Rurelec Regulatory News (RUR)

30 Jun 2009 10:45

30th June, 2009

PRELIMINARY RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2008 (audited)

("Rurelec" or "the Company")

Highlights

Guaracachi - record results in local Bolivian accounting terms and excellent progress on conversion of 96MW "CCGT" capacity

EdS - 60MW of new capacity now in operation

Group turnover increased by 29 % to £29.1m (2007: £22.6m)

Operating loss of £0.2m (2007: profit £2.3m) and loss after tax of £4.2m (2007: loss £0.4m) affected by increased fuel expense in Guaracachi, consolidation of 100% of EdS before new and more efficient capacity has been brought into use, and higher interest charges

Decision on dividend proposal delayed until 3rd quarter of 2009

Post year end highlights

Raised £7.3m from issue of new equity

Sale of 50% of EdS to reduce Group borrowings

Estimated pro-forma Net Asset Value per share of 29p, based on equity shareholders' funds at 31 December 2008 (£52m) adjusted by 119.6m shares issued after the year-end in respect of capital raising and loan capitalisation conducted at 8p per share.

Jimmy West, Chairman, said: "2008 has seen significant progress despite the difficult economic conditions. The additional capacity which will be brought on-line in 2009 should see a marked improvement in results and the addition of expected income from CERs in 2010 should see the Group begin to generate positive cashflow and increasing dividends for shareholders" 

For further information please contact: Peter Earl, CEO, Rurelec PLC	020 7793 5610
Paul Shackleton, Daniel Stewart & Company Plc	020 7776 6550
Ana Ribeiro, Farm Street Media	020 7851 7480

In accordance with the AIM Rules, copies of the results are also available on the Company's website, www.rurelec.com

   

CHAIRMAN'S STATEMENT

The Group's strategy is to own and operate modern, low emission power generation plants in Latin America, paying dividends to shareholders based on strong cash flows and at the same time, developing and constructing new power generation capacity with judicious use of project and local subsidiary company debt.

2008 saw some significant progress for Rurelec in spite of the difficult global economic climate in which the year ended. The Group continued to add more new generating capacity than at any time in its history and broke all records for the number of megawatt hours generated by the Group. This excellent progress in terms of power plant capacity and revenue is not obvious from the consolidated figures announced today.

In the twelve months ended 31st December 2008, Rurelec is reporting an after tax loss, excluding minority interests, of £4.2m (2007 loss - £0.6m).

The Group's operating results showed a loss of £0.2m (2007 £2.3m profit) which, after interest and tax charges, widened to the consolidated after tax loss of £4.2m. Increased fuel expense in Empresa Electrica Guaracachi S. A. ("Guaracachi"), consolidation of 100 per cent. of Energia del Sur S. A. ("EdS") and increased financing costs are the main components of the change.

The Group is reporting a basic, diluted and underlying loss per share of 5.23p (2007 loss - 0.85p).

At the operating company level in Bolivia, under the local accounting principles which govern the Company's ability to receive dividends from Guaracachi,  net income rose to a record US$10.25m while revenues increased to US$45m (2007 US$9.6m and US$42m respectively). The Guaracachi dividend has been declared at last year's level of US$7.05m, of which Rurelec's share (after withholding taxes) will be approximately US$3m. However the combined cycle project at EdS in Patagonia was delayed beyond year end and so Argentina was again a negative contributor, with the loss widening to Ar$10.9m (2007 loss - Ar$9.6m). Since the year end EdS has fully commissioned its new 60 MW of combined cycle capacity and the plant is expected to make a major contribution to the group from now onwards.

The Board anticipates declaring and paying a dividend during the second half of 2009, subject to no unforeseen circumstances and the availability of cash and distributable profits. This prudent approach reflects the fact that Guaracachi will be paying its 2008 dividend to shareholders only when it has satisfied its Board that it has on deposit all of the monies necessary to complete its current combined cycle gas turbine ("CCGT") plant in Santa Cruz. That dividend is expected in the third quarter of 2009 and will in turn be used to fund Rurelec's own dividend payment.

Guaracachi is the largest generating company in Bolivia and the only private power company to have installed new capacity there in recent years, bringing on 8 MW in 2006, 71 MW in 2007 and a further 7.4 MW in 2008 with the completion of commissioning of three more Jenbacher 616 gas engines at Sucre during the course of the year. During 2008 management in Bolivia, with assistance from the UK, finalised the design, procurement and financing of their largest new capacity project of all whilst under Rurelec's majority control, the 96 MW CCGT conversion and expansion project now under construction in Santa Cruz and due for completion towards the end of 2009. This is the first CCGT plant to be installed in Bolivia. Upon commissioning, Guaracachi will have 238 MW of CCGT capacity in operation. The installation of the 96 MW steam turbine and associated boilers is the single largest power generation unit ever to be brought on line in Bolivia. The cost of the project is now set at US $68 million and the cost has been successfully financed through a combination of multi-lateral debt, local bank debt and local bond finance.

By contrast, EdS had a mixed year as a result of difficulties arising from turbulence in the local market. The local finance market in Argentina has not been strong enough to provide local debt for badly needed expansion activities, a circumstance that forced EdS to look overseas for finance and which has not allowed it to top up its finances as planned. Positive factors, like the settlement of Paris Club debt and increasing demand for electricity, were overshadowed by upheavals in the pension sector, strikes and pay increases impacting the construction industry. Even the volcano in Chile proved a hindrance, causing airports to be closed, and thereby contributing to delays in the construction programme in Patagonia.

In spite of the difficulties, we are able to report that the expansion project in Patagonia has now entered full commercial operations and will shortly have completed all formalities with CAMMESA, the Argentine system operator, to be registered as such.

The rapid deterioration in general market sentiment has hit AIM share prices hard, and we have not been immune. Part of the Rurelec share price fall has been due to uncertainty about how we were to refinance the debt we took on when we acquired full ownership of EdS from our then partners, Basic Energy. Since the year end we have managed to resolve that issue through the support of shareholders, both old and new, who have participated in the recent fundraising, and through the decision by Basic Energy to return as a shareholder in EdS. Rurelec has raised £7.3 million of cash from the issue of new shares in 2009 to strengthen its balance sheet and to pay down part of the EdS loan with Standard Bank. This has placed us in a better position to refinance our Argentine operations.

With the completion of the combined cycle projects at both EdS and Guaracachi this year, we can look forward to a more stable platform for the future. 2009 will see a remarkable increase in capacity. Once again, I am proud of the hard work management and employees have put in over the year and I would also like to thank Freddie Fisher for serving as a director of Rurelec until his retirement from the Board earlier this year.

Jimmy West

Chairman

29 June 2009

  

CHIEF EXECUTIVE'S REVIEW OF OPERATIONS

2008 was one of the most turbulent years in financial markets since the 1930s and saw a complete meltdown in project finance and international cross-border lending. It is against this background that the resilience of Rurelec's power plants and projects should be judged.

It has always been Rurelec's policy to maintain conservative levels of borrowing. The Group has gearing ratios of less than one to one while typical quoted power companies have gearing ratios of over two to one. Both Guaracachi and Energia del Sur power plants entered the credit crunch with low levels of overall borrowings. Nonetheless, the collapse of Lehman Brothers in September 2008 led to a freezing of nearly all bank and public market lending activity and it is to the credit of the shareholder base of Rurelec that we were able to respond to this dramatic change of fortunes in financial markets and arrange a rapid capital increase at Rurelec in the first four months of 2009 in order to pay down London-based project debt when it became clear that this was necessary.

