TIDMRUR
RNS Number : 9126L
Rurelec PLC
15 September 2021
Rurelec PLC
("Rurelec" or the "Company")
Audited results for the year ended
31(st) December 2020 and Notice of AGM
Rurelec PLC (AIM:RUR), the electricity utility focused on
ownership and operation of power generation plants in Latin
America, announces its audited results for the year ended 31
December 2020. The annual report will be available from the
Company's website www.rurelec.com from today.
Highlights
-- Operating loss GBP2.9 million (2019: loss GBP3.1 million)
dominated by a GBP1.8 million (2019: GBPnil) impairment of the PEL
investment, the valuation of which reflects the expected
performance of EdS under the prevailing difficult operating
conditions in Argentina. There was GBPnil write down of loans to
PEL (2019: GBP0.2 million) and GBPnil impairment on 701 turbines
(2019: GBP2.0 million).
-- Loss before tax GBP5.3 million (2019: loss GBP4.4 million)
GBP2.0 million net provision for expected credit losses on loans to
PEL (2019: GBPnil) and foreign exchange losses of GBP0.5 million
(2019: losses GBP1.3 million).
-- Rurelec received GBP1.8 million (2019: GBP0.5 million) of
debt repayments from PEL under the terms of the November 2019
Umbrella Agreement regulating the division of debt repayments to be
made by PEL to its two joint venture ("JV") partners
-- Improvement in the Group's liquidity position; cash increased
to GBP668k (2019: GBP137k) and current liabilities fell to GBP0.4
million (2019: GBP0.5 million).
-- Following the repayment of secured debts in previous years,
the Group was able to operate without relying on debt
facilities.
-- Sale of Arica turbine, as announced on 9 September 2021, sale
proceeds GBP0.7 million/US$ 1.0 million. A non-refundable deposit
of GBP73k/US$100k was received on 9 September 2021. The balance is
expected by 30 November 2021.
-- Administration expenses of GBP1.1 million (2019: GBP1.2
million), the further reduction being primarily as a result of
savings in employment and professional fees.
-- Total loss per share 0.95p (2019: 0.79p).
-- Net Asset Value per share 2.7p (2018: 3.7p).
-- Since the end of the period under review:
o Sale of Frame 6B turbine, as announced on 9 September 2021,
sale proceeds GBP0.7 million/US$ 1.0 million. A non-refundable
deposit of GBP73k/US$100k was received on 9 September 2021. The
balance is expected by 30 November 2021.
o Brian Rowbotham, senior independent director, resigned on 13
April 2021, to concentrate on other business interests, he was
replaced by Paul Shackleton on 26 July 2021. Simon Morris,
executive director, resigned on 17 August 2021, recruitment of his
replacement is currently in process, with a view to the Board
seeking to focus on disposal of non-core assets in order to
increase liquidity and as part of its medium-term strategy of
unlocking shareholder value.
Notice of AGM
A copy of the annual report and accounts, and the notice of AGM
will be posted to shareholders on or around 18 September 2021. The
annual general meeting of Rurelec PLC will be held at 5 St. John's
Lane, London, England, EC1M 4BH at 11.00 a.m. on 14 October
2021.
At the time of writing, the Company understands that legal
restrictions on social contact arising from the Covid-19 pandemic
have been largely lifted. However, the public is being urged to
exercise caution and an increase in infections is possible over the
next month. During this time, whilst the Company is not expecting
to be legally restricted in terms of attendance and safety measures
at the AGM, the health of the Company's Board and staff,
shareholders and other users of the offices is paramount.
Accordingly, shareholders are strongly discouraged from attending
this meeting in person. Shareholders are instead strongly
encouraged to ensure that their votes are counted at the Annual
General Meeting by appointing the Chairman of the Annual General
Meeting as their proxy and submitting their completed Form of Proxy
as soon as possible.
In any event, attendees will be required to wear face coverings
and maximise distances between themselves and other attendees. To
further reduce transmission risk at the AGM, there will be no
refreshments and no "mingling" with the Board. The Company will
provide an update via RNS should any attendance arrangements need
to be altered in advance of the AGM.
Commenting on the results, Andy Coveney, Executive Director,
said:
The loss before tax of GBP5.3 million (2019: loss GBP4.4
million) is disappointing but is principally driven by a write-down
of the loans made to PEL and the investment in PEL, following a
downgrade in value of the underlying share of assets in EdS. The
decline in value of EdS has resulted from an assessment of the
effect on cash generation following the sharp decline in the tariff
for Argentinian power. This follows the expiry of the PPA grated
under Resolution SE 220/2007 ("PPA" or "Resolution 220 tariff") by
which the output of the steam turbine was remunerated at a premium.
After the expiry of the PPA the offtake from both steam and gas
turbines were remunerated at the much lower spot tariff under
Resolution SE 31/220 until there was an increase in the spot tariff
under Resolution SE 440/2021 in February 2021. The loans being
written down were originally made by Rurelec to PEL principally in
2008 and 2009 to fund the conversion to combined cycle
operation.
The Group has benefitted from a significantly improved
relationship with its joint venture partners following the 19
November 2019 renegotiation of the Loan notes owed from PEL to the
50:50 joint venture partners in the Argentinian operation, and the
Shareholders Agreement between those partners. The new Agreement
reached with our JV partners has established a framework regulating
future cash repayments and between 19 November 2019 and 31 December
2020, the Group received GBP2.3 million from PEL being its share of
debt repayments made from EdS to PEL. Receipts from PEL totalled
GBP1.8 million in 2020 (2019: GBP0.5 million), and to date in 2021
GBP0.3 million has been received.
In 2020, the COVID-19 pandemic had relatively little effect on
the running of Rurelec's UK head office operations (which were able
to operate remotely). There was, however, more impact on the Joint
Venture power generation operations in Argentina, particularly as
the pandemic slowed decision making processes within the
Argentinian Government's Secretariat of Energy and within CAMMESA.
Such delays resulted in prolonged exposure to low spot tariffs
following the expiry of the PPA. COVID-19 also had an effect on the
running of the Argentinian powerplant, but sound management of
procedures and protocols enabled the EdS plant to keep operating.
Notwithstanding the above, it is still not considered possible to
estimate the long-term financial impact of COVID-19 on the
already-weak Argentinian economy at the present time.
The PPA expired in September 2020, and for the rest of 2020
power was sold at significantly lower prices on the energy spot
market. The Board of Rurelec has ensured that EdS's management is
engaged with the Argentinian government, and energy regulators at
the highest level, in order to gain an improved tariff for the
power generated by EdS. However, against a background of severe
economic hardship in Argentina, COVID-related economic problems and
political uncertainty, at the date of this report it remains
uncertain to what extent, if any, EdS will be granted further
improvements over and above the general 29.5% increase in spot
rates awarded with effect from February 2021. If there is no
further improvement in the price EdS receives for the power it
generates, it will have severe restrictions on the ability of EdS
to generate surplus cash (which in turn will have a significant
impact on the Company's working capital position). EdS' management
has implemented a cost cutting programme (including significant
reductions in employee-related costs) and further cost reduction is
planned to ensure the immediate viability of the plant. Prospects
for excess cash generation over and above the current cash of US$
2.0 million already converted into United States Dollars from
Argentine Pesos, by EdS look limited until such time as the
economic and political climate improves in Argentina. Midterm
legislative elections are scheduled to be held in Argentina on 24
October 2021 (50% of the seats in the Chamber of Deputies and one
third of the Senate) and early signs of a global retrenchment of
the pandemic offer some hope for the future.
Since the end of the period under review on 9 September 2021 the
Company announced the sale of its Frame 6B gas turbine generating
set and certain associated ancillary equipment (The "Frame 6B
Turbine") for US$1.0 million. Its carrying value in this report is
US$0.5 million, costs to sell are estimated at US$ 60k. A
non-refundable deposit of $100k was received on 9 September 2021,
the balance is due on completion, expected to be no later than 30
November 2021.
The cash remittances received by the Group have enabled current
liabilities to be further reduced from GBP0.5 million at 31
December 2019 to GBP0.4 million (2018: GBP2.0 million).
At the 2020 AGM there was approval of a Special Resolution to
allow the restructuring of the share capital of the Company. With
sufficient available cash, this would allow for the payment of
dividends to shareholders. The cash reserves of the business, asset
realisations and potential increases in electricity tariffs have
not yet occurred to the extent that the Company has sufficient cash
reserves for the Board to recommend a dividend in relation to the
results for the year ending 31 December 2020.
For further information please contact:
Rurelec PLC W.H.Ireland
Andy Coveney, Executive Director Katy Mitchell and Ben Good
www.rurelec.com
---------------------------
Tel: +44 (0)20 7549 2829 Tel: +44(0) 20 7220 1666
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NON-EXECUTIVE DIRECTOR'S STATEMENT
Dear Shareholder
In common with many other listed companies, the Annual Report
and Accounts are published and will be filed, later than usual this
year following delays associated with the audit process, caused by
COVID-19. The Company received confirmation that this extended
timetable is permitted pursuant to the relevant amendments to the
Companies Act 2006 (and the requirements of Companies House).
The year ended 31 December 2020 was characterised by a
consolidation of the financial position of the business, minimising
risk and cash outflows in the face of uncertainty regarding the
future cash generation of our joint venture Argentinian asset,
Energia del Sur SA ("EdS"). This uncertainty is being driven by
problems in the Argentinian economy, exacerbated by COVID-19
related hardship. In particular the Argentinian government did not
immediately announce a new tariff to replace the Resolution 220
tariff which had been responsible for economic returns from EdS in
recent years when operating normally. Instead, all generation was
remunerated at the spot tariff from September 2020 and an
improvement in that tariff was delayed until May 2021 when a 29%
increase was announced.
Loan repayments from EdS enabled the Group to settle its secured
creditor during 2019. The Bridge Properties (Arena Central) Limited
("BPAC") loan was fully repaid on 20 December 2019. As a result,
the security held over the assets of the Group by BPAC under its
debenture was released. The Group is now debt-free, an important
step towards financial stability which is a key goal of the Board.
However, unless EdS is able in the future to generate surplus cash
in the face of highly adverse political and economic conditions in
Argentina, in the longer-term cash generation by the Group will
become more reliant on other asset disposals in order ensure
viability and ultimately to be in a position to make returns to
shareholders and that is therefore an area of renewed focus for the
Company.
Post year end, as announced on 9 September 2021 the Group
disposed of its Frame 6B gas turbine generating set and certain
associated ancillary equipment for US$1.0 million, and accordingly
a non-refundable deposit of GBP73k/US$100k was received the balance
of GBP649k/US$900k is expected to be received on completion,
expected to be no later than 30 November 2021. After settlement of
local Chilean costs and other expenses connected with the sale, the
Group expects to receive net US$ 940k from this sale. This will
significantly reduce reliance on cash flows from EdS.
Group current liabilities at 31 December 2020 stood at GBP0.4
million, which compares with the position at 31 December 2019 of
GBP0.5 million.
Outlook
Argentina
Following the extensive maintenance programme completed in early
2019 EdS has performed well from an operational standpoint, albeit
offtake has been reduced by the growth in sustainable energy
sources in Patagonia.
The Rurelec Board continued to prioritise the importance of
maintaining a constructive and co-operative working relationship
with our joint venture partner in Patagonia Energy Limited ("PEL"),
the holding company of the Argentinian asset, as all future cash
remittances from EdS need to flow up through PEL given all direct
debts owed from EdS to the Group were repaid in 2020. That
relationship has improved since November 2019 since the signing of
an agreement with the joint venture partner in PEL that, amongst
other issues, sets out how future cash receipts in PEL will be
allocated between the joint venture partners. This agreement
transformed the relationship resulting in GBP2.3 million of cash
being received by Rurelec from PEL between 19 November 2019 and 31
December 2020.
However, the generation of surplus cash by EdS and rate of cash
remittances from EdS to PEL continued to be hit by other external
factors. Despite the plant continuing to perform well, the economic
situation in Argentina remains in crisis and this has been
amplified by the impact of the COVID-19 pandemic on an already weak
economy. Argentinian cost inflation continued to soar, affecting
staff costs in particular. The economy has shown little sign of
improvement since a change of government in October 2019 and
businesses in the power generation industry have reported
difficulty in operating under current tariffs.
The Argentine annual inflation rate was over 50% in July
2021[1]. The value of the Argentinian peso against the US Dollar
plummeted by nearly 46% in 2020 and at the end of July 2021 had
declined further by 15%. The Exchange controls implemented by the
new government remained punitive to foreign investors - the
Argentinian Central Bank ("BCRA") exchange controls have a direct
effect on the cash remittances by EdS to PEL, the latter not being
resident in Argentina. The cost of transferring money out of
Argentina has increased dramatically since February 2020 and since
then the loss suffered on transferring Argentine Pesos to US
dollars has amounted to approximately 43% of the underlying face
value.
In addition, early in 2020, the Argentinian Government announced
a policy change whereby energy spot prices would no longer be
linked to US Dollars but to Argentinian Pesos. Under the Resolution
220 tariff, by which EdS was remunerated for the power output of
its steam turbine operating in combined cycle, the steam turbine
revenue was US dollar based; this has increased the foreign
exchange risk.
The anticipated expiry of the Resolution 220 tariff in September
2020 has been a source of great uncertainty for a number of years.
The Argentinian government did not immediately announce a
replacement tariff. Instead, remuneration levels fell significantly
to spot-market rates governed by the existing Resolution SE 31/2020
tariff ("Resolution 31").
Despite negotiations at the highest possible level with the
Argentinian Government, its Secretariat of Energy and also with
CAMMESA, output from the Steam Turbine was remunerated at
Resolution 31 spot rates between September 2020 and February
2021.
On 12 February 2021 CAMMESA agreed to a 12 month suspension of
interest and repayments for two maintenance loans to EdS and a
constant Utilization Factor, which is used to calculate capacity
equal to 70% of nominal output from 1(st) February 2021.
On 19 May 2021, Resolution SE 440/2021 ("Resolution 440") was
announced introducing the following changes to the existing
Resolution 31 tariff:
-- Spot generation tariffs increased by additional payments of 29% on average.
-- This increase is to be retroactively applied from February
2021 (though payment of these sums is delayed - see below).
-- There was a cancellation of the Update Clause (Art 2. SE
Resolution 31/2020) for the increase in rates based on the Consumer
Price index "CPI" and the Internal Wholesale Price Index "IPIM"
Under this change, steam and gas turbine capacity and offtake
revenue are all remunerated under the same Resolution 440 tariff.
Previously just gas turbine offtake was remunerated under the
Resolution 31 spot tariff. Despite the increases in Resolution 440,
the income generated under this new tariff will be significantly
lower than under Resolution 220.
The Directors anticipate that EdS's revenue will be
significantly adversely impacted by this change and accordingly
negotiations continue with the Government and CAMMESA to be awarded
an improved tariff that reflects the high cost of operating in the
Comodoro Rivadavia region. The adverse overall impact of the tariff
changes may be mitigated by the ongoing negotiations with the
Argentinian Secretariat of Energy, albeit there is no certainty
when these negotiations will be concluded or what their impact will
be. Until then, EdS's revenue and cash generation will continue to
be affected, which in turn will influence the timing and amounts of
any cash payments from EdS to PEL and ultimately to Rurelec.
Amidst this economic pressure, CAMMESA has also continued to
delay payments due to power generators for the power they have
generated - for example at the time of writing this report, the
additional payments due under the Resolution 440 PPA have been
delayed with the majority of the payment only being received in
August 2021. This has added further adverse pressure on EdS' cash
generation.
In response to anticipated reductions in revenue, directed by
the Board of Rurelec and its JV partners, EdS management pursued a
cost saving programme which culminated in the retirement of EdS's
Chief Executive Officer in December 2020 and the move to part-time
working of two senior staff at the operations Head Office in La
Plata outside Buenos Aires. The achievement of labour cost
reduction in this consensual way became essential as the Argentine
government introduced Emergency labour laws in reaction to
COVID-19. These laws effectively doubled the compensation legally
payable in the event of redundancy in Argentina[2].
