Wrap Text
Reviewed Condensed Consolidated Results for the year ended 28 February 2018
HULISANI LIMITED
Registration number 2015/363903/06
(Incorporated in the Republic of South Africa)
(“the Group” or “the Company” or “Hulisani”)
Share code: HUL
ISIN: ZAE000212072
REVIEWED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2018
INTRODUCTION
In the year end under review Hulisani concluded its first investment, the viable acquisition in
the form of a 6.67% interest in the Kouga Wind Farm (Pty) Ltd, on 22 March 2017. The
transaction resulted in Hulisani ceasing to operate as a Special Acquisition Company
(“SPAC”). Since then Hulisani has concluded three additional investments; a convertible loan
to Legend Power Solution (Pty) Ltd in April 2017, and equity investments of 66% in RustMo1
Solar Farm (RF) (Pty) Ltd in June 2017 and 25% in GRI Wind Steel SA (Pty) Ltd in July 2017
respectively. The RustMo1 Solar Farm transaction is an acquisition of a controlling stake,
which results in a business combination from a financial reporting perspective.
Hulisani is listed on the JSE and trades as an investment holding company.
RESULTS
Hulisani’s performance for the year is a consolidated view of the acquired investments.
Revenue of R37m for the period under review is reported. The revenue arose from the trading
activities of RustMo1 Solar Farm. Operating expenses for the period are R57.7m.
The following table reflects the operating financial results for the year ended 28 February
2018 compared to the corresponding previous financial period:
Reviewed Variance Variance
Summary of Results 2018 Audited 2017
R’000 R’000 R’000 %
Revenue 37,378 - 37,378 100
Operating expenses (57,699) (31,734) (25,965) (82)
Finance income 10,107 25,726 (15,619) (61)
Finance costs (12,298) (2) (12,296) (>100)
Share of losses from
associates (6,492) - (6,492) (>100)
Impairment loss (60,299) - (60,299) (>100)
Fair value adjustment (25,055) - (25,055) (>100)
Loss before tax (113,381) (6,010) (107,371) (>100)
MATERIAL ITEMS
The following items have been identified as items which are material due to the significance
of the amount. They have been separately analysed to provide a better understanding of the
financial performance of the group.
2018
Notes R’000
Impairment loss on net investments from associates (a) 60,299
Fair value loss on financial asset at FVTPL (b) 25,055
(a) Impairment loss
Kouga Wind Farm (Pty) Ltd “Kouga”
The Kouga plant has experienced performance issues during the financial period under
review. This emanates from quality issues on certain parts which have negatively impacted
the performance of the plant. The carrying amount of the investment has been written down
to the recoverable amount of R122m, which was determined by reference to the operations’
value in use. An impairment loss of R14m has been recognised in the statement of
comprehensive income.
GRI Wind Steel SA (Pty) Ltd “GRI”
GRI is a manufacturing plant, with the initial clientele focus on the Renewable Energy
Independent Power Produce Programme (REIPPP), however this programme was put on
hold by the Minister of the Department of Energy, which impacted the business plan of GRI,
as the demand for the products slowed down. This has had an effect on the financial
performance of the company. The carrying amount has been written down to R26m, this
recoverable amount references value in use. An impairment loss of R46m has been
recognised in the statement of comprehensive income.
(b) Fair value loss
A fair value loss of R25m was recognized in the statement of comprehensive income during
the period under review on Legend Power Solution convertible loan. The fair value loss on the
convertible loan is driven by lower revenue projections, in comparison to the initial investment
projections.
Hulisani is confident that the highlighted valuation losses will reverse in the future as the
environment improves in the investments. Furthermore, projections speak to the expected
positive changes in the energy space.
PROJECTIONS
The outlook for the South African energy space is looking very positive, with the recent
signing of Power Purchase Agreements (PPAs) for Independent Power Producers (IPPs) by
the Minister of the Department of Energy (DOE) and Eskom. Given that Hulisani’s projects
pipeline comprises of a few of the projects with recently signed PPAs, Hulisani could benefit
from the signing of the PPAs and enhance its returns. Hulisani also has a healthy pipeline of
secondary opportunities and is in a good position to target the higher yielding ones. Hulisani’s
current projects pipeline in the secondary market is approximately R2.25bn in the focus
projects – this is in relation to operating energy assets within South Africa. Hulisani is
assessing various forms of funding to enable the conclusion of the focus projects in the
pipeline.
