241395 Rurelec Annual Report Cover v1 15/07/2016 16:20 Page 1
RURELEC PLC
18 Soho Square, London W1H 3QL
Tel: +44 (0) 20 7025 8026
8/
Visit us online at
www.rurelec.com
ANNUAL REPORT
AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2015
Stock code: RUR
COMPANY INFORMATION
Directors
S.C. Morris (Executive)
B. Rowbotham (Non-Executive)
Secretary
S.A. Laker
Company number
4812855
Registered office and business address
18 Soho Square
London
W1D 3QL
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
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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 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 business is centred on our operational plant in Argentina whilst also seeking
to sell the remainder of the small hydro portfolio in Peru and to complete the development
of our larger project in Chile.
CONTENTS
Strategic Report
Non-executive Director’s Statement
Review of Financial Performance
Review of Operations
Our Governance
Board of Directors
Director’s Report
Corporate Governance Statement
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
1
4
5
6
7
9
11
12
13
14
15
16
17
18
19
20
IBC
Read more online at
www.rurelec.com
NON-EXECUTIVE DIRECTOR’S STATEMENT
01
01
The Company has fortunately been able to secure two bridging
facilities for a total of £1,200,000 from Bridge Properties
(Arena Central) Limited against security of a debenture over the
Company’s assets. The board’s intention is that the facilities will
be repaid from asset sales. Pending the outcome of potential
asset sales, it is hoped to take further decisions on an appropriate
structure for the board going forward. Simon Morris has carried
a heavy burden of responsibility since his appointment in July
last year following the departure of the former executive board
members and then subsequently of Mark Keegan.
Providing that the Group manages to retain value from its core
assets, the focus is to ensure that the Company is able to
settle its creditors before determining future direction to allow
shareholders to benefi t from the existing asset base. Following
the necessary disposals currently under negotiation, a leaner
company unburdened with debt will be better placed to negotiate
with partners to determine the future.
We remain focused on delivering this objective.
Brian Rowbotham
Non-executive Director
15 July, 2016
Dear Shareholder
It is my duty to present the results of Rurelec PLC (“Rurelec”) for
the fi nancial year ended 31 December 2015, which once again
was a diffi cult year whilst the Company sought to sell its small
hydro portfolio in Peru. The fi rst plant, Canchayllo, was sold in
May 2015 and it is expected that the remaining development will
be sold in the coming months.
During the year a cost reduction exercise was implemented to
preserve the more viable assets in Argentina and Chile. The
separation from the Group of The Independent Power Corporation
PLC in June last year removed over £500,000 per annum of
overheads from the Group.
Outlook
The prime focus of the board is to stabilise the fi nancial position of
the Group. Following the setback of the compensation award from
Bolivia in June 2014 a re-evaluation and revised risk assessment
of the portfolio of small hydros in Peru concluded that it was
too complex to develop for the modest returns it was likely to
yield against the signifi cant risks involved and subsequently the
decision was taken to disinvest in hydros in Peru resulting in
further losses for the Group.
Reforms following the change of government in Argentina are only
now starting to emerge but hope remains that this market is set
to improve and encourage new investment as the Central Bank
controls that have overshadowed the last few years have made it
impossible for our joint venture to repatriate any interest payments
on Rurelec’s loans that enabled the construction of the CCGT
at Energía del Sur in Comodoro Rivadavia, Patagonia. President
Mauricio Macri who came to offi ce in December 2015 has
adopted investment friendly policies focussed on infrastructure
development. Rurelec’s signifi cant investment in Argentina over
the past decade has resulted in a fl agship project at Energia
del Sur, which is a thermal plant believed to be one of the most
reliable in Argentina. It operates under an enhanced value U.S
dollar denominated contract with some four years still remaining
before renegotiation of contracts, as well as generating to the spot
market, which is Argentine Peso based.
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02
STRATEGIC REPORT
Strategy
The current strategy for the Group has been determined by its
fi nancial position, the reasons for which are set out in more detail
below. The Group will dispose of certain assets, in particular the
hydro portfolio in Peru. The level of ongoing development work
has been severely restricted due to the Group’s fi nancial position.
On completion of certain asset sales, the Group can return to a
stable fi nancial footing, and creditors in Rurelec, who have been
very patient can be paid. The Board will then decide whether
certain unfi nished development work, such as the Central Illapa
project in Chile, can be completed. Throughout this period, all
costs will be kept to a minimum.
The overall strategy is to stabilise the fi nancial position of the
Group, to enable the Board to realise as much value for the asset
portfolio (including further development work where appropriate),
and return that value to shareholders.
Liquidity
When I joined the Board in July 2015, I was assured that the cash
position of the Group was stable, and that further funding was
to be made available. The Canchayllo hydro plant in Peru had
recently been sold, and the proceeds had been utilised to pay
down certain creditors. A new funding facility of US $7.5 million
was under discussion from a third party lender.
The new funding facility did not materialise, and the Group was
then in a position where a creditor backlog existed, and free
cash fl ows within the Group were not able to service ongoing
administration costs. As a result, the Board proposed an Open
Offer to shareholders, which, had it proceeded, would have raised
enough liquidity to settle all outstanding creditors in Rurelec and
provide working capital for the Group going forward. A short-term
facility of £600,000 was negotiated with Radix Investments UK
Limited (“Radix”) to enable the Group to put the Open Offer to
shareholders.
At the General Meeting held on 30 November 2015, the Open
Offer was rejected by shareholders. Prior to the General Meeting,
Rurelec’s major shareholder, Sterling Trust Limited, entered into
Administration on 19 October 2015. The ongoing funding of the
Group was now a critical issue.
On 17 February 2016, a facility of £850,000 was agreed with
Bridge Properties (Arena Central) Limited (“BPAC”) (which was
extended by a further facility of £350,000 on 13 April 2016). I
was a director of BPAC at the time (I subsequently resigned from
BPAC on 7 June 2016). A large part of the new facility was utilised
to repay the Radix loan. Despite this new facility, the cash position
of the Group remains critical. Although our plant in Argentina in
Comodoro Rivadavia continues to operate profi tably, it has been
very diffi cult to repatriate cash to the UK to repay loans due to
pressures on the working capital cycle in Argentina.
It is clear to me that the Group has not been adequately funded
for some considerable time, not just the last 12 months. You will
all be aware of the signifi cant setbacks the Group suffered on
the compensation award from Bolivia in June 2014. Since that
period, the Group has relied on short-term fi nance arrangements
to enable it to continue to trade. This included taking on short-
term borrowings at interest rates of 12 per cent. to fund the
development of the hydro portfolio in Peru. The funding was
wholly inappropriate as development fi nance, and much of this
funding remains outstanding today. Many creditors in Rurelec
have outstanding balances stretching back over a year. The poor
cash position of the Group is a legacy of inappropriate funding
entered into in previous years, and decisions to carry on certain
developments without the necessary funding in place.
Management team
The last year has seen very signifi cant change in the management
team. None of the executive directors in offi ce in January 2015
remained on the Board following the Annual General Meeting on
14 July 2015. I was appointed on 19 July 2015, along with Mark
Keegan, as executive directors. Mr Keegan resigned from offi ce
on 14 December 2015 following the rejection of the Open Offer.
Of the non-executive directors, only Brian Rowbotham remains.
Colin Emson, who was non-executive Chairman of both Rurelec
and Sterling Trust Limited, resigned on 13 October 2015. Pablo
Galante was not re-elected at the AGM and Marcelo Blanco also
resigned during the year.
Only Brian Rowbotham and I remain on the Board. I would like to
thank Brian for his continued support through what has been an
extremely diffi cult time for your Company.
