LEAF.L Regulatory News (LEAF)

RNS Number : 8467S

Leaf Clean Energy Company

17 September 2010

 

 

 

 

17 September 2010 Leaf Clean Energy Company

Results for the year ended 30 June 2010

 

 

The Board of Leaf Clean Energy Company ("Leaf" or "the Company") are pleased to announce the Company's audited results for the year ended 30 June 2010

 

Highlights of the year are:

 

·; The Company's NAV per share is 167.65 cents or 112.06 pence at US$1.4961 to the GB£1 (2009: 170.67 cents)

 

·; The net asset value of the Company as at 30 June 2010 is US$240 million of which US$90 million was held in cash, of this figure, US$22 million is committed to portfolio companies. The Board is of the view that the balance of US$68 million is sufficient to meet the Company's working capital requirements and any short term investment requirements in its portfolio companies for the foreseeable future

 

·; Leaf Clean made an additional US$39 million in direct equity and debt investments into existing portfolio businesses.

 

·; The Company earned US$4.6 million of interest income which was recorded in the intermediate holding companies and included in the assessment of valuations for the relevant subsidiaries. In addition, the Company and its intermediate holding companies received US$19.8 million of principal in respect of its outstanding construction and convertible loans to its portfolio companies (US$19 million direct to the Company).

 

·; In April 2010 the Company completed a reverse auction tender offer acquiring 31.05 million shares at an average price of 57.06p.

 

·; In May 2010, Leaf Clean Energy Company terminated its Asset Advisory Agreement with EEA Fund Management Limited, and established its own subsidiary, Leaf Clean Energy USA, LLC ("Leaf USA"), in Washington, DC, from which the Company's internal management team will operate going forward.

 

 

 

 

 

For further information, please contact: 

 

 

Bran Keogh +1 (0) 202 289 7881 Director, Leaf Clean Energy Company

Jim Potochny +1 (0) 202 289 7881 CFO, Leaf Clean Energy Company

Ivonne Cantu / Elizabeth Bowman +44 (0) 207 397 8900 

Cenkos Securities plc

 

 

 

 

 

 

 

 

CHAIRMAN'S STATEMENT

I am pleased to report to shareholders on the activities and performance of Leaf Clean Energy Company ("Leaf Clean" or the "Company") during our last fiscal year. This report coincides with a period of considerable activity for Leaf Clean which was marked by several significant events for our Company including: the unsuccessful proposed merger with Trading Emissions plc ("TEP") which was discussed in our most recent Interim Report, the termination of our Asset Advisory Agreement with EEA Fund Management Limited ("EEA") and certain organisational changes that culminated in the establishment of an office and management team based in Washington D.C. to solely focus on managing the Company's investment portfolio. As a consequence, we enter this period with renewed strength and confidence that your Company will be able to better manage its portfolio and maximise value for shareholders.

 

In May 2010, the Company agreed with EEA Fund Management Limited ("EEA") to terminate the current Asset Advisory Agreement and migrate to an internal management structure which the Board believes will result in operational and financial efficiencies for Leaf Clean. This reshaping was driven by the need of your Company to augment the depth of Leaf Clean's operational expertise in the management of its portfolio as well as to counteract certain shortcomings incurred under the previous management arrangements. It is expected that the capabilities that have been built will positively impact our business. As of the date of this report, the unwinding of the Asset Advisory Agreement has been substantially completed. Bran Keogh, who was appointed by the Board as executive director in February of this year, is overseeing this transition and the recruitment by Leaf Clean of a new management team that reports to the Board. The new management team has a proven track record and the requisite operational expertise to enable Leaf Clean to continue its progress towards the Company's long-term objective of driving Leaf Clean's assets to maturity and successful realisations.

 

During the year, our portfolio investments continued to display satisfactory progress across a number of different fronts. In particular, since the recent management transition, I am delighted to be able to share with you the progress that your Company has achieved in its core areas of activity:

 

§ Rabun Gap, one of our biomass holdings, completed its project financing in June 2010, returning US$17.5 million in capital to the Company. This was done through a favourable low-interest loan from the United States Department of Agriculture's Rural Utility Service.

 

§ Vital Renewable Energy Company ("VREC"), a biofuels production platform company focused on Brazil, is currently in the process of finalizing on an acquisition prospect. Upon the closing of the acquisition, Leaf Clean's capital commitment to VREC will be restructured and the Company will be released from US$29 million of its total US$50m commitment.

 

§ SkyFuel, our concentrated solar power investment, recruited a seasoned industry executive to run the company and has made significant progress in its efforts of commercializing its products.

 

§ New management contracts for our two biomass holdings were negotiated and an established operations, maintenance and asset management firm has been retained to run both businesses. The Company is confident this change will result in the best possible return on our investment.

 

Notwithstanding the aforementioned progress, our portfolio has not been immune to the uncertainty surrounding the broader macro-environment and subdued equity market conditions. Not surprisingly, this environment has had an impact on the value of your Company's portfolio. During the year to 30 June 2010, Leaf Clean's net asset value ("NAV") per share fell from 170.67 cents to 167.65 cents. This decline in our NAV per share is mainly the result of a reduction in valuation in our portfolio as the economic environment deteriorated combined with a reduction in cash from one off expenses incurred relating to the termination of the asset advisory agreement with EEA and the unsuccessful merger. However, these two factors were mostly offset by the buyback activity undertaken by the Company and the resulting uplift in our NAV per share. During the year the Company bought back 40.73 million shares at an average price of 58 pence per share.

 

Despite the challenging environment, we remain confident that our portfolio will be positioned to perform well as market fundamentals improve and will benefit from the new efficient management structure. The net asset value of your Company as at 30 June 2010 is US$240 million of which US$90 million was held in cash, of this figure, US$22 million is committed to portfolio companies. The Board is of the view that the balance of US$68million is sufficient to meet the Company's working capital requirements and any short term investment requirements in its portfolio companies for the foreseeable future.

 

Leaf Clean management is focused on the long-term development of its portfolio. Against that background, this period saw Leaf Clean investing an additional aggregate US$39 million in its existing portfolio companies. Your Company will continue to be very selective in undertaking new investment programs but remain active and diligent in its engagement with current portfolio companies.

 

As we look to the year ahead and our prospects, it is useful to consider the major policy developments of the past twelve months. As expected, there was no firm international agreement reached at Copenhagen. However, several key participants, including the U.S. and China, have made significant political and financial commitments towards implementing emissions reductions programs. The U.S. federal government continues to champion numerous initiatives by providing national tax incentives and grants for renewable energy development that have yielded positive developments across the sector. Leaf Clean has been the recipient of U.S. stimulus dollars through the American Recovery and Reinvestment Act (ARRA) Investment Tax Credit cash grant program. The additional funding our portfolio companies have received from these programs has been instrumental to our biomass projects and the creation of sustainable employment in economically challenged areas, a major part of the legislative intent. Hope runs high that the U.S. economy, in particular the clean energy sector, will continue to realise the benefits from favourable fiscal and monetary policy in the coming year. Your Board believes that Leaf Clean stands well positioned to take advantage of such developments.

In addition to changes on the regulatory front, we are also comforted by the emerging activity in the capital markets over the second half of this period. Although activity across capital markets was muted for much of the first half of this period, IPOs and merger and acquisition (M&A) activity in the renewable energy sector has picked up. Six U.S. cleantech IPOs have successfully commenced trading between January and June of 2010 and the U.S. cleantech IPO backlog appears to show signs of momentum and positive sentiment. This is certainly an encouraging trend for your Company.

 

Whilst there is no question that the last twelve months have been eventful for Leaf Clean, and the operating environment remains challenging, there are signs that confidence may slowly be returning to the economies and sectors on which Leaf Clean focuses. In addition, I am encouraged by the rebuilding and refocusing efforts undertaken by your Company and the steps that have been taken by your Board to develop the Company for the longer term and build further value for shareholders. Your Board and management remain fully committed to their ultimate objective of driving shareholder value.

