236619 Rurelec Annual Report Cover v1 19/06/2015 16:26 Page 1
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RURELEC PLC
17th Floor, Millbank Tower, 21-24 Millbank, London SW1P 4QP
Tel: +44 (0) 20 7793 5610
Fax: +44 (0) 20 7793 7654
Visit us online at
www.rurelec.com
ANNUAL REPORT
AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2014
Stock code: RUR
236619 Rurelec Annual Report Cover v1 19/06/2015 16:26 Page 2
WELCOME TO RURELEC PLC
RURELEC PLC IS AN OWNER, DEVELOPER AND
OPERATOR OF POWER GENERATION CAPACITY
INTERNATIONALLY.
Rurelec’s main business consists of the ownership, operation and development of power
generation facilities on national and regional grids and in isolated areas, selling wholesale
electricity as a generator on commercial terms, through capacity payments or power
purchase agreements (“PPAs”).
Our current businesses include operational plants in Argentina and Peru, as well as the
development of new plants in Argentina, Chile and Peru.
CONTENTS
Strategic Report
Chairman’s Statement
Review of Financial Performance
Review of Operations
Our Governance
Board of Directors
Director’s Report
Corporate Governance Statement
1
3
4
6
7
9
Our Financials
Independent Auditor’s Report
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
Company Information
11
12
13
14
15
16
17
18
19
20
Inside Back Cover
Photo outside front cover:
Transmission line connecting Canchayllo run of river hydro to Grid, Peru
Photos outside back cover:
Top; EdS plant in Patagonia, Argentina.
Rest; Canchayllo run of river hydro, Peru
Read more online at
www.rurelec.com
COMPANY INFORMATION
Directors
C. Emson (Non-Executive Chairman)
B. Rowbotham (Non-Executive)
P. Galante (Non-Executive)
M. Blanco (Non-Executive)
P.R.S. Earl
A.J.S. Morris
E.R. Shaw
Secretary
S.A. Laker
Company number
4812855
Auditor
Grant Thornton UK LLP
Registered Auditors
Chartered Accountants
Grant Thornton House
Melton Street
Euston Square
London
NW1 2EP
Bankers
Coutts & Co
440 Strand
London
WC2R 0QS
Registered office and business address
17th Floor, Millbank Tower
21–24 Millbank
London
SW1P 4QP
Solicitors
Skadden, Arps, Slate, Meagher & Flom (UK) LLP
40 Bank Street
Canary Wharf
London
E14 5DS
CHAIRMAN’S STATEMENT
01
Dear Shareholder
It falls to me to present the results of Rurelec PLC (“Rurelec”) for
the fi nancial year ended 31 December 2014, which proved to be
a diffi cult year for the Company following the announcement in
February of the disappointing result of the Permanent Court of
Arbitration (“PCA”) ruling in The Hague which found against Bolivia
but which awarded Rurelec less than half the book value of its
historical 2006 investment in Empresa Guaracachi. This in turn
was followed by the further discounted settlement for $31.5 million
grudgingly paid by Bolivia in June 2014, which resulted in an
additional loss against the sum awarded by the PCA. It should
be noted that the Board of Rurelec had expected to receive not
less than US $75 million being the book value of the Bolivian
investment and declared but unpaid dividends. The proceeds of
the settlement were used to repay a loan which had been taken
to fund both the cost of the arbitration and the Group’s expansion
into Peru and Chile.
During the year Larry Coben stepped down from the Board of the
Company due to other commitments and we thank him for his
incisive input during his three years on the Board. In April 2015
the board welcomed Pablo Galante as a new director who brings
to the Board extensive experience in the energy sector both in
Latin America and internationally, with particular insight into the
business of fuel supply .
Outlook
In spite of the serious setback from the quantum of the PCA
award and the considerable write-off against reserves which this
entailed , the Board of Rurelec remains optimistic for the future of
the Company. There are continuing projects in Peru and Chile as
well as the potential to expand our presence in Argentina where
the country’s need for power encourages new plant development
under US dollar denominated contracts.
The result of the Arbitration means that the Company has
considerably less funding available to direct towards new projects,
and this has slowed our expansion . In the light of our straightened
circumstance, the Board has decided to concentrate Group funds
in areas of faster growth, involving thermal plants which have the
advantage of shorter lead times in construction. It is therefore
intended to divest the small hydro development business in Peru
which trades under the Cascade Hydro Power brand. Funds
realised from the disposal of this business will be used to repay
loans in connection with development activities and to bring into
construction Rurelec’s thermal developments in Chile and Peru.
Activities in Chile were slowed by the change in government which
led to all projects being called in for review. This had an impact
on the Company’s power project developments in northern Chile
including those with already permitted sites . The process to select
a long term equity partner for projects in Chile has been caught
up in these delays and by the complex transmission system in the
region. These issues have now been largely overcome and the
Company expects to make more rapid progress for the future .
The Company has recently signed a bridging loan facility of
$12 million against the anticipated sales of the Peru hydro
projects. The Company has also agreed terms but has not yet
been contracted, for an alternative one year secured loan from
a large organisation within the South American power industry
which will allow the Group to settle the deferred payment to IPSA
Group PLC and repay outstanding loans. This facility is the fi rst
stage of an intended larger cooperation with this South American
company, a power generation company operating in the same
fi eld as Rurelec in Central and Latin America. The Group expects
to repay all loans from the proceeds of the sale of its Peruvian
hydro portfolio, but with contingency plans for repayment from
other sources if the sales are delayed.
In anticipation of a planned closer co-operation with the
South American group, the Board has agreed that the project
development activities under Independent Power Corporation
PLC (“IPC”) should be spun out of Rurelec now that its task
in Latin America has been completed. IPC was acquired for
£4 million in June 2013 to consolidate the replacement of
capacity through greenfi eld development of projects led by IPC
during the arbitration process. The business separation will be
achieved by Peter Earl acquiring outright ownership of IPC in a
transaction whereby the principal assets of IPC will be transferred
up to Rurelec leaving IPC with only nominal assets and fi xed
overheads of some £500,000 per annum. Peter Earl will step
down as both a director and CEO of Rurelec and will purchase
IPC and its development team for nominal consideration. Former
Chairman, Andrew Morris, has agreed to take over as CEO of the
Company. Both Peter Earl and IPC are entering into consultancy
agreements with the Company so as to maintain continuity and a
smooth handover for the next stage of Rurelec’s planned return
to a dividend paying company. The net effect will be to reduce
overhead within Rurelec and re-establish the core business of
the Group as ownership of cash-producing power plants in Latin
America to be valued on the basis of income.
I look forward to the future with optimism.
Colin Emson
Chairman
18 June, 2015
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02
STRATEGIC REPORT
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, but
we are now ready to expand our horizons in our aim to add cash
generating assets to our Group with a view to paying dividends
as soon as practicable. This goal was underpinned in December
2014, when the High Court approved a capital reorganisation
which will give us the ability to pay dividends when the opportunity
arises.
Business Model
Having identifi ed a new power plant opportunity the development
team work to identify and eliminate the major obstacles
ahead on the development time line. The principle hurdles are
obtaining environmental and planning permits, fuel strategy and
development of the fi nancing plan. In order to effectively use the
minimal amount of capital at our disposal, having reached this
stage in the development process, we seek an equity partner
by selling down up to 50 per cent. of a project company, which
allows us to validate a percentage of the development premium,
whilst participating in the long term increase in capital value.
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.
i) 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 10.1 pence per share.
(2013 restated: 11.0 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 and hence there were
no positive earnings per share.
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 expanded the capacity
in the year by completing the construction in Peru of the 5.3 MW
Canchayllo run-of river hydro plant. The continued ownership of
three turbines ready for deployment for the two projects in Chile
shows the readiness to complete further expansion of the gross
capacity by 295 MW.
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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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REVIEW OF FINANCIAL PERFORMANCE
03
Group Results
The Group loss after tax for the fi nancial year under review is
£2.9 million (2013 restated: £35.8 million loss). The majority of
the loss is due to operational costs and the net effect of foreign
exchange gains and losses on our assets. The results for the
operations in Argentina, Peru, Chile and for IPC are shown below.
Group revenue was £0.3 million (2013 restated: £5.4 million).
Administrative expenses amounted to £7.1 million (2013 restated
£3.7 million). Operating loss was £6.9 million (2013 restated
£0.1 million gain. The loss before tax is £3 million (2013 restated:
£35.7 million loss). The basic loss per share is 0.52p (2013:
7.23 p loss). In the balance sheet the restatement of the 2013
fi nancial statements under IFRS11 has resulted in a decrease in
total assets to £91.0 million – compared with the audited fi gures
of £94.2 million. In 2014, the total assets of £74.8 million (2013
restated: £ 91.0 million) in cludes assets of £18.2 million (2013:
£0), which are held for sale. In December 2014 Rurelec PLC
reorganised its reserves by moving £45 million from the share
premium account to a special reserve that can be designated as
distributable once all creditors at the year end have been paid.
Total equity stands at £56.5 million, or 10.1 p ence per share.
A more detailed analysis of the business entities is given below.
Energia del Sur S.A. Results
At the operating level the plant in Comodoro Rivadavia and
therefore based on 100 per cent. of Energia del Sur S.A.’s
(“EdS’s”) activities the gross operating profi t for the year was
£14.99 million (2013: £10.9 million) on revenues of £17.2 million
(2013: £19.3 million). In local currency terms the revenues
increased to AR$220 million (2013: AR$ 167 million) whilst
the gross operating profi t was AR$ 191 million (2013: AR$
113 million). The reduction in the net loss for the year in EdS
to £0.2 million (2013: £4.2 million loss) was due to change in
the revenue structure with signifi cantly more contracted energy
revenue where we have no fuel costs compared to 2013 where
there was signifi cantly more spot energy sales with corresponding
increase in fuel costs, which led to the increase in the operating
profi ts for the year in 2014.
It should be noted that the results of EdS are no longer shown
proportionately within the accounts in this annual report. This is
because of a change in the reporting rules under the international
accounting convention of the International Financial Reporting
Standards (“IFRS”) which requires us to report the EdS joint
venture as a single line in the Consolidated Statement of Financial
Position and in the Consolidated Income Statement. Further
information on this can be seen in the note 28 to the accounts
and in the Review of Operations.
Independent Power Corporation PLC
IPC has made a loss for the year of £4.2 million (2013: £2.1 million
profi t) which was partly attributable to the Group’s administration
costs being charged to IPC in 2014 after the group overheads
were reorganised. Previously Rurelec’s administration costs were
charged in to Rurelec PLC itself. The activities of the company
involve development work for new projects, the supply of
engineering services to group and other companies and also
the administration of the London offi ce. Administration expenses
for the year were £1.2 million (2013: £1.1 million). The additional
cost this year relates to the writing back of accrued income for
the success fee from the fi nancial close of the Illapa project in
Chile. The measurement of this accrued income was based on
management estimates of the amount of work that had been
completed and the proximity to achieving fi nance of the project.
