REH.L Regulatory News (REH)

28 June 2013

Renewable Energy Holdings plc

("the Company" or, together with its subsidiaries "the Group")

Annual Financial Report

For the year ended 31 December 2012

The Company is pleased to announce its results for the year ended 31 December 2012, which are set out below. The Report and Financial Statements for the year to 31 December 2012 will be posted to shareholders today and is available on the Company's website www.reh-plc.com.

For further information, please contact:

Chairman's statement

for the year ended 31 December 2012

I am pleased to set out an overview of the Group's strategic situation and a review of the Group's activities and financial results for the year ended 31 December 2012 together with other material events that have occurred during the course of 2013.

Wales

During the year work continued on finalising the 'Application for an Order granting Development Consent' (Planning Application) for the Group's 81MW Welsh wind farm project known as Mynydd Y Gwynt ("MyG"). The project is a Nationally Significant Infrastructure Project (as defined by the UK Planning Act 2008) and as such will be considered by the National Infrastructure Directorate in the Planning Inspectorate. The draft Environmental Statement has been published for statutory consultation and the directors believe that the whole planning process should be completed within two years.

As announced on 6 February 2013, the Group has entered into a facility with Utilico Limited ("Utilico") to provide £1.75m of working capital that is, in the view of the directors, necessary to progress MyG to receipt of planning consent (the "Utilico Facility"). In accordance with the terms of the Utilico Facility, circa £0.4m has been drawn down by the Group and used to further the MyG planning process. Also in accordance with the terms of the Utilico Facility, £0.75m has been drawn down and used to repay a loan due to EDF Energies Nouvelles SA (the "EDF Loan"). It is anticipated that the funds used to repay the EDF Loan will be replaced by a portion of the proceeds from the sale of the Group's fully permitted 30MW Polish wind project ("Kobylany").

Poland

In line with the Group's strategy, it has continued to market Kobylany to prospective purchasers, a number of which have completed due diligence on the project. As a result of feedback from these due diligence exercises, the directors have decided to register the grid connection cable route wayleaves such that it will provide an acquirer with the security that derives from more recently available Land Registry registration.

Carnegie Wave Energy Limited ("Carnegie")

The Group has disposed of approximately 50 per cent. of its holding in Carnegie and has applied the proceeds to meet general working capital requirements. At 31 December 2012 the Group owned approximately 8.5 per cent. of Carnegie's issued share capital and no further disposals of Carnegie shares have been made to date.

Overhead costs

Together with the reduction of the Group's asset base, the directors have continued, wherever possible, to reduce overhead expenditure. This has principally been achieved by reducing the number of the Group's employees and directors. As of 1 April 2013, the Group has had only one employee, and it is intended that this will be reduced to nil during the course of 2013 with the directors instead utilising external consultants as and when required. The corporate overhead will continue to be reduced in line with the Company's requirements and in line with staff numbers. The terms of the Utilico Facility as previously announced have been varied to enable the Company to draw down funds in order to meet general working capital requirements. The directors on the board who are deemed to be independent of Utilico (being Sir John Baker and Roger Harper) consider, having consulted with Strand Hanson Limited, that the variation of the terms of the Utilico Facility are fair and reasonable insofar as shareholders are concerned. 

Financial performance

The Group made a loss for the year of £6.9m, of which £4.8m relates to the losses in respect of the holding in the Carnegie shares. In addition, £0.4m was incurred in finance costs during the year, largely associated with the cost of loans from Utilico Limited.

Board changes

On 31 March 2013, Mike Proffitt stepped down as the Group's CEO to concentrate on other interests. Mike continues to advise the directors in his ongoing capacity as a consultant to the Group. I would like to take this opportunity to thank Mike for his contribution as CEO and the support that he is continuing to provide to the board of directors.

The directors continue to seek to maximise shareholder value in a challenging financial climate and look forward to updating the market in due course.

Directors' report

for the year ended 31 December 2012

The Directors present their report together with the audited Financial Statements of Renewable Energy Holdings plc ("the Company") and its subsidiaries (together "the Group") for the year ended 31 December 2012.

Results and dividends

The results of the Group for the year are set out below and show a loss for the year ended 31 December 2012 of £6,907,000 (2011: loss of £16,015,000).

The Directors do not recommend the payment of a dividend.

Principal activities, review of business and future developments

The Company is a limited liability company incorporated and domiciled in the Isle of Man. The Group's strategy is to be an owner and operator of European on-shore wind farms. During 2012 the Group continued to implement its strategy of developing its wind farm sites in Poland and Wales.