Financial results
Although the operating loss for the year of £ 21.9 million is higher
than that incurred last year (2014: £7. 4 million), the overall loss
before tax for the year of £20.0 million is signifi cantly worse than
that reported for last year (2014: £2.9 million). The overall loss
refl ects signifi cant write downs on a number of the Group’s assets
to values that the directors believe can be supported in current
market conditions and given the overall fi nancial position of the
Group.
Since the year end, the Group has been in advanced negotiations
for the sale of certain assets. At the time of this report there can
be no guarantee that these sales will conclude.
Until there is a disposal of assets the Group is dependent upon
the continued forbearance of its creditors. There exists a material
uncertainty as to the timing and the quantum of these receipts.
The Directors are, in the meantime, pursuing alternative sources
of working capital until disposal receipts are assured, none of
which have been secured yet. Additionally some cash has been
repatriated from our joint venture operation in Argentina, however
this has been materially below forecast fi gures for the fi rst six
months of this year.
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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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03
Financial KPIs
Financial KPIs address operating profi tability, net asset value and
earnings per share.
i) Operating profi tability
Operating loss 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 of £ 21.9 million in the year
(2014 £7. 4 million loss).
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 94.4
per cent due to a schedule maintenance outage (2014: 96.0 per
cent), making the plant one of the most reliable in the Argentine
interconnected system.
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 6.8 pence per share
(2014 10.1 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 of 3.57 pence per share in the year
(2014 loss of 0.52 pence per share) 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 reduced capacity in the
year by selling the 5.3 MW Canchayllo run-of-river hydro plant but
continues to own three turbines ready for deployment in projects,
although it is expected that local opposition to the Arica project in
Chile is likely to lead to the turbine being deployed elsewhere.
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.
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REVIEW OF FINANCIAL PERFORMANCE
Rurelec Chile
The development operations in Chile have expensed limited direct
costs in the year of £139k (2014: £82k). Capitalised development
costs have accumulated to £ 1.1 million (2014: £0.9 million)
on both the Central Illapa and Arica projects. In 2015 the Arica
project was impaired by £2.3m (2014: £0). The Central Illapa
project was not impaired in 2015 or 2014.
Cascade Hydro Power
In Peru, the Canchayllo run-of-river hydro plant was sold on 14th
May 2015 for a total sum of US $6.8 million of which US $0.3
million was due to a minority shareholder and the payment to the
Group of US $6.5 million was received from the purchaser on
20 July 2015. Additionally there remains an outstanding amount
due from the purchaser of US $1.0 million. The bank loans from
the Corporacion Interamericana de Inversion (“IIC”) relating to the
construction of the plant were assigned to the purchaser.
Rurelec has outstanding loans of £1.1 million (2014: £9.5 million)
to the Cascade group at the period end. The other assets of
the Cascade group include £2.1 million (2014: £3.2 million) of
bonds held by the Ministry of Minerals and Energy in connection
with development projects. The development project bonds for
the Huasicancha and Chilcay projects have been forfeited due
to the inability of the Cascade group to continue to meet the
development hurdles to maintain these projects in good standing.
Group Results
The Group loss after tax for the fi nancial year under review is
£20.0 million (2014: £2.9 million loss). Most of the losses or
£17.6 million were associated with impairments and loss on
disposals. The impairment losses were £13.3 million for Argentina
operations, £2.3 million for Chilean operations, £1.7 million from
the disposal of Independent Power Corporation and £0.2 million
for Peruvian operations.
The results for the operations in Argentina, Peru, Chile and for IPC
before disposal are shown below.
Group revenue was £0.2 million (2014: £0.3 million), there was
no write off of accrued income (2104: £3.1 million. Cost of Sales
were £22k (2014: £231k) Operating and Administrative expenses
amounted to £4.4 million (2014: £3.8 million). Operating loss was
£ 21.9 million (2014: £7. 4 million loss). The loss before tax is £20.0
million (2014: £2.9 million loss). The basic loss per share is 3.57p
(2014: 0.52p loss). In 2015, the total assets of £ 44.1 million
(2014: £74.8 million) includes assets of £ 3.6 million (2014: £18.2
million), which are held for sale. Total equity stands at £ 37.5
million (2014: £56.8 million), or 6. 8 pence per share (2014: 10.1
pence 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 net operating profi t for the year was AR$
67.5 million (2014: AR$ 80.7 million) on revenues of AR$ 261.6
million (2014: AR$ 231.0 million), whilst the gross operating profi t
was AR$ 100.7 million (2014: AR$ 104.3 million). The net loss for
the year in EdS to AR$ 49.6 million (2014: profi t AR$ 0.6 million)
was due to foreign exchange losses of AR$ 85.0 million (2014:
AR$ 45.2 million).
It should be noted that the results of EdS are not 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 2 6 to the accounts
and in the Review of Operations.
The Independent Power Corporation PLC (“IPC”)
IPC, which was part of the Group until its sale on 18 June
2015, made a total loss for the period to its disposal of £ 0.5
million (2014: £4.2 million loss). Additionally there was a loss on
disposal of £1.7 million (2014: write down of goodwill arising on
consolidation of £691k).
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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REVIEW OF OPERATIONS
05
Argentina
Operations at the power plant continue to allow EdS to show a
good availability record. Gross energy output was 5.6 per cent.
lower at approximately 905 GWh (2014: 958 GWh), due to a
scheduled maintenance outage in November and December.
The average heat rate of the plant was 8.37 MMBTU/MWh
(2014: 8.33). The average heat rate for the plant includes fuel
consumption on both the gas turbines and auxiliary fi ring of the
steam turbine.
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 Year ended
31.12.14
£’000
31.12.15
£’000
9,099
(6,765)
(2,956)
(1,725)
5,284
2,902
(1,658)
(7,212)
8,611
(5,579)
(1,674)
42
7,848
4,312
(3,076)
(8,207)
Revenue attributable to the Group
Expenses
Foreign Currency Exchange
Net (Loss) Profi t
Non-current Assets
Current Assets
Non-current Liabilities
Current Liabilities
Chile
Arica
Very disappointing local opposition has been raised against the
Arica project and the board is seriously considering deploying the
turbine acquired for the project elsewhere. Although the Company
believes that the project is needed in the region, the risk of trying
to deliver the project and the funds put at risk in doing so do not
merit continuing. Funding for the project is unavailable in these
circumstances and efforts to sell the project with planning consent
have failed. An application has therefore been made to the state
asset bureau for a refund of the purchase price for the land and a
buyer is to be sought for the turbine unless it can be redeployed.
Given the uncertainty for the future of the project in impairment
charge of £2.3 million has been recorded in the year.
Central Illapa
The project has continued to make some progress in
development. In April 2016, the project received environmental
consent for the re-routing of the transmission line that will connect
the plant to the main grid. This has enabled further discussion
to take place with the potential joint venture partners who have
been identifi ed and expressed interest and when a joint venture
partnership has been concluded, this will allow the project to
move to fi nancial close.
Peru
The 5.3 MW Canchayllo plant was sold in May 2015 to Energías
Renovables de los Andes, S.A., a subsidiary of Union Group of
Uruguay. The Group has retained a presence in Lima to maintain
the development rights and manage the sale of the 12.05 MW
Colca project in the province of Huancayo on the Junin River for
which performance bonds have been lodged and negotiations
have commenced with a prospective purchaser. If the purchaser
completes the purchase this will enable the proceeds from the
release of bonds back to Rurelec. Bonds in respect of the other
two development projects Chilcay and Huasicancha have been
forfeited because of the decision of the board not to pursue
marginal projects.
The large Santa Rita 255 MW project rights are retained by
Cascade Hydro Power SAC but contrary to expectation, to date
no tender for large hydro PPA’s has been announced. When this
occurs, there would be an opportunity to work with or sell the
project rights to a strong partner active in the large scale hydro
sector.
