Source - RNS
RNS Number : 8798I
Plutus PowerGen PLC
05 September 2016
 

Plutus PowerGen Plc / Ticker: PPG / Index: AIM

5 September 2016

Plutus PowerGen plc ('PPG' or 'the Company')

Final Results

 

Plutus PowerGen plc, the AIM listed power company focused on the development construction and operation of flexible stand-by electricity generation in the UK, announces its results for the year ended 30 April 2016.

 

Highlights

 

This year has seen the Group continuing to build upon the strong operational and financial platforms established by the Company in its first year of operations.

 

Financial

 

•              68.9% reduction in losses after tax for the year compared with last year

•              78.1% reduction in loss per share compared with previous year

•              914% increase in revenues to £887,500 in the year compared with £87,500 last year

•              Fees now being earned from nine management contracts of £150,000 p.a. each

•              Annualised fees projected to be in excess of £1.3m per annum from May 1 2016

 

Operational

 

•              Target of at least 200MW of electricity generating capacity by the end of 2017

•              Portfolio of projects increased by majority owned FlexGen and SolarFlex opportunities

•              Success in the Capacity Market Auction for three 20MW sites to date, with planning of 100MW to date and further capacity at various stages of the planning process

•              MOU with UK based Green Biofuels Limited for the supply of its proprietary renewable fuel 'Green D+' for use across the Company's portfolio

•              Formal partnership with renewable energy developer Reliance Energy Limited to secure further flexible power generation facilities in the UK

•              Continued minimum dilution business model and structure

 

Chairman's Statement

 

This has largely been a year of consolidation for Plutus PowerGen, building upon the excellent work of the previous year.

 

We have made pleasing progress over the last twelve months. Having now passed earlier project milestones for all of the nine investments in companies funded by Rockpool Investments LLP (who have raised in excess of £33 million for these entities), our priority is to achieve planning permission (where not already obtained), build out and commission the sites.

 

These investments have become a valuable asset, and we expect to be able to re-value in the accounts at the end of the next financial year for those sites that are operational. This will provide a strong backbone for the Company in its new phase of seeking further sites for development. With nine management contracts awarded to date, the fee income from these enables the Company to manage our existing investments and also to expand and build out new sites, whether FlexGen or SolarFlex.

 

It is intended these new sites will be majority owned, with Plutus PowerGen typically holding a stake of 80%. These subsidiaries will be consolidated in our Group accounts, further strengthening our balance sheet. Now that we are able to select sites independently, we will be able to develop our plans for SolarFlex facilities and to pilot power storage technologies alongside these, further contributing to the balancing requirements that are a vital service to the National Grid.

 

As a board of Directors, we are looking actively at further improving our low carbon credentials. We were delighted to partner with Green Biofuels Limited for the supply of its proprietary renewable fuel, 'Green D+' for use across the Company's projects. The use of Green D+ across our portfolio means we will be a low carbon, renewable generator, further underpinning our environmental credentials and opening us to renewable investors. We are also exploring partnerships with power storage development companies to evaluate the viability of using battery, capacitor or inertial technology in conjunction with our SolarFlex facilities. Such power storage devices could potentially enhance the flexibility and thus the economics of all flexible generation sites.

 

A crucial part of our next phase is the ability to fund new sites. With that objective, the Company is in the process of launching a bond to be listed on ISDX to raise up to £4.0 million. It is planned that the proceeds from this bond will assist PPG in building out its next three to four 20MW sites, providing us with the funds for our equity share of each of these projects and giving us flexibility in the funding mix for each of these sites. We continue to negotiate with other prospective partners for funding of further sites.

 

Outlook

The Directors look forward to the year ahead with confidence. We anticipate that within the next twelve to eighteen months all of the 45% owned investment sites will be operational. We anticipate that we will start to make headway with PPG's 80% owned sites, which will likely be a mix of both SolarFlex and pure FlexGen sites.

 

I would like to thank my fellow Directors for all their hard work this year and I look forward to being able to report further strong progress in the forthcoming period.

 

Charles Tatnall

Executive Chairman

2 September 2016

 

Case study: Plymouth site

 

Built on the site of the former Toshiba television factory in Ernesettle, our 20MW Plymouth facility is on track to be operational in autumn 2016, in time for the winter season.

 

Although our sites are operated remotely and thus do not create local employment opportunities, we are keen to contribute to the communities in which our facilities are located. We therefore offered an undertaking to Plymouth City Council that we would provide up to £50,000 to support good causes located in the same ward as our site. So far we have contributed to projects relating to infrastructure, sport and education.

 

"Thank you, this is a great opportunity for the club to move forward and create more wheelchair rugby and social activities for disabled people in the Plymouth area." - Hawks Founder and Coach

 

"The Plutus PowerGen pledge was a great boost to our project."- Ocean City Powerchair Football Club Chairperson

 

"The pledges from Plymouth City Council and Plutus PowerGen definitely boosted the support for the project from the community. Work can start on installing security gates and rotavating the land, ready to allocate plots to residents. It actually feels real now!" - Neighbourhood Warden, Four Greens Ernesettle Community Allotment

 

Chief Executive's Review

 

In the last year we have made significant strides to prove the attractiveness of our business model and demonstrate our ability to execute our strategy.

 

Overview

We have had a positive year, and have made solid progress towards achieving our ambition of operating 200MW of capacity on stream by Triad season 2017/18.

 

In summary, we have 100MW of capacity with planning permission secured, 120MW awaiting a decision or about to enter the planning process, and we retain more than 500MW of potential capacity in our pipeline. We secured three 15-year Capacity Market contracts covering 60MW, and expect our first facility to go live in time to participate in this year's Triad season. One further key development is that we secured a source of green fuel, based on HVO (hydrogenated vegetable oil). This fuel attracts ROCs (Renewable Obligation Certificates) per MWh, under the Government scheme for promoting renewable generation.

 

Strategic initiatives

Aside from our priority of making our existing sites operational and developing a number of directly owned sites, a key pillar of our strategy is to establish SolarFlex facilities, where our generators are co-located - and share grid connections - with solar farms. Our partnership with Reliance Energy Limited and advanced talks with several operators of solar farms demonstrate both the technical feasibility of the strategy and the existence of willing counterparties. A compelling characteristic of SolarFlex facilities is that PPG's generators use the connection when not required by the solar farm, hence the technologies are highly complementary and allow more efficient utilisation of connections. By providing an additional return to the solar farm through the strategic cooperation, PPG is helping to accelerate the development of solar farms without subsidy. This SolarFlex model gives us a rich seam of sites in the pipeline where connection to the Grid already exists.

 

In addition, these partnerships will enable PPG to pilot the installation of storage assets on these sites to evaluate the real-life performance and commercial viability of mixing firm, exhaustible and intermittent technologies on a single connection. Assessment of these assets' real-world performance should allow PPG and its partners to attract mainstream investment thereby allowing SolarFlex sites to become an attractive reliable alternative to fossil fuel-based power stations.

 

Market context

In April of this year, we responded to a Department of Environment and Climate Change ("DECC") consultation on reforms to the Capacity Market, in which it confirmed that The Office of Gas and Electricity Markets ("Ofgem") had been asked to review network charging rules and their impact on embedded generation. DECC suggested that current charging arrangements could be providing undue reward to distribution-connected generators. The regulator is scheduled to report back soon with a proposed way forward. Separately, National Grid is undertaking its own review into embedded benefits, and the Department for Environment, Food and Rural Affairs ("Defra") is reviewing emissions as part of the UK's adoption of the Medium Combustion Plant Directive (MCPD).

 

As previously outlined, distribution connected generation is rewarded through embedded benefits, especially where it is predictable and controllable, because it contributes directly to reducing consumer bills (principally by reducing 'pass through' costs) by:

 

•              reducing costs of using the wider system and its reinforcement or replacement,

•              strengthening the operation of the local system, which is increasingly under strain from the rise in mass intermittent exports; and

•              creating local operational efficiencies.

