TIDMRUR
RNS Number : 3989B
Rurelec PLC
30 September 2022
30 September 2022
AIM: RUR
Rurelec PLC
("Rurelec" or "the Company")
Interim results for the six months ended 30 June 2022
Strategy update and intended
Board appointment
Rurelec PLC (AIM: RUR), the owner, operator and developer of
power generation capacity internationally, today announces its
unaudited interim results for the six months ended 30 June
2022.
Financial Highlights:
-- Operating loss: GBP0.49 million (2021 GBP0.44 million)
-- Post tax profit / (loss): GBP0.70 million (2021: (GBP0.88)
million)
-- Profit / (loss) per share: 0.12 pence (2021: (0.16) pence)
-- Net asset value per share: 2.2 pence (2021: 2.5 pence)
-- Net cash balance: GBP0.88 million (2021: GBP0.28 million)
Operational and Post Half-Year Highlights:
-- Major improvement in post-Tax profitability, from a loss of
GBP0.88 million last period to GBP0.70 million profit this period,
this was largely due to exchange rate movements on US
Dollar-denominated loan receivables and the carrying value of the
701 turbines. In the prior period there had been adverse half-year
end exchange rate losses of GBP0.43 million as compared to gains of
GBP1.19 million in the current period.
-- Cash increased from GBP0.28 million last period to GBP0.88
million at the end of the period under review, which is the result
of debt repayment from PEL, the Joint Venture company which owns
Energia del Sur, S.A. ("EdS"), totalling GBP0.67 million and
receipt of disposal proceeds from the sale of the Arica 6B turbine
totalling GBP0.72 million. Current cash balance GBP0.75
million.
-- Whilst the Board is encouraged to note the improvement in the
cash position at 30 June 2022 compared to the same date last year,
there remains significant uncertainty around the timing and quantum
of future debt repayments from PEL. This uncertainty is reflective
of continued trading difficulties in Argentina amidst softening
electricity spot tariffs and tight exchange controls.
-- The Board continues to explore options for the Chilean
project following the successful sale of the Frame 6B turbine sale
for US $1.0 million/GBP0.72 million which was agreed on 9 September
2021.
-- Discussions remain ongoing with regard to the disposal of two
Siemens Westinghouse 701 128 MW gas turbine generators
("701s").
Strategy update and proposed board appointment
The strategy of the Group continues to be focussed on
stabilising the financial position, keeping costs under tight
control, whilst buyers for certain assets are found. The underlying
strategy is to preserve the value of the Group assets and to
generate cash. Given the Group is debt-free, this will in turn
enable Rurelec to maximise returns to its shareholders though, as
reported in the Audited Accounts for the year ended 31 December
2021, the ability of Rurelec to build up sufficient cash reserves
to fund dividend payments remains very uncertain unless the returns
from the Argentinian operations improve or further asset disposals
are achieved.
While the asset disposal program is being pursued, the board is
considering the next phase of the Company's development and also
strategic partnering options for existing assets. The Company has
therefore appointed Orana Corporate LLP ("Orana"), a London-based
corporate advisory and business services practice to assist with
the next phase. The fees for this arrangement are an annual
corporate adviser fee of GBP60,000 per annum; an interim management
fee of GBP5,000 per month until the date that Daniel Maling becomes
a director of the Company (although at this stage there is no
guarantee that he will become a director of the Company); a success
fee calculated as a commission (up to a maximum of 7.5%) linked to
asset sales and associated new business opportunities and, subject
to shareholder approval; the issue of 35,000,000 warrants over
Ordinary Shares at a price of 0.75p per Ordinary Share. Following
shareholder approval, it is intended that the warrants will vest in
two separate tranches with 20,000,000 vesting on an asset sale; and
the balance vesting on satisfactory completion of a fundraising. A
circular to convene a general meeting of shareholders for the
associated approval, which will also contain full details of the
warrant terms, will be dispatched in due course.
Orana's primary objectives are to introduce new investors to the
Company, and a review of Rurelec's assets with a view to unlocking
their inherent value potential for the Company's shareholders. They
will seek to find opportunities to commercialise existing assets,
if they are not sold, and identify new business prospects or
strategic partnerships. This could see Rurelec take advantage of
the global energy sector's transition away from the most polluting
fossil fuels.
In addition, as part of the terms of the arrangement it is
proposed that Mr Daniel Maling, a partner of Orana, be appointed a
director of the Company subject to regulatory due diligence and
Nominated Adviser approval. Mr Maling is a London-based senior
corporate financier with an energy sector focus with over 25 years'
experience, who has advised and managed several quoted companies in
the United Kingdom, Canada, and Australia. Under the terms of his
proposed service contract ("Service Contract") he will be paid a
salary of GBP30k per annum for a minimum of 10 days per month; he
is on three months' notice and is subject to customary restrictive
covenants and standard employment terms and conditions. It is also
intended that, subject to shareholder approval, Daniel will be
issued with 20,000,000 warrants to subscribe for ordinary shares in
the Company. Such options would be capable of being exercised at
any time after their date of vesting, whilst Daniel remains an
employee of the Company, at an exercise price of 0.75p.
