| Wed 31 Mar 2010, 8:00 | | IPS - IPSA Group PLC - Audited results for the year ended 30 September 2009 |
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IPS
IPSA
IPS - IPSA Group PLC - Audited results for the year ended 30 September 2009
IPSA GROUP PLC
(Incorporated and registered in England and Wales)
(Registration Number 5496202)
AIM Share Code IPSA ISIN GB00BOCJ3F01
JSE Share Code IPS ISIN GB00BOCJ3F01
("IPSA" or "the company")
AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2009
IPSA, the AIM and Altx dual listed independent power plant developer with
operations in southern Africa, today announces its audited results for the
year ended 30 September 2009.
Key points for period include:
- Group after tax loss of GBP5.5m (2008 loss GBP4.5m);
- Decision taken to sell all four gas turbines;
- Delay in obtaining PPA under Eskom MTPPP tender leads to suspension of
steam sales.
Key points since the year end include:
- Conditional sale of one gas turbine to IPC, a company controlled by
Peter Earl;
- Issue of GBP650,000 of loan notes due January 2011, plus warrants;
- Standstill agreement with major creditors Standard Bank and TurboCare
to January 2011 and marketing agreement in respect of the turbines;
- Chairman to step down at AGM.
Commenting, Stephen Hargrave, Chairman of IPSA, said:
"The financial year ended 30 September 2009 was an extremely difficult one.
I would like to thank the operating team at the plant in Newcastle for their
hard work and faith in the future of power generation in South Africa, as
well as the directors in London, who have showed determination and tenacity
in the face of difficult times. As with last year, financing remains our top
priority for the coming year and significant risks still remain. However,
the recent Loan Note issue provides us with working capital to enable us to
progress the coal-fired developments in the Eastern Cape in addition to
securing the sale of the turbines and the PPA for Newcastle."
Commenting, Peter Earl, CEO of IPSA, said:
"There is little positive to say about the year ended 30 September 2009.
However, in the coming twelve months the Company is focussing its efforts on
completing the sale of the four gas turbines and on developing the coal-
fired capacity in the Eastern Cape, in addition to securing the long-awaited
PPA for our plant at Newcastle.
The recent marketing agreement with TurboCare SpA and Standard Bank PLC,
which provides for the marketing of the gas turbines as well as a formal
standstill arrangement, is an important development that puts us in a good
position to sell our turbines from a position of strength.
I am sorry to see the departure of Stephen Hargrave as Chairman, but I join
my colleagues in thanking him for his contribution in leading our boardroom
debates over the past four and a half years."
NOTICE OF AGM AND POSTING OF RESULTS
A further announcement will be made detailing the location, time and date of
the Company`s Annual General Meeting.
Copies of the Annual Report and Accounts will be sent to shareholders by 31
March 2010.
For further information contact:
Peter Earl, CEO, IPSA Group PLC +44 (0)20 7793 7676
Elizabeth Shaw, COO, IPSA Group PLC +44 (0)20 7793 7676
John Llewellyn-Lloyd, Execution Noble & Company Ltd
Harry Stockdale (Nominated Adviser and Broker) +44 (0)20 7456 9191
Riaan van Heerden, PSG Capital (Pty) Limited (South African Sponsors) +27
11 797 8400
Or visit IPSA`s website: www.ipsagroup.co.uk
The financial information contained in this announcement does not constitute
statutory accounts within the meaning of Section 435 of the Companies Act
2006 in respect of 2009 accounts or Section 240(3) of the Companies Act 1985
in respect of 2008 accounts. This announcement was approved by the Board on
29 March 2010. Statutory accounts of the Company in respect of the financial
year ended 30 September 2009, upon which the Company`s auditors have given a
report which was unqualified with an emphasis of matter in regard to going
concern, have been delivered to the Registrar of Companies.
CHAIRMAN`S STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2009
I am pleased to present to shareholders of IPSA Group PLC the Report and
Accounts for the year to 30 September 2009. In my last annual statement I
highlighted the cash flow constraints under which we were operating as a
result of the continued delay in putting in place a power purchase agreement
for the plant at Newcastle. These constraints continued throughout the year,
to the extent that I reported the temporary cessation of steam supplies to
our customers in my interim statement. Unfortunately this situation
persists.
In the year under review the Group after tax loss was GBP5.5 million (2008:
loss of GBP4.5 million). The loss at Newcastle Cogeneration (Pty.) Ltd
("NewCogen") was GBP1.4m, of which GBP3m was attributable to the take or pay
element of the gas contract at NewCogen but this was more than offset by a
non-cash foreign exchange gain on sterling denominated loans to NewCogen of
GBP3.4m due to sterling weakness. The remainder of the Group`s loss of
approximately GBP4m was attributable principally to the cost of holding
equipment either in the form of storage charges, interest expense or foreign
exchange loss as sterling weakened against the Euro.
At the beginning of the financial year on which we are now reporting, the
decision was taken to pursue the sale of the 521 MW of generation equipment
the Company has been holding since 2007, given that no definitive programme
to put generation capacity on the Industrial Development Zone at Coega near
Port Elizabeth had materialised. A conditional agreement was signed in
December 2009 for the sale of one of the four turbines to a company
controlled by Peter Earl, IPSA`s chief executive. It is emphasized however
that this transaction is subject to financing.
The Group still intends to refinance the NewCogen plant as soon as a power
purchase agreement ("PPA") is put in place with Eskom, the country`s
parastatal generator and distributor. In the event, the tender for the
Medium-Term Power Purchase Programme ("MTPPP") has taken much longer than
expected to conclude, a factor entirely beyond IPSA`s control, and one that
increases the difficulty of the predicament in which we find ourselves. We
have had to rely on the financial support of our shareholders both for a
small amount of equity injected in March 2009, together with the conversion
of debt to equity by Independent Power Corporation PLC (a company controlled
by our chief executive, Peter Earl) and more recently funds raised in the
form of a GBP650,000 loan note issue with warrants, completed and announced
in March 2010.
Our creditors have also been extremely patient and since the year end, we
have agreed a standstill agreement with our largest creditors, Standard Bank
PLC and TurboCare SpA, which places the Company in a more stable position
whilst the turbines are marketed.
I draw your attention to the fact that the independent auditors have again
included an emphasis of matter paragraph in their unqualified audit opinion.
Conclusion
The financial year ended September 2009 was an extremely difficult one. I
would like to thank the operating team at the plant in Newcastle for their
hard work and faith in the future of power generation in South Africa, as
well as the directors in London, who have showed determination and tenacity
in the face of difficult times. As with last year, financing remains our top
priority and significant risks still remain. The recent announcement by the
South African Energy Regulator indicates that the MTPPP tender now has, at
least, a regulatory foundation, given that an allowance for the costs
associated with its implementation is now included in the Eskom multi-year
tariff determination.
In summary, the situation has developed not necessarily to the Company`s
advantage but IPSA is still here and still fighting. I have been chairman
for four turbulent years and have now decided to focus my attention on other
matters both in business and outside. I will therefore step down from the
Board at the conclusion of the Annual General Meeting on 26 April 2010. I
can assure shareholders that they will not find anywhere a more hardworking
team of executive directors. I look forward to participating in their
success through my own shareholding in the Company.
Stephen Hargrave
Chairman
29 March 2010
CHIEF EXECUTIVE`S REVIEW OF OPERATIONS
The effects of the global economic downturn were evident during the last
financial year. The sharp fall in commodity prices resulted in a drop in
electricity demand (2.2% for the calendar year, 4.6% for the 12 months
ending September 2009), easing the strain on the South African electricity
system that was so evident in 2007/8. South African GDP fell 1.8% during the
2009 calendar year, in spite of the cushioning effect of increased public
expenditure on capital projects ahead of the FIFA World Cup, which will take
place in June 2010. Electricity consumption fell 2.7 per cent over the same
period, but over the period covered by our financial year the drop in demand
was more than double that at 4.6%.