 

We believe that current charging methodologies understate these benefits. A piecemeal approach to change would not only adversely impact the viability of existing embedded generators but also reduce investor confidence at a time when margins are at historically very low levels and security of supply has become politicised. The consequence of reduced investor willingness to invest in energy in the UK will act to drive up the cost of the capital with a resultant impact on consumer bills.

 

Beneath all of the noise and questions surrounding the reviews is an incontrovertible fact: the need for flexible stand-by electricity generation is as vital as ever as the UK's power generation mix shifts inexorably towards a greater proportion of distribution connected renewable energy sources which represents a fundamental shift away from the traditional centralised despatch model operated in the UK.

 

The Directors believe that, in these new models of energy supply in the UK, non-intermittent sources of back-up power, of the type being developed by PPG, have a vital role to play now and in the future.

 

Performance

The year under review has been the first full year of operations since the reverse takeover of Plutus Energy Limited and has been a year of significant progress for the Group in the execution of its business plan. By the end of the year we had seven management contracts in place with Rockpool investee companies and as from 1 May 2016 we have nine management contracts in place, each generating £150,000 per annum of fee income, which represents an annualised total of £1,350,000. In addition to the nine Rockpool companies we are making progress towards the Company's plan to add further capacity by adding another 3 to 4 sites per annum to the portfolio. Each site will be a majority owned subsidiary of the Company and will ordinarily hold 20MW of generating capacity. Turnover has increased over nine-fold during the year and we have reduced operating losses substantially together with attributable losses per share.

 

As Charles outlined in his review, we are in the process of launching a bond, through which we are aiming to raise a gross amount of up to £4.0 million. The net proceeds of the bond issue, alongside our existing cash resources, will be used to finance three or four additional 20MW FlexGen or SolarFlex sites, in which PPG will own an 80% stake.

 

Outlook

We will continue to press on with our strategy. We will build upon the foundations we have laid to bring capacity on-stream, and see a great opportunity in exploring the potential for energy storage.

 

The on-going energy market reviews present a couple of icebergs for us to steer around, but we believe that the gaps between these icebergs are sufficiently large, and are confident that our steady hand on the tiller will steer us through, given the compelling and growing need for reliable, flexible stand-by generation.

 

Phil Stephens

Chief Executive Officer

2 September 2016

 

Sustainability is at the heart of our operations, and our flexible, stand-by sites facilitate the UK's increasing reliance on renewable energy.

 

•              By plugging intermittency gaps from renewable energy in a cost-effective manner, our sites will enable further decarbonisation of the UK energy sector.

•              Our facilities are anticipated to run for no more than 150 hours per year in 1 hour blocks of time during peak demand (indeed they may not exceed 200-300 hours as a result of the commitments made in the planning permission process). Despite providing valuable generating capacity, they are expected to be switched off for more than 97% of the time and their annualised emissions will be minimal.

•              Our generators will be fired with green fuel from HVO (hydrogenated vegetable oil), which reduces the environmental impact and also stimulates the development of such fuels by providing a proven market. This fuel eliminates SOx, reduces NOx by c.30% and reduces particulates. Our facilities will conform to all UK and EU air quality standards. We are evaluating other sources of green fuels, for example fuel from waste plastic which otherwise would go to landfill, and looking at technology to add to our generators to comply with the more stringent requirements associated with the incoming Medium Combustion Plant Directive.

 

Our Market

 

Demand for flexible electricity generation is underpinned by structural changes to the UK's power generation mix, which is seeing an increasing proportion of intermittent, renewable power as legacy fossil capacity is retired.

 

Characteristics of the UK energy market

Increasing volatility

Renewable power generation has grown in the UK from 3% of energy supply in 2000 to currently more than 20%. With the ongoing retirement of high carbon sources of generation, this proportion is set to increase to more than 30% (see the graph below). The Government has committed to closing all coal-fired power stations by 2025, while new gas and nuclear generation is at least 10 to 15 years from coming online.

 

As the UK's power generation mix shifts away from fossil fuels and becomes increasingly reliant on renewable sources, energy supply becomes more irregular: wind is an intermittent source, while solar energy is generated predominantly in the summer months, when least required. Balancing supply and demand is consequently an increasingly challenging, yet vital component of the energy supply market.

 

Tight capacity margins

The UK energy market is experiencing reducing capacity margins, i.e. the difference between peak electricity demand and the capacity available to meet this. For last winter, National Grid had forecast a buffer of just 6%, equivalent to 3GW, although the mild weather alleviated any operational pressure on the system. Continuing high renewable deployment rates, the planned closure of coal generation and the aging condition of a substantial part of the UK nuclear industry, combined with expected delays in the delivery of flagship nuclear projects, suggest that operating challenges will worsen.

 

Increasing need for balancing services

The system operator, National Grid, is responsible for ensuring that the UK electricity system has sufficient supply to match demand. Since power cannot readily be stored in sufficient quantities as yet, matching must be done in real time. Small imbalances in supply and demand lead to frequency distortions, which are critical for many technologies connected to the system. Larger imbalances may lead to brownouts and blackouts.

 

National Grid classifies the capacity it makes available to address imbalances into four categories

 

•              Contingency reserve or margin

•              Short-term operating reserve (STOR)

•              Regulated (or fast) reserve

•              Low frequency response

 

National Grid has also requested notifications of interest in a new service called Enhanced Frequency Response, for very rapid response such as could be provided by battery storage units. Battery storage remains markedly higher cost than other short-term generation solutions and has technological limitations. As a result, this new market is thought likely to complement, rather than remove demand from existing frequency response markets.

 

In addition, energy balancing, using existing capacity in the main balancing market and involving demand reduction, also takes place across all time zones, although is used particularly in the 20 minutes ahead of the demand point.

 

Drivers of demand for flexible power generation

In the context of the fundamental changes to the UK energy sector outlined above and the resulting challenges, flexible power generation plays a vital role in supporting the pillars of the UK's energy strategy, as summarised in the table below.

 

Flexible generation sites support UK energy imperatives

Keeping the lights on

 

Network support

•     Improve operational capability by lowering demands on the network

•     Support the distribution system and provide an important tool to accommodate intermittency of renewable sources

Frequency control

•     Maintain system frequency within operating parameters by generating very quickly, supporting local balancing

System inertia improvement

•     Lower the risk of failure by increasing the inertia on the system

Short run back up capacity

•     Add small scale capacity that can run when larger assets fail

Affordable

Best possible value to the consumer

•     Derive all revenue through market-delivered processes

•     Reduce connection costs by sharing Grid connections with solar

Low carbon

Providing a system that allows the wider decarbonisation of energy

•     Provide operational 'cover' for renewables

•     Give network operators fine tuning capability rather than large scale capacity

 

In contrast to large power stations, which connect to the high voltage transmission grid, most flexible generating assets connect directly to regional distribution networks. Such power generation is known as embedded generation, and enjoys several advantages that result in lower bills for consumers, as well as generators earning a premium over wholesale electricity prices. The benefits derive from three sources:

 

·     Reduced charges: While embedded generation must pay local distribution network fees, it avoids charges relating to transmission use, distribution system use and system balancing. Embedded generation also reduces the need for investment in the transmission and distribution networks, and saves costs associated with operating and maintaining existing infrastructure.

·     Reduced thermal losses;

·     Reduced regulation: embedded generation is not subject to regulatory burdens such as the Carbon Price Floor and Climate Change Levy.

 

Finally, embedded generation generally reduces the volume from balancing energy and hence can reduce the cost of balancing the system on a half hourly basis. Controllable plants such as generators also facilitate management of intermittency at a local level, allowing greater deployment of intermittent assets than would otherwise be viable.

 

The operational benefits and cost efficiencies in the form of avoided charges are typically shared between suppliers and the local producers they contract with, and ultimately benefit consumers through reduced energy bills.

 

UK energy reviews

In Spring 2016, DECC invited responses to a consultation relating to a review of the Capacity Market. As part of this, Ofgem will assess network charging rules and their impact on embedded generation, and is due to report back soon. DECC suggested that current charging arrangements could overly favour distribution-connected generators, and highlighted the type of engine used by Plutus as particular beneficiaries. Aside from this consultation, National Grid is assessing the so-called Triad benefit, and Defra is evaluating emissions, as the UK moves to comply with the Medium Combustion Plant Directive (MCPD). These reviews will, in all likelihood, result in some amendments to the way that embedded generation is rewarded. Concerns relating to security of supply, coupled with the risk of unintended consequences, are thought likely to limit the scale of any changes, however.