Selecting the equity partner has been affected by the change in
Government and the slow- down of power projects in the country.
This along with the need to be certain about accrued income has
le d to a one-off write back which has increased the accounting
loss for the period by £3.1 million.
Rurelec Chile
The development operations in Chile have expensed limited direct
costs in the year of £82k (2013: £111k ). Capitalised d evelopment
costs have accumulated to £0.9 million – (2013: £1.0 million) on
both the Central Illapa and Arica projects.
Cascade Hydro Power
In Peru, the Canchayllo run-of-river hydro plant was completed in
the fi nal days of 2014 and the value of the plant at the year-end is
£8.8 million (2013: £5.7 million).
Rurelec has outstanding loans of £9.5 million (2013: £5.8 million)
to the Cascade group at the period end, whilst there is a
bank loan relating to the Canchayllo operating plant with the
Corporacion Interamericana de Inversion (“IIC”) of £4.6 million
(2013: £4.2 million) and other loans of £2.8 million (2013:
£0.9 million). The other assets of the Cascade group include
£3.2 million (2013: £3.5 million) of bonds held by IIC and the
Ministry of Minerals and Energy in connection with development
projects.
During 2014 the Board took the decision to sell the Peruvian
assets and has therefore reported these assets in accordance
with IFRS standards as assets held for sale. The equity sale of the
Canchayllo plant has been agreed for a total of £4.4 million with
the IIC debt of £4.6 million remaining with the plant.
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04
REVIEW OF OPERATIONS
The fi rst half of the year was devoted to the recovery of the sum –
disappointingly low – awarded by the Arbitration Tribunal, reduced
even further by the Bolivian Government’s threats not to pay
unless Rurelec accepted a further cash discount. All the same,
the Group was able to emerge from the four year nationalisation
nightmare with a number of projects under development in Peru
and Chile. In the second half of the year your executives were able
to concentrate on developing the business, even in the straitened
circumstances arising from the pitiful award. The main source of
cashfl ow for the Group during this period has arisen from it s joint
venture operations in Argentina.
Argentina
Operations at the power plant continue to allow EdS to show an
excellent availability record. Gross energy output was 14 per cent.
higher at approximately 958 GWh (2013: 840 GWh) , since no
maintenance outage was experienced. The average heat rate of
the plant was 8.33 MMBTU/MWh (2013: 8.43), a slight drop due
to normal degradation following the outage in 2013 . The Ministry
of Energy has enacted further 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 the deduction
of a maintenance reserve payment each month, which we have
negotiated to recover starting May 2015, thus increasing cashfl ow
in the coming year. The average notional cost of gas per MWh
generated was AR$176.67 (2013: AR$118.36), in US$ terms
the gas cost has moved to US$21.46 per MWh from US$21.5
in 2013. The average price of electricity in peso terms increased
by 43 per cent. to AR$378.73 (2013: AR$265.17) however
it has decreased by 4.5 per cent in dollar terms, US$46.00
(2013: US$48.17) as a result of the weakening of the peso. The
Resolution 220 contract is the main driver of the strengthening
performance at the EBITDA level, as the proportion of US$ 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 2014
was AR$220 million from AR$ AR$166.5 in 2013. No CERs were
registered in 2014 as the low CER prices currently do not cover
the cost of registration. Gross margin increased in peso terms
to AR$191 million from AR$115 million. Large foreign exchange
losses due to the impact of the revaluation of US$ borrowings
arising from the weakening peso exchange rate once again
increased the after tax loss. Even with the foreign exchange loss
of AR$52.5 million (2013: AR$46 million) the loss for the year was
AR$2.4 million (2013: loss of AR$36 million). This improvement
was signifi cantly due to the change in the structure of the energy
sales now more reliant on the Resolution 220 Contract rather than
spot sales, which incur fuel costs. Cashfl ow was strong, allowing
EdS to remit US$5.4 million to the UK during the year, however,
the electricity sector is still held back by cashfl 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 Q1 2014 saw the biggest correction as the
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$6.2 to the US$, by year end it was AR$8.23 with most
of the fall during January 2014 after a 17 per cent devaluation
in that month alone. 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.
The following table sets out the Group’s share of its interest in the
joint venture in Argentina following the changes in the accounting
for joint ventures to the equity accounting method:
Year ended
31.12.14
£’000
Year ended
31.12.13
£’000
8,611
(5,579)
9,736
4,408
(14,865)
(8,518)
9,652
(8,465)
11,906
3,103
(16,682)
(2,800)
Revenue attributable to the Group
Expenses
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Chile
Arica
Final approval for the use of the gas turbine was received in May
2014. However, as a result of further objections made locally
during the latter half of 2014, we have decided to relinquish the
approval for the GT and revert to the original diesel engine-based
technology of the initial approval. Limited construction worked
has commenced and the environmental approval has been
secured. On this revised basis, dispatch levels for the plant, when
constructed, are expected to be higher than originally envisaged
when using high effi ciency engines. With little new generation
other than solar plants planned for the northern part of the SING
system, we expect the project to be an important contributor to
securing electricity supply in the local area.
Central Illapa
Development of the Illapa project has progressed slower than
anticipated, principally due to the defi nition of the transmission
interconnection taking longer than expected. This issue has
now been resolved and selection of a joint venture partner and
fi nancing for the project is underway and will be pursued with
fi nancial completion expected during 2015.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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05
Peru
During 2014 the construction of the 5.3 MW Canchayllo project
continued and the plant was successfully commissioned on
31 December 2014 after much hard work on the part of our
Cascade Hydro staff in Peru and Harbin, the original equipment
manufacturer. The cost of the plant was approximately 20 per cent
more than originally budgeted but with a higher installed capacity
than originally projected. The Canchayllo plant was fi nanced
with equity from Rurelec and debt from the IIC. In addition, the
Cascade team was successful in winning PPAs for a further 30
MW of new projects, although we elected to fund only one project
to close a power purchase agreement in the 2014 PPA round. The
two other projects have had to be held back for the next round
which planned for later this year.
With signifi cant funding required for bonding and construction
of hydro plants in the tender process, we expect to reduce
exposure to this sector by selling Canchayllo and our development
company Cascade Hydro P ower SAC. This still leaves us with
the opportunity to develop large hydro in the form of Rurelec’s
255 MW Santa Rita project and thermal generation in Peru.
The Proinversion tender for awarding large hydro PPAs was
announced in February 2015 and Rurelec is active now in
preparing a qualifying bid in partnership with a strong fi nancial
partner currently being selected.
Independent Power Corporation
During 2014 IPC directed much of its activities to projects
under development by clients in Ghana having received the
disappointing news that it was unsuccessful in the Gibraltar tender
for which it had qualifi ed. IPC is also in advanced negotiations for
a similar third party project in Ivory Coast.
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 sort 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 of local partners and lending institutions.
The Group is seeking to broaden its base of potential partners
and lending institutions.
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.
The Strategic Report was approved by the Board of Directors on 18 June,
2015 and were signed on its behalf by P. R.S. Earl (Chief Executive).
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06
BOARD OF DIRECTORS
MARCELO BLANCO
Non-Executive Director Former Regional Finance Director for
Latin America, 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 ROWBOTHAM
Non-Executive Director
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
PABLO GALANTE
Non-Executive Director
Pablo has worked for 18 years in the Oil industry. He is currently
focusing his activities in Latin America and West Africa for one
of Europe’s largest oil and energy traders. As a Non-Executive
Director of the Company, he brings an extensive network of
contacts and experience in economies with rapidly expanding
requirements for power. Graduated in Economics from
Universidad Catolica Andres Bello of Caracas, Venezuela.
COLIN EMSON
Chairman and Non-Executive Director
Colin has been Executive Director of Robert Fraser Group since
1979. He is designated member of the business consulting
fi rm Robert Fraser & Partners LLP and Co-founder of 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 EARL
Chief Executive
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
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 and is a graduate
of the University of Newcastle upon Tyne.
ELIZABETH SHAW
Executive Director Project Finance
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 2014
Stock code: RUR
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DIRECTOR’S REPORT
07
THE DIRECTORS SUBMIT THEIR
ANNUAL REPORT TOGETHER
WITH THE AUDITED FINANCIAL
STATEMENTS FOR THE YEAR
ENDED 31 DECEMBER, 2014.
Principal activities
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.
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, 2014 are set
out in the Consolidated Statement of Comprehensive Income.
No dividend was paid during the year to 31 December, 2014
(2013: 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
Peter Earl – Chief Executive
Andrew Morris – Group Finance Director
Elizabeth Shaw – Executive Director Project Finance
Marcelo Blanco – Non-Executive Director
(Regional Director of Finance until 1 January 2015)
Brian Rowbotham – Non-Executive Director
Larry Coben – Non-Executive Director (resigned 11 July 2014)
Pablo Galante – Non-Executive Director
(Appointed 9 April 2015)
Directors’ interests
The Directors’ benefi cial interests in the shares of the Company
were on the reference dates as stated below:
16 .06.2015
31.12.2014
31.12.2013
A.J.S. Morris
737,700
737,700
687,700
L.S. Coben
P.R.S. Earl
E.R. Shaw
n/a
n/a
900,000
7,000,000
7,000,000
6,900,000
325,000
325,000
275,000
Brian Rowbotham
450,000
450,000
270,000
Pablo Galante
13,000,000
n/a
n/a
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 16 June 2014,
being the last practicable date for reporting this information.
Sterling Trust Ltd
YF Finance Ltd
HSBC Client Holdings
Nominees (UK) Limited
Number of
shares % holding
303,092,303
96,565,166
53.989
17.201
16,884,673
3.008
The percentages shown are based on 561,387,586 shares in
issue.
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;
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08
DIRECTOR’S REPORT
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
18 June, 2015
• 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 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
auditors are 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 auditors are aware of that information.
t he 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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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CORPORATE GOVERNANCE
09
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 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, three Executive Directors and three
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 eleven times
during 2014. 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, Marcelo Blanco
and Pablo Galante two of them 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, and
Andrew Morris, who is Group Finance Director. 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.
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, Marcelo Blanco and Pablo
Galante who are all Non-Executive Directors. Mr Rowbotham, is
an accountant and Mr Emson, Mr Blanco and Mr Galante 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 Committee met twice to review the draft half year
and annual fi nancial statements.
Remuneration Committee
The Remuneration Committee comprises Brian Rowbotham
as Chairman of the Committee, Colin Emson, Marcelo Blanco
and Pablo Galante. The Remuneration Committee reviews the
remuneration policy for the Executive Directors and for key
management personnel. 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, Marcelo Blanco and Pablo Galante.
