REG - Rurelec PLC - Audited results for year ended 31st December 2022
30/06/2023 17:00
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RNS Number : 6171E Rurelec PLC 30 June 2023
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 (MAR) as in force in the United Kingdom pursuant to the
European Union (Withdrawal) Act 2018. Upon the publication of this
announcement via Regulatory Information Service (RIS), this inside information
is now considered to be in the public domain.
30 June 2023
Rurelec PLC
("Rurelec" or the "Company")
Audited results for the year ended 31(st) December 2022
Rurelec PLC (AIM:RUR), announces its audited results for the year ended 31
December 2022.
Following the end of the period under review, Rurelec has disposed of its
Argentinean Joint Venture interests (the "Disposal") (see announcements dated
16 May 2023 and 12 June 2023). The sale completed on 9 June 2023 and the
Company has now received the initial consideration of £2.4 million (US$ 3
million). Further contingent payments of up to US$2m (c. £1.6m) are payable
up to 36 months after completion, depending on whether certain conditions are
met. This is detailed in the announcement of 16 May 2023. The Disposal was
approved by the Company's shareholders at the General Meeting on 1 June 2023.
The meeting also approved a Special Dividend of 0.2p per share, which was
payable to shareholders on the register as at 23 June 2023.
As Rurelec has now disposed of all, or substantially all of its business and
assets it is now deemed to be an AIM 15 cash shell. The only significant
assets left in the Company are two Siemens 701DU turbines. Accordingly,
pursuant to AIM Rule 15, before 11 December 2023, Rurelec must make an
acquisition or acquisitions which constitutes a reverse takeover under Rule 14
of the AIM Rules for Companies otherwise Rurelec's Ordinary Shares will be
suspended from trading on AIM. Furthermore, if a qualifying acquisition is
still not completed by Rurelec by 12 June 2024 the admission of the Company's
ordinary shares to trading on AIM will be cancelled. The Board's main focus
is now on maximising returns for shareholders from the sale of the two Siemens
701DU turbines and completing an AIM Rule 14 compliant transaction before 11
December 2023.
Annual General Meeting
A copy of the annual report and accounts, and the notice of AGM will be posted
to shareholders today, and copies are also now available from the Company's
website www.rurelec.com (http://www.rurelec.com) .
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 2 August 2023.
For further information please contact:
Rurelec PLC WH Ireland Ltd
Andy Coveney, Executive Director Katy Mitchell
www.rurelec.com (http://www.rurelec.com)
Tel: +44 (0)20 7549 2829 Tel: +44(0) 20 7220 1666
NON-EXECUTIVE DIRECTOR'S STATEMENT
Dear Shareholder
The strategy for Rurelec has now evolved as the disposal of the Argentinian
interests and the reduction of the cost base over recent years has stabilised
the financial position of the Group. We will continue to seek to sell the
turbines which may take some time and concurrently we will look to
recapitalise the business through a transformative acquisition to deliver
shareholder value. We are in the early stages of considering opportunities
which will take some months to prepare. We are also mindful of our obligations
to complete an AIM Rule 14 compliant acquisition within the relevant
timelines. Any such AIM Rule 14 compliant acquisition will be subject to
shareholder approval; will be notified without delay and will be accompanied
by the publication of an AIM Rule compliant admission document in respect of
the proposed enlarged entity. The proposed acquisition may or may not be in
the power and energy sector.
For a number of years, the Company's shares have traded at a significant
discount to net asset value making it dilutive to issue new shares. The
Directors believe that this discount can be reduced or be eliminated if the
turbines are sold or their value can be ring fenced for the benefit existing
shareholders. This is now a priority for us in the short term and ahead of any
acquisition.
The year in review
The Company's cost base remained steady during the year, despite inflationary
pressures. With relatively few suppliers, every invoice is scrutinised by the
board, and only limited further savings can be made while Rurelec remains a
publicly quoted company responsibly. Currently expenditure is now less than
£1 million per annum.
Group current liabilities at 31 December 2022 stood at £0.47 million, which
compares with the position at 31 December 2021 of £0.45 million.
As announced on 16 May 2023 the Company entered into an agreement to dispose
of its Argentinean Joint Venture being operating assets owned by Energia del
Sur, S.A ("EdS") and held by Joint Venture PEL.
Cash at 31 December 2022 stood at £0.45 million (2021: £0.75 million), but
as at 30 June 2023, cash was £2.289 million after the receipt of the
consideration for the Disposal (but note this is before a special dividend of
£1.12 million) which is due to be paid to the shareholders on 14 July 2023.
Argentina
These assets were transferred to Assets Held for sale on 31 December 2022.
Their sale was announced on 16 May 2023 and completed on 9 June 2023, and an
initial consideration of US$3 million was received on the same date. Further
contingent payments of up to US£2m may be payable if certain conditions, as
outlined in the announcement of 9 May 2023, are met.
Outlook
As announced on 12 June 2023 the Company completed the disposal of PEL which
allowed the Company to declare a dividend to shareholders which was paid on 23
July 2023. The Directors now have two goals which will run concurrently; to
sell the turbines and to undertake a transformative acquisition for Rurelec.
The turbines have been in storage in Italy since 2008. Whilst they are of a
dated design, the Directors believe they are of a high engineering quality.
The Directors also consider that changes in global energy markets, such as
those occurring as a result of the war in Ukraine, means there is still demand
for such ageing assets. The Directors expect that they are likely to be
deployed in developing countries and during the year the Company followed up
on a number of leads in different geographies. The complex and often slow
nature of financing power projects of the scale for which these turbines will
be used makes it difficult for the Directors, both to determine the
credibility of a purchaser, and to predict the timing of any sale, ahead of
receipt of a contractual commitment validated by a deposit. The Directors are
continuing to explore all leads, including the esoteric and improbable.
The Company is seeking an acquisition to create value for shareholders. The
Directors are at the early stages of evaluating opportunities, which will
likely be subject to shareholder approval and require an AIM Rule compliant
admission document. This process is likely to take several months, but with
difficult capital markets the Directors anticipate that companies which are
unable to list onto AIM (a market of the London Stock Exchange) through an IPO
directly, may consider a reverse takeover (pursuant to AIM Rule 14 of the AIM
Rules of Companies) with Rurelec to be a compelling proposition. However, the
Directors believe they will need to undertake some further restructuring if
the Company has not sold the turbines at the time an acquisition is
identified, in order to ensure that both Rurelec and the turbines achieve best
value.
As set out above, the acquisition or acquisitions which constitutes a reverse
takeover under Rule 14 of the AIM Rules for Companies must take place before
11 December 2023 otherwise Rurelec's Ordinary Shares will be suspended from
trading on AIM.
Paul Shackleton
Non-executive Director
30 June 2023
STRATEGIC REPORT
Strategy
The overall strategy for the Group remains the continued stabilisation of its
financial position, with the intention of enabling value to be realised from
the asset portfolio and ultimately returned to shareholders. In pursuing this
aim the Directors considered it appropriate to reclassify the Group's two main
assets, the Joint Venture ("JV") assets in Argentina and two Siemens 701
turbines ("turbines"), as Assets Held for Sale at 31 December 2022. As
announced on 16 May 2023, a Sale and Purchase Agreement for the JV assets had
been signed in mid-May. The sale was authorised at the Company's General
Meeting on 1 June 2023. The completion of the sale was announced on 12 June
2023 and the Company received the initial £2.4 million (US$3 million)
consideration on 9 June 2023, with the potential for further contingent
consideration payable over the next 36 months. Following the disposal of the
JV Assets, the Company became an AIM Rule 15 Cash Shell.. The Directors are
now focused on two goals which will run concurrently; to sell the turbines and
to undertake a transformative acquisition for Rurelec.
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
thus became debt-free in 2019 and it remained debt-free throughout 2022.
Current liabilities have remained stable at £0.47 million (2021: £0.45
million). With the sale of PEL any further increase in Group liquidity is
now dominated by the timing and quantum of inflows from two main sources -
disposal of the turbines and the sale of the cash shell.
During 2022, continued normal operations and cash generation at EdS enabled
the Argentinian operations to remit unsecured debt repayments of £0.8 million
(2021: £0.6 million) to Patagonia Energy Limited ("PEL"). Of this amount,
Rurelec received £0.6 million (2021: £0.3 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 JV partners.
Post year end to date, the Group has received £2.4 million (US$3 million) of
the initial consideration from the sale of PEL.
Group liquidity - cash outflows
There are now no group debt outflows, and outflows on Group administrative
expenses were £0.97 million (2021: £0.97 million).
Group liquidity - post balance sheet date sale of JV interests
As announced on 16 May 2023 a Sales and Purchase Agreement for the PEL was
signed, the sale was authorised at the General Meeting on 1 June 2023 along
with a special dividend of 0.2p per share. As announced on 12 June 2023 the
sale completed on 9 June and the Company received the initial US$3 million
consideration on the same date. Following the disposal, the Group became an
AIM Rule 15 Cash Shell. With the receipt of funds of £2.4 million (US$ 3
million) on 9 June 2023 the Group is in a position whereby it can meet
expected costs for 12 months after the signing of this report.