The COVID-19 pandemic was confirmed to have spread to Argentina
on 3 March 2020. On 19 March 2020, Argentina entered a mandatory
nation-wide lockdown. Restrictions were extended several times
until 8 November 2020. During the second wave, another nationwide
lockdown took place between 22 and 31 May 2021.
Argentina's Government determined that EdS' power generation was
an essential service, and instructed that the power plant should
operate with minimum staffing, covering operational shifts and
specialist preventive cleaning work. All but essential personnel
have been working remotely and not been coming to the plant unless
there is an equipment-related problem to address at the plant. A
wide range of preventative measures were implemented to protect and
safeguard staff. Overall, these measures were successful in
minimising the adverse impact of COVID-19 on EdS's ability to
continue in operation.
However, the major maintenance work on one of the gas turbines
scheduled for Q1 2020 has had to be postponed beyond 31 December
2021, though this is not in the meantime expected to have a
significantly detrimental effect on operations. Maintenance works
are determined by the number of hours a turbine operates, lower
output and careful management of the hours each turbine runs has
allowed the postponement of the previously planned Q1 2020
maintenance, whilst still complying with output levels agreed with
CAMMESA.
Chile and the Group's two 701DU Siemens turbines
The Group's Central Illapa project ("Mejillones") remains
consented, and licence fees have been paid to maintain that
consent. The two 701DU turbines, which are stored in Italy, could
be used in the project (the turbines are consented for the
project), or be sold on the open market. The Directors are pursuing
both options in line with the strategy to return value to
shareholders in the shortest possible timeframe.
Summary
Although 2020 was a year of consolidation with some small
improvements in the Group's liquidity position, the effect of the
current poor state of the Argentinian economy, and the uncertainty
around the ability of EdS to generate excess cash unless a further
improved PPA is awarded, continue to cast a shadow over future
performance.
Against a background of political uncertainty, at the date of
this report, it remains uncertain to what extent, if any, EdS will
be granted further improvements over and above the general increase
in spot rates awarded with effect from February 2021. If there is
no further improvement in the price EdS receives for the power it
generates, it will have severe consequences for the ability of EdS
to generate surplus cash. In case there are no such improvements
EdS management has implemented a cost cutting programme and further
cost reductions are planned to ensure immediate viability of the
plant.
________________
Paul Shackleton
Non-executive Director
15 September 2021
STRATEGIC REPORT
Strategy
The overall strategy for the Group remains the continued
stabilisation of the financial position of the Group, with the
intention of enabling value to be realised from the asset portfolio
and ultimately returned to shareholders. In order to make this
possible the Directors succeeded in carrying out a capital
reconstruction of the Company at the 2020 AGM.
Liquidity
This strategy has been determined by the on-going financial
position of the Group. The main borrowing of the Group was the 2016
secured BPAC loan, which was repaid in 2019 enabling the associated
debenture to be released. The Group has thus become debt-free.
Current liabilities have fallen steadily from GBP2.0 million at 31
December 2018 to GBP0.5 million at 31 December 2019 and GBP0.4
million at 31 December 2020 with all significant arrears to
creditors being satisfied.
The EdS plant, had significant operational problems resulting in
severely reduced output in 2017 through to January 2019. The plant
then underwent a major $6 million maintenance programme primarily
funded by loans from CAMMESA between October 2018 and January 2019.
During that maintenance programme, the steam turbine was completely
overhauled, the rotor and missing turbine blades were replaced, the
steam turbine generator was overhauled and one of the gas turbines
also underwent a rotor replacement and overhaul.
The material loss of revenue of EdS (and consequent intermittent
debt repayments to Rurelec) in 2018 major outages of the plant
resulted in depleted cash reserves for EdS and Rurelec at the start
of 2019. These cash reserves recovered during 2019 and in 2020 up
until the last Resolution 220 receipts in November 2020, as normal
operations resumed despite demand for the power generated by EdS
being scaled back owing to the commissioning of wind farms in the
Comodoro Rivadavia area of Patagonia in which came online in
September 2019. At 31 December 2020, EdS had GBP2.8 million of cash
reserves (2019 GBP3.4 million).
During 2020, continued normal operations and cash generation at
EdS enabled it to remit unsecured debt repayments of GBP2.3
million/$3.0 million (2019: GBP0.6 million/$0.8 million) to
Patagonia Energy Limited ("PEL"). Of this amount, Rurelec received
GBP1.8 million (2019: GBP0.5 million) of debt repayments from PEL
under the terms of the November 2019 Umbrella Agreement regulating
the division of debt repayments to be made by PEL to its two joint
venture ("JV") partners.
In 2020 all Group receipts were made from EdS via PEL under the
terms of the November 2019 Umbrella Agreement between the JV
parties whereas in 2019 the Group had received GBP1.7 million
directly from EdS in repayment of secured and unsecured debts as
well as GBP0.5 million of receipts via PEL The total cash
remittances by PEL in 2020 were GBP1.8 million (2019: GBP2.2
million).
Since EdS has now repaid all debts owed directly to the Rurelec
group companies, Rurelec's liquidity is driven by the flow of
receipts from PEL. PEL's liquidity is, in turn, determined by the
ability of EdS to purchase US Dollars to repay the debts it owes to
PEL or to pay dividends to PEL. In September 2019 in an attempt to
stabilise markets as it faced a deepening economic crisis, the
Argentinian government imposed exchange rate controls as a result
of which the timing and quantum of payments from EdS to PEL is
heavily affected by the duration of exchange controls that firstly
restrict the ability of EdS to transmit funds to PEL and secondly
increase the money conversion cost of achieving those transfers. In
2021 the money conversion cost has reached approximately 43%.
Another adverse effect of the economic crisis has been a
deterioration in collections from debtors by CAMMESA resulting in
delays being experienced by EdS and other electricity generators in
Argentina in receiving payments from CAMMESA. Both these factors,
combined with the low spot prices combine to generate adverse and
uncertain conditions surrounding the Group's liquidity.
Liquidity is also affected by the increased foreign exchange
risk for the Group resulting from the policy change announcement by
the Argentinian Government in response to the economic crisis that
revenue deriving from the electricity generated by EdS from its
steam turbine and sold on the energy spot market will no longer be
linked to the US Dollar but to the Argentinian Peso.
The Resolution 220/2007 Power Purchase Agreement ("PPA"), which
governed the remuneration of capacity and generation payments on
the steam turbine since October 2010 expired in September 2020,
affecting the liquidity of EdS from December 2020. The level of the
replacement Resolution SE 440/2021 tariff ("Resolution 440") tariff
which came into effect from 1 February 2021 will have a significant
effect on EdS's cashflow generation from 2021 onwards as those
levels are significantly below those of Resolution 220. EdS'
management remains hopeful that an additional tariff increase will
be awarded to EdS owing to the cost of producing electricity in the
Comodoro Rivadavia area and because EdS is strategically important
to the supply of electricity to its surrounding area.
Post year end to date the Group has received GBP347k from
PEL.
The Directors have performed a review of Rurelec's cashflow, as
described below in the Going Concern section of this report,
following which it has been concluded that any ongoing impact of
the COVID-19 pandemic to date has had little adverse effect on the
Directors' view on going concern of the Group for the next 12
months after the signing of this report. However, the effects of
the COVID-19 pandemic in Argentina are less clear in the future and
the Directors cannot rule out liquidity issues impacting on the
Group in future periods if Argentina loses control of the disease
to the extent where it has a material impact on the operations of
EdS or demands for electricity. This could lead to a position where
EdS, on its own, would not be in a position to fund Rurelec ongoing
expenses.
Financial results
The operating loss for the year of GBP2.9 million for 2020
represents a decrease in losses compared to the GBP3.1 million
operating loss for 2019. This is explained in more detail in Notes
8 and 9 to the accounts. Included in the loss is an impairment in
the carrying value of Group assets of GBP1.8 million (2019: GBP2.0
million) coupled with administration expenses which fell from
GBP1.2 million in 2019 to GBP1.1 million in 2020.
The impairment is dominated by a reduction in the forecast net
present value of the future cash generation of EdS which is used to
support the value of the loan repayments receivable from PEL. This
reduction in forecast cash generation is the result of revised
assessments of the unfavourable cash generation resulting from
tariffs to be imposed in replacement of Resolution 220. They
reflect the Board's view of the carrying value for the Group's
assets in current market conditions.
The overall loss before tax for the year was GBP5.3 million
(2019: GBP4.4 million). This was after a net finance expense of
GBP2.0 million, due to slower projected PEL loan note repayments
increasing the expected credit losses. There was a GBP0.8 million
reduction in foreign exchange gains/losses from a GBP1.3 million
loss in 2019 to a GBP0.5 million loss in 2020.
Unless there is a significant disposal of assets, in the long
term, the Group is dependent upon debt repayments from Argentina
via PEL. There still exists some uncertainty as to the timing and
the quantum of those receipts given exchange rate controls and
other austerity measures imposed by the Argentinian Secretariat of
Energy and CAMMESA in response to the Argentinian economic
crisis.
At the date of the signing of the Financial Statements, having
considered the cash forecasts from the Argentinian operation and
the received deposit and expected receipts from the sale of the
Frame 6B gas turbine generating set and certain associated
ancillary equipment in Chile, the Directors believe, bearing in
mind the reduced outgoings of the Group, there is currently
sufficient headroom in existing working capital facilities to avoid
the need to seek further sources of working capital. However these
receipts are not guaranteed, If neither source of funds generates
cash there exists a material uncertainty over the ability of the
Company to finance its ongoing activities,
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
financial and non-financial targets which are set annually.
Financial KPIs
Financial KPIs address cashflow, operating profitability, net
asset value and earnings per share.
i) Cash Flows
The Group is heavily focused on optimising cashflow generation.
It regularly monitors actual and forecast Net Cashflows used in
Operating Activities, Net Cashflows Generated by Investing
Activities (predominantly the repayment of loans from PEL) and Net
Cash Used in Financing Activities (although those will in the
foreseeable future be minimal as the Group has become debt-free).
The Net increase in Cash and Cash Equivalents in the year was
GBP531k (2019: decrease GBP214k), a favourable swing of
GBP745k.
ii) Operating profitability
Operating loss excludes all non-operating costs, such as
financing 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 an operating loss of
GBP2.9 million in the year (2019 GBP3.1 million loss).
iii) 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 2.7 pence per share
(2019: 3.7 pence per share).
iv) Earnings per share
Earnings per share provide a measure of the overall
profitability of the Group. It is defined as the profit or loss
attributable to each Ordinary Share based on the consolidated
profit or loss for the year after deducting tax. Growth in earnings
per share is indicative of the Group's ability to identify and add
value. The Group made a loss of 0.95 pence per share in the year
(2019: loss of 0.79 pence per share).
Non-Financial KPIs
Non-financial KPIs address other important technical aspects of
the business, such as gross capacity, operating efficiency 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. EdS in which the Group has a 50% interest has an
installed nominal capacity output of 138 MW. No additional capacity
was added in the period. The group continues to own three turbines
ready for deployment in projects or onward sales. Two of these have
a nominal capacity of 125 MW, the other 38 MW.
ii) Operating efficiency
Operating efficiency is the average operating efficiency of the
generating plant owned by Group companies. It can be improved
through the installation of more thermally efficient turbines,
refurbishment activities or through conversion to combined cycle
operation. The annual heat rate was 8.46 MMBTU/KWh (2019: 8.53
MMBTU/KWh).
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 91.7
per cent. (2019: 89.0 per cent.).
Review of Financial Performance
Group Results
The Group loss after tax for the financial year under review is
GBP5.3 million (2019: GBP4.4 million loss). This included net
impairments of GBP1,8 million (2019: GBP2.0 million), net expected
credit losses of GBP2.0 million and foreign exchange losses of
GBP0.5 million (2019: GBP1.3 million losses). The
impairments/(impairment reversals)/Net Expected Credit Losses are
detailed below:
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
Impairments/(Impairment reversals)/Net
Expected Credit Losses
Investment in JV Companies 1,826 -
Loans to JV Companies (see note 22) - 235
Net Expected Credit Losses 1,964 -
Reversal of impairment of investment
in SEA SA - (188)
Impairment of turbines for Central
Illapa - 1,982
Total 3,790 2,029
----------- -----------
Group revenue was GBPnil (2019: GBPnil), Operating and
Administrative expenses amounted to GBP1.1 million (2019: GBP1.2
million). Operating loss was GBP2.9 million (2019: GBP3.1 million
loss). The loss before tax is GBP5.3 million (2019: GBP4.4 million
loss). The basic loss per share is 0.95p (2019: 0.79p loss). Total
assets are GBP15.4 million (2019: GBP21.0 million). Total equity
stands at GBP15.1 million (2019: GBP20.5 million), or a Net Asset
Value of 2.7 pence per share (2019: 3.7 pence per share).
The results for the operations in Argentina, and Chile are shown
below.
Energia del Sur S.A. Results
After the application of Argentine GAAP accounting treatments to
recognise the effects of hyperinflation, based on 100% of EdS's
activities, the net operating profit for the year was GBP7,8
million/AR$ 722.9 million (2019: GBP11,8 million/AR$ 702.7 million)
on revenues of GBP16,7 million/AR$ 1,540.2 million (2019: GBP22,6
million/AR$ 1,350.8 million), the net pre-tax profit for the year
at EdS was GBP1,9 million/AR$ 174.8 million (2019: profit GBP3,8
million/AR$ 224.8 million) which included foreign exchange losses
of GBP2.6 million/AR$ 239.1 million (2019: GBP2.8 million/AR$ 166.4
million).
As set out in note 22 the Directors have determined that the
relationship with EdS is a joint venture and is therefore equity
accounted.
Rurelec Chile
The development of our 100% owned investments in Chile has
expensed limited direct costs in the year of GBP164k (2019:
GBP98k). Capitalised development costs are GBP0.1 million (2019:
GBP0.1 million) on the Central Illapa project. In 2020 the Arica
turbine was assessed for impairment, it was determined that no
impairment had occurred (2019: GBPnil). The development costs
associated with the Central Illapa project were not impaired in
2020 or 2019. As announced, post year end the Frame 6B gas turbine
generating set and certain associated ancillary equipment was sold
for US$ 1.0 million. This was announced on 9 September 2021, a
non-refundable deposit of GBP73k/US$100k was received,. It is
expected that the balance of US$ 0.9 million will be received by 30
November 2021.
Review of Operations
Argentina
In 2020 the combined cycle power plant continued to benefit from
the Major Maintenance programme that was undertaken from October
2018 to January 2019. The combined cycle plant maintained its
nominal output of 125 MW and there were no major operational
problems or unplanned outages. However, there were transmission
network restrictions associated with the growth in power generated
by wind farms in the Comodoro Rivadavia area which came online in
September 2019 and increased output in the following months which
limited the plant's dispatch such that in times of reduced demand
from the network, to conserve operating cost EdS plant management
have been running only one of the two available gas turbines. Hence
the gross energy generated for the year 2020 of 522 GWh was below
that of 2019: 598 GWh. The average heat rate of the plant in 2020
was 8.46 MMBTU/KWh (2019:8.53 MMBTU/KWh). The average heat rate for
the plant includes fuel consumption on both the gas turbines and
auxiliary firing of the steam turbine.