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.
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10
CORPORATE GOVERNANCE
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.
Statement of Non-Compliance
Marcelo Blanco as Non-Executive Director who has previously
served as an Executive Director cannot be 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
18 June, 2015
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF RURELEC PLC
11
Opinion on other matter prescribed by the Companies
Act 2006
In our opinion the information given in the Strategic Report
and Directors’ Report for the fi nancial year for which the
fi nancial statements are prepared is consistent with the fi nancial
statements.
Matters on which we are required to report by
exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
•
the parent company fi nancial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of directors’ remuneration specifi ed 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
18 June, 2015
We have audited the fi nancial statements of Rurelec plc for the
year ended 31 December 2014 which comprise the consolidated
income statement , the consolidated and parent company
statements of fi nancial position, the consolidated and parent
company statements of cash fl ow, the consolidated and parent
company statements of changes in equity, and the related notes.
The fi nancial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (“IFRSs”) as adopted by the European Union and, as
regards the parent company fi nancial statements, as applied in
accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement
set out on page s 7 & 8 , the directors are responsible for the
preparation of the fi nancial statements and for being satisfi ed that
they give a true and fair view. Our responsibility is to audit and
express an opinion on the fi nancial 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 Ethical Standards for Auditors.
Scope of the audit of the fi nancial statements
A description of the scope of an audit of fi nancial statements
is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
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 2014 and of the group’s loss for the year then
ended;
the group fi nancial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
the parent company fi nancial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
•
the fi nancial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
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12
CONSOLIDATED INCOME
STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
Revenue
Write off of accrued income
Cost of sales
Gross profit
Administrative expenses
Operating (loss)/profit
Other expense
Other i ncome /(expense) – exchange gain/(loss)
Other expense – From share of joint venture
Finance income
Finance expense
Loss before tax
Tax expense
Loss for the year attributable to owner of the company
Earnings per share
Basic loss per share
Diluted (loss)/earnings per share
NOTES
4
15
6
7
9,b,c, 15
9a
28
10
10
11
12
YEAR ENDED
31.12.14
£’000
30 3
(3,129)
(231)
(3,147)
( 3,832)
(6,979)
(392)
2,180
–
2,56 7
(312)
(2,936)
(8)
(2,944)
(0.52 p)
(0. 52 p)
YEAR ENDED
31.12.13
RESTATED
£’000
5,442
–
(1,619)
3,823
(3,741)
82
(38,314)
(561)
(319)
2,767
(20)
(36,365 )
(29)
(36,394 )
(7.23 p)
( 7.23 p)
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
13
Loss for the year
Other comprehensive income/(loss) for the year:
Items that will be subsequently Reclassified to Profit or Loss:
Exchange differences on translation of foreign operations
Total other comprehensive loss
NOTES
YEAR ENDED
31.12.14
£’000
(2,944)
(2,249)
(2,249)
YEAR ENDED
31.12.13
RESTATED
£’000
(36 ,394 )
(364 )
(364 )
Total comprehensive loss for year attributable to owners of the company
(5,193)
(36 ,758 )
236619 Rurelec Annual Report Text.indd C13
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CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2014
NOTES
31.12.14
£’000
31.12.13
RESTATED
£’000
1.1.13
RESTATED
£’000
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investment in Argentinian Joint Venture
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
Assets classified as held for sale
Total assets
Equity and liabilities
Shareholders’ equity
Share capital
Share premium account
Foreign currency reserve
Share option reserve
Plant reserve
Other Reserve
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
Liabilities classified as held for sale
Total liabilities
Total equity and liabilities
14
15
16 a
17
18
16 b
19
20
34
21
22
23
25
17
26 a
24b
25 b
26 b
34
22,169
1,321
–
23,21 2
–
46,702
–
9,60 0
–
283
9,883
18,178
74,763
11,228
22,754
(3,211 )
14 6
1,050
45,000
(20,426 )
56,541
283
56,824
–
–
–
–
4,423
70
3,164
7,657
10,282
17,939
74,763
27,788
1,792
–
23,64 9
–
53,229
–
14,591
19,126
3,730
37,447
–
3,082
–
319
32,833
–
36,234
18 8
1,189
51,473
6,042
58,892
–
90,67 6
95,126
11,145
67,369
( 962 )
107
1,050
–
(17,19 9 )
61,5 10
142
8,413
53,012
( 598 )
46
1,050
–
19,195
81,118
224
61,65 2
81,342
18
–
622
640
8,051
65
20,268
28,384
–
29,024
90,67 6
–
–
–
–
1,787
–
11,997
13,784
–
13,784
95,126
The financial statements were approved by the Board of Directors on 18 June, 201 5 and were signed on its behalf by
P.R.S. Earl (Chief Executive) and A.J.S. Morris (Group Finance Director).
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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PARENT COMPANY STATEMENT
OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2014
15
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
Other Reserves
Retained earnings
Total equity
Current liabilities
Trade and other payables
Total equity and liabilities
NOTES
31.12.14
£’000
31.12.13
£’000
27
16c
18b
16d
20
21
23
22
23
24c
9,755
50, 599
60,354
16,743
42,287
59,030
16,195
16,195
3 8
1
34
21
16,234
16,250
76,588
75,280
11,228
22,754
14 6
45,000
(7,521)
71,607
11,145
67,369
107
–
(8,486)
70,135
4,981
4,981
5,145
5,145
76,588
75,280
The financial statements were approved by the Board of Directors on 18 June, 2015 and were signed on its behalf by
P.R.S. Earl (Chief Executive) and A.J.S. Morris (Group Finance Director).
236619 Rurelec Annual Report Text.indd C15
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CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
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
Settlement for expropriated assets
Repayments from joint venture company
Net cash generated from/(used in) investing activities
NOTES
29
14
YEAR ENDED
31.12.14
£’000
YEAR ENDED
31.12.13
RESTATED
£’000
(4,890)
(312)
(8)
(5,210)
(5,135)
18,863
3,381
17,109
(3,980)
547
(29)
(3,462)
(7,523)
–
3,840
(3,683)
Net cash inflow/(outflow) before financing activities
11,899
(7,145)
Cash flows from financing activities
Issue of shares (net of costs)
Deferred Consideration
Loan drawdowns
Loan repayments
Net cash (used in)/generated from financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
468
(125)
3,170
(18,859)
(15,346)
(3,447)
3,730
283
–
–
4,753
–
4,753
(2,392)
6,122
3,730
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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COMPANY STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
17
Cash flows from operating activities
Cash (used in)/ge nerated from operations
Net cash (used in)/generated from operations
Cash flows from investing activities
Investment in and loans to subsidiaries and joint venture company
Loan repayments by joint venture company
Loan repayment from subsidiary
Net cash generated from/(used in) investing activities
NOTES
29
YEAR ENDED
31.12.14
£’000
YEAR ENDED
31.12.13
£’000
(4,397)
(4,397)
(2,919)
3,382
3,323
3,786
5,783
5,783
(14,104)
3,840
–
(10,264)
Net cash outflow before financing activities
(611)
(4,481)
Cash flows from financing activities
Issue of shares (net of costs)
Loan drawdowns
Loan repayments
Net cash generated from financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
468
278
(155)
591
(20)
21
1
–
–
–
(4,481)
4,502
21
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CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2013
SHARE
CAPITAL
£’000
SHARE
PREMIUM
£’000
NOTE
FOREIGN
CURRENCY
RESERVE
£’000
SHARE
OPTION
RESERVE
£’000
RETAINED
EARNINGS
£’000
OTHER
RESERVE
£’000
PLANT
RESERVE
£’000
TOTAL
£’000
NON-
CONTROLLING
INTEREST
£’000
TOTAL
EQUITY
£’000
Original Balance at 1.1.13
8,413
53,012
(598)
46
19,389
–
1,050 81,312
224 81,536
Effect of restatement due to
change in accounting policy
–
–
–
–
(194)
Restated Balance at 1.1.13
8,413
53,012
(598 )
46
19,195
Transactions with owners
Issue of share
Charge for share options
Non-controlling interest
Total transactions with
owners
Loss for year
Exchange differences
Total comprehensive Loss
2,732
14,357
–
–
–
–
2,732
14,357
–
–
–
–
–
–
–
–
–
–
–
( 364)
( 364)
–
61
–
61
–
–
–
–
–
–
( 36,394)
–
– ( 36,394)
–
–
–
–
–
–
–
–
–
–
( 194)
–
( 194)
1,050 81,118
224
81,342
– 17,089
–
–
61
–
– 17,089
–
(82)
61
(82)
– 17,150
(82) 17,068
– ( 36,394)
–
( 364)
– (36, 758)
– ( 36,394)
–
( 364)
– (36, 758)
Balance at 31.12.13
11,145 67,369
(962 )
107
(17,199 )
–
1,050 61, 510
142 61, 652
Transactions with owners
Issue of share
Share issue costs
Charge for share options
21
83
–
–
467
(82)
–
Transfer to Other reserve
23
– (45,000)
–
–
–
–
–
–
–
–
–
39
–
–
–
–
–
–
–
–
– 45,000
–
–
–
–
–
–
–
550
(82)
39
–
–
–
–
–
–
550
(82)
39
–
141
141
Non-controlling interest
Total transactions with
owners
Loss for year including
Minority Loss
Exchange differences
Total comprehensive loss
for the year
83 (44,615)
–
39
– 45,000
–
507
141
648
–
–
–
–
–
(2,249)
–
–
( 3,227)
–
–
–
– ( 3,227)
– (2,249)
– ( 3,227 )
– (2,249)
–
–
(2,249)
–
(3,227 )
–
–
(5,476 )
–
(5,476 )
Balance at 31.12.14
11,228 22,754
(3,211 )
146
( 20,426) 45,000
1,050 56,541
283 56,824
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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COMPANY STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
19
SHARE
CAPITAL
£’000
SHARE
PREMIUM
£’000
NOTE
SHARE
OPTION
RESERVE
£’000
RETAINED
EARNINGS
£’000
OTHER
RESERVE
£’000
TOTAL
£’000
Balance at 1.1.13
8,413
53,012
46
1,879
–
63,350
Transactions with owners
Issue of share
Charge for share options
Non-controlling interest
2,732
14,357
–
–
–
–
Total transactions with owners
2,732
14,357
–
61
–
61
–
–
–
–
Loss for year
Total comprehensive loss
–
–
–
–
–
–
(10,365)
(10,365)
Balance at 31.12.13
11,145
67,369
107
(8,486)
Transactions with owners
Issue of share
Issue costs
Charge for share options
Transfer to Other Reserve
Total transactions with owners
21
23
Profit for year
Total comprehensive profit
Balance at 31.12.14
83
–
–
–
83
–
–
467
(82)
–
(45,000)
(44,615)
–
–
–
–
39
–
39
–
–
–
–
–
–
–
965
965
–
–
–
–
–
–
–
–
–
–
–
–
45,000
45,000
17,089
61
–
17,150
(10,365)
(10,365)
70,135
550
(82)
39
–
507
965
965
11,228
22,754
146
( 7,521)
45,000
71,607
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20
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
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 year ended 31 December 2014. The Directors have continued
to adopt the going concern basis for the preparation of these financial statements, having received settlement from the Bolivian
Government in 2014 allowing the repayment of the Birdsong loan in June 2014. During 2015 the Group continues to receive funds from
Argentina in service of the loans to the Joint Venture, whilst also selling the assets of the Group in Peru.
