Oracle Power Regulatory News (ORCP)

Oracle Power Plc / EPIC: ORCP / Market: AIM / Sector: Mining

Oracle Power PLC

("Oracle", the "Company" or the "Group")

Final Results for the year ended 31 December 2019

Oracle Power PLC (AIM:ORCP) today announces its audited results for the year ended 31 December 2019.

Highlights:

· A year of significant progress for the Company as it looks to develop one of the largest power projects in Pakistan at its Thar Block VI Project ('the Project')

· The Project has been awarded priority status under the China-Pakistan Economic Corridor (CPEC) initiative within the 'Power' and 'Oil & Gas' working groups

· Continued support for the Project by both the Pakistan and Chinese governments, for development and financing

· New and supportive shareholder, the private office of His Highness Sheikh Ahmed Dalmook Juma Al Maktoum ("HH Private Office"), joined the shareholder register in November 2019 and invested £0.5 million

· Entered into a Joint Development Agreement with HH Private Office and China Coal in December 2019

Post-period:

· Entered into a Consortium Agreement to develop a lignite coal mine, a 1,320MW mine mouth power plant and a coal-to-gas liquid facility in Block VI, the credentials of which were submitted to the Private Power Infrastructure Board as part of the Letter of Intent ("LOI") application and awaiting issue of the LOI

o The Company will seek to formalise detailed arrangements with the Consortium partners following issue of the LOI

· Focus of Company's activities now in Pakistan resulting in substantial reductions in overhead costs in London

· Glen Lewis appointed to the board, highly experienced in the coal mining industry

Update regarding Posting of Annual Report and Notice of Annual General Meeting ("AGM")

The Annual Report and Accounts for the year ended 31 December 2019 will be available shortly to view and download from Oracle's website (www.oraclepower.co.uk), along with the notice of AGM and form of proxy. Copies of the abovementioned documents will be posted this week to shareholders and a further announcement will be made in this regard.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

**ENDS**

For further information:

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2019

I am pleased to present the results for Oracle Power Plc (the "Company" or "Oracle") for the year ended 31 December 2019.

2019 has been an exciting year for Oracle. We have seen major changes in the management of our business and, towards the end of the year, we were delighted to welcome His Highness Sheikh Ahmed Dalmook Juma Al Maktoum, a senior member of the Dubai Royal Family, as a major investor in the Company. In addition, the scope of the development of Block VI has substantially increased to encompass a coal to fertiliser project as well as the coal to electricity project. Successful development of the former would assist in addressing Pakistan's food security issues, whilst the latter would help address Pakistan's energy security issues. Furthermore, by using an indigenous resource, we believe our project would contribute to a reduction in the use of the country's foreign exchange reserves, as a result of a decrease in demand for imported fuel. Our Block VI is one of the largest, if not the largest, private projects in Pakistan and has priority status within the China-Pakistan Economic Corridor ("CPEC").

Shahrukh Khan, who started the Company from nothing and built it up into a multimillion-pound listed Plc, decided that after nearly fifteen years he would step down and hand the reins to our new Chief Executive Officer, Naheed Memon. My Board colleagues and I are profoundly appreciative of his invaluable contribution to the development of Oracle over this time.

In order to re-invigorate the Company, we have changed many of our advisors, consultants and service providers and will shortly be moving to a more cost-efficient office.

I am delighted to welcome Mr Glen Lewis to the Board as a non-executive director. Glen comes with a wealth of knowledge of the coal mining industry and will be of great help with some of the more technical issues we will face. His experience in the industry will be an important part in strengthening the Board.

The Board has recognised that, in order to bring the development of the Thar Block VI projects to fruition, the major thrust of our operations needs to be based in Pakistan and not in London. Ms Memon has had a distinguished career in both the private and public arenas in Pakistan and is uniquely qualified to push our Company forward with the various government agencies in Pakistan.

Financially we are in good health. With the focus of our attention now in Pakistan we have managed to substantially reduce our overhead costs in London. In 2019, we raised a further £1,835,000, which included the £500,000 subscription from the private office of His Highness Sheikh Ahmed Dalmook Juma Al Maktoum, all of which should comfortably cover our working capital requirements to the end of the year. We may, however, seek to raise further funds to finance our contribution to the ongoing capital requirements of the project.

