Source - LSE Regulatory
RNS Number : 8255H
ContourGlobal PLC
06 August 2021
 

ContourGlobal plc

 

Interim Results Announcement

 

Strong operational and financial performance, maintaining 10% annual dividend increase with quarterly dividend of USD 4.465 cents / 3.203 pence per share
Full-year 2021 Adj EBITDA guidance raised to $780 - $810 million
 

 

ContourGlobal plc ("ContourGlobal" or the "Company"), an international owner and operator of contracted power generation plants, today announces its half year results for the six months ended 30 June 2021.

 

H1 2021 KEY HIGHLIGHTS

 

●     Strong operational performance across the fleet of 115 power plants

●     Consolidated revenue up 38% to $935m ($680m in H1 2020)

●     Continued strong financial performance with Adjusted EBITDA of $406m up 16% from $351m in H1 2020, driven by the Western Generation acquisition (+$32.2m), stronger operational performance in renewables (+$5.5m) mainly at our Brazilian Wind assets, and a net positive FX impact of $13.6m mainly driven by EUR:USD appreciation

●     Income from Operations is up 15% versus H1 2020 to $181m

●     Funds from Operations ("FFO") of $219m, a 27% increase from $172m in H1 2020 with a cash conversion[1] of 54% significantly improved from 49% in H1 2020, mainly due to the addition of Western generation  and higher cash conversions in Brazil Wind, Italy Solar, Vorotan and Mexico CHP in H1 2021 compared to H1 2020

●     Increase of full year guidance of Adjusted EBITDA to $780 - 810m[2]

●     Second quarter dividend of 4.465 cents per share, equivalent to 3.203 pence per share[3], to be paid on 10 September 2021, reflecting our commitment to a 10% year-on-year growing dividend supported by our strong and visible cash flows. Dividend cover remains strong at 1.9x[4]

●     Positive outlook for future growth, value realization and return of capital to shareholders

 

Joseph C. Brandt, President and Chief Executive Officer of ContourGlobal, said:

 

"We performed very well in the first half of 2021 with better than plan operating and financial performance across the entire fleet. EBITDA for H1 2021 was $406 million, up 16% versus the same period last year. At the same time our cash conversion ratio increased to 54%.

 

We are raising our full-year 2021 guidance to $780 - $810 million and are pleased to confirm that we will pay a Q2 2021 dividend of 4.465 USD cents per share, in line with our 10% year-on-year dividend growth policy. In combination with prior share buybacks, the Company has returned more than $411[5] million to our shareholders since IPO and continues to focus on unlocking value in the portfolio including through farm downs and the divestitures of our Brazilian renewable portfolio which is currently underway, progressing well and expected to be announced later this year. Moreover our renewables portfolio contributed $226m of Proportionate Adjusted EBITDA in the past twelve months, representing 36% of total Proportionate Adjusted EBITDA.  Applying current private market transaction and public market trading multiples for comparable companies, the implied valuation of our renewables fleet is close to GLO's entire market capitalization.  We are actively evaluating transactions to realize this value and close the discrepancy between our stock price and our underlying value.

 

I am particularly pleased that this performance has been achieved while maintaining our primary focus, as always, on the safety and wellbeing of our people. We continue to pursue "Target Zero", with zero Lost Time Incidents in the 2.2 million hours worked across our 115 assets in the first six months of the year.

 

The integration of our 1.5 GW Western Generation acquisition continues to advance in line with our expectations and the acquired assets are performing well operationally and financially. Impressively, our 604 MW Hobbs flagship CCGT in New Mexico achieved its best operational performance in 13[6] years, despite the asset being actively integrated at the same time. We also have successfully onboarded all on-site employees in the United States and Trinidad and Tobago. In Europe, we continue to drive our Solar roll-up strategy in Italy with the announcement of the 18 MW solar acquisition in June which is expected to close in the second half of the year. We will continue to execute on operationally led acquisition opportunities in the low carbon power generation space.

 

Looking forward to the second half of 2021, we remain confident and committed to unlocking value and delivering further attractive risk adjusted returns for our shareholders."

 

In US$ millions

H1
2021

H1
2020

% YOY
change

Revenue

935

680

+38%

Income from Operations

181

158

+15%

Adjusted EBITDA*

406

351

  +16%

Thermal Adj. EBITDA

261

213

+23%

Renewable Adj. EBITDA

160

155

+4%

Corporate and other costs

(15)

(17)

-11%

Proportionate Adjusted EBITDA*

327

275

+19%

Funds from Operations (FFO)*

219

172

+27%

Net Profit

38

75

-49%**

Adjusted Net Profit*

25

42

-40%

Net Profit attributable to CG shareholders

38

71

-46%**

Adjusted Net Profit attributable to CG shareholders*

25

38

-34%

*Non-IFRS metrics

** Net profit in H1 2020 included a non-cash revaluation of a derivative in Mexican CHP, of $34m set out below in Adj. EBITDA to IFRS Net Profit bridge

 

Robust Financial Performance

●     Consolidated revenue up 38% to $935m ($680m in H1 2020). Performance supported by acquisition of Western Generation in February 2021 (+$86.7m), higher CO2 quotas pass-through revenue at Maritsa (+$63.8m), higher generation with higher prices due to cold weather at Arrubal (+$36.1m), higher generation and higher gas sales prices at Mexican CHP (+$30.5m) and favorable FX movements (+$40.7m). These were partially offset by lower revenue in the French Caribbean (-$15.9m) due to the Energies Antilles PPA expiration in June 2020

●     Adjusted EBITDA of $406m, compared to $351m in H1 2020, primarily driven by the Western Generation acquisition (+$32.2m), better resource in renewables (+$5.5m) mainly at our Brazilian Wind assets, and a net positive FX impact of $13.6m driven by EUR:USD appreciation

●     Strong cashflow generation; funds from operations up to $219m, a 27% increase from $172m in H1 2020. Cash conversion also increased to 54% vs 49% in H1 2020

●     Net profit attributable to ContourGlobal plc shareholders was $38m compared to $75m in H1 2020, mainly driven by a net change in the fair value of a derivative related to the CHP Mexico fixed margin swap for H1 2020 (+$37.1m), compared to H1 2021 (+$3.4m), resulting in basic EPS of $0.06 per share

●     Net consolidated leverage ratio of 5.0x[7] at 30 June 2021 versus 4.4x at 30 June 2020, with the increase driven by the Western Generation acquisition

 

Successful operational performance and growth of the portfolio

●     Continued industry leader in Health and Safety with Target Zero achieved in the first half of 2021 (0 LTIs)

●     Successful completion of our Vorotan refurbishment ahead of schedule without supply chain disruption impacting the execution

●     Availability Factors remained strong in H1 2021, with individual segments shown below. Thermal availability factors remained well above any minimum PPA requirements

 

Equivalent Availability Factors ('EAF') (%)

H1 2021

H1 2020

Thermal

94.8%

97.4%

Hydro

98.3%

96.3%

Wind

93.8%

96.3%

Solar PV

99.6%

99.6%

Solar CSP

94.1%

94.6%

 

EPS

●     EPS for H1 2021 is down to $0.06 cents from $0.11 cents in H1 2020, due to the movement in net profit above

●     Adjusted EPS down to $0.04 cents from $0.06 cents, primarily due to higher unrealized FX in H1 2021 of -$14.5m, compared to -$6.8m in H1 2020

 

Shareholder returns

●     Second quarter dividend of $29.30m or 4.465 cents per share, to be paid on 10 September 2021

●     Including today's announced dividend, a total of $411m has been returned to shareholders since listing via dividends and share buybacks

●     The Directors continue to expect to increase the dividend annually by 10% 

 

Arrubal contract expiration

●     The PPA with our off-taker Naturgy Energy Group S.A for our Spanish natural gas fired power generation asset Arrubal expired according to its terms on July 31

●     The Company is pursuing several strategic options related to the facility and expects to keep the asset uncontracted in the meantime. Assuming the near-term introduction of a Capacity Remuneration Mechanism in the Spanish electricity market, the Company assumes that Arrubal will be contracted and generate approximately $15 - 20m EBITDA on average over the next 10 - 15 years

 

Outlook

ü We are increasing our full-year guidance and now expect 2021 Adjusted EBITDA in the range of $780 - 810m1 for 2021 excluding potential farm-down gains

 

Presentation and conference call

 

The Company will host a conference call for analysts and investors at 08.30 BST, 6 August 2021

 

The meeting can be accessed via a live webcast and dial-in. Details provided below. A copy of the presentation will also be made available online ahead of the meeting on our website at https://www.contourglobal.com/reports 

 

Webcast link

 

https://broadcaster-audience.mediaplatform.com/#/event/60e84e1f394436037b4688af

 

 

Conference details

 

Standard International Access

+44 (0) 33 0551 0200

US +1 212 999 6659

Switzerland

+41 (0) 22 592 7915

Singapore Local

+65 6494 8889

 

Password: ContourGlobal

 

 

Enquiries

 

Alice Heathcote

SVP, Corporate Strategy & Investor Relations

Email:

Alice.Heathcote@contourglobal.com

Phone:

+44.203.626.9077 / +1.646.386.9901

 

 

Media - Brunswick

Charles Pretzlik / Will Medvei

Tel:  +44 (0) 207 404 5959

Contourglobal@brunswickgroup.com

 

 

  

 

Additional Information

 

Adj. EBITDA to IFRS Net Profit bridge (US$m)

H1 2021

H1 2020

Proportionate Adjusted EBITDA

327

275

Minority interests

79

76

Adjusted EBITDA

406

351

Share of adjusted EBITDA in associates

(12)

(10)

Share of profit in associates

9

7

Acquisition related items

(8)

(4)

Private incentive plan

-

(3)

Mexico CHP fixed margin swap

3

(5)

Change in finance lease and financial concession assets

(17)

(18)

