REG - Rurelec PLC - Interim results for six months ended 30 June 2022
30/09/2022 14:30
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RNS Number : 3989B Rurelec PLC 30 September 2022
30 September 2022
AIM: RUR
Rurelec PLC
("Rurelec" or "the Company")
Interim results for the six months ended 30 June 2022
Strategy update and intended
Board appointment
Rurelec PLC (AIM: RUR), the owner, operator and developer of power generation
capacity internationally, today announces its unaudited interim results for
the six months ended 30 June 2022.
Financial Highlights:
· Operating loss:
£0.49 million (2021 £0.44 million)
· Post tax profit /
(loss):
£0.70 million (2021: (£0.88) million)
· Profit / (loss) per share:
0.12 pence (2021: (0.16) pence)
· Net asset value per share:
2.2 pence (2021: 2.5 pence)
· Net cash
balance:
£0.88 million (2021: £0.28 million)
Operational and Post Half-Year Highlights:
· Major improvement in post-Tax profitability, from a loss of
£0.88 million last period to £0.70 million profit this period, this was
largely due to exchange rate movements on US Dollar-denominated loan
receivables and the carrying value of the 701 turbines. In the prior period
there had been adverse half-year end exchange rate losses of £0.43 million as
compared to gains of £1.19 million in the current period.
· Cash increased from £0.28 million last period to £0.88 million
at the end of the period under review, which is the result of debt repayment
from PEL, the Joint Venture company which owns Energia del Sur, S.A. ("EdS"),
totalling £0.67 million and receipt of disposal proceeds from the sale of the
Arica 6B turbine totalling £0.72 million. Current cash balance £0.75
million.
· Whilst the Board is encouraged to note the improvement in the
cash position at 30 June 2022 compared to the same date last year, there
remains significant uncertainty around the timing and quantum of future debt
repayments from PEL. This uncertainty is reflective of continued trading
difficulties in Argentina amidst softening electricity spot tariffs and tight
exchange controls.
· The Board continues to explore options for the Chilean project
following the successful sale of the Frame 6B turbine sale for US $1.0
million/£0.72 million which was agreed on 9 September 2021.
· Discussions remain ongoing with regard to the disposal of two
Siemens Westinghouse 701 128 MW gas turbine generators ("701s").
Strategy update and proposed board appointment
The strategy of the Group continues to be focussed on stabilising the
financial position, keeping costs under tight control, whilst buyers for
certain assets are found. The underlying strategy is to preserve the value of
the Group assets and to generate cash. Given the Group is debt-free, this
will in turn enable Rurelec to maximise returns to its shareholders though, as
reported in the Audited Accounts for the year ended 31 December 2021, the
ability of Rurelec to build up sufficient cash reserves to fund dividend
payments remains very uncertain unless the returns from the Argentinian
operations improve or further asset disposals are achieved.
While the asset disposal program is being pursued, the board is considering
the next phase of the Company's development and also strategic partnering
options for existing assets. The Company has therefore appointed Orana
Corporate LLP ("Orana"), a London-based corporate advisory and business
services practice to assist with the next phase. The fees for this arrangement
are an annual corporate adviser fee of £60,000 per annum; an interim
management fee of £5,000 per month until the date that Daniel Maling becomes
a director of the Company (although at this stage there is no guarantee that
he will become a director of the Company); a success fee calculated as a
commission (up to a maximum of 7.5%) linked to asset sales and associated new
business opportunities and, subject to shareholder approval; the issue of
35,000,000 warrants over Ordinary Shares at a price of 0.75p per Ordinary
Share. Following shareholder approval, it is intended that the warrants will
vest in two separate tranches with 20,000,000 vesting on an asset sale; and
the balance vesting on satisfactory completion of a fundraising. A circular
to convene a general meeting of shareholders for the associated approval,
which will also contain full details of the warrant terms, will be dispatched
in due course.
Orana's primary objectives are to introduce new investors to the Company, and
a review of Rurelec's assets with a view to unlocking their inherent value
potential for the Company's shareholders. They will seek to find opportunities
to commercialise existing assets, if they are not sold, and identify new
business prospects or strategic partnerships. This could see Rurelec take
advantage of the global energy sector's transition away from the most
polluting fossil fuels.
