RNS Number : 4961D
Econergy International Plc
16 September 2008
For Immediate Release
16 September 2008
ECONERGY INTERNATIONAL PLC
Interim Results for Six Months Ended 30 June 2008
Econergy International PLC ("Econergy International" or "the Company"), the renewable independent power producer focused on the
Americas, today announces interim results for the period ended 30 June 2008.
HIGHLIGHTS
Operational Highlights
� Significant progress has been achieved to meet the goal of delivering 1 million MWh, gross, in 2009:
o Empresa Eltrica Corani S.A. produced 433,600 MWh of energy and achieved 99.5% availability during the first 6 months of 2008.
o Construction of the 25.6 MW Beberibe wind project is complete and the plant entered commercial operation on 11 September 2008.
o Areia Branca, the 19.8 MW hydroelectric project, is in construction and is expected to reach commercial operation by the end of
December 2008.
o Planta Eca Guanacaste (PEG) is under construction and Phase I (25 MW) is expected to be complete in the first quarter of 2009;
commercial operation will begin at the same time. In May 2008 Econergy International purchased an additional 44.1%interest in the 50 MW
project bringing total ownership to 90%.
o In June 2008 Cambria 33 executed a 10-year forward sales agreement for all Verified Emission Reductions (VERs) from the project.
Corporate and Financial Highlights
� On 25 June 2008 SESA BidCo Ltd (BidCo), a subsidiary of Suez Energy South America Participa�es Ltda. (part of GDF Suez), extended a
cash offer for the entire issued share capital of Econergy International at 45 pence per share. The offer represented a 50% increase in
share price over the 30 pence price that was offered in cash by Trading Emissions PLC by means of a scheme arrangement on 4 June 2008.
� On 29 July 2008 BidCo announced it had received acceptances in respect to approximately 94.4% of Econergy International*s shares
and declared its offer unconditional as to acceptances but still conditional as to certain Brazilian consents.
� Consolidated revenue increased by 36% to $13.6 million for the first half of 2008 compared to $9.95 million for the same period
last year.
� Gross profit increased by 39% to $9 million compared to $6.5 million last year.
� Administrative expenses increased mainly due to project expenses of approximately $3.8 million related to the Beberibe and Areia
Branca projects which cannot be capitalized for IFRS purposes. Other operating expenses increased mainly as a result of costs incurred with
the pending sale of Econergy International PLC (Econergy International, the Company or with its subsidiaries, the Group).
� Long-term and short-term financing obtained for Areia Branca and Beberibe projects. Total amount drawn approximately $93.8
million. Short-term financing for Beberibe has been replaced by long-term financing in August 2008.
� Financing proceeds of approximately $110 million used for property, plant and equipment purchases and funding of construction costs
for Areia Branca, Beberibe and Pedra do Sal projects in Brazil and PEG in Costa Rica.
Tom Stoner, Chief Executive Officer of Econergy International, commented:
"With the 2006 IPO the Company committed to generate 1 million MW hours of annual power generation by the end of 2009. At this time two
of the five power facilities are producing power and the Company remains on target to meet its energy generation commitments. The pending
sale of the Company to Suez Energy South America Participa�es Ltda. will bring to conclusion Econergy International's operation as an
independent company. I am pleased that the facilities the Company has developed will be owned and managed by a world class organization and
team."
Enquiries
Econergy International PLC
Tom Stoner
Tel: + 303.473.9007
Pelham Public Relations
Chelsea Hayes
Tel: +44 (0)20 7743 6675
Archie Berens
Tel: +44 (0)20 7743 6679
OPERATIONAL UPDATE
Takeover of the Company
In April 2008, the Company announced that it was undertaking a strategic business review and would seek a buyer that would maximize the
value of its existing portfolio and pipeline of Latin America and U.S. renewable energy assets and continue expansion of new business
opportunities. On 15 May 2008, Trading Emissions PLC (TEP) announced its intention to acquire all of the share capital of the Company for
approximately 30 pence per share by way of a scheme of arrangement under section 152 of the Isle of Man Companies Act of 1931 requiring
shareholder approval. On 13 June 2008, Suez Energy South America Participaaes Ltda. (SESA) announced a cash offer (Offer) of 45 pence per
Econergy International share, to be made by SESA or a subsidiary of SESA (BidCo), for the Company. The SESA Offer Document was sent to
Econergy International's shareholders on 25 June 2008. By 28 July 2008, BidCo had received valid acceptances of the Offer in respect of a
total of 82,094,455 Econergy International shares, representing approximately 94.4 per cent. of the Company's existing issued ordinary share capital. Accordingly, the Offer has become unconditional as
to acceptances. The Offer remains subject to the conditions and further terms which relate to the receipt of consents from certain Brazilian
public authorities and entities. The Directors have unanimously recommended SESA's offer and believe that Econergy International's projects
will be developed to their full potential under the ownership by this world class organization and team.
