REG - Mast Energy Dvlpmts. - Half-year Report
25/08/2023 07:00
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RNS Number : 3840K Mast Energy Developments PLC 25 August 2023
Mast Energy Developments PLC
(Incorporated in England and Wales)
(Registration Number: 12886458)
Share code on the LSE: MAST
ISIN: GB00BMBSCV12
("MED" or "MAST" or "the Company")
Unaudited interim results for the six-month period ended 30 June 2023
Dated 25 August 2023
MAST Energy Developments PLC ('MED' or the 'Company') the UK-based
multi-asset owner and operator in the rapidly growing flexible energy market,
is pleased to announce its unaudited interim results for the six months
ended 30 June 2023.
Overview of key highlights during the interim period to date:
· In May 2023, a significant milestone was reached at Rochdale, with the local Council finalising its thorough and robust review of the site's design and construction documents, and officially granting Planning Consent. Rochdale is subsequently fully construction-ready and awaiting project funding.
· A strategic decision was made to forego the pre-existing T-4 CM contract at a tariff of £8/kW/pa for the Pyebridge site in favour of applying for two new replacement CM contracts in the 2022/2023 CM bid window. Consequently, MED was successful in pre-qualification to bid for new T-1 and T-4 CM contracts. The Capacity Market Auctions resulted in a T-1 bid, which cleared at £60/kW/pa and a T-4 bid that cleared at a record price of £63/kW/pa.
· MED has reprofiled the outstanding balances on its existing loan facilities held through an institutional lender group. The aggregate balance outstanding on the loans amounted to £729,750 (the 'Reprofiled Balance'), which was transferred to the new loan agreement (the 'Reprofiling Agreement'). Under the terms of the Reprofiling Agreement, the Reprofiled Amount is deemed an initial advance. A second advance under the terms of the Development Loan of £100,000 was availed by the lender group in conjunction with the signing of the Reprofiling Agreement. Shares to the value of £107,070 were issued in May 2023 in respect of a proportional payment of principal debt and interest in terms of the Reprofiling Agreement.
· Post reporting period
During July 2023, the Company has finalised and entered into a first
definitive and binding Joint Venture Agreement ('JVA') with an institutional
investor-led consortium (the 'Institutional Investor').
Under the JVA, the Institutional Investor will inject all required investment
capital into the Joint Venture ('JV'), with an initial expected total
investment value of c. £5.9m, with no funding contribution required from MED.
The completion date of the JVA has been extended and is now expected around 31
August 2023 (see RNS dated 4 August 2023).
Further, the JVA also commits both parties, as set out in MED's announcements
dated 12 July 2023 and 4 August 2023, to promptly finalise terms on a second
joint venture ('Secondary JVA') that will increase the envisaged total
investment value to c. £31m, with a total portfolio of low-carbon flexible
gas generation peaker plants totally a combined generation output of up to c.
33 MW, to be developed and/or acquired, constructed and in production and
income-generating under the two joint ventures.
This announcement contains inside information for the purposes of the UK
version of the Market Abuse Regulation (EU No. 596/2014) as it forms part of
United Kingdom domestic law by virtue of the European Union (Withdrawal) Act
2018 ('UK MAR'). Upon the publication of this announcement, this inside
information is now considered to be in the public domain.
ENDS
For further information please visit www.med.energy or contact:
Pieter Krügel info@med.energy MAST Energy Developments PLC CEO
Jon Belliss +44 (0)20 7399 9425 Novum Securities Coprorate Broker
Zainab Slemang van Rijmenant zainab@lifacommunications.com Lifa Communications Investor and Media Relations Advisor
Lifa Communications
Investor and Media Relations Advisor
DIRECTORS, OFFICERS AND PROFESSIONAL ADVISERS
BOARD OF DIRECTORS: Louis Lodewyk Coetzee (Non-Executive Chairman)
Pieter Krügel (Chief Executive Officer)
Paul Venter (Non-Executive Director)
Dominic Traynor (Non-Executive Director)
REGISTERED OFFICE AND BUSINESS Salisbury House
ADDRESS: London Wall
London
EC2M 5PS
COMPANY SECRETARY: Noel Flannan O'Keeffe
Salisbury House
London Wall
London
EC2M 5PS
PLACE OF INCORPORATION: England & Wales
AUDITORS: Crowe U.K. LLP
55 Ludgate Hill
London
EC4M 7JW
BROKERS: Novum Securities Limited
2nd Floor
7-10 Chandos Street
London
W1G 9DQ
REGISTRAR: Link Group
Unit 10, Central Square
29 Wellington Street
Leeds
LS1 4DL
SOLICITORS: Druces LLP
Salisbury House
London Wall
London
EC2M 5PS
PRINCIPLE BANKERS: Barclays Bank PLC
1 Churchill Place
Canary Wharf
London E14 5HP
STOCK EXCHANGE LISTING: London Stock Exchange: Main Market (Share code:
MAST)
WEBSITE: www.med.energy
DATE OF INCORPORATION: 17 September 2020
REGISTERED NUMBER: 12886458
DIRECTORS' STATEMENT
We are pleased to present our Interim Report for the six-months ending 30 June
2023.
The Company's activities during the first half of 2023 focused on getting the
Pyebridge site fully operational following the work required at the beginning
of the year, further development of the Bordesley, Rochdale, Hindlip Lane and
Stather Road sites, and finalising discussions with an institutional investor
consortium with the aim of securing significant project capital to further
MED's strategic objectives.
These activities are briefly discussed below, and further details can be found
in the Company's RNS operational updates during and post the period ending 30
June 2023, which can be viewed at med.energy.
Joint Venture Agreement
Following robust negotiations and a due diligence process during the first
half of 2023, all of which MED passed with distinction, the Company has
finalised and entered into a definitive and binding Joint Venture Agreement
('JVA') with an institutional investor-led consortium led by Seira Capital Ltd
('Seira'). Under the JVA, the Institutional Investor will inject all required
investment capital into the Joint Venture ('JV'), with a total initial
investment value of c.£5.9m, with no funding contribution required from MED.
The JVA also commits both parties to promptly finalise terms on a second JV
that will increase the envisaged total investment value to c.£31m. A total
portfolio of gas peaker plants with a combined generation output of up to
c.33MW is to be developed and/or acquired, constructed and in production and
income-generating under the two joint ventures.
Under the JVA, the Institutional Investor shall hold 74.9% of the JV while MED
will possess the remaining 25.1%. The Institutional Investor will further
recognise and reimburse to MED a portion of its actual historic project
acquisition- and development-related costs (the 'Cost Refund'), as detailed
below, and there will be no requirement on MED to provide any further funding.
MED will have joint control of the JV Special Purpose Vehicle ('SPV') Board
and full operational control of the relevant sites' management and operations.
The Institutional Investor will receive a preferential entitlement to 90% of
the profit of the JV until the investment provided has been recovered in full,
at which point any distribution of profits will return to the equity split.
Therefore, it is envisaged that MED will receive a c.25% stake in a portfolio
of up to c.33MW of assets that are expected to be fully funded, constructed
and revenue-generating within the next 12 months.