In addition, as part of the terms of the arrangement it is proposed that Mr
Daniel Maling, a partner of Orana, be appointed a director of the Company
subject to regulatory due diligence and Nominated Adviser approval. Mr Maling
is a London-based senior corporate financier with an energy sector focus with
over 25 years' experience, who has advised and managed several quoted
companies in the United Kingdom, Canada, and Australia. Under the terms of his
proposed service contract ("Service Contract") he will be paid a salary of
£30k per annum for a minimum of 10 days per month; he is on three months'
notice and is subject to customary restrictive covenants and standard
employment terms and conditions. It is also intended that, subject to
shareholder approval, Daniel will be issued with 20,000,000 warrants to
subscribe for ordinary shares in the Company. Such options would be capable of
being exercised at any time after their date of vesting, whilst Daniel remains
an employee of the Company, at an exercise price of 0.75p.
At the same time, it is proposed Daniel Maling enter into a consultancy
agreement with the Company pursuant to which he will receive a fee of £2,500
per month for supplementary work over and above his Service Contract.
Commenting on the results, Andy Coveney, Rurelec's Executive Director, said:
"The Board continues to pursue measures to unlock the inherit value of the
Company through selling or developing assets and managing cash receipts from
the power generation plant in Argentina. We are conscious that the economic
situation in Argentina remains challenging and we continue to monitor the
impact on our operating asset there.
That said, with the prospect of future asset sales, and a healthy cash
balance, we remain cautiously optimistic about stabilising our financial
position and developing a platform for future growth in the period ahead.
I welcome the engagement of Dan Maling and his team at Orana whom we believe
will provide a new impetus and direction as we look forward to the next phase
of the Rurelec story."
For further information please contact:
Rurelec PLC WH Ireland
Andrew Coveney Katy Mitchell
Executive Director Megan Liddell
+44 (0)20 7549 2839 +44 (0)20 7220 1666
Executive Directors' Statement
Review of Operations
Argentina
Energia del Sur, S.A. ("EdS") generated a steady and consistent output which
continued throughout the first 6 months of 2022.
Despite the plant performing well, the economic situation in Argentina
remained in crisis:
1. High inflation and a decline in the value of the Argentinian peso against
the US Dollar led to the Argentinian Central Bank tightening exchange controls
in September 2019. The exchange controls on US Dollars have a direct effect
on the cash remittances by EdS to PEL, the latter not being resident in
Argentina. The cost of transferring money out of Argentina has increased as
a result of these controls and the loss suffered on funds remitted from EdS to
PEL had been in the order of 53 per cent. of the underlying face value. A
similar situation persisted in the first 6 months of 2022. The duration and
severity of these controls remains uncertain.
2. Delays have been experienced by EdS along with other generators in
Argentina in receiving payments of revenue from CAMMESA (the wholesale
electricity market regulator and administrator).
3. The power output generated by EdS has been remunerated as Spot Price under
Resolution SE 440 ("Resolution 440") which dictates the price EdS can charge
for the electricity it generates. Resolution 440 introduced the following main
changes:
• Spot generation tariffs increased by 29 per cent. on
average. This increase was retroactively applied from February 2021.
• Spot prices were no longer linked to the US Dollar, instead
became linked to the Argentine peso.
• Steam turbine and gas turbine capacity and offtake revenue
both became remunerated under the Resolution 440 tariff.
4. In April 2022, the Secretariat of Energy published a new resolution which
governs the Spot price tariff, Resolution SE 238/2022 ("Resolution 238") with
retroactive effect to February 2022. This Resolution introduced the
following changes to Resolution 440:
• Remuneration prices were increased by 30% for the period Feb
to May 2022. A further 10% price increase was implemented from June 2022.
• Cancellation of the clause of reduction of income due to
availability based on the utilization factor. The application of this clause
was suspended for EdS since February 2021, representing an increase in our
collection of AR$86 million, or £0.65 million at average official Argentine
rates, during 2021.
Despite the price increases introduced in Resolution 238, the income generated
under this new tariff is still significantly lower than the income generated
by EdS under Resolution 220 which expired in September 2020.
Until there is a change of government with policies more favourable to
generators, EdS's revenue and cash generation will continue to be
suppressed. This in turn will influence the timing and amounts of any cash
payments from EdS to PEL and ultimately to Rurelec.