Operational Review
The first six months of 2008 were very active for Econergy International PLC. The Group completed construction of the first of its
development projects, Beberibe, a 25.6 MW wind facility in Brazil and placed into operation Cambria 33, a pipeline grade natural gas
extraction facility at a retired coal mine in the U.S.
Empresa Eltrica Corani/hydroelectric/147 MW: Bolivia
Empresa Eltrica Corani S.A. continues to perform well operationally, maintaining 99.5 per cent. availability during the first half of
2008. During the same period the facility produced 433.6 gigawatt-hours (GWh) of energy compared to 355.8 GWh in the same period in 2007.
Financially Corani continues to perform well; revenue for the period was approximately $10.6 million as compared to $8.5 million for 5
months in 2007. EBITDA was $7.1 for the first half of the year compared to $5.8 million for 5 months in 2007.
Beberibe/wind/25.6 MW: Brazil
The Beberibe wind project entered commercial operation on 12 September 2008. It is the first Econergy International built renewable
energy project to go on line. Beberibe is configured with thirty-two Enercon/Wobben 800 kW wind turbines and will sell all of its
electricity to Eletrobr under a 20-year PPA. Econergy International is the sole owner of the facility and recently closed a R$94.9 MM
(USD$59.3 MM) limited recourse long-term take out loan from Brazil's Banco Nacional de Desenvolvimento Econco e Social (BNDES).
Hidrectrica Areia Branca (HAB)/hydroelectric/19.8MW: Brazil
HAB is currently expected to reach commercial operation by the end of December 2008. Construction began in March 2007 and at this time
the civil construction is in its final stage with construction of the dam near completion. The facility is located in the state of Minas
Gerais in eastern Brazil and will sell all of its output to Eletrobr under a 20-year PPA.
Econergy International owns 80 per cent. of the project with the CleanTech Fund owning 20 per cent. The Group had previously entered
into an agreement to sell down an additional 27 per cent. to FMO, the Netherlands Development Finance Company, which is also a limited
partner in the CleanTech Fund. However, FMO and Econergy International mutually agreed to let FMO withdraw from its commitment to invest in
the project.
In Q1 2008 Areia Branca withdrew its first and second disbursement for a total of R$41 million (USD$25.6 million) from a limited
recourse long-term take out loan from BNDES of R$55.6 million (USD$34.8 million).
Pedra do Sal/wind/18 MW: Brazil
Pedra do Sal is scheduled to reach commercial operation in the first quarter of 2009. Civil works are currently underway at the project
site, which is located in northeastern Brazil in the state of Piau Pedra do Sal is configured with twenty Enercon/Wobben 900 kW wind
turbines and will sell all of its electricity to Eletrobr under a 20-year PPA.
Due to uncharacteristically heavy rains associated with the El Niweather phenomenon and renegotiation of the land lease agreement, the
cost of the project has increased by approximately $3 million. There is a possibility that commercial operation of the project will be
delayed by two months due to the flood and renegotiation of the land lease.
Proyecto Eco Guanacaste (PEG)/wind/50MW: Costa Rica
PEG, Econergy International's largest development project, is scheduled to begin producing electricity in January 2009. At that time,
Phase I of the project, 25 MW, will come on line, with Phase II, 25 MW, expected to come on line in January 2010. Construction started
earlier in 2008 and to date preparation of the site has been completed and the turbine foundations poured. At this time erection of the
towers is underway. The project will be composed of fifty-five Enercon 900kW wind converters and sell all of its electricity to ICE, the
state-owned utility, under a 20-year build-own-operate-transfer scheme.
In late 2007, Econergy International was forced to restructure the project company in response to the declaration by one of the original
partners, Saret de Costa Rica (Saret), that it would not be able to meet its share of capital requirements. On 2 May 2008 Econergy
International entered into an agreement for the acquisition of Saret's 44.1 per cent. interest in the project. This agreement was executed
and closed in June 2008, and Econergy International now owns 90 per cent. of the shares of PEG.