 

Any impact of recent structural changes to Government departments is yet to become clear. However, the Directors remain confident that there is a recognition that non-intermittent embedded generation in particular plays a pivotal role in UK energy supply, and, as such, must remain commercially viable, even if the precise reward mechanisms change.

 

Our Business Model

 

Our multi-revenue stream model is founded upon the roll-out of 20MW green fuel generation sites, funded through a combination of equity and asset finance via dedicated subsidiaries.

 

What we do

We are applying our management expertise to the establishment of a group of subsidiaries and investments active in the development, construction and operation of stand-by flexible electricity generation sites in the UK.

 

We plan to sell power to energy suppliers and the National Grid via several mechanisms, and our sites are expected to operate during periods of peak electricity demand or Grid instability.

 

How we operate

Proven, modular generation technology.

 

We will use established, reliable technology based on containerised generators, fired with biofuel. Treated as embedded generation, our unmanned gensets supply the local low voltage distribution network, reaching full output within 150 seconds of being switched on remotely.

 

Each plant has a maximum generating capacity of 20MW. This is optimal for two reasons:

 

•     The planning thresholds - and therefore construction timescales - are reduced; and

•     The emissions fall below a European threshold, thereby reducing compliance costs and risk.

 

Non-dilutive finance model

By setting up a dedicated entity for each site as part of our bottom up investment strategy, we limit medium-term dilution to existing shareholders.

 

The first nine sites have been financed with equity from clients of Rockpool in each of the nine investment entities established for this purpose, and have advance assurance from Her Majesty's Revenue and Customs to benefit from EIS-related tax benefits. PPG has a 45% stake in each of these entities, and currently derives revenue from a management contract with each site. From November 2015, EIS was closed off to new standby power generation projects. Future projects will be held in separate subsidiary companies, in which PPG will seek to obtain an interest of 80%.

 

How we intend to generate revenue

Power sales:      STOR

                                FFR

                                Triad

                                Power Purchase Agreements

                                Capacity Market

 

Other:                   Management contracts

 

Source of Revenue

Mechanism

Overview

Counterparty

Power Sales

STOR

The Short Term Operating Reserve is a mechanism used by National Grid to balance the UK's power supply at short notice. The STOR allows required electricity supply to be decreased (by incentivising major consumers to reduce demand) or increased, by calling on a pool of stand-by power generators. Under the terms of two-year contracts, National Grid pays STOR providers for making their capacity available, as well as for delivery of electricity.

National Grid


Firm Frequency Response (FFR)

FFR is a service procured by National Grid to manage system frequency, the system-wide signal that indicates whether energy supply exceeds demand or vice versa. FFR allows a provider to supply a service to reduce demand or increase generation, when instructed by National Grid. FFR is procured via monthly tender. To take part, generators must be able to deliver a minimum of 10MW, and be capable of responding within 30 seconds and for sufficient duration. Similar to STOR, providers are paid for availability as well as for utilisation. PPG will compete in the static market, whereby energy change occurs at a pre-set frequency and remains at a set level (as opposed to the dynamic market, where energy changes in line with system frequency).

National Grid


Triad

Triad is the scheme under which the National Grid charges energy suppliers significant sums according to their use of the high voltage transmission network during Triad periods - the three half-hour periods of highest demand in a year, identified after the winter. The principal means for National Grid to cover its costs, Triad also serves to incentivise users to limit consumption during peak periods, thereby easing the need for investment in the transmission system. Through the PPA, energy supply companies pay flexible generators of electricity to supply power to local distribution networks during anticipated peak periods (both for the power generated and for Triad avoidance), as their generation reduces demand on the transmission network. Generators must operate during each of the Triad periods to be eligible for payments.

Energy Suppliers


Power Purchase Agreements
(PPA)

This is simply sales of generated power; when operating with an objective of Triad avoidance, power is sold under a PPA, typically to a large UK energy supplier. PPAs are typically of a 5+ year duration.

Energy Suppliers


Capacity Market

To ensure long-term security of supply, the Capacity Market provides financial incentives to bring forward new investment while maximising existing generation capabilities. The structure of CM ensures technology neutrality, meaning that the lowest cost technologies that will guarantee capacity will be awarded 1, 3 and 15-year contracts, depending on the level of capex incurred. These capacity contracts are procured through a reverse auction, run by National Grid. Generators who are successful in the auction will benefit from a regular, predictable and index-linked revenue stream for every hour they are available. The capacity obligation means providers must be available to deliver energy when needed or face penalties.

UK Government (via National Grid)

Other

Management contracts

PPG has a management contract with each Rockpool investor-funded site. Under the terms of these contracts, PPG manages the asset, from identifying the site, obtaining planning permission, to managing the connection, construction and operation of the plant.

PPG Investment Companies

 

Key relationships

The keys to success are land, asset funding and grid connection, and we enjoy constructive relationships with partners in each of these core aspects.

 

Land and Planning

Property developers: we work with developers to secure suitable sites in the south of the UK.

 

Land owners: we are able to secure attractive sites through our relationships with land owners including London & Devonshire Trust and Associated British Ports.

 

Reliance Energy: we have a formal partnership with Reliance Energy to share solar generation sites (SolarFlex), and to raise funds. When procured, each project will be developed by Reliance Energy, and constructed and managed by PPG in return for a management fee. The equity in each project will be split 70:30, with the majority interest granted to the party that successfully introduces the site.

 

Funding

 

Debt markets: there are emerging opportunities to provide development capital for management contracts.

 

Banks: we have strong relationships with banks and other financial institutions to provide debt financing.

 

Third party investors: continuing to work actively with other potential and credible investors.

Investors: PPG was readmitted to AIM in August 2014 to capitalise on the opportunity in flexible power generation and is intending to raise further working capital from the bond issue to enable the Company to operate and build out further 20MW SolarFlex and FlexGen sites.

 

Connections and Contracts

 

National Grid: we will secure STOR contracts with National Grid for our sites, and we have secured Capacity Market contracts for three sites.

 

Energy suppliers: we have negotiated Power Purchase Agreements (PPAs) with two national suppliers and are in detailed negotiations with a third.

 

Connection business: we have a partnership with a connection business to manage both the process of securing connection offers on proposed sites and the contestable connection costs.

 

Our Strategy

 

We have made pleasing headway towards achieving our ambition to develop 200MW of flexible generation by the end of 2017, by steadily executing against our clear strategic priorities.

 

Strategic priority

Progress

Bring online standalone FlexGen sites

-      Nine Rockpool-funded investee company sites

-      One majority-owned (non-EIS) PPG site under development

-      Three further sites that can be majority owned

The facility in Plymouth is scheduled to be online by this winter. 12 sites (equivalent to 240MW) have committed and viable offers of Grid connection, of which 5 (100MW) have planning permission and 1 (20MW) expects permission shortly. The balance of sites with connections are in various stages of pre-planning.

 

One majority owned subsidiary of PPG is at an advanced stage of development, and our objective is to develop an additional 4 such sites per year of which we have visibility of at least three.

Progress SolarFlex sites (co-located solar and biofuel generator facilities)

We developed our existing partnership with Reliance Energy Limited: we held promising talks with several of their solar farm operator clients to establish SolarFlex sites (with shared connections for solar and non-intermittent green fuelled generators). We anticipate that the first of these sites will be in planning within 6 months.

Explore viability of battery, capacitor or inertial energy storage

Over the medium to longer term, our strategy is to explore commercialisation of storage technologies at our SolarFlex sites, placing us at the forefront of innovation in the electricity market.

Derive revenue from multiple sources

The different markets for flexible power and the secured management contracts, means that PPG has several sources of revenue upon which to build:

Triad: The Plymouth site is anticipated to be operational in time for the forthcoming Triad season.

