GLO.L Regulatory News (GLO)

ContourGlobal plc

Interim Results Announcement

Delivering on strategy, strong operational and financial performance

Maintaining 10% annual increase in dividend with quarterly dividend of 3.1077 pence per share

ContourGlobal plc ("ContourGlobal" or the "Company"), an international owner and operator of contracted electricity generating plants, today announces its half year results for the six months ended 30 June 2020.

KEY HIGHLIGHTS

● Continued strong financial performance, with income from operations increasing 11% to $158m from $143m in H1 2019, driven by the acquisition of the Mexican CHP assets, completed in November 2019

● Adjusted EBITDA of $351m down 2% from $357m in H1 2019, or +13%, excluding the $46m of net farm-down gains (cash gain on sale of minority interest in assets) in H1 2019. H1 2020 benefitted from an additional $46m arising from the acquisition of the Mexican CHP assets

● No meaningful impact on operations or financial performance has been experienced as a consequence of COVID-19

● Funds from Operations stable at $172m (H1 2019: $170m), a 49% cash conversion (48% H1 2019). The higher Adjusted EBITDA, excluding farm-down gains, was partially offset by increased distributions to minorities

● Second quarter dividend of 4.0591 cents per share, equivalent to 3.1077 pence per share, to be paid on 25 September 2020, reflecting our commitment to 10% year on year dividend growth supported by ContourGlobal's strong and predictable cash flow generation. Dividend cover of 1.6x[1]

● Ongoing share buyback, with £8m of shares bought back since 1 April 2020, reflecting the Board's view that the current share price does not reflect the intrinsic value of the Company

● Maintain guidance for 2020 of Adjusted EBITDA of $710 - 745m[2]

● Positive outlook for future growth and acquisition of assets, assisted by strong financial position

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

 "During the COVID-19 crisis we have been fortunate to have been classified as an essential business in each of the eighteen countries where we generate electricity. As a result, all 107 of our power generating facilities have been operational and we continue to experience no notable adverse impacts. Of course, operating safely has required that we greatly modify our operating protocols, innovating and implementing new ways of working that have required great agility and determination from our front-line workers. We are all grateful to, and inspired by, their dedication and resilience. We remain, as we have since inception, resolutely focused on the health and safety of our workforce, which is reflected in an industry leading Lost Time Incident Rate of zero during the first half of 2020.

Our financial performance has been robust and continues to meet our growth expectations. Our resilience was reflected in receiving one of the few credit rating upgrades delivered since the start of the COVID-19 pandemic. The business model is underpinned by consistent and contracted cash generation. The stability of the cash flow ensures that we can deliver our long-term commitment to shareholders, including a targeted annual 10% increase in our dividend and our recent share buyback program. Today we also announce a second quarter dividend of $27.03m[3] or 4.0591 cents per share.

We remain positive about the outlook and achieving our commitment to double EBITDA within five years of our 2017 IPO. Supplying all parts of the world with the electricity they need requires over $1.5 trillion of annual investment over the next decade. Most of this investment will be in renewable generation and low-carbon base-load generation such as natural gas and combined heat and power. Our skill set and track record makes us well placed to take advantage of this growth."

*Non-IFRS metrics

** Excluding the net farm-down gains of $46m in Q2 2019 from farm-downs in CSP Spain and Solar Italy and Slovakia, Adjusted EBITDA +13%, Renewable Adjusted EBITDA -8% and Proportionate Adjusted EBITDA +8%

*** Net profit in H1 2020 has been increased by a non-cash revaluation of a derivative in Mexican CHP, of $34m set out below

Robust financial performance

● Consolidated revenue up 10% to $680.2m, driven by the acquisition of the Mexican CHP assets in November 2019, which more than offsets foreign exchange headwinds of -$30m. ($18m of BRL/USD and the balance from Euro/USD)