The reduced demand for electricity meant that Eskom delayed delivery of
electricity under the planned tender for new generation capacity, the medium
term pricing programme ("MTPPP") (supply was scheduled under the tender for
March 2009) and also stalled the process for tendering for large-scale
independent power plants under the multi-site baseload programme. The
economic downturn meant that electricity users were more concerned with
securing their immediate survival rather than securing their electricity
supplies for the future, in spite of the penalties due to be introduced in
the first quarter of 2010 under the power conservation programme.
The effects of these changes on our operating business, NewCogen, were
significant, resulting in the company being unable to secure a power
purchase agreement. Without electricity sales contracts, the economics of
the plant are not sustainable and we reluctantly took the decision to impose
a temporary suspension in the supply of steam to our customers from February
2009. The decision was a difficult one as even without operations we
remained liable under the take or pay element of the gas supply contract.
In spite of the dismal situation in which they found themselves, the staff
at Newcastle have continued to work together to preserve the plant ready for
start up. They have also made contributions to the local community. In one
project our staff at the plant assisted the local school by donating two
containers, converting them into classrooms and refurbishing them ready for
the start of the new term.
Following approval of the new tariff regime for Eskom under the electricity
regulator`s multi year price determination which will take effect from 1st
April 2010, we believe that the way forward to supply electricity under an
MTPPP power purchase agreement has been prepared. It is likely that the
MTPPP will begin at some time during this financial year. However, there has
been no formal confirmation of a timetable. Furthermore, we have to
refinance the NewCogen plant in order to place it on a sustainable footing
for the future and in order to re-start our operations.
In September 2008, we announced that we had agreed the outline terms of the
coal supply agreement for the planned development of the Indwe power plant
in the Eastern Cape, which is intended to consist of up to 500 MW of new
coal-fired capacity. The coal will be supplied by Elitheni Coal Pty.
Limited, the 74% subsidiary of AIM-quoted Strategic Natural Resources PLC.
Work on the environmental approvals is now underway. A site adjacent to the
mine has been selected and an option to purchase the land has been executed.
Technology selection and preliminary engineering work is expected to take
place during the course of this year using funds raised in the recent loan
note issue.
In the coming twelve months the Company will focus on its efforts to
complete the sale of the four gas turbines which we originally purchased in
March 2007 and which were intended for installation at the Industrial
Development Zone at the port of Coega, near Port Elizabeth. As announced, we
have recently entered into a marketing agreement with TurboCare SpA and
Standard Bank PLC which provides for the marketing of the units as well as a
formal standstill arrangement in respect of the amounts due to both these
entities now and arising over the period of the agreement. I believe that
this important development puts us in a good position to sell our turbines
from a position of strength.
This has been a truly horrible year. I would like to thank my colleagues for
their hard work in such difficult and unrewarding circumstances and our
shareholders and suppliers for their patience.
Peter Earl
Chief Executive
29 March 2010
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2009
Notes Year Year
ended ended
30.09.09 30.09.08
GBP`000 GBP`000
Revenue 5 1,039 2,828
Cost of sales (2,227) (3,630)
Gross profit (1,188) (802)
Administrative expenses 7 (985) (1,421)
Other expenses 8 (1,792) (2,221)
Finance income 9 18 33
Finance expense 10 (1,519) (40)
Loss before tax (5,466) (4,451)
Tax expense / credit 11 - -
Loss for the year (5,466) (4,451)
attributable to
equity shareholders of the
parent (5,466)
(4,451)
Loss per share (basic, 13 (5.92p) (4.97p)
diluted and headline) 13
(5.92p) (4.97p)
All of the Group`s activities are continuing activities.
The accompanying accounting policies and notes form an integral part of
these financial statements
CONSOLIDATED BALANCE SHEET
AS AT 30 SEPTEMBER 2009
Notes Year Year
ended ended
30.09.09 30.09.08
GBP`000 GBP`000
Assets
Non-current assets
14 15 14,644
13,978 666 750 12,324
11,574
Property, plant and equipment 14 13,978 11,574
Intangible assets 15 666 750
14,644 12,324
Current assets
Trade and other receivables 20 2,380 1,454
Cash and cash equivalents 21 136 405
2,516 1,859
Non-current assets classified 19 32,253 32,253
as held for sale
Total assets 49,413 46,436
Equity and liabilities
Capital and reserves
attributable to
equity holders of the Company
Share capital 22 1,900 1,792
Share premium account 26,027 25,267
Foreign currency reserve (1,562) (454)
Profit and loss reserve (13,794) (8,328)
Total equity 12,571 18,277
Current liabilities
Trade and other payables 23 19,553 12,017
Borrowings 24 17,289 16,142
36,842 28,159
Total equity and liabilities 49,413 46,436
COMPANY BALANCE SHEET
AS AT 30 SEPTEMBER 2009
Notes Year Year
ended ended
30.09.09 30.09.08
GBP`000 GBP`000
Assets
Non-current assets
14 15 14,644
13,97 666 750 12,324
8
11,57
4
Investments 18 500 500
Trade and other receivables 16 19,833 3,239
20,333 3,739
Current assets
Trade and other receivables 20 2,286 15,115
Cash and cash equivalents 21 20 348
2,306 15,463
Non-current assets classified as 19 32,253 32,253
held for sale
Total assets 54,892 51,455
Equity and liabilities
Capital and reserves attributable
to
equity holders of the Company
Share capital 22 1,900 1,792
Share premium account 26,027 25,267
Foreign currency reserve (4,867) (1,755)
Total equity 23,060 25,304
Current liabilities
Trade and other payables 23 14,559 10,028
Borrowings 24 17,273 16,123
31,832 26,151
Total equity and liabilities 54,892 51,455
CONSOLIDATED CASHFLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2009
Notes Year Year
ended ended
30.09.09 30.09.0
GBP`000 8
GBP`000
Net cash outflow from operating 25 (1,094) (4,357)
activities before interest
Interest received 18 33
14
13,978
11,574
Interest paid (99) (40)
Net cash outflow from operating (1,175) (4,364)
activities
Cash flows from investing
activities
Additions to plant and equipment (30) (1,660)
Additions to plant under - (10,416
construction )
Cash used in investing activities (30) (12,076
)
Cash flows from financing
activities
Issue of shares (net of costs) 868 -
Bank loans - 15,000
Other loans received 618 1,142
Other loans repaid (550) -
Cash inflow from financing 936 16,142
activities
Decrease in cash and cash (269) (298)
equivalents
Reconciliation and analysis of
change in net funds
Decrease in cash during year (269) (298)
Cash and cash equivalents at 405 703
start of year
Cash and cash equivalents at end 21 136 405
of year
COMPANY CASHFLOW STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER 2009
Notes Year Year
ended ended
30.09.09 30.09.08
GBP`000 GBP`000
Net cash outflow from operating 25 (52) (4,159)
activities before interest
Interest received 16 32
Interest paid - (40)
Net cash outflow from operating (36) (4,167)
activities
Cash flows from investing
activities
Additions to plant under - (10,416)
construction
Long term loan to subsidiary (1,234) (1,722)
Cash used in investing (1,234) (12,138)
activities
Cash flows from financing
activities
Issue of shares (net of costs) 868 -
Bank loans - 15,000
Other loans received 624 1,123
Other loans repaid (550) -
Cash inflow from financing 942 16,123
activities
Decrease in cash and cash
equivalents
Reconciliation and analysis of
change in net funds
Decrease in cash during year (328) (182)
Cash and cash equivalents at 348 530
start of year
Cash and cash equivalents at end 21 20 348
of year
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2009
Share Share Foreign Profit Total
Capital Premium Currency and Loss Equity
Account Reserve Reserve
GBP`000 GBP`000 GBP`000 GBP`000 GBP`000
1. Group
At 30.9.07 1,792 25,267 (550) (3,877) 22,632
Exchange - - 96 - 96
differences
Loss for the - - - (4,451) (4,451)
year
Total recognised - - 96 (4,451) (4,355)
income and
expense for year
At 30.9.08 1,792 25,267 (454) (8,328) 18,277
Exchange - - (1,108) - (1,108)
differences
Loss for the - - - (5,466) (5,466)
year
Total recognised - - (1,108) (5,466) (6,574)
income and
expense for year
Allotment of 108 760 - - 868
shares
At 30.9.09 1,900 26,027 (1,562) (13,794) 12,571
2. Company
At 30.9.07 1,792 25,267 - (157) 26,902
Loss for the - - - (1,598) (1,598)
year
Total recognised - - - (1,598) (1,598)
income and
expense for year
At 30.9.08 1,792 25,267 - (1,755) 25,304
Loss for the - - - (3,112) (3,112)
year
Total recognised - - - (3,112) (3,112)
income and
expense for year
Allotment of 108 760 - - 868
shares
At 30.9.09 1,900 26,027 - (4,867) 23,060
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2009
1 Principal activities and nature of operations
The principal activity of IPSA Group PLC and its subsidiaries ("Group") is
the construction, development and operation of electricity generation assets
and the supply of electricity to the wholesale market and major end-users.