Other

(1)

(3)

 

 

 

Depreciation and Amortization

(191)

(151)

Net finance costs, foreign exchange gains and losses, and changes in fair value of derivatives

(125)

(63)

Income tax

(28)

(27)

Net profit

38

75

Mexico CHP fixed margin swap

(6)

(34)

FX unrealized

(15)

(7)

Acquisition related items

8

4

Private incentive plan

-

3

Adjusted net profit

25

42

Minorities

-

4

 

 

 

Net profit to CG PLC shareholders

38

71

Adj. Net profit to CG PLC shareholders

25

38

 

 

 

Normal EPS ($ cents)

$0.06

$0.11

Adjusted EPS ($ cents)

$0.04

$0.06

 

 

 

Adj. EBITDA to Cashflow from Operations Bridge (US$ million)

H1 2021

H1 2020

Adjusted EBITDA

406

351

Change in working capital

27

37

Income tax paid

-14

-13

Share of Adj EBITDA in associates

-12

-10

Contribution received from associates

1

7

Acquisition related items

-7

-

Restructuring costs

-

-2

Cash Flow from Operations

401

370

Change in working capital

-27

-37

Acquisition related items

7

-

Interest paid

-100

-100

Maintenance capex

-20

-23

Other distributions received from associates

8

0

Cash distribution to minorities

-50

-38

Funds from Operations

219

172

Cash Conversion (Funds from Operations/Adj. EBITDA)

54%

49%

 

PRINCIPAL RISKS AND UNCERTAINTIES

The Company has reassessed its principal risks, including the ongoing impact of the COVID19 pandemic. The principal risks and uncertainties set out at the time of the Annual Report and Accounts 2020 (issued in April 2021) remain unchanged, with the exception of Information technology - Cyber security and system integrity.

 

The assessed risk level of the Information technology - Cyber security and system integrity principal risk has increased since 31 December 2020, following the increased frequency and increased potential impact of cyber attacks on critical infrastructure assets. Whilst the assessed level of risk has increased, there has been no change to the assessment of impact or the risk response/mitigation as disclosed in the 31 December 2020 annual report. Other principal risks (that are unchanged) include:

·    Strategy - The impact of Governmental actions and regulations;

·    Strategy - Geopolitical uncertainties and social instability;

·    Strategy - Pandemic virus;

·    Strategy - Disruptive innovation in power generation and storage technologies;

·    Strategy - Supply chain;

·    Operation and execution - Project execution (CAPEX);

·    Operation and execution - Asset integrity (OPEX);

·    Operation and execution - Resources/climate change;

·    Health, safety and environment and food - prevention and regulation;

·    Regulatory and compliance - Fraud, bribery and corruption

·    People and organization - Key people succession planning

 

 

RESPONSIBILITY STATEMENT

The directors confirm that these condensed interim financial statements have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·    an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·    material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

 

 

By order of the Board,

Chief Executive Officer

Joseph C. Brandt

 

 

 

 

Unaudited Interim Consolidated Financial Statements

 

CONTOURGLOBAL PLC and subsidiaries

 

As of June 30, 2021

 

CONTOURGLOBAL PLC and subsidiaries

Unaudited interim consolidated statement of income and other comprehensive income

As of June 30, 2021

 

Unaudited interim consolidated statement of income and other comprehensive income

 

 

For the six months ended June 30

In $ millions

Note

2021

2020

Revenue

4.2

934.9

680.2

Cost of sales

4.3

(730.8)

(494.7)

Gross profit

 

204.1

185.5

Selling, general and administrative expenses

4.3

(18.1)

(19.2)

Other operating income

 

3.7

3.7

Other operating expenses

4.3

(0.8)

(8.1)

Acquisition related items

 

(7.5)

(3.8)

Income from Operations

 

181.4

158.2

Share of profit in associates

 

8.6

6.5

Finance income

4.4

1.5

3.3

Finance costs

4.4

(149.0)

(121.9)

Realized and unrealized foreign exchange gains and change in fair value of derivatives

4.4

23.0

55.5

 

 

65.5

101.6

Income tax expenses

4.5

(27.6)

(26.8)

Net profit

 

37.9

74.8

Profit / (Loss) attributable to

 

 

 

- Equity shareholders of the Company

 

37.7

71.0

- Non-controlling interests

 

0.2

3.8

 

 

 

 

Earnings per share (in $)

 

 

 

- Basic

 

0.06

0.11

- Diluted

 

0.06

0.11

 

 

Six months ended June 30

In $ millions

 

2021

2020

Net profit for the period

 

37.9

74.8

 

 

 

 

Gain / (Loss) on hedging transactions

 

35.1

(62.5)

Cost of hedging reserve

 

(0.1)

-

Deferred taxes on gain / (loss) on hedging transactions

 

(9.3)

17.8

Currency translation differences

 

23.4

(88.5)

Items that may be reclassified subsequently to income statement

 

 

49.1

(133.2)

 

49.1

(133.2)

Total comprehensive profit/(loss) for the period

 

87.0

(58.4)

Attributable to

 

 

 

- Equity shareholders of the Company

 

83.9

(37.2)

- Non-controlling interests

 

3.1

(21.2)

 

 

CONTOURGLOBAL PLC and subsidiaries

Unaudited interim consolidated statement of financial position

As of June 30, 2021

 

Unaudited interim consolidated statement of financial position

In $ millions

Note

As of June 30, 2021

As of December 31, 2020

 

 

 

 

Non-current assets

 

5,158.2

4,375.7

Intangible assets and goodwill

4.6

565.1

319.7

Property, plant and equipment

4.7

4,058.2

3,517.1

Financial and contract assets

 

392.0

408.3

Investments in associates

 

27.9

29.5

Derivative financial instruments

4.9

0.2

1.1

Other non-current assets

 

50.9

42.5

Deferred tax assets

4.5

63.9

57.5

Current assets

 

1,044.4

1,995.1

Inventories

 

222.3

247.4

Financial and contract assets

 

29.6

30.0

Trade and other receivables

 

295.7

264.0

Current income tax assets

 

18.4

21.3

Derivative financial instruments

4.9

0.3

0.4

Other current assets

 

43.1

35.1

Cash and cash equivalents

 

435.0

1,396.9

Total assets

 

6,202.6

6,370.8

 

 

 

 

In $ millions

 

As of June 30, 2021

As of December 31, 2020

 

 

 

 

Total equity and non-controlling interests

 

360.0

337.7

Issued capital

 

8.9

8.9

Share premium

 

380.8

380.8

Treasury shares

 

(37.8)

(30.4)

Retained earnings and other reserves

 

(145.6)

(176.9)

Non-controlling interests

 

153.7

155.3

Non-current liabilities

 

4,609.3

4,492.2

Borrowings

4.13

3,967.7

3,895.5

Derivative financial instruments

4.9

98.8

151.0

Deferred tax liabilities

4.5

321.9

269.0

Provisions

 

84.0

51.8

Other non-current liabilities

 

136.9

124.9

Current liabilities

 

1,233.3

1540.9

Trade and other payables

 

349.5

333.7

Borrowings

4.13

607.4

934.8

Derivative financial instruments

4.9

34.0

41.0

Current income tax liabilities

 

29.4

24.3

Provisions

 

14.5

12.3

Other current liabilities

 

198.5

194.8

Total liabilities

 

5,842.6

6,033.1

Total equity and non-controlling interests and liabilities

 

6,202.6

6,370.8

 

CONTOURGLOBAL PLC and subsidiaries

Unaudited interim consolidated statement of changes in equity

As of June 30, 2021

 

In $ millions

Share capital

Share premium

Treasury shares

Currency Translation Reserve

Hedging reserve

Cost of hedging reserve

Actuarial reserve

Retained earnings

Total equity attributable to shareholders of the Company

Non-controlling interests

Total equity

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2019

8.9

380.8

-

(101.2)

(81.5)

-

(2.3)

180.1

384.8

165.3

550.1

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2020

8.9

380.8

-

(101.2)

(81.5)

-

(2.3)

180.1

384.8

165.3

550.1

Profit for the period

-

-

-

-

-

-

-

71.0

71.0

3.8

74.8

Other comprehensive (loss)

-

-

-

(64.0)

(44.2)

-

-

-

(108.2)

(25.0)

(133.2)

Total comprehensive loss for the period

-

-

-

(64.0)

(44.2)

-

-

71.0

(37.2)

(21.2)

(58.4)

Purchase of treasury shares

-

-

(6.8)

-

-

-

-

-

(6.8)

-

(6.8)

Employee share schemes

-

-

-

-

-

-

-

4.1

4.1

-

4.1

Transaction with non-controlling interests

-

-

 

-

-

-

-

-

-

(3.8)

(3.8)

Dividends

-

-

-

-

-

-

-

(51.8)

(51.8)

(3.3)

(55.1)

Other

-

-

-

-

-

-

-

(0.1)

(0.1)

0.2

0.1

Balance as of June 30, 2020

8.9

380.8

(6.8)

(165.2)

(125.7)

-

(2.3)

203.3

293.0

137.2

430.2

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2021

8.9

380.8

(30.4)

(179.2)

(93.0)

(1.5)

(2.1)

98.9

182.4

155.3

337.7

Profit for the period

-

-

-

-

-

-

-

37.7

37.7

0.2

37.9

Other comprehensive profit

-

-

-

21.5

24.8

(0.1)

-

-

46.2

2.9

49.1

Total comprehensive income / (loss) for the period

-

-

-

21.5

24.8

(0.1)

-

37.7

83.9

3.1

87.0

Purchase of treasury shares

-

-

(7.4)

-

-

-

-

-

(7.4)

-

(7.4)

Employee share schemes

-

-

-

-

-

-

-

0.9

0.9

-

0.9

Dividends

-

-

-

-

-

-

-

(55.9)

(55.9)

(2.5)

(58.4)