GOING CONCERN
The reviewed condensed consolidated results for the year ended 28 February 2018, have
been prepared on a going concern basis. This basis presumes that funds will be available to
finance future operations, mainly from dividend receipts from underlying investments, and that
the realization of assets and settlement of liabilities, contingent obligations and commitments
will occur in the ordinary course of business.
DIRECTORS
The following changes to the board of directors took effect during the period under review:
MH Zilimbola Resigned as CEO 01 July 2017
ME Raphulu Appointed as CEO 01 July 2017
M Booysen Resigned as CFO 01 August 2017
MP Dem Appointed as CFO 01 July 2017
MF Modau Appointed as CIO 01 July 2017
MH Zilimbola Appointed 01 July 2017
B Marx* Appointed 01 July 2017
* Independent Non-executive
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 28
FEBRUARY 2018
Reviewed Audited
period ended period ended
Notes 28-Feb-2018 28-Feb-2017
R’000 R’000
ASSETS
Non-current assets 519,658 3,106
Property, plant and equipment 7 133,914 2,756
Intangible assets 8 152,830 -
Investments in associates 5 148,810 -
Financial asset at FVOCI 8,961
Financial asset at FVTPL 6 75,143 350
Current assets 64,657 498,551
Cash and cash equivalents 35,517 498,551
Trade and other receivables 29,140 -
TOTAL ASSETS 584,315 501,657
EQUITY AND LIABILITIES
Equity 412,524 493,990
Stated capital 500,000 500,000
Accumulated loss (122,874) (6,010)
Non-distributable reserves 773 -
Non-controlling interest 34,625 -
Non-current liabilities 157,506 -
Long term borrowings 9 121,692 -
Deferred tax liability 35,814 -
Current liabilities 14,285 7,667
Trade and other payables 3,722 7,667
Current portion of borrowings 9 10,563 -
TOTAL EQUITY AND LIABILITIES 584,315 501,657
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE
YEAR ENDED 28 FEBRUARY 2018
Reviewed Audited
period ended period ended
Notes 28-Feb-2018 28-Feb-2017
R’000 R’000
Revenue 37,378 -
Other income 977 -
Operating expenses (57,699) (31,734)
Operating loss (19,344) (31,734)
Finance income 10,107 25,726
Finance costs (12,298) (2)
Share of losses from associates 5 (6,492) -
Impairment loss 5 (60,299) -
Loss before fair value adjustments (88,326) 6,010
Fair value loss 6 (25,055) -
Net loss before tax (113,381) (6,010)
Tax (2,463) -
Net loss after tax (115,844) (6,010)
Other comprehensive income 773 -
Total comprehensive loss for the year (115,071) (6,010)
Loss for the year is attributable to:
Owners of Hulisani Limited (116,864) (6,010)
Non-controlling interest 1,020 -
(115,844) (6,010)
Total comprehensive income for the year is
attributable to:
Owners of Hulisani Limited (116,091) (6,010)
Non-controlling interest 1,020 -
(115,071) (6,010)
Basic and Diluted loss per share (cents) 12 (234) (13)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
28 FEBRUARY 2018
Reviewed Audited
period ended period ended
Notes 28-Feb-2018 28-Feb-2017
R’000 R’000
Cash flows from operating activities
Cash generated from operations (30,533) (23,557)
Interest received 8,000 25,726
Interest paid (7,895) (2)
Net Cash inflow/(outflow) from operating activities (30,428) 2,167
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired 4 (100,464) -
Acquisition of investments in associates 5 (223,951) -
Acquisition of financial assets (108,188) -
Acquisition of property, plant and equipment 7 (629) (3,266)
Dividends received 5 8,350
Deposit lodged against bank guarantee - (350)
Net cash outflow from investing activities (424,882) (3,616)
Cash flows from financing activities
Proceeds from the issue of shares - 500,000
Repayment of borrowings 9 (2,697)
Dividends paid to non-controlling interests in
subsidiaries (5,027) -
Net cash inflow/(outflow)from financing activities (7,724) 500,000
Net increase/(decrease) in cash and cash
equivalents (463,034) 498,551
Opening Cash and cash equivalents 498,551 -
Cash and cash equivalents 35,517 498,551
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR
ENDED 28 FEBRUARY 2018
Notes Stated Non- Non-
capital Accumulated distributable controlling
loss Reserves Total interests Total
R’000 R’000 R’000 R’000 R’000 R’000
Balance at 29 - - - - - -
February 2016
Loss for the year -
(6,010) (6,010) (6,010)
Issue of shares 500,000 - - 500,000 - 500,000
Balance at 28
February 2017 500,000 (6,010) - 500,000 - 493,990
Arising from
Acquisition of 4 - - - - 38,632 38,632
subsidiary
Profit/(Loss)for the
year (116,864) (116,864) 1,020 (115,844)
Other comprehensive
income 773 773 - 773
Dividends paid (5,027) (5,027)
Balance at 28
February 2018 500,000 (122,874) 773 377,899 34,625 412,524