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.
b) Financial markets – Whilst project fi nance may be available
in the markets in which the Group operates, the Group’s
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 15 July,
2016 and was signed on its behalf by Simon Morris (Executive Director).
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06
BOARD OF DIRECTORS
BRIAN ROWBOTHAM
Non-Executive Director – appointed 16 October 2013
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 Hichens, Harrison & Co plc after its
acquisition by Religare in 2008. Brian is a Fellow of the Institute of
Chartered Accountants in England and Wales
SIMON MORRIS
Executive Director – appointed 19 July 2015
Fellow of the Institute of Chartered Accountants in England
and Wales, qualifi ed as a Chartered Accountant in 1980. After
obtaining a degree in Business Studies, spent his career with
Grant Thornton and became a partner in 1988. He specialised in
corporate fi nance and corporate recovery, principally restructuring
work. He was appointed Chief Operating Offi cer of Grant Thornton
UK in 2008, retiring in late 2011. Since then he has acted as a
business consultant. He is also an accredited mediator.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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DIRECTOR’S REPORT
07
07
THE DIRECTORS SUBMIT THEIR
ANNUAL REPORT TOGETHER
WITH THE AUDITED FINANCIAL
STATEMENTS FOR THE YEAR
ENDED 31 DECEMBER, 2015.
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.
Since the Company’s admission to AIM in August 2004, the
Company has acquired interests in power generation operations
in Bolivia and Argentina and, since 2012, has commenced
development of assets in Peru and Chile.
Results and dividends
The Group results for the year ended 31 December, 2015 are
set out in the Consolidated Statement of Total Comprehensive
Income.
No dividend was paid during the year to 31 December, 2015
(2014: nil).
Share capital
Details of the issued share capital are set out in Note 20.
Going concern
Since the year end, the Company has been in advanced
negotiations for prospective sales of Group assets in two separate
jurisdictions in South America. At the time of this report there
can be no guarantee that these sales will conclude. There exists
uncertainty as to the timing of the sales of these assets as well
as the quantum of the corresponding proceeds. The Company
expects to make announcements as necessary regarding the
progress of these sales in the near future.
Until there is a disposal of assets, the Company is dependent
on the continued forbearance of its creditors as it will require
additional funds within the next twelve months. The Directors
are pursuing alternative sources of working capital until disposal
receipts are assured, none of these have been assured yet. These
conditions indicate the existence of a material uncertainty that
may cast signifi cant doubt over the group’s ability to continue as
a going concern and, therefore, that it may be unable to realise
its assets and discharge its liabilities in the normal course of
business. On the basis that the Group receives these disposal
proceeds or the alternative sources of working capital, the
Directors have assessed that the Group would have 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.
Directors
The following Directors served during the year:
Colin Emson – Chairman and Non-Executive Director (resigned
13 October 2015)
Peter Earl – Chief Executive (resigned 19 June 2015)
Andrew Morris – Group Finance Director (resigned 14 July 2015)
Elizabeth Shaw – Executive Director Project Finance (resigned
14 July 2015)
Marcelo Blanco – Non-Executive Director (resigned 31 October
2015)
Brian Rowbotham – Non-Executive Director
Pablo Galante – Non-Executive Director (appointed 9 April 2015
– resigned 14 July 2015)
Simon Morris – Executive Director (appointed 19 July 2015)
Mark Keegan – Executive Director (appointed 19 July 2015 –
resigned 14 December 2015)
Directors’ interests
The Directors’ benefi cial interests in the shares of the Company
were on the reference dates as stated below:
A.J.S. Morris
P.R.S. Earl
E.R. Shaw
14. 07.2016
31.12.2015
31.12.2014
n/a
n/a
n/a
n/a
n/a
n/a
737,700
7,000,000
325,000
Brian Rowbotham
450,000
450,000
450,000
Pablo Galante
n/a
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 14 July
2016, being the last practicable date for reporting this information.
Sterling Trust Ltd
YF Finance Ltd
Number of
shares % holding
303,092,303
96,565,166
53.989
17.201
HSBC Client Holdings Nominees
(UK) Limited
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.
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08
DIRECTOR’S REPORT
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;
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.
the Directors are responsible for the maintenance and integrity
of the corporate and fi nancial information included on the
Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of fi nancial
statements may differ from legislation in other jurisdictions.
Auditor
Pursuant to Section 489 of the Companies Act of the Companies
Act 2006, the auditors are Grant Thornton UK LLP.
• make judgments and accounting estimates that are reasonable
and prudent;
On behalf of the Board
• state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the fi nancial
statements;
Susan Laker
Company Secretary
15 July, 2016
• 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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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CORPORATE GOVERNANCE
FOR THE YEAR ENDED 31 DECEMBER 2015
09
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 draw on those aspects of the
Code that are relevant to the Group. We do not 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
Subject to the Articles of Association, UK legislation and any
directions given by special resolution, the business of the Group
is managed by the Board. The Board currently comprises two
members made up of a Non-Executive Director, and an Executive
Director. The Board is responsible for providing leadership to the
management of the Group, determining strategy and ensuring
that agreed strategy is implemented 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 28
times during 2015. All Directors have access to the advice of the
Company Secretary who is responsible to the Board for ensuring
that Board procedures are complied with and that discussions
and decisions are appropriately minuted. External advice is also
available to the Directors at the Group’s expense if they consider
it necessary.
The Non-Executive Director is Brian Rowbotham who is regarded
by the Board as independent in character and judgement.
The Executive Director is Simon Morris. 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, and Simon Morris. Mr Rowbotham and
Mr. Morris are both accountants and 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.
The current year is the sixth year that Christopher Smith, the audit
partner of the Group’s external auditors, Grant Thornton UK LLP,
has been in post as Senior Statutory Auditor. In normal course
there would have been a rotation of Senior Statutory Auditor
after fi ve years’ service. The Audit Committee felt, however, that,
given the changes occurred in the Company’s management and
board of directors during the year, it was important to maintain
continuity of Senior Statutory Auditor for a further year. The
Audit Committee is satisfi ed that this extension does not in any
way prejudice the objectivity and independence of the Senior
Statutory Auditor. The Audit Committee is due to conduct a full
review of the effectiveness of the external audit process following
the completion of the year-end process and will consider the
appointment or the reappointment of the Senior Statutory Auditor
in light of its fi ndings.
Remuneration Committee
The Remuneration Committee comprises Brian Rowbotham who
reviews the remuneration policy for the Executive Director and for
key management personnel. The Executive Director determines
the remuneration arrangements for the Non-Executive Director.
No Director may participate in decisions regarding his or her own
remuneration. Details of the Directors’ remuneration can be found
in Note 8c.
Appointment of Directors
The Nomination Committee presently comprises Brian
Rowbotham. 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
10
CORPORATE GOVERNANCE
FOR THE YEAR ENDED 31 DECEMBER 2015
Statement of Non-Compliance
The Board recognises that the Company does not comply with
the Code. The Committees of the Board (Audit, Nomination and
Remuneration Committees) are not compliant with the Code:
Simon Morris, who is an Executive Director sits on the Audit
Committee and the Remuneration and Nomination Committees
which do not have suffi cient members to comply with the Code
requirements.
Susan Laker
Company Secretary
15 July, 2016
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.
AIM Rule Compliance
Rurelec PLC is quoted on AIM and, as a result, the Group has
complied with the AIM Rules, in particular AIM Rule 31 which
requires the following:
• ensure that there are suffi cient systems, procedures and
controls in place to enable compliance with the AIM Rules.
• seek advice from the Nominated Advisor (“NOMAD”) regarding
compliance with the AIM Rules whenever necessary and take
that advice into consideration.
• provide the NOMAD with any information which it reasonably
requests in order for the NOMAD to fulfi l its responsibilities
under the AIM Rules for Nominated Advisors including any
proposed changes to the Board and provision of draft RNS
notifi cations in advance.
