the nationalisation of the assets of Empresa Electrica Guaracachi SA.
100 per cent (2012: Nil per cent) of the issued share capital of Independent Power Corporation plc (IPC), a company registered in England and Wales
under registration number 3097552. The investment in IPC was acquired in June 2013. IPC is one of the United Kingdom’s leading power developers
and power plant operators. Since 1995 it has developed and operated thermal and hydro plants in North America, Latin America, South Africa, Asia
and Europe. In consideration for the acquisition of the entire issued share capital of IPC, 32,000,000 new Ordinary Shares in Rurelec PLC were issued
to the shareholders of IPC which, at the Placing Price, represents an implied value for IPC of £4 million.
www.rurelec.com
l
i
s
a
c
n
a
n
F
r
u
O
i
48
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
26 Investments (continued)
The provisional fair values of IPC’s assets and liabilities acquired were as follows:
Property, plant and machinery
Investments
Inventories
Trade and other receivables < 1 year
Cash
Trade and other payables > 1 year
Total Net Assets acquired
Excess of acquired cost over net assets (Goodwill and Intangibles)
Purchase Consideration paid in the year in Rurelec PLC shares
BOOK
VALUE
£’000
16
8,523
1,291
4,399
24
(12,964)
1,289
FAIR VALUE
ADJUSTMENT
£’000
PROVISIONAL
FAIR VALUE
£’000
0
(8,523)
0
(2,321)
0
11,764
920
16
0
1,291
2,078
24
(1,200)
2,209
1,791
4,000
27 Joint venture
The following table sets out the Group’s share of its interest in its joint venture operation in Argentina.
Revenue
Expenses
Non-current assets
Current assets
Non-current liabilities1
Current liabilities
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
9,652
(8,465)
11,906
3,103
(16,682)
(2,800)
13,248
(11,322)
16,729
4,048
(16,519)
(3,199)
1 Non-current liabilities includes £15.4 million (2012: £14.4 million) of loans advanced by the Company (see note 16).
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
49
28 Reconciliation of profi t before tax to cash generated from operations
a) Group
(Loss)/profit for the year before tax
Net finance income
Adjustments for:
Depreciation
Unrealised exchange losses in joint venture companies
Movement in share option reserve
Adjustment for loss in Bolivia
Movement in working capital:
Change in inventories
Change in trade and other receivables
Change in trade and other payables
Cash used in operations
b) Company
(Loss)/profit for the year before tax
Net finance income
Adjustments for:
Unrealised exchange losses/(gains) on loans
Movement in share option reserve
Adjustment for loss in Birdsong
Movement in working capital:
Change in trade and other receivables
Change in trade and other payables
Cash used in operations
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
(39,384)
928
444
(3,267)
61
34,384
(267)
(6.467)
4,558
(1,942)
YEAR ENDED
31.12.13
£’000
—
(10,364)
2,276
437
61
10,689
(1,762)
4,446
5,783
(2,546)
(341)
729
1,741
46
—
(187)
(1.907)
198
(2,267)
YEAR ENDED
31.12.12
£’000
—
(604)
(2,511)
1,105
46
—
(1,528)
249
(3,243)
www.rurelec.com
l
i
s
a
c
n
a
n
F
r
u
O
i
50
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
29 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$ 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.
As set out in note 25, the Group has £24.6 million of loans falling due within 12 months. This includes the loan of US$15.45 million, plus
interest, which is due for repayment by 30 April 2014. This loan was repaid on 2 June 2014 from the proceeds of the claim against the
Bolivian Government.
The following table sets out when the Group’s financial obligations fall due:
Current – due within 1 year:
Trade payables
Borrowings
Total due within 1 year:
Non-current – due in more than 1 year but less than 5 years
Borrowings
YEAR ENDED
31.12.13
£’000
YEAR ENDED
31.12.12
£’000
8,883
25,049
33,932
2,373
12,313
14,686
1,499
1,301
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
51
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.
The financial assets and liabilities of the Group and the Company are classified as follows:
31 December 2013
FAIR VALUE
THROUGH
PROFIT
AND LOSS
£’000
—
—
—
—
—
—
—
—
FAIR VALUE
THROUGH
PROFIT
AND LOSS
£’000
—
—
—
—
—
—
—
—
GROUP
LOANS
AND
RECEIVABLES
£’000
16,809
9,831
3,750
—
—
—
—
30,390
GROUP
LOANS
AND
RECEIVABLES
£’000
15,376
4,797
6,122
—
—
—
—
26,295
BORROWINGS
AND PAYABLES
AT AMORTISED
COST
£’000
FAIR VALUE
THROUGH
PROFIT
AND LOSS
£’000
—
—
—
—
(8,883)
(1,499)
(24,583)
(34,965)
—
—
—
—
—
—
—
—
COMPANY
LOANS
AND
RECEIVABLES
£’000
35,771
6,075
21
—
—
—
—
BORROWINGS
AND PAYABLES
AT AMORTISED
COST
£’000
—
—
—
—
(5,144)
—
—
41.867
(5,144)
BORROWINGS
AND PAYABLES
AT AMORTISED
COST
£’000
FAIR VALUE
THROUGH
PROFIT
AND LOSS
£’000
COMPANY
LOANS
AND
RECEIVABLES
£’000
BORROWINGS
AND PAYABLES
AT AMORTISED
COST
£’000
—
—
—
—
(4,325)
(1,301)
(12,313)
(17,949)
—
—
—
—
—
—
—
—
40,397
162
4,502
—
—
—
—
45,061
—
—
—
—
(699)
—
—
(699)
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 2012
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
www.rurelec.com
i
l
s
a
c
n
a
n
F
r
u
O
i
52
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2013
30 Capital commitments
The Group had outstanding capital commitments of US$0.7 million (2012: £2.4 million) in respect of plant ordered but not delivered at
the year-end.