The JVA will initially consist of one project with a generation capacity of
c.9MW that MED will provide to the JV. The Institutional Investor will then
pay MED c. £3.4m in terms of the Cost Refund and inject c. £2.5m into the JV
SPV to cover future capex on the project. Following the binding JVA that has
now been executed, the completion date has been extended and is now expected
around 31 August 2023 (see RNS dated 4 August 2023).
The Secondary JVA is expected to consist of up to four projects with a
combined generation capacity of a minimum 17MW and up to 24MW that MED will
provide to the JV. The Institutional Investor will then pay MED c. £3.8m in
terms of the Cost Refund and inject c. £21.3m into the JV SPV to cover future
capex on these projects.
In addition, the JV will grant MED a five-year management service agreement
('MSA') and associated fees to manage the sites, which will further bolster
MED's share of income from the JV, calculated as £7,200 per MW per annum. It
is MED's intention and plan to use the bulk of the Cost Refund from the JV
investment tranches to further develop and acquire projects that will be used
within the JV, as well as further bolster its own wholly owned portfolio of
assets (external to the JV) by way of further development, construction and
new acquisitions.
Pyebridge (9 MW operational site)
Several key inspections and studies were actioned at the Pyebridge site during
the first half of 2023, to ensure the site continues to operate within the
required safety and regulatory parameters. These included, but were not
limited to, earthing studies, high-voltage studies, low-voltage wiring tests,
removal and replacement of the fire detection and alarm system, gas piping
tightness tests and a full engine control system parameter review. Following
the successful execution of the turnaround plan, which was specifically
developed to address the results of the incident on Engine 1 at the end of
2022, the Pyebridge site also resumed full-scale production and export of
electricity during February 2023.
Upon acquisition of the site by MED, Pyebridge had a pre-existing T-4 CM
contract at a tariff of £8/kW/year with a contract value of c.£60k per
annum. Due to the UK energy market having moved significantly since the site
previously obtained the aforementioned contract, MED took a strategic decision
to forego the contract in favour of applying for new replacement CM contracts
in the 2022/2023 CM bid window. Consequently, MED applied for and was
successful in pre-qualification to bid for two new CM contracts: a T-1 and a
T-4 CM contract. Following the preparation of a robust Capacity Market Auction
bid strategy, MED is pleased to announce that, pursuant to the recent Capacity
Market Auctions and subsequent results, its T-1 bid cleared at £60/kW/year
while its T-4 bid cleared at an unprecedented historic record price of
£63/kW/year. The site's new replacement T-4 contract (at £63/kW/year)
results in an uplift of income of c.7.5x (or 750%) compared to the previous
contract tariff of £8/kW/year. The new additional T-1 CM contract, which the
site did not have previously, will further enhance the site's revenue
significantly. The site's new T-1 CM contract has a revenue value of c.£308k
per annum and its new T-4 CM contract has a revenue value of c.£324k per
annum (the latter is up from the previous T-4 contract's c.£60k per annum).
Both contract values will increase the site's revenue profile accordingly.
As part of the Medium Combustion Plant Directive ('MCPD'), it is a requirement
for medium combustion plants to execute emissions testing to ensure the
facility operates within the legal bounds of emissions of primarily sulphur
dioxide (SO2), nitrogen oxides (NOX) and dust into the air. The MCPD testing
was executed at the end of May 2023. The Pyebridge site therefore, now has a
renewed MCPD permit to continue operations.
The total electricity generation in the GB market decreased in Quarter 1 of
2023 but with a record 47.8 per cent share coming from renewable sources
(i.e., wind and solar). This contributed to an average electricity sales price
of £126.38/MWh (for the period January through June 2023), which is
significantly lower than the average sales price during the previous half-year
period (£421.24/MWh for July through December 2022). This is to be expected
as the previous half-year period ran through colder UK months, which generally
result in a higher demand of power and, consequently, higher average
electricity sales prices. It should also be noted that the Pyebridge site was
not operational during January and half of February 2023, which reduces the
average electricity sales price calculated for the half-year period.
Furthermore, the average price for the period under review (£126.38/MWh) is
still around two times (2x) higher than the average power sales price at the
time of MED's IPO in April 2021 (i.e., around £66).
Bordesley (5 MW site in early construction)
As part of the existing £30.59/kW/year T-4 Capacity Market contract that
Bordesley has in place, the site reached a Financial Commitment Milestone
('FCM') at the end of February 2023, which means that more than 10% of the
total required capital expenditure has been spent on the site.
The Company has worked with its Engineering, Procurement and Construction
('EPC') contractor, Clarke Energy Ltd ('Clarke'), to review and renegotiate
the initial EPC offer supplied for the Bordesley project. Consequently, an
updated quotation has been received with a decreased total cost of 13.56%
compared to the previous EPC offer.
The Bordersley site currently has planning consent, updated offers for EPC and
Scope of Works ('SoW'), offers for Operations and Maintenance ('O&M') and
gas connection, grid connection and a construction management plan in place.
Furthermore, construction works has been initiated at the site and the
Bordesley project is now only awaiting project funding to move forward with
its construction phase. Upon finalisation of the funding agreement the
Bordesley project will immediately continue with construction.
Rochdale (4.4MW fully shovel-ready site)
Like Bordesley above, the Company has worked with its EPC contractor, Clarke,
to review and renegotiate the initial EPC offer supplied for the Rochdale
Project, and an updated quotation has been received from Clarke with a
decreased total cost of 14.23% compared to the original EPC offer.
In May 2023, a significant milestone was reached at Rochdale, with the local
Council finalising its thorough and robust review of the site's design and
construction documents and officially granting the site with Planning Consent.
With the conclusion of this stringent evaluation process, construction
activities may commence. Therefore, and as with the Bordersley project, the
Rochdale project has planning consent, updated offers for EPC and SoW, offers
for O&M and gas and grid connections, and a construction management plan
in place. The site is fully shovel-ready and awaiting project funding to move
into the construction phase.
Hindlip Lane (7.5 MW site in early construction)
Some initial pre-construction work was started at the entrance to the site to
meet planning consent requirements. The Certificate of Lawful Commencement has
been applied for and is expected in August 2023.
To proceed to engine installation as provided in the EPC SoW, the Company has
liaised with its EPC contractor, Clarke, to receive a full EPC and O&M
offer, which is now in place. This - along with the planning consent, gas
connection offer, grid connection offer and construction management plan - are
all in place and Hindlip Lane is fully shovel-ready and awaiting project
funding to move into construction. Upon completion of the anticipated
investment, the Hindlip Lane project will immediately continue with its
construction phase.
Stather Road (2.5 MW site)
The Stather Road project is progressing as a long-term leasehold agreement is
in place. Formal grid connection offers having been secured previously as well
as a gas connection offer. Planning Consent has also been granted, with some
amendments to follow to incorporate the use of Jenbacher engines.
Project Funding
As stated above, most of MED's sites under development are either in
early-stage construction or ready for construction, subject to securing
project capex funding. In order to address this key next step in these
projects' development lifecycle in order to get each project into production
as quickly as possible, it is envisaged that the new JV investment will be
utilised to fund some or all of these projects.