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEAR ENDED 28 FEBRUARY 2018 (CONTINUED)
1. SIGNIFICANT CHANGES IN THE CURRENT REPORTING PERIOD
The purpose of Hulisani is to pursue the acquisition of, and investment in, companies focused
on, and operating in, the energy sector and which evidence good potential for growth. The
financial position and performance of the Company was affected by the following events and
transactions during the year ended to 28 February 2018:
• The Company ceased to operate as a SPAC on 22 March 2017 when it successfully
made a viable acquisition in the form of a 6.67% interest in the Kouga Wind Farm
(Pty)Ltd, situated in the Eastern Cape. (See Note 5)
• Hulisani acquired 100% of the issued ordinary shares in Momentous Technologies (Pty)
Ltd, a holding company that owns a 66% majority stake in RustMo1 Solar Farm (Pty) Ltd
“RustMo1”), a solar PV farm in the North-West province for a gross consideration of
R120m. (See Note 4)
• The Company acquired 25% stake in GRI Wind Steel South Africa (Pty) Ltd to the value
of R82.5m. (See Note 5)
• Hulisani issued a convertible loan to the value of R100m to Legend Power Solution Pty)
Ltd (“LPS”). (see Note 6)
2. BASIS OF PRESENTATION
The condensed consolidated financial statements are prepared in accordance with the
requirements of the JSE Limited Listings Requirements for provisional reports and the
requirements of the Companies Act of South Africa. The Listings Requirements require
provisional reports to be prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial Reporting Standards
(IFRS) and the SAICA financial reporting guides as issued by the accounting practices
committee and financial pronouncements as issued by the Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS 34 Interim
Financial Reporting.
The condensed consolidated financial statements were prepared under the supervision of the
chief financial officer, MP Dem, CA (SA).
The board of directors takes full responsibility for the preparation of the provisional report.
The financial information presented has been correctly extracted from the underlying financial
statements.
REVIEW REPORT
These condensed consolidated financial statements for the year ended 28 February 2018
have been reviewed by the Company’s auditors, PricewaterhouseCoopers Inc., which
expressed an unmodified review conclusion. A copy of the auditor’s review report is available
for inspection at the Company’s registered office together with the financial statements
identified in the auditor’s report.
The accounting policies applied in preparing the condensed consolidated financial statements
are in terms of IFRS and consistent with those applied in the previous annual financial
statements, except for the adoption of new accounting policies as set out below:
• Subsidiaries are all entities (including structured entities) over which the Group has
control. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. The acquisition method of accounting is used to account for business
combinations by the Group.
• The Group recognises any non-controlling interest in the acquired entity on an
acquisition-by-acquisition basis, at the non-controlling interest’s proportionate share of the
acquired entity’s net identifiable assets.
• Associates are all entities over which the Group has significant influence but not control
or joint control.
• Investments in associates are accounted for using the equity method of accounting, after
initially being recognized at cost. The Group’s share of post-acquisition profits is
recognized in profit or loss.
• Revenue is measured at the fair value of the consideration received or receivable. The
Group recognizes revenue when the amount of revenue can be reliably measured.
• At initial recognition, the Group measures a financial asset at its fair value. Loans and
receivables and held-to-maturity investments are subsequently carried at amortised cost
using the effective interest method.
• Customer contracts acquired in the business combination are recognized at fair value at
the acquisition date. They have a finite useful life and are subsequently carried at cost
less accumulated amortisation.
• Development costs acquired in the business combination relate to the development
phase of a project in the subsidiary. The costs are recognized as intangible assets on the
basis that recognition criteria are met. The development costs intangible asset is
recognized at fair value at the acquisition date. The asset is subsequently carried at cost
less accumulated amortisation.