The Group has agreed but not contracted for a bridging loan facility of $12 million that will be drawn down in the event that the
arrangements for an alternative one year secured loan from a large organisation within the South American power industry is not signed
within the time limits required by the company’s creditors. It is expected that the Group will reach satisfactory agreement with this large
organisation such that the proceeds of this loan will be used to meet current obligations and provide working capital for the Group. The
Group expects to repay the loan from the proceeds of the sale of its Peruvian assets. On the basis of these loan facilities the Directors
have assessed that the Group has suffi cient working capital based on their review of cashfl ow forecasts for a period of at least 12
months from the signing of the fi nancial statements.
Restatement of 2013 accounts
The 2013 financial results have been restated for the application of IFRS 11 Joint Arrangements. In previous years the group has
accounted for interests in joint ventures under the proportionate consolidation approach. Under IFRS 11 the Group’s interest needs to
be included in the consolidated accounts by equity accounting. This change in accounting policy has had the effect of increasing the
net assets of the Group by £3.3 million at 31 December 2013 and £0. 2 million as at 1 January 2013 and also has reduced the loss by
£3.3 million in the Consolidated Statement of Comprehensive Income for the year ended 31 December 2013. The investment in the
Joint Venture is held at nil as the Group is not recognising addit ional losses over and above that investment. More information on the
effect of IFRS 11 can be seen in note 28.
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 (2014)
Content
Financial instruments:
Applicable for financial
years beginning on/after
01/01/ 2018
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
21
FOR THE YEAR ENDED 31 DECEMBER 2014
Standards and amendments to existing standards effective 1 January 2014
The following standards, amendments and interpretations became effective in 2014:
Standard/interpretation
Amendments to IAS 36*
Non-Financial Assets
IFRS 10*
IFRS 11
IFRS 12*
IAS 27* (Revised)
IAS 28* (Revised)
Amendment to IFRS 10,
IFRS 11 and IFRS 12*
Amendment to IFRS 10*
Amendments to IAS 32*
IFRIC Interpretation 21*
Content
Recoverable Amount Disclosures for
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Separate Financial Statements
Investments in Associates and Joint Ventures
Transition Guidance
Investment Entities
Offsetting Financial Assets and Financial Liabilities
Levies
Applicable for financial
years beginning on/after
01/01/2014
01/01/2014
01/01/2014
01/01/2014
01/01/2014
01/01/2014
01/01/2014
01/01/2014
01/01/2014
*
The adoption of these Standards and interpretations has had no material impact on the financial statements of the Group other than for the disclosure
of joint venture.
IFRS 9, ‘Financial instruments: Classifi cation and measurement’
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.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of consolidation
The Group financial statements consolidate the results of the Company, the equity accounting under IFRS 11 in the Argentina joint
venture, the Group’s 100 per cent. interest in the Chilean entity and the Peruvian assets held for sale.
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. Management has reviewed its control assessments
in accordance with IFRS 10 and has concluded that there is no effect on the classification as subsidiaries or joint ventures of any of the
Group’s investees held during the period or comparative periods covered by these financial statements.
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2014.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. Generally there is a presumption that a majority of voting rights result
in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the
Group considers all relevant facts and circumstances in assessing whether it has power over an investee.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the
consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group
are eliminated in full on consolidation.
A joint arrangement is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject
to joint control that is when the strategic financial and operating policy decisions relating to the activities of the joint venture require the
unanimous consent of the parties sharing control.
The Group reports its interests in joint venture using the equity method of accounting, except when the investment is classified as held
for sale.
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22
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
Under the equity method, investments in joint ventures are carried in the consolidated statement of financial position at cost as adjusted
for post-acquisition changes in the Group’s share of the net assets of the joint venture, less any impairment in the value of individual
investments. Losses of a joint venture in excess of the Group’s interest in that joint venture are not recognised, unless the Group has
incurred legal or constructive obligations or made payments on behalf of the joint venture.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent
liabilities of the joint venture recognised at the date of acquisition is recognised as goodwill.
The goodwill, if any is included within the carrying amount of the investment and is assessed annually for impairment as part of the
investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the
cost of acquisition, after reassessment, is recognised immediately as a profit or loss.
Unrealised gains on transactions between the Group and its joint venture are eliminated to the extent of the Group’s interest in the joint
venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Unrealised gains on transactions between the Group and subsidiary 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 are dealt with by the acquisition method. This 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 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 joint venture, 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.
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 despatch 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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
23
FOR THE YEAR ENDED 31 DECEMBER 2014
Independent Power Corporation PLC a 100 per cent. subsidiary of Rurelec PLC undertakes engineering and development exercises for
the Group and third parties. Income and expenses are recognised as they occur, however there are accrued income amounts which
relate to success fees on completing the engineering and development of projects that are paid on financial close of the project. The
amounts of accrued income are subjective and are determined by management dependent on the level of completion of the relevant
project and the expected timing of financial close.
2.5 Dividends
Dividends, other than those from investments in associates and joint ventures, are recognised at the time the right to receive payment is
established. No dividends were paid or received during the year (2013: 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 which is not depreciated by equal annual instalments over their estimated useful economic lives. The periods generally applicable are:
Buildings
Plant and equipment
25 to 50 years
3 to 15 years
Material residual values are updated as required, but at least annually. Where the carrying amount of an asset is greater than its
estimated recoverable amount, it is written down immediately to its recoverable amount.
2.8 Impairment of tangible and intangible assets
At each 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. The Group recognises a cash-generating unit by its ability to independently earn income. The Group carries each cash-
generating unit in an individual special purpose company so they are easily recognised.
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.
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24
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
2.9 Non-current Assets Held for Sale and Discontinued Operations
In general IFRS 5 outlines how to account for non-current assets held for sale such that assets (or disposal groups) held for sale are
not depreciated, are measured at the lower of carrying amount and fair value less costs to sell, and are presented separately in the
statement of financial position.
The following conditions must be met for an asset (or ‘disposal group’) to be classified as held for sale: IFRS 5.6-8
• management is committed to a plan to sell
• the asset is available for immediate sale
• an active program to locate a buyer is initiated
• the sale is highly probable, within 12 months of classification as held for sale (subject to limited exceptions)
• the asset is being actively marketed for sale at a sales price reasonable in relation to its fair value
• actions required to complete the plan indicate that it is unlikely that plan will be significantly changed or withdrawn
The assets need to be disposed of through sale. When the Group is committed to a sale involving loss of control of a subsidiary that
qualifies for held-for-sale classification under IFRS 5 the Group classifies all of the assets and liabilities of that subsidiary as held for sale,
even if the entity will retain a non-controlling interest in its former subsidiary after the sale. Non-current assets or disposal groups that
are classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Assets classified as held
for sale, and the assets and liabilities included within a disposal group classified as held for sale, are presented separately on the face
of the statement of financial position. The sum of the post-tax profit or loss of the discontinued operation and the post-tax gain or loss
recognised on the measurement to fair value less cost to sell or fair value adjustments on the disposal of the assets (or disposal group)
is presented as a single amount on the face of the statement of comprehensive income.
2.10 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.
2.11 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 re-measured at amortised cost using the effective interest method, less
provision for impairment. Any impairment is recognised in the income statement.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
25
FOR THE YEAR ENDED 31 DECEMBER 2014
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
assets carrying amount and the present value of estimated cash flows.
2.12 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.
2.13 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.
2.14 Shareholders’ equity
Equity attributable to the shareholders of the parent company comprises the following:
“Share capital” represents the nominal value of equity shares.
“Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of
expenses of the share issue.
“Foreign currency reserve” represents the differences arising from translation of investments in overseas subsidiaries.
“Share option reserve” represents the fair value of options granted and outstanding at the year-end.
“Retained earnings” represents retained profits.
“Other reserves” comprises the reduction of the share premium account.
2.15 Pensions
During the year under review, the Group did not operate or contribute to any pension schemes (201 3: nil).
2.16 Segment reporting
In identifying its operating segments, management follows the Group’s geographic locations and are reported in a manner consistent
with the Chief Operating Decision Maker. 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.
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26
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
3 KEY ASSUMPTIONS AND ESTIMATES
When preparing the financial statement, management make a number of judgements, estimates and assumptions about the recognition
and measurement of assets, liabilities income and expenses. The actual results may differ from the judgements, estimates and
assumptions made and will seldom equal the estimated results. The areas which management consider are likely to be most affected by
the significant judgements, estimates and assumptions on recognition and measurement of assets, liabilities, income and expenses are:
a) Useful lives of depreciable assets – management review, with the assistance of external expert valuers, the useful lives of depreciable
assets at each reporting date. This review includes consideration of the book value of plant under construction which at the year-end
amounted to £3.7 million. Actual results, however, may vary due to changes in technology and industry practices.
b) Impairment – management review tangible and intangible assets at each balance sheet date to determine whether there is any
indication that those assets have suffered an impairment loss. This review process includes making assumptions about future events,
circumstances and operating results. The actual results may vary from those expected and could therefore cause significant adjustments
to the carrying value of the Group’s assets. 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) Management have assessed that we do not control the Argentine Joint Venture and therefore have treated the joint venture in
accordance with IFRS 11 (see note 28). This assessment is based on the lack of power over the investee and due to the exposure to
variable returns from its involvement with the investee.
f) Accrued Income – Management makes assessments as to the amounts of accrued income that is recognised in the Group’s
accounts. The amounts recognised are based on what is expected to be received in total and relate to success fees from projects
developed by the Group. These amounts are then reviewed with adjustments for the level of completion of the project and the likelihood
of reaching financial close when the amounts will become due. These are judgements made by management of the Group and the
actual results may differ from these judgemental assessments.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
27
FOR THE YEAR ENDED 31 DECEMBER 2014
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. However even though the Argentine operation has been accounted for
under the equity accounting method as a Joint Venture under IFRS 11 the segmental analysis is shown in this note 4 but then removed in
consolidation adjustments to provide the results in accordance with IFRS 11. More details on the effect of this has been shown in note 28 .