As these financial statements are published, bank lending is beginning to flow once more in US and European markets. In Latin America, however, Rurelec has been fortunate enough to operate in markets where banks did not collapse and where lending has continued. Hence since September 2008 Guaracachi has drawn down US $20 million of development bank loans and has secured a further US $20.3 million of bond placings and a further US $18 million of loans from Bolivian banks. Such liquidity in the same period was unheard of for British companies dealing with British high street banks. During the same period Guaracachi improved its debt rating, a considerable achievement.

Now in Argentina we are seeing the first signs of a bounce in the bond markets. EdS is in the process of arranging its first ever debt rating with a view to tapping the pension funds market for debt placings. This will be the first step in an overall re-financing of the Comodoro Rivadavia plant now that it has been completed and commercial operation achieved. At 136 MW of highly efficient combined cycle capacity, EdS is a valuable asset for the Rurelec group and the plant is well positioned to earn premium capacity payments under the incentive programme of the Government in Argentina called Energia Plus.

In previous years Rurelec has drawn the attention of shareholders to its expansion programme. Between 2008 and 2009, Rurelec will have added 156 MW of new combined cycle capacity between Argentina and Bolivia. This is a massive step change in installed capacity, and it is only right that shareholders should expect a pause while this new capacity is absorbed. Earnings and cash flow will improve as a result of both the margin increase which CCGT plants provide when operated in base load as well as from the welcome contribution of income from carbon credits. By 2010, Rurelec plants will be generating around half a million CERs a year. At current spot prices, that will translate into income from CERs of around US $8.5 million a year before adjustment for minority holdings. That is a substantial contribution and is in line with our plans to make all new Rurelec power plant capacity low emissions capacity. Few other companies quoted in London can point to so high a contribution from carbon credits. This is a measure of our success both in building new plants and in building plants which are recognised by the United Nations as contributing to a global reduction in emissions of carbon dioxide.

The last twelve months have been a miserable period for shareholders and management of Rurelec alike. I hope that the second half of 2009 will see a resurgence in our fortunes as we deliver the electricity that our customers in Latin America so badly need.

Peter Earl

Chief Executive

29 June 2009

  

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2008

		Year ended	Year ended
		31.12.08	31.12.07
	Notes	£'000	£'000
Revenue	4	29,133	22,636
Cost of sales	6	(24,719)	(17,409)
Gross profit		4,414	5,227
Administrative expenses	7	(4,564)	(2,959)
Operating (loss) / profit		(150)	2,268
Other income	9	-	423
Finance income	10	203	93
Finance expense	10	(3,283)	(1,089)
(Loss) / profit before tax		(3,230)	1,695
Tax expense	11	(923)	(1,271)
(Loss) / profit for the year		(4,153)	424
Attributable to:
Minority interests		4	1,027
Equity shareholders		(4,157)	(603)
		(4,153)	424
Basic and diluted loss per share	14	(5.23p)	(0.85p)

All activities relate to continuing activities

CONSOLIDATED BALANCE SHEET

At 31 December 2008

		31.12.08	31.12.07
	Notes	£'000	£'000
Assets
Non-current assets
Property, plant and equipment	15	168,053	87,235
Intangible assets	16	9,335	-
Trade and other receivables	17	4,793	100
Deferred tax assets	18	1,112	650
		183,293	87,985
Current assets
Inventories	19	3,817	2,562
Trade and other receivables	17	9,939	5,150
Current tax assets	20	4,154	3,238
Cash and cash equivalents	21	5,031	10,599
		22,941	21,549
Total assets		206,234	109,534
Equity and liabilities Shareholders' equity
Share capital	22	1,716	1,466
Share premium account		31,558	23,983
Foreign currency reserve		7,570	(5,550)
Other reserves		3,150	-
Retained earnings		8,024	14,326
Total equity attributable to shareholders of Rurelec PLC		52,018	34,225
Minority interests		37,116	28,681
Total equity		89,134	62,906
Non-current liabilities
Trade and other payables	23	290	179
Deferred tax liabilities	18	4,052	978
Borrowings	25	47,264	20,479
		51,606	21,636
Current liabilities
Trade and other payables	23	27,185	15,239
Current tax liabilities	24	2,347	1,707
Borrowings	25	35,962	8,046
		65,494	24,992
Total liabilities		117,100	46,628
Total equity and liabilities		206,234	109,534

The financial statements were approved by the board of directors on 29 June 2009 and were signed on its behalf by P Earl (Chief Executive) and E Shaw (Finance Director).

COMPANY BALANCE SHEET

At 31 December 2008

		31.12.08	31.12.07
	Notes	£'000	£'000
Assets
Non-current assets
Investments	27	16,649	3,777
Trade and other receivables	17	34,075	22,143
		50,724	25,920
Current assets
Trade and other receivables	17	1,288	36
Cash and cash equivalents	21	42	1,517
		1,330	1,553
Total assets		52,054	27,473
Equity and liabilities
Shareholders' equity
Share capital	22	1,716	1,466
Share premium account		31,558	23,983
Retained earnings		(646)	736
Total equity		32,628	26,185
Current liabilities
Trade and other payables	23	592	176
Borrowings	25	18,834	1,112
		19,426	1,288
Total equity and liabilities		52,054	27,473

The financial statements were approved by the board of directors on 29 June 2009 and were signed on its behalf by P Earl (Chief Executive) and E Shaw (Finance Director).

  

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2008

		Year ended 31.12 08	Year ended 31.12.07
	Notes	£'000	£'000
Cash flows from operating activities
Cash generated from operations	26	3,478	17,234
Interest received		203	93
Interest paid		(1,418)	(947)
Taxation paid		(915)	(994)
Net cash generated from		1,348	15,386
operating activities
Cash flows from investing activities
Purchase of plant and equipment	15	(29,186)	(20,854)
Sale of plant and equipment		1,250	-
Acquisition (net of cash)	28	(5,989)	-
Net cash used in investing activities		(33,925)	(20,854)
Net cash outflow before financing activities		(32,577)	(5,468)
Cash flows from financing activities
Issue of shares (net of costs)	22	7,825	2,780
Loan drawdowns		31,350	17,180
Loan repayments		(7,515)	(3,742)
Dividend paid to minorities		(2,506)	(1,717)
Equity dividend paid	12	(2,145)	(1,613)
Net cash generated from financing activities		27,009	12,888
(Decrease) / increase in cash and cash equivalents		(5,568)	7,420
Cash and cash equivalents at start of year		10,599	3,179
Cash and cash equivalents at end of year		5,031	10,599

  

COMPANY CASH FLOW STATEMENT

For the year ended 31 December 2008

		Year ended	Year ended
		31.12 08	31.12 07
	Notes	£'000	£'000
Cash flows from operating activities
Cash generated from / (used in) operations	26	674	(846)
Interest received		87	61
Tax paid		(22)	-
Interest paid		-	(2)
Net cash generated from / (used in) operations		739	(787)
Cash flows from investing activities
Dividend received (net of tax)		1,591	1,520
Acquisition	28	(6,219)	-
Loans to subsidiaries and joint venture company		(10,986)	-
Repayment of loan by joint venture company		-	368
Net cash (used in) / generated from investing activities		(15,614)	1,888
Net cash outflow / (inflow) before financing activities		(14,875)	1,101
Cash flows from financing activities
Issue of shares (net of costs)	22	7,825	2,780
Loan drawdowns / (repayments)		7,720	(817)
Equity dividend paid	12	(2,145)	(1,613)
Net cash generated from financing activities		13,400	350
(Decrease) / increase in cash and  cash equivalents		(1,475)	1,451
Cash and cash equivalents at start of year		1,517	66
Cash and cash equivalents at end of year		42	1,517

  