The following table sets out the Group's 50 per cent. share of
its interest in Patagonia Energy Limited ("PEL") the BVI registered
joint venture holding company of EdS, its 100 per cent. owned
Argentinian operating subsidiary:
Group share of Joint Venture results Year Ended Year Ended
and net assets
31.12.2020 31.12.2019
GBP'000 GBP'000
Results
Revenue 8,357 11,295
Operating Expenses - excluding foreign
exchange losses (4,464) (6,082)
Foreign exchange losses (1,288) (1,391)
EBITDA 2,605 3,822
Depreciation (1,043) (1,198)
EBIT 1,562 2,624
Intragroup interest - credit re write
back of prior year charge 2,578 2,570
Third party interest payable (634) (1,406)
Profit before tax 3,506 3,787
Tax (829) (1,079)
Profit after tax 2,677 2,709
Summary of Statement of Financial
Position
Non-current assets 10,407 15,889
Cash 1,418 1,713
Current trade and other receivables 1,196 4,907
Non-current liabilities (18,681) (25,785)
Current liabilities (2,060) (4,881)
Net assets/(liabilities) (7,720) (8,157)
Chile
Arica
Following the reassessment of the project the Board has been
considering deploying the Frame 6B turbine acquired for the project
elsewhere. As separately announced on 9 September 2021 a sale of
the turbine has been agreed for US$ 1.0 million approximately GBP
0.72 million. A 10% non-refundable deposit of GBP73k/US$100k was
received on 9 September 2021 the balance is due on completion,
expected 30 November 2021.
Central Illapa
The necessary environmental consents granted for the project
were maintained and an application which had been made in 2019 for
the extension of the construction period from Ministerio de Bienes
Nacionales, the Chilean Ministry of National Assets was duly
approved in January 2020.
The Group's carrying value for projects is assessed for possible
impairments. In light of current local market conditions, in order
for the project to be attractive to joint venture partners, the
capital value of the 701 Siemens turbines going into the project
has been assessed at US $9.4 million (2019:US $9.4 million). The
Directors also obtained an independent valuation produced by a
competent person. Based on valuation advice the Directors have
decided not to further impair the carrying value of these turbines
(2019: GBP2.0 million/$2.6 million impairment). After exchange rate
movements these assets are duly recorded at a value of GBP6.9
million (2019: GBP7.2 million).
Future developments have been considered in the non-executive
Director's statement.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group are
possible changes in demand and pricing for electricity in the
markets in South America in which the Group operates, political
risk, uncertainties in the financial markets, and unexpected
operational events.
a) Political risk - there are significant political risks in the
areas where the Group operates. These include potential for
unfriendly actions towards foreign investments and towards the
domestic utilities sector generally, the imposition of new tariffs
and/or taxes and/or government cash shortages resulting in slow
payment for electricity generated. That political risk also extends
to labour laws which can result in significant employment-related
cost inflation and punitive employment compensation legislation
which can make it difficult and uneconomic to carry out staff
restructuring programmes. There is also the possibility that
domestic economic instability could lead to political unrest or
vice versa. These are significant risks to Rurelec which are
inherent in operating in such territories
b) Financial markets - Should, after careful assessment, the
Group wish to develop its assets, project finance may be
unavailable in the markets in which the Group operates; the Group's
plans remain dependent on raising project finance from a
combination of local partners and lending institutions.
c) Exposure to foreign currency - The Group's activities are in
South America and therefore results will be affected by exchange
rate movements and local inflation rates. Furthermore, at times of
economic crisis (such as in Argentina since late 2019), exchange
control restrictions have been imposed and may be further
tightened. These may have a significant impact on the Group's
ability to repatriate funds to the parent company, and introduce an
additional cost of achieving that repatriation. The Group seeks to
limit these risks by raising funds in the currency of the operating
units.
d) Efficient operation - The Group has an effective maintenance
programme and is committed to maintaining the equipment in a manner
appropriate to the foreseeable demands on that plant to reduce the
breakdown risk as appropriate.
e) Liquidity - The Group needs to be in a position to meet its
short-term cash requirements. Please see Going Concern in the
Directors Report and note 1b for further details.
f) Economic, market and business operations risk resulting from
pandemics, particularly the COVID-19 pandemic. In March 2020, the
World Health Organisation declared the spread of COVID-19 to be a
pandemic. The rapid spread of the virus and consequent global
emergency containment measures resulted in business closures,
travel shutdowns and restrictions that have severely curtailed
economic activity and political and economic decision making. The
prolonged nature of the COVID-19 pandemic has had a severe negative
impact on the UK, Argentinian and Chilean economies where the Group
operates. The demand for electricity has experienced some decline
from the reduced industrial and commercial activity, but background
demand has been maintained. The greater risk has been the effect of
the pandemic on already fragile economies such as that of Argentina
and measures such as emergency labour laws and restrictions on
profit returns from utility companies generally have been
implemented to prevent social hardship with the expectation that
business meets the burden of that implementation.
To date, the pandemic did not have a significant impact on
operations. London head office operations of Rurelec were able to
continue remotely without disruption. All current Head Office
records were digitised before the UK lockdown to allow for remote
access and work has continued from employees' homes. In Argentina,
the spread of the virus did affect the EdS workforce but measures
taken by EdS's management minimised disruption (such as operating
with reduced on-site manpower for non-essential personnel) and this
has mitigated any major adverse effect on EdS's operations to date.
The EdS plant has not experienced shutdowns and has continued to
generate cash broadly in line with expectations.
However, the ultimate duration and effect of the COVID-19
pandemic and any subsequent pandemics remain uncertain. Despite
widespread global stimulus packages and efforts to control and
eradicate the virus, this could eventually have permanent adverse
effects on the growth of those economies, the demand for
electricity, the ability to operate and the ability to obtain spare
parts and engineering expertise in the event of maintenance or
equipment breakdowns. There are no guarantees there will not be yet
further disruption and this could extend to an inability to
transfer funds out of the country for debt repayments owed to the
Group. Group cash flows have been prepared under the scenario that
cash will be normally received under current conditions and local
management's expectations.
Directors' Section 172 Statement
Statement by the directors in performance of their statutory
duties in accordance with s172(1) Companies Act 2006.
The Board of Directors of Rurelec Plc acknowledge that they have
a statutory duty under s172 (1) (a-f) of the Act to promote the
success of the Company for the benefit of the members as a whole
considering broader stakeholder interests, and notably having
regard to:
a) the likely consequence of any decision in the long term;
b) the interests of employees;
c) the need to foster business relationships with suppliers, customers and others;
d) the impact of operations on the community and the environment;
e) the desirability of the company maintaining a reputation for
high standards of business conduct; and
f) the need to act fairly as between members of the Company
We report below on how in the year ended 31 December 2020 the
Board's strategies, actions and key decision making took place
observing these duties with the objective of delivering positive
outcomes for the Company, its shareholders and its wider
stakeholders the most relevant of which have been identified as
including creditors, employees of the Company and of interests in
foreign JV operations and those impacted by its operations in the
wider community.
a) Regarding the likely consequences of long-term decision
making, those decisions were made with clear strategic focus on the
need to return value to shareholders and the need to continue to
build financial strength, thereby avoiding the near-insolvency
event experience by the Company in the past. That strategy drove
cash conservation and cost cutting decisions so that the business
could withstand financial stress. The Company was able to withstand
those stresses in 2020.
With the resilience of Rurelec in mind the Directors invested
much time and effort into achieving an improvement in relations
with its JV partner in Patagonia Energy Limited, owner of the
Argentinian operations. That culminated in the decision to
formalise that improved relationship by signing the November 2019
Umbrella Agreement, Revised Shareholder Agreement and Amended Loan
Notes. Inter alia, by waiving accrued interest (which had been
fully provided), the subsequent alignment of interests paved the
way for both JV parties to maximise the cashflow of the Argentinian
operations and to maximise the submission of cash from EdS to the
JV.
b) Our employees are fundamental to the delivery of our
strategy. The Board has prioritised fair remuneration and pension
arrangements for those employees and undertakes regular
communication updates in an open environment. Decisions taken to
maximise the resilience of the business, preserving cash and
minimising risk, are taken after prioritising the continued
employment of those employee roles that have been instrumental to
the turnaround of the business. Rurelec's Directors have been
instrumental in using impending retirements and encouraging
part-time working to lower the future costs of its Argentinian
operations.
c) Regarding the need to foster business relationships with
suppliers, customers and others, Rurelec has for some time been
keen to repay arrears to trade creditors who have supported the
business over a significant timescale and to repay in full all
secured creditors. The Company has been freed from the interest
burden that was being paid on past loans, thereby benefitting other
stakeholders. Rurelec is now essentially debt- free and, as
operating circumstances allow, the Board's stated objective of
returning value to shareholders can be realised.
d) Regarding the impact of operations on the community and the
environment, Rurelec takes a close interest in the operations in
Argentina and was instrumental in the decision to perform major
maintenance programmes on a gas turbine and on the steam turbine in
2019. This decision involved significant investment and was taken
in the knowledge that, inter alia, the maintenance should extend
the longevity of the turbines and provide safe, and environmentally
compliant generation of electricity. At the operations level, EdS
has assumed sustainable development of its activity and in the
region. Its Environmental Policy is adapted to the nature,
environment, scale and environmental impact of the activities and
services of the plant. It has implemented an Environmental
Management System that has been certified by Bureau Veritas. This
system has procedures, instructions, and records in accordance with
the requirements of ISO 14.001: 2004, whose compliance is verified
through periodic, external and internal audits that contribute to
the continuous improvement of EdS.
e) Regarding the desirability of Rurelec maintaining a
reputation for high standards of business conduct, the Board of
Directors' intention is ensure that the business operates and
behaves in a responsible manner with high standards of business
conduct and governance. Regular communication amongst the Board and
employees and effective, formally recorded Board Meetings ensure
such standards are maintained. Where appropriate, independent legal
advice is obtained to support the decision process.
f) Regarding the need to act fairly, as between members of the
Company, all shareholders are welcome to express their views at the
Annual General Meeting. In December 2019, the Company took the
decision to apply to shareholders and the law courts for a capital
reconstruction in 2020. This reconstruction was duly approved in
2020 to facilitate the distribution of future returns to
shareholders should cash reserves grow to the extent of permitting
this.
The Strategic Report was approved by the Board of Directors on
15 September 2021 and was signed on its behalf by:
_______________________
Andrew Coveney (Executive Director)
BOARD OF DIRECTORS
BRIAN ROWBOTHAM
Non-Executive Director
Brian was 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 flotation on AIM and subsequent move to the Official
List. He ran his own consultancy specialising in turnarounds and
start-ups until joining Hitchens, Harrison & Co plc in January
2005. He left Hitchens, Harrison & Co plc after its acquisition
by Religare in 2008. Brian is a Fellow of the Institute of
Chartered Accountants in England and Wales. During the period he
held a number of other board positions.
Brian resigned on 13 April 2021.
SIMON MORRIS
Executive Director
Fellow of the Institute of Chartered Accountants in England and
Wales qualified 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 finance
and corporate recovery, principally restructuring work. He was
appointed Chief Operating Officer 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.
Simon resigned on 17 August 2021.
ANDY COVENEY
Finance Director
Member of the Institute of Chartered Accountants, qualified as
Chartered Accountant in 1990. After obtaining a degree in Geology
from the University of Durham he joined Deloitte Haskins &
Sells, in 1991 then specialising in Corporate Finance advisory
work. In 1993, Andy embarked on a 15-year spell as FD/MD of several
financial and operational turnarounds in the manufacturing and
distribution sectors, starting with the acquisition and subsequent
turnaround of CP Pharmaceuticals Limited, a loss-making division of
Fisons plc before it was sold to Wockhardt Group a decade later.
Founded Coveney Associates Consulting in 2010 providing FD advice,
turnaround services and cashflow management advice to a portfolio
of businesses.
PAUL SHACKLETON
Non-Executive Director
Paul is the Senior Independent Non-Executive Director and
Chairman of the Audit Committee. He is a corporate finance adviser
at Arden Partners PLC. After university, he spent six years as an
officer in the British Army. In 1996 he joined UBS limited where he
worked with small caps covering Mergers and Acquisitions and Equity
capital markets for listed and AIM traded companies. He
subsequently joined Singer & Friedlander Limited where he was a
founder member of the team which undertook a MBO to form Bridgewell
Limited. Since then, he has continued to specialise in small
companies; his experience also includes being an adviser to Rurelec
between 2006 and 2017.
Paul was appointed on 26 July 2021.
DIRECTORS' REPORT
The Directors submit their annual report together with the
audited financial statements for the year ended 31 December
2020.
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
acquired assets in Argentina and Bolivia and commenced development
of new power generation projects in Peru and Chile. The power
generation projects in Peru were sold on 30 January 2018.
Results and dividends
The Group results for the year ended 31 December 2020 are set
out in the Consolidated Statement of Total Comprehensive
Income.
No dividend was paid during the year to 31 December 2020 (2019:
nil).
Share capital
Details of the issued share capital are set out in Note16.
Going concern
The directors have prepared budgets and forecasts for a period
of at least 12 months from the date of signing of the financial
statements to assess the Group and Company's ability to continue as
a going concern.
On the basis that the Group receives the joint venture
remittances referred to below, or the proceeds from the sale of the
Frame 6B turbine (referred to below), the Directors have assessed
that at the date of signing of the financial statements, the Group
and Company would have sufficient working capital for a period of
at least 12 months from the signing of the financial statements,
without the need to seek further sources of working capital and
have therefore prepared the financial statements on a going concern
basis.
In November 2019, the signing of the Umbrella Agreement and
Revised Shareholder Agreement with the JV partner has significantly
improved the clarity of how the cash proceeds of the JV will be
split between the parties. To date debt repayments of GBP2.3
million has been received from the JV in part payment of the
Amended and Restated Loan Notes. The quantum and timing of such
receipts may still be subject to variation (particularly as a
result of Argentine exchange rate controls) and are not guaranteed
or secured. Loan repayments already received, at the date of this
report, along with projected rest of year repayments from the joint
venture are expected to be sufficient to meet the working capital
requirements for the Group.
The sale of the Frame 6B turbine was announced on 9 September
2021 for $1.0 million. At the time of signing of the financial
statements, $100k has been received, the balance is due on
completion, expected to be before 30 November 2021.
Without either the remittances from its joint venture or funds
to be received from the sale of its Frame 6B Turbine there is
uncertainty on the availability of funds to cover the Group's
forecast expenditure during the going concern period.
There exists uncertainty as to the timing of other asset sales,
as certain negotiations regarding prospective asset sales continue
to be on hold pending an improvement in the economic environment
following the COVID-19 pandemic. Unless there is a significant
disposal of assets, the Group remains reliant on either the
repayments of loans from its joint venture Argentine operations or
the proceeds from the sale of the Frame 6B turbine.
Whilst it is the expectation of the Directors that forecast
remittances from the joint venture will be received along with the
proceeds from the sale of the Frame 6B turbine, these events and
conditions indicate that a material uncertainty exists that may
cast significant doubt on the Group and Company's ability to
continue as a going concern. These consolidated financial
statements do not reflect the adjustments or reclassification of
assets and liabilities, which would be necessary if the Group and
Company were unable to continue its operations.
Directors
The following Directors served during the year and up to the
date of signature of the financial statements as follows:
Brian Rowbotham - Non-Executive Director. Resigned on 13 April
2021.
Simon C. Morris - Executive Director. Resigned on 17 August
2021.
Andy H. Coveney - Executive Director
Paul Shackleton was appointed as Non-Executive Director on 26
July 2021. He will stand for election at the 2021 Annual General
Meeting.
Directors' interests
The Directors' beneficial interests in the number of shares inf
the Company were on the reference dates as stated below:
14.09.2021 31.12.2020 31.12.2019
Brian Rowbotham - resigned
13 April 2021 - 450,000 450,000
Simon C. Morris - resigned - - -
17 August 2021
Andrew H. Coveney - - -
Paul Shackleton - - -
Directors' Indemnity
The Company's Articles of Association provide, subject to the
provisions of UK legislation, an indemnity for Directors and
officers of the Company in respect of liabilities they may incur in
the discharge of their duties or in the exercise of their powers,
including any liabilities relating to the defence of any
proceedings brought against them which relate to anything done or
omitted, or alleged to have been done or omitted, by them as
officers or employees of the Company. Appropriate directors' and
officers' liability insurance cover is in place in respect of all
the Directors.
Significant shareholdings in the Company
In addition to the shareholdings shown above, the Company is
aware of the following interests of 3 per cent. or more in the
issued ordinary share capital of the Company notifiable at 14
September 2021, being the last practicable date for reporting this
information.