Other

-

-

-

-

-

 

-

2.4

2.4

(2.2)

0.2

Balance as of June 30, 2021

8.9

380.8

(37.8)

(157.7)

(68.2)

(1.6)

(2.1)

84.0

206.3

153.7

360.0

 

 

 

In $ millions

Share capital

Share premium

Treasury shares

Currency Translation reserve

Hedging reserve

Cost of hedging reserve

Actuarial reserve

Retained earnings and other reserves

Total equity attributable to shareholders of the Company

Non-controlling interests

Total equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2020

8.9

380.8

-

(101.2)

(81.5)

-

(2.3)

180.1

384.8

165.3

550.1

Profit for the year

-

-

-

-

-

-

-

16.0

16.0

12.6

28.6

Other comprehensive (loss)

-

-

-

(78.0)

(11.5)

(1.5)

0.2

-

(90.8)

(19.7)

(110.5)

Total comprehensive loss for the period

-

-

-

(78.0)

(11.5)

(1.5)

0.2

16.0

(74.8)

(7.1)

(81.9)

Purchase of treasury shares

-

-

(30.4)

-

-

-

-

-

(30.4)

-

(30.4)

Employee share schemes

-

-

-

-

-

-

-

8.5

8.5

-

8.5

Contribution received from non-controlling interest

-

-

 

-

-

 

-

-

-

3.4

3.4

Transaction with non-controlling interests

-

-

-

-

-

-

-

-

-

(1.0)

(1.0)

Dividends

-

-

-

-

-

-

-

(105.7)

(105.7)

(5.4)

(111.1)

Balance as of December 31, 2020

8.9

380.8

(30.4)

(179.2)

(93.0)

(1.5)

(2.1)

98.9

182.4

155.3

337.7

 

CONTOURGLOBAL PLC and subsidiaries

Unaudited interim consolidated statement of cash flows

As of June 30, 2021

 

 

Six months ended June 30

In $ millions

2021

2020

CASH FLOW FROM OPERATING ACTIVITIES

 

 

Net profit

37.9

74.8

Adjustment for:

 

 

Amortization, depreciation and impairment expense

191.2

150.5

Change in provisions

(1.1)

(1.6)

Share of profit in associates

(8.6)

(6.5)

Realized and unrealized foreign exchange gains and losses and change in fair value of derivatives

(23.0)

(55.5)

Interest expenses - net

101.3

94.5

Other financial items

46.3

24.2

Income tax expense

27.6

26.8

Mexico CHP fixed margin swap

(3.1)

5.1

Change in finance lease and financial concession assets

16.7

18.1

Acquisition related items

-

3.8

Other items

1.6

5.5

Change in working capital

27.4

37.0

Income tax paid

(14.0)

(13.3)

Contribution received from associates

0.4

7.3

Net cash generated from operating activities

400.6

370.7

CASH FLOW FROM INVESTING ACTIVITIES

 

 

Purchase of property, plant and equipment

(37.8)

(37.5)

Purchase of intangibles

(2.5)

(1.6)

Acquisition of subsidiaries, net of cash received

(622.7)

-

Other investing activities

(3.4)

(0.3)

Net cash used in investing activities

(666.4)

(39.4)

CASH FLOW FROM FINANCING ACTIVITIES

 

 

Dividends paid

(55.9)

(51.8)

Purchase of treasury shares

(7.4)

(6.8)

Proceeds from borrowings

416.4

119.3

Repayment of borrowings

(835.7)

(193.6)

Debt issuance costs - net

(11.0)

(2.0)

Interest paid

(99.8)

(91.1)

Cash distribution to non-controlling interests

(19.7)

(18.3)

Dividends paid to non-controlling interest holders

(1.6)

(3.2)

Transactions with non-controlling interest holders, cash paid

(28.0)

(26.0)

Other financing activities

(32.1)

(40.8)

Net cash generated from financing activities

(674.8)

(314.3)

Exchange gains on cash and cash equivalents

(21.3)

(27.0)

Net change in cash and cash equivalents

(961.9)

(10.1)

Cash & cash equivalents at beginning of the period

1,396.9

558.5

Cash & cash equivalents at end of the period

435.0

548.4

1.     General information

ContourGlobal plc (the 'Company') is a public listed company, limited by shares, domiciled in the United Kingdom and incorporated in England and Wales. It is the holding company for the group whose principal activities during the period were the operation of wholesale power generation businesses with thermal and renewables assets in Europe, Latin America, United States of America and Africa, and its registered office is:

7th Floor
Park House
116 Park Street
London
W1K 6SS

 

United Kingdom

 

Registered number: 10982736

ContourGlobal plc is listed on the London Stock Exchange.

The Group develops, acquires, operates and manages wholesale power generation businesses on four continents. It focuses on both underserved or niche markets and developed markets and evaluates projects based on individual merit pursuing greenfield, brownfield as well as acquisition opportunities as they arise. The Group actively collaborates with governments, multilateral financial institutions, manufacturers, contractors and other power and non-power industry participants to provide innovative solutions to the challenge of providing clean, reliable electricity.

The Group consists of a diversified portfolio of operating power plants, power plants under construction, as well as projects in pre-construction phase located in four broad geographic areas: Europe, Latin America, United States of America and Africa. It is comprised of 100% owned and/or majority controlled subsidiaries as well as investments in which the Company holds a non-controlling interest.

The Group's main corporate offices are in London (United Kingdom), Luxembourg (Luxembourg), New York (United States), Paris (France), Sao Paulo (Brazil) and Vienna (Austria) and these offices provide administrative and technical support to operations and development activities.

 

CONTOURGLOBAL PLC and subsidiaries

Basis of preparation

As of June 30, 2021

2.    Basis of preparation

On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted international accounting standards, with future changes being subject to endorsement by the UK Endorsement Board. ContourGlobal Plc transitioned to UK-adopted international accounting standards in its consolidated financial statements on 1 January 2021. There was no impact or changes in accounting policies from the transition.

This condensed interim consolidated financial statements for the half-year reporting period ended 30 June 2021 has been prepared in accordance with the UK-adopted IAS 34, "Interim Financial Reporting" and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority. In accordance with IAS 34, interim financial information is prepared in order to update the most recent annual consolidated financial statements prepared by ContourGlobal plc, placing emphasis on new activities, occurrences and circumstances that have taken place during the six months ended June 30, 2021 and not duplicating the information previously published in the annual consolidated financial statements for the year ended December 31, 2020. Therefore, the condensed interim consolidated financial statements do not include all the information that would be required in complete consolidated financial statements. In view of the above, for an adequate understanding of the information, these condensed interim consolidated financial statements must be read together with ContourGlobal plc consolidated financial statements for the year ended December 31, 2020. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. 

In preparing these condensed interim consolidated financial statements, the accounting policies, the significant judgments made by management in applying ContourGlobal plc accounting policies and the key sources of estimation uncertainty were the same as those that applied to ContourGlobal plc consolidated financial statements for the year ended December 31, 2020. In accordance with IAS34, taxes on income in interim periods are accrued using the weighted average effective income tax rate that would be applicable to the expected total annual taxable profit or loss.

The preparation of the IFRS financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may differ from those estimates.

The financial information is prepared in accordance with IFRS under the historical cost convention, as modified for the revaluation of certain financial instruments. The financial information is presented in millions of U.S. Dollars, with one decimal. Thus numbers may not sum precisely due to rounding.

The Directors have formed a judgement, at the time of approving the condensed interim consolidated financial statements, that there is a reasonable expectation that the Group have adequate resources to continue in operational existence for a period of at least 12 months from the date of this report. For this reason and having reassessed the principal risks disclosed in the annual report for the year ended December 31, 2020 and the ongoing risk related to the Covid 19 pandemic, the Directors continue to adopt the going concern basis in preparing the condensed interim consolidated financial statements.

Impact of Covid-19:

The Group continues to experience no material financial impact as a result of the coronavirus ('COVID-19' or 'the virus'), consistent with the position at 31 December 2020. As such, there has been no change in accounting implications under IFRS, on non-financial assets, financial instruments, leases, revenue recognition, non-financial obligations, going concern or events after the reporting period.

 

Foreign currency translation

The assets and liabilities of foreign undertakings are translated into US dollars, the Group's presentation currency, at the period-end exchange rates. The results of foreign undertakings are translated into US dollars at the relevant average rates of exchange for the period. Foreign exchange differences arising on retranslation are recognized directly in the currency translation reserve.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized at period end exchange rates in the statement of income line which most appropriately reflects the nature of the item or transaction. 

The following table summarizes the main exchange rates used for the preparation of the consolidated financial statements of ContourGlobal:

 

 

CLOSING RATES

 

AVERAGE RATES

 

 

At June 30

At December 31

 

Six months ended June 30

Currency

 

2021

2020

 

2021

2020

 

 

 

 

 

 

 

EUR / USD

 

1.1858

1.2216

 

1.2050

1.1018

BRL / USD

 

0.1999

0.1925

 

0.1861

0.2061

BGN / USD

 

0.6063

0.6246

 

0.6161

0.5633

MXN / USD

 

0.0505

0.0501

 

0.0496

0.0468

 

Seasonality of operations

The impact of seasonality on our Thermal operations is minimal as our Thermal assets are generally operated under Power Purchase Agreements ("PPAs") where we are compensated on the basis of electrical capacity or availability whether or not the off-taker requests the electrical output (capacity payments). We do have a seasonal related impact on our Renewable operations. The amount of electricity our renewable assets produce is dependent in part on the amount of sunlight, or irradiation, wind and hydrology where the assets are located. Because shorter daylight hours in winter months results in less irradiation, the generation of particular solar assets will vary depending on the season. Adjusted EBITDA for the two first quarters of the year is typically lower than for the two last quarters for both wind assets in Latin America (high wind season in the second part of the year) and for solar assets in Europe (higher irradiation in the second part of the year).