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2008

Attributable to equity shareholders

	Share	Share	Foreign	Retained	Other	Total	Minority	Total
	capital	premium	currency	earnings	reserves		interest	equity
			reserve
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1.1.07	1,366	21,303	(4,948)	16,542	-	34,263	29,985	64,248
(Loss)/profit for year	-	-	-	(603)	-	(603)	1,027	424
Exchange differences	-	-	(602)	-	-	(602)	(614)	(1,216)
Total recognised income	-	-	(602)	(603)	-	(1,205)	413	(792)
and expense for the year
Allotment of shares	100	2,827	-	-	-	2,927	-	2,927
Share issue costs	-	(147)	-	-	-	(147)	-	(147)
Minority dividend	-	-	-	-	-	-	(1,717)	(1,717)
Equity dividend	-	-	-	(1,613)	-	(1,613)	-	(1,613)
Balance at 31.12.07	1,466	23,983	(5,550)	14,326	-	34,225	28,681	62,906
Balance at 1.1.08	1,466	23,983	(5,550)	14,326	-	34,225	28,681	62,906
(Loss) / profit for year	-	-	-	(4,157)	-	(4,157)	4	(4,153)
Exchange differences	-	-	13,120	-	350	13,470	10,937	24,407
Revaluation
on acquisition	-	-	-	-	2,800	2,800	-	2,800
Total recognised income	-	-	13,120	(4,157)	3,150	12,113	10,941	23,054
and expense for the year
Allotment of shares	250	7,875	-	-	-	8,125	-	8,125
Share issue costs	-	(300)	-	-	-	(300)	-	(300)
Minority dividend	-	-	-	-	-	-	(2,506)	(2,506)
Equity dividend	-	-	-	(2,145)	-	(2,145)	-	(2,145)
Balance at 31.12.08	1,716	31,558	7,570	8,024	3,150	52,018	37,116	89,134

COMPANY STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2008

	Share	Share	Retained	Total
	capital	premium	earnings	equity
	£'000	£'000	£'000	£'000
Company
Balance at 1.1.07	1,366	21,303	1,662	24,331
Profit for the year	-	-	687	687
Total recognised income	-	-	687	687
and expense for the year
Allotment of shares	100	2,827	-	2,927
Share issue costs written-off	-	(147)	-	(147)
Equity dividend	-	-	(1,613)	(1,613)
Balance at 31.12.07	1,466	23,983	736	26,185
Balance at 1.1.08	1,466	23,983	736	26,185
Profit for the year	-	-	763	763
Total recognised income	-	-	763	763
and expense for the year
Allotment of shares	250	7,875	-	8,125
Share issue costs written-off	-	(300)	-	(300)
Equity dividend	-	-	(2,145)	(2,145)
Balance at 31.12.08	1,716	31,558	(646)	32,628

  

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2008

1 General information

Rurelec PLC is the Group's ultimate parent company. It is incorporated and domiciled in England and Wales. The address of Rurelec's registered office is given on the information page. Rurelec's shares are traded on the AIM market of the London Stock Exchange PLC. The nature of the Group's operations and its principal activities are the generation of electricity in South America.

These consolidated financial statements have been approved by the Board of directors on 29th June 2009.

2 Summary of accounting policies

2.1 Basis of preparation

The Company and the consolidated financial statements have been prepared in accordance with applicable and International Financial Reporting Standards ("IFRSs") as adopted by the European Union (EU).

2.2 Going concern

Since the year-end, the Company has raised £7.3m before expenses from the issue of new share capital. As stated at the time of that fund raising, the Board intends to raise additional loan finance at the subsidiary level over the next 12 months in order to provide additional working capital to fund both their existing projects and new projects and to meet their loan repayment obligations.

Although funding for the expansion in Guaracachi is already secured and negotiations to raise US$25m of new loan finance in Argentina for EdS are well advanced, the Directors have concluded that the recent difficulties in the debt market for project finance represents a material uncertainty that casts some doubt upon the Group's and the Company's ability to continue as a going concern for the foreseeable future.

Nevertheless, after making enquiries and considering the uncertainties, the Directors have a reasonable expectation that the Group and the Company does and will continue to have adequate resources to continue in operational existence for the foreseeable future and for this reason, the Directors continue to adopt the going concern basis in preparing these financial statements.

2.3 New accounting standards

The following new standards, amendments to standards or interpretations are mandatory for the first time for the year beginning 1 January 2008 but have no material impact on the results of the Group.

IFRIC 11, (IFRS 2 - Group and Treasury Share Transactions)

IFRIC 12, (Service Concession Arrangements)

IFRIC 14, (IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction)

The following new standards, amendments to standards or interpretations have been issued but are not effective for the financial year beginning on 1 January 2008 and have not been early adopted.

IAS 1 Presentation of Financial Statements (revised 2007) (effective 1 January 2009) 

IAS 23 Borrowing Costs (revised 2007) (effective 1 January 2009) 

Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation (effective 1 January 2009) 

IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective 1 July 2009) 

Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations (effective 1 January 2009) 

Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements - Costs of Investment in a Subsidiary, Jointly Controlled Entity or Associate (effective 1 January 2009) 

Amendment to IAS 39 Financial Instruments: Recognition and Measurement - Eligible Hedged Items (effective 1 July 2009) 

Improvements to IFRSs (effective 1 January 2009 other than certain amendments effective 1 July 2009) 

IFRS 3 Business Combinations (Revised 2008) (effective 1 July 2009) 

IFRS 8 Operating Segments (effective 1 January 2009) 

IFRIC 12 Service Concession Arrangements (effective 1 January 2008) 

IFRIC 13 Customer Loyalty Programmes (effective 1 July 2008) 

IFRIC 15 Agreements for the Construction of Real Estate (effective 1 January 2009) 

IFRIC 16 Hedges of a Net Investment in a Foreign Operation (effective 1 October 2008)

The Directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the accounts of the Group.

2.4 Basis of consolidation

The Group financial statements consolidate those of the Company, its subsidiary undertakings and, for the first six months of the year, its joint venture entity, drawn up to 31 December 2008.

Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

Joint ventures are arrangements in which the Group has a long-term interest and shares control under a written contractual agreement. The Group reports its interests in jointly controlled entities using proportionate consolidation such that the Group's share of the assets, liabilities, income and expenses of jointly controlled entities are combined with the equivalent items in the consolidated financial statements on a line by line basis.

Goodwill, or the excess of interest in acquired assets, liabilities and contingent liabilities over cost, arising on the acquisition of the Group's interest in subsidiary or jointly controlled entities is accounted for in accordance with the Group's accounting policy for goodwill arising on the acquisition of a subsidiary.

Unrealised gains on transactions between the Group and subsidiary and joint venture entities are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiary and joint venture entities have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Acquisitions of subsidiaries and joint venture entities are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the acquired company, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the entity prior to acquisition. On initial recognition, the assets and liabilities of the acquired entity are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. Investments in subsidiaries and joint ventures are stated at cost in the balance sheet of the Company.

In a business combination achieved in stages, a "step acquisition", any revaluation of the Group's existing interest in the identifiable assets and liabilities of the company, which may arise following recognition of the fair value of the identifiable assets and liabilities of the acquired company at the most recent acquisition date, is taken directly to a revaluation reserves.

As set out in note 2.2, the financial statements have been prepared on a going concern basis.

2.5 Goodwill

Goodwill representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is capitalised and reviewed annually for impairment. Goodwill is stated after separating out identifiable assets and liabilities. Goodwill is carried at cost less accumulated impairment losses. Any excess of interest in acquired assets, liabilities and contingent liabilities over cost ('negative goodwill') is recognised immediately after acquisition through the income statement.

2.6 Foreign currency translation

The financial information is presented in pounds sterling, which is also the functional currency of the parent company.

In the separate financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of remaining balances at year-end exchange rates are recognised in the income statement in administrative expenses.