5. The Argentinian economy remained weak throughout the period and the board
understand from local Argentinian management that tariffs are not likely to
increase under the current government other for than general inflationary
increases.
In the 6 months to 30 June 2022 EdS accumulated sufficient cash to make one
payment of unsecured loan repayments to PEL of US $1 million/£0.79 million,
of which Rurelec received (i) US$0.76 million/£0.67 million, in partial
repayment of the Amended and Restated Loan Notes (the "Loan Notes") that were
created as part of a new agreement with the joint venture partner in November
2019; and (ii) US $0.01 million of management fees. This agreement set out how
cash receipts in PEL will be allocated between the joint venture partners and
represented a major step forward in our mutual working relationship. After the
end of the period under review, up to the date of this interim statement,
Rurelec has received no further payments by way of partial repayment of the
Loan Notes.
The balance outstanding on the Loan Notes at 30 June 2022 was US $13.35
million (2021: US $14.94 million). Future loan repayments will be in the
ratio 72:28 (Rurelec:Basic) between Rurelec and Basic Energy Limited, the
ultimate shareholders of PEL.
Chile
In Chile, the necessary environmental consents and land leases were maintained
in order to extend the project and the Board continues to review options in
the light of the risks versus rewards of undertaking this project and the
costs of renewing the annual rental agreement on the land.
Asset disposals
No further asset disposals were achieved in the period.
Head office
Tight controls continued to be maintained on overheads in the UK and
administration costs for the period were flat at £409k (2021: £416k).
Debt repayments and Cash flow
Rurelec remained free of any secured debt and was consequently in the position
of not having to pay any interest.
The period-end cash balance was £879k (2021: £275k).
Liquidity remains a significant issue for the Group. The Group has been able
to cope with variability in the timing and quantum of cash receipts from
Argentina due to long term reductions in Group operating costs. Given the
deterioration in the cash generation from Argentina, the Group is now
critically dependent on asset sales. However, there can be no guarantee as to
the timing of any such asset sales and receipts, nor regarding when any
further cash will be received from Argentina owing to the multiple
uncertainties outlined above. In particular there is no guarantee that the
remuneration level of the tariff/PPA/spot prices will be further improved or
that EdS will remain economically viable. The Directors consider that the
prospect of better tariffs being granted for EdS's power is largely dependent
on political change in Argentina which may not occur until late 2023, if at
all.
Given the cash balances held by the Group, potential cash remittances from our
Argentine operation and potential asset disposals, the directors believe there
is currently sufficient headroom in existing working capital resources to
avoid the need to seek further sources of working capital and accordingly
continue to adopt the going concern basis of accounting. However, the
potential remittances and receipts are not guaranteed and if neither source of
funds generates sufficient cash in the future there would exist a material
uncertainty over the ability of the Company to finance its ongoing activities,
the Directors continue to keep this under review.
Board of Directors
There were no changes to the Board of Directors during the period covered by
these condensed financial statements.
Andy Coveney
Executive Director
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)
for the half year ended 30 June 2022
(expressed in thousands of pounds)
Audited
Notes 6 months to 6 months to 12 months to
30/06/22 30/06/21 31/12/21
£'000 £'000 £'000
Administrative expenses (496) (443) (967)
Other income - - 352
Other expense - - (1,469)
Operating loss (496) (443) (2,084)
Foreign exchange gains / (losses) 1,194 (432) (214)
Finance income - - 491
Finance expense - - (1,827)
Profit / (loss) before tax 697 (875) (3,634)
Tax expense - - -
Profit / (loss) for the period 697 (875) (3,634)
Profit / (loss) per share 3 0.12p (0.16p) (0.65p)
Other comprehensive income
Items that will be subsequently reclassified to Profit & Loss:
Exchange differences on translation of foreign operations 269 77 285
Total other comprehensive income 269 77 285
Total comprehensive profit / (loss) for the period 965 (798) (3,349)
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (unaudited)
at 30 June 2022
(expressed in thousands of pounds)