● Income from operations is up 11% to $158.2m reflecting the above changes

● Adjusted EBITDA of $351.2m, compared to $357.2m in H1 2019, driven by the Mexican CHP acquisition completed in November 2019 (+$46m), higher availability revenue and lower operations and maintenance costs in Maritsa (+$8m), commercial improvements in certain assets (+$6m) and full effect of acquisitions and repowerings (+$4m), offset by farm-down gains from Spanish CSP and Solar Italy and Slovakia in H1 2019 (-$46m), poorer resource in Spanish CSP, Brazil Wind and Vorotan (-$12m) and foreign exchange rate movements (-$17m, as mentioned above)

● Net profit attributable to ContourGlobal plc shareholders was $71m, resulting in basic EPS of 11 USD cents per share. The net profit benefited from a non-cash revaluation of $34m for a derivative in the Mexican CHP assets that locks in a fixed margin for certain contracts

● Strong cashflow generation; funds from operations stable at $172m in H1 2020 (H1 2019: $170m) with a cash conversion rate (defined as FFO / Adjusted EBITDA) of 49%

● Robust liquidity and cash positions with $272m of liquidity ($188m cash on hand and $84m liquidity under an undrawn revolving credit facility) at the parent level as of 30 June 2020

● Net consolidated leverage ratio of 4.4x[4] at 30 June 2020

Successful operational performance and growth of the portfolio

● Continued industry leader in Health and Safety with Target Zero achieved in the first half of 2020 (0 LTIs)

● Availability Factors remained strong at 97.0% for the Group in H1 2020 (H1 2019: 94.6%), with individual segments shown below:

● Integration of Mexican assets, acquired November 2019, has proceeded well, reflected in a combined availability factor for both plants of 97.0% YTD

● Good progress on Vorotan refurbishment and Austrian wind repowering. Hydro EAF in H1 2020, reflects planned outage in the Vorotan complex and unplanned outage in Brazil

● With the Kosovo project's milestones not having been met by the long-stop date in May, the project was terminated. The Company will not acquire or develop any future coal project

COVID-19 Update

● No meaningful disruption to operations resulting from COVID-19 so far and no expected material disruption in 2020

● Activity has been focused on three areas, the health and safety of employees, business resilience including availability and reliability of operations, management of relations with offtakers, and community support

EPS

● Net Profit attributable to ContourGlobal plc shareholders was $71.1m in the first half of 2020 corresponding to EPS of $0.11. Adjusted Net Profit attributable to ContourGlobal plc shareholders was $46.6m in the first half of 2020 corresponding to an Adjusted EPS of $0.07, compared to $0.05 in first half 2019

Dividend

● Today the Company declares a second quarterly dividend for 2020 of 4.0591 USD cents per share or $27m3, or 3.1077 pence per share, which will be paid on 25 September 2020 to shareholders on the register at 4 September 2020[5]

● Including today's announced dividend, a total of $260m has been returned to shareholders since listing

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

Outlook

We continue to expect 2020 Adjusted EBITDA to be between $710m and $745m for the full year.[6] 

Presentation and conference call

The Company will host a conference call for analysts and investors at 09.30 BST, 10 August 2020

The meeting can be accessed via a live webcast and dial-in, details available at https://www.contourglobal.com/investors

A copy of the presentation will be made available online ahead of the meeting on our website at https://www.contourglobal.com/investors 

Enquiries

Investor Relations - ContourGlobal

John Smelt - SVP, Investor Relations

Tel: +44 (0) 203 62690 47

Mob: +44 (0) 7500 129 218

john.smelt@contourglobal.com

Media - Brunswick

Charles Pretzlik/Simon Maine

Tel: +44 (0) 207 404 5959

Contourglobal@brunswickgroup.com

ADDITIONAL INFORMATION

PRINCIPAL RISKS AND UNCERTAINTIES

The Company has reassessed its principal risks in the light of the COVID-19 pandemic. The principal risks and uncertainties set out at the time of the Annual Report and Accounts 2019 (issued in April 2020) remain valid at the date of this report. The risk register will be subsequently updated for the year end. In summary, the principal risks include the impact of Governmental actions and regulations; Macroeconomic and political conditions, including pandemics; Operation and execution - project execution (CAPEX); Operation and execution - asset integrity (OPEX); Operation and execution - resources/climate change; Health, safety and environment (HSE) and food - prevention and regulation; Regulation and compliance - fraud, bribery and corruption; Information technology - cyber security and system integrity; and People and organization - key people (senior executive management) succession planning.