• ensure that each Director accepts full responsibility, collectively
and individually for compliance with the AIM Rules.
• ensure that each Director discloses without delay all
information which the Group should disclose to comply
with the AIM Rules, in particular AIM Rule 17 (Disclosure of
Miscellaneous Information) insofar as that information is known
to the Director or could be reasonably ascertained by the
Director.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF RURELEC PLC
11
11
We have audited the fi nancial statements of Rurelec plc for the
year ended 31 December 2015 which comprise the group income
statement, the group statement of comprehensive income, the
group and parent company statements fi nancial position, the
group and parent company statements of cash fl ow, the group
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 pages 8 and 9, 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 2015 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.
Emphasis of matter – Going concern
In forming our opinion on the fi nancial statements, which is not
modifi ed, we have considered the adequacy of the disclosure
made in note 1b to the fi nancial statements concerning the
Group’s ability to continue as a going concern.
As explained in note 1b, since the year end the company has
been in advanced negotiations for prospective sales of Group
assets in two separate jurisdictions in South America. At the
time of this report there can be no guarantee that these sales
will conclude. Until there is a disposal of the group’s assets, the
group is dependent on the continued forbearance of its creditors
as it will require additional funds within the next twelve months.
There exists a material uncertainty as to the timing and quantum
of these receipts. The Directors are pursuing alternative sources of
working capital until disposal receipts are assured, none of which
have been assured.
These conditions, along with the other matters explained in note
1b to the fi nancial statements, indicate the existence of a material
uncertainty that may cast signifi cant doubt over the group’s ability
to continue as a going concern. The fi nancial statements do not
include the adjustments that would result if the group was unable
to continue as a going concern.
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
Date: 15 July 2016
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12
CONSOLIDATED INCOME
STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2015
Revenue
Write off of Accrued Income
Cost of Sales
Gross Profit
Administrative Expenses
Other Expense
Operating Loss
Share of Joint Venture Profit/(Loss)
Foreign Exchange (Losses)/Gains
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 per Share
NOTES
4
15
6
7
9,b,c&d
26
9a
10
10
11
12
YEAR ENDED
31.12.15
£’000
179
–
(22)
157
(4,435)
(17,572)
(21,850)
–
(106)
2,385
(458)
(20,029)
(3)
(20,032)
(3.57)
(3.57)
YEAR ENDED
31.12.14
£’000
303
(3,219)
(231)
(3,147)
(3,832)
(392)
(7,371)
–
2,180
2,567
(312)
(2,936)
(8)
(2,944)
(0.52)
(0.52)
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2015
13
Loss for the year
Other Comprehensive Income/(Loss) for the year:
Items that will be subsequently Reclassified to Profit & Loss:
Exchange Differences on translation of Foreign Operations
Total Other Comprehensive Income/(Loss)
NOTES
YEAR ENDED
31.12.15
£’000
(20,032)
YEAR ENDED
31.12.14
£’000
(2,944)
999
999
(2,249)
(2,249)
Total Comprehensive Loss for year attributable to owners of the Company
(19,033)
(5,193)
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CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2015
COMPANY NUMBER 4812855
Assets
Non-current assets
Property, Plant and Equipment
Intangible Assets
Trade and Other Receivables
Investment in Joint Venture
Current Assets
Trade and Other Receivables
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
Other Reserves
Special Non-distributable Reserve
Retained Earnings
Total Equity attributable to shareholders of Rurelec PLC
Non-controlling interests
Total Equity
Current Liabilities
Trade and Other Payables
Current Tax Liabilities
Borrowings
Liabilities classified as held for Sale
Total Liabilities
Total Equity and Liabilities
NOTES
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
14
15
16a
26
16b
18
32
19
20
21
22a
23
24
18
19,217
23
–
–
22,169
1,321
23,212
–
19,240
46,702
20,866
386
9,600
283
3,644
18,178
44,136
74,763
11,228
22,754
(2,212)
–
–
45,000
(39,262)
37,508
11,228
22,754
(3,211)
146
1,050
45,000
(20,426)
56,541
–
283
37,508
56,824
2,856
–
3,054
5,910
4,423
70
3,164
7,657
718
10,282
6,628
17,939
44,136
74,763
The financial statements were approved by the Board of Directors on 15 July, 2016 and were signed on its behalf by Simon Morris
(Executive Director) and Brian Rowbotham (Non-executive Director).
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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PARENT COMPANY STATEMENT
OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2015
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
Loans
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
NOTES
25
16c
18b
16d
18
19
21
20
21
22b
100
–
100
16,195
24,657
386
41,238
9,755
50,599
60,354
16,195
38
1
16,234
41,338
76,588
11,228
22,754
–
45,000
(41,146)
37,836
2,592
910
3,502
11,228
22,754
146
45,000
(7,521)
71,607
4,981
–
4,981
Total Equity and Liabilities
41,338
76,588
The financial statements were approved by the Board of Directors on 15 July, 2016 and were signed on its behalf by Simon Morris
(Executive Directors) and Brian Rowbotham (Non-executive Director).
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CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2015
Cash Flows from Operating Activities
Cash used in Operations
Interest Paid
Taxation Paid
NOTES
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
27
(5,545)
–
(3)
(4,890)
(312)
(8)
Net Cash used in Operating Activities
(5, 548)
(5,210)
Cash Flows from Investing Activities
Proceeds from Sale of subsidiary
Sale/(Purchase) of Plant and Equipment
Settlement for Expropriated Assets
Repayments from Joint Venture company
Net Cash generated from/(Used in) Investing Activities
4,358
–
–
2,417
6,775
–
(5,135)
18,863
3,381
17,109
Net Cash Inflow/(Outflow) before Financing Activities
1,227
11,899
Cash Flows from Financing Activities
Issue of Shares (Net of Costs)
Deferred Consideration
Loan Drawdowns
Loan Principal Repayments
Loan Interest 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
(1,237)
1,861
(1,707)
(41)
(1,124)
103
283
386
(125)
3,170
(18,859)
–
(15,346)
(3,447)
3,730
283
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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COMPANY STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2015
17
Cash Flows from Operating Activities
Cash (Used in)/Generated 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
27
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
( 4,070)
( 4,070)
(4,397)
(4,397)
(1, 511)
–
5, 407
3, 896
(2,919)
3,382
3,323
3,786
Net Cash Outflow before Financing Activities
( 174)
(611)
Cash Flows from Financing Activities
Issue of Shares (Net of Costs)
Loan Drawdowns
Loan Principal Repayments
Loan Interest Repayments
Net Cash Generated from Financing Activities
Increase/(Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at start of year
Cash and Cash Equivalents at end of year
–
1,861
(1, 261)
(41)
559
385
1
386
468
278
(155)
–
591
(20)
21
1
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CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
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
11,145 67,369
(962)
107
(17,199)
Balance at 1.1.14
Issue of Share
Share Issue Costs
Charge for Share Options
Transfer to Other Reserve
Non-controlling Interest
Transfer to Assets for Sale
Total Transactions with
Owners
Loss for year including
Minority Loss
Exchange Differences
Total Comprehensive Loss
83
–
–
467
(82)
–
– (45,000)
–
–
83 (44,615)
–
(2,249)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 45,000
–
–
– 45,000
(3,227)
–
(3,227)
–
–
–
1,050 61,510
142 61,652
–
–
–
–
–
–
–
–
–
550
(82)
39
–
–
–
–
–
550
(82)
39
–
–
141
141
507
141
648
(3,227)
(2,249)
(5,476)
– (3,227)
–
–
(2,249)
(5,476)
(20,426) 45,000
1,050 56,541
283 56,824
–
–
39
–
–
39
–
–
146
146
–
(2,249)
Balance at 31.12.14
11,228 22,754
(3,211)
Non-controlling Interest
Transfer to Assets for Sale
Share option/Plant Reserve