We have been approached by a number of people who are involved in power related projects and feel that Oracle would be a symbiotic partner. Whilst the Thar projects are, and should remain, our primary focus we are conscious of the need to have projects that have a faster turnaround.

Operational highlights of 2019 are described in the Chief Executive's Report. Our work in 2020 is concentrated on formalising detailed agreements with our project partners (being the private office of His Highness Sheikh Ahmed Dalmook Juma Al Maktoum and China National Coal Development Company Ltd. ("China Coal"), including the formalisation of financing arrangements for their share of the requisite equity investment, as well as all project debt. We will also ensure that all Government permissions, licences and other approvals are in place, further details of which are described in the Chief Executive's Report.

The Government of Imran Khan remains supportive of the development of Thar coal and of relations with China. The broad parameters of security remain as last year: there have been no major incidents and, overall, the army has maintained order. 

We are most grateful to the Pakistani Authorities at both Federal and Provincial levels, to the Chinese Authorities through China Coal and the Joint Cooperation Committee (JCC) of CPEC for the constructive way in which they have all supported and continue to support our project.

Above all, I wish to thank our shareholders for their continued confidence, patience and support, enabling us to move the project towards realisation.

Mark W Steed

Chairman

CHIEF EXECUTIVE'S REPORT

FOR THE YEAR ENDED 31 DECEMBER 2019

It has been a very busy first year for me, during which, much has been accomplished, and more avenues for success and growth have opened up. Oracle Power's project in Pakistan continued to receive more support from government and investors, given its strategic importance, allowing us to progress key items on the path towards reaching definitive agreements with our partners in the Thar Block VI project.

In the fiscal year 2019, Pakistan posted a growth rate of 3.3%, which was slightly lower than the International Monetary Fund's global growth estimate of 3.5%, and a core inflation of 5.9%, according to the Pakistan Economic Survey. In view of falling income, rising inflation, a weakening currency, and an increased pressure on currency reserves, the Government of Pakistan ("Government"), made a categorical decision to reduce high import bills, of which oil and energy fuel is a large part. This decision provided even greater patronage to the development of Block VI, and encouraged investors to come forward.

The population of Pakistan increased to 216 million taking the number of people with no access to electricity to 65 million. The main reasons for this plight are a stark demand supply gap, inadequate transmission infrastructure, and a dilapidated distribution system. Looking ahead, the demand supply gap is bound to increase. Therefore, new power projects have been planned. Amongst these, those based on indigenous resources, such as Thar coal, have been ranked higher, by the Government, in the merit order for dispatch.

The latest power base-load forecast, released by the Government of Pakistan, has estimated additional demand that is attributed to the Governments' new electric vehicle policy, which stipulates that 30% of vehicles will run on electricity by the year 2030. The forecast also recognises the increased demand for power as a result of the Prime Minister's 'Naya (new) Pakistan Housing Scheme' initiative that plans for 5 million new houses to be built. In addition, industrial demand in the country's nine CPEC Special Economic Zones is also expected to grow, as efforts to mobilize large scale industry are underway. The forecast estimates a peak demand of 34,209 MWs by the year 2024-25. This requirement also accounts for the fact that almost 11,511 MWs of old furnace and diesel based generation will retire from the grid by 2047. In summary, the base case result shows that to meet a demand of 43,820 MWs by the year 2030, a generation capacity of 76,391 MWs is required.

In order to meet this demand by the year 2030, in line with the intent of increasing variable renewable energy (VRE) in the mix, in excess of 20,000 MWs of wind and solar energy, is planned. However, in order to mitigate the intermittency of VRE and to ensure substantial reserve provisioning, adequate base load energy is required to be optimised using close to 5000 MWs from re-gasified liquefied natural gas (RLNG), 6,000 MWs from Thar coal and more than 20,000 MWs of hydro power. Therefore, the latest energy capacity expansion plan is built on inclusion of VREs, minimal reliance on imported fuels and increased share of local coal and hydropower. Inclusion of VREs, hydro and Thar coal is aimed at making Pakistan energy secure and providing much needed relief to the end consumers.