The following tables provide an analysis of the operating results, total assets and liabilities, capital expenditure and depreciation for 2014
and 2013 for each geographic segment.
a) 12 months to 31.12.2014
Revenue
Write off of accrued income
Costs of Sales
Gross profit/(loss)
Administrative expenses
Profit/(loss) from operations
Other (expense)/income
Foreign exchange (losses)/gains
Finance income
Finance expense
(Loss)/profit before tax
Tax expense
Loss for the year
Total assets
Total liabilities
Capital expenditure
Depreciation
ARGENTINA
£’000
CHILE
£’000
PERU
£’000
8,611
–
(5,579)
3,032
(293)
2,739
–
(2,175)
–
(674)
(11 0)
(105)
(21 5)
11,45 5
23,383
–
293
–
–
–
–
(83)
(83)
–
51
–
–
(32)
–
(32)
–
–
–
–
(661)
(661)
–
(631)
18
(742)
2,760
3,780
(918)
(2,01 6)
( 1,18 7)
(8)
–
(2, 02 4)
( 1,18 7)
6,458
7,321
18,528
78,626
22,697
6,865
–
–
5,087
(2)
48
10
UK
£’000
42 3
(3,219)
(231)
(3,027)
( 3,208)
(6,23 5)
BOLIVIA
£’000
CONSOLIDATION
ADJUSTMENTS
£’000
–
–
–
–
–
–
(8,732)
–
5,579
(3,153)
413
(2,740)
TOTAL
£’000
30 3
(3,219)
(231)
(3,147)
( 3,832)
(6,9 79)
(574)
299
(117)
( 392)
–
–
–
299
–
299
–
–
–
–
2,175
( 1,230)
2,022
110
105
215
2,180
2, 568
( 312)
( 2,936)
(8)
( 2,944)
–
( 40,394)
74,763
(42,32 7)
17,9 39
–
5,135
(293)
12
The impairment relating to the IPC goodwill recognised on consolidation is regarded as relating to the UK operating segment. This is due
to the Chief Operating Decision Maker reviewing the results of IPC within the UK operating segment.
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28
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
b) 12 months to 31.12.2013 – restated
ARGENTINA
£’000
CHILE
£’000
PERU
£’000
Revenue
Cost of sales
Gross profit
Administrative expenses
Profit/(loss) from operations
Other expense
Other expense from share of JV
Foreign exchange losses
Finance income
Finance expense
Loss before tax
Tax credit/(expense)
Loss for the year
Total assets
Total liabilities
Capital expenditure
Depreciation
9,651
(4,186)
5,465
(4,278)
1,187
–
–
(3,761)
–
(1,819)
(4,393)
218
(4,175)
15,741
22,169
221
435
–
–
–
(55)
(55)
–
–
(55)
–
(3)
(113)
–
(113)
944
1,701
1,786
–
–
–
–
(475)
(475)
–
–
197
186
(219)
(311)
(29)
(340)
6,499
6,869
5,934
4
5 EXCHANGE RATE SENSITIVITY ANALYSIS
The key exchange rates applicable to the results were as follows:
UK
£’000
5,442
(1,619)
3,823
(3,211)
612
–
–
(504)
3,857
(12,218)
BOLIVIA
£’000
CONSOLIDATION
ADJUSTMENTS
£’000
–
–
–
–
–
(9,651)
4,186
(5,465)
4,278
(1,187)
TOTAL
£’000
5,442
(1,619)
3,823
(3,741)
82
(38,314)
–
(38,314)
–
–
(198)
–
(319)
3,562
(1, 078)
14, 239
(319)
(561)
2, 767
(20)
(8,253)
(38,512)
1 5,217
(3 6,365)
–
–
(218)
(29)
(8,253)
(38,512)
1 4,999
(3 6,394)
78,441
(1,729)
6,199
16,195
5
–
–
–
( 9,22 0)
( 7,914)
–
90,675
29,024
32
24,168
(435)
9
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 £
31.12.14
31.12.13
13.2814
1.5532
940.964
4.5744
12.7777
1.6445
940.528
4.6084
10.7073
1.6488
866
4.55
8.6676
1.5652
863
4.51
If the exchange rate of sterling at 31 December 2014 had been stronger or weaker by 10 per cent with all other variables held constant,
shareholder equity at 31 December 2014 would have been £3.3 million (2013: £0.9 million, restated 2013 £0.2 million) lower or higher
than reported.
If the average exchange rate of sterling during 2014 had been stronger or weaker by 10 per cent with all other variables held constant,
the profit for the year would have been £0.1 million (2013: £0.4 million, restated 2013: £0.05 million) higher or lower than reported.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
29
FOR THE YEAR ENDED 31 DECEMBER 2014
6 COST OF SALES
Expenditure incurred in cost of sales is as follows:
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 services1
YEAR ENDED
31.12.14
£’000
YEAR ENDED
31.12.13
RESTATED
£’000
2
2 29
2 31
1,475
144
1,619
YEAR ENDED
31.12.14
£’000
YEAR ENDED
31.12.13
RESTATED
£’000
YEAR ENDED
31.12.13
ORIGINALLY STATED
£’000
1,754
678
1,326
74
3,832
1,324
416
1,914
87
3,741
3,370
497
4,065
87
8,019
1
Audit services include £74k paid to the auditors for the audit of the Company and the Group financial statements and £nil paid to the Company’s
auditors for non-audit professional services provided to the Company in connection with the review of overseas activities (2013 £75.5k). Fees paid to
other auditors, in respect of the audit of joint venture companies, amounted to £35k (2013: £11.5k).
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
8 EMPLOYEE COSTS
a) Group
YEAR ENDED
31.12.14
£’000
YEAR ENDED
31.12.13
RESTATED
£’000
YEAR ENDED
31.12.13
ORIGINALLY STATED
£’000
Aggregate remuneration of all employees and Directors, including social
security costs
1,754
1,324
3,370
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
NUMBER
NUMBER
NUMBER
5
–
18
22
45
£’000
62
6
10
4
14
34
£’000
409
12
17
7
24
60
£’000
409
The average number of employees in the Company, including Directors, during year was as follows:
Management
c) Directors’ remuneration, including social security costs
NUMBER
NUMBER
NUMBER
5
6
6
The total remuneration paid to the Directors was £717,000 (2013: £615,000). The total remuneration of the highest paid Director was
£230 ,000 (2013: £230,000). Other emoluments paid were health insurance costs, there were no bonuses, pension costs or share
based payments paid during the year (2013: nil)
P. Earl
E. Shaw
A. Morris
M. Blanco
L. Coben
C Emson
B Rowbotham
Total
YEAR ENDED
31.12.14
£’000
Base Salary/Fee
Inc. Social Security
YEAR ENDED
31.12.14
£’000
Other
Emoluments
226
174
209
24
15
29
30
707
4
3
3
–
–
–
-
10
YEAR ENDED
31.12.14
£’000
YEAR ENDED
31.12.13
£’000
Total
230
177
212
24
15
29
30
717
Total
230
160
88
95
30
6
6
615
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
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NOTES TO THE FINANCIAL STATEMENTS
31
FOR THE YEAR ENDED 31 DECEMBER 2014
9 (a) OTHER EXPENSE
Foreign exchange Gains/(losses)3
Total
YEAR ENDED
31.12.14
£’000
2,180
2,180
YEAR ENDED
RESTATED
31.12.13
£’000
( 561)
( 561)
ORIGINALLY
STATED
YEAR ENDED
31.12.13
£’000
(3,268)
(3,268)
3 Foreign exchange Gains/(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 Costs/Cost Reduction2
Impairment charge on intangible in IPC3
Total
YEAR ENDED
31.12.14
£’000
ORIGINALLY STATED
YEAR ENDED
31.12.13
£’000
(376)
259
(691)
( 808)
(29,455)
(4,929)
–
(34,384)
1
2
3
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 $31.5m or £19.1m which is made up of
£17.5m compensation claim and interest of £1.6m. The carrying value of the claim, excluding interest and reimbursement of costs, as at 31 December
2012 was £47.0m and therefore the loss was £29.5m. The amount shown for 2014 of £376k loss was the adjustment of what was accrued in 2013
and paid in 2014.
The arbitration costs were not awarded to Rurelec and so £4.9m has been taken as a charge in 2013, in 2014 these costs were reduced by £259k in
agreement with the suppliers.
Following goodwill impairment testing for IPC an impairment of £691k has been charged in the year, see note 15 for further details.
9 ( c) OTHER EXPENSE
Birdsong Loan Expense
Interest Payable on Birdsong Loan
Birdsong loan participation expense – CVR costs1
Accrued lender costs
Total
YEAR ENDED
31.12.14
£’000
ORIGINALLY STATED
YEAR ENDED
31.12.13
£’000
–
416
–
416
(2,32 8)
(1,299)
(303)
(3,9 30)
1
The Birdsong loan included a contingent value right which amounted to 15 per cent of the Bolivian claim plus interest. In 2014 there was a £416k write
back of CVR costs these are included in other income.
2 The Birdsong lender charges for extending the loan past 31 December 2013 have been accrued in 2013.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
10 FINANCE INCOME & EXPENSE
Inter-group interest received/receivable1
Interest accrued on Bolivian claim
Withholding Tax write back
Total interest income
YEAR ENDED
31.12.14
£’000
2,45 0
–
117
2, 56 7
YEAR ENDED
31.12.13
RESTATED
£’000
YEAR ENDED
31.12.13
ORIGINALLY STATED
£’000
2,966
(199)
–
2,767
2,399
(199)
–
2,200
Interest paid/payable on bank borrowings and loans2
(312)
(20)
(1,272)
1
2
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 £27.6 million (2013: £26.9 million). Interest on inter-group loans has been
charged at rates of between 8 per cent and 19 per cent.
Interest paid/payable includes interest on bank borrowings and other loans in Peru and Argentina. The details of the amounts due under the loans are
shown in note 26.
Sensitivity analysis arising from changes in borrowing costs is set out in note 26.