 

The Annual Report and Accounts set out below incorporate both financial statements for the Company and consolidated financial statements for the wider Leaf Clean Group. References to NAV in my report and the Management Report reflect the Company's NAV. The audit opinions for both the Company and the Leaf Clean Group were unqualified.

 

 

 

 

Peter Tom

Chairman

17 September 2010

 

 

 

(1) Based on US$/£ exchange rate of 1.4961 on 30 June 2010

 

 

 

 

 

 

 

 

 

MANAGEMENT REPORT

 

The period under review has been a challenging one. A less than robust macro environment, limited availability of credit and liquidity and declining equity markets have imposed a difficult operating environment for Leaf Clean and its portfolio companies. During this period, Leaf has embarked upon a number of organisational initiatives in an effort to improve and build a platform to address Leaf Clean's needs particularly as it relates to operational capabilities and resources available to its portfolio. Management has made significant and positive progress towards this goal and remains confident that its organisational development objectives will be achieved.

 

Although numerous opportunities were carefully reviewed, Leaf Clean has remained focused on driving the performance of its existing investment portfolio to ensure that these businesses are well positioned to execute on their business plans. Performance across the portfolio has generally been positive. The Company's net asset value at 30 June 2010 was US$240 million, of which US$90 million was held in cash, and the NAV per share was 167.65cents or 112.06 pence. For the period under review, it's worth highlighting several noteworthy events;

 

·; Leaf Clean made an additional US$39 million in direct equity and debt investments into existing portfolio businesses.

 

·; The Company earned US$4.6 million of interest income which was recorded in the intermediate holding companies and included in the assessment of valuations for the relevant subsidiaries. In addition, the Company and its intermediate holding companies received US$19.8 million of principal in respect of its outstanding construction and convertible loans to its portfolio companies (US$19 million direct to the Company).

 

·; On 17 December 2009 the Company agreed to a merger with Trading Emissions plc, which was not finalized despite in excess of 90% of Leaf shareholders voting in favour.

 

·; In April 2010 the Company completed a reverse auction tender offer acquiring 31.05 million shares at an average price of 57.06p, taking advantage of the weakness in the Company's share price to deliver value to shareholders.

 

·; In May 2010, Leaf Clean Energy Company terminated its Asset Advisory Agreement with EEA, and established its own subsidiary, Leaf Clean Energy USA, LLC ("Leaf USA"), in Washington, DC, from which the Company's internal management team will operate going forward.

 

Market Environment

Leaf's fiscal year ending 30 June 2010 was marked by a partial rebound of the renewable energy industry from the severe decline experienced during the first calendar quarter of 2009. Global recession resulting from the banking crisis of late 2008 has been characterized by the drying up of credit markets, a swing towards much more conservative, risk-averse investor sentiment and the effective closing of public equity markets. In the US, renewable energy related stimulus from the American Recovery and Reinvestment Act (ARRA) began to flow in late 2009, providing clean energy companies with access to tax credits, grants in lieu of tax credits, government loans, and government loan guarantees, which in turn made it easier for some of these companies to access commercial debt and equity financing, and contributed greatly to the partial rebound experienced in late 2009 and early 2010.

In the public markets, prices of renewable energy companies, as measured by the NEX index, have recovered significantly from their Q1 2009 lows, but remain at only about half of their late 2007 highs. The decline in public market valuations for renewable energy companies has in turn put pressure on private company valuations, including the prices for many businesses comparable or related to Leaf Clean's portfolio companies.

Financial Performance

 

Leaf Clean's results for the year were negatively affected by write-downs with respect to certain portfolio companies and nonrecurring expenses associated with the termination of the asset advisory agreement with EEA and the unsuccessful merger. Performance was favourably impacted by Leaf Clean's share buyback programme which took advantage of the Company's weak share price over the last 9 months to deliver value to shareholders.

 

Overall, despite the decline in equity markets, the NAV per share of the Leaf Clean portfolio has remained largely unchanged, mainly due to the Company's buyback programme. The Company's total NAV is US$240 million, of which US$90 million was held in cash and US$159 million in investments. The Company's NAV per share is 167.65 cents or 112.06 pence at US$1.4961 to the GB£1 (2009:170.67 cents).

 

Against the backdrop of the recent economic and market environments the Company has sought to structure its investments in order to provide an income stream and to offer downside protection for the Company while reserving the opportunity to benefit from the equity upside. As a result, the Company earned US$ 4.6million in interest from investments in portfolio companies over the period. Throughout the past year, the Leaf Clean portfolio has benefited greatly from US government stimulus and other programs for renewable energy. For example:

 

·; Miasolé was allocated a US$102 million tax credit under the very competitive US federal Advanced Energy Manufacturing Tax Credit program, which awarded US$2.3 billion in tax credits to only 183 US clean energy companies. Miasole can use this credit to offset future federal income taxes. 

·; Multitrade Rabun Gap and Multitrade Telogia received ITC Grants of US$8.5 million and US$3 million, respectively, under ARRA's Federal Business Energy Investment Tax Credit program. 

·; Multitrade Rabun Gap received a US$20.7 million favourable fixed-rate loan under the USDA's Rural Utilities Services (RUS) loan program.

Other key performance milestones achieved by Leaf Clean Energy and its portfolio companies during the past year included:

·; Despite the difficulties of the current credit markets, Invenergy continued to advance the conversion of its project pipeline, closing three new project financings in 1H calendar 2010. Invenergy has become the largest independent wind developer in the United States, having placed 23 wind generating facilities with an aggregate generation capacity of over 2,000 MW into operation in North America and Europe. Another 450 MW of Invenergy projects are currently under construction and nearly 100 projects are in active development in the United States, Canada and Europe. 

·; Miasolé announced that the U.S. Department of Energy's National Renewable Energy Laboratory (NREL) had independently confirmed the 14.3% efficiency of its large area production modules. This world record for highest efficiency of commercial scale thin-film solar modules will allow MiaSolé to offer solar modules with the efficiency of polysilicon and the lower manufacturing costs of thin-film modules. Also, Miasolé's photovoltaic modules achieved Underwriters Laboratories, Inc (UL) and International Electrotechnical Commission (IEC) milestones, becoming the first CIGS thin-film producer to have its modules certified to the three most critical certification standards.  

·; Upon the closing of an acquisition transaction currently in progress, Leaf Clean's investment in VREC will be restructured and Leaf Clean will be released from its commitment to provide US$29 million of additional capital to VREC. 

·; SkyFuel hired a seasoned industry executive as its new CEO, who was formerly CEO of Chemrec AB and division president at Siemens Building Technologies. During the past year, SkyFuel also completed its commercial demonstration facility at the SEGS-II solar facility in Daggett, California.  

·; Multitrade Rabun Gap achieved its Commercial Operations Date on January 28, 2010. 

·; MaxWest's new management team completed the relocation and consolidation of its headquarters from Houston, Texas to Sanford, Florida.

 

During the period under review, Leaf Clean has not made any investments in new companies or projects. However, Leaf Clean management continues carefully to assess and consider new investment opportunities, while focusing in the short term on the management and appropriate financing of its existing portfolio, and on its transition from a third-party asset-advisory structure to reliance on an internal management team.

 

Leaf Clean's management believes that the diversity and balance of the Leaf Clean portfolio position the Company to benefit from eventual improvements in the current economic environment and the expected resurgence of the market forces driving growth in the renewable energy sector.