During the year under review, the Group`s operating activities included the
generation and sale of electricity and steam by the Group`s gas fired plant
in Newcastle, Republic of South Africa. However, due to continued delays in
obtaining an electricity generating contract from Eskom, the Group decided
to suspend operations of the facility in Newcastle in February 2009.
The Group continued to seek suitable acquirers for its 4 Siemens gas
turbines which were originally acquired in early 2007 for the then proposed
Industrial Development Zone at Coega near Durban. Due to the delays in this
project reported last year, the Group decided that the shareholders` best
interests would be served by disposing of these turbines. As a result of the
weakness in the capital markets for project finance, the disposal is taking
longer than initially expected. Following the end of the year, one turbine
has been conditionally sold (see note 31 (i)).
Further details are provided in the Chairman`s statement and the Chief
Executive`s review of operations.
2 General information
IPSA Group PLC is the Group`s ultimate parent company. It is incorporated
and domiciled in England and Wales. IPSA Group PLC`s shares are traded on
the Alternative Investment Market ("AIM") in London and, since October 2006,
the shares have had a dual listing on AltX (the Alternative Exchange of the
Johannesburg market).
3 Approval of financial statements
The consolidated financial statements for the year ended 30 September 2009
were approved by the Board of directors on 29 March 2010.
4 Summary of accounting policies
4.1 Basis of preparation
The financial statements have been prepared under the historical cost
convention and in accordance with applicable International Financial
Reporting Standards ("IFRS") as adopted by the European Union. The
measurement bases and principal accounting policies of the Group are set out
below.
4.2 Going concern
As set out in the Chairman`s statement and the Chief Executive`s review, the
Board has continued to pursue a medium term electricity generating contract
for the plant in Newcastle and has been actively seeking buyers for the 4
Siemens gas turbines originally acquired for the Coega project in South
Africa.
These delays have impacted the Group`s cash resources and the directors have
therefore obtained a formal standstill agreement on the GBP15m loan from
Standard Bank PLC, which was originally due to be repaid in September 2009.
Standard Bank PLC has also agreed to a formal standstill for the interest
owing and accrued since October 2008 (see note 31 (iii)).
Following the end of the year, and as set out in note 31 (ii), the Group
issued a GBP650k loan note to provide the Group with additional working
capital to enable the Group to continue to i) pursue a medium term
electricity generating contract for the plant in South Africa, ii) further
develop the Group`s plans for coal fired plants in South Africa and iii)
secure disposal of the 4 Siemens gas turbines on favourable terms.
Until the Group is successful in securing a buyer for the gas turbines,
there remains a material degree of uncertainty upon the Company and the
Group`s ability to continue as a going concern.
However, as a result of events during the past few months, including the
conditional sale of one turbine, a number of serious enquiries for the other
turbines, indications from the authorities in South Africa that independent
power suppliers will be invited to enter into medium term power purchase
agreements within the next few months and the standstill agreement entered
into with Standard Bank PLC and Turbocare SpA, the directors consider that
there is a reasonable expectation that the Group and the Company does and
will continue to have adequate resources to continue in operation for the
foreseeable future and for these reasons continue to adopt the going concern
basis in preparing these financial statements.
4.3 Basis of consolidation
The Group financial statements consolidate those of the Company and its
subsidiary undertakings drawn up to 30 September 2009.
Subsidiaries are entities over which the Group has the power to control the
financial and operating policies so as to obtain benefits from its
activities. The Group obtains and exercises control through voting rights.
Joint ventures are arrangements in which the Group has a long-term interest
and shares control under a written contractual agreement. The Group reports
its interest in jointly controlled entities using proportionate
consolidation such that the Group`s share of the assets, liabilities, income
and expenses are combined with the equivalent items in the consolidated
financial statements on a line by line basis.
Unrealised gains on transactions between the Group and subsidiaries are
eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Amounts
reported in the financial statements of subsidiary 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 purchase method. The
purchase 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 subsidiary prior to acquisition.
On initial recognition, the assets and liabilities of the acquired entity
are included in the consolidated balance sheet at their fair values, which
are also used as the bases for subsequent measurement in accordance with the
Group accounting policies.
4.4 Intangible assets acquired as part of a business combination
In accordance with IFRS 3: Business Combinations, an intangible asset
acquired in a business combination is deemed to have a cost to the Group of
its fair value at the acquisition date. The fair value of an intangible
asset reflects market expectations about the probability that the future
economic benefits embodied in the asset will flow to the Group. Where an
intangible asset might be separable, but only together with a related
tangible or intangible asset, the group of assets is recognised as a single
asset separately from the goodwill where the individual fair values of the
assets in the group are not reliably measured. Where the individual fair
value of the complementary assets is reliably measurable, the Group
recognises them as a single asset, provided the individual assets have
similar lives. Subsequent to initial recognition, intangible assets are
reported at cost less accumulated amortisation and accumulated impairment
losses. Amortisation is provided to write-off the cost of the intangible
asset over its useful economic life.
4.5 Impairment of property, plant, equipment and intangible assets
At each balance sheet date, the Group reviews the carrying amount of its
tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset, the
Group estimates the recoverable amount of the cash-generating unit to which
the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value
in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment
loss is recognised immediately in profit or loss, unless the relevant asset
is carried at a revalued amount, in which case the impairment loss is
treated as a revaluation decrease.
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 so 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 profit or
loss, unless the relevant asset is carried at a revalued amount, in which
case the reversal of the impairment loss is treated as a revaluation
increase.
4.6 Foreign currency translation
The financial information is presented in pounds sterling, which is also the
functional currency of the parent company.
In the separate financial statements of the consolidated entities, foreign
currency transactions are translated into the functional currency of the
individual entity using the exchange rates prevailing at the dates of the
transactions (spot exchange rate). Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation
of remaining balances at year end exchange rates are recognised in the
income statement under "other income" or "other expenses", respectively.