In order to provide project financing to PEG, the Company entered into an exclusive mandate with Nord/LB (Nord). However, as of today,
the Company has not reached any commercial agreement with Nord. As the project requires material payments to contractors in the coming
weeks, particularly to Enercon, Econergy International has negotiated a bridge loan of up to $89.3 million with Suez Energy that will allow
the project to fulfill its obligations while giving more time to address Nord's conditions.
Cambria 33/methane/VERs: United States
Cambria 33 began commercial operation on 12 May 2008 by delivering pipeline grade natural gas into the Pennsylvania grid for sale to
local brokers. The gas is produced at a retired coal mine. Engineering is now focused on further refinements in operation to attain optimal
performance of all equipment in commercial configuration. On 30 June 2008, Cambria 33 executed a 10-year forward sales agreement of all
Verified Emission Reductions (VERs) from the project. The VERs will be transacted annually according to the measurement and reporting
protocols of an independent third-party service provider.
Summary
In conclusion, the first half of 2008 was a time of great change and excitement for Econergy International. The Group now has three
projects in operation and anticipates that its remaining projects in construction will all be operational and producing revenue by the end
of the first quarter of 2009. Whilst Econergy International's strong teams work diligently to ensure the timely completion of the projects,
the Group is simultaneously preparing for the pending acquisition by Suez Energy. The Directors are confident that the Group will thrive
under Suez Energy's guidance as the projects will be owned and managed by a world class organization.
The Board of Directors
16 September 2008
INDEPENDENT REVIEW REPORT TO ECONERGY INTERNATIONAL PLC
Introduction
We have been instructed by the Company to review the consolidated financial information of Econergy International PLC for the six months
ended 30 June 2008 contained in the interim financial report which comprises the consolidated income statement, consolidated balance sheet,
consolidat�ed cash flow statement, the consolidated statement of changes in equity and related notes 1 to 13 on pages 13 to 20. We have read
the other information contained in the interim report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Our Responsibility
Our responsibility is to express to the company a conclusion on the financial information in the interim financial report based on our
review
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose. No person
is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of
our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
Directors' Responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the
directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for
companies trading securities on the Alternative Investment Market which require that the interim financial report be presented and prepared
in a form consistent with that which will be adopted in the Group's annual accounts having regard to the accounting standards applicable to
such annual accounts.
Scope of Review
We conducted our review in accordance with guidance contained in ISRE (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim
financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International
Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Review Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the financial information in the interim financial
report for the six months ended 30 June 2008 is not prepared, in all material respects, in accordance with the rules of the London Stock
Exchange for companies trading securities on the Alternative Investment Market.
Emphasis of Matter - Going Concern
In forming our review conclusion, we have considered the adequacy of the disclosures made in note 1 to the financial information
concerning the Group's ability to continue in operational existence for the foreseeable future with the current portfolio of assets.
Currently, the Group has insufficient working capital to meet its corporate overhead obligations as they fall due.
On 13 June 2008, Suez Energy South America Participaes Ltda. ("SESA") announced an all cash offer to acquire the entire issued and to be
issued share capital of the Company. The offer also included the availability of certain project specific funding from SESA. The offer is
contingent upon certain conditions, including consent to the change of control by the Brazilian Development Bank, the Brazilian Electricity
Regulatory Agency and Centrais Electricas do Brasil, S.A whose satisfaction, although reasonably expected, cannot be guaranteed. In the
event that these conditions are not met the offer may be withdrawn.
In the event that the offer is withdrawn the Directors are confident that alternative sources of finance could be raised by the disposal
of certain assets or the injection of debt/equity, but clearly there can be no certainty of a successful outcome given current market
conditions.
These conditions along with other matters disclosed in Note 1 to the financial information, indicate the existence of material
uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial information does not
include the adjustments that would result if the Company was unable to continue as a going concern.