In the consolidated financial statements, all separate financial statements of subsidiary and jointly controlled entities, originally presented in a currency different from the Group's presentation currency, have been converted into sterling. Assets and liabilities have been translated into sterling at the closing rate at the balance sheet date. Income and expenses have been converted into sterling at the average rates over the reporting period. Any differences arising from this procedure have been charged/(credited) to the Foreign Currency Reserve.

2.7 Income and expense recognition 

Revenue is recognised upon the performance of services or transfer of risk to the customer. Revenues represent the total amount receivable by the Group for electricity sales, excluding VAT. Electricity sales includes the income from the sale of electricity generated and the income received for keeping power plants operating and available for despatch into the grid as required. During the year under review and the prior year, no revenues were derived from the sale of equipment purchased with a view to subsequent resale.

Operating expenses are recognised in the income statement upon utilisation of the service or at the date of their origin. All other income and expenses are reported on an accrual basis.

2.8 Dividends

Dividends paid/payable are recognised on a cash paid/cash received basis.

2.9 Borrowing costs

All borrowing costs are expensed as incurred except where the costs are directly attributable to specific construction projects, in which case the interest cost is capitalised as part of those assets.

2.10 Property, plant and equipment 

Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. No depreciation is charged during the period of construction.

All operational buildings and plant and equipment in the course of construction are recorded as plant under construction until such time as they are brought into use by the Group. Plant under construction includes all direct expenditure and may include capitalised interest in accordance with the accounting policy on that subject. On completion, such assets are transferred to the appropriate asset category.

Repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of major renovations and overhauls is included in the carrying amount of the assets where it is probable that the economic life of the asset is significantly enhanced as a consequence of the work. Major renovations and overhauls are depreciated over the expected remaining useful life of the work.

Depreciation is calculated to write down the cost less estimated residual value of all property, plant and equipment other than freehold land by equal annual instalments over their estimated useful economic lives. The periods generally applicable are:

	Buildings		25 to 50 years
	Plant and equipment		3 to 15 years

Material residual values are updated as required, but at least annually. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

2.11 Impairment of tangible and intangible assets

At each balance sheet date, the Group reviews the carrying amount of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

2.12 Taxation

Current income tax assets and liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the period. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement or through the statement of recognised income and expense.

Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. However, in accordance with the rules set out in IAS 12, no deferred taxes are recognised in respect of non-tax deductible goodwill. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided for in full with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided that they are enacted or substantially enacted at the balance sheet date.

No deferred tax is provided on differences between the fair value of assets and liabilities acquired in an acquisition and the carrying value of the assets and liabilities of the acquired entity nor on the differences relating to investments in subsidiary and joint venture companies to the extent that the temporary difference can be controlled will probably not reverse in the foreseeable future.

Changes in deferred tax assets and liabilities are recognised as a component of tax expense in the income statement, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

2.13 Financial assets

The Group's financial assets include cash and cash equivalents, loans and receivables.

Cash and cash equivalents include cash at bank and in hand as well as short term highly liquid investments such as bank deposits.

Loans and receivables are non-derivative financial assets with fixed or determinable payment dates that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. Receivables are measured initially at fair value and subsequently re-measured at amortised cost using the effective interest method, less provision for impairment. Any impairment is recognised in the income statement.

Trade receivables are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated cash flows.

2.14 Financial liabilities

Financial liabilities are obligations to pay cash or other financial instruments and are recognised when the Group becomes a party to the contractual provisions of the instrument. All transaction costs are recognised immediately in the income statement. 

A financial liability is derecognised only when the obligation is extinguished, that is when the obligation is discharged, cancelled or expires.

Bank and other loans are raised for support of long term funding of the Group's operations. They are recognised initially at fair value, net of transaction costs and are subsequently measured at amortised cost using the effective interest method. Finance charges, including premiums payable on settlement or redemption, and direct issue costs are charged to the income statement on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

2.15 Inventories

Inventories comprise spare parts and similar items for use in the Group's plant and equipment. Inventories are valued at the lower of cost and net realisable value on a first-in, first-out basis.

2.16 Shareholders' equity

Equity attributable to the shareholders of the parent company comprises the following:

"Share capital" represents the nominal value of equity shares.

"Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

"Foreign currency reserve" represents the differences arising from translation of investments in overseas subsidiaries.

"Profit and loss reserve" represents retained profits.

"Other reserves" comprises unrealised revaluations of plant and machinery and Carbon Emission Reduction credits arising on the acquisition of 50% of EdS in 2008.

2.17 Pensions

During the year under review, the Group did not operate or contribute to any pension schemes (31 December 2007 - nil).

2.18 Employee indemnity provision

This provision is determined in accordance with current legislation in Bolivia and reflects the liability accrued at the year-end.

3 Key assumptions and estimates

The Group makes estimates and assumptions concerning the future. The resulting estimates will, by definition, seldom equal the related actual results. The Board has considered the critical accounting estimates and assumptions used in the Accounts and concluded that the main area of significant risk which may cause material adjustment to the carrying value of assets and liabilities within the next financial year is in respect of the assumptions used to value plant and machinery. The Board consults periodically with external expert valuers and is satisfied that the market values of the Group's main items of plant and machinery and plant under construction are no less than the carrying values of these assets. However, changes in technology or industry practices may result in the assumptions used needing to be amended in the future. Further important areas requiring estimates and assumptions relate to deferred tax, since there is an element of uncertainty regarding both the timing of the reversing of the asset or liability and the tax rate which will apply when the reversing occurs, and also the recoverability of pre-paid Vat in Argentina.

4 Segment analysis

All of the Group's revenues in Argentina and Bolivia arose from electricity generating activities which is the Group's primary business segment. In the year to 31 December 2008, revenues in the UK represent income arising from the sale of equipment.

For management purposes, the Group is organised into two geographic segments, Argentina and Bolivia. The following table provides a segmental analysis by geographic region:

a) 12 months to 31.12.2008	Argentina	Bolivia	UK	Intra-Group	Total
	£'000	£'000	£'000	£'000	£'000
Revenue	6,211	21,672	1,250	-	29,133
Cost of sales	(5,327)	(18,719)	(673)	-	(24,719)
Gross profit	884	2,953	577	-	4,414
Administrative expenses	(1,125)	(1,317)	(732)	-	(3,174)
Exchange (loss) / gain	(1,545)	653	(498)	-	(1,390)
Operating profit/(loss)	(1,786)	2,289	(653)	-	(150)
Finance income	-	116	1,033	(946)	203
Finance expense	(1,899)	(1,143)	(1,187)	946	(3,283)
Dividend received	-	-	1,819	(1,819)	-
Profit / (loss) before tax	(3,685)	1,262	1,012	(1,819)	(3,230)
Tax credit / (expense)	505	(1,179)	(249)	-	(923)
Profit / (loss) for the	(3,180)	83	763	(1,819)	(4,153)
year
Total assets	63,091	141,820	52,054	(50,731)	206,234
Total liabilities	62,133	86,272	19,426	(50,731)	117,100
Capital expenditure	11,395	17,791	-	-	29,186
Depreciation	616	3,435	-	-	4,051
b) 12 months to	Argentina	Bolivia	UK	Intra-Group	Total
31.12.2007	£'000	£'000	£'000	£'000	£'000
Revenue	3,962	18,674	-	-	22,636
Cost of sales	(3,700)	(13,709)	-	-	(17,409)
Gross profit	262	4,965	-	-	5,227
Administrative expenses	(468)	(1,184)	(972)	-	(2,624)
Exchange gain / (loss)	(151)	(263)	79	-	(335)
Operating profit / (loss)	(357)	3,518	(893)	-	2,268
Other income	-	423	-	-	423
Finance income	-	32	61	-	93
Finance expense	(157)	(930)	(2)	-	(1,089)
Dividend received	-	-	1,738	(1,738)	-
Profit / (loss) before tax	(514)	3,043	904	(1,738)	1,695
Tax expense	(124)	(930)	(217)	-	(1,271)
Profit / (loss) for the	(638)	2,113	687	(1,738)	424
year
Total assets	12,248	95,733	27,473	(25,920)	109,534
Total liabilities	8,046	37,294	1,288	(-)	46,628
Capital expenditure	4,050	16,804	-	-	20,854
Depreciation	355	2,659	-	-	3,014

5 Exchange rate sensitivity analysis

The Group's electricity generating assets are located in Argentina and Bolivia and as a result, the Group's reported results are affected by currency movements.

