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Audited Results for the year ended 31 March 2013
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”, the “Group” or the “Company”)
Audited Results for the year ended 31 March 2013
IPSA, the AIM and AltX listed independent power plant developer with operations in southern Africa,
today announces its audited results for the year ended 31 March 2013.
Highlights:
• Revenue of £4.3 million (year to 31 March 2012 - £4.4 million)
• Group loss after tax of £1.9 million (year to 31 March 2012 - £5.6 million profit, including
£6.1m exceptional profit on sale of 2 turbines)
• Plant gross loss of £0.9 million (year to 31 March 2012 - £0.1 million loss)
• Plant operating loss £1.7 million (year to 31 March 2012 - £0.9 million loss)
Since the year-end, the remaining 2 turbines have been sold for $25m (£16.1m) which has enabled
the Company to repay its borrowings and the Board can now focus fully on developing a strategy of
future growth and expansion of power generation in southern Africa. A pro-forma balance sheet at
31 July 2013 is provided at the end of this report.
Commenting, Richard Linnell, Chairman of IPSA, said:
“It was with considerable relief that I was able to report in June that the final 2 turbines had been
sold. The debt and costs associated with these turbines have been a significant drain on shareholder
value and with all of the Group’s borrowings and the majority of the Group’s creditors now repaid,
the Board can concentrate on its core business of developing profitable power generation operations
in southern Africa.”
For further information contact:
Phil Metcalf, CEO, IPSA Group PLC +44 (0)20 7793 7676
Elizabeth Shaw, Finance Director, IPSA Group PLC +44 (0)20 7793 7676
James Joyce and Nick Field, WH Ireland Ltd (Nominated Adviser and Broker) +44 (0)20 7220 1666
Riaan van Heerden, PSG Capital (Pty) Limited, (South African Sponsors) +27 11 032 7400
Or visit IPSA's website: www.ipsagroup.co.uk
CHAIRMAN'S STATEMENT
I am pleased to present to the shareholders of IPSA Group PLC (the “Group”) the Report and
Accounts for the year ended 31 March 2013.
In operating terms the Group has performed satisfactorily. However, the failure to dispose of the
remaining two Siemens Westinghouse 701DU turbines (the “Turbines”) during the financial year
under review, together with significant deterioration in the sterling/ZAR exchange rate has resulted
in a Group after tax loss of £1.9m.
Group turnover at £4.3 million is almost the same for this year in comparison to last year (2012:
£4.4 million). The Group recorded an overall improvement in its operating figures. However an
impairment charge of £1 million (2012: nil) has been booked against the carrying value of the plant
in South Africa, further details are set out in note 14. As a result the operating loss increased from
£1.45 million last year to £1.95 million loss in the current year.
As in the year to 31 March 2012, there were again a number of one-off items. In total, these
amounted to a credit of £0.6 million (2012: £8.3 million credit, including £6.1 million profit on the
sale of 2 turbines) and comprised costs associated with the turbines of £410k (2012:- £256k), legal
costs associated with the loans on the turbines (which were in default) plus costs associated with
extending the repayment of some loans, totalling £500k (2012:- £320k), foreign exchange losses
on amounts due on the turbines of £459k (2012: £326k credit) and also a credit of £1.9 million in
respect of a deposit paid by a prospective purchaser of the remaining two turbines which was
subsequently forfeited. Further details are set out in note 9.
The net finance expense declined from £1.2 million to £0.5 million as a result of reduced
indebtedness following the disposal of the first pair of Turbines last year.
The carrying value of the remaining Turbines and ancillary equipment in these financial statements
remains at £15.71 million. In June 2013 the Company sold the Turbines for US$25 million (£16.1
million) and the remaining equipment is valued at no less than £4.0 million.
Although the combined revenue in the year of £4.3 million from electricity and steam sales was not
sufficient to record an operating profit after depreciation, it does nonetheless represent continued
reliable performance of the Newcastle Cogeneration plant. Excluding depreciation and the
impairment charge, the plant recorded a gross profit of £0.70 million (2012: gross profit £0.73
million) and an operating loss, excluding depreciation and the impairment charge, of £0.03 million
(2012: £0.06 million loss). In local currency, turnover was ZAR 58.1 million (2012: ZAR 51.7
million), gross profit before depreciation and the impairment charge was ZAR 9.4 million (2012:
ZAR 8.6 million) and the operating loss, excluding depreciation and the impairment charge, was
ZAR 0.8 million (2012: ZAR 0.7 million).
As I touched on briefly in my review of the Group financial statements above, the remaining two
Turbines were sold in June 2013 to Rurelec PLC and a pro forma balance sheet has been prepared
to illustrate the position of the Group at 31 July 2013, following the disposal. Of the total sales price
the Group has received US$18.5m (£11.9 million) of which £10.2 million has been used to repay
trade creditors and borrowings and approximately £1.7 million has been retained by the Company
in cash and shares in the purchaser. The balance of the purchase price (US$6.5 million/£4.2
million) is due to be paid before June 2015. The amount owed to Turbocare SpA is currently under
dispute, but has been fully provided for in the accounts at £4.2 million.
The disposal of the remaining two Turbines has been beneficial for the Group and we will work on
further asset realisations over the coming year. We are now proceeding with plans to expand the
facility at Newcastle in order to maximise the benefit of the existing MTPPP contract, which expires
at the end of March 2015. Prior to that, in accordance with the tariff rules, NewCogen will, from
March 2014, experience an 8 per cent. fall in the price that the Government buys electricity. In
anticipation of that reduction, and in order to take advantage of opportunities arising from a
continued shortage of capacity being added to the South African power system, we are developing
further longer term plans to add additional, more efficient, capacity to the Newcastle site based on
power purchase agreements, leveraging our generating licence, gird connection and gas availability,
as well as seriously considering development at other locations in South Africa
Richard Linnell
Chairman
6 September 2013
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
NEWCOGEN
In the past year we have seen reliable operations at the Newcastle Cogeneration power plant, with
availability of over 95 per cent.