BDO STOY HAYWARD LLP
Chartered Accountants and Registered Auditors
London
16 September 2008
Consolidated Income Statement
unaudited results for the six months ended 30 June 2008
(In US $000s) Note Six months ended30 Six months ended30 Yearended31 December
June 2008 Unaudited June 2007 Unaudited 2007 Audited
Revenue 5 13,570 9,954 25,429
Cost of sales (4,532) (3,468) (10,261)
GROSS PROFIT 9,038 6,486 15,168
Other income (376) (150) (861)
Administrative expenses 11,798 7,329 16,201
Other operating expenses 2,750 21 211
LOSS FROM OPERATIONS (5,134) (714) (383)
Share of loss of investments
accounted
for under the equity method - (82) (183)
Finance income 6 560 1,928 5,923
Finance costs 6 (10,044) (4,108) (9,206)
LOSS BEFORE TAXATION (14,618) (2,976) (3,849)
Taxation 995 738 1,277
LOSS FOR THE PERIOD (15,613) (3,714) (5,126)
Minority Interest 1,439 941 2,388
Attributable to Equity Holders (17,052) (4,655) (7,514)
of the Parent
Loss per share:
Basic and diluted 4 $ (0.20) $ (0.05) $ (0.09)
The Notes on pages 12 to 19 form part of these financial statements.
Consolidated Balance Sheet
unaudited results for the six months ended 30 June 2008
(In US $000) Note 30 June 2008 30 June 31 December
Unaudited 2007 2007
Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 11 204,161 60,315 84,609
Intangible assets 9 9,436 2,261 3,034
Interests in associates 2,592 535 1,658
Available for sale financial assets 3,268 - 2,552
Other receivables 4,443 3,409 2,490
Total non-current assets 223,900 66,520 94,343
Current assets
Trade and other receivables 7 26,499 34,170 45,225
Inventory 5,449 56 5,080
Cash and cash equivalents 43,062 68,063 37,333
Total current assets 75,010 102,289 87,638
TOTAL ASSETS 298,910 168,809 181,981
EQUITY AND LIABILITIES
Capital and reserves
Share capital 1,517 1,517 1,517
Share premium 101,376 101,376 101,376
Foreign exchange reserve 23,597 12,575 12,975
Retained deficit (38,468) (17,366) (19,988)
Equity attributable to shareholders of the parent 88,022 98,102 95,880
Minority Interest 18,384 13,944 20,783
Total Equity 106,406 112,046 116,663
Non-current liabilities
Financial Liabilities 10 101,757 47,033 47,778
Deferred tax liability 3,421 723 519
Other non-current liabilities 364 200 -
Total non-current liabilities 105,542 47,956 48,297
Current liabilities
Trade and other payables 7,654 5,209 5,367
Tax Payable 1,024 - 1,736
Financial Liabilities 10 78,284 3,598 9,918
Total current liabilities 86,962 8,807 17,021
Total liabilities 192,504 56,763 65,318
TOTAL LIABILITIES AND EQUITY 298,910 168,809 181,981
The Notes on pages 12 to 19 form part of these financial statements
Consolidated Statement of Changes in Equity
unaudited results for the six months ended 30 June 2008
(In US $000s) Share Capital Share Premium Foreign Exchange Retained Deficit Total Minority Interest Total
Equity
Reserve
Equity at 31 December 2006 1,517 101,376 11,455 (13,214) 101,134 -
101,134
Foreign currency translation - - 1,120 - 1,120 -
1,120
Net Income recognised directly - - 1,120 - 1,120 -
1,120
in equity
Loss for the period - - - (4,655) (4,655) 941
(3,714)
Total recognised income and - - 1,120 (4,655) (3,535) 941
(2,594)
expense for the period
Share option expense - - - 503 503 -
503
Acquisitions - - - - - 16,943
16,943
Minority Dividend - - - - - (3,940)
(3,940)
Equity at 30 June 2007 1,517 101,376 12,575 (17,366) 98,102 13,944
112,046
Foreign currency translation - - 400 - 400 -
400
Net Income recognised directly - - 400 - 400 -
400
in equity
Loss for the period - - - (2,859) (2,859) 1,447
(1,412)
Total recognised income and - - 400 (2,859) (2,459) 1,447
(1,012)
expense for the period
Share option expense - - - 237 237 -
237
Acquisitions - - - - - 9,332
9,332
Minority Dividend - - - - - (3,940)
(3,940)
Equity at 31 December 2007 1,517 101,376 12,975 (19,988) 95,880 20,783
116,663
Foreign currency translation - - 10,622 - 10,622 -
10,622
Net Income recognised directly - - 10,622 - 10,622 -
10,622
in equity
Loss for the period - - - (17,052) (17,052) 1,439
(15,613)
Total recognised income and - - 10,622 (17,052) (6,430) 1,439
(4,991)
expense for the period
Share option expense - - - 322 322 -
322
Acquisitions - - - (1,750) (1,750) 344
(1,406)
Minority Dividend - - - - - (4,182)
(4,182)
Equity at 30 June 2008 1,517 101,376 23,597 (38,468) 88,022 18,384
106,406
The Notes on pages 12 to 19 form part of these financial statements