In the consolidated financial statements, all separate financial statements
of subsidiary entities, originally presented in a currency different from
the Group`s presentation currency, have been converted into sterling.
Monetary assets and liabilities have been translated into sterling at the
closing rate at the balance sheet date. Income and expenses have been
converted into sterling at the average rates over the reporting period. Any
differences arising from this procedure have been charged / (credited)
through the statement of recognised income and expenditure to the Foreign
Currency Reserve.
4.7 Income and expense recognition
Revenue from the sale of goods and services is recognised when i) the Group
has transferred to the buyer the significant risks and rewards of ownership
of the goods and services which is when supply has been made, ii) the amount
of revenue can be reliably measured and iii) the costs incurred or to be
incurred in respect of the transaction can be measured reliably.
In the year to 30 September 2009 the Group`s revenue primarily included the
sale of steam, until February 2009, when it was decided that the plant would
be temporarily taken out of commission until a new electricity power
purchase agreement was obtained since it was not considered economic to
operate the plant without being able to supply electricity.
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.
4.8 Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation and any
provision for impairment. No depreciation is charged during the period of
construction.
All operational plant and equipment in the course of construction is
recorded as plant under construction until such time as it is brought into
use by the Group. Plant under construction includes all direct expenditure.
On completion, such assets are transferred to the appropriate asset
category.
Depreciation is calculated to write down the cost or valuation less
estimated residual value of all property, plant and equipment other than
freehold land by equal annual instalments over their estimated useful
economic lives. The periods generally applicable are:
Plant and equipment: 3 to 15 years
Material residual values are updated as required, but at least annually,
whether or not the asset is revalued. Where the carrying amount of an asset
is greater than its estimated recoverable amount, it is written down
immediately to its recoverable amount.
4.9 Non-current assets classified as held for sale
Assets are categorised as non-current assets classified as held for sale
when the directors intend that the asset be sold rather than employed as an
operating asset. Non-current assets classified as held for sale are valued
at the lower of cost and fair value less costs to sell.
4.10 Borrowing costs
All borrowing costs, and directly attributable borrowing costs, are expensed
as incurred except where the costs are directly attributable to specific
construction projects, in which case the costs are capitalised as part of
those assets.
4.11 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 balance sheet 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 recognised
income and expense.
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts.
Deferred tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary
differences can be utilised.
Deferred income tax is provided on temporary differences arising in
investments in subsidiaries except where the timing of the reversal of the
temporary difference can be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Changes in deferred tax assets or liabilities are recognised as a component
of tax expense in the income statement, except where they relate to items
that are charged or credited directly to equity in which case the related
deferred tax is also charged or credited directly to equity.
4.12 Financial assets
The Group`s financial assets include cash and cash equivalents, trade and
other receivables.
Cash and cash equivalents include cash at bank and in hand as well as short
term highly liquid investments such as bank deposits.
Receivables are non-derivative financial assets with fixed or determinable
payment dates that are not quoted in an active market. They arise when the
Group provides money, goods or services directly to a debtor with no
intention of trading the receivable. Receivables are measured initially at
fair value and subsequently re-measured at amortised cost using the
effective interest method, less provision for impairment. Any impairment is
recognised in the income statement.
Trade receivables are provided against when objective evidence is received
that the Group will not be able to collect all amounts due to it in
accordance with the original terms of the receivables. The amount of the
write-down is determined as the difference between the asset`s carrying
amount and the present value of estimated cash flows.
4.13 Financial liabilities
Financial liabilities are obligations to pay cash or other financial
instruments and are recognised when the Group becomes a party to the
contractual provisions of the instrument. All interest related charges are
recognised as an expense in "finance expense" in the income statement except
to the extent that the costs are directly attributable to specific
construction projects. Bank and other loans are raised for support of long
term funding of the Group`s operations. They are recognised initially at
fair value, net of transaction costs. In subsequent periods, they are stated
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.
4.14 Hedging instruments
The Group has not entered into any derivative financial instruments for
hedging or for any other purpose.
4.15 Equity
Equity comprises the following:
- "Share capital" represents the nominal value of equity shares.
- "Share premium" represents the excess over nominal value of the fair
value of consideration received for equity shares, net of expenses of
the share issue.
- "Foreign currency reserve" represents the differences arising from
translation of investments in overseas subsidiaries.
- "Profit and loss reserve" represents retained earnings.
4.16 Investment in subsidiary undertakings
The Company`s investments in subsidiary undertakings are stated at cost less
any provision for impairment.
4.17 Amounts due from subsidiaries
Amounts due from subsidiaries are stated at their original value less any
provision for impairment.
4.18 Pensions
During the year under review, the Group did not operate or contribute to any
pension schemes.
4.19 Key assumptions and estimates
The Group makes estimates and assumptions concerning the future. The
resulting estimates will, by definition, seldom equal the related actual
results. The Board has considered the critical accounting estimates and
assumptions used in the financial statements and concluded that the main
areas of significant risk which may cause material adjustment to the
carrying value of assets and liabilities within the next financial year are
in respect of:
i) the value of plant and equipment and intangible assets where it has
been assumed that the MTPPP contract with Eskom will be obtained and a
new gas supply contract with Sasol will be secured, following which the
plant will resume full production of electricity and steam and
therefore no impairment to either of these assets has occurred,
ii) the value of non-current assets classified as held for sale where it
has been assumed that a sale at not less than the carrying value will
be achieved in the next 12 months, despite the fact that marketing of
the assets initially started in September 2008 and
iii) the going concern basis for the preparation of these financial
statements, further details of which are set out in note 4.2.
4.20 Accounting standards and interpretations not yet applied
New standards and interpretations currently in issue but not effective for
accounting periods commencing on 1 October 2008 are:
- IFRS 8 Operating Segments (effective 1 January 2009)
- Amendment to IFRS 2 Vesting Conditions and Cancellations (effective 1
January 2009)
- Improvements to IFRS 2008 (various effective dates, mostly effective 1
January 2009 other than changes relating to business combinations)
- IAS 1 (Revised 2007) Presentation of Financial Statements (effective 1
January 2009)
- IAS 23 (Revised 2007) Borrowing Costs (effective 1 January 2009)
- Amendment to IAS 27 Consolidated and Separate Financial Statements
(effective 1 January 2009)
- Amendment to IAS 32 Financial Instruments: Puttable Financial Instruments
and Obligations Arising on Liquidation (effective 1 January 2009)
- Amendment to IFRS 7 Improving Disclosures about Financial Instruments
(effective 1 January 2009)
- IFRS 9 Financial Instruments (effective 1 January 2013)
- IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011)
- IAS 27 Consolidated and Separate Financial Statements (Revised 2008)
(effective 1 July 2009)
- Amendment to IAS 39 Financial Instruments: Recognition and Measurement -
Eligible Hedged Items (effective 1 July 2009)
- Improvements to IFRSs 2009 (various effective dates, earliest of which is
1 July 2009, but mostly 2010)
- IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009)
- IFRIC 17 Distributions of Non-cash Assets to Owners (effective 1 July
2009)
- IFRIC 18 Transfers of Assets from Customers (effective prospectively for
transfers on or after 1 July 2009)
- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
(effective 1 July 2010)
IFRS 8, `Operating segments`
IFRS 8 replaces IAS 14, `Segment reporting`, and is effective for annual
periods beginning on or after 1 January 2009. The new standard requires a
`management approach`, under which segment information is presented on a
similar basis to that used for internal reporting purposes.