Over the second full year of operation ending in March 2013, NewCogen generated 46,277 MWh of
electricity (2012: 46,470 MWh), predominantly during peak hours on a two shifting basis, and
delivered just under 68,700 tonnes of steam (2012: 57,000 tonnes). Electricity was delivered to
Eskom under the MTPPP contract, which remains in place until March 2015. Steam was delivered to
Karbochem and Lanxess under ad hoc arrangements in the absence of a firm long term contracts.
We continue to enjoy excellent relationships with ESKOM, the local Newcastle Municipality and our
gas supplier, Spring Lights Gas (Pty) Limited (“Spring Lights”). We consumed during the 12 months
to end of March 2013 approximately 683,000 GJ of gas which represented a minor shortfall against
our minimum Take of Pay obligation of 700,000GJ which will be addressed in the next operational
period.
Electricity prices are adjusted annually under the MTPPP contract. In April 2013, the price was
increased by 9.8 per cent. in line with the December 2012 inflation figures. Gas prices are adjusted
twice a year, now taking place in April and October, based on a combination of South African
inflation figures and the price of Brent Crude in ZAR. The April increase was an increase of 10 per
cent, and in October, it was 2.8 per cent. Future projections for gas price increases are currently
forecast to be less than the increase we are anticipating in the electricity prices over the next year,
but margins are susceptible to oil price and foreign exchange movements. In light of this, the
directors have recorded an impairment charge of £1 million against the carrying value of the plant.
Certain major maintenance activities have been carried on out one of the gas turbines, which
resulted in a reduction of revenues over approximately one month. The second gas turbine will
undertake maintenance in a similar manner during the next operational period, with a similar
reduction in revenues over six weeks in this case.
We continue to explore a number of opportunities to increase capacity at the Newcastle site, with
programs already underway and a number of others being actively developed.
NewCogen takes the safety of its employees seriously and I am very pleased to report that there
have been zero incidences or Lost Time Accidents in the past year.
THE TURBINES
The sale of last two of the Gas Turbines was completed for $25 million with Rurelec in June 2013.
This sale did not include the Balance of Plant, which remains for sale and is valued at between $6-
$10m. $6.5m of proceeds from the sale of the turbines is still awaited, but the initial consideration
has allowed settlement with all major creditors, and no loans are now in default. Standard Bank in
particular was fully paid out in March 2013.
On 15 October 2012 the Company announced that it had agreed to sell its two remaining Siemens
Westinghouse 701 DU gas turbines to Iris Eco Power Sdn Bhd ("Iris"), a Malaysian power
development company, for consideration of US$31 million (approximately £19.4 million).
Unfortunately, the purchaser was unable to complete and the contract was terminated on 28
February 2013 In accordance with the terms of the contract the deposit of US$3.1m was not
refundable and the funds were therefore retained by the Company and used to pay creditors.
WORKING CAPITAL
Working capital has continued to be very tight for IPSA, but the situation has been managed
through the year successfully.
In August 2012 the Company received confirmation of the withdrawal of the claim by Sasol Gas
Limited against Newcastle Co-generation (Pty) Limited ("NewCogen"), the Company's wholly owned
subsidiary, for sums claimed under the gas supply agreement terminated in August 2009 (the
"Claim") following payment by NewCogen of the sum of ZAR 7 million (approximately £550,000).
Funding for the settlement was provided by Sterling Trust Limited, our largest shareholder, by way
of a loan to NewCogen. The credit of £3.2 million arising from this satisfactory settlement was
included in last year’s Income statement.
On 27 March 2013 the Company obtained a new short term loan in the amount of £4.2m and used
the proceeds to repay all of the Company's secured bank debt which had been in default for a
considerable period of time. The new funding arrangement allowed sufficient time to achieve a sale
of the Turbines, which duly took place in the first quarter of the new financial year.
The short term loan was subsequently increased in order to allow us to fund our maintenance
program.
Following completion of the sale of the turbines both the Sterling loans to NewCogen and the short
term loans to IPSA have been repaid. Whilst cash remains tight, we are now able to move forward
with expansion projects although some additional modest funding will be required to achieve this in
the short term.
GENERAL, RESTRUCTURING OF THE BOARD RENEWED FOCUS ON SOUTH AFRICA, AND
OTHER PROJECTS
As far as we have been able to with limited funds, we have continued to monitor the market and
examine opportunities which have arisen from time to time. With reserve margins at an all-time low
in South Africa and with a backdrop of positive encouragement towards independent power
producers (“IPPs”) in South Africa, particularly with the introduction recently of a program
sponsored by the Department of Energy for new capacity, the resolution of the legacy problems at
IPSA is very well timed, and we will have many excellent opportunities to develop the business in
the coming 12 months. It is of particular note that we have the capacity and infrastructure available
and permitted in Newcastle to install addition capacity quickly in response to such enquiries and a
growing number of potential Industrial based PPAs.
To make the most of this opportunity we are restructuring the Board, with the first steps already
taken, with an intent and purpose to focus our management execution out of a base in South Africa,
such that we are much closer to the major decision makers in Government, ESKOM and our main
customers.
Since joining as the CEO in September of 2011, there have been many challenging moments, but I
am encouraged to see the options becoming available for growth in the future and for a revitalised,
restructured and re-capitalised IPSA can finally start to realise its full potential in a growing and
welcoming and well regulated market
Phil Metcalf
Chief Executive
6 September 2013
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2013
Notes 12 months 12 months
31/3/13 31/3/12
£’000 £’000
Revenue 4 4,327 4,371
Cost of sales 6 (5,247) (4,438)
Gross loss (920) (67)
Administrative expenses 7 (1,037) (1,380)
Operating loss (1,957) (1,447)
Profit on sale of non-current 8 - 6,116
asset
Other income 9 566 2,200
Net finance expense 10 (485) (1,227)
(Loss) / profit before tax (1,876) 5,642
Tax expense 11 - -
(Loss) / profit after tax (1,876) 5,642
Other comprehensive income
Exchange differences on (977) (980)
translation of foreign operation
Total comprehensive (loss) / (2,853) 4,662
income
(Loss) / profit per ordinary 13 (1.74p) 5.25p
share
(basic, diluted and headline)
The accompanying accounting policies and notes form an integral part of these financial
statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2013
Notes 31/3/13 31/3/12
£’000 £’000
Assets
Non-current assets
Property, plant and equipment 14 8,376 11,070
8,376 11,070
Current assets
Trade and other receivables 17 582 816
Cash and cash equivalents 18 100 35
682 851
Non-current assets classified 19 15,712 15,712
as assets held for sale
Total assets 24,770 27,633
Equity and liabilities
Equity attributable to equity holders of the parent:
Share capital 20 2,150 2,150
Share premium account 26,767 26,767
Foreign currency reserve (4,011) (3,034)
Profit and loss reserve (15,266) (13,390)
Total equity 9,640 12,493
Current liabilities
Trade and other payables 21 7,336 7,814
Borrowings 22 7,794 7,326
15,130 15,140
Total equity and liabilities 24,770 27,633
The financial statements were approved by the Board on 6 September 2013.