Pipeline Sites
The Company is continuously looking to identify and assess attractive
additional reserve power sites for potential acquisition in order to further
grow its asset portfolio. At the moment MED has a near-term pipeline of c.50
MW of additional sites under assessment, with around 20MW of sites in an
advanced stage of due diligence and commercial negotiations. Further
acquisitions will be a significant next step forward in meeting MED's
objective of building a generating capacity of 300 MW in production.
Principle Risk
Refer to Note 17 of the RNS for our assessment of the Principle Risks.
Related Parties
Refer to Note 14 of the RNS for key relationships and disclosure of Related
Parties.
Financial summary of the MAST Energy Developments PLC Group
The following information is included to highlight the financial performance
of the Group for the six months ended.
Description Six (6) Six (6) Year ended 31 December 2022
months ended months ended 30 June 2022
30 June 2023
(Unaudited) (Unaudited) (Audited)
(£) (£) (£)
Revenue 198,438 305,384 1,036,743
Cost of sales (125,008) (260,329) (778,802)
Administrative expenses (472,611) (307,818) (921,769)
Listing and capital raising fees (94,436) (51,119) (107,676)
Project expenditure (224,667) (337,991) (661,079)
Impairments and fair value adjustments (86,558) - (1,288,578)
Other income 128,050 - 86,558
Finance costs (96,958) (29,741) (98,387)
Loss for the period (773,750) (681,614) (2,733,000)
Group revenue is £198,438 for the six-month period ended 30 June 2023, which
is mainly derived from Pyebridge at this stage, and is a decrease in
comparison with the previous financial reporting period revenue of £305,384.
Other income is also derived from Pyebridge, and when combined with revenue,
the total income is comparable to the previous financial reporting period. As
the Company's projects and operations continue to move from development to
commercial production, the growth in revenue is expected to increase
substantially.
The overall increase in loss period-on-period, as disclosed in the table above
and in the statement of comprehensive income, is mainly owing to the following
reasons:
• Increase in administrative expenses due to increased professional,
legal, management and consulting services rendered during the current interim
period in comparison to the previous period.
• Decrease in project expenditure as the sites neared financial
close and the newly acquired sites required less expenditure during the
period.
• Reversals of fair value adjustments relating to derivatives
cancelled as part of the convertible loan notes reprofiled during the year.
• Increase in other income relating to an insurance claim received
for loss of revenue during maintenance and improvements on the Pyebridge site.
• Increase in finance fees relating to interest on the financing
agreement for the development loan and for the acquisitions that took place
during 2022.
There have been no dividends declared or paid during the current interim
financial period (31 December 2022: £ Nil, 30 June 2022: £ Nil).
RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge that:
a) the condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting';
b) the Directors' Statement includes a fair review of the information
required by the Disclosure and Transparency Rule DTR 4.2.7R (indication of
important events during the six months);
c) the Directors' Statement includes a fair review of the information
required by the Disclosure and Transparency Rule DTR 4.2.8R (disclosure of
related party transactions and changes therein); and
d) this report contains certain forward-looking statements with respect to
the operations, performance and financial condition of the Group. By their
nature, these statements involve uncertainty since future events and
circumstances can cause results and developments to differ materially from
those anticipated.
The forward-looking statements reflect knowledge and information available at
the date of preparation of this financial report and the Company undertakes no
obligation to update these forward-looking statements.
Nothing in this financial report should be construed as a profit forecast.
The board of directors all confirm their combined agreement to this statement.
Board of Directors
Louis Lodewyk Coetzee (Non-Executive Chairman)
Pieter Krugel (Chief Executive Officer)
Paul Venter (Non-Executive Director)
Dominic Traynor (Non-Executive Director)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six (6) Six (6) Year ended
months ended 30 June 2023 months ended 30 June 2022 31 December 2022
(Unaudited) (Unaudited) (Audited)
Note £ £ £
Revenue 198,438 305,384 1,036,743
Cost of sales (125,008) (260,329) (778,802)
Gross profit 73,430 45,055 257,941
Administrative expenses (472,611) (307,818) (921,769)
Listing and other corporate fees (94,436) (51,119) (107,676)
Project expenditure (224,667) (337,991) (661,079)
Impairments and fair value adjustments (86,558) - (1,288,578)
Operating loss (804,842) (651,873) (2,721,161)
Other income 128,050 - 86,558
Finance costs (96,958) (29,741) (98,397)
Loss before tax (773,750) (681,614) (2,733,000)
Taxation - - -
Loss for the period (773,750) (681,614) (2,733,000)
Other comprehensive Income/(loss) - -
Total comprehensive loss for the period (773,750) (681,614) (2,733,000)
Loss for the period (773,750) (681,614) (2,733,000)
Attributable to the owners of the parent (773,750) (681,614) (2,733,000)
Attributable to the non-controlling interest - -
Total comprehensive loss for the period (773,750) (681,614) (2,733,000)
Attributable to the owners of the parent (773,750) (681,614) (2,733,000)
Attributable to the non-controlling interest - - -
Loss Per Share
Basic loss per share (pence) 6 (0.34) (0.36) (1.36)
Diluted loss per share (pence) 6 (0.34) (0.36) (1.36)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2023
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
Note £ £ £
Assets
Non‑Current Assets
Property, plant, and equipment 7 2,454,389 2,929,746 2,552,837
Intangible assets 8 1,795,683 2,745,273 1,795,683
Total non-current assets 4,250,072 5,675,019 4,348,520
Current Assets
Trade and other receivables 78,565 158,235 136,801
Cash and cash equivalents 8,804 784,418 132,184
Total current assets 87,369 942,653 268,985
Total Assets 4,337,441 6,617,672 4,617,505
Equity and Liabilities
Equity
Called up share capital 9 232,207 188,717 217,453
Share premium account 9 12,745,924 11,682,343 12,653,607
Common control reserve 10 383,048 383,048 383,048
Warrant and share based payment reserve 10 58,424 - -
Non-controlling interest acquired 10 (4,065,586) (4,065,586) (4,065,586)
Retained deficit (7,845,528) (5,020,593) (7,071,778)
Attributable to equity holders of the parent 1,508,489 3,167,929 2,116,744
Non-controlling interest - - -
Total Equity 1,508,489 3,167,929 2,116,744
Liabilities
Non-current Liabilities
Lease liability 292,826 287,721 346,674
Other financial liabilities 13 494,447 243,056
Total Current Liabilities 787,273 287,721 589,730
Current Liabilities
Loans from related parties 12 1,231,535 2,302,362 1,231,535
Trade and other payables 494,100 195,162 300,325
Other financial liability 13 307,559 661,911 354,805
Lease liability 8,485 2,587 3,980
Derivative liability 13 20,386
Total Current Liabilities 2,041,679 3,162,022 1,911,031
Total Liabilities 2,828,952 3,449,743 2,500,761
Total Equity and Liabilities 4,337,441 6,617,672 4,617,505
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Warrant and share based reserves Common Control Reserve Non-controlling interest acquired Retained deficit Total
Capital Premium
£ £ £ £ £ £ £
Balance at 31 December 2021 188,717 11,682,343 - 383,048 (4,065,586) (4,338,778) 3,849,744
Total comprehensive loss for the period - - - - - (681,614) (681,614)
Balance at 30 June 2022 188,717 11,682,343 - 383,048 (4,065,586) (5,020,392) 3,168,130
Total comprehensive loss for the period - - - - - (2,051,386) (2,051,386)