• Borrowings are initially recognized at fair value, net of transaction costs incurred.
Borrowings are subsequently measured at amortised cost.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires the use of accounting estimates which, by
definition, will seldom equal the actual results. Management also needs to exercise
judgement in applying the Group’s accounting policies. Estimates and judgements are
continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The areas involving significant estimates or judgements are:
• Estimated fair value of financial assets at fair value through profit and loss.
Hulisani issued a convertible loan to Legend Power Solutions. The Group has elected to
classify the financial asset at fair value through profit and loss. The fair value is
determined by using the discounted cash flow method by discounting the dividend
income. The expected cash flows are discounted using an appropriate discount rate. In
determining the recoverable amount, the group made key assumptions on base revenue
from plant operations, discount rate and period of operation.
• Impairment of investments in associates.
The Group recognised impairments on its investments in associates, Kouga Wind Farm
(Pty) Ltd and GRI Wind Steel SA (Pty) Ltd. The fair value of the investment in Kouga is
determined by using the discounted cash flow method. The expected cash flows are
discounted using an appropriate discount rate. In determining the expected cash flows,
the Group made key assumptions on forecasted revenue and discount rate.
• Goodwill impairment.
The carrying value of goodwill in the group is R44m and arose on acquisition of a majority
stake in RustMo1 Solar Farm (Pty) Ltd. RustMo1 is considered to be a separately
identifiable cash generating unit. The recoverable amount of goodwill was based on a
value in use discounted cash flow method. In determining the recoverable amount, the
group made key assumptions on forecasted revenue and the discount rate.
4. ACQUISITION OF SUBSIDIARY
On 1 June 2017, Hulisani Ltd acquired 100% of the issued ordinary shares in Momentous
Technologies (Pty) Ltd, a holding company that owns a 66% majority stake in RustMo1 Solar
Farm (Pty) Ltd, a solar PV farm in the North-West province for a cash consideration of
R120m. RustMo1 is engaged in the development, construction and operation of large scale
photovoltaic power generation for electricity in South Africa. The acquisition is part of
Hulisani’s strategy to invest in energy projects.
The acquired business contributed an incremental revenue of R37m and net profit of R7.4m
before non-controlling interest allocation. The revenue is recognised from the acquisition
date. Had the acquisition happened at the beginning of the financial period the combined
revenue for the group would have been R49.1m and net loss of R114m.
Details of the purchase consideration, net identifiable assets acquired, and goodwill are as
follows:
2018
Purchase consideration R’000
Net Cash paid 119,752
Total net purchase consideration 119,752
The assets and liabilities recognized as a result of the acquisition are:
2018
R’000
Property, plant and equipment 137,487
Derivatives financial instruments 229
Intangible assets (Note 8) 113,218
Cash and cash equivalents 19,287
Other current assets 12,270
Long term borrowings (134,952)
Deferred tax liability (33,356)
Other current liabilities (561)
Net identifiable assets acquired 113,622
Less: Non-controlling interest (38,632)
Add: Goodwill (note 10) 44,761
Net Cash consideration to acquire RustMo1 119,751
Purchase consideration – cash outflow R’000
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration 119,751
Less: Cash balance acquired 19,287
Net outflow of cash – investing activities 100,464
The Group has completed its provisional fair value assessment on the assets acquired in the
business combination and has recognized goodwill of R44m. The goodwill is mainly
attributable to the deferred tax liability recognized on the fair value of intangible assets.
5. INVESTMENTS IN ASSOCIATES
(a) Kouga Wind Farm (Pty) Ltd
On 22 March 2017 Hulisani acquired 100% of issued shares in Red Cap Investments (Pty)
("Red Cap”) Ltd and Eurocape Renewables (Pty) Ltd ("Eurocape") for a combined cash
consideration of R142m. Red Cap and Eurocape hold 5.46% and 1.21% interest in Kouga
Wind Farm (RF) (Pty) Ltd respectively, combined to 6.67%. Red Cap and Eurocape are
investment holding companies.
2018
KOUGA WIND FARM (PTY) LTD R’000
Balance at the beginning of the period -
Addition 141,450
Impairment loss (14,314)
Profit attributable to Hulisani Limited 3,526
Dividends received (8,350)
Balance at the end of the period 122,312
Impairment
The Kouga plant has experienced performance issues in the period under review. The
carrying amount of the investment has been written down to the recoverable amount of
R122m, which was determined by reference to the operations’ value in use.