P C Metcalf E R Shaw
Director Director
Company registration number: 5496202
The accompanying accounting policies and notes form an integral part of these financial
statements
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
at 31 March 2013
Notes 31/3/13 31/3/12
£’000 £’000
Assets
Non-current assets
Investments 15 22,649 500
Trade and other receivables 16 - 22,653
22,649 23,153
Current assets
Trade and other receivables 17 29 21
Cash and cash equivalents 18 2 14
31 35
Non-current assets 19 15,712 15,712
classified as assets held for
sale
Total assets 38,392 38,900
Equity and liabilities
Equity attributable to equity holders of the parent:
Share capital 20 2,150 2,150
Share premium account 26,767 26,767
Profit and loss reserve (3,845) (3,630)
Total equity 25,072 25,287
Current liabilities
Trade and other payables 21 6,532 6,664
Borrowings 22 6,788 6,949
13,320 13,613
Total equity and liabilities 38,392 38,900
The financial statements were approved by the Board on 6 September 2013.
P C Metcalf E R Shaw
Director Director
Company registration number: 5496202
The accompanying accounting policies and notes form an integral part of these financial
statements
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2013
12 months 12 months
31/3/13 31/3/12
£’000 £’000
(Loss) / profit for the year (1,876) 5,642
Add back net finance expense 485 1,227
Deduct profit on sale of asset (1,935) (6,116)
held for sale
Adjustments for:
Depreciation and impairment 1,675 809
Impairment of asset held for - 780
sale
Unrealised exchange losses 427 464
Change in trade and 233 2,150
other receivables
Change in trade and (515) (16,400)
other payables
Cash used in operations (1,506) (11,444)
Interest paid (3,243) (8)
Interest received 34 -
Net cash used in operations (4,715) (11,452)
Cash flows from investing
Activities
Purchase of plant and (384) (1)
Equipment
Proceeds from sale of asset held - 22,912
for sale
Deposit on asset held for sale 1,935 1,257
1,551 24,168
Cash flow from financing
Activities
Loans received 4,799 1,359
Loans repaid (1,570) (14,073)
3,229 (12,714)
Increase in cash 65 2
and cash equivalents
Cash and cash equivalents 35 33
at start of year
Cash and cash equivalents 100 35
at end of year
The accompanying accounting policies and notes form an integral part of these financial
statements
PARENT COMPANY STATEMENT OF CASH FLOWS
for the year ended 31 March 2013
12 months 12 months
31/3/13 31/3/12
£’000 £’000
(Loss) / profit for the year (215) 3,840
Add back net finance expense 936 1,185
Deduct profit on sale of asset (1,935) (6,116)
held for sale
Adjustments for:
Impairment of asset held for - 780
sale
Change in trade and (8) 2,035
other receivables
Change in trade and (170) (12,839)
other payables
Cash used in operations (1,392) (11,115)
Interest paid (3,243) -
Net cash used in operations (4,635) (11,115)
Cash flows from investing
activities
Loan repaid by / (to subsidiary) 4 (343)
Proceeds from sale of asset held - 22,912
for sale
Deposit on asset held for sale 1,935 1,257
1,939 23,826
Cash flow from financing
activities
Loans received 4,254 1,359
Loans repaid (1,570) (14,073)
2,684 (12,714)
Decrease in cash (12) (3)
and cash equivalents
Cash and cash equivalents 14 17
at start of year
Cash and cash equivalents 2 14
at end of year
The accompanying accounting policies and notes form an integral part of these financial
statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2013
Share Share Foreign Profit and loss Total equity
capital premium currency reserve
account reserve
£’000 £’000 £’000 £’000 £’000
At 31.3.11 2,150 26,767 (2,054) (19,032) 7,831
Profit for the year - - - 5,642 5,642
Other comprehensive - - (980) - (980)
income / (loss)
Total comprehensive - - (980) 5,642 4,662
income for the year
At 31.3.12 2,150 26,767 (3,034) (13,390) 12,493
Loss for the year - - - (1,876) (1,876)
Other comprehensive - - (977) - (977)
income / (loss)
Total comprehensive - - (977) (1,876) (2,853)
loss for the year
At 31.3.13 2,150 26,767 (4,011) (15,266) 9,640
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2013
Share Share Foreign Profit and loss Total equity
capital premium currency reserve
account reserve
£’000 £’000 £’000 £’000 £’000
At 31.3.11 2,150 26,767 - (7,470) 21,447
Profit for the year - - - 3,840 3,840
Total comprehensive - - - 3,840 3,840
income for the year
At 31.3.12 2,150 26,767 - (3,630) 25,287
Loss for the year - - - (215) (215)
Total comprehensive - - - (215) (215)
loss for the year
At 31.3.13 2,150 26,767 - (3,845) 25,072
The accompanying accounting policies and notes form an integral part of these financial
statements
Notes to the Financial Statements
for the year ended 31 March 2013
1 Principal activities and nature of operations
The principal activity of IPSA Group PLC and its subsidiaries (the “Group”) is the construction,
development and operation of electricity generation assets and the supply of electricity to the
wholesale market and major end-users. The parent Company is also involved in the purchase and
sale of power related equipment and products.
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, and the
continued marketing of the remaining 2 turbines, which were sold after the year-end for $25m.