Loan with holding company settled in shares 28,736 971,264 - - - - 1,000,000
Balance at 31 December 2022 217,453 12,653,607 - 383,048 (4,065,586) (7,071,778) 2,116,744
Total comprehensive loss for the period - - - - - (773,750) (773,750)
Warrants issued - - 58,424 - - - 58,424
Partial settlement of convertible loan notes in shares 14,754 92,317 - - - - 107,071
Balance at 30 June 2023 232,207 12,745,924 58,424 383,048 (4,065,586) (7,845,528) 1,508,489
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended
31 December
2022
(Unaudited) (Unaudited) (Audited)
£ £ £
Cash flows from operating activities
Loss for the period before taxation (773,750) (681,614) (2,733,000)
Adjustments for non-cash items:
Non-cash interest accrued 96,958 17,198 96,828
Depreciation 45,784 7,123 65,948
Impairment of goodwill - 1,288,578
Loss / (Gain) on revaluation of derivatives 86,558 (86,558)
Warrants issued 58,424
Other non-cash items - 33,327 (2,085)
(486,026) (623,966) (1,370,289)
Movement in working capital
Decrease in debtors 58,236 34,773 45,043
Increase/(Decrease) in creditors 193,775 (75,507) 40,819
252,011 (40,734) 85,862
Net cash outflows from operating activities (234,015) (664,700) (1,284,427)
Cash flows from investing activities
Property, plant and equipment acquired - (38,960) (79,827)
Intangible assets acquired - - (338,988)
Deferred payment on Pyebridge paid - - (555,535)
Net cash flows from investing activities - (38,960) (974,350)
Cash flows from financing activities
Proceeds of issue of share capital - -
Lease liability repaid (24,115) (1,210) (27,000)
Other financial liabilities repaid - (316,173) -
Proceeds from convertible loan notes 85,800 - 650,000
Implementation fee on CLN reprofiling - non-cash item 48,950
Loans from related parties (repaid)/received - - (37,500)
Net cash flows financing activities 110,635 (317,383) 585,500
Net increase/(decrease) in cash and cash equivalents (123,380) (1,021,043) (1,673,277)
Cash and cash equivalents at beginning of period 132,184 1,805,461 1,805,461
Cash and cash equivalents at end of the period 8,804 784,418 132,184
During the six month period, convertible loan notes to the value of £597,861
were reprofiled with no cash settlement taking place. All costs incurred in
the reprofiling of the CLN were capitalised to the balance thereof. Partial
settlement of the CLN to the value of £107,071 took place by way of shares
issued by MAST Energy Developments PLC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR
THE SIX MONTHS ENDED 30 JUNE 2022
Note 1: General information
MAST Energy Developments PLC ('MAST' or 'MED' or the 'Company') is
incorporated in England & Wales as a public limited company. The Company's
registered office is located at Salisbury House, London Wall, London, EC2M
5PS.
The principal activity of MAST, through its subsidiaries (together the
'Group'), is to acquire and develop a portfolio of flexible power plants in
the UK and become a multi-asset operator in the rapidly growing reserve power
market.
The Group currently has five (5) projects in its portfolio referred to as
Pyebridge, Rochdale, Bordersley, Hindlip Lane (ADV 001) and Stather Road (ARL
018).
Note 2: Statement of preparation
The condensed consolidated financial statements are prepared on the historical
cost basis, unless otherwise stated. The Group's accounting policies used in
the preparation of condensed consolidated financial statements are consistent
with those used in the annual financial statements for the year ended 31
December 2022, except for the adoption of new or amended standards applicable
from 1 January 2023, which had no material impact on the condensed
consolidated financial statements of the Group.
The condensed consolidated financial statements of the Company have been
prepared in accordance with the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority and Accounting Standard IAS 34, 'Interim
Financial Reporting', as adopted by the UK.
The interim report does not include all of the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the period ended 31 December 2022,
which has been prepared in accordance with UK-adopted international accounting
standards, and any public announcements made by MED PLC during the interim
reporting period.
The condensed consolidated financial statements of the Group are presented in
Pounds Sterling, which is the functional and presentation currency for the
Group and its related subsidiaries.
The condensed consolidated financial statements do not represent statutory
accounts within the meaning of section 435 of the Companies Act 2016.
The condensed consolidated financial statements have not been audited or
reviewed by the Group's auditors thus no assurance is provided therein.
The Directors acknowledge they are responsible for the fair presentation of
these condensed consolidated financial statements.
Note 3: Consolidation
The consolidated annual financial statements comprise the financial statements
of MAST Energy Developments PLC and its subsidiaries for the year ended 31
December 2022, over which the Company has control.
Control is achieved when the Company:
· has the power over the investee;
· is exposed, or has rights, to variable return from its involvement
with the investee; and
· has the ability to use its power to affect its returns.
In assessing control, potential voting rights that are currently exercisable
or convertible are taken into account. Subsidiaries are fully consolidated
from the date that control commences until the date that control ceases.
Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the Group. Intragroup balances
and any unrealised gains or losses or income or expenses arising from
intragroup transactions are eliminated in preparing the Group financial
statements, except to the extent they provide evidence of impairment.
The Group accounts for business combinations using the acquisition method of
accounting. The cost of the business combination is measured as the aggregate
of the fair values of assets given, liabilities incurred or assumed and equity
instruments issued. Costs directly attributable to the business combination
are expensed as incurred except the costs to issue debt, which are amortised
as part of the effective interest, and costs to issue equity, which are
included in equity.
The acquiree's identifiable assets, liabilities and contingent liabilities,
which meet the recognition conditions of IFRS 3 Business Combinations are
recognised at their fair values at acquisition date.
The Group applied merger accounting for the common control transaction that
occurred during the creation of the group between Kibo Mining (Cyprus)
Limited, Kibo Energy PLC and MAST Energy Projects Limited. In terms of this:
· the assets and liabilities of the acquiree are recorded at their
existing carrying amounts (not fair value);
· if necessary, adjustments are made to achieve uniform accounting
policies;
· intangible assets and contingent liabilities are recognised only to
the extent that they were recognised by the acquiree in accordance with
applicable IFRS;
· no goodwill is recognised. Any difference between the acquirer's cost
of investment and the acquiree's equity is presented separately directly in
equity as a common control reserve (CCR) on consolidation;
· any non-controlling interest is measured as a proportionate share of
the carrying amounts of the related assets and liabilities (as adjusted to
achieve uniform accounting policies); and
· any expenses of the combination are written off immediately in profit
or loss, except for the costs to issue debt, which are amortised as part of
the effective interest, and costs to issue equity, which are recognised within
equity.
Note 4: Going concern
The financial results have been prepared on the going concern basis of
accounting that contemplates the continuity of normal business activities and
the realisation of assets and the settlement of liabilities in the normal
course of business.