Consolidated Statement of Cash Flow
unaudited results for the six months ended 30 June 2008
(In US $000s) Note 30 June 2008 Unaudited 30 June 2007 31 December
2007
Unaudited
Unaudited
Operating activities
Loss for the period (15,613) (3,714)
(5,126)
Adjustments for:
Share of loss of investments accounted
for under the equity method - 82
183
Depreciation & Amortisation 1,797 1,112
2,846
Finance costs 6 10,044 4,108
9,206
Finance income 6 (560) (1,928)
(5,923)
Income Tax Expense 995
1,277
Share-based payment 322 503
740
Decrease (increase) in trade and other receivables 7 18,726 (28,419)
(41,392)
Increase in inventory (369) -
(2,639)
Increase in other assets (8,750) (200)
(684)
Increase (decrease) in trade and other payables 2,286 (2,472)
2,293
Cash from (used in) operations 8,878 (30,928)
(39,219)
Investing activities
Additions to property, plant and equipment 11 (110,669) (960)
(25,403)
Acquisition of interest in subsidiary (Net of Cash) (1,406) 11
(286)
Acquisition of interests in associates and other investments (1,650) (82)
(3,855)
Deferred costs in projects 395 (177)
(724)
Interest received 387 1,928
2,971
Cash (used in) provided by investing (112,943) 720
(27,297)
Financing activities
Repayment of borrowings (703) (2,459)
(2,062)
Proceeds from borrowings 10 113,812 -
3,201
Finance (costs) income (458) (387)
1,193
Dividend paid to minority interest (4,182) (3,940)
(3,940)
Cash generated from/(used in) financing 108,469 (6,786)
(1,608)
Net increase (decrease) in cash and cash equivalents 4,404 (36,994)
(68,124)
Effect of exchange rate changes on cash 1,325 1,120
1,520
Cash and cash equivalents, beginning of period 37,333 103,937
103,937
Cash and cash equivalents at 30 June 2008 43,062 68,063
37,333
The Notes on pages 12 to 19 form part of these financial statements.
1. Going Concern
These interim financial statements have been prepared on the basis of going concern as the Directors consider that the Group will be able to
meet its current obligations and commitments for the foreseeable future.
On 15 May 2008, Trading Emissions PLC (TEP) announced its intentions to acquire all of the share capital of the Group for approximately 30
pence per share by way of a scheme of arrangement under section 152 of the Isle of Man Companies Act of 1931 requiring shareholder approval.
As part of this transaction TEP made a working capital facility of $20 million available to Econergy International to fund the construction
of the Beberibe and PEG projects. In the event the scheme of arrangement was not approved the loan would become repayable after eight months
from inception.
On 25 June 2008 SESA BidCo Ltd (BidCo), a wholly owned subsidiary of Suez Energy South America Participa�es Ltda. (SESA), extended a cash
offer to acquire the entire issued share capital of the Company. As part of the offer Econergy International entered into a loan agreement
with an affiliate of BidCo for a working capital facility of approximately $54 million to be used for working capital matters including the
repayment of the $20 million TEP loan plus interest and the funding of the construction costs for the projects. At the time of publishing
these accounts the TEP scheme of arrangement has been withdrawn and BidCo has received approximately 97.3 per cent. unconditional
acceptances. Econergy International has drawn upon the working capital facility and repaid the TEP loan as well as provided the funds to
the projects in Brazil and Costa Rica.
Due to the lengthy process of closing long-term financing for the PEG project as well as reduced leverage provided by Brazil*s Banco
Nacional de Desenvolvimento Econco e Social (BNDES) for the Brazilian projects, Econergy International has negotiated a second working
capital facility with SESA which will provide a bridge loan for the PEG project as well as fund additional equity requirements by BNDES.
The Directors are reasonably comfortable that with the second working capital facility the Group should be able to meet current obligations
and commitment related to its projects. Although the Directors believe that the Group only has sufficient funds to meet its corporate
overhead until the end of the calendar year, they are confident (on the assumption that SESA*s offer becomes wholly unconditional) that
additional funding will be available after this date to allow these obligations to be met.