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events and their impact during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board,

Chief Executive Officer

Joseph C. Brandt

10 August 2020

Unaudited Interim Consolidated Financial Statements

CONTOURGLOBAL PLC and subsidiaries

As of June 30, 2020

aCONTOURGLOBAL PLC and subsidiaries

Statement of income and other comprehensive income

tement of income and other comprehensive income

ntCONTOURGLOBAL PLC and subsidiaries

Statement of income and other comprehensive income

CONTOURGLOBAL PLC and subsidiaries

Unaudited interim consolidated statement of changes in equity

CONTOURGLOBAL PLC and subsidiaries

lows CONTOURGLOBAL PLC and subsidiaries

The prior year comparative transactions with non-controlling interests have been restated to present separately the dividends paid to non-controlling interests, transactions with non-controlling interest holders, cash received and transactions with non-controlling interest holders, cash paid.

CONTOURGLOBAL PLC and subsidiaries

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 and Africa, and its registered office is:

7th FloorPark House116 Park StreetLondonEnglandW1K 6SS

Registered number: 10982736

ContourGlobal plc is listed on the London Stock Exchange.

The Group develops, acquires and operates wholesale electric power generation businesses on three continents. It focuses on both underserved or niche markets and developed markets but it evaluates projects based on individual merit and pursues 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 three broad geographic areas: Europe, Latin 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

General information

2. Basis of preparation

The condensed interim consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting". In accordance with IAS 34, interim financial information is prepared solely 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, 2020 and not duplicating the information previously published in the annual consolidated financial statements for the year ended December 31, 2019. Therefore, the condensed interim consolidated financial statements do not include all the information that would be required in complete consolidated financial statements prepared in accordance with the International Financial Reporting Standards ("IFRS") as endorsed by and adopted for use by the European Union (EU), IFRS Interpretation Committee (IFRS IC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. 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, 2019. 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, 2019, with the exception of changes in estimates that are required in determining the provision for income taxes. Taxes on income in the interim periods are accrued using the 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, 2019 and the risk related to Covid 19 pandemic, the Directors continue to adopt the going concern basis in preparing the condensed interim consolidated financial statements.

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:

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 season in the second part of the year) and for solar assets in Europe (higher irradiation in the second part of the year).

Changes in Accounting estimates and judgments

Impact of Covid-19:

The Company has considered the impact of the new coronavirus ('COVID-19' or 'the virus') on the financial statements for the period ended 30 June 2020. This analysis included the potential IFRS implications on non-financial assets, financial instruments, leases, revenue recognition, non-financial obligations, going concern and events after the reporting period.

As of 30 June 2020, the Company is experiencing no material operational or financial impact as a result of COVID-19. Action was taken early around critical spares and inventory to ensure continued reliability of operations. To date, the disruption in spares and supply chain has been insignificant.

The Company is not involved in the distribution of power and has limited exposure to merchant markets and energy pricing. The Company has not suffered any significant delay in payment from its off-takers as a result of the COVID-19 pandemic.

As a consequence, the Company sees no or limited impacts on the accounting judgments and estimates disclosed in 31 December 2019 financial statements due to Covid-19.

Other:

During the period ended 30 June 2020, the Company also analyzed the changes in the regulatory rules in Mexico, and concluded that those changes do not constitute an indication of impairment (impairment "trigger") as per IAS 36 as of June 30, 2020.

The Group will continue to monitor future changes in regulation in Mexico and the potential impact on its operations.

Restatements

The prior year comparatives have been restated in the balance sheet to further disaggregate certain line items:

- Trade and other receivables have been further disaggregated into trade and other receivables and current income tax assets. The sub totals current assets remain unchanged.