Capacity Market: PPG was awarded contracts for three sites, which will generate revenues for 15 years from 2019. The clearing price was £18,000 per MW per year and is index-linked from the date of grant.

Power Purchase Agreement: We have Power Purchase Agreements (PPAs) with two national suppliers and are in detailed negotiations with a third.

FFR: Via our subsidiaries and investee companies, we intend to build power generation units which reach full response within 30 seconds and can sustain supply for 30 minutes, allowing us to compete in the static FFR market. STOR and FFR are mutually exclusive, although PPG may bid for both types and run FFR outside STOR hours.

Management contracts: PPG has been granted nine management contracts by the entities financed with equity from clients of Rockpool Investments. Under these agreements, PPG receives monthly payments equivalent to £150,000 per annum for each investee company.

STOR: We intend to secure STOR contracts with National Grid for our sites.

Continue to pursue non-dilutive investment model, holding majority stakes in non-EIS funded, standalone green fuel generation sites

We intend to own majority stakes (typically 80%) in individual entities for future development sites. With that objective, we are in the process of raising €5 million (c.£4.0 million) gross via a 7% 5 year bond issue listed on ISDX. The net proceeds of this (estimated to be £3.6 million) will - in conjunction with our existing cash resources - be allocated towards the equity finance required for three or four additional 20MW flexible generation sites.

 

Financial Review

 

The Group has achieved considerable growth in fees received during the year contributing materially to substantially reduced losses and attributable losses per share

 

The year ended 30 April 2016 has been the first full year of operations since the reverse takeover of Plutus Energy Limited in the previous year together with the contemporaneous re-admission of the Company to AIM. It has been a year of significant progress for the Group in the execution of its business plan. By the end of the year we had seven management contracts in place with Rockpool investee companies and as from 1 May 2016 we have nine management contacts in place, each generating £150,000 per annum of fee income which represents an annualised total of £1,350,000. In addition to the nine Rockpool companies we are making progress towards the Company's plan to add further capacity by adding another 3 to 4 sites per annum to the portfolio. Each site will be a subsidiary of the Company and will ordinarily hold 20MW of generating capacity. The Company will also seek to introduce outside investors so as to maintain its anti-dilution funding model in the Holding Company and will normally seek to maintain a shareholding of 80%. These sites will have the ability to be fully consolidated in the Group's accounts which will see a strengthening of the Group's balance sheet and the earnings of each subsidiary will be consolidated into the profit and loss account of the Group.

 

As part of its strategy to build a majority owned portfolio of 20MW sites beyond the nine Rockpool investee companies, where the Company will continue with its obligations to build and develop the Rockpool portfolio and that will continue to be the backbone of the Group's generating capacity and a potentially valuable investment, the Directors have been investigating a suite of equity and loan arrangements for the financing of the majority owned portfolio. As part of this funding suite the Company is in the process of launching a £4 million (gross) five year 7% bond to give maximum flexibility to the suite of funding options available to it. The bond will enable the Company to build a further 3/4 new majority owned sites. We are able to fund the interest on our bond out of existing operations and are therefore in a good financial position to develop the majority owned portfolio.

 

During the year under review the Group increased its revenue to £887,500 (2015: £87,500), a rise of 914%, from the award of management contracts from the Rockpool investee companies. These fees are expected to run under current management contracts at an annualised rate of £1.35 million in future periods. Administrative expenses have increased to £1,267,588 (2015: £1,071,679) due to the increased activities of the Group in the year under review. There are no other operating expenses in the year under review (2015: £300,190), the previous year's other operating expenses being attributable to the costs of the reverse takeover of Plutus Energy Limited, the cost of re-admission and concurrent placing. As a result of the foregoing the actual overall operating expenses of the Group have reduced slightly and the operating loss of the Group has been reduced significantly to £380,088 (2015: £1,284,369) and the Group made a loss after taxation of £407,776 (2015: £1,311,427) and consequently the basic and diluted loss per share from continuing operations was 0.07p (2015: 0.32p).

 

During the year the 100,000,000 shares were issued due to the acceleration of the deferred consideration for the reverse acquisition of Plutus Energy Limited. In addition, James Longley and Charles Tatnall both exercised 10,000,000 warrants each in the Company with a net cash benefit of £180,000. A warrant was also granted during the year to Rockpool Investments LLP to subscribe for 30,075,207 new ordinary shares of 0.1p each in the Company at a price of 1.15p per share from 27 May 2018 to 27 May 2021. As a result of the acceleration Goodwill increased to £1,085,000 (2015: £485,000). Ordinary share capital is £1,496,950 (2015: £1,376,950) and share premium is £6,994,076 (2015: £6,334,076).

 

In terms of working capital, the Company continues to be owed a considerable sum of money from the Rockpool Investee companies and majority owned companies (after provisions for doubtful projects) of just under £400,000. The Company disburses funds up to the point of planning permission being granted when the disbursements are reimbursed by the Rockpool investee companies and majority owned companies. It is expected that all these funds outstanding at the year-end will be reimbursed by the Rockpool investee companies and subsidiaries in the next twelve months. Cash was £22,608 at the year-end (2015: £320,485). The decrease in cash is largely due to the increase in reimbursable expenses. Trade and other payables are increased slightly at £166,288 (2015: £143,069) which is due largely to the increased level of activity, particularly with regard to the site planning, lease and connection processes. However as mentioned above, we are able to fund the interest on our bond out of existing operations and therefore the relatively low cash balance at the year-end will be increased by the repayment of the reimbursable expenses over the year. Our ongoing overheads and interest will be covered by management fees and we will have the funds from the bond raise coming in to fund new sites. Overall, the Company is in a good situation financially and will continue to manage cash flow and accounts receivable and accounts payable in a fair and reasonable manner within the Group resources.

 

Group net assets at the year-end were £1,166,089 (2015: £758,795, an increase of £407,294 (54%).

 

Key performance indicators

The key performance indicators are set out below:

 

Company statistics

2016

2015

Change %

Gross assets

£1,525,740

£1,083,539

+41%

Cash and cash equivalents

£22,608

£320,485

-93%

Closing share price

0.925p

0.95p

 -2.6%

Earnings per share

(0.07)p

(0.32)p

457%

 

Principal risks and uncertainties

The Board regularly reviews the risks facing the Company and seeks to exploit, avoid or mitigate those risks as appropriate.

 

Financial risk management objectives and policies

Financial risk management objectives and policies of the Company are set out in note 24 to the financial statements.

 

Going concern

The Directors consider the Company can continue in operational existence for the foreseeable future with its existing resources.

 

James Longley

Director

2 September 2016

 

 

Group Statement of Comprehensive Income

For the year ended 30 April 2015

 

 


Note

2016

£

2015

£

Continuing operations




Revenue


887,500

87,500

Gross profit


887,500

87,500





Administrative expenses


(1,267,588)

(1,071,679)

Other operating expenses


-

(300,190)

Operating loss


(380,088)

(1,284,369)

Interest charge on loan note

16

(27,688)

(27,058)

Loss before tax

6

(407,776)

(1,311,427)

Tax

8

-

-

Net loss attributable to equity holders of the Company
and total comprehensive loss


(407,776)

(1,311,427)

Earnings per share (pence per share):




Basic and diluted loss per share from continuing
and total operations

9

(0.07)p

(0.32)p

 

There are no items of other comprehensive income

 

Group Statement of Changes in Equity

For the year ended 30 April 2016

 


Share

capital

£

Share

premium

£

Share

option

 reserve

£

Loan note

equity

reserve

£

Retained

losses

£

Total

£

At 30 April 2014

969,776

4,523,159

26,156

19,664

(5,758,431)

(219,676)

Comprehensive income for the year

-

-

-

-

(1,311,427)

(1,311,427)

Credit to equity in respect of share-based compensation charge

-

-

48,150

-

-

48,150

Issue of share capital

407,174

1,810,917

-

-

-

2,218,091

Transfer from equity reserve on conversion
of loan stock

-

-

-

(19,664)

19,664

-

Transfer to equity reserve on issue of convertible loan stock

-

-

-

23,657

-

23,657

At 30 April 2015

1,376,950

6,334,076

74,306

23,657

(7,050,194)