Group liquidity - asset sales
The Board remains hopeful for the prospects of realising other group assets
notably the two Siemens 701 DU 125MW turbines and generators in storage in
Italy. A sale of these assets would have a material effect on group
liquidity if and when it occurs, but the sale of these units is dependent on a
customer undertaking a suitable project as this size of older turbine are very
rarely bought "for stock"- they would only be bought by a buyer with a
specific project in mind in an appropriate territory where such turbines are
permitted to operate. Hence the exact timing of a future sale remains
uncertain, and this introduces a natural unpredictability to the timing of
receipts from such sales.
Financial Results and Going Concern
The operating loss for the year of £2.4 million for 2022 represents a slight
increase in losses compared to the £2.1 million operating loss for 2021.
Included in the loss is an impairment in the carrying value of Group assets of
£1.4 million (2021: £1.5 million) coupled with administration expenses which
remained stable at a Group level at £0.97 million (2021: £0.97 million). In
the prior year these losses were offset by a gain of £330k (2022: £nil) on
the disposal of the Arica turbine, recorded in Other Income. Other Expense is
comprised of £0.2 million impairment of assets in Chile, all assets are now
fully impaired in 2023 it was decided to discontinue operations in Chile,
please see note 28 Subsequent Events for further details. Additionally,
there was a £1.2 million impairment of the JV interests on their initial
reclassification as Assets Held for Sale, the carrying value was determined as
the lower of fair value and sales proceeds minus costs to sell.
The overall loss before tax for the year was £2.2 million (2021: £3.6
million). There was no net finance expense (2021: £1.3 million). There was a
£0.2 million gain in foreign exchange (2021: losses £0.2 million).
Following the disposal of the Argentinean JV interests, the Company is deemed
to be a Cash Shell pursuant to Rule 15 of the AIM Rules for Companies. The
consequences of this are that before 11 December 2023, being six months after
Rurelec became an AIM Rule 15 cash shell, Rurelec must make an acquisition or
acquisitions which constitutes a reverse takeover under Rule 14 of the AIM
Rules for Companies otherwise Rurelec's Ordinary Shares will be suspended from
trading on AIM. Furthermore, if a qualifying acquisition is not completed by
Rurelec by 12 June 2024, the admission of the Company's ordinary shares to
trading on AIM will be cancelled. The financial statements include a material
uncertainty to going concern related to these matters as explained in note 1c.
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 decrease in Cash and Cash Equivalents in the year was £0.3 million (2021:
increase £77k), cash balances at the year-end were £0.45 million (2021:
£0.75 million).
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 £2.4 million in the year (2021 £2.1 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 1.8 pence per share (2021: 2.2 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 0.39 pence per share in the year
(2021: loss of 0.65 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. As announced on
16 May 2023 a Sales and Purchase Agreement for the JV assets was signed, the
sale was authorised at the General Meeting on 1 June. The sale completed on 09
June.
Review of Financial Performance
Group Results
The Group loss after tax for the financial year under review is £2.2 million
(2021: £3.7 million loss). This included impairment adjustments of £1.4
million (2021: impairments £1.5 million), net expected credit losses of £nil
(2021: £1.3 million), an impairment provision of £nil (2021: £0.1 million)
relating to closure costs of 100per cent. owned subsidiary SEA Energy S.A. and
foreign exchange gains of £0.2 million (2021: £0.2 million losses). The
impairments//Net Expected Credit Losses are detailed below:
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Impairments//Net Expected Credit Losses
Impairment on investment in Joint Venture - 1,336
Impairment of amounts due from joint venture 1,195 -
Impairment of Chile Transformer (note 12) 35 -
Impairment of Chile performance bonds 210 -
Net Expected Credit Losses - 1,345
Provision re closure costs of SEA Energy - 133
Total 1,440 2,814
Group revenue was £nil (2021: £nil). Operating and Administrative expenses
amounted to £0.970 million (2021: £0.97 million). Operating loss was £2.4
million (2021: £2.1 million loss). The loss before tax is £2.2 million
(2021: £3.7 million loss). The basic loss per share is 0.39p (2021: 0.65p
loss). Total assets are £10.86 million (2021: £12.97 million). Total equity
stands at £10.2 million (2021: £12.5 million), or a Net Asset Value of 1.8
pence per share (2021: 2.2 pence per share).
The results for the operations in Argentina, and Chile are shown below.
Energia del Sur S.A. Results
These assets were transferred to Assets Held for sale on 31 December 2022.
Their sale was announced on 16 May 2023 and completion was announced on 12
June 2023.
Rurelec Chile
The development of our 100 per cent. owned investments in Chile has expensed
limited direct costs in the year of £39k (2021: £83k). Capitalised
development costs are £nil (2021: £nil) on the Central Illapa project. As
previously announced the Arica turbine was disposed of in the prior year, the
sales proceeds were US$1.0 million, the net profit of £330k is shown in other
income note 8b. All sale proceeds were received during the prior year. The
development costs associated with the Central Illapa project were impaired to
£nil in 2021 (2020: £nil). At a Board meeting on 21 June 2023, it was
decided that activities in Chile would be regarded as discontinued operations.
All remaining assets have been fully impaired in these financial statements
with a charge of £210k being recorded in Other Expense (2021: £nil).
Review of Operations
Argentina
As announced on 16 May 2023 a Sales and Purchase Agreement for the JV assets
was signed, the sale was authorised at the General Meeting on 1 June 2023. The
sale completed on 9 June 2023 and the Company received the initial US$3
million consideration on the same date. Following the disposal, the Group
became a AIM Rule 15 Cash Shell.
The Argentinian Joint Venture interests were transferred to Assets Held for
Sale on 31 December 2022, in accordance with IFRS 5, please see note 13 for
further details.
The following table sets out the prior year's 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 and net assets Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Results
Revenue - 3,300
Operating Expenses - excluding foreign exchange losses - (2,175)
Foreign exchange losses - 130
EBITDA - 1,255
Depreciation - (1,047)
EBIT - 208
Intragroup interest - credit re write back of prior year charge - 2,478
Third party interest payable - (398)
Profit before tax - 2,288
Tax - 151
Profit after tax - 2,439
Summary of Statement of Financial Position
Non-current assets - 10,871
Cash - 1,419
Current trade and other receivables - 918
Non-current liabilities - (17,100)
Current liabilities - (907)
Net assets/(liabilities) - (4,798)
Chile
Arica
In the prior year, following the reassessment of the project, the Board sought
to redeploy the Frame 6B turbine acquired for the project. As separately
announced on 9 September 2021 a sale of the turbine was concluded at US$1.0
million (approximately £0.72 million), the gain of £330k being shown in
Other Income. All proceeds were received in the year, see note 8b for further
details. The associated transformer was fully impaired in the year (2021:
£35k).
Central Illapa
The Company has been unable to secure the partners required for this project.
The Directors reviewed the project and decided to reclassify the turbines
originally acquired for it to Assets Held for Sale, please see note 13 for
further details.
Turbines
These assets were reclassified as held for sale at 31 December 2022. The
Group's carrying value 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 has been
assessed at £7.8 million (2021: £7.8 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 (2021: £nil).
Future developments have been considered in the non-executive Director's
statement.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group have been stated as the
following risks, though most of these risks are reduced or eliminated as
discussed in note 1.c.
a) Political risk - there are significant political risks in the areas
where the Group operates. These include potential for unfriendly actions
towards foreign investments (including the imposition of exchange controls
that can significantly reduce the return on investment due to the difficulty
and cost of repatriating funds) 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) 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.
c) Liquidity - Following the receipt of the initial consideration of
£2.4 million (US$ 3 million) the Group is in a position to meet its forecast
short-term cash requirements. Please see Going Concern in the Directors
Report and note 1c for further details.
d) 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 severely
curtailed economic activity and political and economic decision making. The
prolonged nature of the COVID-19 pandemic had a severe negative impact on the
UK and Chilean economies where the Group operates. The demand for
electricity experienced some decline from the reduced industrial and
commercial activity, but background demand was 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 had not had 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.
The adverse economic and social effects of the COVID-19 pandemic started to
recede in late 2021. Although many global supply chains continued to be
disrupted and distorted ats Economies recovered, this has had little
discernible effect on EdS or Rurelec to date. However, despite widespread
global stimulus packages and efforts to control and eradicate the virus, it is
not currently known what the lasting effects of COVID-19 and its variants will
be on the growth rates of global economies, and what the effect will be on the
ongoing 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 continue to be received under
current conditions and local management's expectations.
e) War in Ukraine - its current effects on the Group are not considered
to be an adjusting post balance sheet event. See the Directors Report and note
5 - exchange rate sensitivity for further details.
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 2021 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 2022.
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 desirability of Rurelec maintaining a reputation for high
standards of business conduct, the Board of Directors' intention is to 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.
e) 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. On 1 June 2023 there was a General Meeting at which the
shareholders unanimously voted for the proposed disposal of PEL and a 0.2p
dividend per share to be paid from the proceeds.