IAS 1, `Presentation of financial statements`
A revised version of IAS 1 was issued in September 2007. The revised
standard prohibits the presentation of items of income and expenses (that
is, `non-owner changes in equity`) in the statement of changes in equity,
requiring `non-owner changes in equity` to be presented separately from
owner changes in equity in a statement of comprehensive income. As a result,
the Group presents in the consolidated statement of changes in equity all
owner changes in equity; all non-owner changes in equity are presented in
the consolidated statement of comprehensive income. The adoption of this
revised standard will impact only presentational aspects; therefore, it will
have no impact on profit or earnings per share.
IFRS 3, `Business combinations` (revised 2008; effective for business
combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after 1 October 2009).
The revised standard continues to apply the acquisition method to business
combinations, with some significant changes. For example, all payments to
purchase a business are to be recorded at fair value at the acquisition
date, with contingent payments classified as debt subsequently re-measured
through the income statement. There is a choice on an acquisition-by-
acquisition basis to measure the non-controlling interest in the acquiree
either at fair value or at the non-controlling interest`s proportionate
share of the acquiree`s net assets. All acquisition-related costs should be
expensed. The Group will apply the revised standard prospectively to all
business combinations from 1 January 2010.
IFRS 9, `Financial instruments: Classification and measurement`
In November 2009, the Board issued the first part of IFRS 9 relating to the
classification and measurement of financial assets. IFRS 9 will ultimately
replace IAS 39. The standard requires an entity to classify its financial
assets on the basis of the entity`s business model for managing the
financial assets and the contractual cash flow characteristics of the
financial asset, and subsequently measures the financial assets as either at
amortised cost or fair value. The new standard is mandatory for annual
periods beginning on or after 1 January 2013.
`Improvements to IFRS` (issued in April 2009)
The improvements project contains numerous amendments to IFRS that the IASB
considers non-urgent but necessary. `Improvements to IFRS` comprise
amendments that result in accounting changes for presentation, recognition
or measurement purposes, as well as terminology or editorial amendments
related to a variety of individual IFRS standards. Most of the amendments
are effective for annual periods beginning on or after 1 January 2010
respectively, with earlier application permitted.
In 2009, the Group did not early adopt any new or amended standards and does
not plan to early adopt any of the standards issued but not yet effective.
No material changes to accounting policies are expected as a result of these
amendments.
5 Segment analysis
The following table provides a segmental analysis by geographic region. At
present, there are two geographic and two business segments. Activities in
RSA relate to Newcastle Cogeneration (Pty.) Ltd ("NewCogen") and the
business of generating electricity and steam, and activities in UK relate to
IPSA Group PLC and Blazeway Engineering Ltd.
RSA UK Intra- Total
Group
eliminat
ions
GBP`000 GBP`000 GBP`000 GBP`000
i) Year ended 30
September 2009
Revenue 1,039 - - 1,039
Cost of sales (2,227) - - (2,227)
Administrative (563) (422) - (985)
expenses
Other income / 396 (2,188) - (1,792)
(expense)
Net finance expense (99) (1,402) - (1,501)
Loss for the year (1,454) (4,012) - (5,466)
At 30 September 2009
Total assets 14,918 50,190 (15,695) 49,413
Total liabilities 20,705 31,832 (15,695) 36,842
ii) Year ended 30
September 2008
Revenue 2,828 - - 2,828
Cost of sales (3,630) - - (3,630)
Administrative (498) (923) - (1,421)
expenses
Other income/(expense) (654) (1,567) - (2,221)
Net finance expense 1 (8) - (7)
Loss for the year (1,953) (2,498) - (4,451)
At 30 September 2008
Total assets 13,180 47,736 (14,480) 46,436
Total liabilities 16,488 26,151 (14,480) 28,159
6 Sensitivity analysis
The value of shareholder equity and the results for the Group are affected
by changes in exchange rates, prices for electricity, steam and gas, and
interest rates. The following illustrates the effects of changes in these
variables.
Sensitivity to exchange rates
The Group`s electricity generating assets, which also provide steam to
industrial customers, are located in South Africa and therefore the sterling
value of the revenues and costs from this activity are affected by movements
in the value of the GBP versus the ZAR.
The parent company has provided 100% of the funding for the construction of
the plant. The loans are denominated in sterling and therefore the ZAR value
of the loans is affected by movements in the value of the ZAR versus
Sterling.
The parent company acquired, in 2007, 4 gas turbines from an Italian
manufacturer. The cost of the refurbishment, storage and interest charges is
denominated in Euro and the GBP liability outstanding during the year and at
the year end is therefore affected by movements in the exchange rate between
the GBP and the Euro.
The exchange rates applicable to the results for the current and prior year
were as follows:
Year to Year to
30.09.09 30.09.08
i) Closing rate
ZAR to GBP 11.83 14.90
Euro to GBP 1.09 1.26
ii) Average rate
ZAR to GBP 14.00 14.74
Euro to GBP 1.15 1.31
a) The effect of closing exchange rates at the year end is summarised below:
i) ZAR vs. GBP
If the closing rate of the ZAR relative to Sterling at 30 September 2009 had
been stronger or weaker by 10% with all other variables held constant,
shareholder equity would have been GBP1.1m (2008 - GBP1.1m) higher or lower
than reported and the loss for the year would have been GBP1.74m (2008 -
GBP1.46m) lower or higher than the loss reported.
ii) Euro vs. GBP
If the closing rate of the Euro relative to Sterling at 30 September 2009
had been stronger or weaker by 10% with all other variables held constant,
shareholder equity would have been GBP1.56m (2009 - GBP950k) lower or higher
than reported.
b) The effect of average exchange rates during the year is estimated to be:
i) ZAR vs. GBP
If the average rate of the ZAR relative to Sterling during the year to 30
September 2009 had been stronger or weaker by 10% with all other variables
held constant, the loss for the year would have been GBP1.2m (2008 -
GBP126k) higher or lower than the loss reported.
ii) Euro vs. GBP
Since no Euro liabilities were settled during the year, there was no impact
on the Group results arising on settlement of Euro liabilities. (During the
year to 30 September 2008, the amount of Euro liability settled was
Euro15.7m. If the rate of the Euro vs. GBP at the date of settlement had
been 10% lower or higher, the loss for the year to 30 September 2008 would
have been GBP1.26m lower or higher than the reported loss).
Sensitivity to price changes in electricity and steam revenues and gas
purchases
The results of the Group are affected by the price that electricity and
steam is sold at and by the price paid for the gas which is used by the
turbines.
The following table illustrates the effect on the results for the year and
shareholder equity at the year end of a 10% increase or decrease in these
prices:
Year to Year to
30.09.09 30.09.08
GBP`000 GBP`000
Selling price of electricity - 116
Selling price of steam 102 167
Purchase price of gas 415 287
Sensitivity to interest rates
The majority of the Group`s funding has been provided by share capital. In
2008, the Group agreed a GBP15m bank loan to assist in the funding of the 4
Siemens gas turbines. If the interest rate on the loan had been 10% higher
or lower, the effect on the finance expense for the year would have been to
increase or decrease the finance expense by GBP100k (2008 - nil effect since
in 2008 the interest expense was capitalised and added to the cost of the
turbines).
The Group has other short term loans. A 10% change in the interest rate
applied to these loans would have changed the interest expense for the year
by GBP8k (2008 - GBP4k).
Year Year
ended ended
30.09.09 30.09.08
7 Administrative expenses
GBP`000 GBP`000
Expenditure incurred in administrative expenses is as follows
:
Payroll and social security 401 728
Other administrative expenses 540 661
Audit fees 44 32
985 1,421
Audit fees comprise GBP33k (2008 - GBP22k) paid to the Company`s auditors
and GBP11k (2008 - GBP10k) paid to the auditors in respect of the audit of
subsidiary companies.