Audited
30/6/22 30/6/21 31/12/21
Notes £'000 £'000 £'000
Assets
Non-current assets
Property, plant and equipment 7,766 7,230 7,003
Investment in Joint Venture 312 1,648 312
Trade and Other Receivables 3,650 4,496 3,103
11,728 13,374 10,418
Current assets
Trade and other receivables 269 1,032 997
Cash and cash equivalents 879 275 745
1,148 1,307 1,742
Total assets 12,876 14,681 12,160
Equity and liabilities
Shareholders' equity
Share capital 5,614 5,614 5,614
Share premium account - - -
Foreign currency reserve 1,347 870 1,078
Profit and loss reserve 5,711 7,773 5,014
Total equity 12,672 14,257 11,706
Current liabilities
Trade and other payables 200 420 448
Current tax liabilities 4 4 6
204 424 454
Total liabilities 204 424 454
Total equity and liabilities 12,876 14,681 12,160
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
for the half year ended 30 June 2022
(expressed in thousands of pounds)
Share capital £'000 Share premium £'000 Foreign currency reserve £'000 Retained earnings £'000 Other reserve £'000 Total equity £'000
Balance at 01.01.21 5,614 - 793 8,648 - 15,055
Loss for the first 6 months - - - (875) - (875)
Exchange differences on translation - - 77 - - 77
Total comprehensive profit - - 77 (875) - (798)
Balance at 30.06.21 5,614 - 870 7,773 - 14,257
Loss for the Period - - - (2,759) - (2,759)
Exchange differences on translation - - 208 - - 208
Total comprehensive loss - - 208 (2,759) - (2,551)
Balance at 31.12.21 5,614 - 1,078 5,014 - 11,706
Loss for the first 6 months - - - 697 - 697
Exchange differences on translation - - 269 - - 269
Total comprehensive profit / (loss) - - 269 697 - 966
Balance at 30.06.22 5,614 - 1,347 5,711 - 12,672
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
for the half year ended 30 June 2022
(expressed in thousands of pounds)
Audited
6 months to 6 months to 12 months to
30/06/22 30/06/21 31/12/21
Result for the period before tax 697 (875) (3,634)
from operations
Net finance expense - - 1,336
Adjustments for:
Unrealised exchange (gains) / losses (1,194) 429 214
Write down on loans/investments - - 1,500
Gain on disposal - - (330)
Change in trade and other receivables 189 - (173)
Change in trade and other payables (232) 53 96
Cash used in operating activities (540) (393) (991)
Taxation paid - - -
Net cash used in operating activities (540) (393) (991)
Cash flows from investing activities
Repayments from joint venture company 674 - 347
Net proceeds from sale of turbine - - 721
Net cash generated from investing activities 674 - 1,068
Net cash inflow before
financing activities 134 (393) 77
Cash flows from financing activities
Loan Principal Repayments - - -
Loan Interest Repayments - - -
Net cash used in financing activities - - -
Increase / (decrease) in cash
and cash equivalents 134 (393) 77
Cash and cash equivalents at start of period 745 668 668
Cash and cash equivalents at end of period 879 275 745
RURELEC PLC
Notes to the Interim Statement
for the six months ended 30 June 2022
1. Basis of preparation
These condensed consolidated interim financial statements do not constitute
statutory accounts within the meaning of Section 435 of the Companies Act
2006. The comparative figures for the year ended 31 December 2021 were derived
from the statutory accounts for that year which have been delivered to the
Registrar of Companies. The financial information contained in this interim
statement has been prepared in compliance with International Financial
Reporting Standards ("IFRSs") and in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and
expected to apply to the Group's results for the year ending 31 December 2022
and on interpretations of those Standards released to date.
2. Accounting policies
These condensed consolidated interim financial statements have been prepared
in accordance with the accounting policies set out in the Group's financial
statements for the year ended 31 December 2021.
3. Earnings per share
6 months to 6 months to 12 months to
30/6/22 30/6/21 31/12/21
Basic and diluted
Average number of shares 561m 561m 561m
in issue during the period
Profit / (Loss) attributable to equity holders of the parent from continuing £0.30m (£0.88)m (£3.63)m
operations
Basic and diluted profit / (loss) per share on continuing operations
0.12p (0.16)p (0.65)p
There are no financial instruments in issue (2021: none) that could be settled
by the delivery of shares.
4. The Board of Directors approved this interim statement on 30 September
2022. This interim statement has not been audited.
5. Copies of this statement are available at the Company's website
www.rurelec.com (http://www.rurelec.com)
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