Total Transactions with
Owners
Loss for year including
Minority Loss
Exchange Differences
Total Comprehensive Loss
–
–
–
–
–
0
–
–
–
–
–
0
–
–
–
–
999
999
Balance at 31.12.15
11,228 22,754
(2,212)
–
–
(146)
1,196
(146)
1,196
– (20,032)
–
(20,032)
–
0
0
–
–
–
–
–
0
–
(1,050)
(1,050)
–
–
–
– (20,032)
–
999
0 19,033
(283)
(283)
–
–
(283)
(283)
– (20,032)
–
999
0 (19,033)
(39,262) 45,000
0 37,508
0 37,508
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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COMPANY STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015 FOR THE YEAR ENDED 31 DECEMBER 2015
19
SHARE
CAPITAL
£’000
SHARE
PREMIUM
£’000
NOTE
SHARE
OPTION
RESERVE
£’000
RETAINED
EARNINGS
£’000
OTHER
RESERVE
£’000
TOTAL
£’000
Balance at 1.1.14
11,145
67,369
107
(8,486)
0
70,135
Transactions with owners
Issue of Share
Issue Costs
Charge for Share Options
Transfer to Other Reserve
83
–
–
–
467
(82)
–
(45,000)
Total transactions with owners
83
(44,615)
Profit for year
Total Comprehensive Profit
–
–
–
–
–
–
39
–
39
–
–
–
–
–
–
–
–
–
–
45,000
45,000
965
965
–
–
550
(82)
39
–
507
965
965
Balance at 31.12.14
11,228
22,754
146
(7,521)
45,000
71,607
Transactions with owners
Issue of share
Issue costs
Cancel charge for share options
Transfer to Other Reserve
Total transactions with owners
Loss for the year
Total Comprehensive Loss
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(146)
–
(146)
–
–
146
–
146
–
–
(33,771)
(33,771)
–
–
–
–
–
–
–
–
–
–
–
–
(33,771)
(33,771)
Balance at 31.12.15
11,228
22,754
–
(41,146)
45,000
37,836
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20
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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 2015. The Directors have continued to
adopt the going concern basis for the preparation of these financial statements. During 2015 the Group continued to receive funds from
Argentina in service of the loans to the joint venture, whilst also selling the Canchayllo development in Peru.
Since the year end, the Company has been in advanced negotiations for prospective sales of Group assets in two separate jurisdictions
in South America. At the time of this report there can be no guarantee that these sales will conclude. There exists uncertainty as
to the timing of the sales of these assets as well as the quantum of the corresponding proceeds. The Company expects to make
announcements as necessary regarding the progress of these sales in the near future.
Until there is a disposal of assets, the Company is dependent on the continued forbearance of its creditors as it will require additional
funds within the next twelve months. The Directors are pursuing alternative sources of working capital until disposal receipts are
assured, none of these have been assured yet. These conditions indicate the existence of a material uncertainty that may cast significant
doubt over the group’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge
its liabilities in the normal course of business. On the basis that the Group receives these disposal proceeds or the alternative sources
of working capital, the Directors have assessed that the Group would have sufficient working capital based on their review of cashflow
forecasts for a period of at least 12 months from the signing of the financial statements.
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)
IFRS 15
IFRS 16
Content
Financial instruments:
Revenue from contracts with customers
Leases
Applicable for financial
years beginning on/after
01/01/2018
01/01/2018
01/01/2019
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.
IFRS 15 & 16 ‘Revenue from contracts with customers’ & ‘Leases’
The Directors have not completed their assessment of the impact of the adoption of these standards.
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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
21
FOR THE YEAR ENDED 31 DECEMBER 2015
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 2015.
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.
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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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.
Independent Power Corporation PLC a 100 per cent. subsidiary of Rurelec PLC at the beginning of the year was disposed of as at
18 June 2015.
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 (2014: 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:
Plant and equipment
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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
23
FOR THE YEAR ENDED 31 DECEMBER 2015
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.
2.9 Non-current Assets Held for Sale and Discontinued Operation.
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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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.
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.
“Plant reserve” in prior year related to the revaluation of Argentine assets.
2.15 Pensions
During the year under review, the Group did not operate or contribute to any pension schemes (2014: nil).
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
25
FOR THE YEAR ENDED 31 DECEMBER 2015
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.
3 KEY ASSUMPTIONS AND ESTIMATES
When preparing the financial statement, management make a number of judgements, estimates and assumptions about the recognition
and measurement of assets, liabilities income and expenses. The actual results may differ from the judgements, estimates and
assumptions made and will seldom equal the estimated results. The areas which management consider are likely to be most affected by
the significant judgements, estimates and assumptions on recognition and measurement of assets, liabilities, income and expenses are:
a) Useful lives of depreciable assets – management review, with the assistance of external expert valuers, the useful lives of depreciable
assets at each reporting date. Actual results, however, may vary due to changes in technology and industry practices.
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 27). 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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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 27.
The following tables provide an analysis of the operating results, total assets and liabilities, capital expenditure and depreciation for 2015
and 2014 for each geographic segment.
a) 12 months to 31.12.2015
Revenue
Cost of sales
Gross profit/(loss)
Administrative expenses
Profit/(loss) from operations
Other (expense)/income
Foreign exchange (losses)/gains
Finance income
Finance expense
ARGENTINA
£’000
CHILE
£’000
PERU
£’000
9,099
(6,080)
3,019
(684)
2,335
(13,313)
(2,956)
–
(701)
–
–
–
(139)
(139)
(2,345)
(165)
(802)
–
–
–
–
(1,760)
(1,760)
(245)
(1,828)
(508)
(361)
UK
£’000
179
(22)
157
(2,573)
(2,416)
(1,669)
1,887
3,695
(88)
(Loss)/profit before tax
(14,635)
(3,451)
(4,70 2)
1,409
Tax expense
(403)
–
(3)
–
(Loss)/profit for the year
(15,038)
(3,45 1)
(4,70 5)
1,4 09
Total assets
Total liabilities
Capital expenditure
Depreciation
16,372
17,740
–
261
6,688
6,510
–
–
3,644
718
–
45
41,338
3,502
–
3
BOLIVIA
£’000
CONSOLIDATION
ADJUSTMENTS
£’000
TOTAL
£’000
179
(22)
157
(4,435)
(4,278)
(9,099)
6,080
(3,019)
721
(2,298)
–
(17,572)
2,956
–
692
1, 350
403
1,75 3
(23,906)
(21,842)
–
(261)
(106)
2,385
(458)
(20,029)
(3)
(20,032)
44,136
6,628
–
48
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
27
FOR THE YEAR ENDED 31 DECEMBER 2015
ARGENTINA
£’000
CHILE
£’000
PERU
£’000
BOLIVIA
£’000
CONSOLIDATION
ADJUSTMENTS
£’000
b) 12 months to 31.12.2014
Revenue
Write off of accrued income
Cost 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
8,611
–
(5,579)
3,032
(293)
2,739
–
(2,175)
–
(674)
(110)
(105)
(215)
11,545
23,383
–
293
UK
£’000
423
(3,219)
(231)
(3,027)
(3,208)
(6,235)
(574)
2,760
3,780
(918)
–
–
–
–
(661)
(661)
–
(631)
18
(742)
(2,016)
(1,187)
(8)
–
(2,024)
(1,187)
–
–
–
–
(83)
(83)
–
51
–
–
(32)
–
(32)
TOTAL
£’000
303
(3,219)
(231)
(3,147)
(3,832)
(6,979)
(392)
2,180
2,568
(312)
(2,936)
(8)
(2,944)
(8,731)
–
5,579
(3,152)
413
(2,739)
(117)
2,175
(1,230)
2,022
110
105
215
–
–
–
–
–
–
299
–
–
–
299
–
299
–
–
–
–
6,458
7,321
–
–
18,528
22,697
5,087
2
78,626
6,865
48
10
(40,394)
(42,327)
–
(293)
74,763
17,939
5,135
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.