Year Year
ended ended
30.09.09 30.09.08
8 Other expense GBP`000
GBP`000
Storage charges1 (762)
Shortfall on gas `take-or-pay` (2,968) -
contract2
Foreign exchange gains / 1,938 (2,221)
(losses)3
(1,792) (2,221)
1 Storage charges have arisen during the year in respect of the 4 Siemens
gas turbines (2008 - nil). These charges will continue until the turbines
have been sold.
2 During the year, the plant in Newcastle was unable to supply electricity
due to the absence of a electricity offtake agreement with the result that
the gas purchased for the plant was less than the minimum offtake level
required under the `take-or-pay` contract. The shortfall between the gas
consumed and the required level amounted to GBP3m (2008 - nil).
3 Net foreign exchange gains (2008 - losses) have arisen as a result of i)
sterling denominated loans by the parent company to NewCogen being converted
into ZAR at the exchange rate ruling at the balance sheet date as compared
to the exchange rates ruling at the dates of the individual transactions
(2009 - GBP3.352m gain, 2008 - GBP654k loss), ii) weakness of the GBP vs.
the Euro on the Euro denominated liability due to the supplier of the 4
Siemens gas turbines (GBP1.457m loss, 2008 - GBP1.567m loss) and iii) other
exchange gains of GBP43k (2008 - nil).
Year Year
ended ended
30.09.09 30.09.08
9 Finance income
GBP`000 GBP`000
Interest received on bank 18 33
deposits
10 Finance expense Year Year
ended ended
30.09.09 30.09.08
GBP`000 GBP`000
Bank interest (see note 24) 997 2
Loan interest (see note 24) 522 38
1,519 40
11 Tax expense / credit
No UK corporation tax or foreign tax is payable on the
results of the Group. The relationship between the expected
tax credit and the tax credit actually recognised is as
follows:
Year Year
ended ended
30.09.09 30.09.08
GBP`000 GBP`000
Loss for the year before tax (5,466) (4,451)
Standard rate of corporation tax 28% 28%
in UK
Expected tax credit 1,530 1,246
Tax effect of consolidation - 277
adjustments and rate differences
Tax losses carried forward 1,530 1,523
No deferred tax asset has been recognised at the balance sheet date due to
uncertainty as to the timing of the expected utilisation of the tax losses.
12 Loss attributable to the parent company
The loss attributable to the parent company, IPSA Group PLC, was GBP3.11m
(year to 30.9.08 - GBP1.6m loss). As permitted by Section 408 of the
Companies Act 2006, no separate profit and loss account is presented in
respect of the parent company. The parent company loss in the year to 30
September 2009 includes exchange losses of GBP1.4m (2008 exchange loss -
GBP1.6m).
13 Loss per share
The loss per share is calculated by dividing the loss for the year
attributable to shareholders by the weighted average number of shares in
issue during the year.
Year Year
ended ended
30.09.09 30.09.08
Loss attributable to equity holders GBP5,465,92 GBP4,451,
of the Company 1 409
Average shares in issue during the 92,284,081 89,564,08
year 1
Basic, diluted and headline loss per (5.92p) (4.97p)
share
14 Property, plant and Plant and Plant under Total
equipment equipment construction
GBP`000 GBP`000 GBP`000
a) Group
Cost
Cost at 30 September 2007 10,894 21,837 32,731
Additions in year to 30.9.08 1,660 10,416 12,076
Exchange adjustment (566) - (566)
Transfer to `Assets held for - (32,253) (32,253)
resale`
Cost at 30 September 2008 11,988 - 11,988
Additions in year to 30.9.09 30 - 30
Exchange adjustment 3,294 - 3,294
Cost at 30 September 2009 15,312 - 15,312
Depreciation
Depreciation at 30 September 7 - 7
2007
Exchange adjustment (5) - (5)
Charge for the year to 30.9.08 412 - 412
Depreciation at 30 September 414 - 414
2008
Exchange adjustment 107 - 107
Charge for the year to 30.9.09 813 - 813
Depreciation at 30 September 1,334 - 1,334
2009
Net book value at 30 September 13,978 - 13,978
2009
Net book value at 30 September 11,574 - 11,574
2008
b) Company
Cost
Cost at 30 September 2007 - 21,837 21,837
Additions in year to 30.9.08 - 10,416 10,416
Transfer to `Assets held for - (32,253) (32,253)
resale`
Balance at 30 September 2008 - - -
and 2009
Depreciation
Depreciation at 30 September - - -
2007 - - -
Charge for the year to 30.9.08 - - -
Depreciation at 30 September - - -
2008 and 2009
Net book value at 30 September - - -
2009
Net book value at 30 September - - -
2008
Property, plant and equipment has been valued at cost. At 30 September 2007,
plant under construction represented the 4 Siemens gas turbines which were
acquired by the Company for use in the planned Coega Basin project in South
Africa. During 2008, the refurbishment work on these turbines was completed
but as a result of delays to the Coega project, a decision was taken to sell
the turbines.
15 Intangible assets 30.9.09 30.9.08
GBP`000 GBP`000
Net book value at beginning of year 750 833
Amortisation during the year (84) (83)
Net book value at end of year 666 750
The intangible asset represents the directors` estimate of the fair value of
a contract, owned by NewCogen at the date of acquisition, to supply steam
from the electricity generating plant. Amortisation over the life of the
contract commenced in October 2007. The directors estimate that the expected
life of the contract will be between 10 and 15 years. The amount of
amortisation, which has been included within `administrative expenses` in
the consolidated income statement, is based on a 10% per annum straight line
charge.
16 Trade and other receivables 30.9.09 30.9.08
due in more than 1 year
GBP`000 GBP`000
a) Group - -
b) Company
Amount due from subsidiary 19,833 3,239
Interest charged on the loan to subsidiary is at the rate of 3 month LIBOR
plus 1.5% and amounted to GBP900k in the year.
As a result of the continuing delay in NewCogen obtaining a medium term
contract for the supply of electricity, it is unlikely that the loans to
NewCogen will be repaid within the next 12 months and accordingly the
amounts due from NewCogen have been reclassified as being receivable in more
than 12 months. In 2008, the amounts due (GBP14.5m) were classified in trade
and other receivables due in less than 12 months.
17 Deferred tax asset 30.9.09 30.9.08
GBP`000 GBP`000
a) Group
Asset recognised in respect of tax - -
losses
Unrecognised asset in respect of tax 3,964 2,434
losses
b) Company
Asset recognised in respect of tax - -
losses
Unrecognised asset in respect of tax 1,667 796
losses
In view of the uncertainty over the timing of the utilisation of the tax
losses, the directors consider that it would be inappropriate to recognise
the potential deferred tax asset at this early stage in the development of
the Group.
18 Investments 30.9.09 30.9.08
GBP`000 GBP`000
Investment in subsidiary companies 500 500
Investment in joint venture company - -
500 500
i) Investment in Blazeway Engineering Ltd
The Company owns 100% of the issued share capital of Blazeway Engineering
Ltd (a company incorporated in England and Wales, company number 5356014).
The investment has been valued at cost. Blazeway Engineering Ltd owns 100%
of Newcastle Cogeneration (Pty.) Ltd (a company incorporated in the Republic
of South Africa).
ii) Investment in Elitheni Clean Coal Holdings Ltd
On 11 October 2007, Elitheni Clean Coal Holdings Ltd ("ECCH") was
incorporated under the British Virgin Islands Companies Act 2004 (company
number 1437070) as a wholly owned subsidiary of the Company. During the
year, the Company re-acquired at nil cost the outstanding 50% of the shares.