The losses incurred in the current financial period, coupled with the net
current liability position the Group finds itself in as at 30 June 2023, are
considered to indicate that a material uncertainty exists that may cast
significant doubt on the Group's ability to continue as a going concern.
The Board has, inter alia, considered the following specific factors in
determining whether the Group is a going concern:
· The total comprehensive loss for the six-month period ended 30 June
2023 of £773,150 (six months ended 30 June 2022 of £681,614 and year ended
31 December 2022 of £2,733,000);
· Cash and cash equivalents readily available to the Group in the
amount of £8,804 in order to pay its creditors and maturing liabilities in
the amount of £2,041,679 (of which £1,231,535 is from related parties) as
and when they fall due and meet its operating costs for the ensuing twelve
months;
· Whether the Group has available cash resources, or equivalent short
term funding opportunities in the foreseeable future, to deploy in developing
and growing existing operations or invest in new opportunities; and
· The binding JVA agreement referred to in the Directors' statement
which includes a Cost Refund and a MSA to manage sites.
The short-term liquidity position the Group finds itself in is as a result of
the staggered implementation approach of the underlying operations. At a point
the underlying operations will positively contribute to the cash requirements
of the larger Group.
In response to the net current liability position, to address future cash flow
requirements, detailed liquidity improvement initiatives have been identified
and are being pursued. Implementation is regularly monitored in order to
ensure the Group is able to alleviate the liquidity constraints in the
foreseeable future.
Therefore, the ability of the Group to continue as a going concern is
dependent on the successful implementation or conclusion of the below noted
matters as it will address the liquidity risk the Group faces on an ongoing
basis.
· Conclusion of the signed JVA agreement with the institutional
investor, which is expected to be completed in quarter three of 2023.
· Further successful conclusion of funding requirements of the Group in
order to complete construction of the Group's existing and/or new sites.
· Successful cash generation from the Pyebridge power-generation
facilities in order to achieve net cash positive contributions to the Group.
Although there is no guarantee, the Directors are confident that the above
matters will be successfully implemented and have a reasonable expectation
that the Group will be able to raise sufficient financing to support its
ongoing development and commercialisation activities to continue in
operational existence in the next 12 months.
Note 5: Segmental reporting
The Group discloses segmental analysis based on its different operations,
being Bordersley, Rochdale and Pyebridge.
30 June 2023 Bordersley Rochdale Pyebridge ADV001 Hindlip Lane ARL018 Stather Road Treasury and Investment Group
(£) (£) (£) (£) (£) (£) (£)
Revenue - - 198,438 - - - 198,438
Cost of sales - - (125,008) - - - (125,008)
Depreciation (3,918) - (39,817) (1,254) - (795) (45,784)
Profit/ (Loss) before tax (46,200) (19,893) 18,330 (12,603) (29,698) (683,686) (773,750)
Total assets 286,958 92,808 2,050,929 127,858 13,345 1,765,543 4,337,441
Total liabilities (256,806) (25,731) (145,668) (127,398) (30,012) (2,243,337) (2,828,952)
30 June 2022 Bordersley Rochdale Pyebridge Treasury and Investment Group
(£) (£) (£) (£) (£)
Revenue - - 305,384 - 305,384
Cost of sales - - (260,329) - (260,329)
Depreciation (7,042) - - (81) (7,123)
Loss before tax (182,661) (42,704) (57,832) (398,417) (681,614)
Total assets 3,008,424 250,652 2,600,853 746,580 6,617,672
Total liabilities (320,559) (26,682) (103,103) (2,988,234) (3,449,743)
31 December 2022 Bordersley Rochdale Pyebridge ADV001 Hindlip Lane ARL018 Stather Road Treasury and Investment Group
(£) (£) (£) (£) (£) (£) (£)
Revenue - - 1,036,743 - - - 1,036,743
Cost of sales - - (778,802) - - - (778,802)
Impairment (1,288,578) - - - - - (1,288,578)
Depreciation (11,938) - (52,632) - - (751) (65,321)
Loss before tax (1,581,475) (114,853) (50,469) (23,605) (10,967) (951,631) (2,733,000)
Total assets 1,733,554 262,043 2,082,352 265,170 210,907 63,488 4,617,505
Capital expenditure 17,099 57,962 4,766
Total liabilities (296,984) (6,897) (133,650) - (109,898) (1,953,331) (2,500,761)
As the Group currently operates solely from the United Kingdom, consequently
there is no segmented disclosure with regard to different geographic areas of
operation.
Note 6: Loss per share
Basic loss per share
The basic loss and weighted average number of ordinary shares used for
calculation purposes comprise the following:
Basic loss per share 30 June 2023 (£) 30 June 2022 (£) 31 December 2022 (£)
Loss for the period attributable to equity holders of the parent (773,750) (681,614) (2,733,000)
Weighted average number of ordinary shares for the purposes of basic loss per 226,629,075 188,717,097 200,919,900
share
Basic loss per ordinary share (pence) (0.34) (0.36) (1.36)
The Group has no dilutive instruments in issue as at period end.
Note 7: Property, plant and equipment
Land Plant & Machinery Right of use assets Computer Equipment Total
Cost (£) (£) (£) (£) (£)
Opening Cost as at 1 January 2022 602,500 2,011,409 293,793 - 2,907,702
Additions - 36,012 - 2,948 38,960
Closing Cost as at 30 June 2022 602,500 2,047,421 293,793 2,948 2,946,662
Additions - 39,049 62,090 1,818 102,957
Derecognition as a result of waiver of deferred payment. - (421,041) - - (421,041)
Closing Cost as at 31 December 2022 602,500 1,665,429 355,883 4,766 2,628,578
Change in lease - - (52,664) - (52,664)
Closing Cost as at 30 June 2023 602,500 1,665,429 303,219 4,766 2,575,914
Accumulated Depreciation ("Acc Depr") (£) (£) (£) (£) (£)
Opening Acc Depr as at 1 January 2022 - - (9,793) - (9,793)
Depreciation - - (7,042) (81) (7,123)
Closing Acc Depr as at 30 June 2022 - - (16,835) (81) (16,916)
Depreciation - (52,632) (5,523) (670) (58,825)
Closing Acc Depr as at 31 December 2022 - (52,632) (22,358) (751) (75,741)
Depreciation (39,817) (5,173) (794) (45,784)
Closing Acc Depr as at 30 June 2023 - (92,449) (27,531) (1,545) (121,525)
Carrying Value (£) (£) (£) (£) (£)
as at:
30 June 2022 602,500 2,047,421 276,958 2,867 2,929,746
31 December 2022 602,500 1,612,797 333,525 4,015 2,552,837
30 June 2023 602,500 1,572,980 275,688 3,221 2,454,389
The Group has a lease contract for land it shall utilise to construct a 5MW
gas-fuelled power generation plant. The land is located at Bordersley,
Liverpool St. Birmingham.
The lease of the land has a lease term of 20 years, with an option to extend
for 10 years, which the Group has opted to include due to the highly likely
nature of extension as at the time of the original assessment.
The Group has another lease contract for land where it shall construct a 2.4MW
gas-fuelled power generation plant. The land is located at Stather Road,
Flixborough. The lease term is 25 years.