New and revised accounting standards and interpretations

On 1 January 2021 a number of accounting standard amendments to IFRS 9, IAS 39 and IFRS 7 Financial Instruments: Disclosures - Interest rate benchmark reform became applicable as a result of IBOR reforms (phase two). The Group continues to communicate with its counterparty bank's regarding any possible future changes to the Group's EURIBOR and USD LIBOR based financial instruments. To date no changes to these instruments have taken place which would impact on the 30 June 2021 financial statements.  

There are no standards that are issued but not yet effective that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

3.    Significant changes in the reporting period

3.1.         2021 transactions

Acquisition of a portfolio located in the United States and Trinidad and Tobago

On December 7th, 2020, the Group entered into an agreement to acquire a 1,502 MW portfolio of six contracted operating power plants located in the United States and Trinidad and Tobago from Western Generation Partners, LLC. The transaction closed on 18 February 2021.

The total consideration paid amounted to $642.1 million, and an additional estimated $3.4 million of working capital adjustment is expected to be paid in 2021.

On a consolidated basis, had this acquisition taken place as of 1 January 2021, the Group would have recognized consolidated revenue of $963.8 million and consolidated net profit of $38.5 million for the six months ended 30 June 2021.

The preliminary determination of fair value of assets acquired and liabilities assumed at acquisition date are:

In $ millions

 

 

 

Intangible assets

267.5

Property, plant and equipment

688.4

Other assets

69.0

Cash and cash equivalents

19.4

Total assets

1,044.3

Borrowings

262.5

Deferred tax liabilities

40.8

Other liabilities

95.5

Total liabilities

398.8

Total net identifiable assets

645.5

Net purchase consideration

645.5

Goodwill

-

 

The Group has performed a preliminary determination of fair value of assets acquired and liabilities assumed at acquisition date with the support of an external independent valuation expert leading to the following recognition:

• An increase in the book value of intangible assets of $26.1 million representing the incremental fair value of the power purchase agreements and tolling agreements in place in the US assets. The valuation of the power purchase agreements and tolling agreements of $267.9 million are based on a with or without method which reflects the benefit of having the agreements in place.  For the asset in Trinidad and Tobago, the power purchase agreement is not separately identifiable from the tangible asset and therefore does not qualify as a separate identifiable intangible asset.

• An increase in the book value of PP&E of $386.6 million to reflect the fair value of these assets at acquisition based on an income approach method.

• An increase in the book value of the Senior Secured Notes in Lea Power of $40.8 million to reflect the fair value of this liability at acquisition based on an income approach method.

• An increase in the asset retirement obligation of $22.6 million and a net increase in deferred tax liability of $14.7 million.

In the second half of 2021, the Group will continue its assessment of the acquisition accounting and fair value of assets acquired and liabilities assumed.

From the acquisition date on 18 February 2021 to June 30, 2021, this acquisition contributed to consolidated revenue and net profit of $86.7 million and $1.9 million respectively.

Acquisition of a Solar portfolio in Italy

On June 4, 2021 the Group announced it has reached an agreement with a group of private shareholders to acquire up to 100% of the shares in Green Hunter Group S.p.A., a portfolio of Solar Photovoltaic assets totaling 18 MW located in Italy for €49.7 million ($59.1 million) on a debt free, cash free basis. The acquired business will contribute approximately € 8 million ($9.5 million) of Adjusted EBITDA on an annual basis. The transaction is expected to complete in the second half of 2021, subject to the completion of certain customary closing conditions.

 

CONTOURGLOBAL PLC and subsidiaries

Notes to the consolidated financial statements

As of June 30, 2021

 

4.    Notes to the consolidated financial statements

4.1.         Segment reporting

The Group's reporting segments reflect the operating segments which are based on the organizational structure and financial information provided to the Chief Executive Officer, who represents the chief operating decision-maker ("CODM").  

Thermal Energy for power generating plants operating from coal, lignite, natural gas, fuel oil and diesel. Thermal plants include Maritsa, Arrubal, Togo, Cap des Biches, KivuWatt, Energies Antilles, Energies Saint-Martin, Bonaire, Mexican CHP, US and Trinidad & Tobago assets and our equity investees (primarily Termoemcali and Sochagota). Our thermal segment also includes plants which provide electricity and certain other services to beverage bottling companies and other industries.

Renewable Energy for power generating plants operating from renewable resources such as wind, solar and hydro in Europe and Latin America. Renewables plants include Asa Branca, Chapada I, II, III, Inka, Vorotan, Austria Portfolio 1 & 2, Spanish Concentrated Solar Power and our other European and Brazilian plants.

The Corporate & Other category primarily reflects costs for certain centralized functions including executive oversight, corporate treasury and accounting, legal, compliance, human resources, IT and facilities management and certain technical support costs that are not allocated to the segments for internal management reporting purposes.

The CODM assesses the performance of the operating segments based on Adjusted EBITDA which is defined as profit for the period from continuing operations before income taxes, net finance costs, depreciation and amortization, acquisition related expenses, plus net cash gain or loss on sell down transactions (in addition to the entire full period profit from continuing operations for the business the sell down transaction relates to) and specific items which have been identified and material items where the accounting diverges from the cash flow and therefore does not reflect the ability of the assets to generate stable and predictable cash flows in a given period, less the Group's share of profit from non consolidated entities accounted for on the equity method, plus the Group's prorata portion of Adjusted EBITDA for such entities. In determining whether an event or transaction is adjusted, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.

The Group as well presents the Proportionate Adjusted EBITDA which is the Adjusted EBITDA calculated on a proportionally consolidated basis based on applicable ownership percentage. The Proportionate Adjusted EBITDA as well includes the net cash gain or loss on sell down transactions as well as the underlying profit from continuing operations for the business in which the minority interest sale relates to reflecting applicable ownership percentage going forward from the date of completion of the sale of a minority interest.

The Group considers that the presentation of Adjusted EBITDA and Proportionate Adjusted EBITDA enhances the understanding of ContourGlobal's financial performance, in regards to understanding its ability to generate stable and predictable cash flows from operations. The cash gain on sell down is also included to demonstrate the ability of the Group to sell down assets at a significant premium, which is a distinct activity from operational performance of the power plants. The Group also believes Adjusted EBITDA is useful to investors because it is frequently used by security analysts, investors, ratings agencies and other interested parties to evaluate other companies in our industry and to measure the ability of companies to service their debt.

The Chief Operating Decision-Maker does not review nor is presented a segment measure of total assets and total liabilities.

All revenue is derived from external customers.

 

Geographical information

The Group also presents revenue in each of the geographical areas in which it operates as follows: 

-      Europe (including our operations in Austria, Armenia, Northern Ireland, Italy, Romania, Poland, Bulgaria, Slovakia and Spain)

-      Latin America which includes South America (including Brazil, Peru, Colombia), Mexico and Caribbean Islands (including Dutch Antilles, French Territory and Trinidad and Tobago)

-      United States of America

-      Africa (including Nigeria, Togo, Senegal and Rwanda)

 

Six months ended June 30,

In $ millions

2021

2020

 

 

 

Revenue

 

 

Thermal Energy

715.8

466.5

Renewable Energy

219.1

213.7

Total revenue

934.9

680.2

 

 

 

Adjusted EBITDA

 

 

Thermal Energy

260.9

213.0

Renewable Energy

160.5

154.7

Corporate & Other (1)

(15.3)

(16.6)

Total adjusted EBITDA

406.1

351.2

 

 

 

Proportionate adjusted EBITDA

327.0

274.8

Non controlling interests

79.1

76.4

Total adjusted EBITDA

406.1

351.2

 

 

 

Reconciliation to profit before income tax

 

 

Depreciation, amortization and impairment (note 4.3)

(191.2)

(150.5)

Net finance costs, foreign exchange gains and losses, and changes in fair value of derivatives (note 4.4)

(124.5)

(63.1)

Share of adjusted EBITDA in associates (2)

(11.7)

(9.5)

Share of profit in associates

8.6

6.5

Acquisition related items

(7.5)

(3.8)

Restructuring costs (3)

-

(1.9)

Private incentive plan (4)

-

(3.3)

Mexico CHP fixed margin swap (5)

3.1

(5.1)

Change in finance lease and financial concession assets (6)

(16.7)

(18.1)

Other

(0.8)

(0.7)

Profit before income tax

65.5

101.6

 

(1)   Corporate costs correspond to selling, general and administrative expenses before depreciation and amortization of $2.8 million (June 30, 2020: $2.4 million).

(2)  Corresponds to our share of Adjusted EBITDA of plants accounted for under the equity method (Sochagota and Termoemcali) which are reviewed by our CODM as part of our Thermal Energy segment.

(3)  Represents redundancy and staff-related restructuring costs.

(4)  Represents the private incentive plan as described in note 4.27 share-based compensation plan of the annual accounts. The private incentive plan ended 31 December 2020.

(5)  Reflects an adjustment to align the recognized earnings with the cash flows generated under the CHP Mexico fixed margin swap during the period as presented in the consolidated statement of cash flow as "Mexico CHP fixed margin swap".

(6)  Reflects an adjustment to align the recognized earnings with the cash flows generated under finance lease and financial concession arrangements which is presented in the consolidated statement of cash flow as "Change in finance lease and financial concession assets".

Cash outflows on capital expenditure

 

Six months ended June 30,

In $ millions

2021

2020

 

 

 

Thermal Energy

10.7

12.4

Renewable Energy

26.8

23.9

Corporate & Other

0.3

1.2

Total capital expenditure

37.8

37.5

 

Geographical information

The geographical analysis of revenue, based on the country of origin in which the Group's operations are located, and Adjusted EBITDA is as follows:  

 

Six months ended June 30,

In $ millions

2021

2020

 

 

 

Europe (1)

551.9

405.7

Latin America (2)

239.1

216.2

United States

78.1

-

Africa

65.9

58.2

Total revenue

934.9

680.2

 

(1)   Revenue generated in 2021 in Bulgaria and Spain amounted to $296.9 million and $175.5 million respectively (June 30, 2020: $207.7 million and $127.8 million respectively).