31 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$6.3 million/£3.8 million (2011: US$6.6 million/£4.1 million). In the event that EdS wishes to terminate the
agreement before 2022, a default payment would become payable. The Group does not anticipate early termination and therefore no
provision has been made in this regard.
32 Related party transactions
During the year the Company and the Group entered into material transactions with related parties as follows:
a) Company
i) Paid, to its 100 per cent subsidiary Independent Power Corporation PLC (“IPC”), a) £0.1 million to Independent Power Corporation
PLC (“IPC”) under a “Shared Services Agreement”, b) paid a development fee of US$ 0.08 million in respect of a proposed project
in Chile c) reimbursed expenses incurred by IPC on behalf of the Company totalling £9,000. d) Reimbursed pre-project expenses
relating to Central Illapa of £322,000. P.R.S. Earl and E.R. Shaw are Directors of IPC which was acquired by the Company on 10 June
2013.
ii) Paid salaries to key management amounting to £0.6 million (2011: £0.3 million).
iii) Charged interest on loans to its joint venture companies (PEL and EdS) amounting to £2.1 million and £0.8 million respectively. Loans
by the Company to PEL and EdS at the year-end amounted to £19.4 million and £7.7 million respectively. In addition, the Company
has provided £3.8 million of support to creditors of EdS. Interest on these loans has been accrued at rates of between 8 per cent and
18 per cent.
iv) Provided loans totalling £5.6 million to its subsidiary companies in Peru and charged interest amounting to £90,000
v) Provided loans totalling £1.0million to its subsidiaries companies in Chile.
b) Group
None.
33 Post balance sheet date events
Since the year-end, the Group has continued to develop the generation projects in Chile whilst seeking local partners for the two
projects under development. The Group has also continued to construct the Canchayllo run-of-river hydro plant in the Junin province of
Peru some 250km East of Lima, whilst also obtaining the Peruvian Government backed power purchase agreement for a 12 MW run-
of-river hydro plant in the same province as Canchayllo by depositing a $3 million bond with the Supervisory Agency for Investment in
Energy and Mining a public institution responsible for regulating and supervising companies in the electricity, oil and mining sectors.
On the 2 June 2014 the Group received US$31.5 million from the Government of Bolivia in full settlement of the arbitration and also
settled the full amount of the outstanding Birdsong loan of US$25.9 million.
The Chief Executive’s Review of Operations contains further details.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2013
Stock code: RUR
NOITMA
COMPANY INFORMATION
MAROFNY INAMP
MPOC
srtoceriD
Directors
C.J. Emson
(Non-Executive Chairman)
(Non-Executive Chairman)
L. Coben (Non-Executive)
L. Coben (Non-Executive)
B. Rowbotham (Non-Executive)
B. Rowbotham (Non-Executive)
M. Blanco
.R.S. Earl
PP.
A.J.S Morris
E.R. Shaw
Secretary
ytarerecS
y
S.A. Laker
Company number
rebumnyy
ynapmCo
4812855
Registered office and
d ne acfifd o
eretsigeR
business address
ssedrd a
ssneisbu
5th Floor
Prince Consort House
Prince Consort House
27–29 Albert Embankment
27–29 Albert Embankment
London
SE1 7TJ
nton UK LLP
r
Auditor
toiduA
Grant Thor
Grant Thor
ed Auditors
Register
ed Auditors
ed Accountants
ed Accountants
Charter
Grant Thor
nton House
Grant Thor
Melton Str
Melton Str
eet
Euston Squar
Euston Squar
London
NW1 2EP
NW1 2EP
e
sr
Bankers
rkenaB
Coutts & Co
Coutts & Co
440 Strand
440 Strand
London
WC2R 0QS
WC2R 0QS
sor
Solicitors
itciolS
or
Skadden, Arps, Slate, Meagher &
Skadden, Arps, Slate, Meagher &
Flom (UK) LLP
Flom (UK) LLP
40 Bank Str
40 Bank Str
eet
Canary Wharf
Canary Wharf
London
E14 5DS
srke
Brokers
orB
WH Ir
eland Ltd
WH Ir
24 Martin Lane
24 Martin Lane
London
London
EC4R 0DR
EC4R 0DR
omi
omi
Adetna
Nominated Adviser
residv
N
Daniel Stewart and Company Ltd
Daniel Stewart and Company Ltd
Becket House
Becket House
36 Old Jewry
36 Old Jewry
London
London
EC2R 8DD
EC2R 8DD
LONDON
HEAD OFFICE
Visit us online at
www.rurelec.com
Prince Consort House, 27–29 Albert Embankment, London SE1 7TJ, United Kingdom
RURELEC PLC
Tel: +44 (0) 20 7793 5610
Fax: +44 (0) 20 7793 7654