The Strategic Report was approved by the Board of Directors on 30 June 2023
and was signed on its behalf by:
_______________________
Andrew Coveney (Executive Director)
BOARD OF DIRECTORS
ANDY COVENEY
Executive 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.
DIRECTORS' REPORT
The Directors submit their annual report together with the audited financial
statements for the year ended 31 December 2022.
Principal activities
The Company and the Group's principal activity has been 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. In September 2021, the Frame 6B turbine acquired
for the Arica project in Chile was sold. As announced on 16 May 2023 a Sales
and Purchase Agreement for the PEL was signed, the sale was authorised at the
General Meeting on 1 June along with a special dividend of 0.2p per share. The
sale completed on 09 June and the Company received the initial £2.4 million
(US$ 3 million) consideration on the same date. Since the disposal of certain
assets, the principal activity of the Group will change in accordance as the
Directors seek partners to take the group forward in 2023 and beyond,
following the disposal of the Argentinian operations in June 2023.
Results and dividends
The Group results for the year ended 31 December 2022 are set out in the
Consolidated Statement of Total Comprehensive Income.
No dividend was paid during the year to 31 December 2022 (2021: nil).
Share capital
Details of the issued share capital are set out in Note16.
Going concern
Accounting standards require that Directors satisfy themselves that it is
reasonable for them to conclude whether it is appropriate to prepare financial
statements on a going concern basis. In assessing the going concern position
of the Group and Company, the Directors have taken into account the
uncertainties, cash flows, and implementation of revised strategy. The
Directors have reviewed financial projections and strategy to 30 June 2024,
and have considered projections for a base case and a stress case.
At the date of the signing of the Financial Statements, having considered
Rurelec's current cash balances and the cash forecasts including the receipt
of the initial consideration of US$3 million, 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. This is a significant improvement from the
prior years. Refer to Note 1c.
Directors
The following Directors served during the year and up to the date of signature
of the financial statements as follows:
Andy H. Coveney - Executive Director, was elected at 2022 Annual General
Meeting.
Paul Shackleton was appointed as Non-Executive Director on 26 July 2021 and
elected at the 2021 Annual General Meeting.
Directors' interests
The Directors' beneficial interests in the number of shares in the Company
were on the reference dates as stated below:
29.06.2023 31.12.2022 31.12.2021
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 29 June 2023, being the last practicable
date for reporting this information.
Number of shares % holding
Sterling Trust Ltd 303,092,303 53.989
Askar Alshinbayev 96,565,166 17.201
Peter Gyllenhammar AB 22,535,946 4.014
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 23.
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 entered into force on 1 May 2021.
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 has not had a
material impact on the Company.
War in Ukraine
The Group has no activities in, or relating to, Ukraine. Whilst the war's
future impacts are by nature uncertain, at the time of signing this report, no
direct impact on the Group is anticipated over the following 12 months.
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 are required to prepare the
Company and Group financial statements in accordance with UK adopted
international accounting standards. 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 they have been prepared in accordance with UK
adopted international accounting standards, 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 and Group 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
30 June 2023
CORPORATE GOVERNANCE REPORT
for the year ended 31 December 2022
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 2022 is based upon the Code.
The principal means of communicating our application of the QCA Code are this
Annual Report and our Corporate Governance section on our website
(https://www.rurelec.com/about-us/corporate-governance/qca-compliance-table).
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; and
· Look to recapitalise the business through a transformative
acquisition.
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. At
the same time, the Company will be assessing options as it seeks to complete a
transformative acquisition.
The Group and the Company are fully compliant with this principle.
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.
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
(http://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.
The Group and the company are fully compliant with this principle.
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 was the joint
venture operation in Argentina. This operation was run by a full-time local
management team that maintains good relations with all key stakeholders to the
business in Argentina. This asset has since been disposed of by the Group.
The Group and the Company are fully compliant with this principle.
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 7, Strategic Report. The Company has
not yet implemented a risk register which should be under the Audit Committee
reporting and therefore it is not compliant with the QCA Code.
Principle 5. Maintain the Board as a well-functioning, balanced
team led by the chair.
The board acknowledges that the Company is not compliant with the QCA Code as
the Company currently does not have a Chairman nor two independent
Non-Executive Directors.
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.
Paul Shackleton was considered to be independent since his appointment in July
2021. The board evaluated the independence requirements of the QCA Code and
considered that Paul Shackleton was independent during the period.
The number of times the Board met during the year to 31 December 2022 was 19.
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
The Board acknowledges that the Company is not compliant with the QCA Code
terms of reference for these committees as 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 director is a part time director 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 committees which meet regularly. Remuneration
and Nominations Committees do not meet as there are no sufficient members.
Details of Committee Meetings for the period:
Director Date of Appointment Date of Resignation Role at Date of Board Committee
31 December 2021 (re-) appointment
Andrew H. Coveney 16.11.2016 - Executive Director 30.06.2022 - - -
Paul R.A. Shackleton 26.07.2021 - Senior Independent 14.10.2021 N R A
Non-Executive
N = Nomination Committee
R = Remuneration Committee
A = Audit Committee
The Audit Committee met 2 times during the year to 31 December 2022. All the
committee members were present at the meetings.
Due to the size of the Company, the Board does not comply with the principle
that the Board should at least have two independent directors and therefore
its committees' membership is also not compliant with their terms of
reference. Given the current level of transactions within the Company, the
Board considers that adequate resources are available at Board level, although
a further non-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
https://www.rurelec.com/about-us/biographies
(https://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 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 1.
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. Therefore, the Group
and the Company comply only partly with this principle.
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 4 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.
The Group and the company comply with this principle.
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. Under the QCA Code a further Non-Executive Director
is required to be compliant with the said code. A further Non-Executive
Director is being sought.
· Biographical details of the Board of Directors can be
obtained in www.rurelec.com/about-us/board-of-directors-and-senior-management
(http://www.rurelec.com/about-us/board-of-directors-and-senior-management) .
· 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
(http://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
(http://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
30 June 2023
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
2022 and of the Group's loss for the year then ended;
• the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
• the Parent Company financial statements have been properly
prepared in accordance with UK adopted international accounting standards 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 2022 which
comprise the 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 UK adopted international accounting standards 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 1c that explains that following the sale of its
joint venture interest post year-end, the Group and Parent Company have no
trading activities and the Parent Company is classified as a cash shell under
AIM 15 regulations, and that the Directors are seeking a suitable acquisition
within the required timeframe to maintain the Parent Company's listing on AIM.
As stated in note 1c to the financial statements, these events or conditions,
along with other matters as set out in note 1c to the financial statements,
indicate that a material uncertainty exists that may cast significant doubt on
the Group's and Parent Company's ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
We considered going concern to be a Key Audit Matter because of the
significance of this issue. In auditing the financial statements, we have
concluded that the directors' use of the going concern basis of accounting in
the preparation of the Group and Parent Company's financial statements is
appropriate. Our evaluation of the directors' assessment of the entity's
ability to continue to adopt the going concern basis of accounting and in
response to the key audit matter included the following procedures:
· Reviewing the reasonableness of the Directors' budget and cash
flow forecasts prepared for a period of at least 12 months from the date of
approval of the financial statements;
· Checking the mathematical accuracy of the budgets and forecasts;
· Obtaining support for the Directors' assumptions used in the
forecast, including assumptions for cash receipts relating to asset disposal
under the severe but plausible downside scenario;
· Reviewing the reasonableness of the Directors' stress tests
performed on the forecasts based on receiving no further funding and
considering the impact on the Group's going concern;
· Reviewing the executed Share Purchase Agreement of its interest
in joint venture (Patagonia Energy Ltd) and Electrica del Sur S.A. to confirm
the sale value, validity, and any conditions precedent;
· Confirming the actual cash payments of the joint venture sale
agreement by agreeing it to the post year-end bank statement;
· Inquiring of those charged with governance and reviewing
underlying documents to validate their search for potential suitable targets;
· Reviewing board meeting minutes during the year and post year end
to identify any other issues that may indicate inability of the Group to
continue as a going concern; and
· Reviewing the adequacy of the disclosures in the financial
statements against the requirements of accounting standards and consistency of
the disclosures against the Directors' assessment of going concern.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report.
Overview
100% (2021: 100%) of Group profit before tax
Coverage 100% (2021: 100%) of Group total assets
2022 2021
1. Going concern x x
2. Valuation of turbine assets x x
3. Valuation of investments and recoverability of intercompany loans, x
including loans to joint venture
Key audit matters
Valuation of investments and recoverability of intercompany loans, including
loans to joint venture is no longer considered to be a key audit matter
because the investment in joint venture was classified as held for sale and
disposed subsequent to year end and the carrying value was impaired as at 31
December 2022 to reflect the recoverable amount.
Group financial statements as a whole
Materiality
£305,000 (2021: £351,000) based on 3% (2021: 3%) of net assets.
Valuation of investments and recoverability of intercompany loans, including
loans to joint venture is no longer considered to be a key audit matter
because the investment in joint venture was classified as held for sale and
disposed subsequent to year end and the carrying value was impaired as at 31
December 2022 to reflect the recoverable amount.