11 TAX EXPENSE
The relationship between the expected tax expense at basic rate of 21.50 per cent. (31 December 2013: 23.25 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
Adjustment for non-taxable expense
Group relief surrender by joint venture company
Adjustment for different basis of calculating overseas tax
Actual tax (expense) /credit
Comprising:
Current tax (expense)/credit
Deferred tax/ net credit
Total (expense)/credit
YEAR ENDED
31.12.14
£’000
(2,936)
21.50 %
632
–
–
–
(8)
(8)
–
(8)
YEAR ENDED
31.12.13
RESTATED
£’000
YEAR ENDED
31.12.13
ORIGINALLY STATED
£’000
(36 ,3 65 )
23.2 5%
8,4 55
(8,166)
–
–
(29)
(29)
–
(29)
(39,384)
23.2 5%
9,157
(8,166)
–
(997)
189
136
53
189
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
33
FOR THE YEAR ENDED 31 DECEMBER 2014
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 attributable to equity holders of the parent
Basic loss per share
Diluted loss per share
YEAR ENDED
31.12.14
YEAR ENDED
31.12.13
RESTATED
YEAR ENDED
31.12.13
ORIGINALLY STATED
561,181,121
494,993,260
494,993,260
19,525,000
19,525,000
19,525,000
£(2.9m)
(0.52p)
(0.52p)
£(35.8m)
(7.23p)
(7.23p)
£(39.2m)
(7.92p)
(7.92p)
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 profit for the year was £1.0 million (2013: loss £10.4 million).
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
14 PROPERTY, PLANT AND EQUIPMENT
LAND
£’000
PLANT AND
EQUIPMENT
£’000
PLANT UNDER
CONSTRUCTION
£’000
a) Group
Cost at 1.1.13 – Restated
Exchange adjustments
Additions
Cost at 31.12.13 – Restated
Exchange adjustments
Transfer of Assets Held for Sale
Additions
Cost at 31.12.14
Depreciation at 1.1.13
Exchange adjustments
Charge for the year
Depreciation at 31.12.13
Exchange adjustments
Charge for the year
Transfer of Assets Held for Sale
Depreciation at 31.12.14
Net book value – 31.12.14
Net book value – 31.12.13
–
–
72
72
–
–
–
72
–
–
–
–
–
–
–
–
72
72
–
–
16,195
16,195
–
–
60
16,255
–
–
9
9
–
12
–
21
3,082
546
7,901
1 1,530
( 1,184)
(9,558)
5,075
5,8 63
–
–
–
–
–
–
–
–
TOTAL
£’000
3,082
537
24,168
2 7,797
( 1,184)
(9,558)
5,135
17,0 55
–
–
9
9
–
12
–
21
16,2 34
16,1 86
5,85 3
1 1,530
22,169
2 7,788
Operating property, plant and equipment located in Argentina is removed in accordance with IFRS 11. The Property, plant and
equipment of £16.24 million mainly relates to two turbines valued at £16.20 million. Plant under construction comprises of plant in Chile
(£5. 8 million) and Peru (£67k). The plant at Canchayllo was completed in December 2014, and transferred to plant and equipment. It
was commissioned in January 2015.
b) Company
The Company had no property, plant and equipment.
15 INTANGIBLE ASSETS
At 1 January 2014
Additions
Impairment
At 31 December 2014
At 31 December 2013 RESTATED
At 1 January 2013 as originally stated
Effect of restatement due to change in accounting policy
At 1 January 2013 RESTATED
Fair value adjustment on Goodwill and intangibles
At 31 December 2013 RESTATED
GOODWILL
£’000
1,79 2
22 0
(691)
1,321
1,79 2
3,168
(3,168)
Nil
1,79 2
1,79 2
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
35
FOR THE YEAR ENDED 31 DECEMBER 2014
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 100 per cent of IPC in June 2013 the acquisition of Central Illapa SA in March 2013 and
the acquisition of SEA Energy SA in October 2014.
The Group tests goodwill 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. (2013 – 13 per cent.)
In the year ended 31 December 2014 management have concluded that there is uncertainty relating to certain elements of accrued
income previously recognised in relation to operations conducted in Central Illapa. This has resulted in approximately £3.2 million of
accrued revenue being written off in the year. This has led to management performing an impairment review on the IPC CGU as detailed
below. This CGU predominately operates in South America and is focussed on the development of projects in the power generation
industry there. The project in question was situated in Chile, which is one of the operating segments used to monitor business
performance. The recoverable amount of the CGU has been based on the value in use of IPC. The discount rate used in the value in use
calculation was 13 per cent.
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, whilst also including engineering fees and recharge of expenses. The costs and revenue 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 the need for an impairment
of £691k , which is included in other expenses. An increase in the discount rate by 1 per cent. to 14 per cent. would increase the
impairment by £167k. The brand value of IPC and its experience over 20 years in the South American market supports the remaining
intangible assets shown within the Rurelec financial statements.
The amount of goodwill that has been included in the intangible asset is £1,101 k in respect of IPC.
IPC has been active in 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 least at £1.1 million which ensure that the value of the
Goodwill in IPC remains at £1,101 k.
Full year Revenues for IPC were £4 31k (2013: £5,604k) and (Losses)/Profits were (£ 4,167k) (2013: £2,108k).
SEA Energy SA is a wholly owned subsidiary of Rurelec PLC with a small operating wind farm in Buenos Aires province in Argentina.
The Company was purchased in October 2014 for £245k spread over two years. The company had net assets at the time of purchase
of £51k, with revenues for the full year of 2014 of £5k. The intention of the purchase is to increase the size of the windfarm in Argentina
from 250kW to 3MW as well as purchase and own a gas turbine that would operate on the site of the EdS plant in Comodoro Rivadavia
in Chubut Province of Argentina. The goodwill on acquisition was £195k.
Central Illapa SA – is a wholly owned subsidiary of Rurelec PLC, the goodwill on acquisition was £25k.
16 TRADE AND OTHER RECEIVABLES
a) Group – non-current
Trade receivables
Amounts due from joint venture companies1
Other receivables and prepayments
31.12.14
£’000
100
23,09 3
19
23,21 2
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
513
23,101
34
23,648
535
15,399
875
16,809
1
Amounts due from joint venture companies represent the amounts lent by the Company 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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
b) Group – current
Trade receivables
Other receivables and prepayments
31.12.14
£’000
38
9,56 2
9,60 0
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
160
14,431
14,591
3,043
6,788
9,831
Other receivables and prepayments include £8.6 million RPFL loan Rurelec Plc Re: (EdS) .
c) Company – non-current
Amounts owed by subsidiary companies1
Amounts owed by joint venture companies2
The amounts owed by subsidiary companies include:
31.12.14
£’000
31.12.13
ORIGINALLY STATED
£’000
27,50 5
23,094
50, 599
16,851
25,436
42,287
1
2
Loans to subsidiaries in Chile (£6.6 million) and Peru (£11.1 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 loans Peru are expected to be recovered once the assets have been sold, which
management expect to occur during 2015. The loans to Chile are considered recoverable once the projects reach fi nancial close and therefore no
provision has been made against these loans.
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 twelve months. During the period the Group received $5.4 million from EdS in service of the amounts
due. £8.6 million (2013 – £7.7 million) is secured by a fi rst charge against the assets of EdS.
d) Company – current
Other receivables and prepayments
31.12.14
£’000
31.12.13
ORIGINALLY STATED
£’000
3 8
3 8
34
34
All trade and other receivables are unsecured 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 2014
Exchange translation
Credited to tax expense
Asset at 31 December 2014
31.12.14
£’000
–
–
–
–
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
–
–
–
–
389
(101)
53
341
The Group deferred tax asset arises principally from tax losses carried forward in Argentina.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
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NOTES TO THE FINANCIAL STATEMENTS
37
FOR THE YEAR ENDED 31 DECEMBER 2014
b) Liability at 1 January 2014
Exchange translation
Credited/(Debited) to tax expense
Liability at 31 December 2014
31.12.14
£’000
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
–
–
–
–
–
–
–
–
568
(148)
–
420
The Group deferred tax liability arose from deferred tax provisions on the fair value adjustments arising on the acquisition of 50 per cent.
of PEL.
18 INVENTORIES
a) Group – Inventories
Spare parts and consumables
Spare parts and consumables are valued at cost.
b) Parent Company – Inventories
Inventories
31.12.14
£’000
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
–
–
227
31.12.14
£’000
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
16,195
16,195
16,195
Inventories comprises of two Siemens 701DU Turbines acquired from IPSA Group plc in June 2013, these will be sold to Central Illapa
SA for use in Chile during 2015.
19 COMPENSATION CLAIM
Book value of claim
31.12.14
£’000
–
31.12.13
£’000
19,126
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 $142.3 million and the Arbitration
proceedings were held in April 2013. The award amount was for $28.9 million plus interest from 1 May 2010 to the date when the award
is paid. As at the 31 January the interest amounted to $6.6 million making the total amount due to Rurelec in settlement of the claim
$35.5 million or £21.5 million. The Tribunal representing the Permanent Court of Arbitration decided not to award costs to either side.
The costs of the Arbitration to Rurelec were £4.6 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 31 December 2013
being a loss of £29.5 million on the underlying assets and £5.1 million on the legal fees and accrued interest. .
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
20 CASH AND CASH EQUIVALENTS
a) Group
Cash and short-term bank deposits
b) Company
Cash and short-term bank deposits
31.12.14
£’000
283
1
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
3,7 30
3,750
n/a
21
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.
21 SHARE CAPITAL
In issue, called up and fully paid
31.12.14
£’000
31.12.13
£’000
561,387,586 ordinary shares of 2p each (2013: 557,387,586)
11,228
11,145
Reconciliation of movement in share capital
Balance at 1 January 2014
Allotment in January 2014
Balance at 31 December 2014
NUMBER
557,236,492
4,151,094
561,387,586
£’000
11,145
83
11,228
The allotment in January 2014 was at 13.25 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 2014
Change for the Year
Balance at 31 December 2014
31.12.14
£’000
107
39
14 6
31.12.13
£’000
46
61
107
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, 5,216,666 vested in 2014, 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 5,216,667 shares vest in 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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
39
FOR THE YEAR ENDED 31 DECEMBER 2014
Options granted to the directors which were outstanding at the year-end:
A Morris
P Earl
E Shaw
M Blanco
L Coben
31.12.14
NUMBER OF SHARES
31.12.13
NUMBER OF SHARES
1,000,000
5,000,000
4,000,000
2,000,000
650,000
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.
23 OTHER RESERVE
On 17 December 2014 The High Court approved the reduction in the share premium account of the company of £45,000,000 and
the creation of a special reserve in the accounts of the Group. The Group had accumulated losses on its profit and loss account of
£7,371,683. The existence of these losses prevents the Company from paying dividends to its shareholders out of future profits until
these losses have been eliminated. The Board considered that the accumulated losses represented a permanent loss and given the
size of the accumulated losses, there was in the opinion of the Board no reasonable prospect of the losses being eliminated in the short
term. It was proposed that the permanent loss should be recognised by eliminating the deficit on the profit and loss account. This would
be achieved by the reduction in the balance on the Share Premium Account of the Company.