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. The address of IPSA Group PLC’s registered office is given on the information
page. IPSA Group PLC’s shares are traded on the AIM market of the London Stock Exchange PLC in
London and, since October 2006, the shares have had a dual listing on Altx (the Alternative
Exchange, a division of JSE Limited, of the Johannesburg market).
3 Summary of accounting policies
3.1 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.
3.2 Going concern
As announced in June 2013, the Company completed the sale of the remaining 2 turbines for a total
consideration of $25m (£16.1m) of which £11.9m has been paid and the balance of £4.2m is
expected to be received at least within the next 12 months.
This sale enabled the Company to repay all of its loans and settle the majority of its creditors, with
the result that at 31 July 2013 there were only two main creditors - a) an amount claimed by
Turbocare (the supplier of the turbines - £4.16 million at 31 March 2013) and b) unpaid salary due
to the directors (£1.25 million at 31 March 2013) and four main assets - a) a cash balance of £0.7
million b) an amount of ancillary plant equipment which has been valued at in excess of £4 million,
c) 8.5 million shares in Rurelec PLC valued at £1m and d) its 100% investment in Newcastle
Cogeneration (Pty.) Ltd.
A pro-forma consolidated balance sheet at 31 July 2013, which does not form part of these financial
statements, is shown as an appendix at the end of the financial statements.
The Company is in arbitration proceedings with Turbocare with respect to the amount claimed since
a significant portion of the claim by Turbocare (which is fully provided in these financial statements
at £4.16 million) is disputed. This process is expected to conclude early next year.
The directors have agreed a stand-still in respect of the amounts due to them pending the Company
having sufficient cash to settle the overdue amounts.
Whilst there remains uncertainty with respect to the final settlement of the debt claimed by
Turbocare and also uncertainly on the timing of the receipt of the £4.2 million deferred
consideration and the sale proceeds of the ancillary plant equipment, the directors consider that the
Company does have adequate resources to continue in operational existence for the foreseeable
future and therefore the directors continue to adopt the going concern basis in preparing the annual
report and accounts.
3.3 Basis of consolidation
The Group financial statements consolidate those of the Company and its subsidiary undertakings
drawn up to 31 March 2013.
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.
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 acquisition method. The acquisition 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.
3.4 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.
3.5 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.
The 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.
3.6 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
recognised in other comprehensive income and accumulated in the Foreign Currency Reserve.
3.7 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 ended 31 March 2013 the Group’s revenue comprised the sale of electricity and steam
from the plant in South Africa. In the year to 31 March 2012, the profit from the sale of the 2
turbines held as assets for sale was credited to ‘other income’.
Operating expenses are recognised in the consolidated statement of comprehensive income upon
utilisation of the service or at the date of their origin. All other income and expenses are reported
on an accrual basis.
3.8 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 25 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.
3.9 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.
3.10 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.
3.11 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.
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.
3.12 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 Profit or Loss.
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.
3.13 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 Statement of Comprehensive
Income 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 Profit or Loss 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.
3.14 Hedging instruments
The Group has not entered into any derivative financial instruments for hedging or for any other
purpose.
3.15 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; and
• "Profit and loss reserve" represents retained earnings.
3.16 Investment in subsidiary undertakings
The Company’s investments in subsidiary undertakings are stated at cost less any provision for
impairment.
3.17 Amounts due from subsidiaries
Amounts due from subsidiaries are measured initially at fair value plus transaction costs and
thereafter at amortised costs.
3.18 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 the power plant in NewCogen, where recoverable, has been assessed on a value
in use basis amount based on the assumptions that a) a new contract on similar terms to the
MTPPP contract is put in place and will continue for the foreseeable future and b) using a
discount rate of 10.3 per cent, an impairment charge of £1 million has been recognised; and
ii) on the basis as shown in note 15, management have now classified the parent’s receivables
from its subsidiaries as equity in nature and hence all amounts receivable have been added to
the net investment in that subsidiary. Management have performed an impairment review
using discounted cash flow forecasts based on future plans and expectations. Management
are satisfied that no impairment has arisen and will continue to review it on an annual basis;
and
iii) the going concern basis for the preparation of these financial statements, further details of
which are set out in note 3.2.
3.19 Standards, amendments and interpretations to existing standards that are not yet
effective and have not been early adopted by the Group in the 31 March 2013 financial
statements
At the date of authorisation of these financial statements certain new standards, amendments and
interpretations to existing standards have been published but are not yet effective. The Group has
not early adopted any of these pronouncements. The new Standards, amendments and
Interpretations that are expected to be relevant to the Group’s financial statements are as follows:
Applicable for financial
Standard/interpretation Content years
beginning on/after
IFRS 9 Financial instruments: Classification and measurement 1 January, 2015
IFRS 10 Consolidated Financial Statements 1 January, 2014
IFRS 11 Joint Arrangements 1 January, 2014
IFRS 12* Disclosure of Interests in Other Entities 1 January, 2014
IFRS 13* Fair Value Measurement 1 January, 2013
IAS 19 (Revised June 2011)* Employee Benefits 1 January, 2013
IAS 28 (Revised)* Investments in Associates and Joint Ventures 1 January, 2014
Amendments to IFRS 7* Disclosures - Transfers of Financial Assets and Offsetting Financial
Assets and Financial Liabilities - 1 July, 2011
Amendments to IAS 12* Deferred Tax: Recovery of Underlying Assets 1 January, 2012
Amendments to IAS 1 Presentation of Items of Other Comprehensive Income 1 July, 2012
Amendments to IAS 32* Offsetting Financial Assets and Financial Liabilities 1 January, 2014
*Not expected to have a material impact on the Group.
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, 2015.
IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the portion of IAS 27 ‘Consolidated and Separate Financial Statements’ that
addresses the accounting for consolidated financial statements. It also includes the issues raised in
SIC-12 ‘Consolidation — Special Purpose Entities’. IFRS 10 establishes a single control model that
applies to all entities including special purpose entities. The changes introduced by IFRS 10 will
require management to exercise significant judgement to determine which entities are controlled,
and therefore, are required to be consolidated by a parent, compared with the requirements that
were in IAS 27. This standard becomes effective for annual periods beginning on or after 1 January,
2014.