The Group also owns a stake in Australian wave power technology company Carnegie Wave Energy Limited ("CWE"). The Group held 8.52% of the equity of CWE at the Balance Sheet date.

A review of the business and future developments is given in the Chairman's Statement Report below.

Significant shareholdings

The following table represents shareholdings in the Company of 3% or more as at the 31 May 2013.

Name Number of shares % of shareholding

Utilico Limited 19,987,092 28.71

Weiss Asset Management 12,781,700 18.36

Henderson Global Investors 8,711,196 12.51

UBS AG 3,157,926 4.54

EDF Energies Nouvelles SA 3,000,000 4.31

Barclays Wealth 2,454,339 3.53

Directors

The Directors of the Company during the year and their beneficial interests (unless otherwise stated) in the ordinary share capital of the Company and options to purchase such shares under the Founders Share Option Scheme and the Executive Schemes were as follows at 31 December 2012.

No Director has any interest in the shares of any of the subsidiary companies or in the shares of the associate.

Further details of the Directors' share options and long term incentive schemes are shown in note 5 "Directors' remuneration" of the Consolidated Financial Statements which also shows the movements during the year. Details of any Directors' interest in transactions of the Group are given in note 29 "Related party transactions" of the Consolidated Financial Statements.

AuditorPricewaterhouseCoopers LLC resigned as auditors of the company on 7 March 2013. Crowe Morgan Chartered Accountants were appointed as auditors of the Company on 7 March 2013. The appointment will be ratified at the next Annual General Meeting.

Statement of Directors' Responsibilities in respect of the Annual Report and the financial statements 

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable Isle of Man law.Company law requires the Directors to prepare financial statements for each financial year. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period.In preparing those financial statements, the Directors are required to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and estimates that are reasonable and prudent;

·; state that the financial statements comply with IFRSs, as adopted by the European Union subject to any material departures disclosed and explained in the financial statements; and

·; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Isle of Man Companies Acts 1931 to 2004. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the Isle of Man governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. On behalf of the BoardRoger HarperChairman

Independent auditor's report to the members of

Renewable Energy Holdings plc

Report on the Consolidated and Parent Company Financial Statements

We have audited the accompanying consolidated and parent company financial statements ('the financial statements') of Renewable Energy Holdings plc and its subsidiaries (the 'Group') which comprise the consolidated and parent company balance sheets as at 31 December 2012, and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and parent company statements of changes in equity and the consolidated and parent company cash flow statements for the year then ended and a summary of significant accounting policies and other explanatory notes.

Directors' Responsibility for the Financial Statements

The Directors are responsible for the preparation and fair presentation of these financial statements in accordance with applicable Isle of Man law and International Financial Reporting Standards as adopted by the European Union, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. This report, including the opinion, has been prepared for and only for the company's members as a body in accordance with Section 15 of the Isle of Man Companies Act 1982 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

Opinion

In our opinion:

·; the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2012, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union;

·; the parent company financial statements give a true and fair view of the financial position of the parent company as at 31 December 2012, and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union; and

·; the financial statements have been properly prepared in accordance with the Isle of Man Companies Acts 1931 to 2004.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Isle of Man Companies Acts 1931-2004 require us to report to you if, in our opinion:

·; proper books of account have not been kept by the parent company or, proper returns adequate for our audit have not been received from branches not visited by us; or

·; the parent company's balance sheet is not in agreement with the books of account and returns; or

·; we have not received all the information and explanations necessary for the purposes of our audit; and

·; certain disclosures of directors' loans and remuneration specified by law have not been complied with.

8 St George's Street Crowe Morgan

Douglas, Isle of Man Chartered Accountants

IM1 1AH

Dated:

Consolidated income statement

for the year ended 31 December 2012

Consolidated statement of comprehensive income for the year ended 31 December 2012

Consolidated statement of changes in equity

for the year ended 31 December 2012

Consolidated statement of changes in equity

for the year ended 31 December 2011

Company statement of changes in equity

for the year ended 31 December 2012

Company statement of changes in equity

for the year ended 31 December 2011

Consolidated balance sheet at 31 December 2012

Company balance sheet at 31 December 2012

Mr Roger Harper, Chairman Sir John Baker, Director

Consolidated and company cash flow statements

for the year ended 31 December 2012

Consolidated and company cash flow statements

for the year ended 31 December 2012 (continued)

Notes forming part of the financial statements

for the year ended 31 December 2012

1 Accounting policies

The principal accounting policies adopted in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

Basis of preparation

These Consolidated Financial Statements have been prepared under the historical cost or fair value basis as appropriate in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").