Number of shares % holding
Sterling Trust Ltd 303,092,303 53.989
YF Finance Ltd 96,565,166 17.201
Mr & Mrs Scott 17,808,000 3.172
The percentages shown are based on 561,387,586 shares in
issue.
Risk management and objectives
The financial risk management policies and objectives are set
out in Note 24.
Impact Assessments
United Kingdom's Exit from the European Union (Brexit)
The UK left the European Union ("EU") at 11.00 pm on 31 January
2020. The Transition period that was put in place - during which
the UK was still subject to EU rules - ended on 31 December 2020.
The rules governing the new relationship between the EU and UK took
effect on 1 January 2021. The new Trade and Cooperation Agreement
and other agreements were reached between the UK and the EU on 24
December 2020 and were signed during the Transition period. They
are in the process of being ratified.
The Group has very limited transactions with EU members and
those are limited to the provision of services. Rurelec entity and
the Group has only one supplier of services based in the EU.
Therefore, Brexit does not have a material impact on the
Company.
CORONAVIRUS PANDEMIC (COVID-19)
The COVID-19 pandemic spread globally in the first Quarter of
2020. Widespread measures have been implemented globally by
governments to control the virus and to support economies in the
markets where the Group operates. However, it is uncertain whether
those measures will be successful in the long-term eradication of
the virus or in achieving recovery in those economies and over what
timescale. The magnitude and duration of the disruption and decline
in business in the markets in which the Group operates is currently
uncertain.
The Argentinian Government imposed a tight lockdown on 19 March
2020. Argentina's Government, viewing EdS's output as an essential
service, issued instructions whereby the power plant should operate
with the minimum staff, covering operational shifts and preventive
cleaning work with specific teams. All but essential personnel have
been working remotely and not been coming to the plant unless there
is an equipment-related problem to address at the plant. A wide
range of preventative measure were implemented to protect and
safeguard staff. To date the COVID-19 pandemic has had relatively
little impact on the ability of EdS to continue in operation.
Notwithstanding the above, it is not considered possible to
estimate the long-term financial impact of COVID-19 on the
Argentinian economy at the present time, nor to anticipate the
economic and fiscal measures that the Argentinian Government will
impose. The Group's Head Office in London and the EdS head office
in Buenos Aires have operated on a remote basis and the EdS plant
in Argentina has implemented procedures and protocols to allow safe
working practices as near to normal. Notwithstanding the above, it
is not considered possible to estimate the long-term financial
impact of COVID-19 on the Argentinian economy, nor what measures
that government will impose in response.
Statement of directors' responsibilities
The Directors are responsible for preparing the Strategic
Report, the Directors' Report, Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have to prepare the financial statements in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
and in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 for
reporting year ended 31 December 2020. Under company law, the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs and profit or loss of the Company and Group for that
period. In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements;
-- prepare the financial 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 sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
Group, and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Statement as to disclosure of information to auditor
As far as the Directors are aware, they have each taken all
necessary steps to make themselves aware of any relevant audit
information and to establish that the auditor is aware of that
information.
As far as the Directors are aware, there is no relevant audit
information of which the Company's auditor is unaware.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the Companies Act
2006.
Auditor
Pursuant to Section 489 of the Companies Act 2006, BDO LLP has
expressed its willingness to continue in office as auditor and a
resolution to reappoint it will be proposed at the forthcoming
Annual General Meeting.
On behalf of the Board
_________________
Maria J. Bravo Quiterio
Company Secretary
15 September 2021
CORPORATE GOVERNANCE REPORT
for the year ended 31 December 2020
Introduction
Rurelec PLC applies the QCA Corporate Governance Code (the "QCA
Code") published in April 2018 and this Corporate Governance report
for the year ended 31 December 2020 is based upon the Code.
The principal means of communicating our application of the QCA
Code are this Annual Report (pages 18-22) and our Corporate
Governance section on our website ( www.rurelec.com ).
This report sets out the Group's application of the Code,
including where appropriate, cross reference to other sections of
the Annual Report.
Where our practices depart from the expectations of the Code, an
explanation is given as to why, at this time, it is appropriate for
the Group to depart from the Code.
The QCA Code is constructed around ten broad principles and a
set of disclosures which notes appropriate arrangements for growing
companies and requires companies who have adopted the QCA Code to
provide an explanation about how they are meeting those principles
through the prescribed disclosures. In the paragraphs below,
Rurelec PLC explains how it has applied them.
Principle 1. Establish a strategy and business model which
promotes long-term value for shareholders.
The Board is committed to strengthening the Group's underlying
financial position. The Board sets out to deliver long-term value
to shareholders in the following ways:
-- Stabilising the Group's position by reducing cash outflows;
-- Reducing the Company's vulnerability to fluctuations in the
timing of debt repayments receivable from subsidiaries and JVs;
-- Working with joint venture partners to ensure that debts from
those entities are repaid to the fullest extent possible;
-- Using that financial stability to permit an orderly
realisation of assets and investments in a timescale that allows
maximisation of the proceeds of such sales;
-- Where asset realisations are not possible in the short term
due to market conditions, preserving the value of those assets
and/or maximising the cashflow generated by those assets;
The execution of this strategy presents key challenges in the
maximisation of returns on assets given market conditions. Those
challenges are addressed by ensuring that the Company is stable
enough to be able to avoid having to offload such assets when to do
so would minimise value, instead choosing to seek opportunities to
maximise the long term returns that will optimise value for
shareholders.
The business model as to how the Company plans to make money for
its investors revolves around maximising the long term collection
of debts owed in connection with the JV formed to develop the EdS
business in Argentina, whilst repaying Rurelec's own creditors and
continually assessing the value and saleability of its assets with
a view to developing and/or realising those assets in such a way as
to maximise the returns to all shareholders.
Principle 2. Seek to understand and meet shareholder needs and expectations.
The Board attaches great importance to providing shareholders
with clear and transparent information on the Group's activities,
strategy and financial position. Details of all shareholder
communications are provided on the Group's website.
The Board regards the annual general meeting as a good
opportunity to communicate directly with shareholders via an open
question and answer session. Covid-19 lockdown restrictions, and
related social distancing requirements impeded the ability of
shareholders to communicate with the Board members in person at
shareholder meetings during 2020. The Board looks forward to
resuming in person meetings with shareholders in the post pandemic
environment and will also be exploring other methods of shareholder
engagement
The Company lists contact details on its website and on all
announcements released via RNS, should shareholders wish to
communicate with the Board.
The resolutions put to a vote at past AGMs can be found in
www.rurelec.com/investors/circulars
The Board seeks to engage with all shareholders as and when
relevant information needs to be disclosed. The Board recognises
that shareholders may have different time horizons for their
shareholdings and is mindful of the need to consider the interests
of shareholders as a whole in this regard.
Shareholders can communicate with the Company through the email
address in its website. The Board is responsible for reviewing all
communications received from members and determining the most
appropriate response.
Principle 3. Take into account wider stakeholder and social
responsibilities and their implications for long-term success.
The contraction of the Group and the focus on stabilisation of
the financial position of the business has led to frequent
communication at Board level and regular communication with
suppliers/funders to maintain their confidence in the business
model and strategy being pursued by the Board. The long-term
success of the Group relies on maintaining open communication and
good relationships with its stakeholders.
Communication also extends to the Board receiving regular
updates and feedback within the small London-based workforce in the
Company and there are also regular communications with the
directors of the Group's joint venture partner in the British
Virgin Islands. The Group's main trading asset is the joint venture
operation in Argentina. This operation is run by a full-time local
management team that maintains good relations with all key
stakeholders to the business in Argentina.
When permitted, the Executive Directors travel regularly to
Argentina and they meet key stakeholders in person. This year due
to COVID-19 restrictions such visits to Argentina have not taken
place.
Principle 4. Embed effective risk management, considering both
opportunities and threats, throughout the organisation
Given past changes in the Company's financial position, the
Board considers risk management to be of paramount importance and
this has driven its strategy of pursuing financial stability rather
than expansion in order that shareholder value can be maximised
through an orderly realisation of the Group's assets. The risk
position of the Group is considered on a regular basis by the Board
given the cash constraints that the Group has had to work within.
The feedback on its strategy of pursuing a low-risk approach is
received clearly in terms of reductions in cash outflow as measured
by weekly reviews of cash forecasting models, and in terms of
reduced exposure to fluctuations in cash inflow.
Although the Company does not undertake specific risk
assessments, the Board as a whole undertakes regular views of the
principal risks and uncertainties facing the Group as reported in
page 10 of the Strategic Report. The Company is in the process of
implementing a risk register which should be under the Audit
Committee reporting to be compliant with the QCA Code.
Principle 5. Maintain the Board as a well-functioning, balanced team led by the chair.
Due to the size of the company, the Board believes that it can
collectively, and competently execute a clear leadership function
without the appointment of a Chairman.
The Board takes collective responsibility for the quality of,
and approach to corporate governance by the Company, governance and
the systems and procedures by which the Company is directed and
controlled. A prescribed set of rules does not itself determine
good governance or stewardship of a company and, in fulfilling
their responsibilities, the Directors believe that they govern the
Company in the best interests of the shareholders, whilst having
due regard to the interests of other 'stakeholders' in the Group
including, in particular, customers, employees and creditors.
The Board is responsible for running the Company, including all
major business and financial risks and taking strategic
decisions.
The Directors communicate at least weekly on significant
matters, in particular on matters affecting cashflow and on matters
concerning the joint venture in Argentina.
Brian Rowbotham was considered to be independent since his
appointment in October 2013 until his resignation in April 2021.
The board evaluated the independence requirements of the QCA Code
and considered that Brian Rowbotham was independent during the
period. Paul Shackleton was appointed in July 2021 and is
considered to be independent by the board.
The number of times the Board met during the year to 31 December
2020 was 15. All serving directors were present at all the Board
meetings.
The three principal standing committees of the Board are the
Audit, Nominations and Remuneration Committees.
Audit, Remuneration and Nominations Committees
In accordance with the terms of reference for these committees
and under the QCA Code, these committees should be made up only of
Independent Non-Executive Directors. As Paul Shackleton is the
Company's only Independent Non-Executive Director, matters normally
reserved for these committees are currently considered by the whole
board. The business of the board committees will resume when
further appropriate appointments are made to the board.
The executive directors are part time directors of the Company
although all directors are expected to commit sufficient time to
the Company in addition to attending the Board meetings.
The Board minutes and papers are circulated to directors in good
time and ahead of the relevant Board meeting.
The Board has established audit, remuneration and nominations
committees which meet regularly. Details of the Audit, Remuneration
and Nominations Committees for the period:
Director Date of Date of Role at Date of Board Committee
Appointment Resignation 31 December (re-) appointment
2020
Brian Rowbotham 16.10.2013 13.04.2021 Senior Independent 27.06.2018 N R A
Non-Executive
Simon C. Morris 19.07.2015 17.08.2021 Executive Director 30.06.2020 - - A
Andrew H. Coveney 16.11.2016 - Executive Director 27.06.2019 - - -
Paul R.A. Shackleton 26.07.2021 - - - N R A
N = Nomination Committee
R = Remuneration Committee
A = Audit Committee
The Audit Committee met 3 times during the year to 31 December
2020. All the committee members were present at the meetings.
Due to the size of the Company, the Board has not and does not
comply with the principle that the Board and Audit Committee should
at least have two independent directors. Given the current level of
transactions within the Company, the Board considers that adequate
resources are available at Board level, although a further
executive director is currently being sought.
Principle 6. Ensure that between them, the directors have the
necessary up to date experience, skills and capability
The Company has two directors, Paul Shackleton, Senior
Independent Non-Executive Director and Andrew Coveney, Executive
Director. Biographical details of the Directors can be obtained in
www.rurelec.com/about-us/biographies
As the financial position of the Group evolved, so have the
skills required of its directors. The current directors have been
chosen for their skills in maintaining, preserving and realising
shareholder value by pursuing financial stability rather than by
pursuing the aggressive expansion of the past. The Executive
Directors serving during the period, have a wealth of experience of
dealing with the consequence of deterioration in the financial
positions of businesses and in implementing the change necessary to
restore such businesses back to stability. Those skills have been
honed within financial and restructuring backgrounds. It is
important that the directors are seen to be professional, reliable,
trustworthy and represent a safe pair of hands.
The directors keep their skills up to date by attending regular
professional briefings From the Nominated Adviser and lawyers
covering regulations that are relevant to their role as directors
of an AIM-quoted Company.
The Board is grateful for the regular, thorough and diligent
input of a qualified professional Company Secretary. As such the
Company Secretary provides frequent advice to the Board. On legal
matters, the Company Secretary is supported by the Company's
solicitors. The Independent Non-Executive Director provides
guidance and support on relevant matters on a regular basis.
Principle 7. Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement.
The Board evaluates its own performance on a monthly basis and
also regularly considers any feedback from external parties as and
when that feedback is received.
Board performance is evaluated in the light of its own strategic
objectives and tactical plans, in particular in relation to cash
management and other financial forecasts. Any Board appointments
are considered closely in relation to the ability of the proposed
Director to make an active contribution to delivering value to
shareholders through the achievement of the strategies and plans
balanced against the cost of such an appointment.
The Company has not previously engaged any external evaluation
for the performance of the Board members or external advisors for
succession planning. Candidates to the Board have been proposed by
the Board members based on their skills and experience and the
requirements of the Company at the time of the appointment.
There are currently no formal evaluations of the Board.
Principle 8. Promote a corporate culture that is based on ethical values and behaviours.
The Group's corporate culture is based on creating an atmosphere
of trust, openness, communication and professionalism. Due to the
size of the Company, the Board is in very close contact with all
employees and is able to engender an ethical, professional and
effective environment in its day to day and strategic
activities.
The Company has currently 5 employees (including the directors).
The Board seeks to ensure that all of its employees are aware of
its ethical values communicating on a personal basis with its
employees and encourages the adoption of these values through the
appraisal and recruitment process.
Principle 9. Maintain governance structures and processes that
are fit for purpose and support good decision making by the
Board.
In addition to the high level of explanation of the application
of the QCA Code set out in the corporate governance statement:
-- The Board of Directors is responsible for approving Company
policy and strategy. The Board meets regularly throughout the year.
To enable the Board to perform its duties, each director has access
to advice from the Company Secretary and independent professionals
at the Company's expense.
-- The Board currently comprises an Executive Director and a
Non-Executive Director, a further Executive Director is being
sought.
-- Biographical details of the Board of Directors can be obtained in www.rurelec.com/about-us/biographies .
-- All matters are reserved for the Board although the Board has
chosen to delegate some of them to the Audit, Remuneration and
Nominations Committees which will issue advice to the Board on
those matters. Some of the matters reserved for the Board
include:
o Reviewing, approving and guiding group strategy, annual
budgets and business plans; setting performance objectives;
monitoring and implementing corporate performance; and overseeing
major capital expenditures and disposals;
o Monitoring the effectiveness of the Company's governance
arrangements and practices, making changes as needed to ensure the
Company's governance framework complies with current best practices
in accordance with the size of the Company;
o Monitoring and managing potential conflicts of interest that
may arise with Board members, shareholders and external
advisers;
o Overseeing the process of external disclosure and communications.
-- The Board is also responsible for all other matters which are
considered to be of importance to the Group as a whole because of
strategic, financial or reputational implications or
consequences.
-- The Board has established audit, remuneration and nominations
committees however owing to the size of the board at the current
time, all matters are dealt with by the board. Details of these
committees are set out in Principle 5 above.
-- 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.
-- There are no plans to change the current governance framework.
-- The role of the Chair, which is currently undertaken by the
Independent Non-Executive Director includes:
o to take the chair at general meetings and Board meetings;
o providing leadership to the Board;
o ensuring proper information for the Board;
o planning and conducting Board meetings effectively;
o getting all directors involved in the Board's work;
o ensuring the Board focuses on its key tasks
o determination of the order of the agenda;
o ensuring that the Board receives accurate, timely and clear information;
o keeping track of the contribution of individual directors and
ensuring that they are all involved in discussions and
decision-making;
o to ensure effective communication with shareholders and, where appropriate, the stakeholders.