758,795

Comprehensive income for the year

-

-

-

-

(407,776)

(407,776)

Credit to equity in respect of share-based compensation charge

-

-

35,070

-

-

35,070

Issue of share capital

120,000

660,000

-

-

-

780,000

At 30 April 2016

1,496,950

6,994,076

109,376

23,657

(7,457,970)

1,166,089

 



 

Company Statement of Changes in Equity

For the year ended 30 April 2016

 


Share

capital

£

Share

premium

£

Share

option

 reserve

£

Loan note

equity

reserve

£

Retained

losses

£

Total

£

At 30 April 2014

969,776

4,523,159

26,156

19,664

(5,758,431)

(219,676)

Comprehensive income for the year

-

-

-

-

(1,268,355)

(1,268,355)

Credit to equity in respect of share-based compensation charge

-

-

48,150

-

-

48,150

Issue of share capital

407,174

1,810,917

-

-

-

2,218,091

Transfer from equity reserve on conversion
of loan stock

-

-

-

(19,664)

19,664

-

Transfer to equity reserve on issue of convertible loan stock

-

-

-

23,657

-

23,657

At 30 April 2015

1,376,950

6,334,076

74,306

23,657

(7,007,122)

801,867

Comprehensive income for the year

-

-

-

-

(405,426)

(405,426)

Credit to equity in respect of share-based compensation charge

-

-

35,070

-

-

35,070

Issue of share capital

120,000

660,000

-

-

-

780,000

At 30 April 2016

1,496,950

6,994,076

109,376

23,657

(7,412,548)

1,211,511

 



 

Group and Company Statements of Financial Position

For the year ended 30 April 2016

 



Group

Company


Note

2016

£

2015

£

2016

£

2015

£

Non-current assets






Goodwill

12

1,085,000

485,000

-

-

Investments

11

152

47

1,085,152

485,000



1,085,152

485,047

1,085,152

485,000

Current assets






Trade and other receivables

13

417,980

278,007

457,929

317,047

Cash and cash equivalents

14

22,608

320,485

20,375

320,485



440,588

598,492

478,304

637,532

Total assets


1,525,740

1,083,539

1,563,456

1,122,532

Current liabilities






Trade and other payables

15

(166,288)

(143,069)

(158,582)

(138,990)

Borrowings

16

(16,000)

(16,000)

(16,000)

(16,000)



(182,288)

(159,069)

(174,582)

(154,990)

Net current assets


258,300

439,423

303,722

482,542

Non-current liabilities






Borrowings

16

(177,363)

(165,675)

(177,363)

(165,675)

Total liabilities


(359,651)

(324,744)

(351,945)

(320,665)

Net assets


1,166,089

758,795

1,211,511

801,867

Equity






Share capital

17

1,496,950

1,376,950

1,496,950

1,376,950

Share premium account

18

6,994,076

6,334,076

6,994,076

6,334,076

Share option and warrant reserve

19

109,376

74,306

109,376

74,306

Loan note equity reserve

20

23,657

23,657

23,657

23,657

Retained losses

21

(7.457,970)

(7.050,194)

(7,412,548)

(7,007,122)

Equity attributable to owners of the Company


1,166,089

758,795

1,211,511

801,867

 

The financial statements of Plutus PowerGen plc, registered number 5859612, were approved by the Board of Directors and authorised for issue on 2 September 2016. They were signed on its behalf by:

 

James Longley

Director

Group and Company Statements of Cash Flow

For the year ended 30 April 2016

 



Group

Company


Note

2016

£

2015

£

2016

£

2015

£

Net cash used in operating activities

25

(461,772)

(1,121,714)

(219,486)

(931,881)

Investing activities






Investment in associated undertakings


(105)

(47)

(105)

-

Advances to subsidiary undertaking


-

-

(244,519)

(189,880)

Net cash used in investing activities


(105)

(47)

(244,624)

(189,880)







Financing activities






Proceeds of share issues


180,000

1,300,000

180,000

1,300,000

Share issue expenses


-

(67,450)

-

(67,450)

Proceeds of convertible loan
note issues


-

200,000

-

200,000

Proceeds of other loans


-

7,500

-

7,500

Interest paid


(16,000)

(4,701)

(16,000)

(4,701)

Net cash generated from
financing activities


164,000

1,435,349

164,000

1,435,349

Net increase/(decrease) in
cash and cash equivalents


(297,877)

313,588

(300,110)

313,588

Cash and cash equivalents
at beginning of year


320,485

6,897

320,485

6,897

Cash and cash equivalents
at end of year

14

22,608

320,485

20,375

320,485

 

 

Notes to the Financial Statements

For the year ended 30 April 2016

 

1. General information

Plutus PowerGen plc is a Company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 27/28 Eastcastle Street, London W1E 8DH. The nature of the Group's operations and its principal activities are set out in the Strategic Report and in the Chairman's Statement.

 

These financial statements are presented in pounds sterling which is the currency of the primary economic environment in which the Group operates.

 

2. Statement of compliance


The financial statements comply with IFRS as adopted by the European Union. The following new and revised Standards and Interpretations have been adopted in the current period by the Group for the first time and do not have a material impact on the Group.

 


IFRS 12

Disclosures of interests in other entities

 


A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and not early adopted. None of these are expected to have a significant effect on the financial statements of the Group.

 

3. Significant accounting policies

Basis of accounting

The financial statements of Plutus PowerGen plc (the "Company") and its subsidiaries (the "Group") have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union ("EU") applied in accordance with the provisions of the Companies Act 2006.

 

IFRS is subject to amendment and interpretation by the International Accounting Standards Board ("IASB") and the International Financial Standards Interpretations Committee ("IFRS IC") and there is an ongoing process of review and endorsement by the European Commission.

 

The consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments that are measured at amortised cost, as explained in the accounting policies below.

 

Going concern

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Company can continue in operational existence for the foreseeable future. The Group had cash and cash equivalents of £22,608 and net current assets of £256,967 as at 30 April 2016, and incurred a loss of £407,776 for the year then ended.

 

The Directors have based their opinions on a cash flow forecast, which assumes that sufficient revenue will be generated for working capital purposes and that operating costs will be kept to a minimum until adequate revenue streams are secured. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern.

 

Basis of consolidation

The Group's consolidated financial statements incorporate the financial statements of Plutus PowerGen plc (the "Company") and entities controlled by the Company (its subsidiaries). Subsidiaries are entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

 

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

 

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group.

 

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

 

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

 

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the year end date.

 

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

 

The carrying amount of deferred tax assets is reviewed at each year end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and where they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

 

Revenue

Revenue is derived from the provision of management services which are invoiced on a monthly basis and are recognised in the period to which they relate.

 

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.

 

Financial assets

Financial assets are classified into the following specified categories: 'available for sale investments', 'loans and receivables' and 'cash and cash equivalents'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

 

Available for sale investments

Investments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or determinable payments, and management intends to hold them for the medium to long-term. Financial assets that are not classified into any of the other categories are also included in the available-for-sale category.

 

Investments are initially measured at fair value plus incidental acquisition costs. Subsequently, they are measured at fair value in accordance with IAS 39. In respect of quoted investments, this is either the bid price at the period end date or the last traded price, depending on the convention of the exchange on which the investment is quoted, with no deduction for any estimated future selling cost. Unquoted investments are valued by the Directors using primary valuation techniques such as recent transactions, last price or net asset value.

 

Gains and losses on measurement are recognised in other comprehensive income except for impairment losses and foreign exchange gains and losses on monetary items denominated in a foreign currency, which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired the cumulative gain or loss previously recognised in other comprehensive income is reclassified to profit or loss.

 

The Group assesses at each period end date whether there is any objective evidence that a financial asset or group of financial assets classified as available-for-sale has been impaired. An impairment loss is recognised if there is objective evidence that an event or events since initial recognition of the asset have adversely affected the amount or timing of future cash flows from the asset. A significant or prolonged decline in the fair value of a security below its cost shall be considered in determining whether the asset is impaired.

