IGAS.L Regulatory News (IGAS)

29 Jun 2007 08:30

KP Renewables PLC29 June 2007 FOR IMMEDIATE RELEASE 29 June 2007 KP Renewables Plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 CHAIRMAN'S STATEMENT Shareholders will already be aware that the year to 31 December 2006 was aparticularly difficult one for the company. As I explained in my InterimStatement for the period to 30 June 2006, refinancing problems that arose duringthe year led to the suspension of the company's shares and eventually to seriousquestions as to whether the company could survive. As a result, it was decidedthat the only way to retain some residual value and some hope of future recoveryfor creditors and shareholders was to put the company through a CompanyVoluntary Arrangement ("CVA") and to restructure and refinance the company onthat basis. The terms of the CVA and refinancing were outlined in my Interim Statement andmore fully set out in the Circular to Shareholders dated 16 March 2007. I ampleased to report that the CVA was approved by creditors and shareholders and,following the restructuring of the company's share capital, a placing took placethrough which £750,000 was eventually raised, as opposed to £575,000 asindicated in the Interim Statement. As a result, the company is now able to revive its business plan, seek toresuscitate existing projects and to identify new opportunities principally inthe renewable energy field, albeit at this stage at a relatively low-key level.The company continues to have the benefit of an experienced team with strongconnections in the renewables field, both at Board and consultants' level, andis confident of identifying new and viable businesses and projects in the comingmonths. The Board believes that, with increasing interest in this sector andwith the help of advisers and brokers, the company will be in a good position toraise the necessary finance as and when such viable propositions are identified. I should meanwhile explain in greater detail the background and reasons for theproblems experienced in 2006. Good progress was made in the early months of theyear in terms of identifying suitable opportunities for investment anddevelopment, and the company entered into a number of significant developmentagreements. The Chief Executive's Report for the year to 31 December 2005identified a range of potentially large and exciting projects in which thecompany was involved. However, it was also made clear that progressing theseopportunities would require additional financing and that this was beingactively sought at the time of the announcement of the 2005 results in June2006. The company's development programme was in fact severely restricted byshortage of funds. As I explained in the Interim Statement, this was in largepart attributable to the illness and subsequent death of the company's founderand Chief Executive Officer, Dr James Watkins, who had been leading the fundraising efforts. The Board remained hopeful that the company could generate value from itsportfolio of projects while continuing negotiations for the injection of newcapital. However, in the absence of new investment, the Board concluded thatthere were insufficient resources to devote to these projects to bring them tofruition. Indeed, the financial uncertainties surrounding the company were suchthat, on 21 September 2006, the Board requested that the company's shares be suspended from trading onAIM pending a decision on refinancing. In the months following the suspension, the Board, with the active assistance ofits advisers, conducted a review of all the available options, including thesale of the company's interest in certain projects and further negotiations fornew investment, and concluded that the only route forward for creditors andshareholders was to propose a CVA as referred to above, whereby the creditors ofthe company would be asked to materially compromise the amounts owed to eachand, conditional on the creditors agreeing to be so compromised, to raise newequity capital. The creditors and shareholders of the Company approved the proposed CVA, whichwas put to them on 10 April 2007. Under the terms of the CVA, creditors will nowreceive either a payment of 4p in the £ in cash or, at the option of individualcreditors, a cash payment of 2p in the £ plus an allotment of shares to theequivalent value of 2p in the £. As I explained in my Interim Statement, thosecreditors of the Company who elected for the cash and shares option are entitledto 60% of any net proceeds which may flow from the existing portfolio ofprojects over a three year period on a pro rata basis, subject to a maximum of100% of each creditor's CVA claim. Further to the approval of the CVA, the company completed a placing to raise£750,000. The details of the reorganisation of the share capital and the placingwere given in my Interim Statement and are summarised in the Post Balance SheetEvents note in these accounts. The placing was effected at 1p per share in theconsolidated form, resulting in the issue of 75,000,000 shares. After takingaccount of the issue of a further 6,500,000 in settlement of related costs, thenumber of shares in issue is 83,829,483. The results for the period under review, which reveal a loss before tax of£2.88m, are largely of academic interest in view of the events described above.The loss was exacerbated by the need to make a charge of £1.1m against assetsthat the Board considered no longer had any value. This charge principallyrelated to pre-payments made in respect of the Power Purchase Agreements("PPAs") referred to in the Chief Executive's Report for the year ended 31December 2005. In view of the fact that two of the PPAs expired during 2006 andthe remaining one contained provisions for cancellation in the event of acompany administration and in any case would require substantial investment wellbeyond the level now or at any time available to the Company, it was thoughtappropriate to make a full provision against the carrying value of the PPAs andthe related intangible asset. David Lloyd-Jacob, Stephen Drummond and Paul Goodrow resigned as directorsshortly before the events described above. I am pleased to inform you that PeterRedmond and Richard Armstrong, who advised the company on its reorganisation andassisted in the fundraising, joined the Board on completion of the