Principle 10. Communicate how the Company is governed and is
performing by maintaining a dialogue
Disclosure of the outcomes of all votes are in
www.rurelec.com/investors/proxy-results
Historical annual reports and other governance-related material,
including notices of all general meetings over the last five years
can be obtained in www.rurelec.com/investors/circulars
Further disclosure required under QCA Principle 10 can be found
in Principles 5 and 9 above.
------------------------
Maria J. Bravo Quiterio
Company Secretary
15 September 2021
Independent auditor's report to the members of Rurelec Plc
Opinion on the financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
December 2020 and of the Group's loss for the year then ended;
-- the Group financial statements have been properly prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006;
-- the Parent Company financial statements have been properly
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and as
applied in accordance with the provisions of the Companies Act
2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Rurelec Plc (the
'Parent Company') and its subsidiaries (the 'Group') for the year
ended 31 December 2020 which comprise consolidated income
statement, the consolidated statement of comprehensive income, the
consolidated statement of financial position, the company statement
of financial position, the consolidated statement of cash flows,
the company statement of cash flows, the consolidated statement of
changes in equity, the company statement of changes in equity and
notes to the financial statements, including a summary of
significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and
international accounting standards in conformity with the
requirements of the Companies Act 2006 and, as regards the Parent
Company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's
Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
Material uncertainty related to going concern
We draw attention to Note 1 of the financial statements
concerning the Group and the Parent Company's ability to continue
as a going concern. The Group continues to make a loss, with the
only operational part of the business being its investment in a
joint venture, which is now starting to make profits and repay its
loans to Rurelec. To continue as a going concern, the Group is
reliant on either further remittances from its joint venture or
funds to be received from the sale of its Frame 6B Turbine which
was announced on the 9 September 2021 (as detailed in note 28 in
the financial statements). Without either of these there is a
shortfall in the availability of funds to cover the Group's
forecast expenditure during the going concern period. These
matters, along with the other the other matters explained in Note
1, indicate the existence of a material uncertainty which may cast
significant doubt over the Group and Parent Company's ability to
continue as a going concern. Our opinion is not modified in respect
of this matter.
We consider this area to be a key audit matter.
Our evaluation of the Directors' assessment of the Group and the
Parent Company's ability to continue to adopt the going concern
basis of accounting and in response to the key audit matter
included:
-- Reviewing budget and cash flow forecasts for at least 12
months from the date of approval of the financial statements
-- Obtaining support for the Directors' assumptions used in the
forecast and assessing clerical accuracy
-- Reviewing stress tests on the forecasts based on receiving no
further loan repayments from Energía del Sur S.A or receipts under
the Equipment Sale Agreement of the Frame 6B Turbine. Under each of
the stress test scenarios, the Group has sufficient cash during the
going concern period, but in the event of both situations occurring
there is a cash shortfall in the going concern period.
-- Confirming the actual cash repayments of the loan from the
joint venture for the months post year end
-- Reviewing board minutes during the year and post year end to
indicate any other issues that may indicate inability of the Group
to continue as a going concern
-- Reviewing the Equipment Sale Agreement of the Frame 6B
Turbine, announced on 9 September 2021 to confirm sale value,
validity and any conditions precedent
-- Reviewing the going concern assessment of Energía del Sur S.A by review of forecasts
-- Reviewing the impacts COVID-19 has had on Energía del Sur
S.A, the Group and the Company. There was deemed to be limited
impact of COVID-19 due to the nature of the Group's operations
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
100% (2019: 100%) of Group loss before
Coverage tax
100% (2019: 100%) of Group total assets
2020 2019
Valuation a a
of turbine
assets
Key audit matters Going Concern a a
Valuation a a
of investments
and recoverability
of intercompany
loan, including
loans to joint
venture
------------------------------------------
Group financial statements as a whole
Materiality
GBP451,000 (2019:GBP615,000) based on 3%
(2019: 3%) of Net Assets
------------------------------------------
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. We also addressed the risk of management
override of internal controls, including assessing whether there
was evidence of bias by the Directors that may have represented a
risk of material misstatement.
The Group operates through the parent company, a subsidiary
undertaking registered in the UK and a joint venture undertaking
registered in the British Virgin Islands which were considered to
be significant components for the purposes of the audit as well as
a number of non-trading subsidiary undertakings. In establishing
our overall approach to the Group audit, we determined the type of
work that needed to be performed in respect of each component. This
consisted of us carrying out a full audit of the UK significant
components of the Group and utilising non-BDO component auditors
for the audit of the joint venture and specific procedures on the
remaining components.
We directed our work toward areas of the financial statements
which we assessed as having the highest risk of containing material
misstatements, and tested and examined information using both
analytical procedures and tests of detail, to the extent necessary
to provide us with a reasonable basis to draw conclusions. These
procedures, together with our detailed review of procedures
performed by component auditors, gave us the evidence that we need
for our opinion on the financial statements as a whole.
The Group audit team was actively involved in the direction of
the audits and specific audit procedures performed by the component
auditors along with the consideration of findings and determination
of conclusions drawn. As part of our audit strategy, we issued
group audit engagement instructions and directed the component
materiality. We discussed the instructions with component auditors.
We took part in planning and closing meetings with component
auditors to discuss the results.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
In addition to the matter described in the material uncertainty
related to going concern section, we have determined the matters
below to be the key audit matters to be communicated in our
report.
Key audit matter How the scope of our audit
addressed the key audit matter
Valuation The Group holds two Siemens In this area our procedures
of turbine 701 turbines which have included:
assets (Note been partially impaired. * Verifying the existence of the assets, their storage
12) At the year end the Directors and condition;
Accounting obtained independent
policy 2.8 valuations
to confirm that the assets * Reviewing the valuation report prepared by an
were not overstated in independent expert, confirming the expert's
the financial statements independence, assessing the conclusions reached and
and to assess the carrying the underlying assumptions used and the competency
value. and qualifications of the expert;
Management's assessment
of the valuations contain * Reviewing the independent valuations to ensure that
significant estimation the value of the assets is recoverable through sale;
and judgement. Given the
subjectivity involved,
the carrying value of * Reviewing insurance documentation and
turbine assets are considered storage/maintenance documentation to assess the risk
to represent a key audit of further impairment; and
matter.
* Reviewing the signed sale agreement for the Frame 6B
turbine, including the sales price, which was higher
than carrying value at year end.
Key Observations
Our work did not indicate
that financial statement
valuations of the turbine
assets were not appropriate
------------------------------ ----------------------------------------------------------------
Valuation The repayment of these In this area our procedures
of investment loans and the recoverability included:
and recoverability of the investment is * Obtaining loan confirmations of balances and any
of intercompany dependent interest accrued;
loans, including on the economic feasibility
loans to of the underlying operations
joint venture within the Group. The * Reviewing the going concern assessment of
(Note 13 recoverability of these Energía del Sur S.A.; and
& 21) loans is judgemental and
Accounting hence there is a risk
policy 2.11 that the loans are * Assessing recoverability of the loans and investment
overstated. through review of the inputs, assumptions and output
The investment value of s
the joint venture, the of the financial projections model, and net asset
loans to the joint venture positions of subsidiaries and the joint venture.
and the intercompany loans
due to the Parent Company
were reviewed by the
Directors Key Observations
and it was deemed that
an impairment was required Our work did not indicate
to the joint venture that management's assessment
investment of the valuation of investments
balance and an expected and the recoverability of
credit loss was applied intercompany loans was not
to the loan receivable appropriate.
from the joint venture
based on the cash flow
models in respect of the
joint venture
Management's assessment
of the valuation of
investments
and inter-company loans
contain a number of key
assumptions that require
significant estimation
and judgement. Given the
subjectivity involved,
the carrying value of
investments and
recoverability
of loans is considered
to represent a key audit
matter.
------------------------------ ----------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance materiality
as follows:
Group financial statements Parent company financial
statements
2020 2019 2020 2019
GBP GBP GBP GBP
----------------- --------------- ---------------- ----------------
Materiality 451,000 615,000 442,000 520,000
----------------- --------------- ---------------- ----------------
Basis for determining 3% of Net assets 3% of Net assets
materiality
---------------------------------- ----------------------------------
Rationale for Group's activities Group's activities of investing
the benchmark of investing in power in power assets are focussed
applied assets are focussed on the realisation of asset
on the realisation sales making the net assets
of asset sales making basis most appropriate
the net assets basis
most appropriate.
---------------------------------- ----------------------------------
Performance
materiality 270,000 369,000 265,000 312,000
----------------- --------------- ---------------- ----------------
Basis for determining 60% of materiality based on consideration of
performance factors including the level of historical errors
materiality and nature of activities.
----------------------------------------------------------------------
Component materiality
Component materiality ranged from GBP208,000 to GBP3,000. In the
audit of each component, we further applied performance materiality
levels of 60% of the component materiality to our testing to ensure
that the risk of errors exceeding component materiality was
appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of GBP9,000
(2019:GBP30,000). We also agreed to report differences below this
threshold that, in our view, warranted reporting on qualitative
grounds.
Other information
The Directors are responsible for the other information. The
other information comprises the information included in the annual
report other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on
the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and
matters as described below.
Strategic In our opinion, based on the work undertaken in
report and the course of the audit:
Directors' * the information given in the Strategic report and the
report Directors' report for the financial year for which
the financial statements are prepared is consistent
with the financial statements; and
* the Strategic report and the Directors' report have
been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding
of the Group and Parent Company and its environment
obtained in the course of the audit, we have not
identified material misstatements in the strategic
report or the Directors' report.
Matters on We have nothing to report in respect of the following
which we matters in relation to which the Companies Act
are required 2006 requires us to report to you if, in our opinion:
to report
by exception * adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit
have not been received from branches not visited by
us; or
* the Parent Company financial statements are not in
agreement with the accounting records and returns; or
* certain disclosures of Directors' remuneration
specified by law are not made; or
* we have not received all the information and
explanations we require for our audit.
------------------------------------------------------------------------
Responsibilities of Directors
As explained more fully in the Directors' responsibilities
statement, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
-- We gained an understanding of the legal and regulatory
framework applicable to the Group and industry in which it
operates, through discussion with management and the Audit
Committee and our knowledge of the industry. We focussed on
significant laws and regulations that could give rise to a material
misstatement in the financial statements, including, but not
limited to UK Employment Legislation, Companies Act 2006, Health
and Safety Law, HMRC tax regulations and Argentinian legal
compliance.
-- We considered compliance with these laws and regulations
through discussions with management, the company secretary and
component auditors. Our procedures also included reviewing minutes
from board meetings and inspecting invoices for legal fees incurred
in the period.
-- We assessed the susceptibility of the Group's financial
statements to material misstatements, including how fraud might
occur. We evaluated management's controls designed to prevent and
detect irregularities.
-- We performed a review of the Group's year end adjusting
entries and journals throughout the year and investigated any that
appeared unusual as to nature or amount. In addition we identified
and tested journals with unusual account combinations, unusual
posting dates and unusual descriptions.
-- We identified areas at risk of management bias, particularly
cashflow models to support loan valuations, and reviewed key
estimates and judgements applied by Management in the financial
statements to assess their appropriateness (as mentioned in the Key
Audit Matters Section above).
-- We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members and
component auditors and remained alert to any indications of fraud
or non-compliance with laws and regulations throughout the
audit.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities . This description forms
part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Laura Pingree (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2020
Notes Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
-------------------------------------- ------ ----------- -----------
Revenue 4 - -
Gross Profit - -
Administrative Expenses 6 (1,110) (1,168)
Other Income 8b 22 130
Impairment Charges 8b (1,826) (2,029)
Operating Loss (2,914) (3,067)
Share of Joint Venture Profit/(Loss) 21,22 - -
Foreign Exchange (Losses) 8a (456) (1,287)
Finance Income 9 819 6
Finance Expense 9 (2,783) (70)
Loss before Tax (5,334) (4,418)
Tax Expense 10 - -
Loss for the year attributable to
owners of the Company (5,334) (4,418)
-------------------------------------- ------ ----------- -----------
Earnings per Share - in pence 11
Basic Loss per Share (0.95) (0.79)
Diluted Loss per Share (0.95) (0.79)
-------------------------------------- ------ ----------- -----------
The Notes on pages 37 to 61 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2020
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
---------------------------------------------- ----------- -----------
Loss for the year (5,334) (4,418)
Other Comprehensive (Loss)/Income for
the year:
Items that will be subsequently Reclassified
to Profit & Loss:
Exchange Differences on Translation
of Foreign Operations (130) 136
Total Other Comprehensive Income (130) 136
Loss for the year attributable to owners
of the Company (5,464) (4,282)
---------------------------------------------- ----------- -----------
The Notes on pages 37 to 61 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2020
31.12.2020 31.12.2019
Notes GBP'000 GBP'000
------------------------------------- ------ ----------- -----------
Assets
Non-current Assets
Property, Plant and Equipment 12 7,371 7,685
Investment in Joint Venture 21,22 1,648 3,474
Trade and Other Receivables 13a 4,586 6,423
13,605 17,582
Current Assets
Trade and Other Receivables 13b 1,142 3,272
Cash and Cash Equivalents 15 668 137
1,810 3,409
Total Assets 15,415 20,991
------------------------------------- ------ ----------- -----------
Equity and Liabilities
Shareholders' Equity
Share Capital 16 5,614 11,228
Share Premium Account 17 - 22,754
Foreign Currency Reserve 793 923
Special Non-distributable Reserve 17 - 45,000
Retained Earnings/Losses 8,648 (59,385)
Total Equity attributable to owners
of the Company 15,055 20,520
Current Liabilities
Trade and Other Payables 18a 353 465
Current Tax Liabilities 19 7 6
Borrowings 20 - -
Total Liabilities 360 471
Total Equity and Liabilities 15,415 20,991
------------------------------------- ------ ----------- -----------
The financial statements were approved by the Board of Directors
on 15 September 2021 and were signed on its behalf by Andrew
Coveney and Paul Shackleton.
______________ ___________________
Andrew Coveney Paul Shackleton
The notes on pages 37 to 61 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF FINANCIAL POSITION COMPANY NUMBER: 4812855
At 31 December 2020
Notes
31.12.2020 31.12.2019
GBP'000 GBP'000
----------------------------------- ------ ----------- -----------
Assets
Non-current Assets
Investment in Joint Venture 21,22 1,648 3,474
Trade and Other Receivables 13 4,586 6,423
6,234 9,897
Current Assets
Inventories 14 6,923 7,167
Trade and Other Receivables 13a 1,397 3,593
Cash and Cash Equivalents 15 667 137
8,987 10,897
Total Assets 15,221 20,794
----------------------------------- ------ ----------- -----------
Equity and Liabilities
Shareholders' Equity
Share Capital 16 5,614 11,228
Share Premium Account 17 - 22,754
Special Non-distributable Reserve 17 - 45,000
Retained Earnings/Losses 9,153 (58,747)
Total Equity 14,767 20,235
Current Liabilities
Trade and Other Payables 18b 447 554
Current Tax Liabilities 19 7 5
Borrowings 20 - -
454 559
Total Equity and Liabilities 15,221 20,794
----------------------------------- ------ ----------- -----------
As permitted by s408 Companies Act 2006, the Company has not
presented its own profit and loss account and related notes. The
Company's loss for the year was GBP5.5 million (2019: loss GBP4.5
million).
The financial statements were approved by the Board of Directors
on 15 September 2021 and were signed on its behalf by Andrew
Coveney and Paul Shackleton.