The key exchange rates applicable to the results were as follows:

i) Closing rate	31 December 2008	31 December 2007
Boliviano to £	10.43	15.40
AR $ to £	5.00	6.30
US $ to £	1.45	2.00
ii) Average rate
Boliviano to £	13.70	16.10
AR $ to £	5.87	6.25
US $ to £	1.86	2.00

If the exchange rate of sterling at 31 December 2008 had been stronger or weaker by 10% with all other variables held constant, shareholder equity at 31 December 2008 would have been £5.7m (2007 - £3.1m) lower or higher than reported.

If the average exchange rate of sterling during 2008 had been stronger or weaker by 10% with all other variables held constant, the loss (2007 - profit) for the year, would have been £0.29m (2007 - £0.13m) higher or lower than reported, including minority interests, and £0.29m (2007 - £0.03m) higher or lower excluding minority interests.

The results of the parent company are affected by exchange rate movements in so far as dividends received in 2008 and 2007 were received in US $. If the US $ had been stronger or weaker by 10% as compared to the actual rate when the dividend from Guaracachi was received in 2008, with all other variables held constant, the profit of the parent company and the net equity of the parent company would have been £0.2m higher or lower than reported (2007 - £0.2m).

6 Cost of sales	Year ended	Year ended
	31.12.08	31.12.07
	£'000	£'000
Expenditure incurred in cost of sales is as follows:
Cost of fuel	14,636	9,749
Cost of equipment sold	673	-
Transmission fees	2,395	1,982
Depreciation	4,012	2,989
Maintenance	1,171	1,296
Other	1,832	1,393
	24,719	17,409

7 Administrative expenses	Year ended	Year ended
	31.12.08	31.12.07
	£'000	£'000
Expenditure incurred in administrative expenses is as follows:
Payroll and social security	1,473	1,230
Services, legal and professional	468	503
Office costs and general overheads	1,189	856
Audit fees	44	35
	3,174	2,624
Exchange losses	1,390	335
	4,564	2,959

In addition to the audit fees shown above, amounts paid to the Company's auditors for non-audit professional fees amounted to £nil (31 December 2007 - £7,400). The fees in 2007 related to work in connection with taxation advice. Fees paid to the Company's auditors in respect of their review of overseas operations amounted to £7,000 (31 December 2007 - £6,000). Fees paid to other auditors, in respect of the audit of subsidiary and joint venture companies, amounted to £38,000 (2007 - £35,000).

8 Employee costs	Year ended	Year ended
	31.12.08	31.12.07
a) Group	£'000	£'000
Aggregate remuneration of all employees and directors, including social security costs	2,004	1,755
The average number of employees in the Group, including directors, during the year was as follows:
Management	19	19
Operations	99	74
Total	118	93
b) Company	£'000	£'000
Aggregate remuneration of all employees and directors, including social security costs	261	406
The average number of employees in the Company, including directors, during year was as follows:
Management	7	7

c) Directors remuneration

The total remuneration paid to the directors was £203,375 (2007 - £300,417). The total remuneration of the highest paid director was £44,000 (2007 - £71,250).

9 Other income

Other income in 2007 represented the book profit on the sale of surplus inventory.

10 Finance income and expense	Year ended	Year ended
	31.12.08	31.12.07
	£'000	£'000
Interest received on bank deposits	203	93
Interest paid / payable on bank borrowings and loans	2,309	947
Imputed interest on loans	153	142
Interest accrued on deferred consideration	821	-
	3,283	1,089

Sensitivity analysis arising from changes in borrowing costs is set out in note 25.

Interest accrued on deferred consideration relates to interest payable on loan notes issued in June 2008 to the vendors of 50% of PEL. In June 2009, this interest was waived.

11 Tax expense

The relationship between the expected tax expense at the basic rate of 28% (31 December 2007 - 30%) and the tax expense actually recognised in the income statement can be reconciled as follows:

	Year ended	Year ended
	31.12.08	31.12.07
	£000	£'000
Result for the year before tax	(3,230)	1,695
Standard rate of corporation tax in UK	28%	30%
Expected tax (credit) / expense	(904)	509
Adjustment for different overseas tax rates	1,407	(123)
Other temporary differences	(233)	147
UK losses carried forwards	226	267
Overseas losses carried forwards	200	254
Tax on overseas dividends, less double tax relief	227	217
Actual tax expense	923	1,271

Comprising:
Current tax expense	1,205	1,275
Deferred tax (income) / expense	(282)	(4)
Total expense	923	1,271

The adjustment in the current year for different overseas tax rates arises primarily in Bolivia where tax is charged on inflation adjusted results.

12 Dividends	Year ended	Year ended
	31.12.08	31.12.07
	£'000	£'000
Amounts recognised as distributions to equity shareholders  during the year:
Final dividend for the year ended 31 December 2007  of 2.5p per share (2007 - 2.25p) paid in August 2008	2,145	1,613

13 Holding company's result for the year

As permitted by Section 230 of the Companies Act 1985, the holding company's income statement is not shown separately in the financial statements. The profit for the year was £0.8m (31 December 2007 - profit £0.7m).

14 Earnings per share

Basic loss per share is calculated by dividing the loss for the period attributable to shareholders by the weighted average number of shares in issue during the period. For diluted loss per share, the weighted average number of shares is adjusted to assume conversion of all dilutive potential ordinary shares. The fully diluted calculation of loss per share is unchanged from the basic calculation as there are no dilutive potential ordinary shares outstanding.

	Year ended 31.12.08	Year ended 31.12.07
Loss attributable to equity shareholder   of the Company	£4.2m	£0.6m
Average number of issued shares	79,538,775	71,247,679
Basic and diluted loss per share	5.23p	0.85p

15 Property, plant and equipment	Land	Plant and  equipment	Plant under construction	Total
	£'000	£'000	£'000	£'000
a) Group
Cost at 1 January 2007	4,484	55,223	13,873	73,580
Exchange adjustments	(94)	(2,220)	(244)	(2,558)
Additions	-	3,401	17,453	20,854
Transfers in classification	-	8,880	(8,880)	-
Cost at 31 December 2007	4,390	65,284	22,202	91,876
On acquisition	90	3,695	13,059	16,844
Exchange adjustments	1,687	24,871	15,821	42,379
Additions	-	2,232	26,954	29,186
Disposals	-	-	(673)	(673)
Cost at 31 December 2008	6,167	96,082	77,363	179,612
Depreciation at 1 January 2007	-	2,694	-	2,694
Exchange adjustments	-	(1,067)	-	(1,067)
Charge for year	-	3,014	-	3,014
Depreciation at 31 December 2007	-	4,641	-	4,641
On acquisition	-	983	-	983
Exchange adjustments	-	1,884	-	1,884
Charge for the year	-	4,051	-	4,051
At 31 December 2008	-	11,559	-	11,559
Net book value - 31.12.08	6,167	84,523	77,363	168,053
Net book value - 31.12.07	4,390	60,643	22,202	87,235

i) The value of property, plant and equipment recognised upon the initial acquisition of 50% of EdS in 2005 was £4.15m. This amount included a negative fair value adjustment of £0.45m resulting from a professional valuation carried out at the date of the acquisition. The value of property, plant and equipment recognised upon the acquisition of the remaining 50% of EdS in 2008 was £19.7m. This included a positive fair value adjustment of £5m based on the directors' estimate of the fair value of the plant under construction.

ii) The value of property, plant and equipment recognised upon the initial inclusion of Guaracachi in the financial statements in 2006 was £69.9m. This amount included a positive fair value adjustment of £14.3m resulting from a professional valuation carried out at the date of the acquisition.

iii) Plant under construction comprises the 96MW combined cycle gas turbine (CCGT) conversion and expansion project in Santa Cruz, Bolivia, which is due for completion in late 2009 and the CCGT project in Patagonia, Argentina, where capacity has been increased from 76MW to 136MW and which is now in service.

b) Company - the Company had no property, plant and equipment.