The Company had built up a substantial Share Premium Account through the issue of shares for cash at values in excess of the nominal
value of those shares. At the time of the High Court hearing, the balance standing to the credit of the share premium account was
£67,835,921. A resolution was proposed and successfully passed at a General Meeting on 25 November 2014 to reduce the amount
standing to the credit of the share premium account of the Company by £45,000,000 from £67,835,921 to £22,835,921.
The resolution was subsequently confirmed by the High Court in the terms proposed at the time by your Board, the effect of the Capital
Reduction was to release part of the amount standing to the credit of the Share Premium Account of the Company so that £45,000,000
(i) may be used by the Company to eliminate the deficit on the profit and loss account and (ii) the balance credited to the distributable
reserves of the Company to allow the Company to pay dividends in due course.
Share issue costs of £82,233 have been offset against the Share Premium account, which is now shown at £22,753,689.
The implementation of the Capital Reduction is subject to a number of criteria which are explained further below.
Capital Reduction – Share Premium Account
Share premium is treated as part of the capital of the Company and arises on the issue by the Company of shares at a premium to their
nominal value. The premium element is credited to the Share Premium Account. The Company is generally precluded from the payment
of any dividends or other distributions or the redemption or buy back of its issued shares in the absence of sufficient distributable
reserves, and the Share Premium Account can be applied by the Company only for limited purposes.
In particular, the Share Premium Account is a non-distributable capital reserve and the Company’s ability to use any amount credited to
that reserve is limited by the Companies Act. However, with the confirmed approval of our shareholders by way of a special resolution
and subsequent confirmation by the High Court, the Company has reduced our Company’s share premium account and credited it to
the profit and loss account.
To the extent that the release of such a sum from the Share Premium Account creates or increases a credit on the profit and loss
account, that sum represents distributable reserves of the Company subject to the restrictions set out below.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
Capital Reduction – Procedure
In order to approve the Capital Reduction, the High Court was required to be satisfied that the interests of the Company’s creditors
will not be prejudiced by the Capital Reduction. The Company was not required to seek written consent to the Capital Reduction from
its creditors. However, for the benefit of those of its creditors from whom consent is not required, the Company will not be capable of
making a distribution to shareholders until any such outstanding obligations have been discharged, and the Company has given an
undertaking to that effect to the High Court. At the date of the audit report there are some £3.4 million of creditors to be settled. The
Board of Directors consider that these amounts will be settled in the short term and therefore the £45 million remains within a Special
Reserve which is non-distributable until these settlements have occurred.
The Capital Reduction does not affect the number of Shares in issue, the nominal value per Share or the voting or dividend rights of any
Shareholder.
24 TRADE AND OTHER PAYABLES
a) Group – non-current
b) Group – current
Trade payables
Accruals
c) Company – current
Trade payables
Accruals
25 TAX LIABILITIES
a) Group – non-current
Tax due in UK
b) Group – current
UK corporation tax
P.A.Y.E. in UK
VAT in UK
Tax due in Argentina
Other taxes due in Argentina principally VAT
P.A.Y.E in Peru
31.12.14
£’000
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
–
–
–
4,046
377
4,423
4,193
788
4,981
7,360
69 1
8,05 1
n/a
n/a
n/a
8,417
466
8,883
5,084
61
5,145
31.12.14
£’000
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
–
18
18
31.12.14
£’000
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
–
28
(14)
–
–
56
70
–
38
–
–
–
27
65
–
29
11
56
343
27
466
This net liability for tax due in the UK is £14k relates to UK PAYE and VAT refund. A PAYE tax liability of £56k is also due in Peru.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
41
FOR THE YEAR ENDED 31 DECEMBER 2014
26 BORROWINGS
a) Group – non-current
Loan from CAMMESA
Other loans
b) Group – current
Loan from CAMMESA
Other loans
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
31.12.14
£’000
31.12.13
RESTATED
£’000
31.12.13
ORIGINALLY STATED
£’000
–
–
–
–
3,164
3,164
3,164
–
622
622
–
20,268
20,268
20,890
877
622
1,499
1,516
23,067
24,583
26,082
3,164
20,268
24,583
–
–
–
311
311
–
311
311
877
3,164
20,890
26,082
Other loans of £3.2 million including accrued interest are made up of £2.9 million loans to Cascade Hydro Limited and Cascade Hydro
Power S.A.C and a further loan of £250k to Rurelec Plc.
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 £15,000 lower or higher than reported.
Sensitivity analysis to changes in exchange rates:
Only $205,000 of these loans are denominated in US$. As a result, the liability to the Group’s lenders will change as exchange rates
change. 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 £12,000 (2013: £1.2 million).
The Group’s Joint Venture borrowings are denominated in AR $ and US$ and are substantially related to specific electricity generating
assets and therefore the effect on the net equity of the Group is limited.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
27 INVESTMENTS
Cost at 1 January 2013
Additions during the year
Investment in Cascade Hydro Limited
Investment in Term oelectrica 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
Cost at 1 January 2014
Additions during the year
Investment in Term oelectrica del Norte SA – Disposal by Entity
Investment in Central Illapa SA – Disposal by Entity
Investment in Electricidad Andina – Disposal by Entity
Cost at 31 December 2014
Impairment Loss in IPC
Balance at 31 December 2014
31.12.13
£’000
18,998
269
4,190
33
4,000
(10,455)
(292)
16,743
31.12.14
£’000
16,743
(4,190)
(33)
(63)
12,457
(2,702)
9,756
The impairment loss relates to the write down of the accrued income in IPC triggered by the impairment review, which has resulted in
the impairment loss in the year.
At the year-end the Company held the following investments:
•
•
•
•
•
•
•
50 per cent. (2013: 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. (2013: 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. (2013 – 100 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. (2013 – 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. (2013 -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. (2013 – 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. (2013 – 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 was written down to zero in 2013 because the assets were incorporated within the overall settlement
with the Plurinational State of Bolivia with the nationalisation of the assets of Empresa Electrica Guaracachi SA.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
43
FOR THE YEAR ENDED 31 DECEMBER 2014
•
100 per cent. (2013 – 100 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.
28 JOINT VENTURE
Under IFRS 11 the reporting of jointly controlled entities has changed such that the use of proportionate consolidation for arrangements
classified as jointly controlled require the use of the equity method of accounting. The Group’s only joint arrangement within the
scope of IFRS 11 is its 50 per cent. investment in Patagonia Energy Limited (“PEL”), which directly owns Energia del Sur SA (EdS) in
Argentina. This was previously accounted for using the proportionate consolidation method under IAS 31. Management has reviewed
the classification of PEL in accordance with IFRS11 and has concluded that it is a joint venture and therefore we have accounted for our
interest in the PEL joint venture using the equity accounting method.
IFRS11 has been applied retrospectively in accordance with the transitional provisions set out in IFRS11. Consequently the investment
in PEL has been restated by aggregating the carrying amounts of the assets and liabilities that the Group had previously proportionately
consolidated with effect from 1 January 2013. The group has assessed the carrying amount of the investment for impairment as at
31 December 2013 and 31 December 2014 and has concluded that no impairment loss is required. (See also note 29 )
The effects on the statements of financial position at 31 December 2013 and 31 December 2014 show an increase in the net assets
of the Group due to the fact that the Joint Venture was previously proportionately consolidated and so included its share of the losses
in the joint venture whilst under the equity method it has not included losses in excess of the Group’s interest in the joint venture as
detailed in note 2.1.
The investment held by the group in the Argentine Joint Venture is held at £0.3 million at 1 January 2013 and at nil value at
31 December 2013 and 31 December 2014. Although negative net assets arise when combining the carrying amount of assets and
liabilities of the joint venture management note that as this is caused by the amounts loaned to the joint venture by the group that
therefore the group do not have an obligation in relation to those negative net assets and as such the investment is held at a nil value. At
the end of the year accumulated losses in relation to the group’s share of the results of the joint venture total £5, 490k (2013, £3,3 20k).
The effects on the statements of financial position at 31 December 2013 and 31 December 2014 were:
Increase in investments accounted for using the equity method
Increase in:
Rurelec Loans to EdS
Rurelec Loans to PEL
Decrease in:
Property, plant and equipment
Intangible assets
Inventories
Trade and other receivables
Cash and cash equivalents
Deferred tax liabilities re Plant
Trade and other payables
Borrowings
Borrowings – non-current
Current tax liabilities
Change in net assets
YEAR ENDED
31.12.14
£’000
Nil
YEAR ENDED
31.12.13
£’000
Nil
4,487
11,338
(9,065)
(3,168)
–
(3,812)
(569)
339
2,245
1,933
2,032
398
6,157
5,739
9,682
(11, 370)
(3,168)
(227)
(3, 820)
(2 0)
79
832
4,315
877
401
3,320
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
The effects on the statement of comprehensive income for the years ended 31 December 2013 and 31 December 2014:
De crease in share of profit from equity accounted investments
Decrease in:
Revenue
Changes in inventories
Costs of material
Operating & maintenance expenses
Depreciation, amortisation and impairment of non-financial assets
Other interest expense and exchange losses
Tax expense
Current Year translation difference
Change in comprehensive loss for the year
YEAR ENDED
31.12.14
£’000
Nil
YEAR ENDED
31.12.13
£’000
(319)
(8,611)
(9,651 )
1,118
4,461
293
3,924
105
880
2,170
4,186
3,750
528
4,474
(218)
570
3,3 20
The application of IFRS 11 did not have a material impact on the cash flows of the Group and on the earnings per share for the year
ended 31 December 2014.
The following table sets out the effect oof restatement on Rurelec’s investment in the joint venture:
Investment in Joint Venture
Rurelec Loans to EdS
Rurelec Loans to PEL
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Non-current liabilities
Trade and other payables
Deferred tax liabilities
Borrowings
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Investment as 1.1.13
RESTATED
AS AT 1.1.13
£’000
(7,549)
(8,845)
15,405
3,168
935
389
306
3,66 2
79
(210)
(568)
(1,301)
(2, 830)
( 53)
(2,269)
319
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
45
FOR THE YEAR ENDED 31 DECEMBER 2014
The following table sets out the results of the joint venture operation in Argentina of which the Group has a 50 per cent. share.
Revenue
Expenses
Non-current assets
Current assets
Non-current liabilities1
Current liabilities2
YEAR ENDED
31.12.14
£’000
YEAR ENDED
31.12.13
£’000
17,222
(11,158)
19,472
8,815
(29,726)
(17,036)
19,304
(16,930)
23,812
6,206
(33,364)
(5,600)
1
2
Non-current liabilities includes £11.3 million (2013 – £15.4 million) of loans advanced by the Company (see note 16).
Current liabilities includes £4.5 million (2013: Nil) of loans advanced by the Company which have become current (see note 16).