______________ ___________________
Andrew Coveney Paul Shackleton
The notes on pages 37 to 61 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2020
Notes Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
--------------------------------------- ------ ----------------------- -----------
Cash Flows from Operating Activities
Cash used in Operations 23 (1,273) (1,260)
Net Cash used in Operating Activities (1,273) (1,260)
Cash Flows from Investing Activities
Proceeds from Sale of Subsidiary - 60
Loan Repayments from Joint Venture
Company 1,804 2,246
Net Cash generated from Investing
Activities 1,804 2,306
Net Cash Inflow before Financing
Activities 531 1,046
Cash Flows from Financing Activities
Loan Principal Repayments 20 - (1,200)
Loan Interest Repayments 20 - (60)
Net Cash used in Financing Activities - (1,260)
Increase/(Decrease) in Cash and Cash
Equivalents 531 (214)
Cash and Cash Equivalents at the
Start of the year 137 351
Cash and Cash Equivalents at the
End of the year 668 137
--------------------------------------- ------ ----------------------- -----------
The notes on pages 37 to 61 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2020
Notes Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------------------------------------- ------ ----------- -----------
Cash Flows from Operating Activities
Cash used in Operations 23 (1,110) (1,161)
Net Cash used in Operating Activities (1,110) (1,161)
Cash Flows from Investing Activities
Proceeds from Sale of Subsidiary - 60
Investment in and Loans to Subsidiaries (164) (98)
Loan repayments from Subsidiaries - 1,235
Loan Repayments from Joint Venture
Company 1,804 1,011
Net Cash generated from Investing
Activities 1,640 2,208
Net Cash Inflow before Financing
Activities 530 1,047
Cash Flows from Financing Activities
Loan Principal Repayments 20 - (1,200)
Loan Interest Repayments 20 - (60)
Net Cash used in Financing Activities - (1,260)
Increase/(Decrease) in Cash and Cash
Equivalents 530 (213)
Cash and Cash Equivalents at the
Start of the year 137 350
Cash and Cash Equivalents at the
End of the year 667 137
----------------------------------------- ------ ----------- -----------
The notes on pages 37 to 61 form an integral part of these
Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2020
Share Share Foreign Retained Special Total
Capital Premium Currency Losses/Earnings Non-distributable
Reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- ---------- ----------------- ------------------- --------
Balance at 01.01.2019 11,228 22,754 787 (54,968) 45,000 24,801
Loss for the year
attributable to
owners of the parent - - - (4,418) - (4,418)
Exchange Differences - - 136 - - 136
Total Comprehensive
Loss - - 136 (4,418) - (4,282)
Balance at 31.12.2019 11,228 22,754 923 (59,386) 45,000 20,519
Transactions with
owners
Transfer of Special
non-distributable
reserve - - - 45,000 (45,000) -
Capital reduction
- Share Premium - (22,754) - 22,754 - -
Capital reduction
- Share Capital (5,614) - - 5,614 - -
Total transactions
with owners (5,614) (22,754) - 73,368 (45,000) -
Loss for the year
attributable to
owners of the parent - - - (5,334) - (5,334)
Exchange Differences - - (130) - - (130)
Total Comprehensive
Loss - - (130) (5,334) - (5,464)
Balance at 31.12.2020 5,614 - 793 8,648 - 15,055
Notes: 16 17 17
The notes on pages 37 to 61 form an integral part of these
Consolidated Financial Statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2020
Share Capital Share Accumulated Special Total
Premium Losses Non-distributable
Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- --------- ------------ ------------------- --------
Balance at 01.01.2019 11,228 22,754 (54,239) 45,000 24,743
Loss for the year - - (4,508) - (4,508)
Total Comprehensive
Loss - - (4,508) - (4,508)
Balance at 31.12.2019 11,228 22,754 (58,747) 45,000 20,235
Transactions with
owners
Transfer of Special
non-distributable
reserve - - 45,000 (45,000) -
Capital reduction
- Share Premium - (22,754) 22,754 - -
Capital reduction
- Share Capital (5,614) - 5,614 - -
Total transactions
with owners (5,614) (22,754) 73,368 (45,000) -
Loss for the year - - (5,468) - (5,468)
Total Comprehensive
Loss - - (5,468) - (5,468)
Balance at 31.12.2020 5,614 - 9,153 - 14,767
Notes: 16 17 17
The notes on pages 37 to 61 form an integral part of these
Consolidated Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2020
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
The Company and the consolidated financial statements have been
prepared in compliance with International Financial Reporting
Standards ("IFRSs") and in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 for reporting year ended 31 December 2020.
Basis of measurement
The presentational currency of the Group is Pounds Sterling. The
functional currencies of Group entities are Pounds Sterling,
Argentinian Pesos, Chilean Pesos and United States Dollars.
Going Concern
The directors have prepared budgets and forecasts for a period
of at least 12 months from the date of signing of the financial
statements to assess the Group and Company's ability to continue as
a going concern.
On the basis that the Group receives the joint venture
remittances referred to below, or the proceeds from the sale of the
Frame 6B turbine (referred to below), the Directors have assessed
that at the date of signing of the financial statements, the Group
and Company would have sufficient working capital for a period of
at least 12 months from the signing of the financial statements,
without the need to seek further sources of working capital and
have therefore prepared the financial statements on a going concern
basis.
In November 2019, the signing of the Umbrella Agreement and
Revised Shareholder Agreement with the JV partner has significantly
improved the clarity of how the cash proceeds of the JV will be
split between the parties. To date debt repayments of GBP2.3
million has been received from the JV in part payment of the
Amended and Restated Loan Notes. The quantum and timing of such
receipts may still be subject to variation (particularly as a
result of Argentine exchange rate controls) and are not guaranteed
or secured. Loan repayments already received, at the date of this
report, along with projected rest of year repayments from the joint
venture are expected to be sufficient to meet the working capital
requirements for the Group.
The sale of the Frame 6B turbine was announced on 9 September
2021 for $1.0 million. At the time of signing of the financial
statements, $100k has been received, the balance is due on
completion, expected to be before 30 November 2021.
Without either the remittances from its joint venture or funds
to be received from the sale of its Frame 6B Turbine there is
uncertainty on the availability of funds to cover the Group's
forecast expenditure during the going concern period.
There exists uncertainty as to the timing of other asset sales,
as certain negotiations regarding prospective asset sales continue
to be on hold pending an improvement in the economic environment
following the COVID-19 pandemic. Unless there is a significant
disposal of assets, the Group remains reliant on either the
repayments of loans from its joint venture Argentine operations or
the proceeds from the sale of the Frame 6B turbine.
Whilst it is the expectation of the Directors that forecast
remittances from the joint venture will be received along with the
proceeds from the sale of the Frame 6B turbine, these events and
conditions indicate that a material uncertainty exists that may
cast significant doubt on the Group and Company's ability to
continue as a going concern. These consolidated financial
statements do not reflect the adjustments or reclassification of
assets and liabilities, which would be necessary if the Group and
Company were unable to continue its operations.
1c. New accounting standards
The Directors consider that no revisions to IFRS standards
implemented in the year have had any significant effect on these
statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of Consolidation
The consolidated financial statements comprise the financial
statements of the Group and its subsidiaries as at 31 December
2020. 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 venture is a joint arrangement whereby the Group and
other parties that have joint control of the arrangement have
rights to the net assets of the arrangement (IFRS11). 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 investment 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. 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 less impairment in
the statement of financial position of the Company.
2.2 Equity Accounted Joint Ventures
The Group reports its interests in joint ventures using the
equity method of accounting, except when the investment is
classified as held for sale. Whilst the Group does not directly
have revenues, its JV operating plant at EdS does. Revenues are
derived from electricity exported to the Argentinian grid. CAMMESA
records the level of exports, raising the required documentation,
on a monthly basis. This is agreed with EdS, the receivables then
become due for payment after 60 days.
2.3 Goodwill
Goodwill representing the excess of the cost of acquisition over
the fair value of the Group's share of the identifiable net assets
acquired is capitalised and reviewed annually for impairment.
Goodwill is stated after separating out identifiable assets and
liabilities. Goodwill is carried at cost less accumulated
impairment losses.
Any excess of interest in acquired assets, liabilities and
contingent liabilities over fair value is recognised immediately
after acquisition through the income statement.
2.4 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 'Foreign Exchange (Losses)/Gains'.
In the consolidated financial statements, all separate financial
statements of subsidiaries and joint ventures, 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. 2020 marks the fourth year
of inflation accounting adjustments in Argentina. It is the
Directors' judgement that the Argentine GAAP hyperinflation
adjustments to the accounts of the Group's Joint Venture operations
in Argentina give an approximate fair value of these operations.
There are no material differences arising from Argentine GAAP
inflationary accounting and IAS 29.
Non-monetary assets are valued at historic rates.
2.5 Expense recognition
Operating expenses are recognised in the income statement upon
utilisation of the service or at the date of their origin. All
other income and expenses are reported on an accrual basis.
2.6 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 (2019: nil).
2.7 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.
2.8 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.
2.9 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 of
disposal 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.
2.10 Taxation
Current income tax assets and liabilities comprise those
obligations to, or claims from, fiscal authorities relating to the
current or prior reporting period, that are unpaid at the reporting
date. They are calculated according to the tax rates and tax laws
applicable to the fiscal periods to which they relate, based on the
taxable profit for the period. All changes to current tax assets or
liabilities are recognised as a component of tax expense in the
income statement or through the statement of changes in equity.
Deferred income taxes are calculated using the liability method
on temporary differences. This involves the comparison of the
carrying amounts of assets and liabilities in the consolidated
financial statements with their respective tax bases. However, in
accordance with the rules set out in IAS 12, no deferred taxes are
recognised in respect of non-tax-deductible goodwill. In addition,
tax losses available to be carried forward as well as other income
tax credits to the Group are assessed for recognition as deferred
tax assets.
Deferred tax liabilities are provided for in full with no
discounting. Deferred tax assets are recognised to the extent that
it is probable that the underlying deductible temporary differences
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax rates
that are expected to apply to their respective period of
realisation, provided that they are enacted or substantially
enacted at the reporting date.
Deferred tax is provided on differences between the fair value
of assets and liabilities acquired in an acquisition and the
carrying value of the assets and liabilities of the acquired entity
and on the differences relating to investments in subsidiary and
joint venture companies if the difference is a temporary difference
and is expected to reverse in the foreseeable future.
Changes in deferred tax assets and liabilities are recognised as
a component of tax expense in the income statement, except where
they relate to items that are accounted for through other
comprehensive income or charged or credited directly to equity in
which case the related deferred tax is also charged or credited
directly to equity, or other comprehensive income.
2.11 Financial Assets
The Group's financial assets include cash and cash equivalents,
loans and receivables, held at amortised cost.
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. These are assets held on a 'hold to collect' basis.
They arise when the Group provides money, goods or services
directly to a debtor with no intention of trading the receivable.
Receivables are measured initially at fair value and subsequently
remeasured to test for impairment, the carrying value is less
provision for impairment. Any impairment is recognised in the
income statement.
The portion of loans due from the Joint Venture which are
expected to be received in 2021 are shown as current assets. The
remainder are expected in 2022 to 2034, these are shown as
non-current assets.
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.
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 short-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 Short term leases
IFRS 16 provides a single lessee accounting model, requiring the
recognition of assets and liabilities for all leases, together with
the option to exclude leases where the lease term is 12 months or
less, or where the underlying asset is of low value. IFRS 16
substantially carries forward the lessor accounting in IAS 17, with
the distinction between operating leases and finance leases being
retained. The Group does not have significant leasing activities
acting as a lessor, also, there are no impacts as a lessee.
2.14 Inventories
Inventories in the Company comprise turbines and associated
spare parts and similar items for use in the Group's plant and
equipment. Inventories are carried at the lower of cost and net
realisable value.
2.15 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 account" represents the excess over nominal value
of the fair value of consideration received for equity shares, net
of expenses of the share issue.
"Foreign currency reserve" represents the differences arising
from translation of investments in overseas subsidiaries.
"Retained Losses/Earnings" represents losses/earnings to
date.
"Special Non-distributable reserves" comprises the reduction of
the share premium account.
2.16 Pensions
Under the Pensions Act 2008, every employer in the UK must put
certain staff into a workplace pension scheme and contribute
towards it. This is called 'automatic enrolment'. Rurelec's staging
date was 1 October 2017. Rurelec chose to set up its auto enrolment
contribution plan pension scheme with NEST which ensures access to
suitable, low-charge pension provision to meet the new duty to
enrol all eligible workers into a workplace pension
automatically.
Rurelec also offers a Salary Sacrifice Scheme within NEST by
which employees sacrifice part of their salary in exchange for the
company to make an employer contribution on their behalf to the
pension scheme and also to contribute their national insurance
savings on the amount sacrificed by the employee.
During the year under review, the Company continued its
contributions to the contribution plan NEST Pension scheme.
2.17 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 development of generation assets and
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 statements, management makes a
number of judgements, estimates and assumptions about the
recognition and measurement of assets, liabilities, income and
expenses. The actual results may differ from the judgements,
estimates and assumptions made and will seldom equal the estimated
results. The areas which management 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:
Impairment - management review tangible and intangible assets,
including intra group and Joint Venture loans, at each balance
sheet date to determine whether there is, in their judgement, 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 8b.
4. SEGMENT ANALYSIS
Management currently identifies the Group's four geographic
operating segments; Argentina, Chile, Peru and the head office in
the UK, as operating segments as further described in the
accounting policy note. These operating segments are monitored, and
strategic decisions are made on the basis of segment operating
results. The Group's joint venture operations in Argentina have
been excluded, see note 22 for more detail.
The following tables provide an analysis of the operating
results, total assets and liabilities, in 2020 and 2019 for each
geographic segment.
a) 12 months to 31.12.2020
Chile UK Consolidation Total
Adjustments
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------------- --------
Administrative Expenses (97) (1,013) - (1,110)
Loss from Operations (97) (1,013) - (1,110)
Other Income - 22 - 22
Other Expense - (1,826) - (1,826)
Foreign Exchange Gains/(Losses) 8 (464) - (456)
Finance Income - 1,472 (653) 819
Finance Expense (653) (2,783) 653 (2,783)
Loss before Tax from Operations (742) (4,592) - (5,334)
Tax Expense - - - -
Total Loss (742) (4,592) - (5,334)
Total Assets 1,282 15,221 (1,088) 15,415
Total Liabilities 13,296 569 (13,505) 360
b) 12 months to 31.12.2019
Chile UK Consolidation Total
Adjustments
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------------- --------
Administrative Expenses (112) (1,056) - (1,168)
Loss from Operations (112) (1,056) - (1,168)
Other Income - 130 - 130
Other Expense - (2,029) - (2,029)
Foreign Exchange (Losses)/Gains (216) (1,071) - (1,287)
Finance Income - 609 (603) 6
Finance Expense (613) (60) 603 (70)
(Loss)/Profit before Tax
from Operations (941) (3,477) - (4,418)
Tax Expense - - - -
Total (Loss)/Profit (941) (3,477) - (4,418)
Total Assets 1,264 21,316 (1,589) 20,991
Total Liabilities 12,428 420 (12,377) 471
5. EXCHANGE RATE SENSITIVITY ANALYSIS
The key exchange rates applicable to the results were as
follows:
Year Ended Year Ended
31.12.2020 31.12.2019
------------ -----------
i) Closing rate
US $ to GBP 1.3578 1.3116
CLP (Chilean Peso) to GBP 965.3 977.2
ii) Average rate
US $ to GBP 1.2872 1.2764
CLP (Chilean Peso) to GBP 1,018.5 905.9
If the exchange rate of sterling at 31 December 2020 had been
stronger or weaker by 10 per cent. from the above, with all other
variables held constant, shareholder equity at 31 December 2020
would have been GBP1.4 million (2019: GBP2.0 million) lower or
higher than reported.
If the average exchange rate of sterling during 2020 had been
stronger or weaker by 10 per cent. with all other variables held
constant, the effect on the loss for the year would have been
GBP1.4 million (2019: GBP0.1 million) higher or lower than
reported.
If the average exchange rate of sterling during 2020 had been
stronger or weaker by 10% per cent. with all other variables held
constant, the effect on the total other comprehensive loss for the
year would have been GBP1.5 million (2019: GBP0.02 million) higher
or lower than reported.