 

Portfolio Overview

 

A. Active Investments - Growth Companies

MaxWest Environmental Systems ("MaxWest") Waste-to-energy gasification

Investment: US$20mm

Ownership: Majority

Company Summary   MaxWest designs, builds, owns and operates waste to energy gasification facilities specifically applied to wastewater solids.   MaxWest plants can be "bolt-on" to existing water treatment facilities providing municipalities and industrial sites with a cost effective, environmentally friendly alternative to traditional methods of waste disposal.   Its first project has been successfully constructed in Sanford, Florida for the local municipal water treatment plant and operates under a long term contract.     www.maxwestenergy.com

Recent Highlights   § New management team appointed led by Ross Patten as CEO to embark in commercial expansion.   § Completed relocation and consolidation of headquarters and operations to Sanford, Florida

 

SkyFuel Inc. ("SkyFuel") Concentrated Solar Power

Investment: US$18.5mm

Ownership: Significant stake

Company Summary   SkyFuel was founded in 2007 and is an emerging technology leader in the solar thermal power equipment sector.   SkyFuel is one of the few remaining stand-alone concentrated solar power ("CSP") technology providers.   SkyFuel possesses proprietary and patented technologies which provide a meaningful cost advantage relative to its competitors   § SkyTrough® - an advanced, low-cost, accurate parabolic trough based on ReflecTech®, and   § ReflecTech® Mirror Film - a shatterproof glass alternative                       www.skyfuel.com

Recent Highlights   § Independent third-party validation of SkyFuel technology and performance received (August 2010)   § Recruited a seasoned industry executive as CEO who was formerly CEO of Chemrec AB and division president at Siemens Building Technologies   § Strong CSP market developments   § Awarded US Department of Energy ("DOE") grant to develop advanced high-concentration parabolic trough collector (May 2010)   § Commissioning completed on SkyTrough commercial installation at Sunray Energy plant (February 2010)   § ReflecTech technology selected by the US DOE for a US$750,000 manufacturing tax credit (January 2010)   § Construction completed on SkyTrough commercial installation at Sunray Energy plant (December 2009)   www.skyfuel.com/#/NEWS/

 

B. Active Investments - Projects

Johnstown Regional Energy, LLC ("JRE") Landfill Gas

Investment: US$28.4mm

Ownership: Wholly owned

Company Summary   JRE owns and operates three high-Btu landfill gas-to-methane projects in Pennsylvania.   JRE extracts raw landfill gas that is subsequently cleaned in advanced technology processing plants and sold to utility gas providers via connecting pipelines as an alternative to fossil based natural gas.   The high quality "green" gas ultimately displaces the use of fossil fuel-based natural gas, making it eligible for renewable energy credits (RECs).         www.jreenergy.com

Recent Highlights   § Appointed an established operations, maintenance and asset management firm to manage the project   § Adversely affected by significant drop in level of gas prices

 

Multitrade Rabun Gap ("Rabun Gap") Wood-fuelled biomass

Investment: US$13.0mm

Ownership: Majority

Company Summary   Rabun Gap is a 20MW capacity wood-fuelled bio-mass facility in Georgia.   Rabun Gap utilises renewable fuel from the local forest industry and sells power to a Georgia co-operative under a long-term power purchase agreement.

Recent Highlights   § Achieved commercial operations in January 2010   § Appointed an established operations, maintenance and asset management firm to manage the project   § Received an ITC grant of US$8.5mm under ARRA's Federal Business Energy Investment Tax Credit Program in May 2010   § Received a US$20.7mm favourable fixed-rate loan under the USDA's Rural Utilities Services (RUS) loan program in June/ July 2010

 

Multitrade Telogia ("Telogia") Wood-fuelled biomass

Investment: US$10.7mm	Ownership: Majority
Company Summary   Telogia is a 14 MW capacity wood-fuelled bio-mass facility in Telogia, Florida.   Telogia utilises renewable fuel from the local forest industry and sells power to a local co-operative under a long-term power purchase agreement.	Recent Highlights   § Achieved commercial operations   § Qualified for and received Federal ITC grant in the amount of approximately US$3.0 million, which was used to pay part of the Leaf construction loan   § Appointed an established operations, maintenance and asset management firm to manage the project

 

 

Vital Renewable Energy Company ("VREC") Biofuels - Ethanol

Investment: US$20.9mm	Ownership: Significant stake
Company Summary   VREC is a renewable energy company focused on the development of sugar cane based ethanol facilities and electricity generation in Brazil, as well as related infrastructure projects.     www.vrec.com.br	Recent Highlights   § VREC is currently in the process of finalizing on an acquisition prospect   § Upon the closing of the acquisition prospect, Leaf Clean's investment commitment will be restructured down from US$50m to US$21m.

 

Energia Escalona ("Escalona") Hydro

Investment: US$20.9mm	Ownership: Majority
Company Summary   Escalona is a run of the river 9.3MW hydroelectric project in Veracruz, Mexico.	Recent Highlights   § The project suffered substantial delays as a result of difficulties with the EPC contractor and other vendors. These issues persist.   § The project is on hold until receipt of an extension to the water concession.

 

C. Passive Investments

Invenergy Wind LLC ("Invenergy") Wind Power

Investment: US$40.0mm	Ownership: Minority
Company Summary   One of the largest independently-owned wind energy operators and developers in North America, having placed nearly 2,000 MW into operation since 2004.   In addition to its large portfolio of operating assets, Invenergy also has a strong and diversified pipeline of wind power projects in advanced stages of development across North America and Europe.       www.invenergyllc.com	Recent Highlights   § Successfully completed several project financings for projects expected to be operational in 2010   § Completed construction of Beech Ridge project, continues to augment size of its installed capacity   § Secured PPA contracts with TVA for 600 MW of wind projects   www.invenergyllc.com/news.html

 

Range Fuels Inc Biofuels - Cellulosic Ethanol

Investment: US$20.0mm

Ownership: Minority

Company Summary   Range Fuels Inc is a cellulosic ethanol technology and production company, which utilises a proprietary two-step thermo-chemical conversion process to produce ethanol, methanol, and other fuels that are renewable, sustainable, and eco-friendly, from cellulose-based biomass, including waste materials and non-food sources.   Range Fuels' business model is to design, build, own and operate its plants.     www.rangefuels.com

Recent Highlights   § Soperton is commissioned and company commences production of cellulosic methanol   § Range Fuels closes on US$80 mm loan from USDA   § The U.S. ethanol sector remains under significant pressure       www.rangefuels.com/news-highlights.html

 

 

Miasole Solar PV

Investment: US$15.0mm

Ownership: Minority

Company Summary   Miasole develops and manufactures thin-film copper-indium-gallium-diselenide (CIGS) solar photovoltaic cells   Miasole's panels are designed to be used in residential, commercial and utility developments   Miasole utilises a differentiated vacuum deposition process that is highly efficient and is designed to apply CIGS material over large area substrates in a continuous fashion.   Miasole is leveraging expertise in semiconductor manufacturing and a deep understanding of CIGS material to manufacture new, versatile and low-cost solar products   www.miasole.com

§ Achieves new record highs in module conversion efficiencies as confirmed by the U.S. National Renewable Energy Laboratory   § Continues to make significant commercial progress   § Announced multi-year 600 MW panel supply agreement with Juwi Solar in August 2010   § Signed multi-year framework agreement with Phoenix Solar AG for delivery of panels   § Announced receipt of UL certification becoming first CIGS thin-film module to be certified by UL, a critical milestone    www.miasole.com/pgs-news/overview.shtml

 

17 September 2010

 

 

 

 

 

  

 

 

 

 

Parent company statement of comprehensive income

for the year ended 30 June 2010

 

	Note	Year ended 30 June 2010	Year ended 30 June 2009
		US$'000	US$'000
Interest income on cash balances	7	168	4,430
Unrealised losses on revaluation of investments at fair value through profit or loss	11.2	(16,481)	(30,400)
Net foreign exchange loss		(3,200)	(16,818)
Gross portfolio return		(19,513)	(42,788)
Investment management fees	8.2	(5,263)	(6,902)
Termination of investment management agreement	8.1	(7,000)	-
Other administration expenses	9	(5,560)	(4,169)
Total expenses		(17,823)	(11,071)
Loss before taxation		(37,336)	(53,859)
Taxation	3.9	-	-
Loss for the year and comprehensive loss for the year		(37,336)	(53,859)
Basic and diluted loss per share (cents)	17	(21.04)	(28.38)