Amendments to IAS 1 Presentation of Financial Statements (IAS 1 Amendments)
The IAS 1 Amendments require an entity to group items presented in other comprehensive income
into those that, in accordance with other IFRSs: (a) will not be reclassified subsequently to profit or
loss and (b) will be reclassified subsequently to profit or loss when specific conditions are met. It is
applicable for annual periods beginning on or after 1 July, 2012. The Group’s management expects
this will change the current presentation of items in other comprehensive income; however, it will
not affect the measurement or recognition of such items.
The directors do not anticipate that the adoption of these standards and interpretations in future
periods will have any material impact on the financial statements of the Group.
4 Segment analysis
IFRS 8 requires operating segments to be identified on the basis of internal reports that are
regularly reviewed by the chief operating decision maker (considered to be the Executive Board).
Management currently identifies two operating segments, being operations in RSA (comprising the
business of generating electricity and, as a by-product, the generation of steam) and the head office
in the UK. Each operating segment is monitored separately and strategic decisions are made on the
basis of segment operating results. The electricity is sold to a single customer and the steam is sold
to two industrial customers who operate from premises adjacent to the plant.
The following table provides a segmental analysis.
RSA UK Inter-group Total
Year ended 31.03.13
£’000 £’000 £’000 £’000
Revenue 4,327 - - 4,327
Cost of sales (5,322) - 75 (5,247)
Gross loss (995) - 75 (920)
Administrative expenses (738) (224) (75) (1,037)
Operating loss (1,733) (224) - (1,957)
Other income / (expense) (379) 945 - 566
Net finance expense (49) (936) 500 (485)
Loss for year (2,161) (215) 500 (1,876)
Total assets 9,027 38,392 (22,649) 24,770
Total liabilities 24,459 13,320 (22,649) 15,130
Year ended 31.03.12 RSA UK Inter-group Total
£’000 £’000 £’000 £’000
Revenue 4,371 - - 4,371
Cost of sales (4,438) - - (4,438)
Gross loss (67) - - (67)
Administrative expenses (791) (589) - (1,380)
Operating loss (858) (589) - (1,447)
Profit on sale of non - 6,116 - 6,116
current asset
Other income / (expense) 3,202 (1,002) - 2,200
Finance expense (42) (685) (500) (1,227)
Profit / (loss) for year 2,302 3,840 (500) 5,642
Total assets 11,886 38,900 (23,153) 27,633
Total liabilities 24,680 13,613 (23,153) 15,140
5 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.
i) 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 sterling versus the ZAR.
In addition to the effects arising from changes in the value of sterling relative to the ZAR, the
Company’s results are exposed to changes in the value of sterling versus the € in respect of the
liability arising on the Turbines purchased from an Italian manufacturer since the liability is
denominated in €.
The exchange rates applicable to the results for the current year and prior year were as follows:
Year to Year to
31.03.13 31.03.12
Closing rate
ZAR to £ 14.00 12.27
€ to £ 1.19 1.20
Average rate
ZAR to £ 13.42 11.83
€ to £ 1.236 1.16
If exchange rates had been 10% higher or lower, the effect on the Group’s results and net equity
would have been:
A 10% change in the value of
Sterling on result for the year
ZAR £0.1m £0.2m
€ £0.4m £0.5m
A 10% change in the value of
Sterling on net equity
ZAR £0.8m £0.7m
€ £0.4m £0.5m
ii) Sensitivity to price changes in electricity and steam sold and gas purchased
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.
If the price of electricity and steam sold during the year had been 10 per cent higher or lower, the
result for the year would have been £433,000 (year to 31.3.2012:£437,000) higher or lower.
If the price paid for gas used during the year had been 10 per cent higher or lower, the result for
the year would have been £318,000 (year to 31.3.2012: £321,000) lower or higher.
iii) Sensitivity to interest rates
The Group has a number of short term interest bearing loans. A 10 per cent change in the interest
rate applied to these loans would have changed the interest expense for the year by £49,000
(31.3.2012: £98,000).
6 Cost of sales Year ended Year ended
31.03.13 31.03.12
£’000 £’000
Gas 3,176 3,218
Depreciation 675 798
Impairment charge 1,000 -
Other 396 422
5,247 4,438
7 Administrative expenses Year ended Year ended
31.03.13 31.03.12
£’000 £’000
Payroll and social security 680 786
Other administrative expenses 316 555
Audit fees 41 39
1,037 1,380
Audit fees comprise £31,000 (year to 31.3.2012: £29,000) paid to the Company’s auditors and
£10,000 (year to 31.3.2012: £10,000) paid to the auditors in respect of the audit of subsidiary
companies.
8 Profit on sale of non-current asset Year ended Year ended
31.03.13 31.03.12
£’000 £’000
Sale proceeds - 22,912
Costs - (16,796)
Profit on sale - 6,116
In 2007, the Company acquired 4 gas turbines. Following refurbishment of the turbines, the
Company intended to sell the turbines to its subsidiary in South Africa which was tendering for a
major power project. Due to weakening economic conditions, the project was delayed and it was
decided that it was in the best interests of shareholders to sell the turbines to a third party. During
2012, 2 of the turbines were sold. The remaining two turbines were sold after the year-end.
9 Other income Year ended Year ended
31.03.13 31.03.12
£’000 £’000
1
Storage and insurance charges (410) (256)
Costs re loan for turbines2 (500) (320)
Deposit received on turbine3 1,935 -
Write-down value of turbine equipment - (780)
Adjustment on gas ”take-or-pay” contract - 3,230
Other foreign currency gains / (losses)4 (459) 326
566 2,200
1
These costs relate to storage and insurance of the 2 remaining Turbines and balance of plant.