6. ADMINISTRATIVE EXPENSES
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
Expenditure incurred in administrative
expenses is as follows:
Payroll and Social Security 522 550
Services, Legal and Professional 258 311
Office Costs and General Overheads 236 239
Audit Costs(1) 94 68
Total 1,110 1,168
----------- -----------
(1) Audit services include GBP67k (2019: GBP58k) paid to the
auditors for the audit of the Company and Group's financial
statements. GBP10k (2019: GBP10k) for the audit of the Group's
subsidiaries. Fees paid to other auditors, in respect of the audit
of joint venture companies, amounted to GBP13.2k (2019: GBP16.8k).
The group auditors also provided taxation services for the Group in
the year, the costs were GBP17.1k (2019 GBP11.4k).
7. EMPLOYEE COSTS
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
a) Group
Aggregate remuneration of all employees
and Directors 490 517
Social Security Costs 20 20
Pension Costs 12 13
----------- -----------
Total 522 550
----------- -----------
The average number of employees in the Group, including
Directors, during the year was as follows:
Year Ended Year Ended
31.12.2020 31.12.2019
----------- -----------
Management 3 3
Administration and development 4 4
Total 7 7
----------- -----------
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
b) Company
Aggregate remuneration of all employees
and Directors 474 499
Social Security Costs 18 17
Pension Costs 13 13
----------- -----------
Total 505 529
----------- -----------
The average number of employees in the Company, including
Directors, during the year was as follows:
Year Ended Year Ended
31.12.2020 31.12.2019
----------- -----------
Management 3 3
Administration and development 3 3
Total 6 6
----------- -----------
c) Directors' remuneration
The total remuneration paid to the Directors was GBP280k (2019:
GBP314k). The total remuneration of the highest paid Director was
GBP168k (2019: GBP186k). There were no health insurance costs,
bonuses, pension costs or share based payments paid during the year
(2019: Nil).
Year Ended Year Ended Year Ended
31.12.2020 31.12.2020 31.12.2019
GBP'000 GBP'000 GBP'000
Base Salary/Fee Total Total
---------------- ----------- -----------
B Rowbotham 30 30 30
S Morris 82 82 98
A Coveney 168 168 186
---------------- ----------- -----------
Total 280 280 314
B Rowbotham has been on payroll in 2019 and 2020.
S Morris provided services under a service agreement contract
with SC Morris Ltd and received GBP22.5k via payroll.
A Coveney provided services under a service agreement contract
with Coveney Associates Consulting Ltd and received GBP22.5k via
payroll.
8. a) FOREIGN EXCHANGE
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
Foreign Exchange (Losses) (456) (1,287)
Total (456) (1,287)
----------- -----------
Foreign currency-based assets are translated at the relevant
year end rates. The majority of foreign exchanges losses were
incurred on the 701 turbines, 2020 carrying value US$9.4 million
(2019: US$9.4 million) resulted in GBP0.2 million loss in 2020
(2019: loss GBP0.3 million) and net JV receivables in 2019 had a
carrying value US$9.5 million (2019: US$12.4 million) which
resulted in losses of GBP0.1 million (2019: losses of GBP0.7
million).
b) OTHER INCOME/IMPAIRMENT CHARGES/(REVERSALS)
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
Other Income
Agency Fees on RPFL's loan to EdS - 107
Director's fees due from EdS 22 23
----------- -----------
Total 22 130
----------- -----------
Impairment Charges/(Reversals)
Loans to Joint Venture Companies
(see note 22) - 235
Impairment on investment in Joint 1,826 -
Venture
Reversal of prior year impairment
of investment in SEA - (188)
Impairment of turbines for Central
Illapa - 1,982
Total 1,826 2,029
----------- -----------
During the year the directors tested all major assets for
indication of impairment the results of these were:
LOANS TO JOINT VENTURE COMPANIES:
Carrying Value 1.1.20 GBP9.4m
Exchange adjustment GBP(0.2)m
Repayments GBP(1.8m)
Reversal of 2019 Expected Credit GBP0.8m
Losses
2020 Expected Credit Losses GBP(2.8)m
Carrying Value 31.12.20 GBP5.4m
Amount recognised as investment GBP1.6m
(note 21)
Amount recognised as receivable GBP5.4m
(note 13)
The carrying value of the loans is based on the replacement
Amended Loan Notes, gross value at 31 December 2020 of GBP10.7
million (2019: GBP12.9 million). These notes bear zero interest and
have a long stop maturity of 31 December 2039. Carrying values have
been determined by discounting the predicted future repayments at a
rate of 9% pa, it is anticipated that the notes will be fully
repaid in 2034 (2019: 2027). Assessment of discount rate
sensitivity, were the discount rate to be 10% higher or lower then
the expected credit losses would be +/- GBP0.3 million. The notes
are held in the Statement of Financial Position at their discounted
value.
TURBINES FOR CENTRAL ILLAPA (CHILE):
GBP'(000)
Carrying value of turbine 1.1.20 GBP7,167
Exchange adjustment GBP(244)
Impairment in year GBPnil
Carrying value of turbine 31.12.20 GBP6,923
The carrying value of the turbines is based on the higher of
fair value less costs to sell and value in use. The Directors
obtained an independent valuation to determine an achievable market
valuation, less costs to sell. As a result, the Directors
determined a recoverable amount of GBP6.9 million (US $9.4 million)
(2019: GBP7.2 million (US $9.4 million)). The realisation of the
asset is dependent on a successful future sale or successful
development of the Central Illapa Project, both of which are
uncertain.
The Illapa turbines are included within Property, Plant and
Equipment in the Group and in the Company, they are included in
Inventories.
TURBINE - ARICA (CHILE)
GBP'(000)
Carrying value of Arica turbine GBP386
1.1.20
Foreign exchange revaluation GBP(18)
Impairment in year GBP -
Carrying value of Arica turbine GBP368
31.12.20
The carrying value is assessed as fair value less costs to sell,
based on historic offers and an independent valuation report. The
above asset is included in Property, Plant and Equipment.
9. FINANCE INCOME & EXPENSE
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
Finance Income
Reversal of 2019 Expected Credit 819 -
Losses
Other Interest Received - 6
----------- -----------
819 6
----------- -----------
Finance Expense
Charge for 2020 Expected Credit Losses 2,783 -
Interest Expense Paid/Payable on
bank borrowings and loans(1) - 60
Other interest payable - 10
----------- -----------
2,783 70
----------- -----------
(1) Expected credit losses are charged as the Amended Loan Notes
repayments are projected to received of a longer period of time,
with final repayment in 2034 (2019: 2027)
(1) In the prior year interest paid/payable included interest on
the BPAC loan in accordance with the terms of the payment plan
following a settlement agreement, the final payment was made in
December 2019. The details of the amounts due under the loans are
shown in Note 20.
Sensitivity analysis arising from changes in borrowing costs is
set out in Note 20.
10. TAX EXPENSE
The relationship between the expected tax expense at basic rate
of 19 per cent. (2019: 19 per cent.) and the tax expense actually
recognised in the income statement can be reconciled as
follows:
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
Result for the year before tax (5,334) (4,418)
Standard rate of Corporation Tax
in UK 19% 19%
Expected Tax Credit (1,013) (839)
Tax effect not deductible in determining
taxable profits 350 (49)
Unrecognised Loss carried forward 663 888
Actual Tax Expense - -
Comprising:
Current Tax Expense - -
Deferred Tax/(Net Credit) - -
----------- -----------
Total Credit (Expense) - -
----------- -----------
A deferred tax asset for the year of GBP0.7 million (2019:
GBP0.9 million) is not recognised as an asset due to the
uncertainty and unknown timing of its realisation against future
profits. The estimated accumulated unrecognised deferred tax asset
is GBP3.1 million (2019: GBP2.2 million), based on cumulative tax
losses of GBP16.2 million (2019: GBP12.8 million).
11. EARNING 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.
Year Ended Year Ended
31.12.2020 31.12.2019
Average number of shares in issue 561,387,586 561,387,586
Result for the year
Total Loss attributable to equity GBP5.3m GBP4.4m
holders of the parent
Basic Loss per share 0.95p 0.79p
Diluted Loss per share 0.95p 0.79p
----------------------------------- ------------ ------------
There is no difference between the Basic and Diluted loss per
share.
12. PROPERTY, PLANT AND EQUIPMENT
Plant Plant under Total
and
Equipment Construction
GBP'000 GBP'000 GBP'000
---------- ------------- --------
a) Group
Cost at 01.01.2019 15,389 2,212 17,601
Exchange Adjustments (500) (71) (571)
Cost at 31.12.2019 14,889 2,141 17,030
Exchange Adjustments (774) (111) (885)
Cost at 31.12.2020 14,115 2,030 16,145
Accumulated Depreciation and Impairment
at 01.01.2019 5,933 1,630 7,563
Exchange Adjustments (193) (7) (200)
Charge for the year - - -
Charge for impairment for the year 1,982 - 1,982
Accumulated Depreciation and Impairment
at 31.12.2019 7,722 1,623 9,345
Exchange Adjustments (530) (41) (571)
Charge for the year - - -
Charge for impairment for the year - - -
Accumulated Depreciation and Impairment
at 31.12.2020 7,192 1,582 8,774
Net Book Value - 31.12.2020 6,923 448 7,371
Net Book Value - 31.12.2019 7,167 518 7,685
The plant and equipment of GBP6.9 million (2019: GBP7.2 million)
relates to two Siemens turbines, stored in Venice for use in the
Central Illapa project purchased for US $25.0 million. The turbines
are held as inventory in the Company.
Plant under construction comprises a turbine plant in Chile
GBP0.4 million (2019: GBP0.4 million) and Central Illapa
development costs of GBP0.1 million (2019: GBP0.1 million). The
turbine disposal was announced on 9 September 2021, see note 28
Post Balance Sheet Events.
b) Company - The Company had no property, plant and equipment.
13. TRADE AND OTHER RECEIVABLES
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
a) Group - non-current
Amounts due from Joint Venture
Companies(1) 4,586 6,423
b) Group - current
Amounts due from Joint Venture
Companies(1) 843 3,005
Tax Receivable - VAT 4 10
Other Receivables and Prepayments 295 257
----------- -----------
1,142 3,272
----------- -----------
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
a) Company - non-current
Amounts due from Joint Venture
Companies(1) 4,586 6,423
b) Company - current
Amounts due from Joint Venture
Companies(1) 843 3,005
Tax Receivable - VAT 4 10
Loans to subsidiaries(2) 448 514
Other Receivables and Prepayments 102 64
----------- -----------
1,397 3,593
----------- -----------
The amounts owed by subsidiary companies include:
(1) Amounts due from joint venture companies represent the
amounts lent by the Company, net of impairments, to PEL. Interest
on these amounts has been accrued at rates of nil per cent. (2019:
nil per cent.). These loans were replaced in the prior year with
Amended Loan Notes, as previously announced on 19 November 2019.
These notes bear zero interest. Carrying values have been
determined by discounting the predicted future repayments at a rate
of 9% pa, it is anticipated that the notes will be fully repaid in
2034, please see note 8b for details. The first GBP0.5 million
repayment was received in December 2019 ,in 2020: GBP1.8 million
was received, one repayment of $347k has been received in 2021, the
board expects that further repayments will be received in the
remainder of the year.
(2) Loans to subsidiaries in Cochrane Power Limited GBP11.4
million, (2019: GBP10.6 million) repayable on demand. These loans
have been impaired to GBP0.4 million (2019: GBP0.5 million) in
Cochrane Power Limited, the UK holding company for assets in Chile.
The loans to Chile bear nil per cent. interest.
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.
14. INVENTORIES
Company - Inventories Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
Inventories 6,923 7,167
----------- -----------
Inventories comprises of two Siemens 701DU turbines acquired
from IPSA in June 2013. Further details of which are set out in
note Error! Reference source not found. . Storage and insurance
costs for the turbines in the year totalled GBP112k (2019:
GBP111k).
15. CASH AND CASH EQUIVALENTS
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
a) Group - current
Cash and short-term bank deposits 668 137
b) Company - current
Cash and short-term bank deposits 667 137
----------- -----------
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.
16. SHARE CAPITAL
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
-------------------------------------- ----------- -----------
In issue, authorised, called up and
fully paid
561,387,586 ordinary shares of 1p
each (2019: 561,387,586 of 2p each) 5,614 11,228
-------------------------------------- ----------- -----------
Ordinary shares have no redemption rights and are entitled to
full rights to dividends and excess capital on winding up. The
capital reduction reduced the Nominal Value from two pence to one
pence, see below for further details,there was no change to the
number of shares in issue. This reduction in nominal value was
effective from 26 August 2020,
The Company applied to the High Court to allow for a capital
reorganisation in respect of each holding of ordinary shares of
GBP0.02 each in the capital of the Company ("Ordinary Shares") at
the close of business on 30 June 2020 each and every Ordinary Share
to be subdivided into (A) one ordinary share of GBP0.01 ("New
Ordinary Share"), each such New Ordinary Share having the same
rights and being subject to the same restrictions as the Ordinary
Shares and (B) one deferred share of GBP0.01 ("New Deferred
Share"), each such New Deferred Share having the rights and being
subject to the restrictions set out in the articles of association
of the Company to be adopted at the Company's annual general
meeting on 30 June 2020. On 14 August 2020, the High Court approved
the reorganisation of the issued share capital of the Company which
was reduced from GBP11,227,751.72 to GBP5,613,875.86 by cancelling
and extinguishing 561,387,586 of the issued New Deferred Shares of
GBP0.01 each in the Company, each of which is fully paid up, and
the amount by which the share capital is so reduced to be credited
to retained earnings.
On 14 August 2020, the High Court approved the reduction in the
share premium account of the Company of GBP22,753,689 to be
credited to a reserve in the accounts of the Group and the
reduction of the Company's nominal share capital by way of
cancellation of 561,387,586 deferred shares of GBP0.01 each and the
cancellation of the share premium account of the Company also to be
credited to a reserve in the accounts of the Group (together, the
"Reduction of Capital") which became effective on 26 August
2020.
Following the Capital Reduction, the issued share capital of the
Company consists of 561,387,586 ordinary shares of GBP0.01 each and
the distributable reserves will amount to GBP14,620,074
17. SPECIAL NON-DISTRIBUTABLE RESERVE/SHARE PREMIUM
1(st) Capital reduction
On 17 December 2014, the High Court approved the reduction in
the share premium account of the company of GBP45,000,000 and the
creation of a special reserve in the accounts of the Group. The
Group had, at that time, accumulated losses on its profit and loss
account of GBP7,371,683. The existence of these losses prevented
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 GBP67,835,921. 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 GBP45,000,000 from GBP67,835,921 to
GBP22,835,921. This transfer was effective on 26 August 2020.
The resolution was subsequently confirmed by the High Court in
the terms proposed at the time by the 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 after
certain creditors are repaid GBP45,000,000 (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. Until
the creditors are repaid the balance is to be held in a Special
Non-distributable Reserve. The balance of unpaid creditors was
GBPnil (2019: GBPnil).
Share Premium account, after the 1(st) deduction of
GBP45,000,000 was GBP22,753,689.
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.
2(nd) Capital reduction
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, effective 26
August 2020, by way of a special resolution and subsequent
confirmation by the High Court, the Company has reduced the share
premium account of GBP22,753,689 to GBPnil and credited it to a
retained earnings.
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.
The Capital Reduction does not affect the number of Shares in
issue, or the voting or dividend rights of any Shareholder.
18. TRADE AND OTHER PAYABLES
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
a) Group - current
Trade Payables 150 251
Accruals 203 214
353 465
b) Company - current
Trade Payables 104 204
Group borrowings 228 236
Accruals 115 114
447 554
----------- -----------
19. TAX LIABILITIES
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
Group/Company - Current
Other tax and social security 7 6
7 6
----------- -----------
20. BORROWINGS
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
Group/Company - Current
Other Loans - -
- -
Group/Company - Total Borrowings - -
The Group's borrowings are repayable
as follows:
Within 1 year - -
- -
----------- -----------
Group and Company
During the prior year the loan was repaid in full. The final
repayment was made on 27 December 2019.