At the same time, it is proposed Daniel Maling enter into a
consultancy agreement with the Company pursuant to which he will
receive a fee of GBP2,500 per month for supplementary work over and
above his Service Contract.
Commenting on the results, Andy Coveney, Rurelec's Executive
Director, said:
"The Board continues to pursue measures to unlock the inherit
value of the Company through selling or developing assets and
managing cash receipts from the power generation plant in
Argentina. We are conscious that the economic situation in
Argentina remains challenging and we continue to monitor the impact
on our operating asset there.
That said, with the prospect of future asset sales, and a
healthy cash balance, we remain cautiously optimistic about
stabilising our financial position and developing a platform for
future growth in the period ahead.
I welcome the engagement of Dan Maling and his team at Orana
whom we believe will provide a new impetus and direction as we look
forward to the next phase of the Rurelec story."
For further information please contact :
Rurelec PLC WH Ireland
Andrew Coveney Katy Mitchell
Executive Director Megan Liddell
+44 (0)20 7549 2839 +44 (0)20 7220 1666
Executive Directors' Statement
Review of Operations
Argentina
Energia del Sur, S.A. ("EdS") generated a steady and consistent
output which continued throughout the first 6 months of 2022.
Despite the plant performing well, the economic situation in
Argentina remained in crisis:
1 . High inflation and a decline in the value of the Argentinian
peso against the US Dollar led to the Argentinian Central Bank
tightening exchange controls in September 2019. The exchange
controls on US Dollars have a direct effect on the cash remittances
by EdS to PEL, the latter not being resident in Argentina. The cost
of transferring money out of Argentina has increased as a result of
these controls and the loss suffered on funds remitted from EdS to
PEL had been in the order of 53 per cent. of the underlying face
value. A similar situation persisted in the first 6 months of 2022.
The duration and severity of these controls remains uncertain.
2 . Delays have been experienced by EdS along with other
generators in Argentina in receiving payments of revenue from
CAMMESA (the wholesale electricity market regulator and
administrator).
3 . The power output generated by EdS has been remunerated as
Spot Price under Resolution SE 440 ("Resolution 440") which
dictates the price EdS can charge for the electricity it generates.
Resolution 440 introduced the following main changes:
-- Spot generation tariffs increased by 29 per cent. on average.
This increase was retroactively applied from February 2021.
-- Spot prices were no longer linked to the US Dollar, instead
became linked to the Argentine peso.
-- Steam turbine and gas turbine capacity and offtake revenue
both became remunerated under the Resolution 440 tariff.
4 . In April 2022, the Secretariat of Energy published a new
resolution which governs the Spot price tariff, Resolution SE
238/2022 ("Resolution 238") with retroactive effect to February
2022. This Resolution introduced the following changes to
Resolution 440:
-- Remuneration prices were increased by 30% for the period Feb
to May 2022. A further 10% price increase was implemented from June
2022.
-- Cancellation of the clause of reduction of income due to
availability based on the utilization factor. The application of
this clause was suspended for EdS since February 2021, representing
an increase in our collection of AR$86 million, or GBP0.65 million
at average official Argentine rates, during 2021.
Despite the price increases introduced in Resolution 238, the
income generated under this new tariff is still significantly lower
than the income generated by EdS under Resolution 220 which expired
in September 2020.
Until there is a change of government with policies more
favourable to generators, EdS's revenue and cash generation will
continue to be suppressed. This in turn will influence the timing
and amounts of any cash payments from EdS to PEL and ultimately to
Rurelec.
5. The Argentinian economy remained weak throughout the period
and the board understand from local Argentinian management that
tariffs are not likely to increase under the current government
other for than general inflationary increases.
In the 6 months to 30 June 2022 EdS accumulated sufficient cash
to make one payment of unsecured loan repayments to PEL of US $1
million/GBP0.79 million, of which Rurelec received (i) US$0.76
million/GBP0.67 million, in partial repayment of the Amended and
Restated Loan Notes (the "Loan Notes") that were created as part of
a new agreement with the joint venture partner in November 2019;
and (ii) US $0.01 million of management fees. This agreement set
out how cash receipts in PEL will be allocated between the joint
venture partners and represented a major step forward in our mutual
working relationship. After the end of the period under review, up
to the date of this interim statement, Rurelec has received no
further payments by way of partial repayment of the Loan Notes.
The balance outstanding on the Loan Notes at 30 June 2022 was US
$13.35 million (2021: US $14.94 million). Future loan repayments
will be in the ratio 72:28 (Rurelec:Basic) between Rurelec and
Basic Energy Limited, the ultimate shareholders of PEL.
Chile
In Chile, the necessary environmental consents and land leases
were maintained in order to extend the project and the Board
continues to review options in the light of the risks versus
rewards of undertaking this project and the costs of renewing the
annual rental agreement on the land.
Asset disposals
No further asset disposals were achieved in the period.
Head office
Tight controls continued to be maintained on overheads in the UK
and administration costs for the period were flat at GBP409k (2021:
GBP416k).
Debt repayments and Cash flow
Rurelec remained free of any secured debt and was consequently
in the position of not having to pay any interest.
The period-end cash balance was GBP879k (2021: GBP275k).
Liquidity remains a significant issue for the Group. The Group
has been able to cope with variability in the timing and quantum of
cash receipts from Argentina due to long term reductions in Group
operating costs. Given the deterioration in the cash generation
from Argentina, the Group is now critically dependent on asset
sales. However, there can be no guarantee as to the timing of any
such asset sales and receipts, nor regarding when any further cash
will be received from Argentina owing to the multiple uncertainties
outlined above. In particular there is no guarantee that the
remuneration level of the tariff/PPA/spot prices will be further
improved or that EdS will remain economically viable. The Directors
consider that the prospect of better tariffs being granted for
EdS's power is largely dependent on political change in Argentina
which may not occur until late 2023, if at all.
Given the cash balances held by the Group, potential cash
remittances from our Argentine operation and potential asset
disposals, the directors believe there is currently sufficient
headroom in existing working capital resources to avoid the need to
seek further sources of working capital and accordingly continue to
adopt the going concern basis of accounting. However, the potential
remittances and receipts are not guaranteed and if neither source
of funds generates sufficient cash in the future there would exist
a material uncertainty over the ability of the Company to finance
its ongoing activities, the Directors continue to keep this under
review.
Board of Directors
There were no changes to the Board of Directors during the
period covered by these condensed financial statements.
Andy Coveney
Executive Director
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
for the half year ended 30 June 2022
(expressed in thousands of pounds)
Audited
Notes 6 months 6 months 12 months
to to to
30/06/22 30/06/21 31/12/21
GBP'000 GBP'000 GBP'000
------------------------------------- ------ --------- --------- ----------
Administrative expenses (496) (443) (967)
Other income - - 352
Other expense - - (1,469)
Operating loss (496) (443) (2,084)
Foreign exchange gains / (losses) 1,194 (432) (214)
Finance income - - 491
Finance expense - - (1,827)
------------------------------------- ------ --------- --------- ----------
Profit / (loss) before tax 697 (875) (3,634)
Tax expense - - -
------------------------------------- ------ --------- --------- ----------
Profit / (loss) for the period 697 (875) (3,634)
Profit / (loss) per share 3 0.12p (0.16p) (0.65p)
------------------------------------- ------ --------- --------- ----------
Other comprehensive income
Items that will be subsequently
reclassified to Profit & Loss:
Exchange differences on translation
of foreign operations 269 77 285
Total other comprehensive
income 269 77 285
Total comprehensive profit
/ (loss) for the period 965 (798) (3,349)
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(unaudited)
at 30 June 2022
(expressed in thousands of pounds)
Audited
30/6/22 30/6/21 31/12/21
Notes GBP'000 GBP'000 GBP'000
------------------------------- --------- ------------------------- --------------------------- ---------
Assets
Non-current assets
Property, plant and equipment 7,766 7,230 7,003
Investment in Joint Venture 312 1,648 312
Trade and Other Receivables 3,650 4,496 3,103
11,728 13,374 10,418
----------------------------------------- ------------------------- --------------------------- ---------
Current assets
Trade and other receivables 269 1,032 997
Cash and cash equivalents 879 275 745
1,148 1,307 1,742
----------------------------------------- ------------------------- --------------------------- ---------
Total assets 12,876 14,681 12,160
------------------------------------------ ------------------------- --------------------------- ---------
Equity and liabilities
Shareholders' equity
Share capital 5,614 5,614 5,614
Share premium account - - -
Foreign currency reserve 1,347 870 1,078
Profit and loss reserve 5,711 7,773 5,014
------------------------------------------ ------------------------- --------------------------- ---------
Total equity 12,672 14,257 11,706
Current liabilities
Trade and other payables 200 420 448
Current tax liabilities 4 4 6
204 424 454
----------------------------------------- ------------------------- --------------------------- ---------
Total liabilities 204 424 454
------------------------------------------ ------------------------- --------------------------- ---------