2
During the year, Standard Bank levied charges, including legal fees, on the loan in connection with
the turbines amounting to £328,000 (year to 31.12.12 - £320,000). Additional charges in
connection with the Company’s loans were incurred during the year and these comprised a) a 10%
premium payable to holders of the loan notes in exchange for extending the repayment terms
(£65,000), b) a 10% premium payable to certain loan providers in exchange for extending the
repayment terms (£20,000) and c) a fee of $2m (£1.3m) payable to the lender who provided £4.1m
of loan which enabled the Company to repay the borrowings from Standard Bank which were in
default. This fee is payable on the sale of the remaining 2 turbines and as this new loan was drawn
down shortly before the year-end, a pro-rata sum of £0.1 million in respect of this fee has been
expensed in the current period. The balance of £1.2 million will be charged in the year to 31 March
2014.
3
During the year, a conditional contract was entered into for the sale of the 2 remaining turbines.
The prospective purchaser paid a non-refundable deposit of $3.1m (£1.9m) which was forfeited due
to non-performance of the contract terms. This sum has been credited to Other Income (see note
9). The directors have been advised that the purchaser intends to seek recovery of the forfeited
deposit. However no provision for repayment of the deposit has been made as the directors have
been advised that there are no valid grounds for returning the deposit.
4
Exchange losses (2012 – gains) gains arising primarily on the euro liability to Turbocare as a result
of the change in the value of the € against sterling.
10 Net finance income Year ended Year ended
31.03.13 31.03.12
£’000 £’000
Interest received on bank deposits 34 -
Interest expense:
Bank interest1 212 708
Loan note interest2 52 48
Other loans interest3 218 222
Other interest4 37 249
519 1,227
Net finance expense 485 1,227
1 Bank interest comprises interest on the Standard Bank loan (see also note 22).
2 Loan note interest comprises interest on the £650,000 loan note (see also note 22).
3 Other loans interest comprises interest on other loans (see also note 22).
4 Other interest represents an accrual for interest payable on the overdue sum due to Turbocare.
11Tax 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 ended Year ended
31.03.13 31.03.12
£’000 £’000
(Loss) / profit for the year before tax (1,876) 5,642
Expected tax (credit) / charge based on standard rate of 450 1,580
UK corporation tax (24%)
Tax losses utilised - (1,580)
(Addition to) / reduction in tax losses carried forward (450) 1,580
No deferred tax asset has been recognised owing to uncertainty as to the timing and utilisation of
the tax losses. In the event that a deferred tax asset was recognised at the balance sheet date, it is
estimated that the value of the deferred tax asset would be £3.6 million (31.3.2012: £3.7 million) in
respect of the Group and £1.0 million (31.3.2012: £0.9 million) in respect of the Company.
12 Profit attributable to the parent company
The loss attributable to the Parent Company, IPSA Group PLC, was £0.2 million (year to 31.3.2012:
£3.8 million profit). As permitted by Section 408 of the Companies Act 2006, no separate profit and
loss account is presented in respect of the Parent Company.
13 Loss per share
The loss per share (year ended 31.3.2012 – profit) is calculated by dividing the result for the year
attributable to shareholders by the weighted average number of shares in issue during the year.
Year ended Year ended
31.03.13 31.03.12
(Loss) / profit attributable to equity holders of the £(1.9m) £5.6m
Company
Average number of shares in issue 107.5m 107.5m
Basic, diluted and headline (loss) / profit per share (1.74p) 5.25p
There is no difference between the basic and diluted earnings per share as the 6.8m warrants
outstanding during the year were exercisable at a price either at or above the share price of the
Company and therefore had no dilution effect.
14 Plant and equipment 31.03.13 31.03.12
£’000 £’000
Cost
At beginning of year 14,309 16,075
Addition in year 384 1
Exchange adjustment (1,803) (1,767)
At end of year 12,890 14,309
Depreciation
At beginning of year 3,239 2,756
Charge for the year 675 798
Impairment charge 1,000 -
Exchange adjustment (400) (315)
At end of year 4,514 3,239
Net book value at start of year 11,070 13,319
Net book value at end of year 8,376 11,070
Property, plant and equipment has been valued at cost. It represents the 18 MW plant in
NewCogen.
The plant has been subject to an impairment review and the directors consider that an impairment
of £1 million has arisen. The recoverable amount of this asset is established by assessing the value
in use of the plant and discounting the estimated future cash flows using a pre-tax discount rate
that reflects current market assessments of time value of money and the risks specific to the asset.
The main assumptions used in estimating the future cash flows include i) an asset life of 25 years,
ii) continuing demand during that period for the electricity and steam generated by the plant, iii)
escalation in the prices that electricity and steam will command based management’s estimates and
experience and iv) management’s estimates of the price and availability of gas to supply the plant.
The estimated future cash flows have been discounted at a rate of 10.3%.
15 Investments in subsidiary undertakings 31.03.13 30.03.12
£’000 £’000
Investment in Blazeway Engineering Ltd1 500 500
Loans to Blazeway Engineering Ltd 2,339 -
Loans to Newcastle Cogeneration (Pty.) Ltd2 19,810 -
22,649 500
1
Investment in Blazeway Engineering Ltd
The Company owns 100 per cent. 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 per cent. of Newcastle Cogeneration (Pty.) Ltd
(a company incorporated in the RSA).
2
Loans to Newcastle Cogeneration (Pty.) Ltd
The Company has funded the construction of the plant in South Africa and the initial start-up losses
with a combination of share capital (£2.8 million) and loans (£19.8 million). The loans were
previously repayable on demand but in view of the start-up losses incurred, the Company regards
the loan as quasi-equity and is no longer charging interest on the loans. As a result, the loans are
now being classified as part of the Company’s net investment in South Africa whereas in prior
years, the loans were shown under Trade and other receivables (note 16).
The investments in and loans to subsidiary undertakings have been subjected to an impairment
review. In spite of the Company’s equity worth being greater than the Group’s market value, the
directors do not consider that any impairment has arisen since the directors believe that the
Group’s market value has been adversely affected by the losses arising from delays in bringing
projects to completion and does not fully reflect the future potential of the Group given its position
as an established independent power producer in RSA with the opportunities this provides to
profitably expand operations in the area.
16 Trade and other receivables due in 31.03.13 31.03.12
more than 1 year £’000 £’000
a) Group - -
b) Company
Amount due from subsidiary - 22,653
The loans to Newcastle Cogeneration (Pty.) Ltd are now regarded as part of Investment in
subsidiary undertakings (note 15).