(2)  Revenue generated in 2021 in Brazil and Mexico amounted to $69.9 million and $129.3 million respectively (June 30, 2020: $69.1 million and $98.8 million respectively).

 

Six months ended June 30,

In $ millions

2021

2020

 

 

 

Europe (1)

223.3

205.3

Latin America (2)

124.9

123.8

United States of America

32.2

-

Africa

41.0

38.7

Corporate & Other

(15.3)

(16.6)

Total adjusted EBITDA

406.1

351.2

 

(1)   Adjusted EBITDA generated in 2021 in Bulgaria and Spain amounted to $70.4 million and $99.0 million respectively (June 30, 2020: $68.5 million and $89.3 million respectively).

(2)  Adjusted EBITDA generated in 2021 in Brazil and Mexico amounted to $44.1 million and $51.8 million respectively (June 30, 2020: $43.2 million and $46.4 million respectively).

The geographic analysis of non-current assets, excluding derivative financial instruments and deferred tax assets, based on the location of the assets, which are not presented to the CODM, is as follows:

 

Six months ended June 30,

Year ended December 31

In $ millions

2021

2020

 

 

 

Europe

2,024.3

2,151.1

Latin America

1,890.6

1,761.6

United States

789.6

-

Africa

389.5

405.4

Total non-current assets

5,094.0

4,318.1

 

4.2.        Revenue

 

Six months ended June 30,

In $ millions

2021

2020

 

 

 

Revenue from power sales (1)

812.1

570.2

Revenue from operating leases (2)

38.1

49.0

Revenue from concession and finance lease assets (3)

16.7

17.7

Other revenue (4)

68.0

43.3

Total revenue

934.9

680.2

 

Revenue from power sales and Other revenue are recognised under IFRS 15 and total $880.1 million in June 30, 2021 (June 30, 2020: $613.5 million). Revenue from operating leases and revenue from concession and finance lease assets are recognised under IFRS 16 and IFRIC 12 respectively.

(1) The increase in Revenue from power sales from $570.2 million to $812.1 million is mainly due to the February 2021 acquisition of the US and Trinidad and Tobago assets contributing $80.6 million, higher CO2 emissions revenue in in our Maritsa plant for $89.2 million, higher production due to cold weather increasing revenue by $36.1 million in Arrubal and higher production and higher gas pass throughs at Mexico CHP contributing $30.5 million.

(2) Revenue from operating leases mainly includes $24.5 million relating to our Solutions plants, $13.6 million relating to our Bonaire plant and nil million relating to our Energie Antilles plant in June 30, 2021 (June 30, 2020: $21.4 million, $11.6 million and $16.0 million respectively).

(3) Some of our main plants are operating under specific arrangements for which certain other accounting principles are applied as follows:

-              Our Togo, Rwanda (Kivuwatt) and Senegal (Cap des Biches) plants are operating pursuant to concession agreements that are under the scope of IFRIC 12.

-              Our Energies Saint Martin plant is operating pursuant to power purchase agreements that are considered to contain a finance lease

(4) Other revenue primarily relates to environmental, operational and maintenance services rendered to offtakers in our power plants in Bulgaria, Togo, Rwanda and Senegal and CO2 quota recharges to customers.

The Group has one customer contributing more than 10% of Group's revenue (June 2020: one customer).

 

Six months ended June 30,

 

2021

2020

 

 

 

Customer A

31.8%

30.5%

 

4.3.        Expenses by nature

 

Six months ended June 30,

In $ millions

2021

2020

 

 

 

Fuel costs

205.3

128.5

Depreciation, amortization and impairment

191.2

150.5

Operation and maintenance costs

50.2

34.4

Employee costs

52.3

46.1

Emission allowance utilized (1)

154.0

73.2

Professional fees

9.1

9.1

Purchased power

18.7

18.1

Transmission charges

18.9

15.0

Operating consumables and supplies

8.6

9.9

Insurance costs

15.9

11.5

Other expenses (2)

24.7

17.6

Total cost of sales and selling, general and administrative expenses

748.9

513.9

 

(1) Emission allowances utilized corresponds mainly to the costs of CO2 quotas in Maritsa which are passed through to its offtaker, and includes any write-downs to net realizable value.

(2) Other expenses include facility costs of $6.8 million in June 30, 2021 (June 30, 2020: $6.2 million).

 

Six months ended June 30,

In $ millions

2021

2020

 

 

 

Private Incentive Plan (1)

-

3.3

Restructuring costs (2)

-

1.9

Other

0.8

2.9

Total other operating expenses

0.8

8.1

 

(1)   Represents the private incentive plan as described in note 4.27 share-based compensation plan of the annual accounts. The private incentive plan ended at the end of December 2020.

(2)  Represents redundancy and staff-related restructuring costs.

 

4.4.        Net finance costs, foreign exchange gains and losses, and changes in fair value of derivatives

 

Six months ended June 30,

In $ millions

2021

2020

 

 

 

Finance income

1.5

3.3

Net change in fair value of fixed margin derivative (1)

4.8

53.0

Net change in fair value of other derivatives (2)

3.9

22.9

Net realized foreign exchange differences (3)

(0.2)

(27.2)

Net unrealized foreign exchange differences (3)

14.5

6.8

Realized and unrealized foreign exchange gains and (losses) and change in fair value of derivatives

23.0

55.5

Interest expenses on borrowings

(102.7)

(97.8)

Amortization of deferred financing costs

(10.7)

(5.2)

Unwinding of discounting (4)

(15.9)

(8.4)

Other (5)

(19.7)

(10.5)

Finance costs

(149.0)

(121.9)

Net finance costs, foreign exchange gains and losses, and changes in fair value of derivatives

(124.5)

(63.1)

 

(1)   Net change in fair value of derivative related to the CHP Mexico fixed margin swap.

(2)  The Group recognized a profit of $1.7 million in the six months ended June 30, 2021 in relation to its interest rate, cross currency, financial swaps, options, foreign exchange options and forward contracts (June 30, 2020: profit of $12.9 million) and a profit of $2.2 million in the six months ended June 30, 2021 in relation with settled positions (June 30, 2020: profit of $10.0 million). Change in fair value of derivatives relates primarily to interest rate swaps, options and forward contracts.

(3)  Net realized foreign exchange differences include realized foreign exchange gains and losses related to conversion of foreign currency denominated cash balances recorded as fair value through profit or loss. Unrealized foreign exchange differences primarily relate to subsidiaries and loans in subsidiaries that have a functional currency different to the currency in which the loans are denominated.

(4)  Unwinding of discounting mainly relates to Maritsa debt to non-controlling interests and other long-term liabilities in the six months ended June 30, 2021 and 2020.

(5)  Other mainly includes costs associated with other financing, finance costs of leases, as well as income and expenses.

4.5.        Income tax expense and deferred income tax

General accounting policies

The current and deferred income tax are calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the countries where the Group and its subsidiaries operate. The income tax was calculated using the effective tax rate expected to apply to each taxing jurisdiction of the Group in the period ending December 31, 2021. The estimated effective tax rate is determined on a tax group basis and applied to the profit before tax of each taxing jurisdiction.

Income tax expense and deferred income tax

 

Six monts ended June 30,

In $ millions

2021

2020

Current tax

(21.7)

(19.9)

Deferred income tax

(5.9)

(6.9)

Income tax expense

(27.6)

(26.8)

Effective Tax Rate

42%

26%

 

In the six months ended June 30, 2021, the tax charge is broadly comparable to the charge in the six months ended June 30, 2020. The tax charge now includes a tax charge attributable to the Togo asset, which is now subject to 15% income tax following the end of a previously agreed tax exemption period, and has the impact of the U.S. and Trinidad assets acquired in the period. The effective tax rate of the group mainly differs to the UK statutory rate of 19% due to the impact of the geographical composition of the profit before tax, and tax losses arising on certain group and financing costs on which no deferred tax asset is recognised. The group rate is also impacted by tax only adjustments relating to forex and inflation, and the profit mix of Brazilian entities where the headline tax rate is 34% whereas some entities have elected into a simplified corporate tax regime whereby the tax calculation is driven by revenue.

Net deferred tax movement

The gross movements of net deferred income tax assets (liabilities) were as follows:

 

 

In $ millions

June 30, 2021

December 31, 2020

 

 

 

Net deferred tax assets (liabilities) as of January, 1

(211.4)

(218.5)

Statement of income

(5.9)

(10.9)

Deferred tax recognized directly in other comprehensive income

(9.6)

27.9

Acquisitions

(34.2)

-

Currency translation differences

3.1

(9.9)

Net deferred tax assets (liabilities) at closing date

(258.0)

(211.4)

Including net deferred tax assets balance of:

63.9

57.5

Deferred tax liabilities balance of:

(321.9)

(268.9)

 

The net deferred tax liabilities increase in 2021 is mainly in relation with the Trinidad & Tobago asset acquired in February 2021. No increase in deferred tax is seen on acquisition of U.S. assets due to the fact that the acquisition was structured as an asset deal for U.S. tax purposes.  The residual increase is driven by the utilisation of tax losses which are currently offset against deferred tax liabilities.

 

Analysis of the deferred tax position unrecognized in the consolidated statement of financial position

Unrecognized deferred tax assets amount to $271.8 million as of June 30, 2021 (December 31, 2020: $268.2 million).

Deferred tax assets that have not been recognized mainly relate to tax losses in Luxembourg and Brazil where it is not probable that future taxable profit will be available against which the tax losses can be utilized. The amounts unrecognised for deferred tax purposes generally do not expire with the exception of Luxembourg, for which the tax losses generated after January 1, 2017 expire after 17 years.