 

When a decline in the fair value of a financial asset classified as available-for-sale has been previously recognised in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss is removed from other comprehensive income and recognised in profit or loss. The loss is measured as the difference between the cost of the financial asset and its current fair value less any previous impairment.

 

Fair Value Measurements:

The Group holds investments that are measured at fair value at the end of each reporting period using the IFRS 7 fair value hierarchy as set out below.

Level 1 - valued using quoted prices in active markets for identical assets.

Level 2 - valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1.

Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data.

 

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

 

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

 

Derecognition of financial assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

 

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received net of direct issue costs.

 

The share capital account represents the amount subscribed for shares at nominal value.

 

The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

 

The share option reserve represents the fair value, calculated at the date of grant, of options unexercised at the balance sheet date.

 

The loan note equity reserve represents the fair value, calculated at issuance of the loan notes.

 

Retained losses include all current and prior period results as disclosed in the statement of comprehensive income.

 

Financial liabilities

Financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument. All interest related charges are recognised as an expense in finance cost in the income statement using the effective interest rate method.

The Group's financial liabilities comprise trade and other payables and borrowings.

 

Trade payables are recognised initially at their fair value and subsequently measured at amortised cost less settlement payments.

 

Borrowings represent convertible loans that are accounted for as compound instruments. The fair value of the liability portion of the convertible loan notes is determined using a market interest rate for an equivalent non-convertible loan note. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the loan notes. The remainder of the proceeds is allocated to the conversion option, which is recognised and included in shareholders' equity, net of tax effects, and is not subsequently re-measured.

 

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

 

Share-based payments

The Group has applied the requirements of IFRS 2 'Share-based Payments'.

 

The Group issues equity-settled share based payments to certain employees. Equity settled share based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity settled share based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

 

Fair value is measured by use of the Black Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

 

4. Critical accounting judgements and key sources of estimation uncertainty

Critical judgements in applying the Group's accounting policies

 

In the application of the Group's accounting policies, which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period; or in the period of the revision and future periods if the revision affects both current and future periods.

 

(i) Classification of investments as available for sale

Note 11 describes the investments in nine operating companies where the Group's shareholdings exceed 20% as 'Available for Sale Investments'. Based on the contractual agreements between the Group and other investors, the Group does not have any power to appoint or remove board of directors members of the investees. Therefore the Directors of the Company concluded that the Group does not have significant influence over these companies.

 

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are set out below.

 

(i) Share options

In order to calculate the charge for share-options as required by IFRS 2, the Group makes estimates principally relating to the assumptions used in its Black-Scholes option pricing model as set out in note 20.

 

5. Business segments

In accordance with IFRS 8, the Group is required to define its operating segments based on the internal reports presented to its Chief Operating decision maker in order to allocate resources and assess performance. The Chief Operating decision maker is the Chief Executive. There is only one continuing class of business, being the operation of flexible stand-by electricity generators in the UK.

 

Given that there is only one continuing class of business, operating within the UK, no further segmental information has been provided.

 

6. Loss for the year

Loss for the year from continuing operations has been arrived at after charging:


2016

£

2015

£

Operating lease in respect of property

63,839

12,856

Employee costs - including share-based compensation costs
(see note 7)

766,010

774,817

 

The analysis of auditors' remuneration is as follows:


2016

£

2015

£

Fees payable to the Group's auditor for the audit of the Group's annual accounts

20,000

17,500

Other services pursuant to legislation:



- tax services

2,000

2,000

Total non-audit fees

2,000

2,000

 

7. Employee costs (including Directors)


2016

£

2015

£

Salaries and fees

752,091

724,810

Employee share option charge

3,794

48,150

Employer's national insurance contributions

10,125

1,857


766,010

774,817

 

The average monthly number of employees (including Executive Directors) employed by the Group during the year was 4, all of whom were involved in management and administration activities (2015:4).

 

8. Tax


2016

£

2015

£

Current tax

-

-

Deferred tax

-

-


-

-

 

Corporation tax is calculated at 20% (2015: 20%) of the estimated assessable loss for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The charge for the year can be reconciled to the profit per the statement of comprehensive income as follows:

 

Tax reconciliation


2016

£

2015

£

Loss before tax

(407,776)

(1,311,427)

Tax at UK corporation tax rate of 20% (2015: 20%)

(81,555)

(262,285)

Effects of:



Expenses not deductible for tax purposes

10,650

61,353

Tax losses carried forward

70,905

200,932

Total tax charge

-

-

 

Deferred tax assets of approximately £388,000 (2015: £388,000) have not been recognised as the Directors consider there to be insufficient evidence that the assets will be recovered.

 

9. EARNINGS per share

Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.

 

In order to calculate diluted loss per share, the weighted average number of ordinary shares in issue was adjusted to assume conversion of all dilutive potential ordinary shares according to IAS 33. Dilutive potential ordinary shares include share options granted to employees and Directors where the exercise price (adjusted according to IAS 33) is less than the average market price of the Company's ordinary shares during the year.

 

IAS 33 'Earnings per share' requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. Only options that are 'in the money' are treated as dilutive and net loss per share would not be increased by the exercise of such options.

Loss

2016

£

2015

£

Loss for the purposes of basic and diluted earnings per share:
Continuing and total operations

(407,776)

(1,311,427)

Number of shares

Number

Number

Weighted average number of ordinary shares for the purposes of basic
and diluted loss per share

602,254,768

411,010,715

 

10. Investments in subsidiarIES

 

The Group holds the following investments in subsidiary undertakings:

 

Subsidiary

Country of
Incorporation

Percentage of
ordinary shares held

Principal
activity

Plutus Energy Limited

England and Wales

100%

Management services to the electricity generating entities (Note 11)

GW Power Limited

England and Wales

80%

Electricity generation

 

The carrying value of the investments in the Company is as follows:


2016

£

2015

£

Fair value brought forward

485,000

-

Reclassified from investments in associated entities

-

125,000

Purchase of investments (see note below)

600,000

360,000

At 30 April 2016

1,085,000

485,000

 

At the Company's AGM held on 20 November 2015 a proposed amendment to the acquisition agreement in respect of Plutus Energy Limited ("PEL") was approved to the effect that the Deferred Consideration of up to 50,000,000 Ordinary Shares for each of the Vendors, which was conditional on certain events per the original agreement, became immediately payable and subsequently, on 1 February 2016, 50,000,000 shares were issued to each of Philip Stephens and Paul Lazarevic.

 

11. AVAILABLE FOR SALE INVESTMENTS

 

Available for sale investments comprise investments in nine operating entities. As explained in Note 4, these investments are not equity accounted for as the Group does not meet the criteria for exerting significant influence as set out in IAS 28.

 

All investments are classified as Level 3 under the IFRS 7 fair value hierarchy as set out under Fair Value Measurements.

 

Level 3 investments

2016

£

2015

£

At 1 May 2014 and 1 May 2015

47

-

Purchase of investments (see note below)

105

47

At 30 April 2016

152

47

 

During the year the Group acquired 44.5% shareholdings in six further companies set up to supply stand-by electricity to the National Grid for the total cost of these shareholdings was £105.

 

The details of investments classified as available for sale are as follows:

 

Investment Company

Country of
Incorporation

Percentage of
ordinary shares held

Principal
activity

Attune Energy Limited

England and Wales

44.5%

Electricity generation

Balance Power Limited

England and Wales

44.5%

Electricity generation

Flexible Generation Limited

England and Wales

44.5%

Electricity generation

Equivalence Energy Limited

England and Wales

44.5%

Electricity generation

Precise Energy Limited

England and Wales

44.5%

Electricity generation

Valence Power Limited

England and Wales

44.5%

Electricity generation

Portman Power Limited

England and Wales

44.5%

Electricity generation

Reliance Generation Limited

England and Wales

44.5%

Electricity generation

Selectgen Limited

England and Wales

44.5%

Electricity generation

 

 

12. Goodwill

 


2016

£

2015

£

Brought forward

485,000

-

Arising on acquisition of PEL

-

485,000

On issue of deferred consideration shares (see note below)

600,000

-

Carried forward at 30 April 2016

1,085,000

485,000

 

On 22 August 2014 the Group completed the acquisition of the remaining 75% of the equity of Plutus Energy Limited ("PEL") for a consideration of £360,000, satisfied by the issue of 60,000,000 ordinary shares at 0.6p per share. The Group acquired its original 25% shareholding in PEL for £125,000 in January 2014. At the date of acquisition PEL had net assets of £nil and the consideration of £485,000 was accounted for as goodwill.