5 EXCHANGE RATE SENSITIVITY ANALYSIS
The key exchange rates applicable to the results were as follows:
i) Closing rate
AR $ (Argentine Peso) to £
US $ to £
CLP (Chilean Peso) to £
PEN (Peruvian Sol) to £
ii) Average rate
AR $ (Argentine Peso) to £
US $ to £
CLP (Chilean Peso) to £
PEN (Peruvian Sol) to £
YEAR ENDED
31.12.15
YEAR ENDED
31.12.14
19.2522
1.4824
1,048.2000
4.9637
14.3764
1.5256
1,005.1725
4.8183
13.2814
1.5532
940.964
4.5744
12.7777
1.6445
940.528
4.6084
If the exchange rate of sterling at 31 December 2015 had been stronger or weaker by 10 per cent. with all other variables held constant,
shareholder equity at 31 December 2015 would have been £2.5 million (2014: £3.3 million) lower or higher than reported.
If the average exchange rate of sterling during 2015 had been stronger or weaker by 10 per cent. with all other variables held constant,
the profit for the year would have been £0.2 million (2014: £0.1 million) higher or lower than reported.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
–
22
22
2
2 29
2 31
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
1,728
1,082
1,539
86
4,435
1,754
678
1,326
74
3,832
1
Audit services include £72.5k (2104: £74.0k) 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. Fees paid to other
auditors, in respect of the audit of joint venture companies, amounted to £13.4k (2014: £35k).
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
29
FOR THE YEAR ENDED 31 DECEMBER 2015
8 EMPLOYEE COSTS
a) Group
Aggregate remuneration of all employees and Directors, including social security costs
The average number of employees in the Group, including Directors, during the year was as follows:
Management
Development
Administration
Total
b) Company
Aggregate remuneration of all employees and Directors, including social security costs
The average number of employees in the Company, including Directors, during year was as follows:
Management
Administration
Total
YEAR ENDED
31.12.15
£’000
1,728
YEAR ENDED
31.12.14
£’00.
1,754
NUMBER
NUMBER
4
16
11
31
5
18
22
45
YEAR ENDED
31.12.15
£’000
1,405
YEAR ENDED
31.12.14
£’000
62
NUMBER
NUMBER
4
5
9
5
0
5
In the prior year the majority of costs & staff were included in IPC rather than Rurelec entity.
c) Directors’ remuneration, including social security costs
The total remuneration paid to the Directors was £939k (2014: £717k). The total remuneration of the highest paid Director was £267k
(2014: £230k). Other emoluments paid were health insurance costs, there were no bonuses, pension costs or share based payments
paid during the year (2014: Nil)
P. Earl
E. Shaw
A. Morris
M. Blanco
L. Coben
C Emson
B Rowbotham
P Galante
M Keegan
S Morris
Total
YEAR ENDED
31.12.15
£’000
Base Salary/Fee
Inc. Social Security
YEAR ENDED
31.12.15
£’000
Other
Emoluments
263
205
189
30
–
25
30
7
84
96
929
4
3
3
–
–
–
–
–
–
–
10
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
Total
267
208
192
30
–
25
30
7
84
96
939
Total
230
177
212
24
15
29
30
–
–
–
717
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
9 (a) OTHER EXPENSE
Foreign exchange (losses)/gains
Total
(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
31.12.15
£’000
(106)
(106)
YEAR ENDED
31.12.14
£’000
2,180
2,180
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
–
–
–
–
(376)
259
(691)
(808)
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 $31.5 million or £19.1 million which
is made up of £17.5 million compensation claim and interest of £1.6 million. The carrying value of the claim, excluding interest and reimbursement
of costs, as at 31 December 2012 was £47.0 million and therefore the loss was £29.5 million. The 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 £4.9 million has been taken as a charge in 2013, in 2014 these costs were reduced by £259k
in agreement with the suppliers.
Following disposal goodwill in IPC has been written off in 2014 impairment testing for IPC resulted in an impairment of £691k , see Note 15 for further
details.
(c) OTHER EXPENSE
Birdsong Loan Expense
Birdsong loan participation expense – CVR costs1
Total
YEAR ENDED
31.12.15
£’000
–
–
YEAR ENDED
31.12.14
£’000
416
416
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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
31
FOR THE YEAR ENDED 31 DECEMBER 2015
(d) OTHER EXPENSE
Realised loss on disposal
IPC
Impairment provisions
Argentina
Peru
Chile (Africa Project)
Total interest income
10 FINANCE INCOME & EXPENSE
Inter-group interest received/receivable1
Withholding Tax write back
Bank interest
Total interest income
YEAR ENDED
31.12.15
£’000
1,669
13,313
245
2,345
17,572
YEAR ENDED
31.12.14
£’000
2,450
117
–
2,567
YEAR ENDED
31.12.15
£’000
2,376
–
9
2,385
Interest expense paid/payable on bank borrowings and loans2
(458)
(312)
1
2
Inter-group interest arises on loans by the Company to its 50 per cent. owned joint venture companies (PEL and EdS). 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. The details of the amounts due under the loans are shown in Note 25.
Sensitivity analysis arising from changes in borrowing costs is set out in Note 25.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
11 TAX EXPENSE
The relationship between the expected tax expense at basic rate of 20 per cent. (2014: 21.50 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
Permanent differences
Unrecognised loss carried forward
Actual tax expense
Comprising:
Current tax expense
Deferred tax/(net credit)
Total credit (expense)
YEAR ENDED
31.12.15
£’000
(20,029)
20.00%
(4,006)
(3)
4,006
(3)
(3)
–
(3)
YEAR ENDED
31.12.14
£’00.
(2,936)
21.50%
(632)
(8)
632
(8)
(8)
–
(8)
The expected tax credit for the year £4.0 million is not recognised as an asset due to the uncertainty and unknown timing of its
realisation against future profits. The accumulated unrecognised deferred tax asset is £7.8 million.
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
31.12.15
YEAR ENDED
31.12.14
561,387,586
561,181,121
–
–
£(20.0)m
(3.57p)
(3.57p)
£(2.9)m
(0.52p)
(0.52p)
There is no difference between the Basic and Diluted loss per share as there was a loss in the year and therefore the outstanding
options were anti-dilutive.
13 HOLDING COMPANY’S RESULT FOR THE YEAR
As permitted by Section 408 of the Companies Act 2006, the holding company’s income statement is not shown separately in
the financial statements. The loss for the year was £33.8 million due to impairments for loans to Argentine joint venture in the year
of £13.3 million, impairments re operations in Peru of £7.6 million, impairments re Termonor project in Chile of £2.3 million (2014:
profit £1.0 million) and the loss on disposal of IPC £1.7 million. There are also Impairment provisions for the investment in Argentina
£8.2 million and impairment provisions for loans to Chile £2.5 million.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
33
FOR THE YEAR ENDED 31 DECEMBER 2015
14 PROPERTY, PLANT AND EQUIPMENT
LAND
£’000
PLANT AND
EQUIPMENT
£’000
PLANT UNDER
CONSTRUCTION
£’000
a) Group
Cost at 1.1.14
Exchange adjustments
Transfer of Assets Held for Sale
Additions
Cost at 31.12.14
Exchange adjustments
Transfer of Assets Held for Sale
Impairments
Cost at 31.12.15
Accumulated Depreciation at 1.1.14
Exchange adjustments
Charge for the year
Accumulated Depreciation at 31.12.14
Exchange adjustments
Charge for the year
Transfer of Assets Held for Sale
Accumulated Depreciation at 31.12.15
Net book value – 31.12.15
Net book value – 31.12.14
72
–
–
–
72
–
–
(72)
–
–
–
–
–
–
–
–
–
–
72
16,195
–
–
60
16,255
–
–
(60)
16,195
9
–
12
21
–
48
–
69
11,530
(1,184)
(9,558)
5,075
5,863
(1,408)
–
(1,364)
3,091
–
–
–
–
–
–
–
–
TOTAL
£’000
27,797
(1,184)
(9,558)
5,135
22,190
(1,408)
–
(1,496)
19,286
9
0
12
21
–
48
–
69
16,126
16,234
3,091
5,853
19,217
22,169
The Property, plant and equipment of £16.2 million mainly relates to two turbines valued at £16.2 million. Plant under construction
comprises of plant in Chile £3.1 million and Peru. 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 2015
Disposal of IPC
At 31 December 2015
At 1 January 2014
Additions
Impairment
At 31 December 2014
GOODWILL
£’000
1,321
(1,298)
23
1,792
220
(691)
1,321
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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. (2014 – 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.