- Prior year comparatives have also been restated for further disaggregation in note 4.3 and 4.4.

CONTOURGLOBAL PLC and subsidiaries

Basis of preparation

3. Significant changes in the reporting period

3.1. 2020 transactions

The Group did not perform any transaction in the first half of 2020.

3.2. 2019 transactions

Sale of non-controlling interest which did not result in a change of control

Spanish CSP portfolio

In December 2018, the Group signed an agreement to sell 49% minority interest of the Spanish CSP portfolio with Credit Suisse Energy Infrastructure Partners for an amount of €134.2 million ($150.5 million). The sale closed on 20 May 2019 and the cash received amounted to €128.4 million or $144.0 million (net of €5.8 million or $6.5 million pre-closing distribution), €51.0 million ($57.1 million) was for the sale of shares and €77.4 million ($86.9 million) was for the sale of existing shareholder loans.

In line with IFRS 10 "Consolidated financial statements", this transaction is considered as an equity transaction as it does not result in a loss of control. Therefore, the net cash gain on sale of these assets, which represented an amount of €46.3 million or $51.9 million, was recorded as an increase in the equity attributable to owners of the parent, and reflected in Adjusted EBITDA as a gain in the period ended June 30, 2019. It corresponds to the difference between the consideration received for the sale of shares (€51.0 million or $57.1 million) and of the carrying amount of non-controlling interest sold (€4.7 million or $5.2 million).

Solar portfolio acquisition - Italy

In February 2019, the Group entered into an agreement for the acquisition of Interporto, a 12.4 MW Solar Photovoltaic portfolio in northern Italy.

This transaction closed on June 11, 2019. The total consideration amounted to €28.3 million ($32.0 million) including €21.1 million ($23.9 million) for the acquisition of 100% of the shares and €7.2 million (or $8.1 million) for the repayment of shareholders loans.

The Group and Credit Suisse Energy Infrastructure Partners have a 51% and a 49% interest in the shares of the acquired entity respectively, and have paid their share of the consideration.

On a consolidated basis, had these acquisitions taken place as of January 1, 2019, the Group would have recognized 2019 six-month consolidated revenue of $620.0 million and six-month consolidated net profit of $7.0 million.

Determination of fair value of assets acquired and liabilities assumed at acquisition date are:

From the acquisition date to December 31, 2019, this acquisition contributed to consolidated revenue and net result of $3.5 million and $0.2 million respectively.

Acquisition of two CHP plants in Mexico

On 6th January 2019, the Group signed an agreement to acquire two natural gas-fired combined heat and power ('CHP') plants, together with development rights and permits for a third plant, in Mexico from Alpek. The CHP plants have a gross installed capacity of 518 MW. The transaction closed on 25 November 2019.

The total consideration amounted to $814.5 million, including $232.0 million for the shares and $582.5 million for the plants' assets.

Since December 31, 2019 the final working capital adjustment has been reduced by $1.4 million impacting the total consideration by the same amount and the preliminary determination of the fair value of assets has been updated accordingly.

The acquisition generated a $77 million value added tax credit which was refunded in full in June 2020.

On a consolidated basis, had these acquisitions taken place as of January 1, 2019, the Group would have recognized 2019 six-month consolidated revenue of $748.4 million and consolidated net profit of $15.0 million.

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

Since December 31, 2019, the Group has updated the fair value of the assets acquired and liabilities assumed leading to the following adjustments:

- A $24.8 million deferred tax asset has been recognized on the $82.8 million fixed margin liabilities consistently with the Mexican tax rules, based on advice on tax deductibility from the tax advisors.

- The initial step up to the book value of the PP&E was reduced by $37.5 million and the corresponding deferred tax liability by $11.2 million.

After consideration of those adjustments, the updated fair value of assets acquired and liabilities assumed at acquisition date as of June 30, 2020 notably includes:

- An intangible asset of $232.5 million representing the fair value of the Legado rights based on an income approach based method.

- A financial asset of $12.9 million representing the tax savings asset (the "TSA") arising from the time value of the tax shield related to the accelerated depreciation of the plant assets allowed under Mexican tax regulations.