 

The accompanying notes form an integral part of these financial statements 

 

 

Parent company statement of financial position

as at 30 June 2010

 

	Note	30 June 2010	30 June 2009
		US$'000	US$'000
Assets
Investments in subsidiaries at fair value through profit or loss	11.2	159,331	168,868
Total non-current assets		159,331	168,868
Trade and other receivables	12	358	121
Cash and cash equivalents	13	89,609	167,075
Total current assets		89,967	167,196
Total assets		249,298	336,064
Equity
Share capital	14	30	37
Share premium	14	323,115	359,603
Retained losses		(83,577)	(46,241)
Total equity		239,568	313,399
Liabilities
Unpaid capital contributions to subsidiaries	15	-	14,745
Total non-current liabilities		-	14,745
Trade and other payables	16	2,774	844
Unpaid capital contributions to subsidiaries	15	6,956	7,076
Total current liabilities		9,730	7,920
Total liabilities		9,730	22,665
Total equity and liabilities		249,298	336,064
Net asset value per share (cents)	6	167.65	170.67

 

 

The accompanying notes form an integral part of these financial statements

 

 

The financial statements were approved by the Board of Directors on 17 September 2010 and signed on their behalf by:

 

 

 

 

Peter Tom	J. Curtis Moffatt
Non-Executive Chairman	Non-Executive Director

 

 

Parent company statement of changes in equity

for the year ended 30 June 2010

 

	Share Capital	Share Premium	Retained losses	Total
	US$'000	US$'000	US$'000	US$'000
Balance at 1 July 2009	37	359,603	(46,241)	313,399
Total comprehensive loss	-	-	(37,336)	(37,336)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Repurchase of shares	(7)	(36,488)	-	(36,495)
Total contributions by and distributions to owners	(7)	(36,488)	-	(36,495)
Balance at 30 June 2010	30	323,115	(83,577)	239,568
Balance at 1 July 2008	40	386,067	7,618	393,725
Total comprehensive loss	-	-	(53,859)	(53,859)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Repurchase of shares	(3)	(26,464)	-	(26,467)
Total contributions by and distributions to owners	(3)	(26,464)	-	(26,467)
Balance at 30 June 2009	37	359,603	(46,241)	313,399

 

The accompanying notes form an integral part of these financial statements

 

 

Parent company statement of cash flows

For the year ended 30 June 2010

	Year ended 30 June 2010	Year ended 30 June 2009
	US$'000	US$'000
Cash flows from operating activities
Interest received on cash balances	168	4,598
Operating expenses paid	(16,130)	(12,902)
Net cash used in operating activities	(15,962)	(8,304)
Cash flows from investing activities
Repayment of capital by subsidiaries at fair value through profit or loss	19,000	-
Additional investments in subsidiaries at fair value through profit or loss	(32,444)	(122,088)
Payment of unpaid share capital to subsidiaries	(8,366)	-
Net cash used in investing activities	(21,810)	(122,088)
Cash flows from financing activities
Repurchase of shares	(36,495)	(26,467)
Net cash used in financing activities	(36,495)	(26,467)
Net decrease in cash and cash equivalents	(74,266)	(156,859)
Cash and cash equivalents at start of the year	167,075	340,752
Effect of exchange rate fluctuations on cash and cash equivalents	(3,200)	(16,818)
Cash and cash equivalents at end of year	89,609	167,075

 

 

Reconciliation of loss before taxation to net cash used in operating activities	Year ended 30 June 2010	Year ended 30 June 2009
	US$'000	US$'000
Loss before taxation	(37,336)	(53,859)
Adjustments for:
Unrealised losses on revaluation of investments at fair value through profit or loss	16,481	30,400
Foreign exchange loss	3,200	16,818
Movement in trade and other receivables	(237)	194
Movement in trade and other payables	1,930	(1,857)
Net cash used in operating activities	(15,962)	(8,304)

 

The accompanying notes form an integral part of these financial statements

Notes to the financial statements

for the year ended 30 June 2010

 

1 The Company

 

Leaf Clean Energy Company ("Leaf" or the "Company") was incorporated and registered in the Cayman Islands on 14 May 2007. The Company was established to invest in clean energy projects, predominantly in North America. Clean energy includes activities such as the production of alternative fuels, renewable power generation and the use of technologies to reduce the environmental impact of traditional energy. The Company seeks to achieve long term capital appreciation primarily through making privately negotiated acquisitions of interest (principally equity but also equity-related and subordinated or mezzanine debt securities) in both projects and companies which own assets or which participate in the clean energy sector and through the generation and commercialisation of carbon credits derived from these projects.

 

Pursuant to the Company's Admission Document dated 22 June 2007 there was an original placing of up to 200,000,000 Ordinary Shares of GB£0.0001 each for GB£1 each.

 

The Shares of the Company were admitted to trading on the AIM market of the London Stock Exchange ("AIM") on 28 June 2007 when dealings also commenced.

 

The Company's agents and the inhouse management team perform all significant functions.

 

2 Basis of preparation

 

2.1 Statement of compliance

 

The Company's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). In order to present information that is comparable with other investment companies, Leaf publishes financial statements of the Company, which include investments in subsidiaries regarded as part of the Company's investing business at fair value.

 

The financial statements were authorised for issue by the Board of Directors on 17 September 2010.

 

2.2 Basis of measurement

 

The financial statements have been prepared on the historical cost basis except for the investments in subsidiaries that are measured at fair value in the statement of financial position.

 

2.3 Functional and presentation currency

 

The financial statements are presented in United States Dollars ("US$"), which is the Company's functional currency. All financial information presented in US$ has been rounded to the nearest thousand.

 

2.4 Use of estimates and judgements

 

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

 

The most significant area requiring estimation and judgement by the Directors is the valuation of unquoted investments, see note 5 and 11.

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

2 Basis of preparation (continued)

 

2.5 Change in accounting policy

 

Presentation of financial statements

The Company applied revised IAS 1 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. As a result, the Company presents in the statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the statement of comprehensive income. 

 

Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

 

2.6 Other accounting developments

 

Disclosures pertaining to fair values and liquidity of financial instruments

The Company has applied Improving Disclosures about Financial Instruments (Amendments to IFRS 7), issued in March 2009, that require enhanced disclosures about fair value measurements and liquidity risk in respect of financial instruments.

 

The amendments require that fair value measurement disclosures use a three-level fair value hierarchy that reflects the significance of the inputs used in measuring fair values of financial instruments. Specific disclosures are required when fair value measurements are categorised as Level 3 (significant unobservable inputs) in the fair value hierarchy. The amendments require that any significant transfers between Level 1 and Level 2 of the fair value hierarchy be disclosed separately, distinguishing between transfers into and out of each level. Furthermore, changes in valuation techniques from one period to another, including the reasons therefore, are required to be disclosed for each class of financial instruments.

 

Disclosures in respect of fair values of financial instruments are included in notes 5 and 11.

 

Furthermore the definition of liquidity risk has been amended and it is now defined as the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

 

The amendments require disclosure of a maturity analysis for non-derivative and derivative financial liabilities, but contractual maturities are required to be disclosed for derivative financial liabilities only when contractual maturities are essential for an understanding of the timing of cash flows. For issued financial guarantee contracts, the amendments require maximum amount of the guarantee to be disclosed in the earliest period in which the guarantee could be called.

 

Disclosures in respect of liquidity risk are included in note 4.

 

3 Significant accounting policies

 

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, except as explained in note 2.5 which addresses changes in accounting policies.

 

Certain comparative amounts have been reclassified to conform with the current year's presentation.

 

3.1 Investments in subsidiaries

 

The Company designated its investments, including equity, loan and similar instruments, as at fair value through profit or loss on initial recognition. Gains and losses arising from changes in fair value of investments, including foreign exchange movements, are recognised in the profit or loss.