Materiality
Group financial statements as a whole
£305,000 (2021: £351,000) based on 3% (2021: 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.
Our Group audit focused on the parent company which gave us sufficient
coverage over the Group's total assets and profits before tax while
considering the appropriateness of coverage over the audit risks identified.
In establishing our overall approach to the Group audit, we determined the
type of audit procedures that needed to be performed in respect of each
component. The only significant component was the Parent company, and the
Group audit team undertook a full scope audit of the parent company.
Non-significant components were subject to either specified audit procedures
over large or higher risk balances and group level analytical procedures. The
Group audit team completed the procedures on non-significant components.
These specified procedures, together with our detailed review of procedures
performed by component auditor, provided us the evidence that we need for our
opinion on the financial statements as a whole.
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 of
our report, we have determined the matter below to be the key audit matter to
be communicated in our report.
Key audit matter How the scope of our audit addressed the key audit matter
Valuation of turbine assets The Group owns two Siemens turbines. At the year end the Directors obtained Our audit procedures over valuation of turbine assets included the following:
independent valuations from a third party to assess the carrying value of
these assets.
Note 12 and 13 · Performed physical inspection of the assets to verify the existence
of the assets, their storage and present condition, to identify any indicators
Given the complexity of the valuation involved, the carrying value of the of impairment;
turbine assets was considered to be a key area of focus for our audit.
Accounting policy 2.8 and 2.9
· Reviewed the valuation report prepared by the Directors'
independent expert, assessing the conclusions reached and the underlying
assumptions used;
As at 31 December 2022, these assets are classified as held for sale.
· Confirmed the Directors' expert's independence, competence and
objectivity by reviewing their qualifications, work experience and terms of
engagement;
· Reviewed the expressions of interest of external parties, provided
by management, to assess reasonableness and legitimacy of these valuations,
and checked that the value of the assets is recoverable through potential
sale;
· Reviewed insurance documentation to check appropriate risk coverage
is in place; and
· Confirmed with the title owners that the there are no objections to
transfer the turbine assets to external buyers.
Key observations:
We considered that the judgements and estimates made by management in
determining the value and classification of turbine assets were appropriate.
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
2022 2021 2022 2021
£ £ £ £
Materiality 305,000 351,000 274,000 346,000
Basis for determining materiality 3% of Net assets Materiality was capped at 90% of Group materiality 3% of Net assets
Rationale for the benchmark applied The Group's activities of investing in power assets are focused on the As the Company's key assets are classified as held of sale, we have capped a We considered net assets to be the most appropriate benchmark as the
realisation of asset sales, therefore net assets was considered to be the most percentage of Group materiality to respond to aggregation risk.
appropriate benchmark. primary focus of the users of the financial statements are on capital growth.
Performance materiality 183,000 211,000 164,000 208,000
Basis for determining performance materiality We set performance materiality at 60% (2021: 60%) of overall materiality.
Rationale for the percentage applied for performance materiality In reaching our conclusion on the level of performance materiality to be
applied for 2022 we considered a number of factors including the expected
total value of known and likely misstatements (based on past experience), our
knowledge of the group's internal controls and management's attitude towards
proposed adjustments.
Component materiality
For the purposes of our Group audit opinion, we set materiality for each
significant component of the Group. The Group's only component is the Parent
Company whose materiality is set out above.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual
audit differences in excess of £9,000 (2021: £8,000). 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 and accounts 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 report and Directors' report In our opinion, based on the work undertaken in the course of the audit:
· the information given in the Strategic report and the 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 which we are required to report by exception We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received from
branches not visited by us; or
· the Parent Company financial statements are not in agreement with
the accounting records and returns; or
· certain disclosures of Directors' remuneration specified by law
are not made; or
· we have not received all the information and explanations we
require for our audit.
Responsibilities of Directors
As explained more fully in the statement of Directors' responsibilities, 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:
Non-compliance with laws and regulations
Based on:
· Our understanding of the Group and the industry in which it
operates;
· Discussion with management and those charged with governance; and
· Obtaining and understanding of the Group's policies and
procedures regarding compliance with laws and regulations;
We considered the significant laws and regulations to be UK-adopted
international accounting
standards, UK tax legislation, AIM Listing Rules, and the Companies Act 2006.
Our procedures in respect of the above included:
· Review of minutes of meeting of those charged with governance for
any instances of non-compliance with laws and regulations;
· Review of financial statement disclosures and agreeing to
supporting documentation; and
· Review of legal expenditure accounts to understand the nature of
expenditure incurred.
Fraud
We assessed the susceptibility of the financial statements to material
misstatement, including fraud. Our risk assessment procedures included:
· Enquiry with management and those charged with governance
regarding any known or suspected instances of fraud;
· Review of minutes of meeting of those charged with governance for
any known or suspected instances of fraud;
· Discussion amongst the engagement team as to how and where fraud
might occur in the financial statements;
· Performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material misstatement due
to fraud; and
· Reviewed estimates and judgements applied by Management in the
financial statements to assess their appropriateness and the existence of any
systematic bias.
Based on our risk assessment, we considered the areas most susceptible to
fraud to be exertion of bias in accounting estimates and management override
of controls.
Our procedures in respect of the above included:
· Testing a sample of journal entries throughout the year, which
met a defined risk criteria, by agreeing to supporting documentation; and
· Challenging the assumptions and judgements made by management in
their significant
accounting estimate related to the valuation of turbines by performing the
procedures as set out in the Key Audit Matters section of our report.
We also communicated relevant identified laws and regulations and potential
fraud risks to all engagement team members who were all deemed to have
appropriate competence and capabilities 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
(http://insite.bdo.co.uk/sites/audit/Documents/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.
Rida Rahmani (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
30 June 2023
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 2022
Restated
Notes Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Revenue 4 - -
Gross Profit - -
Administrative Expenses 6 (998) (967)
Other Income 8b 25 352
Impairment Charges 8b (1,924) (1,469)
Operating Loss (2,897) (2,084)
Share of Joint Venture Profit/(Loss) 22 - -
Net foreign Exchange Gains/(Loss) 8a 661 (259)
Finance Income 9 - 491
Finance Expense 9 - (1,827)
Profit /(Loss) before Tax (2,236) (3,679)
Tax Expense 10 - -
Loss for the year attributable to owners of the Company (2,236) (3,679)
Earnings per Share - in pence 11
Basic Loss per Share (0.39) (0.65)
Diluted Loss per Share (0.39) (0.65)
The Notes on pages 32 to 54 form an integral part of these Consolidated
Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2022
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Loss for the year (2,236) (3,634)
Other Comprehensive Income for the year:
Items that will be subsequently reclassified to income statement:
Exchange Differences on Translation of Foreign Operations (122) 285
Total Other Comprehensive Income (122) 285
Loss for the year attributable to owners of the Company (2,358) (3,349)
The Notes on pages 32 to 54 form an integral part of these Consolidated
Financial Statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 December 2022
Restated Restated
31.12.2022 31.12.2021 01.01.2021
Notes £'000 £'000 £'000
Assets
Non-current Assets
Property, Plant and Equipment 12 - 7,808 8,220
Investment in Joint Venture 20,22 - 312 1,648
Trade and Other Receivables 14a - 3,103 4,586
- 11,223 14,454
Assets held for sale 13 10,108 - -
Current Assets
Trade and Other Receivables 14b 91 997 1,142
Cash and Cash Equivalents 16 449 745 668
540 1,742 1,810
Total Assets 10,648 12,965 16,264
Equity and Liabilities
Shareholders' Equity
Share Capital 17 5,614 5,614 5,614
Foreign Currency translation Reserve 956 1,078 793
Retained Earnings/Losses 3,582 5,819 9,497
Total Equity attributable to owners of the Company 10,152 12,511 15,904
Current Liabilities
Trade and Other Payables 18a 496 448 353
Current Tax Liabilities 19 - 6 7
Total Liabilities 496 454 360
Total Equity and Liabilities 10,648 12,965 16,264
The financial statements were approved by the Board of Directors on 30 June
2023 and were signed on its behalf by Andrew Coveney and Paul
Shackleton.
Andrew Coveney
Paul Shackleton
The notes on pages 32 to 54 form an integral part of these Consolidated
Financial Statements.
COMPANY STATEMENT OF FINANCIAL POSITION COMPANY NUMBER: 4812855
At 31 December 2022
Restated Restated
31.12.2022 31.12.2021 01.01.2021
Notes £'000 £'000 £'000
Assets
Non-current Assets
Investment in Joint Venture 20,22 - 312 1,648
Trade and Other Receivables 14a - 3,104 4,586
- 3,416 6,234
Assets held for sale 13 10,108 - -
Current Assets
Inventories 15 - 7,773 7,773
Trade and Other Receivables 14b 89 825 1,397
Cash and Cash Equivalents 16 446 743 667
535 9,341 9,837
Total Assets 10,643 12,757 16,071
Equity and Liabilities
Shareholders' Equity
Share Capital 17 5,614 5,614 5,614
Retained Earnings/Losses 4,545 6,727 10,003
Total Equity 10,159 12,341 15,617
Current Liabilities
Trade and Other Payables 18a 484 410 447
Current Tax Liabilities 19 - 6 7
Total Liabilities 484 416 454
Total Equity and Liabilities 10,643 12,757 16,071
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
£2.2million (2021: loss £3.2 million).