In the overall new energy mix of the Government's plan, indigenous coal is set to increase from 3% in 2020 to 13% by the year 2030. Oracle's planned 1,320 MWs coal-based power is a confirmed source of power in such plans. Accordingly, our Company intends to progress its Thar Block VI project as expeditiously as possible in order to capitalise on the opportunity of selling power to the Government of Pakistan, at an attractive price, and contribute significantly towards addressing Pakistan's energy crisis, which, ultimately, would generate substantial value for our shareholders.

Currently, under the CPEC agreement a number of energy projects are in various stages of development throughout the country. Oracle's planned Block VI integrated coal mine and mine mouth power plant is on the Priority List of Energy Projects in CPEC and continues to be supported by both the Pakistan and Chinese governments, for development and financing.

The last 12 months have brought forth strong testaments of support and endorsement. The size and scale of the project has been enhanced as a result being identified for coal chemistry initiatives. On 6 November 2019, at the ninth JCC meeting on CPEC, Thar Block VI was included as a potential block for coal to gas to urea/fertilizer production, alongside and in parallel with the integrated coal mine and mine mouth power plant project.

Block VI is now the only block that is supported in CPEC for energy development as well as for oil and gas projects. It was listed as a flagship block in Thar for coal to gas, as input for urea, in the November meeting. Consequentially, the development of Oracle's Thar project is now aligned with Pakistan's energy and food security programmes

In December 2019, we were delighted to announce that Oracle had entered into a Joint Development Agreement ("JDA") with Sheikh Ahmed Dalmook Al Maktoum Private Office One Person Company LLP and China Coal (the "Consortium"), a subsidiary of China National Coal Group Corporation.

Further to the JDA, post period, in February 2020, Oracle entered into a Consortium Agreement ("CA") and submitted, to the Private Power Infrastructure Board ("PPIB") credentials of the Consortium partners with regard to building, owning and operating a 2x660 MW supercritical mine mouth plant in Block VI. It is expected that PPIB will issue a Letter of Intent ("LOI") soon.

On issuance of the LOI, the Consortium will proceed to apply to National Electric Power Regulatory Authority for a cost plus tariff and generation licence.

However, before the project can be awarded a tariff, a project SPV will need to be incorporated in accordance with the CA. The incorporation of an SPV would entail signing firm shareholder agreements with the Consortium partners, and consequential recognition of Oracle's investment in the development of this project to date. Moving forward, the PPIB would then issue a Letter of Support so that the Power Purchase Agreement ("PPA") can be finalised with the Central Power Purchasing Authority, along with the Implementation Agreement ("IA"). The IA guarantees payment under the PPA. All of this would enable the project SPV(s) to achieve financial close.

With respect to the new and significant opportunity to develop coal for gas, Oracle will begin work on this in collaboration with its Consortium partners once the coal to power phase of the project is underway. In the next phase, China Coal will conduct technical and commercial viability studies for coal to gas in Block VI and the Consortium will engage with the Government to establish mechanisms (such as pricing) to facilitate such a project.

The Company is cognisant of other opportunities in the power and natural resource sector and intends to capitalize on the experience of its team, to develop other commercially lucrative projects, with a quick turnaround and high returns. Oracle Power's management is committed to making the Company into a vibrant platform which develops multimillion dollar projects, in the medium to long term.

Whilst I write this statement, the world is in the grips of a pandemic which has forced global economies to come to a grinding halt. Wherever we are, we face an unparalleled health and economic emergency. Although, the impact and intensity of COVID 19 is relatively less in Pakistan so far, legacy inefficiencies and economic fragility may likely result in negative growth in the short term. In these conditions, Oracle project, centered on the development of an indigenous asset, becomes more important as it can set up ways for Pakistan to become self-sufficient in energy and even food. Further, in the post COVID world, as the drivers of globalisation are negatively impacted, large domestic markets such as those of Pakistan, present relatively greater growth and income opportunities. The Board of Oracle is also cognisant of imminent new industry, and opportunities in the region and elsewhere, and remains focused on delivering higher value.