16 Intangible assets	Goodwill	CERs	Patent	Total
	£'000	£'000	£'000	£'000
At 1 January 2007	-	-	3	3
Amortisation	-	-	(3)	(3)
At 31 December 2007	-	-	-	-
Goodwill arising on acquisition	6,335	-	-	6,335
Fair value on acquisition	-	3,000	-	3,000
At 31 December 2008	6,335	3,000	-	9,335

Goodwill represents the difference between the fair value of the assets and liabilities acquired on the acquisition of 50% of EdS in June 2008 (see note 28).

CERs (Carbon Emission Reduction credits) represents the fair value of the CERs acquired on the acquisition of 50% of EdS in June 2008. The fair value is based on the market price of CERs at the date of acquisition and the Directors' estimate of the discounted value of the income from CERs which EdS is expected to generate.

The patent licence was written off in 2007 as it has negligible value.

The Group tests goodwill and other intangible assets annually or more frequently if there are indications that the intangible asset might be impaired. The recoverable amounts are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the future cash flows, which are based on management projections, taking into account experience, expected revenues and operating margins, and the discount rate applied to those cash flows. The discount rate applied is 15%.

17 Trade and other receivables	31.12.08	31.12.07
	£'000	£'000
a) Group - current
Trade receivables	6,291	3,781
Other receivables and prepayments	3,648	1,369
	9,939	5,150

Other receivables and prepayments at 31 December 2008 include:

i) £nil (31 December 2007 - £0.9m) relating to the 'Stabilisation Fund' in Guaracachi. Under Resolution No. 014/2002, the Superintendent of Electricity in Bolivia set up a stabilisation fund to stabilise the electricity tariffs paid by end users. The purpose of these funds is to help smooth the impact on consumers of changes in spot prices.

ii) £1.15m (31 December 2007 - £1.1m) of surplus Vat which has been paid by EdS and is recoverable as a deduction against future Vat liabilities.

b) Company - current
Trade receivables	1,250	-
Other receivables and prepayments	38	36
	1,288	36
c) Group - non-current
Trade receivables	1,543	87
Other receivables and prepayments	3,250	13
	4,793	100

Non-current trade receivables represents retentions by the Electricity Regulator in Argentina. It is expected that the retention will either be released or contributed towards ongoing capital projects. Other receivables includes £3.25m of surplus Vat which has been paid by EdS and is recoverable as a deduction against future Vat liabilities.

d) Company - non-current

Amounts owed by subsidiary companies 34,075 22,143

The amounts owed by subsidiary companies (2007 - subsidiary and joint venture companies) are unsecured and payable on demand but are not expected to be fully received within the next twelve months. £13.1m is interest bearing at 14.32%. The balance is non-interest bearing.

All trade and other receivables are unsecured and are not past their due by dates. The fair values of receivables is not materially different to the carrying values shown above.

18 Deferred tax	31.12.08	31.12.07
	£'000	£'000
a) Asset at 1 January 2008	650	359
Exchange translation	180	(7)
Credited to tax expense	282	298
Asset at 31 December 2008	1,112	650

The Group deferred tax asset arises principally from temporary differences on accelerated depreciation in Bolivia.

No deferred tax asset has been recognised in respect of the parent company's tax losses (£1.7m at 31 December 2008 - £1.1m at 31 December 2007) in view of the uncertainty over the timing of the utilisation of these tax losses.

b) Liability at 1 January 2008	978	739
On acquisition	2,400	-
Exchange translation	674	(15)
Charged to tax expense	-	254
Liability at 31 December 2008	4,052	978

The Group deferred tax liability arises from:

i) accelerated tax allowances on plant and equipment expenditure in Bolivia - £1.4m (2007 - £1m)

ii) deferred tax provision on the fair value adjustments arising on the acquisition of 50% of EdS in June 2008 - £2.7m (2007 - nil).

19 Inventories	31.12.08	31.12.07
	£'000	£'000
Spare parts and consumables	3,817	2,562

Spare parts and consumables are valued at cost.

20 Current tax assets	31.12.08	31.12.07
	£'000	£'000
Sales taxes / Vat	-	1,771
Pre-paid profits tax	4,154	1,467
	4,154	3,238

Pre-paid profits tax relates to taxes paid in Bolivia and Argentina which are off-settable against future tax liabilities. At 31 December 2008, prepaid sales taxes / Vat have been included in 'trade and other receivables - note 17'.

21 Cash and cash equivalents	31.12.08	31.12.07
	£'000	£'000
a) Group
Cash at bank and in hand	486	10
Short-term bank deposits	4,545	9,231
Short-term bank deposits (restricted)	-	1,358
	5,031	10,599

b) Company
Cash at bank and in hand	35	4
Short-term bank deposits	7	322
Short-term bank deposits (restricted)	-	1,191
	42	1,517

Cash and short-term bank deposits are held in interest bearing bank accounts, accessible at between 1 and 30 days notice. The effective average interest rate is 1%. The Group holds cash balances to meet its day-to-day requirements.

Restricted deposits at 31 December 2007 represented funds held as collateral against borrowings.

22 Share capital	31.12.08	31.12.07
	£'000	£'000
a) Authorised
120,000,000 ordinary shares of 2p each	2,400	2,400
b) Allotted, called up and fully paid
85,788,775 ordinary shares of 2p each	1,716	1,466
(31 December 2007 - 73,288,775)

Reconciliation of movement in share capital	Number	£'000
Balance at 1 January 2007	68,288,775	1,366
Allotment in May 2007	3,400,000	68
Allotment in June 2007	1,600,000	32
At 31 December 2007	73,288,775	1,466
Allotment in June 2008	12,500,000	250
Balance at 31 December 2008	85,788,775	1,716

The allotments in May and June 2007 were at 59.25p and 57p respectively. The allotment in June 2008 was at 65p per share. The difference between the total consideration arising from shares issued and the nominal value of the shares issued has been credited to the share premium account.

Changes since the balance sheet date are set-out in note 33.

23 Trade and other payables	31.12.08	31.12.07
	£'000	£'000
a) Group - current
Trade payables	24,914	13,865
Accruals	2,271	1,374
	27,185	15,239
b) Company - current
Trade payables	372	117
Accruals	220	59
	592	176
c) Group - non-current
Staff indemnity provision	290	179

The staff indemnity provision represents statutory long service entitlements due to employees in Guaracachi. The entitlement is payable on leaving service.