The Group's obligations under its leases are secured by the lessor's title to
the leased assets. The Group's incremental borrowing rate ranges between 8.44%
and 10.38%.
Note 8: Intangible assets
Intangible assets consist of separately identifiable assets or intellectual
property (Bordersley Power), acquired either through business combinations or
through separate asset acquisitions. These intangible assets are recognised at
the respective fair values of the underlying asset acquired or, where the fair
value of the underlying asset acquired is not readily available, the fair
value of the consideration.
The following reconciliation serves to summarise the composition of intangible
assets as at period end:
Group Rochdale Power (£) Bordersley Power ARL018 Stather Road (£) ADV001 Hindlip Lane (£) Total
(£)
(£)
Carrying value as at 1 January 2021 - 2,595,000 - - 2,595,000
Acquisition of Rochdale Power Ltd 150,273 - - - 150,273
Carrying value as at 31 December 2021 150,273 2,595,000 - - 2,745,273
Acquisition of ARL018 Stather Road - - 91,482 - 91,482
Acquisition of ADV001 Hindlip Lane - - - 247,506 247,506
Impairments (1,288,578) (1,288,578)
Carrying value as at 31 December 2022 150,273 1,306,422 91,482 247,506 1,795,683
Carrying value as at 30 June 2023 150,273 1,306,422 91,482 247,506 1,795,683
Intangible assets are amortised once commercial production commences over the
remaining useful life of the project, which is estimated to be 20 years,
depending on the unique characteristics of each project.
Until such time as the underlying operations commence production, the Group
performs regular impairment reviews to determine whether any impairment
indicators exist.
One or more of the following facts or circumstances indicate that an entity
should test an intangible asset for impairment:
• The period for which the entity has the right to develop the asset
has expired during the period or will expire in the foreseeable future;
• The substantial expenditure on the asset in future is neither
planned nor budgeted.
• Sufficient data exists to indicate that, although a development in
the specific area is likely to proceed, the carrying amount of the development
asset is unlikely to be recovered in full from successful development or by
sale.
Note 9: Share Capital
The called-up and fully paid share capital of the Company is as follows:
30 June 30 June 31 December 2022 (£)
2023 (£) 2022 (£)
Allotted, issued and fully paid shares
(Jun 2023: 232,207,643 Ordinary shares of £0.001 each) 232,207 - -
(Jun 2022: 188,717,097 Ordinary shares of £0.001 each) - 188,717 -
(Dec 2022: 217,452,729 Ordinary shares of £0.001 each) - - 217,453
232,207 188,717 217,453
Number of Shares Ordinary Share Capital Share Premium
(£)
(£)
Balance at 31 December 2021 188,717,097 188,717 11,682,343
Balance at 30 June 2022 188,717,097 188,717 11,682,343
Partial Settlement of outstanding shareholders loan 28,735,632 28,736 971,264
Balance at 31 December 2022 217,452,729 217,453 12,653,607
Partial settlement of outstanding other financial liabilities 14,754,914 14,754 92,317
Balance at 30 June 2023 232,207,643 232,207 12,745,924
During the six months ended 30 June 2023 the Company issued shares as partial
settlement of amounts due (30 June 2022: £Nil and 31 December 2022:
£1,000,000).
Note 10: Reserves
Common control reserve
On 17 September 2020, the Company became the legal parent of Sloane
Developments Limited following completion of the acquisition of the entire
issued share capital of Sloane Developments Limited from Kibo Mining Cyprus
Limited, a wholly owned subsidiary of Kibo Energy PLC. Following the
completion of the acquisition, the ultimate holding company, being Kibo Energy
PLC, retained control over Sloane Developments Limited.
As MED is only an investment holding company, incorporated for the purposes of
raising capital funding for its investee projects, and the majority
shareholder before and after the acquisition continues to be Kibo Energy PLC,
the transaction is considered to be a common control transaction, outside the
scope of IFRS 3, and seen as a capital reorganisation, where predecessor
valuation accounting was applied with regard to the incorporation of historic
financial information.
The common control reserve is the result of the predecessor valuation
accounting which was applied as a result of the common control transaction.
Non-controlling interest acquired
On 31 July 2020, Sloane Developments Limited, MAST Energy Projects Limited
and St. Anderton on Vaal Limited entered into the Share Exchange Agreement
relating to the acquisition by Sloane Developments Limited of the remaining
40% of the issued share capital of MAST Energy Projects Limited. Under the
Share Exchange Agreement, the Company will pay St Anderton on Vaal Limited the
sum of £4,065,586 payable by the issue of 36,917,076 ordinary shares of
£0.001 each in the Company. Completion of the Share Exchange Agreement was
subject to and conditional upon the Admission of MAST Energy Developments
Limited to the London Stock Exchange.
Following completion of the IPO on 14 April 2021, the Group acquired the
remaining equity interest in MAST Energy Projects Limited for the
consideration equal to 36,917,076 shares at a total value of £4,065,586. As
the controlling stake in the entity had already been acquired, the transaction
was seen as a transaction with owners and the financial impact recognised
directly in equity of £4,065,586.
The rationale for the transaction was to acquire the remaining equity within
MAST Energy Projects Limited in order to have the exclusive see-through equity
interest in the Bordersley project, held in the form of royalty and revenue
agreements between MAST Energy Projects Limited and Bordersley Power Limited,
from which MED could restructure the Group through its special purpose
vehicles (SPVs).
Warrant and share based payment reserve
On 18 May 2023, MAST Energy Developments PLC entered into warranty agreements
with financial institutions as part of convertible loan note financial
instruments.
The following warrants were in issue as at 30 June 2023:
Date of grant Issue date Expiry date Exercise price Number Granted Fair Value
18/05/2023 18/05/2023 18/05/2026 2.00p 2,255,656 £1,219
18/05/2023 18/05/2023 18/05/2026 2.00p 2,255,656 £1,219
18/05/2023 18/05/2023 18/05/2027 0.89p 20,575,813 £16,131
18/05/2023 18/05/2023 18/05/2027 1.77p 20,575,813 £11,862
18/05/2023 18/05/2023 18/05/2027 0.89p 20,575,812 £16,131
18/05/2023 18/05/2023 18/05/2027 1.77p 20,575,812 £11,862
86,814,562 £58,424
Group Group
30 June 2023 30 June 2023
Quantity (£)
Opening balance as at 1 January 2023 - -
New warrants issued 86,814,562 58,424
Closing balance as at 30 June 2023 86,814,562 58,424
Note 11: Loan from related parties
Group Group Group
30 June 30 June 31 December 2022 (£)
2023 (£) 2022 (£)
Amounts falling due within one year:
Kibo Mining (Cyprus) Limited 1,231,535 2,302,362 1,231,535
1,231,535 2,302,362 1,231,535
The loan is unsecured, carries interest at 0% and is repayable on demand. The
carrying value of loans from related parties equals their fair value due
mainly to the short-term nature of the liability.