I remain grateful to both the Provincial Government of Sindh and the Federal Government of Pakistan for their continuing support for the Block VI project, which we strongly believe will produce cheaper abundant power and become an important feedstock for Pakistan's agriculture sector in the future.

I also extend my greatest thanks to the shareholders for their support and belief in the Company, and for placing their trust in its management.

Ms Naheed Memon,

Chief Executive Officer

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE YEAR ENDED 31 DECEMBER 2019

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 DECEMBER 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2019

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2019

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

1. STATUTORY INFORMATION

Oracle Power PLC is a public company, limited by shares and registered and domiciled in England and Wales. It is the ultimate holding company of the Oracle Power Plc Group. The Group is primarily involved in an energy project, based on the exploration and development of coal and building a mine-mouth power plant in Pakistan. The presentation currency of the financial statements is the Pound Sterling (£). The company's registered number and registered office address can be found on the General Information page.

2. ACCOUNTING POLICIES

Going concern

The Directors have considered the cashflow requirements of the Group over the next 12 months and believe there are sufficient existing funds to meet overhead requirements. It will be necessary to raise additional funds to bring the project to financial close. The Directors expect to meet the funding requirements and therefore believe that the going concern basis is appropriate for the preparation of the financial statements.

The Directors have also considered the COVID-19 global pandemic and whether any adjustments are required to reported amounts in the financial statements. As at the reporting date no global pandemic had been declared. Subsequent to the reporting date with social distancing and restrictions on travel and in person meetings business has had to be carried out in a very different way which can delay or stop critical decisions being made.

The Directors have been able to continue with aspects of the project despite the restrictions put in place to deal with the pandemic. They have been able to carry out all internal functions as normal and progress the project.

Compliance with accounting standards

These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to reporting groups under IFRS.

The financial statements have been prepared under the historical cost convention.

Significant accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for revenues and expenses during the year and the amounts reported for assets and liabilities at the statement of financial position date. However, the nature of estimation means that the actual outcomes could differ from those estimates.

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement of any impairment on intangible assets and the estimation of share-based payment costs.

The principal risk and uncertainty of the intangible assets (exploration assets) is that the Group may not reach financial close - as disclosed in Note 9 of the full financial statements. The board have tested the intangible assets for impairment and concluded that no impairment provision is required.

The Group determines whether there is any impairment of intangible assets on an annual basis.

At the balance sheet date the intangible assets are carried forward at their cost of £4,633,022.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

Business acquisitions have been accounted for in accordance with IFRS 3, 'Business Combinations'. Fair values are attributed to the Group's share of net assets. Where the cost of acquisition exceeds the fair values attributed to such assets, the difference is treated as purchased goodwill and is capitalised. In the case of subsequent acquisitions of minority interests, the difference between the consideration payable for the additional interest in the subsidiary and the minority interest's share of the assets and liabilities reflected in the consolidated statement of financial position at the date of acquisition of the minority interest has been treated as goodwill.

Intangible fixed assets - exploration costs

Expenditure on the acquisition costs, exploration and evaluation of interests in licences, including related finance and administration costs, are capitalised. Such costs are carried forward in the statement of financial position under intangible assets and amortised over the minimum period of the expected commercial production of coal in respect of each area of interest where:

a) such costs are expected to be recouped through successful development and exploration of the area of interest or alternatively by its sale;

b) exploration activities have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active operations in relation to the areas are continuing.

An annual impairment review is carried out by the Directors to consider whether any exploration or development costs have suffered impairment in value where a site has been abandoned or confirmed as no longer technically feasible. Accumulated costs in respect of areas of interest that have been abandoned are written off to the profit and loss account in the year in which the area is abandoned.

Exploration costs are carried at cost less any provision for impairment.

Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation. Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Investments

Fixed asset investments are stated at cost. The investments are reviewed annually and any impairment is taken directly to the statement of profit or loss. Investments in subsidiaries are fully consolidated within the Group financial statements.