 

Unquoted investments are valued using recognised valuation methodologies, based on the International Private Equity and Venture Capital Guidelines, which reflect the amount for which an asset could be exchanged between knowledgeable, willing parties on an arm's length basis.

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

3.2 Cash and cash equivalents

 

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term highly liquid investments that are readily converted to known amounts of cash and which are subject to an insignificant risk of changes in value.

 

3.3 Revenue and expense recognition

 

Interest income is recognised on a time-proportionate basis using the effective interest rate method.

 

Dividends receivable on equity and non-equity shares, which carry significant equity rights, are recognised as revenue when the shareholders' right to receive payment has been established, normally ex-dividend date. When no ex-dividend date is available, dividends receivable on or before the period end are treated as revenue for the period. Provision is made for any dividends not expected to be received.

 

Fixed returns on debt securities and loans are recognised on an effective interest rate basis, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

 

Expenses are accounted for on an accrual basis. Expenses are charged to the profit or loss. This includes expenses directly related to making an investment which is held at fair value through profit or loss.

 

3.4 Foreign currency translation

 

Transactions in foreign currencies are translated to the functional currency of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss.

 

3.5 Share issue costs

 

Costs directly related to the issue of shares are deducted from equity.

 

3.6 Dividends payable

 

Dividends payable are recognised as a liability in the period in which they are declared and approved.

 

3.7 Trade and other receivables

 

Trade and other receivables are stated at amortised cost less provision for bad debts.

 

3.8 Trade and other payables

 

Trade and other payables are stated at amortised cost.

 

3.9 Income tax expense

 

Cayman Islands taxation

The Company received from the Governor-in-Cabinet of the Cayman Islands, an undertaking that, for a period of 20 years from 5 June 2007 no laws of the Cayman Islands imposing any tax on profits, income, gains or appreciation shall apply to the Company and that no such tax or any tax in the nature of estate duty or inheritance tax shall be payable on the shares, debentures or other obligations of the Company. Under the current Cayman Islands law, no tax will be charged on profits or gains of the Company and dividends of the Company would be payable to Shareholders resident in or outside the Cayman Islands without deduction of tax.

 

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

3.10 Future changes in accounting policies

 

IASB (International Accounting Standards Board) and IFRIC (International Financial Reporting Interpretations Committee) have issued the following standards and interpretations with an effective date after the date of these financial statements:

 

New/Revised International Financial Reporting Standards (IAS/IFRS)	Effective date (accounting periods Commencing and or after)
IAS 1 Presentation of Financial Statements (Revised April 2009)*	1 January 2010
IAS 1 Presentation of Financial Statements (Revised May 2010)**	1 January 2011
IAS 7 Statement of Cash Flows (Revised April 2009)*	1 January 2010
IAS 17 Leases (Revised April 2009)*	1 January 2010
IAS 24 Related Party Disclosures - Revised definition of related parties	1 January 2011
IAS 27 Consolidated and Separate Financial Statements (Revised May 2010)**	1 July 2010
IAS 32 Financial Instruments: Presentation - Amendments relating to classification of rights issues	1 February 2010
IAS 34 Interim Financial Reporting (Revised May 2010)**	1 January 2011
IAS 36 Impairment of Assets (Revised April 2009)*	1 January 2010
IAS 39 Financial Instruments: Recognition and Measurement (Revised April 2009)*	1 January 2010
IFRS 2 Share-based Payment - Amendments relating to group cash-settled share-based payment transactions	1 January 2010
IFRS 3 Business Combinations - (Revised May 2010)**	1 July 2010
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (Revised April 2009)*	1 January 2010
IFRS 7 Financial Instruments: Disclosures (Revised May 2010)**	1 January 2011
IFRS 8 Operating Segments (Revised April 2009)*	1 January 2010
IFRS 9 Financial Instruments - Classification and Measurement	1 January 2013
IFRIC Interpretation
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments	1 July 2010

 

*Amendments resulting from April 2009 Annual Improvements to IFRSs

**Amendments resulting from May 2010 Annual Improvements to IFRSs

 

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

4 Financial risk management

 

The Parent Company's investments expose it to a variety of financial risks: market risk (including currency risk, market price risk and interest rate risk), credit risk and liquidity risk.

 

Market price risk

The subsidiaries in which the Company invests operate in sectors that may be affected by the prevailing prices of electricity, oil, natural gas and other commodities. As energy and fuels derived from non-renewable sources become more expensive or scarce, renewable energy and alternative fuels become more valuable. Conversely, if non-renewable energy and fuels become more abundant or, for other reasons become less expensive, the value of renewable or alternative fuels may be negatively affected. As a result, the performance of the project companies is likely to be dependent upon prevailing prices for these commodities, which have been historically, and may continue to be, volatile and subject to wide variations for a variety of reasons beyond the control of the Company. These factors include the level of consumer product demand, weather conditions, governmental regulations in producing and consuming countries, the price and availability of alternative fuels, the supply of oil and natural gas, and overall geo-political and economic conditions. Therefore, volatility of commodity prices may adversely affect the value of the Company's investments.

 

Market price risk is managed by the management team of the Company, in accordance with parameters set by the Board.

 

All of the Company'sinvestments comprise interests in companies which are not publicly traded or freely marketable. The Company may also be restricted from selling certain securities by contract or regulatory considerations. Such investments may therefore be difficult to value or realise. Any such realisation may involve significant time and expense.

 

If the value of the Company'sinvestment portfolio increased/decreased by 5%, the net assets of the Company would increase/decrease by US$8,431,760 (2009: US$7,336,100)

 

Foreign exchange risk

The Company is exposed to foreign exchange risk with regard to transactions made in Sterling and balances held in Sterling.

 

An analysis of net assets by currency exposure as at 30 June 2010 is as follows:

 

	Net Assets US$'000s	Net Assets US$'000s
	30 June 2010	30 June 2009
US Dollars	237,999	264,118
Sterling	1,569	49,838
Total	239,568	313,956

 

An appreciation of the Sterling against the US Dollar of 5% would have increased net assets by US$117,341 (2009: US$2,500,000). A decrease of 5% would have an equal and opposite effect.

 

Interest rate risk

The Company is exposed to cash flow interest rate risk on cash balances which are all short term fixed deposits. The weighted average interest rates on short term fixed deposits as at 30 June 2010 were:

 

	30 June 2010	30 June 2009
	%	%
Cash balances
US Dollars	0.37	0.43
Sterling	0.14	0.38

 

 

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

4 Financial risk management (continued)

 

Interest rate risk (continued)

The table below summarises the Company's exposure to interest rate risks. It includes the financial assets and liabilities at the earlier of contractual re-pricing or maturity date, measured by the carrying values of assets and liabilities:

 

30 June 2010	Less than 1month	1-3 months	3 months to 1 year	1-5 years	Over 5 Years	Non-interest bearing	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial Assets
Investments in subsidiaries at fair value through profit or loss	-	-	-	-	-	159,331	159,331
Trade and other receivables	-	-	-	-	-	358	358
Cash and cash equivalents	59,358	30,251	-	-	-	-	89,609
Total financial assets	59,358	30,251	-	-	-	159,689	249,298
Financial Liabilities
Trade and other payables	-	-	-	-	-	(2,774)	(2,774)
Unpaid capital contributions to subsidiaries	-	-	-	-	-	(6,956)	(6,956)
Total financial liabilities	-	-	-	-	-	(9,730)	(9,730)
Total interest rate sensitivity gap	59,358	30,251	-	-	-

 

 

30 June 2009	Less than 1month	1-3 months	3 months to 1 year	1-5 years	Over 5 years	Non-interest bearing	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial Assets
Investments in subsidiaries at fair value through profit or loss	-	-	-	-	-	168,868	168,868
Trade and other receivables	-	-	-	-	-	121	121
Cash and cash equivalents	61,921	105,154	-	-	-	-	167,075
Total financial assets	61,921	105,154	-	-	-	168,989	336,064
Financial Liabilities
Trade and other payables	-	-	-	-	-	(844)	(844)
Unpaid capital contributions to subsidiaries	-	-	-	-	-	(21,821)	(21,821)
Total financial liabilities	-	-	-	-	-	(22,665)	(22,665)
Total interest rate sensitivity gap	61,921	105,154	-	-	-

 

No fair value interest rate sensitivity analysis has been provided as no financial assets or liabilities are subject to fair value interest rate risk. If interest rates have been 1% higher/lower for the year, interest receivable would have been US$896,090 (2009: US$1,670,750) higher/lower.