Total equity and liabilities 12,876 14,681 12,160
------------------------------------------ ------------------------- --------------------------- ---------
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
for the half year ended 30 June 2022
(expressed in thousands of pounds)
Share Share Foreign Retained Other Total
capital premium currency earnings reserve equity
GBP'000 GBP'000 reserve GBP'000 GBP'000 GBP'000
GBP'000
Balance at 01.01.21 5,614 - 793 8,648 - 15,055
Loss for the first 6
months - - - (875) - (875)
Exchange differences
on translation - - 77 - - 77
---------------------- ----------- ------------ ----------- ----------- ----------- ------------
Total comprehensive
profit - - 77 (875) - (798)
---------------------- ----------- ------------ ----------- ----------- ----------- ------------
Balance at 30.06.21 5,614 - 870 7,773 - 14,257
Loss for the Period - - - (2,759) - (2,759)
Exchange differences
on translation - - 208 - - 208
---------------------- ----------- ------------ ----------- ----------- ----------- ------------
Total comprehensive
loss - - 208 (2,759) - (2,551)
---------------------- ----------- ------------ ----------- ----------- ----------- ------------
Balance at 31.12.21 5,614 - 1,078 5,014 - 11,706
Loss for the first 6
months - - - 697 - 697
Exchange differences
on translation - - 269 - - 269
---------------------- ----------- ------------ ----------- ----------- ----------- ------------
Total comprehensive
profit / (loss) - - 269 697 - 966
---------------------- ----------- ------------ ----------- ----------- ----------- ------------
Balance at 30.06.22 5,614 - 1,347 5,711 - 12,672
---------------------- ----------- ------------ ----------- ----------- ----------- ------------
RURELEC PLC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
for the half year ended 30 June 2022
(expressed in thousands of pounds)
Audited
6 months 6 months 12 months
to to to
30/06/22 30/06/21 31/12/21
----------------------------------- --------- --------- ----------
Result for the period before
tax 697 (875) (3,634)
from operations
Net finance expense - - 1,336
Adjustments for:
Unrealised exchange (gains)
/ losses (1,194) 429 214
Write down on loans/investments - - 1,500
Gain on disposal - - (330)
Change in trade and other
receivables 189 - (173)
Change in trade and other
payables (232) 53 96
----------------------------------- --------- --------- ----------
Cash used in operating activities (540) (393) (991)
----------------------------------- --------- --------- ----------
Taxation paid - - -
----------------------------------- --------- --------- ----------
Net cash used in operating
activities (540) (393) (991)
----------------------------------- --------- --------- ----------
Cash flows from investing
activities
Repayments from joint venture
company 674 - 347
Net proceeds from sale of
turbine - - 721
Net cash generated from investing
activities 674 - 1,068
----------------------------------- --------- --------- ----------
Net cash inflow before
financing activities 134 (393) 77
----------------------------------- --------- --------- ----------
Cash flows from financing
activities
Loan Principal Repayments - - -
Loan Interest Repayments - - -
----------------------------------- --------- --------- ----------
Net cash used in financing - - -
activities
----------------------------------- --------- --------- ----------
Increase / (decrease) in
cash
and cash equivalents 134 (393) 77
-----------------------------------
Cash and cash equivalents
at start of period 745 668 668
----------------------------------- --------- --------- ----------
Cash and cash equivalents
at end of period 879 275 745
RURELEC PLC
Notes to the Interim Statement
for the six months ended 30 June 2022
1. Basis of preparation
These condensed consolidated interim financial statements do not
constitute statutory accounts within the meaning of Section 435 of
the Companies Act 2006. The comparative figures for the year ended
31 December 2021 were derived from the statutory accounts for that
year which have been delivered to the Registrar of Companies. The
financial information contained in this interim statement has been
prepared in compliance with International Financial Reporting
Standards ("IFRSs") and in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and expected to apply to the Group's results for the year
ending 31 December 2022 and on interpretations of those Standards
released to date.
2. Accounting policies
These condensed consolidated interim financial statements have
been prepared in accordance with the accounting policies set out in
the Group's financial statements for the year ended 31 December
2021.
3. Earnings per share
6 months 6 months 12 months
to to to
30/6/22 30/6/21 31/12/21
--------- ----------- -----------
Basic and diluted
Average number of shares 561m 561m 561m
in issue during the period
Profit / (Loss) attributable GBP0.30m (GBP0.88)m (GBP3.63)m
to equity holders of the parent
from continuing operations
Basic and diluted profit /
(loss) per share on continuing
operations 0.12p (0.16)p (0.65)p
--------- ----------- -----------
There are no financial instruments in issue (2021: none) that
could be settled by the delivery of shares.
4. The Board of Directors approved this interim statement on 30
September 2022. This interim statement has not been audited.
5 . Copies of this statement are available at the Company's
website www.rurelec.com
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