steps takento place the company on a firmer footing. Mr Redmond and Mr Armstrong both haveextensive experience in the small cap sector of AIM and have particularexperience in restructuring and relaunching smaller quoted companies that havefallen into difficulties. I am pleased to report that Dr David Lindley, who haswide experience and expertise in the renewables sector, will remain on the Boardand I will continue as Chairman. The company will continue to operate in the renewable energy sector and theimmediate priority of the Board will be to attempt to crystallise value fromsome of the existing projects in a cost effective manner. There is a portfolioof eight biomass and thirteen wind projects where the Company had entered intodevelopment agreements. The company is reviewing these projects to establishwhether they can be profitably revived. Although it is too early to comment indetail, the Directors are confident that some of them will in due course bearfruit. It has always been part of the company's strategy to develop certainprojects to a point where they could be "sold on" and this in the short termwill continue, both in relation to existing projects and in relation to certainnew projects that the Directors are beginning to investigate. While thecompany's business will initially be limited in scale, it is likely to be inshareholders' best interests for consideration to be given either to asignificant further fund raising to support investment in a sizable project orto the acquisition of another larger business. The Directors will be activelyconsidering these alternatives in the coming months. To all intents and purposes, the company has now been relaunched and your Boardhopes to build some value both for previous and for new shareholders.Accordingly, the Directors will propose a change of name to Clear Skies EnergyPlc at the forthcoming Annual General Meeting of the company, a notice of whichis enclosed with these accounts. I would like to take this opportunity to thank shareholders for their continuedsupport. The Board is confident that it will now be able to progress thedevelopment of the business of the company, building on the stability achievedin recent months. John BryantChairman 28 June 2007 Contacts:KP Renewables PlcJohn Bryant, Chairman Tel: 0776 888 8359 Merchant Capital LimitedPeter Redmond Tel: 020 7332 2200 CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2006 2006 2005 £ £ Administrative expenses and operating loss 2,876,102) (1,968,099)Investment income 10,023 30,267Interest paid - (1,548) ---------- -----------Loss for the year (2,866,079) (1,939,380) ========== ===========Loss per share 6.15p 4.46p ========== =========== CONSOLIDATED BALANCE SHEETAs at 31 December 2006 2006 2005 £ £ASSETS Non-current assetsGoodwill - -Investment on product development - 217,796 -------- ----------- - 217,796 -------- -----------Current assetsProject development costs 13,505 -Trade and other receivables 38,380 1,023,974Cash and cash equivalents 12,436 1,100,181 ---------- ----------- 64,321 2,124,155 ---------- ----------- Total assets 64,321 2,341,951 ========== =========== EQUITY AND LIABILITIES Share capital 465,897 465,897Share option reserve 244,000 244,000Share premium 3,734,347 3,734,347Accumulated losses (5,026,410) (2,160,331) ---------- -----------Total equity (582,166) 2,283,913 ---------- -----------Current liabilitiesTrade and other payables 646,487 58,038 ---------- -----------Total equity and liabilities 64,321 2,341,951 ========== =========== CONSOLIDATED CASHFLOW STATEMENTAs at 31 December 2006 2006 2005 £ £ Net cash flow from operating activitiesCash flow from operating activities (2,658,306) (1,362,104)Interest paid - (1,548) --------- ----------- (2,658,306) (1,363,652)Movement in working capitalIncrease in project development costs (13,505) -Decrease in receivables 985,594 (315,754)Increase in payables 588,449 (78,622) --------- -----------Net cash used in operating activities (1,097,768) (1,758,028) ========= ===========Cash flows from investing activitiesInterest received 10,023 30,267Acquisition of subsidiary - - --------- -----------Net cash from investment activities 10,023 30,267 ========= ===========Cash flows from financing activitiesLoan from parent - (20,000)Proceeds from issue of share capital - 2,837,202 --------- -----------Net cash from financing activities - 2,817,202 ========= ===========Net decrease in cash (1,087,745) 1,089,441 Cash and cash equivalents at beginning of 1,100,181 10,740year --------- -----------Cash and cash equivalents at end of year 12,436 1,100,181 ========= =========== Notes to the Financial Statements 1. Basis of Preparation The financial information set out above does not constitute the Company'sstatutory accounts within the meaning of section 240 of the Companies Act 1985.The balance sheet at 31 December 2006 and the profit and loss account and cashflow statement for the year then ended have been extracted from the Company'saudited financial statements. The auditors report on those financial statementsis unqualified and does not contain statements under sections 237(2) or (3) ofthe Companies Act 1985. 2. Taxation No charge to taxation arose due to the losses incurred during the year. At 31 December 2006, the group had a deferred tax asset (using a tax rate of30%) of approximately £1,500,000, (2005 - £648,000) in respect of unused taxlosses. In view of the fact that the group currently has limited incomegenerating activities the directors do not consider it appropriate to recognisethis asset. 3. Loss per Share 2006 2005Loss for the financial yearattributable to ordinary shareholders £2,866,079 £1,939,380 Basic losses per share 6.15p 4.46p Basic losses per share has been calculated by dividing the loss for thefinancial year attributable to shareholders by 46,589,663 being the weightedaverage number of shares in issue during the year (2005 - 43,524,396). Theimpact of shares held in option schemes has not been disclosed as this would beanti-dilutive. 4. Publication of Accounts The financial statements will be posted to the Registrar of Companies andshareholders today. Copies will also be available from the Company's registeredoffice: Aldermary House, 10-15 Queen Street, London EC4N 1TX. This information is provided by RNS The company news service from the London Stock Exchange