Central Illapa SA is a wholly owned subsidiary of Rurelec PLC, the goodwill on acquisition was £23k.
16 TRADE AND OTHER RECEIVABLES
a) Group – non-current
Trade receivables
Amounts due from joint venture companies1
Other receivables and prepayments
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
–
–
–
–
100
23,093
19
23,212
1
Amounts due from joint venture companies represent the amounts lent by the Company, net of impairments, 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.
b) Group – current
Trade receivables
Other receivables and prepayments
Other receivables and prepayments include £20.1 million due from PEL and EdS.
c) Company – Non-current
Amounts owed by subsidiary companies
Amounts owed by joint venture companies
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
607
20,259
20,866
38
9,562
9,600
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
–
–
–
27,505
23,094
50,599
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
35
FOR THE YEAR ENDED 31 DECEMBER 2015
d) Company – current
Loans to Joint Ventures 2
Loans to Subsidiaries 1
Other receivables and prepayments
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
20,103
4,149
405
24,657
–
–
38
38
The amounts owed by subsidiary companies include:
1
2
Loans to subsidiaries in Chile £7.8 million and Peru £8.5 million are repayable on demand. At a group level, these loans have been impaired to
£3.0 million in Chile and by £1.1 million in Peru. 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 2016.
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.
During the period the Group received US $3.7 million from EdS in service of the amounts due £6.7 million (2014: £8.6 million) is secured by a fi rst
charge against the assets of EdS.
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 INVENTORIES
Company – Inventories
Inventories
Inventories comprises of two Siemens 701DU Turbines acquired from IPSA Group plc in June 2013.
18 CASH AND CASH EQUIVALENTS
a) Group
Cash and short-term bank deposits
b) Company
Cash and short-term bank deposits
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
16,195
16,195
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
386
386
283
1
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.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
19 SHARE CAPITAL
In issue, called up and fully paid
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
561,387,586 ordinary shares of 2p each (2014: 561,387,586)
11,228
11,228
20 SHARE OPTION RESERVE
Balance at 1 January 2015
Change for the Year
Cancellation of share option scheme
Balance at 31 December 2015
YEAR ENDED
31.12.15
£’000
146
–
(146)
–
YEAR ENDED
31.12.14
£’000
107
39
–
146
21 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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
37
FOR THE YEAR ENDED 31 DECEMBER 2015
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.
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 £1.2 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.
22 TRADE AND OTHER PAYABLES
a) Group – current
Trade payables
Accruals
b) Company – current
Trade payables
Accruals
23 TAX LIABILITIES
Group – current
P.A.Y.E.
VAT
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
2,856
–
2,856
2,592
–
2,592
4,046
377
4,423
4,193
788
4,981
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
–
–
–
84
(14)
70
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38
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
24 BORROWINGS
Group – Current
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
Company – Current
Other Loans
Company – Total Borrowings
The Group’s borrowings are repayable as follows:
Within 1 year
In more than 1 year, but less than 2 years
In more than 2 years, but less than 3 years
In more than 3 years
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
3,054
3,054
3,054
3,054
–
–
–
3,164
3,164
3,164
3,164
–
–
–
3,054
3,164
910
910
910
910
–
–
–
910
–
–
–
–
–
–
–
–
Group
Other loans of £3.1 million including accrued interest are made up of £2.2 million from Technology Finance Ltd £0.6 million loans from
Radix Investments (UK) Ltd repaid after the year end and £0.3 million due to Grange Capital Ltd of which £0.1 million has been repaid
after the year end.
Company
Other loans of £0.9 million including accrued interest are made up of £0.6 million loans from Radix Investments (UK) Ltd repaid after the
year end and £0.3 million due to Grange Capital Ltd of which £0.1 million has been repaid after the year end.
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 had a nominal impact on earnings.
Sensitivity analysis to changes in exchange rates:
Only US $375k of these loans are denominated in US $. These are included in liabilities held for sale. 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 £5k (2014: £12k).
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.
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
39
FOR THE YEAR ENDED 31 DECEMBER 2015
25 INVESTMENTS
Cost at 1 January 2014
Additions during the year
Investment in Termoelectrica del Norte S.A. – Disposal by Entity
Investment in Central Illapa S.A. – Disposal by Entity
Investment in Electricidad Andina S.A. – Disposal by Entity
Cost at 31 December 2014
Impairment Loss in IPC
Balance at 31 December 2014
Cost at 1 January 2015
Additions during the year
lmpairment in Cascade Hydro Limited
Impairment in Patagonia Energy Ltd
Disposal of IPC
Balance at 31 December 2015
YEAR ENDED
31.12.14
£’000
16,743
(4,190)
(33)
(63)
12,457
(2,702)
9,755
YEAR ENDED
31.12.15
£’000
9,755
(179)
(8,178)
(1,298)
100
At the year-end the Company held the following investments:
1. 50 per cent. (2014: 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.
2. 100 per cent. (2014: 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..
3. 100 per cent. (2014: 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 Colca, S.A.C., both being companies registered
in Peru. During 2013, Rurelec acquired the remaining 30 per cent. minority stake in CHL 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.
4. 100 per cent. (2014: 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.
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40
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
26 JOINT VENTURE
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. 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.
The Group does not participate in losses of the joint venture. In prior years the losses had exceeded the investment in the joint venture
and therefore the Group does not recognise its share of losses in the joint venture.
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
Foreign Currency Exchange
Net/(loss) profit
Rurelec share of net/(loss) profit
Total assets
Total liabilities
YEAR ENDED
31.12.15
£’000
18,198
YEAR ENDED
31.12.14
£’000
17,222
(13,529)
(5,912)
(3,450)
(1,725)
16,372
(17,740)
(11,158)
(3,348)
42
21
24,322
(22,567)
27 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
Write down of loans
Loss on disposal
Impairment of goodwill
Deferred consideration
Movement in working capital:
Change in trade and other receivables
Change in trade and other payables
Cash used in operations
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
(20,029)
(1,927)
48
106
–
15,903
1,669
–
–
(1,366)
51
( 5,545)
(2,936)
(2,255)
12
(2,180)
39
–
–
691
–
5,426
(3,687)
(4,890)
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
41
FOR THE YEAR ENDED 31 DECEMBER 2015
b) Company
(Loss)/profit for the year before tax
Net finance income
Adjustments for:
Unrealised exchange (gains) on loans
Movement in share option reserve
Write down of investments
Write down of loans
Loss on disposal
Reclassification of investment to receivables
Movement in working capital:
Change in trade and other receivables
Change in trade and other payables
Cash used in operations
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
(33,771)
(3,482)
(1,819)
–
8,357
26,68 4
1,669
–
1,062
(2, 770 )
( 4,070)
965
(3,380)
(2,057)
39
2,703
–
–
5,881
(8,384)
(164)
(4,397)
28 FINANCIAL RISK MANAGEMENT
The Group is exposed to a variety of financial risks which result from both its operating and investing activities. The Group’s risk
management is coordinated to secure the Group’s short to medium-term cash flows by minimising its exposure to financial markets. The
Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant
risks to which the Group is exposed are described below:
a) Foreign currency risk
The Group is exposed to translation and transaction foreign exchange risk. Foreign exchange differences on retranslation of these
assets and liabilities are taken to the profit and loss account of the Group. The Group’s principal trading operations are based in South
America and as a result the Group has exposure to currency exchange rate fluctuations in the principal currencies used in South
America. The Group also has exposure to the US $ as a result of borrowings denominated in these currencies.
b) Interest rate risk
Group funds are invested in short-term deposit accounts, with a maturity of less than three months, with the objective of maintaining a
balance between accessibility of funds and competitive rates of return.
c) Capital management policies and liquidity risk
The Group considers its capital to comprise its ordinary share capital, share premium, accumulated retained earnings and other
reserves.