In the event the offer is withdrawn, the Group will not have sufficient funding to meet its immediate financial obligations and will need to
raise alternative sources of financing. The Directors are confident that the necessary funds can be raised by the sale of certain assets, or
an injection of debt or equity. However, there can be no guarantee that funds will be raised or indeed on what terms.
These matters indicate the existence of a material uncertainty which may cast significant doubt over the Group*s ability to continue as a
going concern with its current portfolio of assets, and may not be able to realise its assets and discharge its liabilities in the normal
course of business. The financial interim report does not include the adjustments that would result if the Group was unable to continue as a
going concern.
2. Basis of Preparation
The comparative figures for the year ended 31 December 2007 do not constitute the Group*s full statutory accounts. The statutory accounts
for that period have been reported on by the Group*s auditors and delivered to the Companies Registry. The audit report was unqualified as
to the Group*s financial statements and included a reference to going concern to which the auditor drew attention by way of a matter of
emphasis without qualifying their report and did not contain a statement under chapter 2 section 15.4 (a) * (b) of the Companies Act 1982.
The interim results were prepared on a basis consistent with the accounting policies expected to be applied at 31 December 2008. The Group
prepares its statements in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) issued by the
International Accounting Standards Board.
3. Dividends
No dividend was declared or paid by the Company in any period.
4. Earnings per Share
Earnings per share are determined according to IAS 33 (Earnings per Share) by dividing the loss attributable to ordinary equity holders of
the parent entity by the weighted average number of shares outstanding.
For the period ended 30 June 2008 the weighted average number of shares outstanding during the period was 87,000,000; for the period ended
30 June 2007: 87,000,000 and for the year ended 31 December 2007: 87,000,000.
There were no dilutive options, warrants or instruments convertible into ordinary shares outstanding at any period end.
5. Revenue
Revenue (in US $000s) arises from:
Six months ended Six months ended Year ended
Revenues 30 June 2008 30 June 2007 31 December 2007
Consulting services 1,378
758 636
Energy related investments and 8,958 23,224
services 12,585
Carbon Services 827
227 360
9,954 25,429
13,570
6. Financial Income and Expenses
Six months ended Six months ended Yearended
30 June 2008 30 June 2007 31 December 2007
$'000 $'000 $'000
Finance income
Bank interest received 1,928 2,971
387
Project related interest 1,882
income - -
Total interest income 1,928 4,853
calculated using effective 387
interest rate method
Foreign currency exchange gain 1,070
173 -
Total finance income 1,928 5,923
560
Finance expense
Bank borrowings 1,018
751 476
Interest on CER loan
740 427 956
Project related interest
expense 85 - -
1,576 1,974
903
Other finance expense
Revaluation of CER loan 8,167 1,817 5,314
Total interest expense 8,167 1,817 5,314
calculated using effective
interest rate method
Foreign currency exchange loss 1,388 1,918
301
Total finance expense (10,044)
(4,108) (9,206)
The revaluation of the CER loan (a CERs denominated loan) is a non-cash item.
7. Trade Receivables and Other Receivables
Current Receivables
30 June 2008 30 June 2007 Unaudited 31 December 2007Audited $'000
Unaudited $'000 $'000
Trade receivables 3,002 2,894 5,966
Earnings in excess of contract 73 - 25
billings
Employee accounts receivable 30 86 69
Prepayments 21,495 30,882 39,165
Other receivables 1,899 308 -
26,499 34,170 45,225
Prepayments are advances made for construction of three projects. These advances will be reflected as Fixed Assets and
Construction-in-Progress once the equipment has been installed on the sites.
Other Receivables included in Non-Current Assets at 30 June 2008 principally reflect deferred development costs of $1.9 million for
projects, operating leases of $1.4 million and the accumulated cost of the substation for the PEG project of $946,000.
8. Forward Hedge of Debt Denominated in Foreign Currency
The Group*s Bolivian subsidiary, Corani, has a loan denominated in Euros. The subsidiary entered into a forward contract to hedge against
the foreign denominated loan. The forward contract is not accounted for as a hedge under IAS 39 and is renewed every six months. The
changes in fair value of the hedge are recognised to profit and loss. For the period ended 30 June 2008 the changes in fair value resulted
in a loss of $331,000 (31 December 2007: $1,165,000; 20 June 2007: $nil). The loss is mainly due to the increase in the Euro above the
contract price.