The financial statements were approved by the Board of Directors on 30 June
2023 and were signed on its behalf by Andrew Coveney and Paul
Shackleton.
Andrew
Coveney
Paul Shackleton
The notes on pages 32 to 54 form an integral part of these Consolidated
Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2022
Notes Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Cash Flows from Operating Activities
Cash used in Operations 21 (912) (991)
Net Cash used in Operating Activities (912) (991)
Cash Flows from Investing Activities
Net proceeds from Sale of Turbine - 721
Loan Repayments from Joint Venture Company 599 347
Net Cash generated from Investing Activities 599 1,068
Net Cash (Outflow)/Inflow before Financing Activities (313) 77
(Decrease)/Increase in Cash and Cash Equivalents (313) 77
Cash and Cash Equivalents at the Start of the year 745 668
Exchange gains on cash and cash equivalents 17 -
Cash and Cash Equivalents at the End of the year 449 745
The notes on pages 32 to 54 form an integral part of these Consolidated
Financial Statements.
COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 December 2022
Notes Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Cash Flows from Operating Activities
Cash used in Operations 21 (898) (909)
Net Cash used in Operating Activities (898) (909)
Cash Flows from Investing Activities
Investment in and Loans to Subsidiaries - (83)
Loan repayments from Subsidiaries - 721
Loan Repayments from Joint Venture Company 599 347
Net Cash generated from Investing Activities 599 985
Net Cash (Outflow)/Inflow before Financing Activities (299) 76
(Decrease)/Increase in Cash and Cash Equivalents (299) 76
Cash and Cash Equivalents at the Start of the year 743 667
Exchange gains on cash and cash equivalents 17
Cash and Cash Equivalents at the End of the year 446 743
The notes on pages 32 to 54 form an integral part of these Consolidated
Financial Statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2022
Share Capital Foreign Currency translation Reserve Retained Losses/Earnings Total
£'000 £'000 £'000 £'000
Balance at 01.01.2021 5,614 793 8,648 15,055
Correction of prior period errors (note 28) 849 849
Balance at 01.01.2021 - as restated 5,614 793 9,497 15,904
Loss for the year attributable to owners of the parent - as restated - - (3,679) (3,679)
Exchange Differences - 285 - 285
Total Comprehensive Loss - as restated - 285 (3,679) (3,394)
Balance at 31.12.2021- as restated 5,614 1,078 5,818 12,510
Balance at 01.01.2022- as restated 5,614 1,078 5,818 12,510
Loss for the year attributable to owners of the parent - - (2,236) (2,236)
Exchange Differences - (122) - (122)
Total Comprehensive Loss - (122) (2,236) (2,358)
Balance at 31.12.2022 5,614 956 3,582 10,152
The notes on pages 32 to 54 form an integral part of these Consolidated
Financial Statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2022
Share Capital Share Premium Accumulated Losses Special Non-distributable Reserve Total
£'000 £'000 £'000 £'000 £'000
Balance at 01.01.2021 5,614 - 9,153 - 14,767
Correction of prior period errors (note 28) 849 849
Balance at 01.01.2021 - as restated 5,614 - 10,002 - 15,616
Loss for the year - - (3,276) - (3,276)
Total Comprehensive Loss - - (3,276) - (3,276)
Balance at 31.12.2021 - as restated 5,614 - 6,726 - 12,340
Balance at 01.01.2022 - as restated 5,614 - 6,726 - 12,340
Loss for the year - - (2,181) - (2,181)
Total Comprehensive Loss - - (2,181) - (2,181)
Balance at 31.12.2022 5,614 - 4,545 - 10,159
Notes: 17
The notes on pages 32 to 54 form an integral part of these Consolidated
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2022
1. GENERAL INFORMATION, BASIS OF PREPARATION AND NEW ACCOUNTING
STANDARDS
1a. General information
Rurelec PLC is the Group's ultimate parent company ("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 Group ("Group") consists of Rurelec PLC and all of its subsidiaries as
listed in note 20. The nature of the Group's operations and its principal
activities are the generation of electricity in South America. Following the
disposal of Rurelec's Argentinean Joint Venture interests in May 2023 the
Company is an AIM 15 cash shell.
1b. Basis of preparation
The Company and the consolidated financial statements have been prepared in
accordance with UK adopted international accounting standards, in conformity
with the requirements of the Companies Act 2006.
The principal accounting policies adopted in the preparation of the Company
and the consolidated financial statements financial statements are set out in
note 2. The policies have been consistently applied to all the years
presented, unless otherwise stated.
The Company and the consolidated financial statements are presented in Pound
Sterling which is also the functional currency of the Company and the Group.
The other functional currencies of the Group entities are Chilean Pesos and
United States Dollars.
Amounts are rounded to the nearest thousand, unless otherwise stated.
Basis of measurement
The Company and the consolidated financial statements have been prepared on a
historical cost basis.
1c. Going concern
Accounting standards require that Directors satisfy themselves that it is
reasonable for them to conclude whether it is appropriate to prepare financial
statements on a going concern basis. In assessing the going concern position
of the Group and Company, the Directors have taken into account the
uncertainties, cash flows, and ability to find a target for reverse
acquisition. All scenarios discussed below, represent a material uncertainty
that casts significant doubt upon the company's ability to continue as a going
concern. These scenarios are also discussed in the strategic and directors
report of the annual report. The Directors have reviewed financial projections
and strategy to 30 June 2024, and have considered projections for both the
base and the severe but plausible downside sensitivity scenario.
The potential scenarios which could lead to the Group and Company not being a
going concern are considered to be:
a. Reverse merger
Following the disposal of the Argentinean JV interest, the Company is deemed
to be an AIM Rule 15 cash shell. The consequences of this are that before 11
December 2023, being six months after cash shell status, the Company must make
an acquisition or acquisitions which constitutes a reverse takeover under Rule
14 of the AIM Rules for Companies otherwise it's ordinary shares will be
suspended from trading on AIM. Furthermore, if a qualifying acquisition is not
completed by 12 June 2024, the admission of the Company's ordinary shares to
trading on AIM will be cancelled. The Directors are seeking a suitable reverse
acquisition in order to maintain the admission of the Company's shares to AIM
before 11 December 2023 and to support the going concern of the company by
transferring the business of the acquiror into the Company.
The Directors have concluded that the conditionality of finding a suitable
reverse acquisition in six months represents a material uncertainty which may
cast significant doubt on the group's and parent company's ability to continue
as a going concern as an AIM listed company. While the Directors have a
preference and priority to maintain the listing on AIM, they will consider
alternative proposals including those where the listing is cancelled.
Turbines
The company will continue to explore potential buyers for the 701 DU 125MW
turbines ("turbines"). Further updates on this initiative will be made as
appropriate.
b. Liquidity
At the date of the signing of the financial statements, having taken account
of current cash balance of £2.3 million out of which £1.2 million are
reserved for declared dividends, and the cash forecasts where outgoings are
now reduced, 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. The
base case forecast model was further adjusted to establish at what point
additional funding is required without further mitigating actions. In the
Directors assessment this is unlikely to happen in next 12 months.
As at 31 December 2022, turbines are classified as held for sale and an active
programme to locate a potential buyer has been initiated. The turbines were
purchased from IPSA in 2013 and IPSA retain their title but have no beneficial
interest in them. The assets are available for immediate sale in their present
condition at a price that is reasonable in relation to its current fair value.
The Directors are confident that the sale is highly probable within 12 months
from the reporting period.
Whilst the directors have instituted measures to preserve cash and find buyers
for turbines to generate cash inflow, these circumstances create material
uncertainties to continue in operational existence for the foreseeable future.
The directors have prepared budgets and forecasts, and performed stress tests
thereon, 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. Beyond the 12-month period, after making enquiries and
considering the uncertainties described above, the directors have a reasonable
expectation that the company has adequate resources to continue in operational
existence for the foreseeable future. For these reasons, they continue to
adopt the going concern basis of accounting in preparing the annual financial
statements.
1d. 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 2022. 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.
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 pound 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 pound sterling at the
closing rate at the reporting date. Income and expenses have been converted
into pound sterling at the average rates over the reporting period. The
resulting exchange differences are recognised in other comprehensive income
and accumulated in equity within the foreign exchange reserve. 2022 marks the
sixth 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 (2021: £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
Depreciation of an asset commences when it is available for use, i.e. when it
is in location and condition necessary for it to be capable of operating in
the manner intended by management. 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 it's 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.
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. These inventories were
transferred to Assets Held for Sale on 31 December 2022, please see notes 12
and 13 for further details.
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.
"Foreign currency reserve" represents the differences arising from translation
of investments in overseas subsidiaries.