24 Current tax liabilities	31.12.08	31.12.07
	£'000	£'000
a) Group
Sales taxes / Vat	-	330
Profits taxes	2,347	1,377
	2,347	1,707

At 31 December 2008, the liability for sales taxes / Vat have been included in 'trade and other payables - note 23.

b) Company
UK corporation tax	-	-

25 Borrowings	31.12.08	31.12.07
	£'000	£'000
a) Group - current
Loan from CAMMESA (note i below)	896	330
Bank loans - EdS (note ii below)	4,034	736
Bank loans - Guaracachi (note iii below)	7,162	5,228
Other loans (note iv below)	14,234	1,752
Deferred consideration payable (note vi below)	9,636	-
	35,962	8,046
b) Group - non current
Loan from CAMMESA (note i below)	1,743	189
Bank loans - EdS (note ii below)	7,106	4,266
Bank loans - Guaracachi (note iii below)	27,374	10,094
Loan note - Guaracachi (note v below)	11,041	5,930
	47,264	20,479
Group - total borrowings	83,226	28,525
The borrowings are repayable as follows:
On demand or within one year	35,962	8,046
In the second year	6,009	2,431
In the third to fifth years inclusive	18,031	6,344
After five years	23,223	11,704
	83,226	28,525
c) Company - current
Deferred consideration payable (note vi below)	9,636	-
Other loans (note iv below)	9,198	1,112
	18,834	1,112

i) CAMMESA, the Argentine wholesale market administrator, has advanced funds to EdS to support capital expenditure. The loan bears interest at 7% per annum. The loan is repayable in instalments with the final repayment due in August 2012.

ii) The loan which bears interest at US Libor plus 6% is repayable as follows (the comparative figures for 2007 show the Group's 50% share of the loans):

	31.12.08	31.12.07
	£'000	£'000
Within 1 year	4,034	736
In the second year	2,842	500
In the third to fifth years inclusive	4,264	1,912
After five years	-	1,854
	11,140	5,002
iii) Bank loans to Guaracachi comprise:		£'000
FND Fondo Nordica (ai)		729
KFR 87-75-166 (aii)		2,299
KFR 92-65-711 (aiii)		4,226
CAF(b)		14,137
Banco Economico (c)		2,208
Banco Union (d)		4,144
Banco Mercantile (e)		2,993
Banco Bisa (f)		3,800
Total		34,536
Current		7,162
Non-current		27,374
Total		34,536

a) In 1994, as part of the privatisation process, Guaracachi entered into an agreement with Empresa Nacional de Electricidad (ENDE) and the Bolivian Treasury Department whereby Guaracachi undertook to make a series of payments to the Bolivian Treasury on behalf of ENDE.

Certain assets of Guaracachi are pledged as security for these obligations.

ai) Loan controlled by the Bolivian Government, obtained from the Nordic Fund (FND), repayable in half-yearly equal instalments. The maturity date is 24 October 2015 and the interest rate is 4.5% per annum. Guaracachi's liability is denominated in Special Drawing Rights.

aii) Loan controlled by the Bolivian Government, obtained from the Kredintanstalt fur Weideraufbau N° 87-65-166 for DM12.2m payable in 44 semi-annual instalments. The maturity date is 31 December 2017 and the interest rate is 4.5% per annum. Repayments are now made in Euros.

aiii) Loan controlled by the Bolivian Government, obtained from the Kredintanstalt fur Weideraufbau N° 92-65-711 for DM16m payable in 50 semi-annual instalments. The maturity date is 30 December 2022 and the interest rate is 4.5% per annum. Repayments are now made in Euros.

In determining the fair values, the Company has used interest rates prevailing at the balance sheet date which would have been available to a company of similar size and similar credit risk. The interest rate assumptions used to determine the fair values are as follows:

		As at date of acquisition	At 31.12.08
Swap rate for 15 year Euro loans		3.50%	3.00%
Adjustment for country and credit risk		5.00%	5.00%
Total		8.50%	8.00%

b) CAF has provided a loan of $20m at an interest rate based on US Libor plus a margin of 3.5% less a discount of 1.3%. The loan is repayable in 8 equal annual instalments commencing in 2011.

c) Banco Economico has provided a loan of $3.2m at an interest rate of 10.3%. The loan is repayable in 9 equal half-yearly instalments between 2009 and 2013.

d) Banco Union has provided 2 loans totalling $6m at an interest rate of 10.5%, repayable in equal annual instalments commencing in 2009.

e) Banco Mercantile has provided a loan of $4.3m at an interest rate of 8%, repayable in 7 equal annual instalments.

f) Banco Bisa has provided a loan of $5.5m at an interest rate of 11.5%. The loan is repayable in 2009.

iv) Other loans comprise short term loans, repayable within 12 months, at an interest rate of UK base rate plus a margin of 2%.

v) Loan note

In December 2007, Guaracachi issued a US$ 20m bond, with an interest coupon of 8.55%. At 31 December 2008, US$16m had been issued. The bond matures in November 2017 with principal repayments of 1/3 of the outstanding amount in each of years 2015, 2016 and 2017.

Sensitivity analysis to changes in interest rates:

If interest rates on the Group's borrowings during the year had been 0.5% higher or lower with all other variables held constant, the interest expense and pre-tax profits would have been £0.2m lower or higher than reported.

Sensitivity analysis to changes in exchange rates:

The Group's borrowings are denominated in £, US $ and Ar $. As a result, the liability to the Group's lenders will change as exchange rates change. The Group's borrowings are substantially related to specific electricity generating assets and therefore the effect on the net equity of the Group is limited. The overall effect on the Group's net equity which would arise from changes in exchange rates is set out in note 1 above.

The effect on borrowings alone if exchange rates weakened or strengthened by 10% with all other variables held constant would be to reduce or increase the value of the Group's borrowings and equity by £8m (2007 - £2.7m).

The parent company's borrowings are denominated is US$ and £. The effect of a 10% change in the value of the US$ relative to the £ would increase or decrease the parent company's borrowings by £1.4m.

26 Reconciliation of profit before tax to cash generated from operations

	Year ended	Year ended
	31.12.08	31.12.07
a) Group	£'000	£'000
Result for the year before tax	(3,230)	1,694
Net finance costs	3,080	996
Adjustments for:
Depreciation	4,051	3,014
Profit on sale of equipment	(577)
Movement in working capital:
Change in inventories	80	510
Change in trade and other receivables	(4,209)	776
Change in trade and other payables	4,283	10,244
Cash generated from operations	3,478	17,234

	Year ended	Year ended
	31.12.08	31.12.07
b) Company	£'000	£'000
Result for the year before tax	1,011	905
Net finance income / (expense)	154	(59)
Adjustments for:
Dividend received	(1,591)	(1,520)
Tax paid on dividend received	(227)	(217)
Unrealised exchange loss on loans	2,163	-
Movement in working capital:
Change in trade and other receivables	(1,252)	34
Change in trade and other payables	416	11
Cash generated from / (used in) operations	674	(846)

27 Investments	31.12.08	31.12.07
	£'000	£'000
Cost at 1 January 2008	3,777	3,777
Additions	12,872	-
Balance at 31 December 2008	16,649	3,777

In June 2008, the Company acquired a further 50% interest in Patagonia Energy Limited ("PEL") thereby increasing the Company's interest in PEL to 100%. Since the year end, the Company has sold 50% of its interest PEL.

At 31 December 2008, the Company held the following investments:

i) 100% of the issued share capital of Energia para Sistemas Aislados S.A. ("Energais"), a company registered in Bolivia under registration number 107752. This company was acquired in October 2004. Energia is in the process of negotiating the installation of its small generating units in rural areas in Bolivia.

ii) 100% of the issued share capital of Bolivia Integrated Energy Limited ("BIE"), a company registered in the British Virgin Islands, under registration number 510247. BIE owns, through an intermediary holding company, 50.00125% of the issued share capital of Empresa Electrica Guaracachi S.A. (Guaracachi), a company registered in Bolivia. Guaracachi is a generator and supplier of electricity to the national grid in Bolivia. The investment in BIE was acquired in January 2006.

iii) 100% (2007 - 50%) of the issued share capital of Patagonia Energy Limited ("PEL"), a company registered in the British Virgin Islands under registration number 620522. PEL owns 100% of the issued share capital of Energia del Sur S.A. (EdS), a company registered in Argentina. EdS is a generator and supplier of electricity to the national grid in Argentina. The investment in PEL was acquired in July 2005.