Estimates, judgements and critical accounting policies

The preparation of Consolidated Financial Statements under IFRS requires the Directors to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on the net present value of future cash flows, historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below:

·; Going concern

In assessing the going concern basis of preparation of the financial information for the year ended 31 December 2012, the Directors have taken into account anticipated capital raised as the Group disposes of its assets in an orderly manner. The Directors have considered the status of current negotiations on the sale of assets and the timings of related cash flows. Forecasts and projections through to December 2014 have been prepared, taking into account the disposal plans and administrative cost savings. The Directors consider that the Group has sufficient facilities for its ongoing operations and therefore have continued to adopt the going concern basis in preparing the 2012 financial results.

·; Impairment of intangible assets

Intangible assets are carried at cost less a provision for impairment. They are required to be assessed for impairment annually and assessed on an ongoing basis to determine whether circumstances exist that could lead to the conclusion that the carrying value of such assets is not supportable or impaired. Such calculations are based on the net present value of future cash flows and require judgement relating to the appropriate discount factors and long term growth prevalent in a particular market as well as short term business performance. The Directors draw upon experience as well as external resources in making these judgements.

·; Useful lives of intangible assets and property, plant and equipment

Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on management's estimates of the period over which the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged or credited to the Consolidated Income Statement in specific periods.

New and amended standards adopted by the Group

There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on 1 January 2012 that have had a material impact on the Group.

Notes forming part of the financial statements

for the year ended 31 December 2012

1 Accounting policies

New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2012 and not early adopted.

IAS 1 (Amended), 'Financial statement presentation' regarding other comprehensive income. The main change resulting from these amendments is a requirement for entities to group items presented in 'other comprehensive income' ('OCI') on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The Group is yet to fully assess IAS 1's impact.

IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2011. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 required financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. The Group is yet to assess IFRS 9's full impact and intends to adopt IFRS 9 no later than the accounting period beginning on or after 1 January 2015.

IFRS 10, 'Consolidated financial statements', builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. The Group is yet to assess IFRS 10's full impact and intends to adopt IFRS 10 no later than the accounting period beginning on or after 1 January 2013.

IFRS 11, 'Joint arrangements', is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefore accounts for its share of assets, liabilities, revenue and expenses. Joint ventures arise where the joint venturer has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. IFRS 11 is not expected to impact the Group and the Group intends to adopt IFRS 11 no later than the accounting period beginning on or after 1 January 2014, the date it has been endorsed for by the EU.

IFRS 12, 'Disclosures of interests in other entities', includes the disclosure requirements for all forms of interest in other entities, including joint arrangements, associated, special purpose vehicles and other off balance sheet vehicles. The Group is yet to assess IFRS 12's full impact and intends to adopt IFRS 12 no later than the accounting period beginning on or after 1 January 2014.

Amendments to IFRSs 10, 11 and 12 on transition guidance provides additional transition relief to IFRS's 10,11 and 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. The Group is yet to fully assess the full impact of these amendments and intends to adopt the amendments to IFRS's 10,11 and 12 no later than the accounting period beginning on or after 1 January 2013, the date it has been endorsed for by the EU.

IFRS 13, 'Fair value measurement', aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. There is no impact on the Group from the adoption of IFRS 13. The Group will adopt IFRS 13 no later than the accounting period beginning on or after 1 January 2013.

Notes forming part of the financial statements

for the year ended 31 December 2012

New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2012 and not early adopted. (continued)

Annual improvements 2011 (issued May 2012), effective 1 January 2013, were issued by the IASB as part of the 'annual improvements process' resulting in amendments to 5 standards. The improvements have not had a significant impact on the Group.

IAS 27, 'Separate Financial Statements' (revised 2011), effective 1 January 2013, includes the requirements relating to separate Financial Statements, following the issue of IFRS 10. The Group is yet to fully assess IAS 27's impact and intends to adopt IAS 27 no later than the accounting period beginning on or after 1 January 2014, the date it has been endorsed for by the EU.

IAS 28 (revised 2011), 'Associates and joint ventures' effective 1 January 2013, includes the requirements for associates and joint ventures that have to be equity accounted following the issue of IFRS 11. The Group is yet to fully assess IAS 28's impact and intends to adopt IAS 28 no later than the accounting period beginning on or after 1 January 2014, the date it has been endorsed for by the EU.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The Consolidated Financial Statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity.

Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than half the voting rights. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method of accounting for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Investments

Investments in the Company Balance Sheet represent investments in subsidiary companies and associates and are stated at cost less provision for impairment.

Operating segmentsOperating segments are reported in a manner consistent with the internal reporting provided to the board of Directors, who are responsible for allocating resources and assessing performance of the operating segments.

Associates

Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the Consolidated Balance Sheet at cost. The Group's share of post-acquisition profits and losses is recognised in the Consolidated Income Statement, except that losses in excess of the Group's investment in the associate are not recognised unless there is an obligation to make good those losses.

Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The Group's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.

Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

Impairment of non-financial assets

Impairment tests on intangible assets with indefinite useful economic lives or that are not yet in use, are undertaken annually at the end of each accounting period.

Assets that are amortised and depreciated are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. At each reporting date the Directors' assess whether there is any objective evidence that the Group's investment in associate is impaired.

In the event of an impairment, a loss is recognised in the Consolidated Income Statement for the amount by which the asset's carrying value may not be recoverable. The recoverable amount is the higher of the asset's fair value less costs to sell and value in use. An impairment charge is generally recognised when there is a significant or prolonged decline in an asset's fair value for a period of two years or more.

Foreign currency

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the Balance Sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the Consolidated Income Statement.

Assets classified as held for sale

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered

principally through a sale transaction rather than continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its current condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of the classification.

When the group is committed to the sale plan involving the loss of control of a subsidiary, all the assets and liabilities of that subsidiary are classified held for sale when the above criteria are met.

Non current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying value and fair value less cost to sell.

Foreign currency (continued)

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the Balance Sheet date. Resulting exchange differences are recognised directly in Other Comprehensive Income ("Foreign Exchange Reserve").

Exchange differences recognised in the Income Statements of group entities' separate financial statements on the translation of long-term monetary items forming part of the Group's net investment in the overseas operation concerned are reclassified to the foreign exchange reserve on consolidation.

On disposal of a foreign operation, the cumulative exchange differences recognised in the Foreign Exchange Reserve relating to that operation up to the date of disposal are transferred to the Consolidated Income Statement as part of the profit or loss on disposal.

Financial assets

The Group classifies its financial assets as loans and receivables, available for sale assets and cash and cash equivalents. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of it financial assets at initial recognition. The Group's accounting policies for loans and receivables and available for sale assets are as follows:

Available for sale financial assets

Quoted shares held by the Group that are traded on an active market are classified as available for sale and are stated at fair value. Fair value is determined with reference to the market value of the shares.

Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the available for sale reserve, with the exception of impairment losses which are recognised in profit and loss.

The fair value of available for sale assets denominated in a foreign currency is determined in that currency and translated at the spot rate at the end of the reporting period.

Loans and receivables 

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. They are carried at fair value on recognition and held at amortised cost less any provision for impairment.

The Company classifies amounts due from subsidiaries as loans and receivables.

Financial liabilities

Other financial liabilities include the following items:

·; Trade payables and other short-term monetary liabilities are recognised initially at fair value and subsequently measured at amortised cost.

·; Loans payable are initially recognised at fair value. Such interest bearing liabilities are subsequently measured at amortised cost to ensure that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the Balance Sheet. "Interest expense" in this context includes initial transaction costs and premiums payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

Retirement benefits: Defined contribution schemes

The Group operates a defined contribution pension scheme. A defined contribution scheme is a pension scheme under which the Group pays fixed contributions to a separate entity.

The Group has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current or prior periods.

Share-based payments

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

Where equity instruments are granted to persons other than employees, the Consolidated Income Statement is charged with the fair value of goods and services received.

The charge for share-based payment is calculated in accordance with the analysis described in note 23. The option valuation models used require highly subjective assumptions to be made including the future volatility of the Group's share price, expected dividend yield, risk-free interest rates and expected staff turnover. The Directors draw upon a variety of external sources to aid in the determination of the appropriate data to use in such calculations.

Operating leases

Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an "operating lease"), the total rental payable under the lease is charged to the Consolidated Income Statement on a straight-line basis over the lease term.

Internally generated intangible assets (research and development costs)

Expenditure on internally developed products is capitalised if it can be demonstrated that:

·; it is technically feasible to develop the asset so that it will be available for use;

·; adequate technical, financial and other resources are available to complete the development;

·; there is an intention to complete, use or sell the asset;

·; the Group is able to use or sell the asset;

·; sale of the asset will generate future economic benefits; and

·; expenditure on the asset can be measured reliably.