"Retained Losses/Earnings" represents losses/earnings to date, after prior
years transfers from 'Share. Capital' and 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.
2.18 Non-current assets held for sale and discontinued operations
The Group and Company classifies non-current assets and disposal groups as
held for sale if their carrying amounts will be recovered principally through
a sale transaction rather than through continuing use. Non-current assets and
disposal groups classified as held for sale are measured at the lower of their
carrying amount and fair value less costs to sell. Costs to sell are the
incremental costs directly attributable to the disposal of an asset (disposal
group), excluding finance costs and income tax expense.
The criteria for held for sale classification is regarded as met only when the
sale is highly probable, and
the asset or disposal group is available for immediate sale in its present
condition. Actions required to
complete the sale should indicate that it is unlikely that significant changes
to the sale will be made or that
the decision to sell will be withdrawn. Management must be committed to the
plan to sell the asset and the
sale expected to be completed within one year from the date of the
classification.
Property, plant and equipment and intangible assets are not depreciated or
amortised once classified as held
for sale.
Assets and liabilities classified as held for sale are presented separately as
current items in the statement of
financial position.
Discontinued operations are excluded from the results of continuing operations
and are presented as a
single amount as profit or loss after tax from discontinued operations in the
statement of profit or loss.
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 from loan repayment receipts and asset sales 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. The key assumption used in the plant and equipment's
annual impairment assessment is estimating the residual value of the assets.
Based on the market demand, the directors apply judgement to estimate the
price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.
The sale of these units is dependent on a customer undertaking a suitable
project as this size of older turbine are very rarely bought "for stock"- they
would only be bought by a buyer with a specific project in mind in an
appropriate territory where such turbines are permitted to operate. Hence
the exact timing of a future sale remains uncertain, and this introduces a
natural unpredictability to the timing and value of receipts from such sales.
Income - the Group is reliant on asset sales, a material uncertainty exists as
to whether projected receipts will occur.
Expected Credit Losses - judgements used to assess the ECL's for the current
year included the macroeconomic factors which includes inflation forecasts and
foreign exchange controls.
4. SEGMENT ANALYSIS
Management currently identifies the Group's two geographic operating segments;
Chile, 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 2022 and 2021 for each geographic segment.
a) 12 months to 31.12.2022
Chile UK Consolidation Adjustments Total
£'000 £'000 £'000 £'000
Administrative Expenses (43) (955) - (998)
Loss from Operations (43) (955) - (998)
Other Income - 25 - 25
Other Expense (245) (2,571) 892 (1,924)
Foreign Exchange (Losses)/Gains 2 658 1 661
Finance Income - 696 (696) -
Finance Expense (696) - 696 -
Loss before Tax from Operations (982) (2,147) 893 (2,236)
Tax Expense - - - -
Total Loss (982) (2,147) 893 (2,236)
Total Assets 248 10,665 (33) 10,880
Total Liabilities 13,614 456 (13,602) 468
b) 12 months to 31.12.2021
Chile UK Consolidation Adjustments Total
£'000 £'000 £'000 £'000
Administrative Expenses (123) (844) - (967)
Loss from Operations (123) (844) - (967)
Other Income 365 (13) - 352
Other Expense - (1,469) - (1,469)
Foreign Exchange (Losses)/Gains (324) 110 - (214)
Finance Income - 1,173 (682) 491
Finance Expense (682) (1,827) 682 (1,827)
Loss before Tax from Operations (764) (2,870) - (3,634)
Tax Expense - - - -
Total Loss (764) (2,872) - (3,634)
Total Assets 452 17,090 (5,382) 12,160
Total Liabilities 12,966 462 (12,974) 454
5. EXCHANGE RATE SENSITIVITY ANALYSIS
The key exchange rates applicable to the results were as follows:
Year Ended Year Ended
31.12.2022 31.12.2021
i) Closing rate
US $ to £ 1.20582 1.34894
CLP (Chilean Peso) to £ 1,032.0 1,139.4
ii) Average rate
US $ to £ 1.2319 1.35751
CLP (Chilean Peso) to £ 1,068.1 1,050.8
If the exchange rate of sterling at 31 December 2022 had been stronger or
weaker by 10 per cent. from the above, with all other variables held constant,
shareholder equity at 31 December 2022 would have been £1.1 million (2021:
£1.2 million) lower or higher than reported.
If the average exchange rate of sterling during 2022 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 £1.1 million (2021: £1.2 million)
higher or lower than reported.
If the average exchange rate of sterling during 2022 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 £1.1 million
(2021: £1.1 million) higher or lower than reported.
6. ADMINISTRATIVE EXPENSES
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Expenditure incurred in administrative expenses is as follows:
Payroll and Social Security 373 397
Services, Legal and Professional 299 213
Office Costs and General Overheads 216 269
Audit Costs(1) 110 88
Total 998 967
(1)Audit services include £110k (2021: £88k) paid to the auditors for the
audit of the Company, Group's UK subsidiaries and Group's financial
statements. The group auditors also provided taxation services for the Group
in the year, the costs were £22k (2021: £15k).
7. EMPLOYEE COSTS
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
a) Group
Aggregate remuneration of all employees and Directors 348 372
Social Security Costs 16 17
Pension Costs 8 8
Total 372 397
The average number of employees in the Group, including Directors, during the
year was as follows:
Year Ended Year Ended
31.12.2022 31.12.2021
Management 2 3
Administration and development 3 3
Total 5 6
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
b) Company
Aggregate remuneration of all employees and Directors 332 357
Social Security Costs 14 15
Pension Costs 8 8
Total 354 380
The average number of employees in the Company, including Directors, during
the year was as follows:
Year Ended Year Ended
31.12.2022 31.12.2021
Management 2 3
Administration and development 2 2
Total 4 5
c) Directors' remuneration
The total remuneration paid to the Directors was £206k (2021: £246k). The
total remuneration of the highest paid Director was £176k (2021: £145k).
There were no health insurance costs, bonuses, pension costs or share based
payments paid during the year (2021: £nil).
Year Ended Year Ended Year Ended
31.12.2022 31.12.2022 31.12.2021
£'000 £'000 £'000
Base Salary/Fee Total Total
B Rowbotham - - 9
S Morris - - 79
A Coveney 176 176 145
P Shackleton 30 30 13
Total 206 206 246
B Rowbotham has been on payroll in 2020 and 2021 until his resignation on 13
April 2021.
S Morris provided services under a service agreement contract with SC Morris
Ltd and received £26.4k via payroll in the prior year. Simon resigned on 17
August 2021.
A Coveney provided services under a service agreement contract with Coveney
Associates Consulting Ltd and received £30k via payroll (2021: £30k).
8. a) FOREIGN EXCHANGE
Year Ended Restated Year Ended
31.12.2022 31.12.2021
£'000 £'000
Foreign Exchange gains/(losses) 661 (259)
Total 661 (259)
Foreign currency-based assets are translated at the relevant year end rates.
b) OTHER INCOME/IMPAIRMENT CHARGES
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Other Income
Net profit on disposal of Chile turbine (note 12) - 330
Director's fees due from EdS 25 22
Total 25 352
Impairment Charges
Impairment on investment in Joint Venture (note 13) - 1,336
Impairment of amounts due from joint venture (note 14) 1,679 -
Impairment of Chile Transformer (note 12) 35 -
Impairment of Chile performance bonds (note 14) 210 -
Provision for closure costs relating to investment in SEA Energy S.A. - 133
Total 1,924 1,469
9. FINANCE INCOME & EXPENSE
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Finance Income
Reversal of 2021 Expected Credit Losses - 491
Other Interest Received - -
- 491
Finance Expense
Charge for 2022 Expected Credit Losses(1) - 1,827
Other interest payable - -
- 1,827
(1) Expected credit losses were charged in the prior year as the Amended Loan
Notes repayments were projected to be received over a longer period of time,
with final repayment in 2034. These loans were classified as held for sale and
received cash in June 2023.
10. TAX EXPENSE
The relationship between the expected tax expense at basic rate of 19 per
cent. (2021: 19 per cent.) and the tax expense actually recognised in the
income statement can be reconciled as follows:
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Result for the year before tax (2,208) (3,634)
Standard rate of Corporation Tax in UK 19% 19%
Expected Tax Credit (420) (690)
Tax effect not deductible in determining taxable profits (39) 94
Unrecognised Loss carried forward (385) 675
Actual Tax Expense - -
Comprising:
Current Tax Expense - -
Deferred Tax/(Net Credit) - -
Total Credit (Expense) - -
The estimated accumulated unrecognised deferred tax asset is £3.1 million
(2021: £2.8 million), based on cumulative tax losses of £16.9 million (2021:
£4.9 million). A deferred tax asset is not recognised as an asset due to the
uncertainty and unknown timing of its realisation against future profits.
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
31.12.2022 31.12.2021
Average number of shares in issue 561,387,586 561,387,586
Result for the year
Total Loss attributable to equity holders of the parent £2.2m £3.7m
Basic Loss per share 0.39p 0.65p
Diluted Loss per share 0.39p 0.65p
There is no difference between the Basic and Diluted loss per share.