28 Acquisition

In June 2008, the Company acquired a further 50% interest in PEL. The table below shows the book value and fair value adjustments of the assets and liabilities acquired:

	Book value	Fair value	Provisional
		adjustments	fair values
	£'000	£'000	£'000
Property, plant and machinery	10,861	2,500	13,361
Intangible asset	-	1,500	1,500
Inventories	405	-	405
Trade and other receivables	3,445	-	3,445
Cash	230	-	230
Trade and other payables	(2,178)	-	(2,178)
Borrowings	(5,638)	-	(5,638)
Amount due to vendor	(3,387)	-	(3,387)
Deferred tax liability	-	(1,200)	(1,200)
Total net assets acquired	3,739	2,800	6,538
Goodwill (excess of cost over net assets acquired)			6,335
Purchase price			12,873
Paid on completion			6,148
Transaction costs			71
			6,219
Loan note issued to vendor at completion			6,654
Purchase price			12,873

Goodwill recognised in the above acquisition represents intangible assets that are not capable of being separately measured reliably and are not allowed under IFRS 3 to be separately identified. This includes the workforce acquired and commercial opportunities and synergies expected to be achieved as a result of being part of the Group.

The purchase consideration for the shares was $25m, of which $12m was paid in cash on completion and $13m deferred consideration of which US$3m was due to be paid 3 months after completion and $10m was due to be paid 12 months after completion. Interest at 11.32% was due to be paid on the deferred consideration.

If the Company had owned 100% of PEL throughout the year, the Group loss would have been £120k less than that reported.

In June 2009, the Company sold back 50% to the original vendor for $13m plus waiver of the accrued interest on the deferred consideration (see note 33).

29 Financial risk management

The Group is exposed to a variety of financial risks which result from both its operating and investing activities. The Group's risk management is coordinated to secure the Group's short to medium term cash flows by minimising its exposure to financial markets. The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant risks to which the Group is exposed are described below:

a) Foreign currency risk

The Group is exposed to translation and transaction foreign exchange risk. Foreign exchange differences on retranslation of these assets and liabilities are taken to the profit and loss account of the Group. The Group's principal trading operations are based in South America and as a result the Group has exposure to currency exchange rate fluctuations in the principal currencies used in South America. The Group also has exposure to the US dollar and the Euro as a result of borrowings denominated in these currencies.

b) Interest rate risk

Group funds are invested in short term deposit accounts, with a maturity of less than three months, with the objective of maintaining a balance between accessibility of funds and competitive rates of return.

c) Liquidity risk

The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.

d) Credit risk

Generally, the maximum credit risk exposure of financial assets is the carrying amount of the financial assets as shown on the face of the balance sheet (or in the detailed analysis provided in the notes to the financial statements). Credit risk, therefore, is only disclosed in circumstances where the maximum potential loss differs significantly from the financial asset's carrying value. The Group's trade and other receivables are actively monitored to avoid significant concentrations of credit risk.

e) Fair values

In the opinion of the directors, there is no significant difference between the fair values of the Group's and the Company's assets and liabilities and their carrying values.

The financial assets and liabilities of the Group and the Company are classified as follows:

31 December 2008	Group			Company
	Fair value through profit and loss	Loans and receivables	Borrowings and payables at amortised  cost	Fair value through profit and loss	Loans and receivables	Borrowings and payables at amortised cost
	£'000	£'000	£'000	£'000	£'000	£'000
Trade and other receivables > 1 year	-	4,793	-	-	34,075	-
Trade and other receivables < 1 year	-	9,939	-	-	1,288	-
Cash and cash equivalents	-	5,031	-	-	42	-
Trade and other payables > 1 year	-	-	(290)	-	-	-
Trade and other payables < 1 year	-	-	(27,185)	-	-	(592)
Borrowings > 1 year	-	-	(47,264)	-	-	-
Borrowings < 1 year	-	-	(35,962)	-	-	(18,834)
Totals	-	19,763	(110,701)	-	35,405	(19,426)
31 December 2007	Group			Company
	Fair value through profit and loss	Loans and receivables	Borrowings and payables at amortised  cost	Fair value through profit and loss	Loans and receivables	Borrowings and payables at amortised cost
	£'000	£'000	£'000	£'000	£'000	£'000
Trade and other receivables > 1 year	-	100	-	-	22,143	-
Trade and other receivables < 1 year	-	5,150	-	-	36	-
Cash and cash equivalents	-	10,599	-	-	1,517	-
Trade and other payables > 1 year	-	-	(179)	-	-	-
Trade and other payables < 1 year	-	-	(15,239)	-	-	(176)
Borrowings > 1 year	-	-	(20,479)	-	-	-
Borrowings < 1 year	-	-	(8,046)	-	-	(1,112)
Totals	-	15,849	(43,943)	-	23,696	(1,288)

30 Capital commitments

The Group is engaged in developing new turbines in Bolivia and Argentina. At 31 December 2008, the Group had outstanding capital commitments of £1.0m (31 December 2007 - £0.5m).

31 Contingent liabilities

EdS has entered into a long term maintenance agreement with a third party who provides for the regular service and replacement of parts of two turbines. The agreement runs until 2022. The Group's share of the total payable under the agreement until the year 2022 amounts to US$20m/£13.8m (2007 - 50% share, US$11m / £5.61m). In the event that EdS wished to terminate the agreement before 2022, a default payment may become payable. The Group does not anticipate early termination and therefore no provision has been made in this regard.

Guaracachi has received a claim in 2007 in respect of VAT amounting to US$1.7m. The Bolivian tax authorities maintain that the VAT, which was associated with an insurance claim, is payable to the tax authorities. Guaracachi's management do not consider the claim to be valid and accordingly no provision has been made in respect of this claim.

32 Related party transactions

During the year the Company and the Group entered into material transactions with related parties as follows:

a) Company

i) paid £0.12m to Independent Power Corporation PLC (IPC) under a "Shared Services Agreement". P R S Earl and E R Shaw are shareholders and directors of IPC and J G West is a director. An amount of £0.07m was outstanding at 31 December 2008.

ii) received a loan from IPC. The balance owing at 31 December 2008 was £4.98m, including accrued interest of £0.1m.

iii) received a loan from Secteur Holdings Ltd, a company of which Mrs P Earl is a director. The balance owing at 31 December 2008 was £3.87m, including accrued interest of £0.3m.

iv) sold equipment for £1.25m to IPC on an arm's length basis. This balance was outstanding at 31 December 2008. Since the year-end, the balance has been set-off against amounts owing to IPC.

v) paid salaries to key management amounting to £0.26m (2007 - £0.37m).

b) Group

Guaracachi paid £0.2m (2007 - £0.3m) to Independent Power Operations Limited, a wholly owned subsidiary of IPC, for engineering services. An amount of £9,000 was owing at 31 December 2008 (£8,000 at 31 December 2007).

33 Post balance sheet date events

i) Issue of share capital

Since the year-end, the Company has allotted 119,632,730 Ordinary 2p shares at 8p per share. 91,562,500 shares were allotted for cash raising £7.325m before expenses and 28,070,230 shares were allotted as capitalisation of loans.

ii) Sale of 50% of PEL

Following a decision made after the year-end, 50% of its interest in PEL to the original vendors for US$13m plus the waiver and cancellation of accrued interest amounting to US$0.95m. Following this sale, the Company retains ownership of 50% of PEL.

ENDFR IIFVARTIIVIA