The key inputs to the discounted cash flow model are as follows:
1. Discount rate – 13.5%
2. Base revenue – Base revenue is determined using the PPA tariff inflated at CPI over
the term of the PPA. The base revenue in the cash flow projections, year ending 28
February 2018, is R470 million.
The model is most sensitive to changes in base revenue and discount rate.
i. If all assumptions remained unchanged, a 5% decrease in base revenue results in a
decrease in the recoverable amount, and further impairment of R11m;
ii. If all assumptions remained unchanged, a 1% increase in discount rate results in a
decrease in the recoverable amount, and further impairment of R8m.
(b) GRI Wind Steel SA (Pty) Ltd
On 27 July 2017 the Company acquired 50% of the share capital in Pele SPV13 (Pty) Ltd for
a cash consideration of R42.5m and issued preference shares of R42.5m to Pele SPV198
(Pty) Ltd. The transaction resulted in an acquisition of a 25% stake in GRI Wind Steel South
Africa (Pty) Ltd (“GRI”). Pele SPC198 has an option to acquire 12.5% interest in GRI.
2018
GRI WIND STEEL SA(PTY) LTD R’000
Balance at the beginning of the period -
Addition 82,501
Impairment loss (45,985)
Loss attributable to Hulisani Limited (10,018)
Balance at the end of the period 26,498
Impairment
The GRI is a manufacturing plant, with the initial clientele focus on the Renewable Energy
Independent Power Produce Programme (REIPPP), however this programme was put on
hold by the Minister of the Department of Energy, which impacted the business plan of GRI,
as the demand for the products slowed down. This has had an effect on the financial
performance of the company. The carrying amount of the investment has been written down
to the recoverable amount of R26m, which was determined by reference to the fair value of
individual assets.
The impairment loss of R46m is included in the statement of profit and loss.
6. FINANCIAL ASSET AT FVTPL
Hulisani issued a convertible loan to the value of R100m to Legend Power Solution Pty) Ltd
(“LPS”). The loan participates in distributable profits available to LPS shareholders. On
maturity the loan will convert to equity in LPS. The loan is classified as a financial investment
through profit and loss, with a fair value of R75m at the end of the financial period.
2018
R’000
Balance at the beginning of the period -
Addition 100,000
Fair value loss* (24,857)
Balance at the end of the period 75,143
* The balance of the fair value loss as disclosed in the income statement includes R198k
which relates to other fair value movements.
The fair value loss on the Legend Power Solution convertible loan is driven by lower revenue
projections, in comparison to the initial investment projections.
The fair value is determined by using the discounted cash flow method by discounting the
dividend income.
Refer to Note 11 for further information on valuation inputs.
7. PROPERTY, PLANT AND EQUIPMENT
The property, plant and equipment assets held by Hulisani increased because of the
acquisition of Rustmo1 Solar Farm (Pty) Ltd. (See note 4)
Computer
Fixtures Equipment
Land & Office and & Motor Plant &
Buildings Equipment Fittings Software Vehicles Machinery Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 01
March 2016
Cost - 323 2,310 170 - - 2,803
Accumulated
depreciation - - (18) (29) - (47)
Carrying
amount at 28
February 2017 - 323 2,292 141 - - 2,756
Year ended 28 February 2018
Opening
carrying
amount - 323 2,292 141 - - 2,756
Additions - 49 472 108 - - 629
Acquisition of
subsidiary
(Note 4) 2,212 - 2 - 248 135,025 137,487
Depreciation - (60) (416) (69) (55) (6,356) (6,957)
Balance at 28
February 2018 2,212 312 2,349 179 194 128,669 133,914
Cost 2,212 372 2,784 278 248 135,025 140,919
Accumulated
depreciation - (60) (435) (98) (55) (6,356) (7,004)
Carrying
Amount at 28
February 2018 2,212 312 2,349 179 194 128,669 133,914
8. INTANGIBLES
The intangible assets held by Hulisani increased because of the acquisition of RustMo1 Solar
Farm (Pty) Ltd. The intangible assets consist of the development costs, customer contract,
and goodwill. (See note 4)
Development Customer
Goodwill costs contract Total
R'000 R'000 R'000 R'000
Opening carrying amount - - - -
Additions 44,761 44,761
Acquisition of subsidiary
(Note 4) - 25,029 88,188 113,218
Amortisation - (1,140) (4,009) (5,149)
Balance at 28 February 2018 44,761 23,889 84,179 152,830
Cost 44,761 25,029 88,188 157,979
Accumulated amortisation - (1,140) (4,009) (5,149)
Carrying Amount at 28 February
2018 44,761 23,889 84,179 152,830
9. BORROWINGS
Interest bearing liabilities held by Hulisani increased primarily because of the acquisition of
Rustmo1 Solar Farm (Pty) Ltd.