Net Debt Reconciliation
Year Ended Year Ended
31.12.2020 31.12.2019
a) Group GBP'000 GBP'000
------------ -----------
Balance at the start of the year - 1,200
Non-Cash Flow Transactions
Interest charge - 60
Cash Flow Transactions
Interest Paid - (60)
Principal Repayment - (1,200)
Balance at the end of the year - -
------------ -----------
Year Ended Year Ended
31.12.2020 31.12.2019
b) Company GBP'000 GBP'000
------------ -----------
Balance at the start of the year - 1,200
Non-Cash Flow Transactions
Interest charge - 60
Cash Flow Transactions
Interest Paid - (60)
Principal Repayment - (1,200)
Balance at the end of the year - -
------------ -----------
21. INVESTMENTS
PEL Total
GBP'000 GBP'000
--------- ---------
Cost at 01.01.2019 8,178 8,178
Addition resulting from new
loan note 3,474 3,474
Cost at 31.12.2019 11,652 11,652
Cost at 31.12.2020 11,652 11,652
Accumulated Impairment at
01.01.2019 (8,178) (8,178)
Accumulated Impairment at
31.12.2019 (8,178) (8,178)
Impairment in year (1,826) (1,826)
Accumulated Impairment at
31.12.2020 (10,004) (10,004)
Carrying Value at 31.12.2020 1,648 1,648
Carrying Value at 31.12.2019 3,474 3,474
The 2019 amendment of the loan note receivable agreement to the
JV (US$ 17.6 million) is on a fixed term but carries no interest.
Because of this, under IFRS 9, a market rate of interest (9 per
cent.) was used to FV the loan. The difference been the balance
outstanding on the GBP12.9m, and the 2019 initial fair value
adjustment amount of GBP3.5m has been treated as an investment,
with the GBP9.4m remaining in receivables as at 31/12/19. After
review at 31 December 2020 an impairment of GBP1.8 million has been
recorded, this represents an increase in expected credit losses,
caused by slower repayment of the receivable. Full repayment is now
expected in 2034 (2019: 2027).
At the year end the Company held the following investments:
Direct investments:
1. 50 per cent. (2019: 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 EdS, a company
registered in Argentina. EdS is a generator and supplier of
electricity to the national grid in Argentina.
2. 100 per cent. (2019: 100 per cent.) of the issued share
capital 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.
3. 100 per cent. (2019: 100 per cent.) of the issued share
capital of Rurelec Project Finance Limited a company registered in
England and Wales under registration number 7523554.
Indirect investments:
Name Trading address/registered Interest Held
address
--------------------------- -------------------------------- --------------
Energia del Sur, S.A.* Arroyo 880, Piso 2 50%
--------------
C10007AAB
--------------
Ciudad Autónoma de Buenos
Aires
Argentina
------------------------------------------------------------ --------------
Electrica del Sur,
S.A.* Arroyo 880, Piso 2 50%
--------------
C10007AAB
--------------
Ciudad Autónoma de Buenos
Aires
Argentina
------------------------------------------------------------ --------------
SEA Energy, S.A.** Arroyo 880, Piso 2 100%
--------------
C10007AAB
--------------
Ciudad Autónoma de Buenos
Aires
Argentina
------------------------------------------------------------ --------------
Rurelec Chile SpA*** c/o Guerrero Olivos 100%
--------------
Av. Vitacura 2939, Piso 8
--------------
Las Condes
Santiago
Chile
------------------------------------------------------------ --------------
Rurelec Chile Limitada*** c/o Guerrero Olivos 100%
--------------
Av. Vitacura 2939, Piso 8
--------------
Las Condes
Santiago
Chile
------------------------------------------------------------ --------------
Termoelectrica del
Norte, S.A.*** c/o Guerrero Olivos 100%
--------------
Av. Vitacura 2939, Piso 8
--------------
Las Condes
Santiago
Chile
------------------------------------------------------------ --------------
Central Illapa, S.A.*** c/o Guerrero Olivos 100%
--------------
Av. Vitacura 2939, Piso 8
--------------
Las Condes
Santiago
Chile
------------------------------------------------------------ --------------
*Held via Patagonia Energy Limited and equity accounted as a
joint venture, see Note Error! Reference source not found. .
**Held via Rurelec Project Finance Limited
***Held via Cochrane Power Limited
The results of all of the above directly and indirectly held
subsidiaries have been included in the consolidated group accounts
except where joint ventures are equity accounted as indicated.
22. 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 owns 100 per cent. of EdS, its operating asset in Argentina.
Management has reviewed the classification of PEL in accordance
with IFRS 11 and has concluded that it is a joint venture and
therefore it has been accounted for using the equity accounting
method as set out in IAS 28.
Since previous blade failure issues were resolved in January
2019 plant availability continues to be within expectations, 2020
average 91.7 per cent. (2019: 89.0 per cent.).
The Group does not participate in the current year profits of
the joint venture, as they are exceeded by previous losses. In
prior years the losses had exceeded the investment in the joint
venture and therefore the Group has not recognised its share of
losses in the joint venture. During 2020 the joint venture made a
profit. Total loss position at the year-end was GBP32.5 million
(2019: GBP40.2 million).
The following table sets out the results of the joint venture in
Argentina of which the Group has a 50 per cent. share:
Group share of Joint Venture results Year Ended Year Ended
and net assets
31.12.2020 31.12.2019
GBP'000 GBP'000
Results
Revenue 8,357 11,295
Operating Expenses - excluding foreign
exchange losses (4,464) (6,082)
Foreign exchange losses (1,288) (1,391)
EBITDA 2,605 3,822
Depreciation (1,043) (1,198)
EBIT 1,562 2,624
Intragroup interest - credit re write
back of prior year charge 2,578 2,570
Third party interest payable (634) (1,406)
Profit before tax 3,506 3,787
Tax (829) (1,079)
Profit after tax 2,677 2,709
Summary of Statement of Financial
Position
Non-current assets 10,407 15,889
Cash 1,418 1,713
Current trade and other receivables 1,196 4,907
Non-current liabilities (18,681) (25,785)
Current liabilities (2,060) (4,881)
Net assets/(liabilities) (7,720) (8,157)
The Group share of joint venture results and net assets are
shown in Argentinian GAAP, which is the accounting framework
applied to the Joint Venture. The only difference to IFRS is that
fixed assets inspection costs capitalised under Argentinian GAAP
would be de-recognised under IFRS. The impact of this adjustment
would be to decrease the Group's share of Joint Venture fixed
assets by GBP0.8 million.
Revenue is derived from one principal customer, CAMMESA, which
is the Government appointed purchaser of wholesale electricity in
Argentina.
23. RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM
OPERATIONS
Year Ended Year Ended
31.12.2020 31.12.2019
a) Group GBP'000 GBP'000
----------- -----------
Loss for the year before tax (5,334) (4,418)
Net Finance Income (819) -
Net Finance Expense 2,783 64
Adjustments for:
Unrealised exchange losses 456 1,287
Write down of loans - 235
Write down of investment 1,826 -
Write down of investment in SEA Energy
(reversal) - (188)
Write down of Turbines for Illapa - 1,982
Movement in Working Capital:
Change in Trade and Other Receivables (73) 88
Change in Trade and Other Payables (112) (308)
Cash Used in Operations (1,273) (1,260)
----------- -----------
Year Ended Year Ended
31.12.2020 31.12.2019
b) Company GBP'000 GBP'000
----------- -----------
Loss for the year before tax (5,467) (4,510)
Net Finance Income (1,472) (566)
Net Finance Expense 2,783 -
Adjustments for:
Unrealised exchange losses 456 1,070
Write down of loans 883 1,003
Write down of investment 1,826 -
Write down of 701 turbines - 1,982
Movement in working capital:
Change in Trade and Other Receivables (41) (62)
Change in Trade and Other Payables (78) (78)
Cash Used in Operations (1,110) (1,161)
----------- -----------
24. 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. 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. As a result of recent inflation, Argentine GAAP
measures for hyperinflation have come into force. The EdS
financials included in this report have been prepared with these
measures. The Directors are of the view that these accounts require
no further adjustment.
The Group also had exposure to the US Dollar as a result of
borrowings denominated in this currency.
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 no such analysis
has been undertaken.
The following table sets out when the financial obligations fall
due:
Year Ended Year Ended
31.12.2020 31.12.2019
a) Group GBP'000 GBP'000
----------- -----------
Current - due within 1 year:
Trade Payables 150 251
Accruals 203 214
Tax Liabilities 7 6
Borrowings - -
----------- -----------
Total due within 1 year: 360 471
Year Ended Year Ended
31.12.2020 31.12.2019
b) Company GBP'000 GBP'000
----------- -----------
Current - due within 1 year:
Trade Payables 104 203
Accruals 115 115
Intra Group borrowing 228 236
Tax Liabilities 7 5
Borrowings - -
----------- -----------
Total due within 1 year: 454 559
c) 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.
d) 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 2020 Company Company Group Financial Group Borrowings
Financial Borrowings Assets and Payables
Assets and Payables At at
At at Amortised Amortised
Cost Amortised Cost
Amortised Cost
Cost
GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ---------------- -----------------
Trade and Other Receivables
> 1 year 4,586 - 4,586 -
Trade and Other Receivables
< 1 year 1,397 - 1,143 -
Cash and Cash Equivalents 667 - 668 -
Trade and Other Payables
< 1 year - (447) - (354)
Total 6,650 (447) 6,397 (354)
----------- -------------- ---------------- -----------------
31 December 2019 Company Company Group Financial Group Borrowings
Financial Borrowings Assets and Payables
Assets and Payables At at
At at Amortised Amortised
Cost Amortised Cost
Amortised Cost
Cost
GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ---------------- -----------------
Trade and Other Receivables
< 1 year 6,423 - 6,423 -
Trade and Other Receivables
< 1 year 3,005 - 3,005 -
Cash and Cash Equivalents 137 - 137 -
Trade and Other Payables
< 1 year - (438) - (259)
Borrowings < 1 year - - - -
----------- -------------- ---------------- -----------------
Total 9,565 (438) 9,565 (259)
----------- -------------- ---------------- -----------------
25. SHORT TERM LEASE COMMITMENTS
Office premises
Low value, less than one year GBP16k (2019: GBP22k).
Office premises relates to the Company's offices.
26. 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 directors, who are considered Key Management
Personnel which amounted to GBP0.3 million (2019: GBP0.3
million).
Year Ended Year Ended Year Ended
31.12.2020 31.12.2020 31.12.2019
GBP'000 GBP'000 GBP'000
Base Salary/Fee Total Total
---------------- ----------- -----------
B Rowbotham 30 30 30
S Morris 82 82 98
A Coveney 168 168 186
---------------- ----------- -----------
Total 280 280 314
B Rowbotham provided services under a service agreement contract
with Mountbeach Associates Ltd until June 2017, since then he was
on payroll.
S Morris provided services under a service agreement contract
with SC Morris Ltd.
A Coveney provided services under a service agreement contract
with Coveney Associates Consulting Ltd.
ii) Charged interest on loans to its 100% subsidiary Rurelec
Project Finance Ltd ("RPFL") totalling GBPnil (2019: GBP23k). The
loan balance outstanding at the year-end due to RPFL was GBP0.2
million (2019: due GBP0.2 million).
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
Year-end Debtor - -
Year-end Creditor 228 236
Interest credited
/(charged) - 23
----------- -----------
iii) Charged interest on loans to its 50% owned joint venture
company, Patagonia Energy Ltd ("PEL") amounting to GBPnil (2019:
GBPnil). Received loan repayments of GBP1,804k (2019: GBP488k). The
Directors have assessed the recoverability of the loans and
consider that it is appropriate to recognise an adjustment for
Expected Credit Losses to the carrying value of GBP2.8 million and
a reversal of 2019 Expected Credit Losses of GBP0.8 million, net
charge GBP2.0 million (2019: GBP3.5 million) at the of the Amended
Loan Notes issued at value at GBP13.4 million (US$ 17.6 million) as
a result of their zero interest rate. Additionally, an impairment
was recognised during the year of GBPnil (2019: GBP0.2 million).
After impairment reviews and expected credit losses the loan
balances at the year-end totalled GBP5.7 million (2019: GBP9.4
million). Interest on these loans has been accrued at an effective
rate of nil per cent (2019: nil per cent). The total outstanding
before impairment is GBP24.9 million (2019: GBP32.3 million).
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
Y/E Debtor 5,428 9,428
Repayment 1,804 487
Interest charged - -
----------- -----------
iv) Received from its joint venture company Energia del Sur S.A.
("EdS") repayments totalling GBPnil (2019: GBP0.5 million) of a
loan previously given in support of a creditor of EdS. This loan
was fully repaid during the prior year.
v) Provided loans and charged interest of 0.5% per month to its
100 per cent. subsidiary Cochrane Power Ltd. New loans in the year
totalled GBP0.2 million (2019: GBP0.1 million). The total
outstanding at the year-end was GBP11.4 million (2019: GBP10.6
million). These loans have been impaired to GBP0.4 million (2019:
GBP0.5 million).
Year Ended Year Ended
31.12.2020 31.12.2019
GBP'000 GBP'000
----------- -----------
Y/E Debtor 448 514
Further loans made 164 98
Interest charged 653 603
----------- -----------
b) Group
RPFL received from EdS full repayment of its loan during the
prior year totalling GBP1.1 million. The interest rate on prior
year's accrued interest was zero, the effective prior interest rate
(on principal and accrued interest) was nil.
27. CONTROL
The Directors consider that the ultimate controlling party is
Sterling Trust Limited on the basis of their 53.9% shareholding in
the Company.
28. POST BALANCE SHEET DATE EVENTS
The COVID-19 pandemic spread globally in Quarter 1 2020.
Widespread measures have continued to be implemented globally by
governments to control the virus and to support economies in the
markets where the Group operates. However, it remains uncertain
whether those measures will be successful in the long-term
eradication of the virus or in achieving a full recovery in those
economies and over what timescale. The magnitude and duration of
the disruption and decline in business in the markets in which
Rurelec operates is uncertain.
The Argentinian Government imposed a tight lockdown on 19 March
2020. Argentina's Government, viewing EdS's output as an essential
service, issued instructions whereby the power plant should operate
with the smallest number of people possible, covering operational
shifts and preventive cleaning work with specific teams. All but
essential staff have been working remotely and not been coming to
the plant unless there is an equipment-related problem to address
at the plant. A wide range of preventative measure were implemented
to protect and safeguard staff. Furthermore, the importance of EdS
in the generation of electricity in the Chubut province means that
its output remains strategically important and a high priority for
CAMMESA.
Notwithstanding the above, it is still not considered possible
to estimate the long-term financial impact of COVID-19 on the
Argentinian economy at the present time, nor to anticipate the
economic and fiscal measures that the Argentinian Government will
impose in response. The pandemic is considered a non-adjusting
balance sheet event.
As announced on 9 September 2021, Termoelectrica del Norte SA,
an indirectly held 100% subsidiary, agreed the sale of its Frame
6B, originally purchased for the Arica project. for $1.0 million.
At the time of signing of the financial statements, GBP73k/ $100k
has been received, the balance is due on completion, expected to be
before 30 November 2021. Please refer to Note 1b.
COMPANY INFORMATION
Directors
A.H. Coveney (Executive)
P. Shackleton (Non-Executive)
Secretary
M J. Bravo Quiterio
Company number
4812855
Registered office and business address
5 St. John's Lane
London
EC1M 4BH
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Bankers
Barclays Bank plc
1 Churchill Place
London
E14 5HP
[1] INDEC (Instituto Nacional de Estadística y Censos de la
Argentina) (Argentinas' National Statistics and Census Office)
Technical repor, Vol. 5, No. 25
https://www.indec.gob.ar/uploads/informesdeprensa/ipc_07_212AB2FD3F4F.pdf
[2] Art. 3 Decreto de necesidad y urgencia 34/2019, valid until
31.12.2021.
https://www.argentina.gob.ar/justicia/derechofacil/leysimple/despido
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