The group accrues deferred tax liabilities for the withholding tax that will arise on the future repatriation of undistributed earnings. There are no undistributed earnings with material unrecognized temporary differences.

 

4.6.        Intangible assets and goodwill

In $ millions

Goodwill

Work in progress

Legado rights

Contracts

Permits, licenses and other project development rights

Software and Other

Total

 

 

 

 

 

 

 

 

Cost

0.5

-

233.3

-

145.8

34.6

414.2

Accumulated amortisation and impairment

-

-

(1.1)

-

(44.3)

(16.1)

(61.6)

Carrying amount as of December 31, 2019

0.5

-

232.2

-

101.5

18.4

352.6

Additions

-

-

-

-

2.2

3.5

5.7

Disposals

-

-

-

-

-

-

-

Currency translation differences

0.1

-

-

-

(16.6)

-

(16.5)

Reclassification

-

1.5

-

-

(1.1)

3.8

4.2

Amortisation charge

-

-

(13.7)

-

(6.4)

(6.0)

(26.2)

Closing net book amount

0.6

1.5

218.4

-

79.4

19.7

319.7

Cost

0.6

1.5

233.3

-

122.8

40.9

399.1

Accumulated amortisation and impairment

-

-

(14.9)

-

(43.4)

(21.1)

(79.4)

Carrying amount as of December 31, 2020

0.6

1.5

218.4

-

79.4

19.7

319.7

Additions

-

0.6

-

-

0.7

1.0

2.3

Disposals

-

-

-

-

-

-

-

Acquired through business combination

-

-

-

267.5

-

-

267.5

Currency translation differences

-

-

-

-

1.8

-

1.8

Reclassification

-

0.1

-

-

0.4

0.5

1.0

Amortisation charge

-

-

(6.8)

(11.1)

(7.7)

(1.5)

(27.1)

Closing net book amount

0.6

2.2

211.6

256.4

74.6

19.7

565.1

Cost

0.6

2.2

233.3

267.5

127.1

42.3

673.0

Accumulated amortisation and impairment

-

-

(21.7)

(11.1)

(52.5)

(22.6)

(107.9)

Carrying amount as of June 30, 2021

0.6

2.2

211.6

256.4

74.6

19.7

565.1

 

Contracts relate to the fair valuation on acquisition of power purchase agreements in the United States of America, detailed in note 3.1. Contracts are subsequently measured at amortized cost.

Permits, licenses and other project development rights relate to licenses acquired from the initial developers for our wind parks in Peru and Brazil. Legado rights were recognized on acquisition of Mexico CHP.

Amortisation included in 'cost of sales' in the consolidated statement of income amounted to $25.6 million in the six months period ended June 30, 2021 (June 30, 2020: $10.9 million) and amortization included in 'selling, general and administrative expenses' amount to $1.5 million in the six months period ended June 30, 2021 (June 30, 2020: $0.8 million).

 

4.7.        Property, plant and equipment

The power plant assets predominantly relate to wind farms, natural gas plants, fuel oil or diesel plants, coal plants, hydro plants, solar plants and other buildings.

Other assets mainly include IT equipment, furniture and fixtures, facility equipment, asset retirement obligations and vehicles, and project development costs.

Assets acquired through business combinations are explained in Note 3 Significant changes in the reporting period.

In $ millions

Land

Power plant assets

Construction work in progress

Right of use of assets

Other

Total

Cost

72.2

5,172.5

76.8

47.6

285.2

5,654.4

Accumulated depreciation and impairment

(0.6)

(1,988.5)

-

(13.1)

(135.0)

(2,137.3)

Carrying amount as of January 1, 2021

71.6

3,184.0

76.8

34.5

150.2

3,517.1

-

4.8

42.3

1.6

2.7

51.4

-

(1.5)

(7.6)

-

-

(9.1)

-

66.4

(68.5)

-

1.8

(0.3)

Acquired through business combination(1)

14.3

653.6

-

1.4

19.0

688.4

(1.7)

(25.6)

3.5

(0.7)

(0.5)

(25.0)

(0.1)

(154.7)

-

(3.0)

(6.3)

(164.1)

Closing net book amount

84.1

3,727.0

46.5

33.8

166.9

4,058.2

84.9

5,826.0

46.5

49.5

305.5

6,312.3

Accumulated depreciation and impairment

(0.8)

(2,099.0)

-

(15.7)

(138.6)

(2,254.1)

Carrying amount as of June 30, 2021

84.1

3,727.0

46.5

33.8

166.9

4,058.2

 

(1) Assets acquired through business combination relate to our United States of America and Trinidad and Tobago portfolio, detailed in note 3.1.

Construction work in progress as of June 30, 2021 predominantly relates to our ongoing Austria Wind repowering project, Vorotan refurbishment project, and projects at Maritsa, United States of America and Mexico plants. Reclassification from Construction work in progress to Power plant assets primarily relates to completed phases of the Vorotan refurbishment project ($47.8 million) and, Austria Wind repowering project ($13.5 million).

As of June 30, 2021, the Other category mainly related to $57.9 million of instruments and tools, $48.8 million of facility equipment, $29.3 million of assets retirement obligations, $26.4 million of critical spare parts.

Depreciation included in 'cost of sales' in the consolidated statement of income amounted to $161.3 million in the period ended June 30, 2021 (June 30, 2020: $136.3 million) and depreciation included in 'selling, general and administrative expenses' amount to $2.8 million in the period ended June 30, 2021 (June 30, 2020: $2.4 million).

In the period ended June 30, 2021, the Group capitalised $0.6 million of borrowing costs in relation to project financing.

 

In $ millions

Land

Power plant assets

Construction work in progress

Right of use of assets

Other

Total

Cost

68.6

5,187.1

61.5

43.7

325.8

5,686.7

Accumulated depreciation and impairment

(0.5)

(1,736.7)

-

(8.3)

(131.4)

(1,876.9)

Carrying amount as of January 1, 2020

68.1

3,450.5

61.5

35.4

194.4

3,809.8

Restatement for finalisation of fair values on acquisition (1)

-

(37.5)

-

-

-

(37.5)

Carrying amount as of January 1, 2020 (restated)

68.1

3,413.0

61.5

35.4

194.4

3,772.3

-

17.4

59.3

4.2

9.8

90.6

-

(5.8)

(4.6)

(1.1)

-

(11.5)

-

42.7

(36.9)

-

(30.7)

(24.9)

3.6

(20.1)

(2.4)

2.0

(7.2)

(24.1)

(0.1)

(263.1)

-

(6.0)

(16.1)

(285.3)

Closing net book amount

71.6

3,184.1

76.8

34.5

150.2

3,517.1

72.2

5,172.5

76.8

47.6

285.2

5,654.4

Accumulated depreciation and impairment

(0.6)

(1,988.5)

-

(13.1)

(135.0)

(2,137.3)

Carrying amount as of December 31, 2020

71.6

3,184.0

76.8

34.5

150.2

3,517.1

 

(1) IFRS 3 remeasurement adjustment on assets acquired through business combination relate to our Mexican CHP portfolio.

(2) Mainly relates to project development costs in Kosovo of €19.7 million ($22.5 million). Given the termination of the Kosovo project agreements in May 2020, the recoverable costs have been de-recognised from Property, plant and equipment and recognised as a contract asset arising from a revenue arrangement presented in line with IFRS 15 in Other non current assets.

(3) Reclassification includes previous year's non-material reallocations between asset categories to reflect current positions.

Construction work in progress as of December 31, 2020 predominantly related to our Vorotan refurbishment project, our Austria Wind project repowering, our Mexico CHP and our Maritsa plants.

As of December 31, 2020, the Other category mainly related to $62.1 million of instruments and tools, $48.7 million of facility equipment, $29.7 million of assets retirement obligations.

Depreciation included in 'cost of sales' in the consolidated statement of income amounted to $282.0 million in the period ended December 31, 2020 and depreciation included in 'selling, general and administrative expenses' amount to $3.3 million in the period ended December 31, 2020.

In the period ended December 31, 2020, the Group capitalised $1.1 million of borrowing costs in relation to project financing.

 

4.8.        Management of financial risk

The condensed interim consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the ContourGlobal plc consolidated financial statements for the year ended December 31, 2020. There has been no material change in financial risk factors since the year end and there have been no changes in the risk management department or in any risk management policies since December 31, 2020.

 

4.9.        Derivative financial instruments

The Group uses interest rate swaps to manage its exposure to interest rate movements on borrowings, foreign exchange forward contracts and option contracts to mitigate currency risk, a financial swap in our Mexican CHP business to protect power purchase agreements and cross currency swap contracts in Cap des Biches project in Senegal to manage both currency and interest rate risks. The fair value of derivative financial instruments are as follows:

 

June 30,

December 31,

 

2021

2020

In $ millions

Assets

Liabilities

Assets

Liabilities

Interest rate swaps - Cash flow hedge (1)

0.1

77.4

-

120.9

Cross currency swaps - Cash flow hedge (2)

-

18.4

-

26.2

Foreign exchange forward contracts - Trading (3)

-

0.2

-

0.6

Option contracts - not in hedge relationships (4)

-

2.3

1.5

1.6

Financial swap on commodity (5)

0.4

-

-

0.1

Fixed margin swap(6)

-

34.6

-

42.6

Total

0.5

132.8

1.5

192.0

 

 

 

 

 

Less non-current portion:

 

 

 

 

Interest rate swaps - Cash flow hedge

0.1

57.0

-

92.7

Cross currency swaps - Cash flow hedge

-

16.7

-

24.2

Foreign exchange forward contracts - Trading

-

0.2

-

0.1

Option contracts - not in hedge relationships

-

-

1.1

-

Financial swap on commodity

0.1

-

-

0.1

Fixed margin swap

-

25.0

-

33.9

Total non-current portion

0.2

98.8

1.1

151.0

Current portion

0.3

34.0

0.4

41.0

 

(1) Interest Rate swaps are used to hedge floating rate borrowings to a fixed interest rate. The decrease in fair value of the liability is attributed to favourable movements in LIBOR floating rates over the period to June 30, 2021. The fair value of the interest rate swaps mostly relate to contracts in Mexico for $61.8 million (December 31, 2020: $83.4 million) maturing in November 2031 and in Armenia for $12.3 million (December 31, 2020: $16.8 million) maturing in November 2034. Interest rate swaps are hedge accounted and as a result changes in fair value are recognized in other comprehensive income.