29 RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS
a) Group
Loss for the year before tax
Net finance income
Adjustments for: depreciation
Unrealised exchange gains
Movement in share option reserve
Impairment of goodwill
Deferred Consideration
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
YEAR ENDED
31.12.14
£’000
YEAR ENDED
31.12.13
RESTATED
£’000
YEAR ENDED
31.12.13
£’000
(2,936)
(2,255)
12
(2,180)
39
691
–
–
–
5,426
(3,687)
(4,890)
(35,726)
(2,747)
9
(494)
61
–
3,025
34,384
–
(6,208)
3,716
( 3,980)
(39,384)
928
444
3,267
61
–
–
34,384
267
(6,467)
4,558
(1,942)
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
b) Company
Profit/(loss) for the year before tax
Net finance income
Adjustments for:
Unrealised exchange (gains)/losses on loans
Movement in share option reserve
Write down of investments
Reclassification of investment to receivables
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
31.12.14
£’000
YEAR ENDED
31.12.13
£’000
965
(3,380)
(2,057)
39
2,703
5,881
–
(8,384)
(164)
( 4,397)
(10,364)
2,276
437
61
–
–
10,689
(1,762)
4,446
5,783
30 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:
Current – due within 1 year:
Trade payables
Borrowings
Total due within 1 year:
YEAR ENDED
31.12.14
£’000
4,557
3, 262
7,722
YEAR ENDED
31.12.13
RESTATED
£’000
8,117
20,268
28,385
YEAR ENDED
31.12.13
£’000
8,883
25,049
33,932
Non-current – due in more than 1 year but less than 5 years
Borrowings
0
622
1,499
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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
47
FOR THE YEAR ENDED 31 DECEMBER 2014
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 26 , the Group has £3.2 million of loans falling due within 12 months. The directors consider that the Group will be able
to raise sufficient funds from the sale of assets and from other sources to repay the loans.
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
31.12.14
£’000
YEAR ENDED
31.12.13
£’000
4,557
3,164
7,721
Nil
8,117
20,268
28,385
622
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 2014
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
Total
LOANS AND
RECEIVABLES
£’000
16,809
9,831
3,750
–
–
–
–
30,390
BORROWINGS
AND PAYABLES AT
AMORTISED COST
£’000
–
–
–
–
(8,883)
(1,499)
(24,583)
(34,965)
LOANS AND
RECEIVABLES
£’000
35,771
6,075
21
–
–
–
–
BORROWINGS
AND PAYABLES AT
AMORTISED COST
£’000
–
–
–
–
(5,144)
–
–
41,867
(5,144)
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48
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
31 December 2013
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
Total
LOANS AND
RECEIVABLES
£’000
15,376
4,797
6,122
–
–
–
–
26,295
BORROWINGS
AND PAYABLES AT
AMORTISED COST
£’000
–
–
–
–
(4,325)
(1,301)
(12,313)
(17,949)
LOANS AND
RECEIVABLES
£’000
40,397
162
4,502
–
–
–
–
45,061
BORROWINGS
AND PAYABLES AT
AMORTISED COST
£’000
–
–
–
–
(699)
–
–
(699)
31 CAPITAL COMMITMENTS
The Group had outstanding capital commitments of £Nil (2013: £0.7 million) in respect of plant ordered but not delivered at the
year-end.
32 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$5.6 million/£3.6 million (2013: US$6.3 million/£3.8 million). In the event that EdS wish to terminate the
agreement before 2022, a default payment would become payable. The Group does not anticipate early termination and therefore no
provision has been made in this regard.
33 RELATED PARTY TRANSACTIONS
During the year the Company and the Group entered into material transactions with related parties as follows:
a) Company
i) Paid salaries to key management amounting to £0.6 million (2013 £0.6 million)
ii) Paid, to its 100 per cent. subsidiary Independent Power Corporation PLC (“IPC”) a) £0.1 million under a “Shared Service Agreement”
b) Provided loans of £2.3 million. The loan balance outstanding at the year end was £1.4 million. P.R.S. Earl, A.J.S. Morris and
E.R. Shaw are Directors of IPC.
iii) A.J.S. Morris purchased 50,000 shares for £3k on 16 June in an open market transaction. He made various loans to the Company
during the year. At 31.12.2014 there was a balance of £17k due to him, this loan has been repaid after the year end.
iv) P.R.S. Earl purchased 100,000 shares for £6k on 16 June in an open market transaction.
v) E.R. Shaw purchased 50,000 shares for £3k on 16 June in an open market transaction. She made various loans to the Company
during the year. At 31.12.2014 there was a balance of £11k due to her, this loan has been repaid after the year end.
vi) Charged interest on loans to its 100 per cent subsidiary Rurelec Project Finance Ltd (“RPFL”) totalling £918k. The loan balance
outstanding at the year end was £8.6 million.
vii) Charged interest on loans to its 50 per cent. owned joint venture company, Patagonia Energy Ltd (“PEL”) amounting to £2.0 million.
The loan balances at the year end totalled £24.7 million. Interest on these loans has been accrued at 11.1 per cent.
viii) Received from its joint venture company Energia del Sur S.A. (“EdS”) repayments totalling £3.4 million of support previously given to
creditors of EdS. £0.4 million of credit support remains outstanding at the year end.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
49
FOR THE YEAR ENDED 31 DECEMBER 2014
ix) a) Charged IPSA Group PLC (“IPSA”) £60k under a “Shared Service Agreement”. b) Repaid £125k of deferred consideration on the
2013 turbine purchase, £3.1 million remains outstanding at the year end. P.R.S. Earl and E.R. Shaw are Directors of IPSA.
x) Provided loans to its 100 per cent. subsidiary Cochrane Power Ltd of £125k. The total outstanding at the year end was £6.6 million.
xi) Provided loans to its 100 per cent. subsidiary Cascade Hydro Ltd (“CHL”) of £2.8 million and charged CHL interest of £436k. The
interest rate was 0.5 per cent. per month. The total outstanding at the year end was £9.5 million.
b) Group
i) A.J.S. Morris loaned CHL £50k and charged interest of £5.1k. The total outstanding at the year end was £55.1k.
ii) E. R. Shaw loaned CHL £94.4k and charged interest of £3.1k. The total outstanding at the year end was £97.5k.
iii) P.R.S. Earl was repaid £10k by IPC, the loan was made in 2013.
iv) RPFL accrued interest on amounts due from EdS of £0.4 million, the interest rate on the principal was 18.5 per cent ., the effective
interest rate (on principal and accrued interest) was 4.4 per cent. The total outstanding at the year end was £8.6 million.
34 ASSETS HELD FOR SALE
Assets held for sale relate to all legal entities within Peru except for Electricidad Andina. These business segments were reclassified
to assets held for sale following the commitment of the Group’s management on 16.09. 2014 to restructure its Peruvian operations by
means of sale. Two disposal groups have been identified, one of which comprises the Canchayllo run of the river plant with the rest of
the assets included in the second group. At the end of the year the assets were being actively marketed and a sale is expected by the
end of 2015.
Cost:
At 1 January
Transfer to assets held for sale
Carrying amount at 31 December
Assets classified as held for sale
Property, plant and equipment
Inventories
Trade and other receivables
Liabilities classified as held for sale
Trade and other payables
Deferred tax liabilities
2014
£’000
–
7,896
7,896
2013
£’000
–
–
–
2014
£’000
9,558
55
8,565
18,178
2014
£’000
10,158
124
10,282
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
35 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 successfully operated the 5.6MW Canchayllo run-of-river hydro plant in the Junin province of Peru some 250km East
of Lima, whilst also developing the Colca 12MW run-of-river hydro plant in the same province as Canchayllo, which has a Peruvian
Government backed power purchase agreement.
On the 15 May 2015 the Group entered into a replacement to sell the run-of-river hydro plant in Peru for £4.4 million.
The Group has entered into additional loan facilities during March and May 2015 amounting to £590,000.
The Group has agreed but not contracted for a bridging loan facility of $12 million that will be drawn down in the event that the
arrangements for an alternative one year secured loan from a large organisation within the South American power industry is not signed
within the time limits required by the company’s creditors. It is expected that the Group will reach satisfactory agreement with this large
organisation such that the proceeds of this loan will be used to meet current obligations. The Group expects to repay the loan from the
proceeds of the sale of its Peruvian assets. The loan is the fi rst stage of a potential cooperation with the Group.
The Chairman’s statement and the Strategic Report with a review of operations contains further details.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2014
Stock code: RUR
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236619 Rurelec Annual Report Cover v1 19/06/2015 16:26 Page 2
WELCOME TO RURELEC PLC
RURELEC PLC IS AN OWNER, DEVELOPER AND
OPERATOR OF POWER GENERATION CAPACITY
INTERNATIONALLY.
Rurelec’s main business consists of the ownership, operation and development of power
generation facilities on national and regional grids and in isolated areas, selling wholesale
electricity as a generator on commercial terms, through capacity payments or power
purchase agreements (“PPAs”).
Our current businesses include operational plants in Argentina and Peru, as well as the
development of new plants in Argentina, Chile and Peru.
CONTENTS
Strategic Report
Chairman’s Statement
Review of Financial Performance
Review of Operations
Our Governance
Board of Directors
Director’s Report
Corporate Governance Statement
1
3
4
6
7
9
Our Financials
Independent Auditor’s Report
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
Company Information
11
12
13
14
15
16
17
18
19
20
Inside Back Cover
Photo outside front cover:
Transmission line connecting Canchayllo run of river hydro to Grid, Peru
Photos outside back cover:
Top; EdS plant in Patagonia, Argentina.
Rest; Canchayllo run of river hydro, Peru
Read more online at
www.rurelec.com
COMPANY INFORMATION
Directors
C. Emson (Non-Executive Chairman)
B. Rowbotham (Non-Executive)
P. Galante (Non-Executive)
M. Blanco (Non-Executive)
P.R.S. Earl
A.J.S. Morris
E.R. Shaw
Secretary
S.A. Laker
Company number
4812855
Auditor
Grant Thornton UK LLP
Registered Auditors
Chartered Accountants
Grant Thornton House
Melton Street
Euston Square
London
NW1 2EP
Bankers
Coutts & Co
440 Strand
London
WC2R 0QS
Registered office and business address
17th Floor, Millbank Tower
21–24 Millbank
London
SW1P 4QP
Solicitors
Skadden, Arps, Slate, Meagher & Flom (UK) LLP
40 Bank Street
Canary Wharf
London
E14 5DS
236619 Rurelec Annual Report Cover v1 19/06/2015 16:26 Page 1
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RURELEC PLC
17th Floor, Millbank Tower, 21-24 Millbank, London SW1P 4QP
Tel: +44 (0) 20 7793 5610
Fax: +44 (0) 20 7793 7654
Visit us online at
www.rurelec.com
ANNUAL REPORT
AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2014
Stock code: RUR