Capitalised development costs are amortised from the point at which they are available for use, over the period the Group expects to benefit from using or selling the products developed. The amortisation expense is included in administrative expenses in the Consolidated Income Statement.

Research and development expenditure not satisfying the above criteria and expenditure on the research phase of projects are recognised and disclosed separately in the Consolidated Income Statement as incurred.

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives. The amortisation expense is included within administrative expenses in the Consolidated Income Statement.

Intangible assets are recognised at fair value on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights.

Externally acquired intangible assets (continued)

In-process research and development programmes acquired in such combinations are recognised as an asset even if subsequent expenditure is written off because the criteria specified in the policy for research and development costs above are not met.

The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

Historic cost is the market value on the date of acquisition. Wind farm planning permission and permits and Wind farm planning application are subject to an annual impairment review.

Whilst a wind farm is under construction or pending planning consent and therefore is not available for use, the Board will review the carrying value for impairment at least annually.

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs.

Depreciation is provided on all items of property, plant and equipment to write off the carrying value of items over their expected useful economic lives, at the following rates:

Plant, machinery and motor vehicles: 10% - 33% per annum straight line

Assets under construction are recognised at cost and will be depreciated when brought into use.

2 Acquisition of Mynydd Y Gwynt Limited

During 2011, the Group paid £2,000 for 2,000 "A" preference shares of Mynydd Y Gwynt Limited ("MYG"). MYG has the right to the land leases at the proposed 81 MW Sweetlamb wind farm and is responsible for the related planning application. MYG also has 1,000 ordinary shares in issue owned by its founders.

The Group controls MYG due to it owning over 50% of the voting rights and having the power to appoint the majority of the board of directors. In addition, an "A" preference shareholder has to be present for quorum to exist. The "A" preference shares are not entitled to participate in the profits of MYG and therefore the "A" preference shares are not classified as equity resulting in the non-controlling interest being 100% of MYG. MYG has been consolidated from 24 November 2011, the date the Group achieved control.

MYG's assets and liabilities have been recognised in the Group's Consolidated Balance Sheet at fair value. The non-controlling interest in MYG has been recognised at the fair value of the non-controlling interests proportionate share of identifiable net assets. As all expenditure of MYG has been capitalised into property, plant and equipment, there is no profit or loss attributable to the non-controlling interest.

Under the terms of an existing agreement between the Group and the ordinary shareholders of MYG for which the Group paid £750,000 included in "other receivables and prepayments", the Group has the option to acquire the ordinary shares of MYG once MYG achieves planning permission.

Upon exercising the option, £225,000 per MW is payable to the ordinary shareholders of MYG. Under the terms of the agreement, these ordinary shares will be acquired by the Group on payment of the consideration. This amount is included within "Trade and other receivables" on the Consolidated Balance Sheet.

Prior to the Group gaining control over Mynydd Y Gwynt, Mynydd Y Gwynt's working capital requirements of up to £500,000 were funded by Howard Evans, an original shareholder. This amount is repayable and contingent on receiving planning consent for the Mynydd Y Gwynt wind farm (and will be settled from the consideration paid to the original shareholders). The board expects this to occur in 2014 and therefore this is classified within non-current liabilities.

3 Profit/(loss) for the year from continuing operations

4 Staff costs

5 Directors' remuneration

In 2011 the Board agreed to award Mr Michael Proffitt 500,000 shares however the award was subsequently cancelled prior to the share options being issued.

A share-based payment expense of £Nil (2011: £27,000) was recognised in the year. £Nil (2011: £14,825) of this charge relates to share options awarded to Mr Michael Proffitt.

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

The charge for share-based payment is calculated using option valuation models. The option valuation models used require highly subjective assumptions to be made including the future volatility of the Company's share price, expected dividend yield, risk-free interest rates and expected staff turnover. The Directors draw upon a variety of external sources to aid in the determination of the appropriate data to use in such calculations. Details of the assumptions applied are set out in note 23.

6 Segment information

The Group had four main reportable segments during the year ended 31 December 2012. The segments at 31 December 2012 were:

·; Head office - this segment represents the operation of the Group's head office facility in the Isle of Man.

·; CETO development - this segment represents the Group's investment in CETO technology development operations in Perth, Western Australia. This technology was sold in 2009 and the amounts in this segment relate to costs associated with the Group's Australian subsidiary and its shareholding in Carnegie Wave Energy Limited.

·; Polish wind farms - this segment represents the wind farm under construction at Kobylany.

·; Welsh wind farms - this segment represents the wind farm development project at Sweetlamb.