Note 12: Other financial liabilities
Group Group Group
30 June
30 June
31 December 2022 (£)
2023 (£) 2022 (£)
Amounts falling due within one year:
Convertible loan notes 307,559 - 354,805
Derivative liability - - 20,386
Deferred vendor liability - 661,911 -
307,559 661,911 375,191
Amounts falling due between one year and five years:
Convertible loan notes 494,447 - 243,056
494,447 - 243,056
802,006 661,911 618,247
Deferred vendor liability
The amount due to vendors represents the balance of the purchase consideration
owed in respect of the acquisition of Pyebridge Power Limited.
The deferred vendor liability was settled during the 2022 financial year by
mutual agreement between the seller of Pyebridge and MED PLC. The settlement
took place following agreed costs incurred by MED on behalf of the seller and
the eventual waiver of the remaining amounts due in the amount of £421,041.
Convertible loan notes
Short-term loans relate to two unsecured loan facilities from the
institutional investor, which are repayable either through the issue of
ordinary shares or payment of cash by the Company.
These facilities have repayment periods of 18 and 24 months, respectively, for
each drawdown from the facility. The facilities may be converted at the option
of the note-holders once certain milestones have been met. At the financial
year ending 31 December 2022, none of these milestones were met and no
conversion could take place.
During the six months ended 30 June 2023, these convertible loan notes were
reprofiled into one convertible loan note with interest rates of between 9.5%
and 10% as agreed on between the parties based on separate advances.
Derivatives
The derivative liability is derived from the convertible loan notes. The
convertible feature within the convertible loan notes enables the noteholders
to convert the notes into a fixed number of shares at the Fixed Premium
Payment Price ('FPPP'). This price does have variability, although the FPPP is
set at the reference Price. In the event that a share placing occurs at below
the reference Price, the FPPP will be the share placing price (round down -
feature). The conversion includes an embedded derivative as its value moves in
relation to the share price (through a placing price) and it is not related to
the underlying host instrument, the debt. The effect is that the embedded
derivative is accounted for separately at fair value.
The derivative was cancelled in May 2023 pursuant to the reprofiling of the
loan from which it generated. The losses were reversed in the current year and
the balance capitalised to the convertible loan note liability.
Note 13: Related parties
Related parties of the Group comprise subsidiaries, significant shareholders
and the Directors.
Relationships
Board of Directors/ Key Management
Name Relationship (Directors of:)
Paul Venter PSCD Power 1 Ltd
Louis Coetzee Kibo Energy PLC and Katoro Gold PLC
Dominic Traynor Druces LLP
Pieter Krügel Chief Executive Officer
Other entities over which Directors/Key Management or their close family have
control or significant influence:
Kibo Energy PLC: Kibo Energy PLC is the majority shareholder of MAST Energy Developments PLC.
Kibo Energy PLC
Ultimate shareholder:
Significant shareholders: PSCD Power 1 Ltd
Kibo Mining (Cyprus) Limited (a wholly owned subsidiary of Kibo Energy PLC)
Katoro Gold PLC
Associated by fellow directorship:
MAST Energy Developments PLC is a shareholder of the following companies and,
as such, are considered related parties:
Directly held subsidiaries:
Sloane Developments Limited
MAST Energy Projects Limited - liquidated during 2022
Bordersley Power Limited
Pyebridge Power Limited
Rochdale Power Limited
ARL 018 Limited
ADV 001 Limited
Balances and transactions
Name Balance at Balance at Balance at
30 June 30 June 31 December 2022 (£)
2023 (£) 2022 (£)
Kibo Energy PLC - Loan from related parties owing 1,231,535 2,302,362 1,231,535
Kibo Energy PLC - Management and administration services - 33,327 -
Note 14: Post Statement of Financial Position events
Joint venture agreement
The Company has finalised and entered into a first definitive and binding
Joint Venture Agreement ('JVA') with an institutional investor-led consortium
(the 'Institutional Investor').
Under the JVA, the Institutional Investor will inject all required investment
capital into the Joint Venture ('JV'), with an initial expected total
investment value of c. £5.9m, with no funding contribution required from MED.
The completion date of the JVA has been extended and is now expected around 31
August 2023 (see RNS dated 4 August 2023).
Further, the JVA also commits both parties, as set out in MED's announcement
dated 12 July 2023, to promptly finalise terms on a second joint venture that
will increase the envisaged total investment value to c. £31m, with a total
portfolio of low-carbon flexible gas generation peaker plants with totalling a
combined generation output of up to c. 33 MW, to be developed and/or acquired,
constructed and in production and income-generating under the two joint
ventures ('Secondary JVA'). MED has now received the published guidance from
the FCA and the FCA have confirmed that they agree with MED that entrance into
the second joint venture would not constitute a reverse takeover. As such,
notwithstanding the extension of completion of the first JVA as referred to
above, MED will endeavour to finalise terms for the second JV promptly.
Note 15: Commitments and contingencies
The Group does not have identifiable material commitments and contingencies as
at the reporting date.
Note 16: Principal risks
The realisation of the various projects is dependent on the successful
completion of technical assessments, project development and project
implementation and is subject to a number of significant potential risks
summarised as follows, and described further below:
• Funding risks;
• Regulatory risks;
• Commodity risks;
• Development and construction risks;
• Staffing and key personnel risks; and
• Information technology risks.
Funding risks
Following the successful conclusion of an Initial Public Offering (IPO) on 14
April 2021, the Group was able to raise £5.54 million in cash resources which
has been utilised to further advance the various projects of the Group for the
period to date.
There can be no assurance that such funds will continue to be available on
reasonable terms, or at all in future, and that projects will be completed
within the anticipated timeframes to supplement cashflows through operational
activities. In addition, any equity funding may be subject to shareholder
approvals in line with legal and regulatory requirements as appropriate.
The Group generated revenue of £198,438 for the period ended 30 June 2023 (30
June 2022: £305,384 and 31 December 2022: £1,036,743) and had net assets of
£1,508,489 as at 30 June 2023 (30 June 2022: £3,167,929 and 31 December
2022: £2,116,744). As at 30 June 2023, the Group had liquid assets in the
form of cash and cash equivalent and other receivables of £8,804 (30 June
2022: £784,418 and 31 December 2022: £132,184) and £78,565 (30 June 2022:
£158,235 and 31 December 2022: £136,801), respectively.
The Directors have reviewed budgets, projected cash flows and other relevant
information and on the basis of this review and the rationale set out below,
they have a reasonable expectation that the Group will be able to raise
sufficient financing to support its ongoing development and commercialisation
activities to continue in operational existence for the foreseeable future.
Relevant information includes:
· The Group expects to have sufficient funds for its present working
capital requirements for the foreseeable future due to the successful binding
JVA that was signed as per note 14, of which the completion date is 31 August
2023.
· The Directors further continue to review the Group's options to
secure additional funding for its general working capital requirements as well
as project financing for commercial production-ready sites alongside its
ongoing review of revenue generation from existing operations, potential
acquisition targets and corporate development needs.
Although there is no guarantee, the Directors are confident that the above
matters will be successfully implemented. As a result, the Directors
continue to monitor and manage the Group's cash and overheads carefully in the
best interests of its shareholders.