- A step-up to the book value of the PP&E of $157.2 million, as part of the allocation of the excess purchase price.

In 2020, the Group continues its assessment of the acquisition accounting and fair value of assets acquired and liabilities assumed, that will be completed before November 2020.

From the acquisition date to December 31, 2019, this acquisition contributed to consolidated revenue and net loss of $23.4 million and $11.3 million respectively.

CONTOURGLOBAL PLC and subsidiaries

Significant changes in the reporting period

4. Notes to the consolidated financial statements

4.1. Segment reporting

The Group's reportable segments are the operating segments overseen by distinct segment managers responsible for their performance with no aggregation of operating segments.

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 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 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"). 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 and specific items which have been identified and adjusted by virtue of their size, nature or incidence, 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 specific, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.

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. Finally, the Group considers that the presentation of 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 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, Spain and Ukraine)

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

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

(1) Corporate costs correspond to selling, general and administrative expenses before depreciation and amortization of $2.4 million (June 30, 2019: $2.4 million).

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

(3) Represents in 2019 the cash gain on the divestment of 49% stake of our CSP Portfolio in Spain and the adjustment to the earnout calculation on the divestment of 49% stake of our Italian and Slovakian solar portfolio.

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

(5) Represents the private incentive plan as described in note 4.26 share-based compensation plan of the annual accounts.

(6) Mainly reflects an adjustment to align the recognized earnings with the cash flows generated under finance lease and financial concession arrangements ($18.1 million) and cash flows generated by the CHP Mexico fixed margin swap agreement ($5.1m).

Cash outflows on capital expenditure

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:

(1) Revenue generated in 2020 in Bulgaria and Spain amounted to $207.7 million and $127.8 million respectively (June 30, 2019: $186.4 million and $169.8 million respectively).

(2) Revenue generated in 2020 in Brazil and Mexico amounted to $69.1 million and $98.8 million respectively (June 30, 2019: $71.7 million and nil respectively).

(1) Adjusted EBITDA generated in 2020 in Bulgaria and Spain amounted to $68.5 million and $89.3 million respectively (June 30, 2019: $62.5 million and $98.1 million respectively).

(2) Adjusted EBITDA generated in 2020 in Brazil and Mexico amounted to $43.2 million and $46.4 million respectively (June 30, 2019: $46.9 million and nil respectively).

4.2. Revenue

Revenue from power sales and Other revenue are recognised under IFRS 15 and total $613.5 million (June 30,2019: $542.6 million). Revenue from operating leases and revenue from concession and finance lease assets are recognised under IFRS 16 and IFRIC 12 respectively.

(1) 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 a power purchase agreement that is considered to contain a finance lease

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

The Group has one customer contributing more than 10% of Group's revenue.

4.3. Expenses by nature

(1) Emission allowances utilized corresponds mainly to the costs of CO2 quotas in Maritsa which are passed through to its offtaker, as well as changes in fair value of CO2 quotas in the period.

(2) Other expenses include facility costs of $6.2 million in June 30, 2020 (June 30, 2019: $6.5 million). In the current period, other expenses have been further disaggregated into transmission charges and other consumables and supplies. The comparatives have been restated accordingly

(1) Represents the private incentive plan as described in note 4.26 share-based compensation plan of the annual accounts.

The other operating income totals $3.7 million in June 30, 2020 (June 30, 2019 $3.5 million).

In the current period, the other operating income and the other operating expenses have been presented gross on the consolidated statement of income and other comprehensive income. The comparatives have been restated accordingly.

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

(1) The Group recognized a profit of $12.9 million in the six months ended June 30, 2020 in relation to its interest rate, cross currency, financial swaps, options, foreign exchange options and forward contracts (June 30, 2019: profit of $2.2 million) and a profit of $10.0 million in the six months ended June 30, 2020 in relation with settled positions (June 30, 2019: loss of $11.0 million). Change in fair value of derivatives relates primarily to interest rate swaps, options and forward contracts.