9. Intangible Assets
Intangible assets for the Group relate to contract rights to acquire Certified Emission Reductions (CERs) over the period to 2013.
Intangible assets are recognised at cost and amortised over the life of the asset. Provision for impairment is made when recoverable amount
exceeds book value. There was no impairment charge for the first half of 2008.
During the period the Group invested in a project in Brazil which gave rise to an intangible under contract of $6,540,000 for a power
purchase agreement with a useful economic life of twenty years. Once the project goes into operation these costs are amortised over the
life of the power purchase agreement.
$'000 ContractIntangibles
Cost
At 1 January 2007 2,874
Additions 69
At 30 June 2007 2,943
Additions 915
At 31 December 2007 3,858
Additions 6,554
At 30 June 2008 10,412
Accumulated amortisation
At 1 January 2007 625
Charge for the period 57
At 30 June 2007 682
Charge for the period 142
At 31 December 2007 824
Charge for the period 152
At 30 June 2008 976
Net book value
At 30 June 2007 2,261
At 31 December 2007 3,034
At 30 June 2008 9,436
10. Interest Bearing Loans and Borrowings
Financial Liabilities 30 June 2008 30 June 2007 31 December 2007
$'000 $'000 $'000
CER Loan 21,600 12,867
9,435
Corani - IDB and KfW Loans 24,960 25,136
24,683
Corani - Finance Leases 15,899 16,319
16,319
Areia Branca - BNDES Loan 27,226 -
-
Beberibe * ABN AMRO Loan 66,621 -
-
TEP Loan 20,000 -
-
Other borrowings 3,735 3,374
173
Less current maturities (78,284) (9,918)
(3,577)
Long-term financial 101,757 47,778
liabilities 47,033
The increase in total financial liabilities of the Group occurred principally as a result of the project financing for the Brazilian
projects and the increase in the CER loan. Other borrowings include a short-term loan from the CleanTech Fund for $3.2 million. The
borrowings for Areia Branca and Beberibe were primarily for the payment of WECs, civil works and balance of plant. The TEP loan was
primarily for the funding of construction costs of the Costa Rican wind project, PEG.
In 2005 the Group obtained a loan of $4 million dollars that is repayable in tons of CERs over a period of eight years. The CER loan is
accounted for as a financial liability with an effective interest rate of 13 per cent. As the cash flows to settle the obligation change,
the loan is re-measured at the original effective interest rate. Any gain or loss is recognised in the Income Statement.
At 30 June 2008 the Group re-measured the loan obligation based on increased market prices for CERs. Consequently a charge of $8,167,000 was
recognised in the Income Statement. The Group also recorded the non-cash interest expense on the loan of $740,000.
Based on current market prices the undiscounted value of the financial obligation is measured at $28 million over the life of the loan.
Using the revised cash flows to repay the loan with the original effective interest rate of 13 per cent. the current value of the loan
including the current non-cash interest is $21.6 million.
CER Loan
Total Total Total
30 June 2008 30 June 2007 31 December 2007
$'000 $'000 $'000
Discounted Discounted Discounted
Maturing within one year 3,000
579 2,315
within 2 to 5 years 9,863
6,300 7,107
Over 5 years 8,737
2,556 3,445
21,600
9,435 12,867
11. Property, Plant and Equipment
The increase in property, plant and equipment was mainly due to the acquisition of Beberibe with approximately $80 million in property,
plant and equipment and the additional construction costs incurred at the Areia Branca project for $19 million. Both projects financed the
cost of construction and purchases of equipment through equity contributions and short and long term financing.
Other increases in property, plant and equipment relate to construction of the PEG project in Costa Rica which has been funded with equity
contributions and the TEP loan for $20 million.
12. Commitments
On 30 April 2008 the Group entered into an agreement with Saret de Costs Rica S.A. (Saret) to acquire its interest in PEG for $1,750,000.
The Group had previously extended a loan to Saret for EUR1.06 million secured by 6 per cent. shares in PEG. Since the loan was not repaid
and now in default the Group agreed to purchase the remaining non-controllable interest in PEG. Econergy International now holds a 90 per
cent. interest in PEG. The transaction gave rise to a reduction in retained earnings through equity. The purchase agreement provides for a
final payment in April 2009 of $750,000. Saret will hold a security interest in land owned by the Group.