 

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

4 Financial risk management (continued)

 

Credit risk

Credit risk is the risk that counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company.

 

The carrying amounts of financial assets best represent the maximum credit risk exposure at the reporting date. This relates also to financial assets carried at amortised cost, as they have a short term maturity.

 

At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:

 

	30 June 2010	30 June 2009
	US$'000	US$'000
Investments in subsidiaries at fair value through profit or loss	159,331	168,868
Trade and other receivables	358	121
Cash and cash equivalents	89,609	167,075
	249,298	336,064

 

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position. Management does not expect any counterparty to fail to meet its obligations. No impairment provisions had been made as at the year end and no debtors were past their due date.

 

Cash balances are held with P-1* financial institutions.

 

*- A Moody's rating of Prime-1 (P-1) means that the issuer has a superior ability to repay short-term debt for the obligations.

 

Liquidity risk

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions, without incurring unacceptable losses. The Company's liquidity position is monitored by the Board of Directors.

 

Residual undiscounted contractual maturities of financial liabilities:

 

 

30 June 2010	Less than 1 month	1-3 months	3 months to 1 year	1-5 years	Over 5 years	No stated maturity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial liabilities
Trade and other payables	(2,774)	-	-	-	-	-
Unpaid capital contributions to subsidiaries	(6,956)
	(9,730)	-	-	-	-	-

 

30 June 2009	Less than 1 month	1-3 months	3 months to 1 year	1-5 years	Over 5 years	No stated maturity
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
Financial liabilities
Trade and other payables	(844)	-	-	-	-	-
Unpaid capital contributions to subsidiaries	(21,821)
	(22,665)	-	-	-	-	-

 

Fair values

 

All assets and liabilities at 30 June 2010 are considered to be stated at fair value.

 

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

5. Critical accounting estimates and assumptions

 

These disclosures supplement the commentary on financial risk management (see note 4).

 

Key sources of estimation uncertainty

 

Determining fair values

The determination of fair values for financial assets for which there is no observable market prices requires the use of valuation techniques as described in accounting policy 3.1. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. See also "Valuation of financial instruments" below.

 

Critical judgements in applying the Company's accounting policies

 

Critical judgements made in applying the Company's accounting policies include:

 

Valuation of financial instruments

The Company's accounting policy on fair value measurements is discussed in accounting policy 3.1. The Company measures fair value using the following hierarchy that reflects the significant of inputs used in making the measurements:

 

·; Level 1: Quoted market price (unadjusted) in an active market for and identical instrument.

·; Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category included instruments valued using: quoted market prices in active markets for similar instruments: quoted market prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

·; Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Fair values of financial assets and financial liabilities that are traded in active markets are basedon quoted market prices or dealer price quotations. For all other financial instruments the Company determines fair values using valuation techniques.

 

The Group holds full or partial ownership interests in a number of unquoted clean energy companies. The Company's investments are classified as level 3 in the fair value hierarchy. A reconciliation from the beginning balances to the ending balances is shown in note 11.

 

6 Net Asset Value per Share

 

The net asset value per share as at 30 June 2010 is 167.65 cents based on net assets of US$239,568,000 and 142,900,726ordinary shares in issue as at that date (2009: 170.67 cents based on net assets of US$313,399,017 and 183,633,773ordinary shares).

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

7 Interest Income on Cash Balances

 

	Year ended 30 June 2010	Year ended 30 June 2009
	US$'000	US$'000
Interest income receivable on Sterling cash balances	72	2,090
Interest income receivable on US Dollar cash balances	96	2,340
	168	4,430

 

8 Management Fees

 

8.1 Termination of investment management agreement

 

On 25 September 2009, EEA Fund Management Limited ("EEA"), the Company's former asset advisor terminated the investment management agreement with Energy & Climate Advisors, formerly a joint venture between EEA and Shaw Capital Inc that was responsible for performing the asset advisor's obligations under the Asset Advisory Agreement.

 

In May 2010, the Board agreed with EEA to conclude the Asset Advisory Agreement. Leaf Clean Energy Company migrated to an internal management structure which the Board believes will result in operational and financials efficiencies for the Company.

 

The consideration payable by the Company to EEA comprises US$7 million and a payment of US$300,000 contingent upon realisation of a portfolio asset. EEA will retain its existing rights to any performance fee relating to the period up to 30 June 2013.

 

8.2 Investment management fees (prior to termination)

 

Under the former Asset Advisory Agreement, the former Asset Advisor receives an annual management fee from the Company, payable quarterly in advance, equating to 0.5% per quarter of the Net Asset Value of the Company as determined in accordance with such agreement, as at the quarter end dates (being 31 March, 30 June, 30 September and 31 December).

 

Management fees for the year ended 30 June 2010 amounted to US$5,262,702 (year ended 30 June 2009: US$6,902,416) and the amount accrued but not paid at the year end was US$ nil (2008: US$nil).

 

8.3 Performance fees

 

EEA may also, pursuant to the Asset Advisory Agreement, become entitled to receive from the Company an annual performance fee calculated by reference to Total Shareholder Return over the course of a performance period, starting on Admission.

 

Any performance fee will become payable once annualised Total Shareholder Return in any performance period exceeds an annual rate of 9% ("the Hurdle"). Once the Hurdle is exceeded, the performance fee will become payable in an amount equal to 20% of any aggregate return over and above the Hurdle subject to a high watermark. Total Shareholder Return is calculated on the basis of the increase in market capitalization of the Company, allowing for dividend and other distributions paid to Shareholders in the relevant performance period.

 

There were no performance fees payable for the year ended 30 June 2010 (year ended 30 June 2009: US$nil).

 

 

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

9 Other administration expenses

 

	Year ended 30 June 2010	Year ended 30 June 2009
	US$'000	US$'000
Legal and professional fees (note 9.1)	3,331	2,674
Directors' remuneration (note 10)	989	370
Re-charges fees from the former asset advisor (note 9.2)	437	160
Administration fees (note 9.3)	243	234
Takeover Panel fees	164	-
Audit fees	99	66
Printing and stationery expenses	79	47
Directors' and Officers' insurance expense	62	59
Registrar fees and costs	46	25
Travel and subsistence expenses	30	27
Sponsorship fees	-	75
Other expenses	80	432
Total	5,560	4,169

 

9.1 Legal and professional fees

Legal and professional fees represent legal, advisory and consultancy fees incurred during and after the implementation of investment acquisitions, as well as work on group and portfolio structuring.

 

Costs incurred in relation to the proposed and aborted merger with Trading Emmissions PLC are included in professional fees above.

 

9.2 Recharges from former asset advisor

Re-charges from former asset advisor comprises re-imbursement of expenses to Shaw Capital Inc and EEA Fund Management Limited for expenses incurred on behalf of the Company and its subsidiaries.

 

US$88,817 was charged by Shaw Capital, Inc (2009: US$122,100) and US$nil was outstanding as at 30 June 2009 (30 June 2009: US$122,100).

 

GB£229,848 was charged by EEA Fund Management Limited (US$348,677 based on invoice date exchange rate) (2009: GB£23,543) and US$135,918 was outstanding at 30 June 2010 (2009: US$38,774). The amounts were billed mainly for the reimbursement of flights, accommodations and meals for the purpose of business meetings of the Company during the year.