2018
R’000
Balance as at 01 March 2017 -
Arising from Acquisition of subsidiary (Note 4) 134,952
Repayments (2,697)
Balances as at 28 February 2018 132,255
Non-current
IDC loan 60,977
Nedbank loan 60,715
Total non-current interest-bearing debt 121,692
Current
IDC loan 5,301
Nedbank loan 5,262
Total current interest-bearing debt 10,563
Total interest-bearing debt 132,255
IDC loan
The IDC loan is secured, bears interest at 11.61% and is payable in semi-annual instalments
over a term of 14 years.
Nedbank loan
The Nedbank loan is secured, bears interest at 11.60% and is payable in semi-annual
instalments over a term of 14 years.
10. GOODWILL
2018
R’000
Balance at 01 March 2017 -
Addition 44,761
Balance at 28 February 2018 44,761
The goodwill relates to the acquisition of a subsidiary disclosed in Note 4.
Impairment of goodwill
Goodwill has been tested for impairment. The recoverable amount of goodwill was based on
a value in use discounted cash flow method. No impairment loss was recognized on goodwill
in the period under review.
The key inputs to the discounted cash flow model are as follows:
1. Discount rate – 13.5%
2. Base revenue - Base revenue is determined using the PPA tariff inflated at CPI over
the term of the PPA. The base revenue in the cash flow projections, year ending 28
February 2018, is R44.5 million.
11. FINANCIAL INSTRUMENTS FAIR VALUE MEASUREMENTS
(a) Fair value Hierarchy
The following table presents the group’s financial assets measured and recognized at fair
value at 28 February 2018:
Level 1 Level 2 Level 3 Total
At 28 February 2018 R'000 R'000 R'000 R'000
Financial assets at FVPL
- Convertible loan - - 75,143 75,143
Financial assets at FVOCI
- Cumulative
preference shares - - 8,961 8,961
Total assets - 84,104 84,104
2018
R’000
Total loss for the period recognised in profit or loss under ‘Fair (24,857)
value loss’
Total gains for the period recognised in other comprehensive 773
income under ‘Other comprehensive income’
(b) Valuation techniques used to determine fair values
The fair value of the convertible loan and preference shares is determined using discounted
cash flow method.
(c) Fair value measurements using significant unobservable inputs (level 3)
Cumulative
Convertible preference
loan shares Total
At 28 February 2018 R'000 R'000 R'000
Opening balance 01 March 2017 - - -
Acquisitions 100,000 8,188 108,888
Income recognised in other
comprehensive income - 773 773
Gains/(losses) recognised in profit
or loss (24,857) - (24,857)
Total assets 75,143 8,961 84,104
(d) Valuation inputs and relationships to fair value
Actual input Relationship of
unobservable
inputs to fair
Fair Value Unobservable value
R’000 inputs
Description
Cumulative 8,961 Discount rate 12.5% The higher the
preference discount rate
shares the lower the
fair value
Convertible loan 75,143 Discount rates 13.20% The higher the
discount rate
the lower the
fair value
Base revenue 2.3 billion The higher the
from plant base revenue,
operation the higher the
fair value
Period of 30 years The shorter the
operation period, the
lower the fair
value
(e) Valuation processes
The finance department of the group obtains input from independent valuation experts in
performing valuations of financial assets required for financial reporting purposes, including
level 3 fair values. The valuations expert communicates directly with the chief financial officer
(CFO).
Financial assets are valued by using either the Discounted Cash Flow Method or the Dividend
Discount Model. The discount rates used for the valuations are the prevailing market rates at
the time of the valuations.
The Group conducts valuations twice a year, at the interim financial reporting period and also
at the year-end reporting period.
(f) Significant unobservable inputs on convertible loan
The fair value is determined by using the discounted cash flow method by discounting the
dividend income.