(2) Net change in fair value related to the CHP Mexico fixed margin liability.

(3) Unrealized foreign exchange differences primarily relate to loans in subsidiaries that have a functional currency different to the currency in which the loans are denominated.

(4) Unwinding effects mainly related to Maritsa debt to non-controlling interests and other long-term liabilities in the six months ended June 30, 2020 and 2019.

(5) Other mainly includes costs associated with other financing, finance costs of leases, as well as income and expenses related to interests and penalties for late payments.

In the current period, realized and unrealized foreign exchange differences gains and losses have been presented gross. The comparatives have been restated accordingly.

4.5. Income tax expense and deferred income tax

In the six months ended June 30, 2020, the tax charge amounted to $26.8 million compared to $17.2 million in the six months ended June 30, 2019. The increase in the tax charge between periods was mainly driven by the increase in profit before tax attributable to Mexico, which was not part of the group in the first six months of 2019, and the composition of the profit before tax across the group entities. In the first six months of 2020 only, the effective tax rate is also impacted by large foreign exchange movements in Mexico. In both periods, there were accounting losses in certain territories, for which deferred tax assets were not recognized and the tax charge was further impacted by Brazilian entities being taxed by reference to revenue rather than accounting profits.

4.6. 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.

(1) Project development costs in Kosovo have been reclassed to Other non current assets for $21.7 million as they relate to a receivable.

(2) Assets acquired through business combination relate to our Mexican CHP portfolio, detailed in note 3.2.

Construction work in progress as of June 30, 2020 predominantly related to our Vorotan refurbishment project, our Austria Wind project repowering, Bonaire and Maritsa plants.

As of June 30, 2020, the Other category mainly related to $59.0 million of instruments and tools, $45.6 million of facility equipment, $26.9 million of assets retirement obligations.

Depreciation included in 'cost of sales' in the consolidated statement of income amounted to $136.3 million in the period ended June 30, 2020 (June 30, 2019: $124.2 million) and depreciation included in 'selling, general and administrative expenses' amount to $2.4 million in the period ended June 30, 2020 (June 30, 2019: $2.5 million).

In period ended June 30, 2020, the Group capitalised $0.5 million borrowing costs in relation to project financing.

(1) With the implementation of IFRS 16 on 1 January 2019, right of use assets amounting to $31.0 million were recognized. The right of use assets mainly relates to office space and land.

(2) Assets acquired through business combination relate to an additional solar portfolio and the Mexican CHP acquisitions, detailed in note 3.1.

(3) The effect of change in classification of contract corresponds to the change in the Bonaire power purchase agreement, which resulted in the recognition of property, plant and equipment and the derecognition of a financial asset of the same value under IFRS 16.

(4) The Group decided to partially impair the project development costs related to our Kosovo project resulting in a charge of $12.1 million due to the uncertainties related to the continuation of the project; other property plant and equipment were also impaired resulting in a charge of $0.3 million.

Construction work in progress as of December 31, 2019 predominantly related to our Vorotan refurbishment project, our Austria Wind project repowering, Bonaire and Maritsa plants.

Other as of December 31, 2019 mainly relate to $61.4 of facility equipment, $60.9 million of instruments and tools, $33.6 million of project development costs, $18.0 million of assets retirement obligations. Project development costs mainly relate to the Kosovo project and are not depreciated.

Depreciation included in 'cost of sales' in the consolidated statement of income amounted to $255.1 million in the period ended December 31, 2019 (December 31, 2018: $229.4 million) and depreciation included in 'selling, general and administrative expenses' amount to $3.6 million in the period ended December 31, 2019 (December 31, 2018: $0.2 million).

In period ended December 31, 2019, the Group capitalised $0.5 million borrowing costs in relation to project financing.

4.7. 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, 2019. 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, 2019.

4.8. 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, financial swaps 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:

(1) Interest rate swaps - cash flow hedge mainly increased as a result from the valuation of the instrument related to the Mexican portfolio.