17 Trade and other receivables due in 31.03.13 31.03.12
less than 1 year £’000 £’000
a) Group
Trade receivables 417 441
1
Gas deposit - 261
Vat receivable 51 12
Other receivables and prepayments 114 102
582 816
b) Company
Trade receivable - -
Vat receivable 21 -
Other receivables and prepayments 8 21
29 21
1
The gas deposit is no longer required as it has been replaced with a bank guarantee.
All trade and other receivables are unsecured and are not past their due dates. In the opinion of the
directors, the fair values of receivables are not materially different to the carrying values shown
above.
18 Cash and cash equivalents 31.03.13 31.03.12
£’000 £’000
a) Group
Cash at bank and in hand 100 35
b) Company
Cash at bank and in hand 2 14
19 Assets held for sale 31.03.13 31.03.12
£’000 £’000
Siemens Gas Turbines 15,712 15,712
These assets comprise 2 (31 March 2012 – 2) of the original 4 turbines, plus ancillary equipment,
which were acquired in 2007 for the Coega project in South Africa. As a result of the delay in the
timetable for the Coega project, it was decided in 2009 to sell the Turbines and since then this asset
has been classified as ‘assets held for sale’. Sale of 2 of the turbines was completed in January
2012. The remaining 2 turbines were sold in June 2013 for $25 million (£16.1 million). There
remains a quantity of ancillary equipment, which has been valued at not less £4 million. It is
expected that this equipment will be sold during the next 12 months.
20 Share capital 31.03.13 31.03.12
£’000 £’000
a) Authorised
150,000,000 ordinary shares of 2p each 3,000 3,000
b) Fully paid
107,504,018 ordinary shares of 2p each 2,150 2,150
There were no changes in the share capital of the Company during the year (2012 – none).
21 Trade and other payables 31.03.13 31.03.12
£’000 £’000
a) Group
1
Trade payables 5,651 6,232
2
Other payables 1,685 1,582
7,336 7,814
b) Company
1
Trade payables 4,949 5,286
2
Other payables 1,583 1,378
6,532 6,664
Trade payables include:
1
An amount of €4.9 million / £4.2 million (31.3.2012: €5.5 million / £4.6 million) claimed by
Turbocare in respect of the refurbishment work (which was completed in 2008 on the turbines
originally acquired for the Coega project) plus storage charges and interest (calculated at 1 month
EURIBOR plus 1 per cent per annum on the amount outstanding). Included within the €4.9 million is
an amount of €2.3 million of VAT which the directors do not regard as being due. The Company is in
discussions with Turbocare with the objective of reaching a negotiated settlement of the amounts
claimed.
2
Other payables includes an accrual for directors’ remuneration and salaries of £1.26 million
(31.3.2012: £1.20m) accrued but unpaid in respect of remuneration due to the directors and one
employee – see also note 27.
22 Borrowings 31.03.13 31.03.12
£’000 £’000
a) Group
Bank loan and overdue interest 1 - 4,601
Loan note 2 650 650
Overdue interest on loan note 2 136 89
Other loans including accrued interest 3 7,008 1,986
7,794 7,326
b) Company
Bank loan and overdue interest 1 - 4,601
Loan note 2 650 650
Overdue interest on loan note 2 136 89
Other loans including accrued interest 3 6,002 1,609
6,788 6,949
1
The bank loan, together with overdue interest, was repaid in full in March 2013.
2
The loan note was issued in March 2010. Interest is payable at 6 per cent per annum. With the
exception of £0.01 million, the loan note has been repaid since the year-end. Holders of the loan
notes were entitled to subscribe for a total of 6.5 million ordinary shares at a price of 5 pence per
share or such lower price at which any future ordinary shares are issued prior to exercise. No
exercise has taken place.
3
Other loans, plus accrued interest comprise:
Group Company Group Company
31.3.13 31.3.13 31.3.12 31.3.12
£’000 £’000 £’000 £’000
Loan 1 399 399 356 356
Loan 2 1,212 1,199 1,059 1,046
Loan 3 158 158 140 140
Loan 4 75 75 67 67
Loan 5 400 - 364 -
Loan 6 593 - - -
Loan 7 4,171 4,171 - -
Total 7,008 6,002 1,986 1,609
Interest rates on these loans vary between 0.75 per cent and 12 per cent. All the loans have been
repaid since the year-end.
All borrowings are denominated in sterling.
23 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. As the Group has only one
operating subsidiary, the impact on the parent Company is deemed to be materially similar to the
impact on the Group.
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) Capital management policies and liquidity risk
The Company considers its capital to comprise its ordinary share capital, share premium,
accumulated retained earnings and other reserves.
The Company’s objective when maintaining capital is to safeguard the Group’s ability to continue
as a going concern so that it can provide returns for shareholders and other stakeholders.
The Company meets its capital needs by a combination of equity and debt funding and attempts
to anticipate the future cash requirements for each project and put in place appropriate equity
and debt facilities to match the funding requirements of these projects. As a result of the time
taken to secure a purchaser for the Company’s turbines, the Company was required during the
year to obtain extensions to the repayment dates of loans and bank borrowings. Since the year-
end, these loans and borrowings have been repaid.
The Group does not have any derivate or hedging instruments.
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
23
concentrations of credit risk. The Company’s primary credit risk relates to the investment in its
subsidiaries. As noted in note 3.18, this is reviewed on an annual basis.
e) 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 the
Group’s or 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:
Group Group Company Company
Loans and Amortised Loans and Amortised
receivables cost receivables cost
31.03.2013 £’000 £’000 £’000 £’000
Trade and - - - -
other
receivables >
1 year
Trade and 417 - - -
other
receivables <
1 year
Cash and 100 - 2 -
cash
equivalents
Trade and - (7,336) - -
other
payables
Borrowings - (7,794) - (6,788)
517 (15,130) 2 (6,788)
£’000 £’000 £’000 £’000
31.03.2012
Trade and - - 22,653 -
other
receivables >
1 yea
Trade and 702 - - -
other
receivables <
1 year
Cash and 35 - 14 -
cash
equivalents
Trade and - (7,814) - (6,664)
other
payables
Borrowings - (7,326) - (6,949)
737 (15,140) 22,667 (13,613)
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.