The key inputs to the discounted cash flow model are as follows:
1. Discount rate – 13.2%
2. Base revenue from plant operation – Base revenue is determined using the PPA tariff
for Dedisa and for Avon, inflated at CPI over the term of operation. The base revenue
in the cash flow projections of Dedisa and Avon, year ending 28 February 2018, is
R2.3 billion.
3. Period of operation - 30 years
The model is most sensitive to changes in base revenue from operations, discount rate and
period of operation.
If all assumptions remained unchanged, a 5% decrease in base revenue results in a further
reduction in fair value of R14m;
If all assumptions remained unchanged, a 1% increase in discount rate results in a further
reduction in fair value of R9m.
If all assumptions remained unchanged, a 5 year reduction in the period of operation results
in a further reduction in fair value of R9m.
12. EARNINGS PER SHARE
The calculation of earnings per share at 28 February 2018 was based on the loss attributable
to ordinary shareholders of Hulisani, and a weighted average number of ordinary shares. The
calculation is as follows:
Reviewed Audited
2018 2017
R’000 R’000
Loss for the year (116,864) (6,010)
Adjustments: - -
Listing costs - 2,365
Loss on disposal of property, plant and equipment - 413
Impairment loss 60,299 -
Safe custody costs - 2,633
Headline earnings (56,565) (599)
Number of shares in issue (‘000) 50,000 50,000
Weighted numbers of shares (‘000) 50,000 44,795
Basic and diluted earnings per share (cents) (234) (13)
Basic and diluted headline earnings per share (cents) (113) (1)
13. RELATED PARTY TRANSACTIONS AND BALANCES
(a) Transactions
2018 2017
R’000 R’000
Professional fees (i) 1,611 456
Consulting fees (ii) 4,406
Management fees (iii) 3,511
Dividends paid (iv) 2,514
Subleasing charges - 994
i. Professional fees of R1.6m were paid for due diligence on investments; R990k to
Uniper Energy SA (Pty) Ltd and R621k was to Mothee Consulting respectively. Both
entities have relationships with some of the directors of Hulisani.
ii. Consulting fees of R4.4m we paid to GraysMaker Advisory (Pty) Ltd and Marsay (Pty)
Ltd. The entities are owned by the directors of Hulisani subsidiaries; namely Umhlaba
Land Lease (Pty) Ltd for GrayMaker and Optimise Advisory Services (Pty)Ltd for
Marsay (Pty) Ltd.
iii. Management fees were paid by RustMo1 Farm (Pty) Ltd to Momentous Operations
Services (Pty) Ltd; a director of RustMo1 is a shareholder of Momentous Operations.
iv. Dividends were paid by RusMo1 Farm (Pty) Ltd to Momentous Solar Farm (RF) (Pty)
Ltd; a director of RustMo1 is a shareholder of Momentous Solar Farm.
v. The company sub leased office space for a period of eight months from non-
executive directors. The lease period terminated on 30 November 2016. The amount
shown are market related amounts.
(b) Balances
2018
R’000
Loans receivables (i) 416
Other receivables (ii) 5,200
i. The loan amount was granted by Optimise Advisory Services (Pty) Ltd to Gromac
Holding (Pty) Limited, an associate of the Group.
ii. An overpayment was made to Nibira (Pty) Ltd for fees due, the amount remains
owing to the group at the end of the financial period. Nibira (Pty) Ltd is owned by
some of the directors who are the founding members of Hulisani.
14. DIVIDENDS
There are no dividends declared for the period.
Johannesburg
1 June 2018
On behalf of the Board
ME Raphulu
Chief Executive Officer
Registered Office:
4th Floor, North Tower, 90 Rivonia Road, Sandton, Gauteng.
Auditors
PricewaterhouseCoopers Inc.
Sponsor
PSG Capital
Transfer secretaries:
Computershare Investor Services Proprietary Limited, 70 Marshall Street Johannesburg,
2001
Company secretary
ER Goodman Secretarial Services CC, Houghton Estate Office Park, 2nd Floor, Palm Grove,
2 Osborn Road, Houghton, 2198
Directors:
ME Raphulu (Chief Executive Officer), MF Modau (Chief Investment Officer), MP Dem (Chief
Financial Officer), PC Mdoda* (Chairman), A Notshe*, MH Zilimbola*, NP Gosa*, DR
Hlatshwayo*, HH Schaaf*#, B Marx*.
* Independent Non-executive # German
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