(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, 2020 amounts to $16.6 million (December 31, 2019: $14.8 million). Credit value adjustment amounts to $1.0 million as of June 30, 2020 and December 31, 2019.

(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. The BRL-denominated 2022 distributions have been hedged using a series of forward exchange contracts with a fair value of positive $0.3 million and maturity in December 2022 (2019: $1.8 million). The MXP-denominated distributions have been hedged using forward contracts that have been closed during the period ended June 30, 2020 (2019: $2.5 million). Hedge accounting is not applied to BRL/USD and MXP/USD foreign exchange forward contracts, change in fair value is therefore 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. The distributions expected in years 2020 and 2021 have been protected against material depreciation of the BRL using option contracts with fair values of asset $0.2 million and liability $0.7 million maturing in December 2020 and 2021 respectively (2019: $2.4 million and $2.9 million maturing in December 2020 and 2021 respectively). The Group has also executed an offset to protect the value, in USD terms, of the GBP-denominated expected repurchases under the share buy-back program with a fair value of $0.1 million maturing in September 2020. The Group additionally entered into an option giving us the possibility to enter into an underlying swap with the objective to protect us against changes on the interest rates over our financing projects with a fair value of positive $1.4 million and available until May 2021.

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

(6) CHP Mexico entered into fixed margin swap agreements with the Seller's affiliates in order to protect certain power purchase agreements against variations of the CFE tariffs. The fair value of the liability from those instruments was presented in Other non-current liabilities as of December 31, 2019 for a total amount of $82.8 million.Since the year-end, the Group has re-reviewed the terms of the instruments and determined that they should be classified as derivatives and not as other liabilities. However, the comparative as of December 31, 2019 has not been restated as the Group considers the change in classification to be immaterial to the users of the financial statements, in the context of the size of total non-current liabilities.

The notional principal amount of:

- the outstanding interest rate swap contracts and cross currency swap qualified as cash-flow hedge amounted to $1,213.9 million as of June 30, 2020 (December 31, 2019: $1,231.1 million).

- the outstanding foreign exchange forward and option contracts amount to $175.8 million as of June 30, 2019 (December 31, 2019: $251.4 million). The outstanding option giving us the possibility to enter into an underlying swap on our financing projects amounted to $200.0 million as of June 30, 2020.

- the swap on commodity related to our Mexican CHP amount to $3.5 million as of June 30, 2020 (December 31, 2019: $4.0 million).

The Group recognized in Finance costs net a profit of $65.9 million in the six months ended June 30, 2020 in relation to its interest rate, cross currency, financial swaps, options, foreign exchange options and forward contracts (June 30, 2019: profit of $2.2 million) and a profit of $10.0 million in the six months period ended June 30, 2020 in relation with settled positions (June 30, 2019: loss of $11.0 million).

4.9. 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, 2019 and June 30, 2020.

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, 2020 and December 31, 2019, we have measured these at level 2 in the fair value hierarchy with the exception of the debt to non-controlling interests and 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 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 December 31, 2019 of $53m is driven by the movement of market inputs, in particular the USD/MXN spot exchange rate, accounting for $48.3 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 increase/decrease by $13.9 million, (ii) for an increase/decrease of 5% in the Natural Gas cost, the fixed margin swap liability will decrease/increase by $5.7 million (iii) and for an increase/decrease of 25% in discount rates, the fixed margin swap liability will decrease/increase by $1.8 million, (iv) for an increase/decrease of 5% in the CFE tariff, the fixed margin swap liability will increase/decrease by $13.9 million.

4.10. Financial instruments by category

(1) These balances exclude receivables and payables balances in relation to taxes.

(2) Mexico CHP fixed margin liability, presented in other non current liabilities, for $82.8 million was reclassified in December 31, 2019 from "other financial liabilities at amortised costs" to "liabilities at fair value through profit and loss".

4.11. Equity

Share repurchases

On April 1, 2020, in accordance with the authorization of the Shareholders' Meeting of May 21, 2019, the Company implemented a share buyback programme of up to £30 million with an expiration date of June 30, 2020. The maximum number of shares that may be repurchased by the Company under this programme is 20 million, based on closing share price of 147 pence on 30 March.