The Group’s objective when maintaining capital is to safeguard the entity’s ability to continue as a going concern, so that it can provide
returns for shareholders and benefits for other stakeholders.
The Company meets its capital needs primarily by equity financing. The Group sets the amount of capital it requires to fund the Group’s
project evaluation costs and administration expenses. The Group manages its capital structure and makes adjustments to it in the light
of changes in economic conditions and the risk characteristics of the underlying assets.
The Company and Group do not have any derivative instruments or hedging instruments. It has been determined that a sensitivity
analysis will not be representative of the Company’s and Group’s position in relation to market risk and therefore, such analysis has not
been undertaken.
As set out in Note 25, the Group has £3.1 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.
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42
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
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
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
2,856
3,054
5,910
Nil
4,493
3,164
7,657
Nil
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 2015
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
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
PARENT LOANS AND
RECEIVABLES
£’000
PARENT
BORROWINGS
AND PAYABLES AT
AMORTISED COST
£’000
GROUP LOANS AND
RECEIVABLES
£’000
GROUP
BORROWINGS
AND PAYABLES AT
AMORTISED COST
£’000
–
24,657
386
–
–
–
–
25,043
–
–
–
–
(2,592)
–
(910)
(3,502)
–
20,835
386
–
–
–
–
21,221
–
–
–
–
(2,856)
–
(3,054)
(5,910)
PARENT LOANS AND
RECEIVABLES
£’000
PARENT
BORROWINGS
AND PAYABLES AT
AMORTISED COST
£’000
GROUP LOANS AND
RECEIVABLES
£’000
GROUP
BORROWINGS
AND PAYABLES AT
AMORTISED COST
£’000
16,809
9,831
3,750
–
–
–
–
30,390
–
–
–
–
(8,883)
(1,499)
(24,583)
(34,965)
35,771
6,075
21
–
–
–
–
–
–
–
–
(5,144)
–
–
41,867
(5,144)
RURELEC PLC Annual Report and Accounts for the year ended 31 December 2015
Stock code: RUR
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NOTES TO THE FINANCIAL STATEMENTS
43
FOR THE YEAR ENDED 31 DECEMBER 2015
29 CAPITAL COMMITMENTS
The Group had outstanding capital commitments of £Nil (2014: Nil) in respect of plant ordered but not delivered at the year-end.
30 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 $5.1 million/£3.4 million (2014: US $5.6 million/£3.6 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.
31 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 £0.9 million (2014: £0.6 million).
ii) Paid, to its former 100 per cent. subsidiary Independent Power Corporation PLC (“IPC”) £0.1 million under a “Shared Service
Agreement”.
iii) Charged interest on loans to its 100 per cent. subsidiary Rurelec Project Finance Ltd (“RPFL”) totalling £528k. The loan balance
outstanding at the year end was £6.9 million.
iv) Charged interest on loans to its 50 per cent. owned joint venture company, Patagonia Energy Ltd (“PEL”) amounting to £2.2 million.
The loan balances at the year end totalled £20.1 million. Interest on these loans has been accrued at between 8 and 18.5 per cent..
v) Received from its joint venture company Energia del Sur S.A. (“EdS”) repayments totalling £0.0 million of support previously given to
creditors of EdS. £0.7 million of credit support remains outstanding at the year end.
vi) a) Charged IPSA Group PLC (“IPSA”) £60k under a “Shared Service Agreement”. b) Repaid £1.2 million of deferred consideration on
the 2013 turbine purchase, £1.3 million remains outstanding at the year end. P.R.S. Earl and E.R. Shaw were Directors of IPSA.
vii) Provided loans and charged interest of 0.5 per cent. per month to its 100 per cent. subsidiary Cochrane Power Ltd of £1.2 million.
The total outstanding at the year end was £7.8 million. These loans have been impaired to £3.0 million.
viii) Received and provided loans to its 100 per cent. subsidiary Cascade Hydro Ltd (“CHL”) of net receipt £1.0 million and charged CHL
interest of £560k. The interest rate was 0.5 per cent. per month. The total outstanding at the year end was £8.5 million. These loans
have been impaired to £1.1 million.
b) Group
i)
A.J.S. Morris loaned CHL £50k in prior years and was repaid £50k in current year and charged interest of £4.4k. The total
outstanding at the year end was £9.5k.
ii) E. R. Shaw loaned CHL £94.4k in prior years and was repaid £83.2k and charged interest of £8.1k. The total outstanding at the year
end was £11.2k.
iii) RPFL received £2.4 million in repayments from and accrued interest on amounts due from EdS of £0.2 million, the interest rate on
the principal was 18.5 per cent., the effective interest rate (on principal and accrued interest) was 0.1 per cent. The total outstanding
at the year end was £6.7 million.
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44
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
32 ASSETS HELD FOR SALE
Assets held for sale relate to three project companies within Peru. 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 were identified, one of which comprises the Canchayllo run of the river plant, sold in July 2015, with the rest of the
project companies 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 2016.
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
YEAR ENDED
31.12.15
£’000
YEAR ENDED
31.12.14
£’000
–
–
3,644
3,644
YEAR ENDED
31.12.15
£’000
718
–
718
9,558
55
8,565
18,178
YEAR ENDED
31.12.14
£’000
10,158
124
10,282
33 POST BALANCE SHEET DATE EVENTS
Since the year end, on February 17 the Company entered into a working capital facility arrangement with Bridge Properties (Arena
Central) Ltd in the amount of £850k. This amount was used to pay the Radix Investments (UK) Ltd loans. This facility was increased on
April 13 by £350k to £1.2 million.
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 2015
Stock code: RUR
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COMPANY INFORMATION
Directors
S.C. Morris (Executive)
B. Rowbotham (Non-Executive)
Secretary
S.A. Laker
Company number
4812855
Registered office and business address
18 Soho Square
London
W1D 3QL
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
241395 Rurelec Annual Report Cover v1 15/07/2016 16:20 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 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 business is centred on our operational plant in Argentina whilst also seeking
to sell the remainder of the small hydro portfolio in Peru and to complete the development
of our larger project in Chile.
CONTENTS
Strategic Report
Non-executive Director’s Statement
Review of Financial Performance
Review of Operations
Our Governance
Board of Directors
Director’s Report
Corporate Governance Statement
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
1
4
5
6
7
9
11
12
13
14
15
16
17
18
19
20
IBC
Read more online at
www.rurelec.com
241395 Rurelec Annual Report Cover v1 15/07/2016 16:20 Page 1
RURELEC PLC
18 Soho Square, London W1H 3QL
Tel: +44 (0) 20 7025 8026
8/
Visit us online at
www.rurelec.com
ANNUAL REPORT
AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2015
Stock code: RUR