12. PROPERTY PLANT AND EQUIPMENT
Plant and Plant under Total
Equipment Construction
£'000 £'000 £'000
a) Group
Cost at 01.01.2021 (restated) 16,195 2,030 18,225
Exchange Adjustments (restated) - 18 18
Disposal - (1,677) (1,677)
Cost at 31.12.2021 (restated) 16,195 371 16,566
Exchange Adjustments - 44 44
Disposal - - -
Transfer to Assets Held for Sale (note 13) (16,195) - (16,195)
Cost at 31.12.2022 - 415 415
Accumulated Depreciation and Impairment at 1.1.2021 (restated) 8,423 1,582 10,005
Exchange Adjustments (restated) - 9 9
Charge for the year - - -
Charge for impairment for the year - - -
Disposal - - -
Accumulated Depreciation and Impairment at 31.12.2021 (restated) 8,423 336 8,759
Exchange Adjustments - 44 44
Charge for impairment for the year - 35 35
Transfer to Assets Held for Sale (note 13) (8,423) - (8,423)
Accumulated Depreciation and Impairment at 31.12.2022 - 415 415
Net Book Value - 31.12.2021 7,773 35 7,808
Net Book Value - 31.12.2022 - - -
NBV transferred to HFS 7,773
The plant and equipment (2021: £7.8 million) relates to two Siemens turbines,
stored in Venice for use in the Central Illapa project purchased from IPSA for
US $25.0 million. IPSA retains the title but has no beneficial interest in the
turbines. The turbines were transferred to Assets Held for Sale on 31 December
2022; see note 13 for further details. Plant under construction comprised a
transformer in Chile which is impaired during year. The turbine plant in Chile
£nil (2021: £nil) was sold in the prior year as announced on 09 September
2021, and all proceeds were received before the year end, with the profit on
disposal, shown in Other Income, was £0.3 million.
Company - The Company had no property, plant and equipment.
13. ASSETS HELD FOR SALE
The following assets have been transferred to assets held for sale:
a) Joint Venture - Argentinian interests
Investment (note 20) £312k
Receivable (note 14) £2,023k
Total
£2,335k
Patagonia Energy Ltd ("PEL") is the joint venture company which owns Energia
del Sur, S.A ("EdS") based in Argentina and in which Rurelec has a 50 per
cent. share. The above are the Group's and Company investment and receivable
in PEL. The sale was completed on 16 May 2023, the initial proceeds of £2.4
million were received on 09 June 2023. The sale included two conditional
deferred payments of $1 million due in 2024 and 2025. Immediately before the
classification as held for sale, the recoverable amount was estimated for JV
investment and receivable from PEL and an impairment has occurred (note 14).
b) Plant & Equipment (Company: Inventories) £ 7,773k
Two Siemens Westinghouse 701 128 MW gas turbine generators ("701s") are
expected to be sold in the next 12 months. There was interest from various
parties in 2022, but as yet no sale has concluded. Subsequent to year end
discussions remain ongoing with regard to the disposal. The carrying value has
been tested for impairment and the directors consider that no impairment has
occurred as the carrying amount of the asset did not fall below its fair value
less costs to sell.
As at 31 December 2022, asset held for sale for both Group and Company is
£10,108k.
14. TRADE AND OTHER RECEIVABLES
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
a) Group - non-current
Amounts due from Joint Venture Companies(1) - 3,103
b) Group - current
Amounts due from Joint Venture Companies(1) 714
Tax Receivable - VAT 10 4
Other Receivables and Prepayments (3) 81 279
91 997
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
a) Company - non-current
Amounts due from Joint Venture Companies(1) - 3,103
b) Company - current
Amounts due from Joint Venture Companies(1) - 714
Tax Receivable - VAT 9 4
Amounts due from subsidiary undertakings(2) - -
Other Receivables and Prepayments (3) 80 107
89 825
(1) Amounts due from joint venture companies represent the amounts lent by the
Company, net of impairments, to PEL. These loans were replaced in 2019 with
Amended Loan Notes, as previously announced on 19 November 2019. The carrying
value of the loans is based on the replacement Amended Loan Notes, gross value
at 31 December 2022 of £ 11.1million (2021: £10.5 million). Movement is due
to exchange adjustments. 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 per cent. pa, it is
anticipated that the notes will be fully repaid in 2034. The notes are held in
the Statement of Financial Position at their discounted value. The loans were
transferred to assets held for sale on 31 December 2022, please see note 13
for further details. Prior to held of sale classification, the directors
tested for impairment and recorded adjustment for £1.7 million. In prior year
impairment of £1.8 million was recorded. The first £0.5 million repayment
was received in December 2019, in 2020: £1.8 million and in 2021 £0.3
million were received, one repayment of £0.6 million has been received in
2022.
(2) Receivable balance from Cochrane Power Limited of £11.4 million (2021:
£11.4 million) repayable on demand with nil per cent interest. These loans
have been impaired to £nil (2021: £nil) in Cochrane Power Limited, the UK
holding company for assets in Chile. Other loans of £1.4 million (2021:
£.1.4 million) related to subsidiaries of Cochrane Power Limited where the
rights have been assigned to the Company. None of the entities are trading.
The Directors performed assessment and these loans have been impaired to £nil
(2021: £nil). As per subsequent events note 27 it was decided that activities
in Chile would be regarded as discontinued operations. No interest income
recognised as income is not probable.
(3) During the year Chile performance bonds were impaired due to uncertainty
over their recoverability as the project will not be completed.
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.
15. INVENTORIES
Restated
Company - Inventories Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Inventories - 7,773
Inventories comprised of two Siemens 701DU turbines acquired from IPSA in June
2013. IPSA retains the title but has no beneficial interest in the turbines.
Storage and insurance costs for the turbines in the year totalled £109k
(2021: £105k). They were transferred to Assets Held for Sale on 31 December
2022, please see note 13 for further details.
16. CASH AND CASH EQUIVALENTS
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
a) Group - current
Cash and short-term bank deposits 449 745
b) Company - current
Cash and short-term bank deposits 446 743
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 per annum. The
Group holds cash balances to meet its day-to-day requirements.
17. SHARE CAPITAL
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
In issue, authorised, called up and fully paid
561,387,586 ordinary shares of 1p each 5,614 5,614
Ordinary shares have no redemption rights and are entitled to full rights to
dividends and excess capital on winding up.
The issued share capital of the Company consists of 561,387,586 ordinary
shares of £0.01 each.
18. TRADE AND OTHER PAYABLES
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
a) Group - current
Trade Payables 130 97
Accruals 366 351
496 448
b) Company - current
Trade Payables 84 46
Amount due to subsidiary undertakings (note 25) 257 229
Accruals 142 135
483 410
19. TAX LIABILITIES
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Group/Company - Current
Other tax and social security - 6
- 6
20. INVESTMENTS
PEL Total
£'000 £'000
Cost at 31.12.2021 11,652 11,652
Cost at 31.12.2022 11,652 11,652
Accumulated Impairment at 01.01.2021 (10,004) (10,004)
Impairment in year (1,336) (1,336)
Accumulated Impairment at 31.12.2021 (11,130) (11,130)
Accumulated Impairment at 31.12.2022 (11,130)
Transfer to Assets Held for Sale (note 13) (312) (312)
Carrying Value at 31.12.2022 - -
Carrying Value at 31.12.2021 312 312
The balance was transferred to Assets held for Sale on 31 December 2022,
please see note 13 for further details. As announced on 12 June 2023 the asset
was disposed of on 09 June 2023, please see note 28 Post Balance Sheet Events.
At the year end the Company held the following investments:
Direct investments:
1. 50 per cent. (2021: 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. This investment
was transferred to Assets Held for Sale on 31 December 2022. The asset was
disposed off on 09 June 2023, please see note 27 Post Balance Sheet Events.
2. 100 per cent. (2021: 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. (2021: 100 per cent.) of the issued share capital
of Rurelec Project Finance Limited a company registered in England and Wales
under registration number 7523554. Rurelec Project Finance Limited owned at
the year-end 95 per cent. interest in SEA Energy S.A.
4. 5 per cent. (2021: 5 per cent. of SEA Energy S.A. a company
registered in Argentina under registration number CUIT 30-71022906-2.
Indirect investments:
Name Trading address/registered address Interest Held
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 95%
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 22.