Regulatory risks
The United Kingdom power sector has undergone a number of considerable
regulatory changes over the last few years and is now at a state of transition
from large fossil-fuel plants to a more diverse range of power generation
sources including renewables, small, distributed plants and new nuclear. As a
result, there is greater regulatory involvement in the structure of the UK
power market than has been the case over the last 20 years. Therefore, there
remains a risk that future interventions by Ofgem or Government could have an
adverse impact on the underlying assets that the Group manages and/or owns.
Commodity Risks
The assets that the Group manages and owns will receive revenue from the sale
of energy to the wholesale market or to end users at a price linked to the
wholesale power market price. Fluctuations in power prices going forward will
affect the profitability of the underlying reserve power assets. The Group
will also use its skills, capabilities and knowledge of the UK power market in
order to optimise these wholesale revenues. The Group's ability to effectively
manage price risk and maximise profitability through trading and risk
management techniques will have a considerable impact on revenues and returns.
Development and Construction Risks
The Group will continue to develop new project sites that includes obtaining
planning permission, securing land (under option to lease or freehold), and
obtaining gas and grid connections. The Group will also oversee the
construction of these projects where needed.
Risks to project delivery include damage or disruption to suppliers or to
relevant manufacturing or distribution capabilities due to weather, natural
disaster, fire, terrorism, pandemic, strikes or other reasons that could
impair the Groups ability to deliver projects on time.
Failure to take adequate steps to mitigate the likelihood or potential impact
of development and construction setbacks, or to effectively manage such events
if they occur, could adversely affect the Group's business or financial
results. There are inherent risks that the Group may not ultimately be
successful in achieving the full development and construction of every site
and sunk costs could be lost. However, the risk is mitigated as the Group
targets shovel ready sites that adhere to specific requirements, coupled with
an experienced senior management team.
Staffing and Key Personnel Risks
Personnel are our only truly sustainable source of competitive advantage and
competition for key skills is intense, especially around science, technology,
engineering and mathematics (STEM) disciplines. While the Group has good
relations with its employees, these relations may be impacted by various
factors. The Group may not be successful in attracting, retaining, developing,
engaging and inspiring the right people with the right skills to achieve our
growth ambitions, which is why staff are encouraged to discuss with management
matters of interest to the employees and subjects affecting day-to-day
operations of the Group.
Information Technology Risks
The Group relies on information technology ('IT') in all aspects of its
business. Any significant disruption or failure, caused by external factors,
denial of service, computer viruses or human error could result in a service
interruption, accident or misappropriation of confidential information.
Process failure, security breach or other operational difficulties may also
lead to revenue loss or increased costs, fines, penalties, or additional
insurance requirements. The Group continues to implement more cloud-based
systems and processes, and improve cyber security protocols and facilities to
mitigate the risk of data loss or business interruption.
Note 17: Use of estimates and judgements
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of
making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources.
In particular, there are significant areas of estimation, uncertainty and
critical judgements in applying accounting policies that have the most
significant effect on the amounts recognised in the financial statements.
Estimation uncertainty:
Information about estimates and assumptions that may have the most significant
effect on recognition and measurement on assets, liabilities and expenses is
provided below:
Impairment assessment of investments in subsidiaries, property plant and
equipment and intangible assets
In applying IAS 36, impairment assessments are performed whenever events or
changes in circumstances indicate that the carrying amount of an asset or CGU
may not be recoverable.
A cash-generating unit (CGU) is defined as the smallest identifiable group of
assets that generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
Estimates are made in determining the recoverable amount of assets which
includes the estimation of cash flows and discount rates used. In estimating
the cash flows, management bases cash flow projections on reasonable and
supportable assumptions that represent management's best estimate of the range
of economic conditions that will exist over the remaining useful life of the
assets. The discount rates used reflect the current market assessment of the
time value of money and the risks specific to the assets for which the future
cash flow estimates have not been adjusted.
During the period no impairments have been identified.
Useful life of intangible assets
Amortisation is charged on a systematic basis over the estimated useful lives
of the assets after taking into account the estimated residual values of the
assets. Useful life is either the period of time over which the asset is
expected to be used or the number of production or similar units expected to
be obtained from the use of the asset.
Leases - Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in the lease,
therefore, it uses its incremental borrowing rate (IBR) to measure lease
liabilities. The IBR is the rate of interest that the Group would have to pay
to borrow over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use asset in a
similar economic environment. The IBR therefore reflects what the Group 'would
have to pay', which requires estimation when no observable rates are available
or when they need to be adjusted to reflect the terms and conditions of the
lease. The Group estimates the IBR using observable inputs (such as market
interest rates) when available and is required to make certain entity-specific
estimates.
Useful life of property, plant and equipment
The depreciable amounts of assets are allocated on a systematic basis over
their useful lives. In determining the depreciable amount, management makes
assumptions in respect of the residual value of assets based on the expected
estimated amount that the entity would currently obtain from disposing the
asset, after deducting the estimated costs of disposal. If an asset is
expected to be abandoned, the residual value is estimated at nil. In
determining the useful lives of assets, management considers the expected
period of use of assets, expected physical wear and tear, legal or similar
limits of assets such as rights, condition and location of the asset as well
as obsolescence.
Environmental rehabilitation provisions
The Company recognises that its activities require it to have regard to the
potential impact that it, its subsidiaries and partners may have on the
environment. Where energy development projects are undertaken, care is taken
to limit the amount of disturbance and where any remediation works are
required, they are carried out as and when required.
Once commercial production is undertaken, the Group ensures adequate
provisions or rehabilitation, and decommissioning is made in accordance with
the relevant laws and regulations.
Warrants
For such grants of share options or warrants qualifying as equity-settled
share-based payments, the fair value as at the date of grant is calculated
using the Black-Scholes option pricing model, taking into account the terms
and conditions upon which the options or warrants were granted. The amount
recognised as an expense is adjusted to reflect the actual number of share
options or warrants that are likely to vest, except where forfeiture is only
due to market-based conditions not achieving the threshold for vesting.
Critical judgements:
Information about critical judgements that may have the most significant
effect on recognition and measurement on assets, liabilities and expenses is
provided below:
Going Concern
The Groups current liabilities exceed its current assets as at 30 June 2023,
mainly due to the loans from related parties to the amount of £1,231,535
which contributes significantly to the material uncertainty related to the
going concern assumption applied in preparation of the financial statements.
In determining whether or not the Group is able to continue as a going concern
for the foreseeable future, management applies judgement in identifying the
matters that give rise to the existence of the material uncertainty and in
developing responses thereto in order to address the risk of material
uncertainty. Refer Note 4.
Note 18: Financial instruments - Fair value and risk management
The carrying amount of all financial assets and liabilities approximates the
fair value. Directors consider the carrying value of financial instruments of
a short-term nature, that mature in 12 months or less, to approximate the fair
value of such assets or liability classes.
The carrying values of longer-term assets are considered to approximate their
fair value as these instruments bear interest at interest rates appropriate to
the risk profile of the asset or liability class.
The Group does not carry any financial instruments measured in the statement
of financial position at fair value at 30 June 2023 nor did it carry any
financial instruments measured at fair value at 31 December 2022 and 30 June
2022.
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