 

9.3 Administration fees

Up to October 2009, the Administrator was entitled to an administration fee, payable quarterly in arrears and calculated in respect of each quarter or other period, with a minimum fee of GBP25,000 per quarter at the rate of 0.08% per annum where the total assets of the Company less borrowings is less than US$100,000,000; 0.07% where the total assets of the Company less borrowings at the end of the relevant quarter is greater than or equal to US$100,000,000 but less than US$200,000,000; and at the rate of 0.06% per annum where the total assets of the Company less borrowings at the end of the relevant quarter is greater than or equal to US$200,000,000.

 

With effect from November 2009, the Company administrator is entitled to an administration fee, payable quarterly in arrears and calculated in respect of each quarter or other period with a minimum fee of GBP25,000 per quarter at the rate of 0.1% per annum where the total assets of the parent company less borrowings is less than US$100,000,000; 0.09% where the total assets of the Company less borrowings at the end of the relevant quarter is greater than or equal to US$100,000,000 but less than US$200,000,000; and at the rate of 0.08% per annum where the total assets of the Company less borrowings at the end of the relevant quarter is greater than or equal to US$200,000,000.

 

Administration fees for the year amounted to US$243,173 (2009: US$233,712) and US$56,620 was outstanding as at 30 June 2010 (2009: US$54,906).

 

Notes to the financial statements

for the year ended 30 June 2010

 

10 Directors' remuneration

 

Due to the migration of the management structure to an in house management in which the new management team is led by the Directors, the Directors' annual remuneration was reviewed and recommended to be increased from 3 March 2010 to US$200,000 for the Chairman, US$150,000 for the independent Directors and US$400,000 for the Executive Director, Bran Keogh, who was appointed in February 2010 to oversee the migration transition and the new management team.

 

On 12 November 2009, Nora Mead Brownell resigned as a Director of the Company.

 

Details of the Directors' basic annual remuneration during the year were as follows:

 

	Remuneration for the period from 1 July 2009 to 3 March 2010	Remuneration for the period from 4 March 2010 to 30 June 2010
	US$	US$
Peter Tom (Chairman)	140,000	200,000
Bran Keogh	100,000	400,000
J. Curtis Moffatt	105,000	150,000
Peter O'Keefe	105,000	150,000
Nora Mead Brownell	105,000	-
	555,000	900,000

 

Directors' fees and expenses paid during the year were:

30 June 2010	Directors' fees	Other emoluments	Total
	US$	US$	US$
Peter Tom (Chairman)	153,724	99,167	252,891
Bran Keogh	191,788	196,051	387,839
J. Curtis Moffatt	115,095	20,861	135,956
Peter O'Keefe	115,095	30,755	145,850
Nora Mead Brownell	39,750	26,911	66,661
	615,452	373,745	989,197

 

30 June 2009	Directors' fees	Other emoluments	Total
	US$	US$	US$
Peter Tom (Chairman)	110,834	8,430	119,264
Bran Keogh	54,468	13,980	68,448
J. Curtis Moffatt	60,601	-	60,601
Peter O'Keefe	60,601	-	60,601
Nora Mead Brownell	60,601	-	60,601
	347,105	22,410	369,515

 

The Directors are also entitled to receive reimbursement of any expenses in relation to their appointment. Total fees and expenses paid to the Directors for the year ended 30 June 2010 amounted to US$989,197 (2009: US$369,515) of which US$225,000 was outstanding at 30June 2010 (June 2009: US$135,000).

 

Due to the disestablishment of Energy and Climate Advisors ("E&CA"), formerly the investment advisor for the Group, the Directors were paid a total of US$178,394 to monitor the disestablishment process. E&CA contributed US$23,000 towards the additional Directors' fees.

 

Bran Keogh received US$50,000 in additional compensation for his services on the aborted merger processes.

 

Mr J. Curtis Moffatt, the Chairman of the Audit Committee and one of the Board members, is a partner at Van Ness Feldman. The Group engaged Van Ness Feldman for providing services in US energy and environmental laws consultations. Total fees for the year to 30 June 2010 amounted to US$5,938 (2009: US$54,044) and the amount accrued but not paid at the period end was US$ nil (2009: US$nil).

Notes to the financial statements

for the year ended 30 June 2010

 

10 Directors' remuneration (continued)

 

At the time Van Ness Feldman was engaged to assist in the due diligence matter on behalf of Leaf, Mr. Moffatt recused himself from any consideration of the proposed investment by Leaf since such consideration would rely, in part, upon the advice and counsel of Van Ness Feldman.

 

11 Investments

 

11.1 The Subsidiaries

 

Since incorporation, for efficient portfolio management purposes, the Company has established the following subsidiary companies:

	Country of incorporation	Percentage of shares held
Leaf Bioenergy Company	Cayman Islands	100%
Leaf Biomass Company	Cayman Islands	100%
Leaf Biomass Investments, Inc.*	USA (Delaware)	100%
Leaf Escalona Company*	Cayman Islands	100%
Leaf Finance Company	Cayman Islands	100%
Leaf Greenline Company*	Cayman Islands	100%
Leaf Hydro Company	Cayman Islands	100%
Leaf Invenergy Company*	Cayman Islands	100%
Leaf Invenergy US Investments, Inc*	USA (Delaware)	100%
Leaf LFG Company	Cayman Islands	100%
Leaf LFG US Investments, Inc.*	USA (Delaware)	100%
Leaf MaxWest Company*	USA (Delaware)	100%
Leaf Miasole*	Cayman Islands	100%
Leaf Range Fuels Company*	Cayman Islands	100%
Leaf Skyfuels Company*	Cayman Islands	100%
Leaf Solar Company	Cayman Islands	100%
Leaf VREC*	Cayman Islands	100%
Leaf Waste Energy	Cayman Islands	100%
Leaf Wind Company	Cayman Islands	100%
Leaf Clean Energy USA, LLC	USA (District of Columbia)	100%

 

*Indirect subsidiaries

 

The Company has also control over the following underlying investee companies:

 

	Country of incorporation	Principal activity	Effective interest held
Energia Escalona Coopertief U.A	Netherlands	Hydro Energy	87.5%
Escalona B.V	Netherlands	Hydro Energy	87.5%
Energia Escalona I S.A. de C.V	Mexico	Hydro Energy	87.5%
Energia Escalona s.r.l.	Mexico	Hydro Energy	87.5%
Energentum S.A. de C.V	Mexico	Hydro Energy	86.6%
Johnstown Regional Energy LLC	USA (Pennsylvania)	Landfill	100%
MaxWest Environmental Systems Inc	USA (Nevada)	Waste Energy	51.39%(1)
Multitrade Rabun Gap LLC	USA (Virginia)	Biomass	75%(2)
Multitrade Telogia LLC	USA (Virginia)	Biomass	61.25%(3)
Telogia Power LLC	USA (Virginia)	Biomass	61.25%(3)

 

(1) Voting rights 60.9%

(2) Voting rights 81.9%

(3) Voting rights 66.25%

11.2 Investments in subsidiaries at fair value through profit or loss

 

	30 June 2010	30 June 2009
	US$'000	US$'000
Balance brought forward	168,868	55,000
Additional investments in subsidiaries	38,944	144,268
Repayment of capital investment	(19,000)	-
Unpaid share capital reversed	(13,000)	-
Unrealised losses on investments in subsidiaries	(16,481)	(30,400)
Balance carried forward	159,331	168,868

 

11.3 Portfolio valuation methodology

 

Unquoted investments are valued by applying an appropriate valuation technique, which makes maximum use of market-based information, is consistent with models generally used by market participants and is applied consistently from period to period, except where a change would result in a better estimation of fair value. The Company primarily invests in unquoted direct investments. Unquoted direct investments have characteristics similar to private equity investments, in that the value is generally determined through the sale or flotation of the entire business, rather than the sale of an individual instrument. Valuations of such investments are based upon the "International Private Equity and Venture Capital Valuation Guidelines."