On May 27, 2020, the General Shareholders' Meeting adopted a resolution renewing the authorizations granted to the Board of directors by the Shareholders' Meeting of May 21, 2019 to repurchase shares of the company..

During the period ended June 30, 2020, the Company repurchased 3,508,239 treasury shares at an average price of 155.9 pence per share for an aggregate amount of GBP5.5 million ($6.8 million).

As of June 30, 2020, the Company held 3,508,239 treasury shares, representing 0.52% of its share capital.

On June 30, 2020 the Company announced the continuation of the buyback programme from 30 June 2020 to 30 September 2020 for a maximum number of shares of 12,900,000, based on closing share price of 190 pence on 29 June 2020 and an initial programme of £30 million. Based on the Company's free float, the maximum number of shares which can be bought back is 5,300,000.

4.12. 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 $3,909.5 million in total as of June 30, 2020 (December 31, 2019: $4,135.7 million) primarily relate to the following:

(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.

(2) On 25th November 2019, the Group acquired a Thermal portfolio in Mexico representing a total of 518 MW, new debt was issued at acquisition due in 2026 with an outstanding nominal of $535.0 million at 31st December 2019. The loan bears an interest rate of LIBOR +2.5% maturing in 2026.

(3) On December 6, 2018, an agreement to sell a 49% minority interest of the Spanish CSP portfolio to Credit Suisse Energy Infrastructure Partners ("CSEIP") was signed (see note 3.1). Following the sell-down, 49% of the debt held in the project financing was transferred to a subsidiary of the acquiring entity ("CSEIP").

(4) Debt to affiliate Credit Suisse Energy Infrastructure Partners ("CSEIP") as a result of the agreement to sell 49% minority interest of the Spanish CSP portfolio (see note 3.1 and (3) above). The facility bears a fixed rate of 5.8% and 6.7% maturing in 2026 and 2038.

 (5) On June 20, 2019, ContourGlobal Mediterraneo S.r.l. entered into a €196.0 million facilities agreement with Banco BPM S.p.A., Bayerische Landesbank Anstalt des öffentlichen Rechts, BNP Paribas, Italian Branch, Crédit Agricole Corporate and Investment Bank, Société Générale, Milan Branch and UBI Banca S.p.A. (the "Mediterraneo Facility"), refinancing all the existing Italian Solar Plants facilities. The Facility bears interest at EURIBOR 6-month plus 1.70% per year and matures on December 31, 2030.

(6) Taxa de Juros de Longo Prazo ("TJLP") represents the Brazil Long Term Interest Rate, which was approximately 4.94% at June 30, 2020 (December 31, 2019: 5.57%).

(7) On February 25, 2020, the group signed a loan agreement to refinance our Austria Wind portfolio. The new loan agreement was issued for €35.9 million bearing a rate of 6M EURIBOR + 1.55% maturing in 2033.

(8) On January 26, 2019, the group signed a loan agreement to refinance our Solar Slovak portfolio. The new loan agreement was issued for €51.1 million bearing a mix of fix rate of 0.161% + 1.4% with a variable part bearing a rate of EURIBOR 6M +1.4% maturing in 2025.

(9) In August 2019, the group repaid in full its debt in ContourGlobal Bonaire.

There are no changes to debt covenants, restrictions and securities given as compared to those disclosed in the consolidated financial statements for the year ended December 31, 2019, with the exception of those related to a new loan facility on Austria Wind and a Letter of Credit facility on CG Power Holdings signed in 2020 with no amounts outstanding as of June 30, 2020.

4.13. Financial commitments and contingent liabilities

ContourGlobal plc has 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, 2019. Since December 31, 2019, the status of our contingent liabilities has not changed.

4.14. Guarantees and letters of credit

As of June 30, 2020, there have been no significant additional guarantees and letter of credits as compared to those disclosed in the consolidated financial statements for the year ended December 31, 2019.