**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.
21. PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS
Year Ended Year Ended
31.12.2022 31.12.2021
a) Group £'000 £'000
Loss for the year before tax (2,236) (3,634)
Net Finance Income - (491)
Net Finance Expense - 1,827
Adjustments for:
Foreign exchange (gains)/losses (661) 214
Write down of investment - 1,366
Impairment of amounts due from Joint Venture 1,679 -
Impairment of Chile transformer 35 -
Impairment of Chile performance bonds 210 -
Costs re investment in SEA Energy - 134
Gain on disposal - (330)
Movement in Working Capital:
Change in Trade and Other Receivables 19 (173)
Change in Trade and Other Payables 42 96
Cash Used in Operations (912) (991)
Year Ended Year Ended
31.12.2022 31.12.2021
b) Company £'000 £'000
Loss for the year before tax (2,147) (3,230)
Net Finance Income - (1,173)
Net Finance Expense - 1,827
Adjustments for:
Foreign exchange gains (160) (108)
Write down of loans - 492
Impairment of JV receivable 1,679 -
Write down of investment - 1,336
Costs re investment in SEA Energy - 134
Movement in working capital:
Change in Trade and Other Receivables (299) (147)
Change in Trade and Other Payables 25 (38)
Cash Used in Operations (898) (909)
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
As announced on 16 May 2023 a Sales and Purchase Agreement for the JV assets
was signed, the sale was authorised at the General Meeting on 1 June 2023. As
announced on 12 June 2023 the sale completed on 09 June and the Company
received the initial US$3 million consideration on the same date.
The Joint Venture interest were transferred to Assets Held for Sale on 31
December 2022, in accordance with IFRS 5; please see note 13 for further
details. A fair value adjustment on their initial recognition of £1.7 million
was charged to Other Expense. Please see note 8b for further details.
The following table sets out the prior year's 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. The Group did not participate in prior year profits of the joint
venture, as they are exceeded by previous losses. Current year results are not
disclosed as per IFRS 12 as the JV is now classified as Assets Held for Sale.
Group share of Joint Venture results and net assets Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Results
Revenue - 3,300
Operating Expenses - excluding foreign exchange losses - (2,175)
Foreign exchange losses - 130
EBITDA - 1,255
Depreciation - (1,047)
EBIT - 208
Intragroup interest - credit re write back of prior year charge - 2,478
Third party interest payable - (398)
Profit before tax - 2,288
Tax - 151
Profit after tax - 2,439
Summary of Statement of Financial Position
Non-current assets - 10,871
Cash - 1,419
Current trade and other receivables - 918
Non-current liabilities - (17,100)
Current liabilities - (907)
Net assets/(liabilities) - (4,798)
23. 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. The Group did not participate in
prior year profits of the joint venture, as they are exceeded by previous
losses. Current year results are not disclosed as per IFRS 12 as the JV is now
classified as Assets Held for Sale. Refer to note 22. None of the group
entities are trading in South America therefore the Directors are of the view
that these accounts require no further adjustment related to hyperinflation.
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
31.12.2022 31.12.2021
a) Group £'000 £'000
Current - due within 1 year:
Trade Payables 130 97
Accruals 366 351
Tax Liabilities - 6
Total due within 1 year: 496 454
Year Ended Year Ended
31.12.2022 31.12.2021
b) Company £'000 £'000
Current - due within 1 year:
Trade Payables 84 46
Accruals 142 135
Amount due to subsidiary undertakings (note 25) 257 229
Tax Liabilities - 6
Total due within 1 year: 483 416
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 2022 Company Financial Assets Company Borrowings and Payables Group Financial Assets Group Borrowings and Payables
at at Amortised Cost at at
Amortised Cost
Amortised Cost Amortised Cost
£'000 £'000 £'000 £'000
Trade and Other Receivables > 1 year - - -
Trade and Other Receivables < 1 year 90 - 91 -
Cash and Cash Equivalents 446 - 449 -
Trade and Other Payables < 1 year - (483) - (496)
Total 536 (483) 540 (496)
31 December 2021 Company Financial Assets Company Borrowings and Payables Group Financial Assets Group Borrowings and Payables
at at Amortised Cost at at
Amortised Cost
Amortised Cost Amortised Cost
£'000 £'000 £'000 £'000
Trade and Other Receivables < 1 year 3,103 - 3,103 -
Trade and Other Receivables < 1 year 814 - 986 -
Cash and Cash Equivalents 743 - 745 -
Trade and Other Payables < 1 year - (416) - (454)
Total 4,660 (416) 4,834 (454)
24. SHORT TERM LEASE COMMITMENTS
Office premises
Office premises relates to the Company's offices. These are of low value, and
less than one year £16k (2021: £16k).
25. 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 £0.2 million (2020: £0.3 million).
Year Ended Year Ended Year Ended
31.12.2022 31.12.2022 31.12.2021
£'000 £'000 £'000
Base Salary/Fee Total Total
B Rowbotham - - 9
S Morris - - 79
A Coveney 177 177 145
P Shackleton 30 30 13
Total 207 207 246
B Rowbotham provided services under a service agreement contract with
Mountbeach Associates Ltd until June 2017, since then he was on payroll. He
resigned on 13 April 2021.
S Morris provided services of £54k under a service agreement contract with SC
Morris Ltd. He resigned on 17 August 2021.
A Coveney provided services of £147k under a service agreement contract with
Coveney Associates Consulting Ltd.
P Shackleton joined on 27 July 2021, and he is on payroll.
ii) Accrued interest on loans from its 100% subsidiary Rurelec Project
Finance Ltd ("RPFL") totalling £nil (2020: £nil). The loan balance
outstanding at the year-end due to RPFL was £0.3 million (2021: due £0.2
million).
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Year-end Creditor (note 18) 256 229
Interest credited/(charged) - -
iii) Received loan repayments of £599k from PEL (2021: £347k).
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Y/E Debtor - 3,807
Repayment 599 367
Interest charged - -
Transfer to Assets Held for Sale (note 13) 2,023 -
i)
iv) Provided loans and charged interest of 0.5% per month to its 100 per
cent. subsidiary Cochrane Power Ltd. Net loans were £14k (2021: net repayment
in the year £0.7 million (2020: loans of £0.2 million). The total outyear
end at the year-end was £12.1 million (2020: £11.4 million). These loans
have been impaired to £nil (2021: £ nil). As per subsequent events note 27
it was decided that activities in Chile would be regarded as discontinued
operations. No interest income recognised as income is not probable.
Year Ended Year Ended
31.12.2022 31.12.2021
£'000 £'000
Y/E Debtor - -
(Repayment)/Further loans made 14 (638)
Assignment of loan to Rurelec plc. - (1,266)
Interest charged - 682
26. CONTROL
The Directors consider that the ultimate controlling party is Sterling Trust
Limited on the basis of their 53.9% shareholding in the Company.
27. POST BALANCE SHEET DATE EVENTS
As announced on 16 May 2022 the Company signed a Sales and Purchase Agreement
for its Joint Venture interests in Argentina. A deposit of US$ 600k was paid
to a solicitor's account. This with the remaining US$ 2.4 million initial
payment was received on 09 June 2023. The Sales and Purchase Agreement
included the possibility of two further payments of US$1 million which could
be paid in 2024 and 2025, providing certain qualifying conditions are met.
Under current market and Argentinean economic circumstances there can be no
certainty that these conditions will be met, as a result of this these amounts
have been excluded from this report.
At the General Meeting held on 1 June 2023 shareholders unanimously voted to
approve the sale and a special dividend of 0.2 pence per share. The dividend
will be paid on 14 July 2023 to shareholders on the register as at 23 June
2023. The associated ex-dividend date will be 22 June 2023.
At a Board meeting on 21 June 2023, it was decided that activities in Chile
would be regarded as discontinued operations. All remaining assets have been
fully impaired in these financial statements with a charge of £210k being
recorded in Other Expense (2021: £nil).
There are no other significant subsequent events.
28. PRIOR PERIOD ADJUSTMENTS
The consolidated income statement, consolidated statement of financial
position, company statement of financial position, consolidated statement of
changes in equity and company statement of changes in equity have been
restated due to incorrect accounting treatment related to foreign exchange
losses/ gains. The Group and Company recorded foreign exchange translation for
non-monetary items held at cost which understated the property plant and
equipment and inventories (company). The following corrections to prior
periods were identified resulting in the changes set out below. An additional
comparative Statement of Financial Position for group and company has been
presented in order to demonstrate the impact to the opening position in the
prior year.
Group Impact on the Statement of Profit or Loss and Other Comprehensive Income
Restated
Notes Year Ended Year Ended
Extract 31.12.2021 Adjustments 31.12.2021
£'000 £'000 £'000
Net Foreign Exchange Losses (214) 45 (259)
Loss before Tax (3,634) 45 (3,679)
Tax Expense -
Loss for the year attributable to owners of the Company (3,634) (3,679)
Group Impact on the Statement of Financial
Position
Reported Adjusted Reported Adjusted
Extract 01.01.2021 Adjustment 01.01.2021 31.12.2021 Adjustment 31.12.2021
£'000 £'000 £'000 £'000 £'000 £'000
Property, Plant and Equipment 7,371 849 8,220 7,003 805 7,808
Retained Earnings 8,648 849 9,497 5,014 805 5,819
Company Impact on the Statement of Financial Position
Reported Adjusted Reported Adjusted
Extract 01.01.2021 Adjustment 01.01.2021 31.12.2021 Adjustment 31.12.2021
£'000 £'000 £'000 £'000 £'000 £'000
Inventories 6,923 849 7,772 6,968 805 7,773
Retained Earnings 9,153 849 10,002 5,922 805 6,727
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