In August 2007 Econergy International entered into an Asset Purchase and Sale Agreement with Seawest do Brasil and Eventure Desenvolvimentos
de Projetos de Energia Ltd for certain assets pertaining to the Pedra do Sal project in Brazil. The first installment of the purchase price
of approximately $600,000 was dependent on certain conditions which are in the process of being finalized and should be complete by the end
of the fourth quarter of 2008. The second installment of approximately $3.5 million is not due until December 2011.
13. Post Balance Sheet Events
On 13 June 2008 Suez Energy South America Participa�es Ltda. (SESA) announced the terms of a cash offer to be made by SESA or a subsidiary
of SESA (BidCo) to acquire the entire issued and to be issued share capital of Econergy International PLC for 45 pence per share.
Subsequent to the announcement the offer was extended to all shareholders subject to certain conditions. These conditions principally were
valid acceptances of the offer in excess of 90 per cent. and consents from certain Brazilian public authorities. As part of the offer
Econergy International entered into a loan agreement with an affiliate of BidCo for a working capital facility of approximately $54 million
to be used for working capital purposes including the repayment of the existing $20 million loan with Trading Emissions PLC and the funding
of further construction in the projects. In July 2008 Econergy International was able to draw on the loan to fund construction for the
Beberibe and Areia Branca projects in Brazil.
On 9 September 2008, SESA and Econergy International finalized an amendment to the original working capital facility to allow for additional
funding of $98.5 million. The proceeds from this working capital facility provide a bridge loan to the PEG project as well as fund
additional equity requirements for Areia Branca and Beberibe.
On 15 May 2008, Trading Emissions PLC entered into a loan agreement with Econergy International to advance $20 million for the construction
of the PEG and Beberibe projects. TEP had reached an agreement with Econergy International to acquire all the issued share capital of
Econergy International by way of a scheme of arrangement under section 152 of the Isle of Man Companies Act 1931. On 12 August 2008
Econergy International drew against the working capital facility from SESA and repaid the loan plus interest.
In March 2008 the Board approved a guarantee to ABN AMRO for a bridge loan facility to finance the construction of Pedra do Sal. The bridge
loan was for a total of R$72.8 million (USD$45.5 million) and included a guarantee of R$64 million (USD$40 million) to Wobben, the
manufacturer of the wind energy converters. In July and August 2008 Pedra do Sal drew R$20 million (USD$12.5 million) against the bridge
loan facility. Econergy International continues to work with BNDES to secure long-term project financing. The Pedra do Sal project is
expected to reach commercial operation during the first quarter of 2009.
In March 2008 Hydro Partners, LLC brought an action against Econergy International to compel the Company to close the Pipoca stock
transaction. In July 2008 Econergy International reached an agreement with Hydro Partners, LLC and the matter was settled with no financial
impact.
In August 2008 BNDES made its first disbursement against the long term financing agreement for the Beberibe project. Econergy International
currently has a bridge loan facility in place with ABN AMRO to fund the construction of Beberibe. BNDES*s first disbursement falls short of
cancelling the total bridge loan facility. The Group will provide the funds necessary from the SESA working capital facility to pay the
remaining balance on the bridge loan until BNDES makes the second disbursement which is expected to occur in October 2008. The project
began commercial operation on 11 September 2008.
In July 2008 Econergy International received a distribution of $489,000 from the partial sale of its share of the NEOgas investment held by
CleanTech Investor. Econergy International is the General Partner for the CleanTech Fund (CTF) which owned 24 per cent. of NEOgas do Brasil
Gas Natural Comprimido S.A. (NEOgas), prior to the sale. CTF sold 47.12 per cent. of its share in NEOgas.
14. Pending Litigation
On 5 August 2008 the Group commenced an arbitration relating to the Loreto Bay wind farm project in Mexico. The project company, Econergy
Mexicana Holdings y Compania S. en C. por A. de C.V. (EMHYC), is owned 51 per cent. by Econergy Mexicana Holdings S.A. de C.V. and 49 per
cent. by Baja Renewable Energy Company LLC (BRE).
The dispute concerns BRE*s failure to pay its share of development costs for the Loreto Bay project. Econergy International*s 4 June and 11
July 2008 default notices to BRE demand payment of $163,000 under the original Development Budget. Since BRE has failed to cure its default
Econergy International intends to exercise its purchase option of BRE*s interest in EMHYC at the Defaulting Party Transfer Price which is
book value less 50 per cent.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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