Since the year end, ECCH entered into an option to purchase land which the
directors intend to use, subject to appropriate planning approvals, as a
site for a coal fired generating plant. Since the project has not commenced,
the investment is being carried at cost (USD100).
19 Assets held for resale - Group and 30.9.09 30.9.08
Company
GBP`000 GBP`000
Balance at beginning of year 32,253 -
Steam turbines (transferred from property, - 32,253
plant and equipment)
Balance at end of year 32,253 32,253
These assets comprise 4 Siemens gas turbines which were acquired in 2007 for
the Coega project at a cost of GBP21.8m. During 2008, the manufacturer
refurbished the turbines at a cost of GBP9.8m and GBP0.6m was added to the
cost in respect of interest on a GBP15m bank loan which was used to partly
finance their purchase and is secured by a first charge on the assets. The
turbines were initially classified as `plant under construction`. Following
the completion of their refurbishment and the delay in the timetable for the
Coega project, it was decided in 2008 to sell the turbines and since then
the asset has been reclassified as `assets held for resale`. As set out in
note 31 (i), one turbine has been conditionally sold since the year end.
The directors consider, on the basis of professional valuations, that the
fair value, based on `open market value`, is in excess of the carrying
value. `Open market value` assumes willing buyer and willing seller.
20 Trade and other receivables due in 30.9.09 30.9.08
less than 1 year
GBP`000 GBP`000
a) Group
Trade receivables 75 1,370
Other receivables and prepayments 2,305 84
2,380 1,454
b) Company
Trade receivables 75 588
Other receivables and prepayments 2,211 66
Amounts due from subsidiary - 14,461
2,286 15,115
All trade and other receivables are unsecured and are not past their due
dates. The fair values of receivables is not materially different to the
carrying values shown above.
Amounts due from subsidiary in 2008 represent short term finance to NewCogen
in order to provide funding for the development of the plant in Newcastle.
The loan has been reclassified as a non-current asset during the year (see
note 16).
21 Cash and cash equivalents 30.9.09 30.9.08
GBP`000 GBP`000
a) Group
Cash at bank and in hand 38 54
Short term bank deposits 98 15
Short term bank deposits held as - 336
collateral
136 405
b) Company
Cash at bank and in hand 20 12
Short term bank deposits - -
Short term bank deposits held as - 336
collateral
20 348
The deposits held as collateral in 2008 were provided as security for gas
purchases by NewCogen.
22 Share capital 30.9.09 30.9.08
GBP`000 GBP`000
a) Authorised
150,000,000 ordinary shares of 2p 3,000 3,000
each
b) Allotted, called-up and fully
paid
95,004,081 ordinary shares of 2p 1,900 1,792
each
c) Reconciliation of movement in Number GBP
share capital
At 30 September 2007 and 2008 89,564,081 1,791,282
Allotment during the year 5,440,000 108,800
Total at 30 September 2009 95,004,081 1,900,082
The difference between the total consideration, less related costs, arising
from shares issued and the nominal value of the shares issued has been
credited to the share premium account.
23 Trade and other payables 30.9.09 30.9.08
GBP`000 GBP`000
a) Group
Trade payables 18,922 11,108
Other payables 631 909
19,553 12,017
b) Company
Trade payables 14,493 9,553
Other payables 66 475
14,559 10,028
Trade payables at 30 September 2009 includes an amount of Euro15.3m /
GBP14.01m (2008 - Euro11.8m / GBP9.4m) owing to Turbocare in respect of the
refurbishment work (which was completed in 2008 on the 4 Siemens gas
turbines originally acquired for the Coega project) plus storage charges and
interest (calculated at 1 month EURIBOR plus 1% per annum on the amount
outstanding). Euro12m of the Euro15.3m owing is not due until the turbines
are either sold or commissioned and a formal standstill over the due date
for the remaining balance of Euro3.3m / GBP3.0m has, since the year end,
been granted by Turbocare (see note 31(iii)).
24 Borrowings 30.9.09 30.9.08
GBP`000 GBP`000
a) Group
Bank loan 15,000 15,000
Overdue interest 997 -
Other loans 1,292 1,142
17,289 16,142
b) Company
Bank loan 15,000 15,000
Overdue interest 997 -
Other loans 1,276 1,123
17,273 16,123
The bank loan comprise a fully drawn facility of GBP15m which was originally
repayable on 30 September 2009. Interest is calculated on 3 month LIBOR plus
a margin of 2.25% and a default margin of 2%. The interest rate applicable
at 30 September 2009 was 4.85% (2008 - 8.56%). Interest charged during the
year amounted to GBP997k (2008 - GBP618k). This interest charged in 2008 was
capitalised. The loan is secured by a first charge on the 4 Siemens gas
turbines.
Since the year end, the Company has agreed a formal standstill on the bank
loan and the overdue interest until at least 30 November 2010 (see note
31(iii)).
Other loans comprise short term loans which are repayable on between 1 and 6
months notice. The loans bear interest at between 5% and 8% per annum (2008
- 8%). Interest charged during the year amounted to GBP82k (2008 - GBP38k).
All borrowings are denominated in sterling.
25 Reconciliation of loss before tax 30.9.09 30.9.08
to cash outflow from operations
GBP`000 GBP`000
a) Group
Loss before tax (5,466) (4,451)
Depreciation 813 412
Amortisation of intangible 84 83
Changes in working capital
Trade and other receivables (925) (362)
Trade and other payables 7,195 (703)
Exchange translation adjustments (4,296) 657
Interest received (18) (33)
Interest paid / payable 1,519 40
Net cash outflow from operating (1,094) (4,357)
activities
a) Company
Loss before tax (3,112) (1,598)
Changes in working capital
Trade and other receivables (1,631) (619)
Trade and other payables 4,190 (1,050)
Interest received (918) (932)
Interest paid / payable 1,419 40
Net cash outflow from operating (52) (4,159)
activities
26 Financial instruments and risk management
The Group is exposed to a variety of financial risks which result from both
its operating and investing risks. The Group`s risk management is
coordinated to secure the Group`s short to medium term cash flows by
minimising the 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`s principal trading operations are based in South Africa
and as a result the Group has exposure to currency exchange rate
fluctuations in the ZAR relative to sterling.
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) Liquidity risk
The Group attempts to anticipate the future cash requirements for
each project and seeks to put in place appropriate equity and debt
facilities to match the funding requirements of these projects.
Given the delays experienced in projects to date, there is a risk
that the Group will encounter difficulty in meeting obligations
associated with its financial liabilities since the Group`s assets
consist primarily of plant and equipment which may take time to
realise (see also note 4.2). However, since the year end and as
set out in notes 23, 24 and 31(iii), the Company has agreed a
formal standstill with its bankers and also with its main trade
creditor with respect to repayment terms which is expected to
provide sufficient time to realise proceeds from the sale of the
four Siemens gas turbines and enable the Group to meet its
financial obligations as they fall due.
d) Credit risk
Generally, the maximum credit risk exposure of financial assets is
the carrying amount of the financial assets as shown on the face
of the balance sheet (or in the detailed analysis provided in the
notes to the financial statements). Credit risk, therefore, is
only disclosed in circumstances where the maximum potential loss
differs significantly from the financial asset`s carrying amount.
The Group`s trade and other receivables are actively monitored to
avoid significant concentrations of credit risk.