(2) In 2015, the Group entered into cross currency swaps in our Cap des Biches project in Senegal. The fair value of the instruments as of June 30, 2021 amounts to $19.2 million (December 31, 2020: $27.4 million) maturing in July 2033. Credit value adjustment amounts to $0.8 million as of June 30, 2021 and $1.2 million as of December 31, 2020. Currency swaps are hedge accounted and as a result changes in fair value are recognized in other comprehensive income.

(3) The Group has executed a series of offsets to protect the value, in USD terms, of the BRL-denominated expected distributions from the Brazilian portfolio and of the COP-denominated distributions from the Colombian portfolio. The BRL-denominated 2022 distributions have been hedged using a forward exchange contract with a fair value of liability $0.2 million and maturity in December 2022 (December 31, 2020: liability $0.1 million). The COP-denominated distributions were economically hedged in 2020 using a forward which was closed in January 2021 (December 31, 2020: liability $0.5 million). Hedge accounting is not applied to BRL/USD and COP/USD foreign exchange forward contracts, as a result changes in fair value are recognized in the consolidated statement of income.

(4) The Group has executed a series of offsets to protect the value, in USD terms, of the BRL-denominated expected distributions from the Brazilian portfolio and the MXN-denominated expected distributions from the Mexican portfolio. The distributions expected in 2021 have been protected against material depreciation of the BRL using option contracts with fair values of liability $2.3 million maturing in December 2021 (December 31, 2020: $1.6 million). The MXN-denominated distributions were protected in 2020 against material depreciation of the MXN using an option contract in place (December 31, 2020: asset $0.4 million maturing in November 2021). The Group entered in 2020 into an option allowing the possibility to enter into an underlying swap with the objective to protect the Group against changes on the interest rates over our financing projects. This contract was cancelled in 2021 (December 31, 2020: asset $1.1 million).

(5) The Group entered into a financial swap related to our Mexican CHP business to protect one purchase power agreement against the variations of the natural gas price maturing in April 2024.

(6) CHP Mexico entered into fixed margin swap agreements with the Seller's affiliates in order to protect certain power purchase agreements against variations in the CFE tariffs (electricity prices). The cash flows hedged amount to around $40 million of annual revenue over the next 8 years.

The notional principal amount of derivative financial instruments:

- the outstanding interest rate swap contracts and cross currency swap qualified as cash-flow hedge amounted to $1,076.0 million as of June 30, 2021 (December 31, 2020: $1,213.4 million).

- the outstanding foreign exchange forward and option contracts amounted to $154.8 million as of June 30, 2021 (December 31, 2020: $161.8 million). In 2020, the outstanding option allowing the possibility to enter into an underlying swap with the objective to protect the Group against changes on the interest rates over our financing projects amounted to $200.0 million. This contract was cancelled in 2021 (December 31, 2020: asset $1.1 million).

- the commodity swap (gas) relates to one PPA in our Mexican CHP amounted to $2.6 million as of June 30, 2021 (December 31, 2020: $3.0 million).

The Group recognized in Net Finance costs a gain in respect of changes in fair value of derivatives listed above of $6.5 million in the six months ended June 30, 2021 (June 30, 2020: profit $65.9 million) and a gain of $2.2 million in the six months ended June 30, 2021 in relation to settled positions (June 30, 2020: profit of $10.0 million).

 

4.10.      Fair value measurements

Fair value measurements of financial instruments are presented through the use of a three-level fair value hierarchy that prioritises the valuation techniques used in fair value calculations. The Group's policy is to recognise transfers into and out of fair value hierarchy levels as at the end of the reporting period.

The levels in the fair value hierarchy are as follows:

-      Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group has the ability to access at the measurement date.

-      Level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

-      Level 3 inputs are unobservable inputs for the asset or liability.

There were no transfers between fair value measurement levels between December 31, 2020 and June 30, 2021.

When measuring our interest rate, cross currency swaps and foreign exchange forward and option contracts at fair value on a recurring basis at both June 30, 2021 and December 31, 2020, we have measured these at level 2 in the fair value hierarchy with the exception of the fixed margin swap which are level 3. The fair value of those financial instruments is determined by using valuation techniques. These valuations techniques maximise the use of observable data where it is available and rely as little as possible on entity specific estimates.

The Group uses a market approach as part of their available valuation techniques to determine the fair value of derivatives. The market approach uses prices and other relevant information generated from market transactions.

The Group's finance department performs valuation of financial assets and liabilities required for financial reporting purposes as categorized at levels 2 and 3. The Group's only derivatives are interest rate swaps, foreign exchange forward contracts, option contracts, commodity swap contract, fixed margin swap in our Mexican CHP business and cross currency swap contracts in our Cap des Biches project in Senegal.

The change in the fair value of the fixed margin swap since June 30, 2021 of $4.8 million is driven by the movement of market inputs, in particular the natural gas price and CFE tariff, accounting for $4.6 million of the total.

The sensitivity calculations on the CHP Mexico fixed margin swap liability show that (i) for an increase/decrease of 5% in the USD/MXN exchange rate, the fixed margin swap liability will decrease/increase by $9.5 million, (ii) for an increase/decrease of 5% in the Natural Gas cost, the fixed margin swap liability will decrease/increase by $5.2 million (iii) for an increase/decrease of 25% in discount rates, the fixed margin swap liability will decrease/increase by $1.5 million, (iv) and for an increase/decrease of 5% in the CFE tariff, the fixed margin swap liability will increase/decrease by $11.8 million.

Money market funds comprise investment in funds that are subject to an insignificant risk of changes in fair value. The fair value of money market funds is calculated by multiplying the net asset value per share by the investment held at the balance sheet date, we have measured these at level 2 in the fair value hierarchy.

 

4.11.       Financial instruments by category

In $ millions

Financial asset category

As at December 31, 2020

Financial assets at amortised costs

Assets at fair value through profit and loss

Derivative used for hedging

Total net book value per balance sheet

 

 

 

 

 

Derivative financial instruments

-

1.5

-

1.5

Financial and contract assets

438.3

-

-

438.3

Trade and other receivables (1)

228.0

-

-

228.0

Other non-current assets (1)

41.1

-

-

41.1

Cash and cash equivalents (2)

-

1,396.9

-

1,396.9

Total

707.4

1,398.4

-

2,105.8

 

In $ millions

Financial asset category

As at June 30, 2021

Financial assets at amortised costs

Assets at fair value through profit and loss

Derivative used for hedging

Total net book value per balance sheet

 

 

 

 

 

Derivative financial instruments

-

0.5

-

0.5

Financial and contract assets

421.5

-

-

421.5

Trade and other receivables (1)

295.7

-

-

295.7

Other non-current assets (1)

50.2

-

-

50.2

Cash and cash equivalents (2)

-

435.0

-

435.0

Total

767.4

435.5

-

1,202.9

 

In $ millions

Financial liability category

As at December 31, 2020

Liabilities at fair value through profit and loss

Other financial liabilities at amortised cost

Derivative used for hedging

Total net book value per balance sheet

 

 

 

 

 

Borrowings

-

4,830.3

-

4,830.3

Derivative financial instruments

44.8

-

147.2

192.0

Trade and other payables

-

333.7

-

333.7

Other current liabilities (1)

-

154.6

-

154.6

Other non current liabilities

-

124.9

-

124.9

Total

44.8

5,443.5

147.2

5,635.5

 

In $ millions

Financial liability category

As at June 30, 2021

Liabilities at fair value through profit and loss

Other financial liabilities at amortised cost

Derivative used for hedging

Total net book value per balance sheet

 

 

 

 

 

Borrowings

-

4,575.1

-

4,575.1

Derivative financial instruments

37.0

-

95.8

132.8

Trade and other payables

-

349.5

-

349.5

Other current liabilities (1)

-

153.0

-

153.0

Other non current liabilities

-

136.9

-

136.9

Total

37.0

5,214.5

95.8

5,347.3

 

(1) These balances exclude receivables and payables balances in relation to taxes and deferred revenue balance of $6.6 million in June 30, 2021 ($5.6 million in December 31, 2020).

(2) These balances include money market funds, which comprise investment in funds that are subject to an insignificant risk of changes in fair value.

 

4.12.      Equity

Share repurchases

On 1 April 2020 ContourGlobal announced a buyback programme of up to £30 million of ContourGlobal plc ordinary shares of £0.01 each ("Shares"), to initially run from 1 April 2020 to 30 June 2020, subsequently extended to 30 September 2020, then further extended to December 31, 2020 and to March 31, 2021.

During the period ended June 30, 2021, the Company repurchased 2,624,774 treasury shares at an average price of 208.4 pence per share for an aggregate amount of GBP5.5 million ($7.4 million), representing 0.40% of its share capital. Since the beginning of the buyback programme, the Company repurchased 14,999,505 treasury shares, representing 2.24% of its share capital.

 

4.13.      Borrowings

Certain power plants have financed their electric power generating projects by entering into external financing arrangements which require the pledging of collateral and may include financial covenants as described below. The financing arrangements are generally non-recourse (subject to certain guarantees) and the legal obligation for repayment is limited to the borrowing entity. 