 

As detailed in note 10 on 1 February 2016 100,000,000 ordinary shares were issued at 0.6p each to the vendors of PEL.

 

Goodwill is monitored by management at the Group level. The recoverable amount is determined based on value-in-use calculations which uses cash flow projections based on financial budgets approved by the Directors covering a five-year period, and a discount rate of 15% per annum.

 

The Directors believe that any reasonably possible change in key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit.

 

13. TRADE AND OTHER RECEIVABLES

 

Group

Company


2016

£

2015

£

2016

£

2015

£

Trade receivables

-

30,000

-

30,000

Amounts due from subsidiary undertakings

-

-

434,399

189,880

Other receivables

399,050

232,307

4,600

81,467

Prepayments and accrued income

18,930

15,700

18,930

15,700


417,980

278,007

457,929

317,047

 

Other receivables include amounts due from the operating entities of £394,450 (2015: £150,840) which relate to initial site preparation expenses incurred on their behalf. The costs incurred are unsecured and fall due to the Company once the planning permission for the site has been received.

 

The Directors consider the carrying amount of trade and other receivables approximates to their fair value.

 

14. Cash and cash equivalents


Group

Company


2016

£

2015

£

2016

£

2015

£

Cash and cash equivalents

22,608

320,485

20,375

320,485


22,608

320,485

20,375

320,485

 

Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates their fair value.

 

15. Trade and other payables


Group

Company


2016

£

2015

£

2016

£

2015

£

Trade payables

82,665

48,130

74,959

44,095

Other payables

20,273

3,289

20,273

3,245

Accruals and deferred income

63,350

91,650

63,350

91,650


166,288

143,069

158,582

138,990

 

Trade payables and accruals principally comprise amounts outstanding for trade purchases and on-going costs. The Directors consider that the carrying amount of trade and other payables approximates to their fair value. No trade payables were older than 90 days.

16. Borrowings

Group and Company

Convertible loans

 

On 22 December 2014 the Company issued £200,000 convertible loan notes, repayable on 18 December 2016 if not converted into shares prior to that date, and bearing interest at 8% p.a. payable quarterly in arrears.

 

The net proceeds from the issue of the loan notes have been split between the liability element and an equity component, representing the fair value of the embedded option to convert the liability into equity of the Company as follows:

 

The interest charged during the period is calculated by applying an effective average interest rate of 15% to the liability component for the period since the loan notes were issued.

 

The Directors estimate the fair value of the liability component of the loan notes at 30 April 2016 to be approximately £193,363 (2015: £181,675). This fair value has been calculated by discounting the future cash flows at the market rate of 15%.

 


2016

£

2015

£

Liability component brought forward

181,675

245,767

Nominal value of convertible loan notes issued

-

200,000

Conversion of loan notes

-

(262,792)

Equity component of convertible loan notes issued

-

(23,657)


181,675

159,318

Interest charge for the period

27,688

27,058

Interest paid

(16,000)

(4,701)

Liability component of convertible loans at 30 April 2016

193,363

181,675

Other loans

-

-

Total borrowings

193,363

181,675

Current liabilities

16,000

16,000

Non-current liabilities

177,363

165,675


193,363

181,675

 

17. Share capital


2016

Number

2015

Number

Authorised shares



Ordinary shares of £0.001 each

771,428,935

571,428,935.

Deferred shares of £0.049 each

16,439,210

16,439,210

Total

787,868,145

587,868,145

 


2016

Number

2016

£

2015

Number

2015

£

Issued and fully paid





Ordinary shares of £0.001 each

691,428,935

691,429

571,428,935

571,429

Deferred shares of £0.049 each

16,439,210

805,521

16,439,210

805,521

Total


1,496,950


1,376,950

Share issues

Ordinary shares

Number

Nominal
value

£

£

Issued shares on 30 April 2014

164,255,215


164,255

Issue of shares

407,173,720

0.001

407,174

Issued shares on 30 April 2015

571,428,935


571,429

Issue of shares

120,000,000

0.001

120,000

Issued ordinary shares on 30 April 2016

691,428,935


691,429

 

On 1 February 2016 the following share issues took place:

·   20,000,000 shares were issued for cash at 0.9p per share on the exercise of warrants.

•   100,000,000 shares were issued at 0.6p per share as deferred consideration in accordance with the amended agreement for the acquisition of Plutus Energy Limited.

 

18. Share premium account

Share premium account

£

Balance at 30 April 2014

4,523,159

Premium arising on issue of equity shares

1,878,367

Share issue expenses

(67,450)

Balance at 30 April 2015

6,334,076

Premium arising on issue of equity shares

660,000

Balance at 30 April 2016

6,994,076

 

19. Share option and warrant reserve


£

Balance at 30 April 2014

26,156

Share-based payment charge

48,150

Balance at 30 April 2015

74,306

Share-based payment charge

35,070

Balance at 30 April 2016

109,376

 

20. loan note equity reserve


£

Balance at 30 April 2014

19,664

Transfer to retained losses on conversion of loan stock

(19,664)

Arising on issue of convertible unsecured loan stock

23,657

Balance at 30 April 2015 and 30 April 2016

23,657

 

21. Retained losses


£

Balance at 30 April 2014

(5,758,431)

Comprehensive loss for the year

(1,311,427)

Transfer from loan note equity reserve

19,664

Balance at 30 April 2015

(7,050,194)

Comprehensive loss for the year

(407,776)

Balance at 30 April 2016

7,457,970

 

22. Share options and warrants

 

Options

On 8 March 2013, options over, in aggregate, 14,310,000 ordinary shares of 0.1 pence were granted to the Directors of the Company. Each option carries the right to subscribe to one new Ordinary Share in the capital of the Company at a price of 0.675p per Ordinary Share, being the closing mid-market price of the Company's ordinary shares on 8 March 2013. These options vest over a period of three years from the date of the Grant, with a third of the options vesting on the first, second and third anniversaries of the Grant respectively. These options are exercisable for a period of ten years from the date of the Grant subject to the vesting conditions.

 

The fair value of the options was calculated using the Black-Scholes model and the Group recognised total expenses of £3,794 (2015: £10,150) related to the grant of these options during the year. The inputs to the Black-Scholes model were as follows:

 

Grant date share price                                  0.675p

Exercise share price                                      0.675p

Risk free rate                                                    2.5%

Expected volatility                                         50%

Option life                                                          10 years

Calculated fair value per share                 0.420p

 

The table below summarises the share options extant during the year:

 

Number of

options at

30 April 2015

Issued in
the year

Exercised

in the year

Lapsed in
the year

Number of
options at
30 April 2016

Exercisable at 30 April
2016

Exercise
price

Vesting
date

Expiry

date

3,180,000

-

-

-

3,180,000

3,180,000

0.675p

8.03.2014

8.03.2023

3,180,000

-

-

-

3,180,000

3,180,000

0.675p

8.03.2015

8.03.2023

3,180,000

-

-

-

3,180,000

3,180,000

0.675p

8.03.2016

8.03.2023

9,540,000

-

-

-

9,540,000

9,540,000

0.675p



 

Warrants

On 28 May 2015, warrants over, in aggregate, 30,075,207 ordinary shares of 0.1 pence were issued to Rockpool LLP, an advisor to the Company. Each warrant carries the right to subscribe for one new Ordinary Share in the capital of the Company at a price of 1.15p per ordinary share at any time between 27 May 2018 and 27 May 2021.