The financial assets and liabilities of the Group and the Company are
classified as follows:
Group Company
Fair Loans Amor- Fair Loans Amor-
value and tised value and tised
through receiv- cost throug receiv- cost
profit ables h ables
and profit
loss and
loss
30 September GBP`000 GBP`000 GBP`000 GBP`00 GBP`000 GBP`000
2009 0
Trade and - - - - 19,833 -
other
receivables
> 1 year
Trade and - 75 - - 75 -
other
receivables
< 1 year
Cash and - 136 - - 20 -
cash
equivalents
Trade and - - (19,553) - - (14,559)
other
payables
Borrowings - - (17,289) - - (17,273)
- 211 (36,842) - 19,928 (31,832)
Group Company
Fair Loans Amor- Fair Loans Amor-
value and tised value and tised
through receiv- cost throug receiv- cost
profit ables h ables
and profit
loss and
loss
30 September GBP`000 GBP`000 GBP`000 GBP`00 GBP`000 GBP`000
2008 0
Trade and - - - - 3,239 -
other
receivables >
1 year
Trade and - 1,370 - - 14,461 -
other
receivables <
1 year
Cash and cash - 405 - - 348 -
equivalents
Trade and - - (12,017) - - (10,028)
other
payables
Borrowings - - (16,142) - - (16,123)
- 1,775 (28,159) - 18,048 (26,151)
In the opinion of the directors, there is no significant difference between
the fair values of the Group`s and the Company`s financial assets and
liabilities and their carrying values.
27 Capital commitments
There were no outstanding capital commitments at the year end.
28 Contingent liabilities
In July 2006, NewCogen entered into a contract with Sasol Gas for the supply
of gas. The contract provided for minimum offtake requirements ("take-or-
pay") during the first 5 years of the contract. In July 2009, the supplier
terminated the contact due to non-performance under the payment terms of the
contract, following the decision to temporarily cease power generation at
the plant owing to the delays by the authorities in South Africa in granting
a power purchase agreement. The directors of NewCogen are in discussions
with Sasol Gas concerning possible claims for non-performance under the take-
or-pay terms. The maximum potential claim amounts to ZAR 115.5m / GBP9.4m.
The directors have provided for ZAR 4.7m / GBP0.4m in respect of the period
from 1 July 2009 to 31 July 2009, being the date of termination of the
contract as the directors have been advised by their lawyers that any claim
for subsequent periods is unlikely to be successful.
As a result of NewCogen temporarily ceasing steam production in February
2009, NewCogen`s steam customers have indicated that they may make a claim
against NewCogen for additional costs of working, based on their costs of
procuring replacement steam. The directors of NewCogen do not consider that
any liability exists.
29 Related party transactions
Material transactions with related parties during the year were as follows:
Charge to the Company of GBP60k by Independent Power Corporation PLC ("IPC")
under a "Shared Services Agreement" for the provision of offices and other
administrative services. P Earl and E Shaw are shareholders and directors of
IPC. A sum of GBP115k (2008 - GBP23.5k) was owing to IPC at 30 September
2009.
ii) Short term loan from IPC amounting to GBP791k, including accrued
interest, at the year end (2008 - GBP781k). Interest on the loan,
which is being charged at 8%, amounted to GBP57k (2008 - GBP12k).
During the year, GBP550k of loans was capitalised by subscription
for 3,437,500 ordinary 2p shares at 16p per share. The loan is
repayable on six months notice.
iii) Short term loan from Secteur Holdings Ltd amounting to GBP350k,
including accrued interest, at the year end (2008 - GBP330k).
Interest on the loan, which is being charged at 3 month LIBOR +
3%, with a minimum of 5%, amounted to GBP21k (2008 - GBP26k). The
loan is repayable on 3 month`s notice. Mrs E Earl, P Earl`s wife,
is a director of Secteur Holdings Ltd.
iv) Payment by the Group of salaries (short term employee benefits) to
key management totalling GBP60k (2008 - GBP372k).
Transactions between the Company and NewCogen included:
i) Expense recharges in relation to services provided - GBPnil (2008
- GBP213k).
ii) Increase in unsecured loans by the Company to NewCogen of GBP1.2m
(2008 - GBP1.7m).
iii) Interest charge of GBP900k on loan balances outstanding (2008
- GBP900k).
30 Directors and 30.9.09 30.9.08
employee costs
GBP`000 GBP`000
Aggregate remuneration of 401 728
all employees and
directors
(including national
insurance)
Directors` remuneration Salary Fees Total
2009 2008 2009 2008 2009 2008
GBP`0 GBP` GBP` GBP`0 GBP`0 GBP`0
00 000 000 00 00 00
S Hargrave (Chairman) - 45 - - - 45
P Earl (Chief Executive) - 53 - - - 53
N Bryson - - 19 31 19 31
M Cox - 20 - - - 20
J Eyre 9 53 - - 9 53
R Sampson - - - 10 - 10
E Shaw 9 53 - - 9 53
J West - 3 17 22 17 25
Total 18 227 36 63 54 290
Fees include GBP18,750 (2008 - GBP30,500) charged by Balmyle Ltd, a company
controlled by N Bryson and GBP16,500 (2008 - GBP22,000) charged by Jimmy
West Associates Ltd, a company controlled by J West. No fees were paid to
Balmyle Ltd or Jimmy West Associates Ltd during the year and the amounts
charged were outstanding at the year end.
The average number of employees in the Group, including directors, was 21.
At 30 September 2009, the total number of employees in the Group was 20.
31 Post balance sheet date events
i) On 22 December 2009, the Company sold one of its four Siemens gas
turbines on a conditional contract to IPOL Bolivia Sucursal, a branch office
of Independent Power Operations Ltd, a subsidiary of IPC, a related party as
disclosed in note 29(i). The sale price of USD30m is payable by a) a non-
refundable deposit of USD1m which has been offset against loans to the
Company from IPC, b) USD20m payable on completion and iii) USD9m payable no
later than 31 March 2011. Completion is dependent upon the purchaser raising
funds and making payment of USD20m.
ii) On 5th March 2010, the Company issued a GBP650k unsecured loan note,
with interest payable at 6%. The loan note is repayable by 31 January 2011
or the earlier of a change of control of the Company or the sale of two of
the steam turbines or a full or partial sale of certain plant and equipment
in South Africa. The loan note holders have also been issued warrants over
6.5m ordinary shares exercisable between the repayment date and 30 months
thereafter at the lower of 19 pence per share and the price at which any
future ordinary shares are issued prior to such exercise.
iii) On 5th March 2010, the Company entered into an agency agreement with
Standard Bank and Turbocare in respect of the marketing of the 4 Siemens gas
turbines and the distribution of the proceeds received in connection with
the sale. The agreement also provides for a standstill agreement whereby
Standard Bank and Turbocare have undertaken that they will not take
proceedings against the Company to recover debts owed to them and that they
will not enforce any security rights they may have during the term of the
agreement. This agreement terminates on 31 January 2011 or earlier in the
event that Standard Bank and Turbocare are paid all sums due to them prior
to that date or at Standard Bank`s election after 30 November 2010 in the
event that a sale has not been secured.
iv) The Company`s subsidiary, NewCogen is currently endeavouring to secure a
power purchase contract with Eskom for its power plant in South Africa under
the delayed MTPPP. There has been no new announcement from Eskom regarding
the MTPPP. However on 24 February 2010 the South African electricity
regulator, NERSA, announced the new multi-year price determination for
Eskom, which included an allocation of resources in connection with power
purchase contracts with independent producers, of which the MTPPP forms a
part. It is the intention of the directors of NewCogen to substantially
refinance its 18MW power plant as soon as a power purchase agreement is
signed. NewCogen needs to come to an agreement with Sasol for a new gas
contract and settle overdue amounts of approximately GBP3m claimed by Sasol
in respect of gas consumption and take-or-pay liabilities prior to
restarting the plant.
Date: 31/03/2010 08:00:05 Produced by the JSE SENS Department.
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