The Group's principal borrowings with a nominal outstanding amount of $4,580.9 million in total as of June 30, 2021 (December 31, 2020: $4,871.8 million) primarily relate to the following:

Type of borrowing

Currency

Project Financing

Issue

Maturity

Outstanding nominal amount June 30, 2021

($ million)

Outstanding nominal amount December 31, 2020

($ million)

Rate

 

 

 

 

 

 

 

 

Corporate bond (1)

EUR

Corporate Indenture

2020

2026

486.2

500.9

2.750%

Corporate bond (1)

EUR

Corporate Indenture

2018

2025

474.3

1,038.4

4.125%

Corporate bond (1)

EUR

Corporate Indenture

2020

2028

355.7

366.5

3.125%

Loan Agreement

USD

Mexican CHP

2019

2026

489.7

508.5

LIBOR + 2.5%

Loan Agreement

EUR

Spanish CSP

2018

2026 2038

365.5

392.5

Fixed 5.8% and 6.7%

Loan Agreement

EUR

Spanish CSP

2018

2036

330.7

348.4

3.438%

Loan agreement

EUR

Solar Italy

2019

2030

196.1

215.5

EURIBOR 6M + 1.7%

Loan Agreement (2)

USD

US and Trinidad and Tobago

2007

2033

187.5

-

Fixed 6.6%

Loan Agreement (2)

USD

US and Trinidad and Tobago

2021

2021

175.0

-

Fixed 2.5% to 4.5%

Loan Agreement (3)

EUR

Spanish CSP

2021

2028

2034

175.0

152.2

EURIBOR + 1.8% Fixed + 2.5%

Project bond

USD

Inka

2014

2034

170.2

173.2

6.0%

Loan Agreement

USD

Vorotan

2016

2034

119.5

121.5

LIBOR + 4.625%

Loan Agreement / Debentures (4)

BRL

Chapada I

2015

2032 2029

117.7

115.5

TJLP + 2.18% / IPCA + 8%

Loan Agreement

EUR

Austria Wind

2013 2020

2027 2033

100.2

105.2

EURIBOR 6M + 2.45% and 4.305% / EURIBOR 3M+1.95% and 4.0% / EURIBOR 6M +1.55%

Loan Agreement

USD

Cap des Biches

2015

2033

93.7

96.3

USD-LIBOR BBA (ICE)+3.20%

Loan Agreement

EUR

Maritsa

2006

2023

89.2

109.1

EURIBOR + 0.125%

Loan Agreement (4)

BRL

Chapada II

2016

2032

84.2

84.8

TJLP + 2.18%

Loan Agreement

USD

Togo

2008

2028

76.6

80.8

7.16% (Weighted average)

Loan Agreement

EUR

Arrubal

2011

2021

73.9

98.9

4.9%

Loan Agreement (4)

BRL

Asa Branca

2011

2030

57.5

58.5

TJLP+ 1.92%

Loan Agreement

USD

KivuWatt

2011

2026

52.4

57.2

LIBOR plus 5.50% and mix of fixed rates

Other Credit facilities (individually < $50 million)

Various

Various

2012 -

2019

2021 -

2034

310.0

248.0

Mix of fix and variable rates

Total

 

 

 

 

4,580.9

4,871.8

 

(1) Corporate bond issued by ContourGlobal Power Holdings S.A. in July 2018 for €750 million dual-tranche, it includes €450 million bearing a fixed interest rate of 3.375% maturing in 2023 and €300 million bearing a fixed interest rate of 4.125% maturing in 2025. In July 2019, a new €100 million corporate bond tab was added to the €300 million tranche bearing the same fixed interest rate of 4.125% maturing also in 2025. On December 17, 2020 two new Corporate bonds were issued by ContourGlobal Power Holdings S.A. for €410 million aggregate principal amount of 2.75% senior secured notes due in 2026 and €300 million aggregate principal amount of 3.125% senior secured notes due in 2028. On January 6, 2021 the Group redeemed the €450 million ($549.7 million) aggregate principal amount of its 3.375% senior secured notes due 2023.

(2) On February 18, 2021, the Group acquired a Thermal portfolio in the United States of America and Trinidad and Tobago representing a total of 1,502 MW. The group entered into a term loan facility agreement in December 2020, and the loan was issued in February 2021 with an outstanding nominal amount of $175.0 million, bearing incremental fixed 2.5% to 4.5% rate, maturing in December 2021 (with option to extend to June 2022). The legal entity Lea Power acquired as per this transaction issued 6.595% Senior Secured Notes under an indenture dated July 24, 2007 which are due to mature June 2033. The remaining nominal amount is $187.5 million as of June 30, 2021.

(3) On May 24, 2021, Termosolar Alvarado entered into a €162.0 million ($197.3 million) facilities agreement with Unicredit Bank AG, Banco De Crédito Social Cooperativo, S.A., Rivage Euro Debt Infrastructure 3, Rivage Richelieu 1 Fcp, L7 Investment Holdings LP, refinancing the Alvarado facility. The Facility bears interest at EURIBOR plus 1.8% and fixed 2.5% per year and matures in 2028 and 2034.

(4) Taxa de Juros de Longo Prazo ("TJLP") represents the Brazil Long Term Interest Rate, which was approximately 4.61% at June 30, 2021 (December 31, 2020: 4.55%).

With the exception of our corporate bond and revolving credit facility, all external borrowings relate to project financing. Such project financing are generally non-recourse (subject to certain guarantees).

 

4.14.      Share-based compensation plans

ContourGlobal long-term incentive plan

On 17 May 2021, a fourth grant of performance shares was made under the long term incentive plan ("LTIP") with awards over a total of 2,606,267 ordinary shares of 1 pence in ContourGlobal plc granted to eligible employees (the "participants"). These shares will vest on 17 May 2024 subject to the participant's continued service and to the extent to which the performance conditions set for the awards are satisfied over the period of three years commencing on 1 January 2021 and, ordinarily, ending on 31 December 2023 (the "Performance Period"):

i)             EBITDA condition: 50.0 % of award to the compounded annual growth rate of the Company's EBITDA over the Performance Period.

ii)           IRR condition: 12.5 % of award to the internal rate of return on qualifying Company projects over the Performance Period.

iii)          LTIR condition: 25.0 % of award to the lost time incident rate of the Company over the Performance Period.

iv)          Project milestones condition: 12.5 % of award to the number of corporate milestones completed on qualifying projects conditions over the Performance Period.

The long term incentive plans are considered as equity-settled share-based incentives, presented within selling, general and administrative expenses in the consolidated statement of income.

4.15.      Financial commitments and contingent liabilities

ContourGlobal plc has no new financial commitments and no new contingent liabilities in respect of legal claims arising in the ordinary course of business as compared to those disclosed in the consolidated financial statements for the year ended December 31, 2020.

Since December 31, 2020, the status of our contingent liabilities has not changed, except for as mentioned below:

Operation & Maintenance contractor litigation (Energies Antilles): In April 2021, the Court of Appeal ruled in favor of Energies Antilles by overturning the decision of the tribunal of first instance rendered in September 2018. The contractor did not appeal the judgment at the Supreme Court.

Power industry law (Ley de la Industria Eléctrica - LIE): On 29 January 2021, the president of the United Mexican States submitted before the Mexican Chamber of Representatives (Cámara de Deputados) a preferential initiative to modify several provisions of the Power Industry Law (Ley de la Industria Eléctrica) ("LIE") which was enacted on 10 March 2021. One of the proposed changes is to modify the order in which electricity is dispatched to the system, which would favor the State-owned power plants and may have an adverse impact on future revenues and profits in our Mexican assets. The Group filed Amparo claims to challenge the reform in April 2021 and the First District Court granted our assets in Mexico ("CELCSA" and "CGA") definitive injunction against the amendment to the LIE in April 2021. This injunction was granted with general effects, preventing the application and implementation of the challenged provisions by the relevant authorities. Certain Mexican authorities and regulators ("CRE") submitted a revision appeal against the definitive injunctions and the granting of the amparos in May 2021.

On 15 July 2021, the Second Specialized Circuit Court revoked the definitive injunction for CELCSA on the grounds that there was no immediate harm to it as a result of the LIE reform; any harm would be by subsequent acts of CRE to try to revoke the cogeneration self-supply permit, and/or by the relevant authorities to change the dispatch order; both of which are uncertain and have not occurred yet. The Group is evaluating available recourse against this revocation.

4.16.      Guarantees and letters of credit

As of June 30, 2021, there have been additional guarantees and letter of credits related to our acquisition in the United States and Trinidad and Tobago and Mexico CHP as compared to those disclosed in the consolidated financial statements for the year ended December 31, 2020.

·      Mexican CHP. $35 million letter of credit signed on February 5, 2021 which replaced the letter of credit previously issued under the UniCredit facility released for $32 million on May 5, 2021 at the corporate level. Maturity is in February 2023.

·      United States and Trinidad and Tobago. Letter of credit extension for 7 years signed on June 17, 2021 for an amount of $91 million issued for Debt Service Reserve Accounts and performance guarantees. Maturity is in 2028.

·      United States and Trinidad and Tobago. Letter of credit facility for a total of $45 million of which $31.5 million were issued. Maturity is in 2023.

 

[1]  Defined as Funds From Operations divided by Adjusted EBITDA

[2]  Based on constant exchange rates from 2020 of EUR/USD 1.12 and BRL/USD 0.25

[3] USD:GBP of 1.39 as of 5 August 2021

[4] Dividend cover of 1.9x, defined as LTM Parent Company Free Cash Flow divided by declared dividend

[5] Includes Q2 2021 dividend to be paid in September

[6] Best 12 month rolling Capacity Availability Factor in June 2021

[7] Net debt at corporate level including the Corporate Bonds less the cash held in the group corporate holdings, divided by CFADS (Cash flows available for debt service) as defined in the Corporate Bond Indenture; Pro forma for full year expected EBITDA of Western Generation of $92m

 

 

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