 

The fair value of the warrants was calculated using the Black-Scholes model and the Group recognised total expenses of £31,276 (2015: £38,000) related to the issue of these warrants during the year. The inputs to the Black-Scholes model were as follows:

 

Grant date share price                                  0.8p

Exercise share price                                      1.15p

Risk free rate                                                    2%

Expected volatility                                         50%

Life of warrant                                                 6 years

Calculated fair value per share                 0.312p

 

The table below summarises the share warrants extant during the year:

 

 

Number of

warrants at

30 April 2015

Issued in
the year

Exercised

in the year

Lapsed in the year

Number of
warrants at
30 April 2016

Exercisable at 30 April 2016

Exercise
price

Vesting
date

Expiry date

40,000,000

-

(20,000,000)

-

20,000,000

20,000,000

0.9p

22.08.2014

*22.08.2016

-

30,075,207

-

-

30,075,207

-

1.15p

27.05.2018

27.05.2021

40,000,000

30,075,207

(20,000,000)

-

50,075,207

20,000,000




*On 1 August 2016, the expiry date of the 20,000,000 warrants, issued to Charles Tatnall and James Longley on 5 August 2014, was extended to 22 August 2017.

 

23. Financial instruments

Categories of financial instruments


Carrying value


2016

£

2015

£

Financial assets



Investments designated as available for sale on initial recognition

1,085,152

485,047

Trade receivables

-

30,000

Cash and cash equivalents

22,608

320,485


1,107,760

835,532

Financial liabilities at amortised cost:



Convertible unsecured loan notes

193,363

181,675

Trade and other payables

102,938

48,130


296,301

229,805

 

24. Risk management objectives and policies

The Group's finance function monitors and manages the financial risks relating to the operations of the Group. These risks include credit risk, liquidity risk and cash flow interest rate risk.

 

The Group seeks to minimise the effects of these risks, in accordance with the Group's policies approved by the Board of Directors, which provide written principles on interest rate risk, credit risk and the investment of excess liquidity. The Group does not enter into or trade financial instruments, including derivative financial instruments, for any purpose.

 

Capital management

 

The Group's objectives when managing capital are:

•   to safeguard the Group's ability to continue as a going concern, so that it continues to provide returns and benefits for shareholders;

•   to support the Group's growth; and

•   to provide capital for the purpose of strengthening the Group's risk management capability.

 

The Group actively and regularly reviews and manages its capital structure to ensure an optimal capital structure and equity holder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. The capital structure consists of capital and reserves and convertible loan notes, for capital management purposes.

Interest rate risk

The Group's exposure to interest rate risk is limited to the interest payable on the convertible unsecured loan notes, which are at fixed rates of interest.

 

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.

 

The Group's principal financial assets are bank balances and cash and other receivables.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.

 

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the Board of Directors. The Group manages liquidity risk by maintaining adequate reserves and banking facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

 

25. Notes to the cash flow statement


Group

Company


2016

£

2015

£

2016

£

2015

£

Loss before tax

(407,776)

(1,311,427)

(405,426)

(1,268,355)

Share-based compensation charge

35,070

48,150

35,070

48,150

Loan note interest charge

27,688

27,058

27,688

27,058

Shares issued in settlement of fees
and bonuses

-

330,000

-

330,000

Operating cash flow before movements
in working capital

(345,018)

(906,219)

(342,668)

(863,147)

(Increase)/decrease in receivables

(139,973)

(267,352)

103,637

(116,512)

Increase in payables

21,886

51,857

18,212

47,778

Net cash used in operating activities

(463,105)

(1,121,714)

(220,819)

(931,881)

 

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less.

 

26. Operating lease arrangements

The Group and Company as lessee


2016

£

2015

£

Minimum lease payments under operating leases due within 1 year

41,400

36,000

 

27. Related party transactions

During the year ended 30 April 2016, fees of £116,750 (2015: £107,334) were paid to Yum Management Limited in respect of Charles Tatnall's services as Executive Chairman. £nil (2015: £8,000) was owing at the year end to Yum Management Limited in respect of these fees.

During the year ended 30 April 2016, fees of £116,750 (2015: £107,058) were paid to Dearden Chapman Accountants Limited in respect of James Longley's services as Chief Financial Officer. £nil (2015: £8,000) was owing at the year end to Dearden Chapman Accountants Limited in respect of these fees.

During the year ended 30 April 2016, fees of £158,167 (2015: £87,668) were paid to PPT Capital Limited in respect of services rendered by Phil Stephens and Paul Lazarevic. Phil Stephens and Paul Lazarevic were both directors of PPT Capital Ltd during the year. £nil (2015: £16,000) was owing at the year end to PPT Capital Limited in respect of these fees. Also fees of £45,000 (2015: £nil) were paid to Helvic Limited in respect of services rendered by Paul Lazarevic, who was a director of Helvic Limited during the year. No amounts were due to Helvic Limited at either 30 April 3016 or 30 April 2015.

Also on 1 February 2016, following approval at the Company's AGM of an amendment to the acquisition agreement in respect of Plutus Energy Limited ("PEL") 50,000,000 shares were issued to each of Philip Stephens and Paul Lazarevic.

Remuneration of key management personnel

The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual Directors is provided in the Directors' Remuneration Report.


2016

£

2015

£

Short-term employee benefits

734,913

711,667


734,913

711,667

 

In addition to the information disclosed in Note 22, movement on warrants held by the Directors is as follows:




James Longley

Charles Tatnall


Exercise price

Vesting date

Number of warrants

Number of warrants

At 30 April 2014



-

-

Granted in the year

0.9

22.08.2017

20,000,000

20,000,000

At 30 April 2015



20,000,000

20,000,000

Exercised during the year



(10,000,000)

(10,000,000)

At 30 April 2016



10,000,000

10,000,000

On 1 February 2016, 10,000,000 shares were issued at 0.9p per share to each of Charles Tatnall and James Longley on the exercise of warrants. The aggregate of the amount of gains made by each director on the exercise of warrants is £20,000.

 

 

Transactions with subsidiary undertaking

The Company has made payments on behalf of its subsidiary undertaking PEL amounting to £244,519 (2015: £233,630) and PEL has charged the Company £443,750 (2015: £43,750) for consultancy services. At the year end there was an amount due by PEL to the Company of £434,399 (2015: £189,880) as disclosed in note 13.

28. Events after the YEAR END

The Company received planning permission for two 20MW flexible stand-by power generation sites in Ipswich. These sites are equity funded by Rockpool Investments LLP and in which we have a 44.5% interest. With planning permission now obtained for a total of 40MW at the sites in Ipswich, preparations for the civil construction phase of these projects can now commence. The sites will be eligible for prequalification to the Capacity Market and it is expected that power generation from these sites will commence in 2017.

 

**ENDS**

 

 

For further information, please visit www.plutuspowergen.com, or contact:

 

Charles Tatnall

Plutus PowerGen Plc

Tel: +44 (0) 20 3705 8350

Phil Stephens

Plutus PowerGen Plc

Tel: +44 (0) 20 3705 8352

Ewan Leggat

SP Angel Corporate Finance LLP

Tel: +44 (0) 20 3470 0470

Laura Harrison

SP Angel Corporate Finance LLP

Tel: +44 (0) 20 3470 0470

Elisabeth Cowell

St Brides Partners Ltd

Tel: +44 (0) 20 7236 1177

Isabel de Salis

St Brides Partners Ltd

Tel: +44 (0) 20 7236 1177

 

Notes to Editors

 

Plutus PowerGen plc is an AIM listed company focused on the development, construction and operation of flexible stand-by power generation sites in the UK. At present, the market dynamics for flexible power generation are positive as a result of the continued downward pressure on capacity available to National Grid to balance supply and demand, leading to their announcements about possible power shortages over the next few years.

 

Flexible Power generators such as PPG offer a viable and timely solution to the power capacity shortfall in the UK. To this end, PPG is initially focusing on delivering 200MW of capacity by the end of 2017 and currently has a project pipeline of potential development sites with 700MW of power generation capacity.

 

PPG has a straightforward multi-revenue stream model with large and stable counter-parties and is using project/EIS funding through SPVs to finance construction of the generation assets. This structure has the benefit of limiting dilution to plc shareholders as the assets are financed and built.

 

 

 

 

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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