24 Capital commitments
There were no outstanding capital commitments at the year end.
25 Contingent liabilities
During the year, the Company entered into a contract for the sale of 2 turbines. The prospective
purchaser paid a non-refundable deposit of $3.1m (£1.9m). Under the terms of the contract, the
deposit was forfeited as the purchaser failed to complete the contract. The Company has been
advised that the purchaser intends to initiate proceedings to recover the deposit. No provision has
been made in these financial statements as the directors have been advised by their solicitors that
the recovery claim has no validity.
26 Related party transactions
Material transactions with related parties during the year were as follows:
i) Charge to the Company of £60,000 by Independent Power Corporation PLC (“IPC”) under a
“Shared Services Agreement” for the provision of offices and other administrative services. P
Earl, E Shaw and P Metcalf are directors of IPC. A sum of £136,000 was owing to IPC at 31
March 2013 (31.3.2012: £252,000).
ii) Short term loan from IPC amounting to £1.2 million, including accrued interest, at 31 March
2013 (31.3.2012: £1.1m). Interest on the loan, which is being charged at 8 per cent,
amounted to £84,000 (year to 31.3.2012: £142,000). The loan was due to be repaid on 31
July 2012 and an informal extension was been granted pending the sale of the remaining 2
turbines. The loan was repaid after the year-end.
iii) An accrual for Group salaries (short term employee benefits) payable to key management
totalling £77,000 during the year (12 months to 31.3.2012: £340,000). The £77,000 is after
deduction £317,000 of salary and fee entitlements which had accrued but which was waived.
The amount waived was equivalent to 20% of the amount accrued but unpaid in the 4 year
period to 31 March 2013.
Transactions between the Company and NewCogen:
i) Waiver of imputed interest of £0.5 million (year to 31 3.12: £0.5 million charged).
27 Directors’ and employee costs Year ended Year ended
31.03.13 31.03.12
£’000 £’000
Aggregate remuneration of all employees and
directors, including national insurance 680 786
No remuneration was paid to the directors during the year. The amounts accrued and waived (see
below) for directors who served during the year was:
Salary Salary Fees Fees Total
incl. NI incl. NI
2013 waived 2013 waived 2013
£’000 £’000 £’000 £’000 £’000
R Linnell - - 45 (26) 19
N Bryson - - 25 (24) 1
M Cox 33 (30) - - 3
P Earl - - 25 (37) (12)
J Eyre 59 (51) - - 8
P Metcalf 64 (24) - - 40
R Sampson - - 25 (23) 2
E Shaw 59 (51) - - 8
215 (156) 120 (110) 69
The directors agreed to waived 20% of the outstanding accrued salary and fee entitlements as at 31
March 2013. The amounts accrued and unpaid at 31 March 2013 in respect of directors who served
during the year totalled £1.0 million, comprising the following amounts: R Linnell - £106k, N Bryson
- £95, M Cox – £102k, P Earl - £150k, J Eyre - £177k, P Metcalf - £80k, R Sampson - £90k and E
Shaw - £177k. Since the year end, each director has been paid £20k in respect of the amounts
accrued at 31 March 2013. The remaining balances owing will be paid when the Company has
sufficient cash resources available.
No salaries or fees were paid during the year to 31 March 2012. The amounts accrued in respect of
salaries and fees in that year were as follows:
Salary Fees Total
2012 2012 2012
£’000 £’000 £’000
R Linnell - 45 45
N Bryson - 25 25
M Cox 30 - 30
P Earl 37 - 37
J Eyre 52 - 52
P Metcalf - 40 40
R Sampson - 25 25
E Shaw 52 - 52
171 135 306
The Group considers the directors to be the key management personnel.
The average number of employees in the Group, including directors, was 25 (31.3.2012 – 25).
28 Post balance sheet date events
In June 2013, the Company sold the remaining 2 turbines for a total consideration of $25m (£16.1
million) of which £11.9 million was paid and £4.2 million is deferred but due no later than 10 June
2015. The purchaser of these 2 turbines was Rurelec PLC, a company in which Sterling Trust Ltd, a
shareholder in the Company, is a significant shareholder. P Earl and E Shaw are directors of Rurelec
PLC. The transaction was done at market value.
The consideration received has been used to repay all of the Company’s indebtedness with the
exception of the amount claimed by Turbocare (see note 21) and a significant portion of the accrued
and unpaid directors’ remuneration (see note 21).
The Company has retained ownership of some ancillary equipment which, based on a third party
valuation, is worth in excess of £4 million.
The following pro-forma unaudited Group balance sheet updated as at 31 July 2013 does not form
part of these Statutory Accounts and is provided for illustrative purposes only to show the Group’s
financial position following the sale in June 2013 of the 2 turbines.
Notes 31/7/13 31/3/13
£’000 £’000
Pro-forma
Unaudited Audited
Assets
Non-current assets
Property, plant and equipment 7,777 8,376
7,777 8,376
Current assets
Trade and other receivables 1 4,813 582
Investments 2 1,063
Cash and cash equivalents 650 100
6,526 682
Non-current assets classified 3 4,000 15,712
as assets held for sale
Total assets 18,303 24,770
Equity and liabilities
Equity attributable to equity holders of the parent:
Share capital 2,150 2,150
Share premium account 26,767 26,767
Foreign currency reserve (4,593) (4,011)
Profit and loss reserve (13,013) (15,266)
Total equity 11,311 9,640
Current liabilities
Trade and other payables 4 6,814 7,336
Borrowings 178 7,794
6,992 15,130
Total equity and liabilities 18,303 24,770
Notes:
1. Includes $6.5m due from Rurelec PLC in respect of the deferred consideration due on the
sale of the 2 turbines.
2. Represents 8.5 million shares in Rurelec, valued at cost of 12.5p.
3. Comprises balance of plant which was not sold to Rurelec and is currently available for sale.
4. Includes £4.4 million claimed by Turbocare. The Company is in discussions with Turbocare
regarding settlement of amounts due.
27
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