 

The in house management conducted a valuation analysis of the Company's investment portfolio based upon standard valuation approaches compatible with the "International Private Equity and Venture Capital Valuation Guidelines." Given the uncertainties inherent in estimating the fair value of unquoted direct investments, a degree of caution was applied by the in house management in exercising judgements and making the necessary estimate.

 

12 Trade and Other Receivables

 

	30 June 2010	30 June 2009
	US$'000	US$'000
Inter-company receivables	232	-
Prepayments	105	92
Other receivables	21	-
Interest receivables	-	29
Total	358	121

 

Amounts due from group companies are unsecured, interest free and receivable on demand.

 

13 Cash and Cash Equivalents

 

	30 June 2010	30 June 2009
	US$'000	US$'000
Short term fixed deposits	30,251	105,154
Bank current account balances	59,358	61,921
Total	89,609	167,075

 

The short-term deposits are subject to interest rates between 0.09% and 0.37% per annum and are fixed for periods ranging up to 3 months from the balance sheet date.

 

Notes to the financial statements

For the year ended 30 June 2010

 

14 Share Capital

 

Ordinary shares of GB£0.0001 each	Number of shares	Share capital	Share premium
		US$'000	US$'000
At 30 June 2009	183,633,773	37	359,603
Repurchased during the year	(40,733,047)	(7)	(36,488)
At 30 June 2009	142,900,726	30	323,115

 

The authorised share capital of the Company is GB£25,000 divided into 250 million Ordinary Shares of GB£0.0001 each.

 

Under the terms of the placement on 22 June 2007, the Company issued 200,000,000 shares of GB£0.0001 each par value at a price of GB£1 each. The difference between the issue price and the par value was transferred to share premium account, net of share issue expenses.

 

Share capital and premium received was translated to US Dollars at the exchange rate prevailing at the date of receipt of the proceeds.

 

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regards to the Company's assets.

 

During the year 40,733,047 shares were repurchased by the Company leaving 142,900,726 shares in issue as at 30 June 2010. The shares were repurchased in 11 tranches and a reverse auction tender during the year at an average price of 58 pence per share for a total consideration of GB£23,767,981 (US$36,494,586). The Company's share price has averaged 77 pence during the year.

 

The repurchases of the Company's shares are in line with its capital management philosophy whereby the Board manages the Company's affairs to achieve shareholder returns through capital growth rather than income, and monitors the achievement of this through growth in net asset value per share.

 

Capital management

 

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board manages the Company's affairs to achieve shareholder returns through capital growth rather than income, and monitors the achievement of this through growth in net asset value per share.

 

Company capital comprises share capital, share premium and reserves. The Company is not subject to externally imposed capital requirements.

 

15 Unpaid capital contributions to subsidiaries

 

	30 June 2010	30 June 2009
	US$'000	US$'000
Current liabilities	6,956	7,076
Non-current liabilities	-	14,745
Total	6,956	21,821

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

16 Trade and Other Payables

 

	30 June2010	30 June 2009
	US$'000	US$'000
Amounts due to subsidiaries	2,090	-
Other creditors	350	41
Directors' fees payable	225	135
Administration fees payable	57	55
Audit fees payable	52	44
Investment call payable	-	409
Amounts due to related parties *	-	160
Total	2,774	844

 

*Amounts due to subsidiaries and other related parties are unsecured, interest free and payable on demand.

 

17 Basic and Diluted Loss per Share

 

Basic and diluted loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year:

 

	Year ended 30 June 2010	Year ended 30 June 2009
Loss attributable to equity holders of the Company (US$'000)	(37,336)	(53,859)
Weighted average number of ordinary shares in issue (thousands)	177,466	189,760
Basic and fully diluted loss per share (cents per share)	(21.04)	(28.38)

 

There is no difference between the basic and diluted loss per share for the year as there are no potential dilutive ordinary shares.

 

18 Related Party Transactions

 

Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial or operational decisions.

 

The former Asset Advisor, the Company administrator and the Directors are considered related parties due to the significance of the contracts with these parties. Details of the fee arrangements with these parties are given in notes 8.2, 9.3 and 10.

 

19 Capital Commitments

 

As at 30 June 2010 capital commitments in respect of investments were as follows:

 

	Initial commitment	Drawn down	Remaining commitment
	US$'000	US$'000	US$'000
Investment in subsidiary	21,000	(6,226)	14,774
	21,000	(6,226)	14,774

 

 

 

Notes to the financial statements

for the year ended 30 June 2010

 

20 Exchange Rates

 

The following exchange rates were used to translate assets and liabilities into the reporting currency at 30 June 2010:

 

GBP Sterling to US$ 1.4961 (2009: 1.6469)

 

21 Subsequent events

 

There were no material subsequent events after the reporting date.

Consolidated statement of comprehensive income

For the year ended 30 June 2010

 

			(Restated Note 2.5(ii))
	Note	Year ended 30 June 2010	Year ended 30 June 2009
		US$'000	US$'000
Interest income on cash balances		434	4,438
Interest income on investments at fair value through profit or loss	9	793	-
Unrealised losses on revaluation of investments at fair value through profit or loss	14.1	(8,650)	(30,400)
Net foreign exchange loss		(3,187)	(16,818)
Gross portfolio return		(10,610)	(42,780)
Management fees	7.2	(5,263)	(6,902)
Termination of investment management agreement	7.1	(7,000)
Other administration expenses	8	(5,560)	(4,169)
Net portfolio return		(28,433)	(53,851)
Sales revenue and other income		13,271	2,782
Profit on disposal of assets		31	57
Impairment of non-financial assets	11	(4,391)	-
Operating expenses		(23,838)	(4,430)
Loss before finance costs		(43,360)	(55,442)
Finance costs		(1,619)	(119)
Loss before taxation		(44,979)	(55,561)
Taxation		-	-
Loss for the year		(44,979)	(55,561)
Other comprehensive income
Exchange differences on translation of foreign operations		(22)	(123)
Total comprehensive income		(45,001)	(55,684)
Loss for the year attributable to
Equity holders of the parent		(41,034)	(55,226)
Non-controlling interests		(3,945)	(335)
		(44,979)	(55,561)
Total comprehensive income attributable to
Equity holders of the parent		(41,090)	(55,338)
Non-controlling interests		(3,911)	(346)
		(45,001)	(55,684)
Basic and diluted loss per share (cents)	12	(23.12)	(29.10)

 

The accompanying notes form an integral part of these financial statements

 

 

 

 

Consolidated statement of financial position

as at 30June2010

 

			(Restated Note 2.5(ii))
	Note	30 June 2010	30 June 2009
		US$'000	US$'000
Assets
Investments at fair value through profit or loss	14.1	80,676	85,826
Property, plant and equipment	17	57,470	53,257
Other non current assets		513	-
Intangible assets	18	28,095	18,137
Total non-current assets		166,754	157,220
Inventories		406	128
Trade and other receivables	15	3,355	2,982
Cash and cash equivalents	16	98,978	171,852
Total current assets		102,739	174,962
Total assets		269,493	332,182
Equity
Share capital	20	30	37
Share premium	20	323,115	359,603
Foreign currency translation reserve		(124)	(112)
Retained losses		(88,642)	(47,608)
Total equity attributable to equity holders of the parent		234,379	311,920
Non-controlling interests		1,951	2,404
Total equity		236,330	314,324
Liabilities
Loans and borrowings	22	21,908	7,689
Deferred infrastructure grants		1,830	1,600
Deferred revenue		1,381	1,381
Total non-current liabilities		25,119	10,670
Loans and borrowings	22	2,693	1,577
Trade and other payables	21	5,351	5,611
Total current liabilities		8,044	7,188
Total liabilities		33,163	17,858
Total equity and liabilities		269,493	332,182

 

The accompanying notes form an integral part of these financial statements

 

The financial statements were approved by the Board of Directors on 17 September 2010 and signed on their behalf by:

 

 

 

 

Peter Tom	J. Curtis Moffatt
Non-Executive Chairman	Non-Executive Director