Financial instruments

Financial assets and liabilities are recognised on the statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Taxation

Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the statement of financial position date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

Profit and losses of overseas subsidiary undertakings are translated into sterling at average rates for the year. The statements of financial position of overseas subsidiary undertakings are translated at the rate ruling at the statement of financial position date. Differences arising from the translation of Group investments in overseas subsidiary undertakings are recognised as a separate component of equity.

Net exchange differences classified as equity are separately tracked and the cumulative amount disclosed as a translation reserve.

The principal place of business of the Group is the United Kingdom with sterling being the functional currency. Funds are advanced to Pakistan as required to finance the exploration costs which are payable locally.

Leasing commitments

All leases held are either short-term leases or are for low value assets. The rentals paid are charged to the statement of profit or loss on a straight line basis over the period of the lease.

Employee benefit costs

The group operates a defined contribution pension scheme. Contributions payable to the group's pension scheme are charged to the income statement in the period to which they relate.

Share-based payment transactions

Where equity settled share warrants are awarded to employees, the fair value of the warrants at the date of grant is charged to the statement of profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of warrants that eventually vest. Market vesting conditions are factored into the fair value of all warrants granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where terms and conditions of warrants are modified before they vest, the increase in the fair value of the warrants, measured immediately before and after the modification, is also charged to the statement of profit or loss over the remaining vesting period.

Where equity instruments are granted to persons other than employees, the statement of profit or loss is charged with the fair value of goods and services received.

Cash and cash equivalents

Cash and cash equivalents for the purpose of the cash flow statement comprise cash and bank balances.

New standards and interpretations applied

In preparing these financial statements the Company has reviewed all new standards and interpretations.

New Standards, Interpretations and Amendments effective from 1 January 2019

The following new and revised Standards and Interpretations have been adopted in these financial statements but their adoption has not had any significant impact on the amounts reported in these financial statements:

 - IFRS 16 Leases (issued January 2016)

 - IAS 19 Employee Benefits (amended 2018)

 - IFRS 3 Business Combinations (amended 2018)

 - IFRS 11 Joint Operations (amended 2014)

 - IFRS 9 Financial Instruments (amended 2017)

 - IAS 12 Income Tax (amended 2016)

 - IAS 32 Borrowing Costs (amended 2011)

The other new and revised Standards and Interpretations are not considered to be relevant to the Company's financial reporting and operations and are not detailed in these financial statements.

IFRS 16 Leases

In the context of the transition to IFRS 16, the Group has decided not to apply the new guidance to leases whose term will end within twelve months of the date of initial application. In such cases the leases will be accounted for as short-term leases and the lease payments associated with them will be recognised as an expense from short-term leases. The following reconciliation to the opening balance for the lease liabilities as at 1 January 2019 is based upon the operating lease obligations as at 31 December 2018:

The group has applied the short-term lease exemption in IFRS 16 and expensed lease payments rather than recognising a right of use asset and a lease liability. Details of the lease payments expensed as a result of these two expedients are included in Note 18 of the full financial statements.

New Standards, Interpretations and Amendments that are not yet effective and have not been adopted early

The following new and revised Standards and Interpretations are relevant to the Company but not yet effective for the year commencing 1 January 2019 and have not been applied in preparing these financial statements:

- IAS 1 Presentation of Financial Statements (amended 2018)

- IAS 8 Accounting Policies (amended 2018)

The Directors do not consider that the implementation of any of these new standards will have a material impact upon reported income or reported net assets.

3. SEGMENTAL REPORTING

The principal activity of the Group is an energy project, based on the exploration and development of coal mining and building a mine-mouth power plant in Pakistan. All expenditure is in respect of this one activity and the £4,633,022 (2018: £4,742,818) intangible non-current assets of the Group are wholly attributable to the project in Pakistan.

To-date the Group has raised a total £18.4m and spent £17.6m on this project, Thar Block VI.

The Group and Company had estimated UK excess management charges of £8,688,609 (2018: £7,622,334) to carry forward against future income. The overseas subsidiaries have losses of £107,226 (2018: £100,746) which will be carried forward to offset future profits. There is no charge for foreign taxation for the year (2018: nil).

While the financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRSs.