Trading Emissions PLC Regulatory News (TRE)

Trading Emissions PLC

Results for the six month period ended 31 December 2015

Trading Emissions PLC ("TEP" or "the Company"), a closed ended investment company that specialises in renewable energy projects and emissions instruments, today announces its results for the six month period ended 31 December 2015.

Enquiries:

Liberum +44 (0)20 3100 2222

Steve Pearce / Tom Fyson

FIM Capital Limited + 44 (0) 1624 681200

Philip Scales

Chairman's Statement

 Dear Shareholder

Your Board is pleased to report solid progress on a number of fronts during the current financial year as processes implemented in recent years come to fruition. Trading Emissions PLC (the "Company" or "TEP") has continued to generate cash from its private equity investments. Coupled with the significant decline in liabilities and contingent liabilities relating to the carbon portfolio, we have now reached the point where the Board can announce the resumption of Shareholder distributions. TEP will today announce that the Company will distribute to Shareholders an amount of 5.0p per Share, an aggregate of £12.5 million, on 29 April 2016.

Financial Highlights 

Net Asset Value 

During the six-month period ended 31 December 2015, the net asset value ("NAV") of the Company reduced to £26.3 million (10.5p per Share) from £26.6 million (10.6p per Share) at 30 June 2015 and £37.8 million (15.1p per Share) at 31 December 2014. The change in NAV during the first half of the financial year was caused mainly by a reduction in the fair value of the private equity portfolio of £3.5 million and an increase of £3.4 million (1.4p per Share) in the cash balances held. The value of other liabilities increased by £0.2 million. These aggregate changes mask a material change in the structure of the Company's income statement and balance sheet, which are explained in more detail below.

Cash

At 31 December 2015, the Company's cash balances increased to £13.2 million (5.3p per Share) from £9.8 million (3.9p per Share) at 30 June 2015 and £4.9 million (1.9p per Share) at 31 December 2014. The principal sources of cash during the period were from Elements Markets LLC ("Element Markets") and TEP (Solar Holdings) Limited ("TEP Solar"). Subsequent to period-end, cash held by TEP (Renewables Holding) Limited ("TEP Renewables") was paid to the Company. At the time of writing, TEP holds cash of approximately £17.6 million (7.1p per Share).

Carbon Portfolio

TEP's activities in the carbon market continue to shrink. No Certified Emissions Reductions ("CERs") were delivered to TEP during the first six months of the financial year.

Valuation

At 31 December 2015, the value of TEP's CER inventory was negligible. Aggregate net liabilities, which arise principally from CERs delivered to TEP and subsequently sold in the spot market but, so far, not invoiced by the Chinese issuers amounted to £0.1 million at 31 December 2015. TEP continues to have the right to offset the costs incurred in the process of verification and registration of CER issues against the proceeds from the sale of those CERs.

Since the conclusion of the United Nations Climate Change Conference held in Paris last December, there has been no significant impact in the CER markets.

Arbitrations

Shareholders will be aware that during the financial period, TEP made a number of important announcements in relation to the Hong Kong arbitrations which it has been defending.

By way of background, in March and June 2014, TEP received notices of arbitration in respect of claims that challenged the amendments made to, in total, six Emissions Reduction Purchase Agreements ("ERPAs"), each between TEP and a project company owned by Yunnan Dianneng (Group) Holding Co. Ltd ("Dianneng"). Dianneng is ultimately controlled by the State Power Investment Corporation ("CPI"), one of China's largest energy companies.

The associated claims originally amounted to, in aggregate, approximately €24 million, but were subsequently revised by Dianneng to an aggregate of approximately €26 million.

During the first half of the financial year, two of the arbitration tribunals found in favour of TEP and dismissed three claims, amounting to approximately €15.1 million. In March 2016, another tribunal terminated an arbitration in relation to a claim of approximately €5.6 million.

The arbitration processes concluded or terminated involved claims against TEP by Dianneng amounting to approximately €20.7 million. The arbitration tribunals have issued cost awards and orders in the Company's favour totalling the equivalent of approximately £0.9 million.

To date, Dianneng has not paid these awards and orders. Hong Kong arbitration awards are enforceable in China in accordance with the 'Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region'. This Arrangement provides for the enforcement of Hong Kong arbitration awards in the courts in the People's Republic of China without re-opening the merits of the underlying disputes. Possible challenges to such enforcement are limited. TEP is now preparing to enforce its awards against Dianneng through the Chinese courts.

The Board is confident that the two remaining arbitration processes, involving claims totalling approximately €5.6 million will also be terminated in due course.

During the six-month period ended 31 December 2015, TEP paid tribunal, legal and related expenses in connection with the arbitrations of approximately £0.2 million. This compares with £1.4 million of expenses incurred in the financial year ended 30 June 2015. At 31 December 2015, TEP retained a provision of £0.4 million to meet estimated future costs related to the enforcement of the arbitration awards and/ or defending legal actions in China.

Private Equity Portfolio

During the first half of the financial year, TEP received distributions totalling £5.9 million from Element Markets, which was generated from operating activities, and sold its US holding company for a nominal sum. The estimated tax liability and related costs associated with Element Markets' operations during the 2015 fiscal year is estimated at £2.2 million and is shown as a liability on TEP's balance sheet, which is consistent with the terms of the sale of the subsidiary that held the investment for TEP. The actual tax liability is expected to crystallise and be settled during 2016.

The fair value of TEP's remaining private equity portfolio at 31 December 2015 was £16.1 million (6.4p per Share) compared with £19.5 million (7.8p per Share) at 30 June 2015 and £37.7 million (15.1p per Share) on 31 December 2014. The Company's remaining private equity investments with material value are the TEP Renewables receivable from the sale of EWG Slupsk and TEP Solar's equity interest in the solar business in Italy.

TEP Renewables/ EWG Slupsk

In mid-2014, the Company's wholly owned subsidiary, TEP Renewables, sold its equity interest in EWG Slupsk, which is the developer of one of the largest wind farms in northern Poland, to a Polish special purpose vehicle owned and controlled by Winergy Last Mile. As a result of significant delays to the project, caused mainly by the changing legal landscape in Poland surrounding renewable energy and the ensuing regulatory uncertainties, which frustrated the buyer's endeavours to secure limited recourse debt to finance construction of the project, the terms of the sales and purchase agreement were substantially renegotiated during 2015. An amendment to the agreement was signed in early 2016, under which substantially all potential claims against TEP Renewables under the representations and warranties have been waived, the timeframe for further payments has been extended, further payments are consolidated into a single amount per wind farm cluster financed and a simplified foreclosure process in the event of a material default has been determined.

An initial consideration of €7.0 million was received by TEP Renewables in July 2014 for the sale of EWG Slupsk. The immediate consequence for the Company of the amended sales and purchase agreement was that the cash held by TEP Renewables could be released to TEP.

The entitlement of TEP Renewables to receive further amounts have reduced to a revised estimated range of between €10.7 million and €13.4 million, from a previous estimated range of between €14.2 million and €17.5 million. The projected timing of the payments to TEP Renewables has also been delayed to between 2018 and 2020 from an original estimate of a series of payments between 2015 and 2018. The timing and final amounts continue to be dependent principally on the proportionate amount of debt financing raised and on the final permitted capacity of each wind farm cluster.

The new Polish Government elected in late 2015 commenced the process of enacting new legislation in 2016 that would further undermine all wind projects in Poland. Despite various legal challenges and protests, the Government is endeavouring to fast track Parliamentary approval. Although at the time of issuing these interim financial statements, there remains some uncertainty as to the timing and exact impact of the law, the current draft legislation could render EWG Slupsk's project unfeasible and prevent the buyer from financing and constructing the wind farm.

Surya/ TEP Solar

The five operating companies in TEP's Italian solar portfolio continued to absorb significant non-financial resources during the 6 months ended 31 December 2015. The plants continue to underperform due to degradation of the First Solar thin film panels and issues involving the replacement of the Trina polycrystalline panels. Nevertheless, high levels of irradiation have mitigated somewhat the financial underperformance. Aggregate revenues of €1.6 million were generated in the six-month period ended 31 December 2015 at the lower tariff rates under the Spalma incentivi legislation. Work continues with the O&M contractors and the suppliers to resolve the panel performance issues; we have had to negotiate the replacement of one of the O&M contractors at two separate plants; we have tried to resolve damages claims disputed by our insurers; and we still await the Sicilian regional Government's formal approval of the rerouting of the public road that had originally been planned to cut through the Librandello plant.

We continue to work closely with our financial adviser to optimise the value of our investment. During the first half of the financial year, €1.3 million was distributed to TEP Solar from one of the Italian subsidiaries. At 31 December 2015, €2.3 million of cash was held by TEP Solar and an aggregate of €8.9 million was held by its Italian subsidiaries, most of which is restricted. In early 2016, the Company received the equivalent of £1.0 million, which had been distributed from TEP Solar.

Other Private Equity investments

Shareholders will be aware that the following investments of the Company have minimal value:

· The equity interest in Billiter Participações, which, upon payment of the related arbitration fees in Brazil, will have the right to increase its 25% equity interest to over 99% in insolvent biodiesel plant operator, Bionasa.

· The receivable from a subsidiary of troubled Rurelec in relation to the sale by Santa Rita of Electricidad Andina, a Peruvian company with rights to a run-of-river hydro project, which is contingent on Rurelec developing the project.

· The final proceeds from the liquidation of Carbon Capital Markets.

Given their lack of materiality in valuation terms, the Board does not intend to report further to Shareholders on these holdings unless a significant event, positive or negative, occurs. The Board will, however, continue to monitor developments and endeavour to minimise associated costs and/ or maximise any proceeds.

Operating Expenses

TEP's operating expenses continue to decline commensurate with the Company's reduced activities.

Legal costs have been declining as the arbitrations conclude and/ or are terminated. £0.8 million of the provision for legal costs associated with the arbitration processes has been reversed.

Other expenses include out-of-pocket costs associated with Directors' involvement in the management of the carbon and private equity investments. These are activities that were previously carried out by EEA Fund Management Limited.

EEA Fund Management Limited ("EEA")

The Services Agreement with EEA was terminated effective 5 March 2016. EEA no longer provides any services to TEP. EEA remains entitled to receive an equity transaction fee on any further amounts received by TEP from the sale of EWG Slupsk.

Distributions

In the Chairman's Statement accompanying TEP's audited financial statements for the year ended 30 June 2015, the Board committed to consult with Shareholders to help ascertain the optimum way to effect future distributions of capital given that recent changes in UK tax legislation reduced the attraction of the B share schemes which the Company had previously employed. Most shareholders consulted expressed a preference for a return of capital over a dividend.

TEP will today announce that the Company will distribute to Shareholders an amount of 5.0p per Share, an aggregate of £12.5 million, on 29 April 2016 by means of a capital return of share premium.

Outlook

As and when further amounts are received from our remaining investments, the Board intends that the proceeds will be distributed to Shareholders, subject to the Company retaining sufficient resources to meet liabilities and operating costs.

Martin M. Adams

Chairman

23 March 2016

Independent Review Report to Trading Emissions PLC

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2015 which comprises the Condensed Statement of Comprehensive Income, Condensed Statement of Financial Position, Condensed Statement of Changes in Equity, Condensed Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules.

As disclosed in note 2, the annual financial statements of the company are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2015 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the AIM Rules.

KPMG Audit LLC

Chartered Accountants

Heritage Court

41 Athol Street

Douglas

Isle of Man IM99 1HN

Condensed Statement of Comprehensive Income

The notes are an integral part of these interim financial statements.

Condensed Statement of Financial Position

The notes are an integral part of these interim financial statements.

The interim financial statements were approved and authorised for issue by the Board of Directors on 23 March 2016 and signed on its behalf by:

Philip Scales Martin Adams

Director Director

Condensed Statement of Changes in Equity

The notes on pages are an integral part of these interim financial statements.

Condensed Cash Flow Statement

The notes are an integral part of these interim financial statements.

Notes to the Condensed Interim Financial Statements

for the 6 months ended 31 December 2015

1 Operations

Trading Emissions PLC ("the Company") invests in environmental and emissions assets, companies providing products and services related to the reduction of greenhouse gas emissions and associated financial products. The Investing Policy of the Company was amended on 13 September 2010 to carry out an orderly realisation of the portfolio of Carbon and Private Equity assets, distribute the net proceeds to Shareholders and then undertake a voluntary winding-up of the Company. No new Private Equity investments will be made except where the Board of Directors of the Company ("the Board") considers it necessary to provide follow-on capital to protect an existing investment.

The Company is a closed-ended investment company domiciled in the Isle of Man. The address of its registered office is IOMA House, Hope Street, Douglas, Isle of Man. It was incorporated on 15 March 2005 in the Isle of Man as a public limited company and is quoted on the Alternative Investment Market ("AIM") operated and regulated by the London Stock Exchange. In December 2011, the Company was re-registered under the Isle of Man Companies Act 2006.

2 Basis of Preparation

These interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. They do not include information required for a complete set of financial statements prepared in accordance with IFRSs as adopted by the EU. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the financial position and performance since the last annual financial statements as at and for the year ended 30 June 2015.

The principal accounting policies applied in the preparation of the interim financial statements are unchanged from those disclosed in the annual audited financial statements for the year ended 30 June 2015. These policies have been consistently applied to each of the periods presented. The audited financial statements for the year ended 30 June 2015 are available at www.tradingemissionsplc.com.

The interim financial statements for the six months ended 31 December 2015 should be read in conjunction with the annual financial statements for the year ended 30 June 2015.

3 Critical accounting estimates and judgements

Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Other than those disclosed in note 8 of the annual audited financial statements for the year ended 30 June 2015, the estimates and assumptions that have a significant risk of causing a material adjustment to the carrying values of assets and liabilities within the next financial year are addressed below.

Accrual for tax expenses in relation to the sale of Billiter Energy Corporation ("Billiter")

The Company exercises judgement in estimating the accrual for tax expenses. The estimate is based on advice provided by tax advisers, but cannot be quantified until final tax assessments are received from Element Markets LLC ("Element Markets") for the year-ended 31 December 2015. Because of the inherent uncertainty in this evaluation process, actual tax expenses may be different from the estimated accrual.

4 Segmental information 

The Board has determined the operating segments based on the reports and financial information provided to it by the administrator. These reports are used by the Board to make strategic decisions. The Board manages the assets across three segments.

Carbon

The Carbon segment comprises carbon investments and associated costs and provisions. The segment is the sum of these as measured in a manner consistent with IFRS.

Private Equity

Private Equity consists of all private equity investments and associated costs and provisions. Given the Board's realisation strategy, all private equity investments are aggregated into one reportable segment and the Board reviews the NAV of the segment attributable to the Company. Net Asset Value ("NAV") is measured in a manner consistent with IFRS.

Corporate

The corporate segment comprises all assets and liabilities not otherwise attributable to the Carbon or Private Equity segments and includes cash. The Company incurs certain costs and holds certain assets and liabilities, which are not attributable to the Carbon or Private Equity segments. The Board reviews material expenses incurred on a regular basis. Cash resources as reported in the Statement of Financial Position, are monitored by the Board to ensure there is sufficient cash to meet its obligations as they fall due.

The Carbon segment includes financial assets at fair value through profit or loss - Carbon, £149,000 of Certified Emissions Reduction ("CER") trade creditors (30 June 2015: £537,000; 31 December 2014: £527,000) and £400,000 (30 June 2015: £1,401,000; 31 December 2014: £2,097,000) for the provision for litigation costs (see note 15 and note 16).

The Private Equity segment includes financial assets at fair value through profit or loss - Private Equity, £2,179,000 for the accrual for estimated liabilities in relation to the disposal of Billiter (30 June 2015 :

£nil; 31 December 2014: £nil) (see note 6).

The Corporate segment includes cash of £13,207,000 (30 June 2015: £9,821,000; 31 December 2014: £4,851,000).

5 Financial risk management

Fair value estimation

Assets and liabilities are carried at fair value by valuation method. The different levels of valuation method are defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (that is, as prices) or indirectly (that is, derived from prices); and

Level 3: Inputs for assets or liabilities that are not based on observable market data (that is, unobservable inputs).

The categorisation of a financial asset or liability within the hierarchy is based upon the pricing transparency of the asset or liability and does not necessarily correspond to the perceived risk. A financial assets or liabilities level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgement by the Board.

The fair value of assets and liabilities that are not traded in an active market are determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on estimates provided by the management of the assets and liabilities. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2; otherwise they are classified as Level 3. Where valuation techniques (for example, estimated recovery value) are used to determine fair values, they are validated and reviewed by experienced personnel and where appropriate, third party advisers. Valuation models are calibrated by back-testing to actual transactions to try to ensure that the outputs are reliable.

The Company holds no Level 1 or 2 assets or liabilities.

The Company's investments included within Level 3 are:

· Carbon

· Private Equity

Both Carbon and Private Equity investments include "TEP Investment Companies". TEP Investment Companies are companies in which TEP holds an ownership interest greater than 20%.

1. Carbon

The Carbon investments or ("Carbon") are CERs, Emission Reduction Purchase Agreements ("ERPAs") and TEP Investment Companies, which trade in CERs and hold ERPAs, which are shown below:

Carbon investments are held at fair value. Fair value is determined using market data in the first instance. If this is not available the fair value is determined using the income approach based on Directors' estimates and assumptions.

2. Private Equity

Private Equity is held at fair value. Private Equity consists of all TEP Investment Companies, with the exception of those which trade in CERs and/or hold ERPAs. Fair value is estimated using market data in the first instance. If this is not available, the fair value is determined using the income approach based on Directors' estimates and assumptions.

The table below shows all companies that are included under the term 'TEP Investment Companies' in Private Equity.

The following table presents assets and liabilities that are measured at fair value at 31 December 2015.

Level 3 Valuation Methodology

The valuation methodologies, significant assumptions and fair values of investments as at 31 December 2015 are summarised below:

Fair value of financial assets and liabilities

Significant unobservable inputs are estimated as follows:

Discounted proposed transaction terms include non-binding offers received from third parties for the purchase of Private Equity investments, which form the basis of current negotiations.

Discount rates represent the rate used to discount projected levered or unlevered projected cash flows and terminal value for an investment to their present values as part of the calculation of enterprise value for the investment. The Company uses a Capital Asset Pricing Model approach to calculate a discount rate appropriate for each project or company.

Cash flows are projected by the Company and management of some of the TEP Investment Companies by considering possible operational scenarios and transaction terms, the amount to be paid or received under each scenario and the probability of each scenario.

Estimated recovery value is the amount estimated by the Directors to be realised on an investment in a disposal or liquidation scenario.

6 Realised loss on disposal of financial assets at fair value through profit or loss - Private Equity

On 20 November 2015 TEP entered into a Membership Interest Purchase Agreement ("MIPA") with RASCHWA LLC for the sale of it's subsidiary company Billiter, that owned 51.2% Element Markets, which completed on 31 December 2015. During the period net cash receipts in relation to Element Markets of £4,837,000 (US$7,008,000) were received by TEP, after payments on account for Billiter's 2014 and 2015 United States income tax liability, in accordance with the terms of the MIPA. As at 31 December 2015 an accrual has been included by the Company within trade and other payables for the outstanding estimated 2015 income tax liability on Billiter's income from Element Markets for the period it was owned by the investment of £2,073,000 (US$3,054,000). The realised loss on disposal of the investment was £236,000.

7 Investment Services fees

Under a Services Agreement, EEA Fund Management Limited ("EEA") received a monthly fee of £23,700. Investment services fees for the 6 month period ending 31 December 2015 were £142,000 (for the year ended 30 June 2015: £442,000; for the 6 month period ended 31 December 2014: £296,000).

The Services Agreement was terminated effective 5 March 2016, following which no monthly fees are payable. EEA continues to be entitled to receive an equity transaction fee in relation a disposal (see note 17).

8 Directors' fees

The Company paid the following fees to Directors during the period:

* Isle of Man resident

The annual Directors' fees (excluding any additional fees) are currently £60,000 for the Chairman and £40,000 for the other non-executive Directors other than for Philip Scales who receives an annual fee of £5,000. The Directors are also reimbursed for travel and out of pocket expenses incurred. Directors' fees included an additional annual fee of £20,000 payable to the Chairman of the Audit Committee until 30 September 2015.

9 Other operating expenses

*Net CER Costs income of £349,000 arose during the period from CER Costs that have historically been expensed, but remain recoverable under the relevant ERPAs as an offset against the income from the revenue from the sale of the related CERs, as determined in each ERPA. CER Costs in excess of the revenue from the sale of the related CERs are not recoverable and continue to be expensed.

10 Trade and other payables

11 Loss per share for the period

(a) Basic

Basic profit or loss per Share is calculated by dividing the profit or loss by the weighted average number of ordinary shares in issue during the period.

(b) Diluted

Diluted profit or loss per Share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company had no dilutive potential ordinary shares at each of the reporting dates.

12 Net asset value per share

The NAV per Share is calculated by dividing the net assets by the number of ordinary shares in issue.

13 Share capital

The total number of authorised and issued ordinary shares of the Company is as follows:

All issued ordinary shares are fully paid, and each ordinary share carries the right to one vote.

14 Related party transactions

The Company entered into a Fees and Expenses Agreement with TEP Renewables on 6 December 2010. Under the terms of the agreement the Company will reimburse TEP Renewables for any 'agreed company expenses'. During the period fees and expenses reimbursed by the Company to TEP Renewables amounted to €24,000 (30 June 2015: €55,000; 31 December 2014: €37,000).

On 6 December 2010 the Company also entered into a Total Return Swap Agreement ("TRS") with TEP Renewables. The TRS is for a period of 20 years with a termination date of 6 December 2030 or such earlier date as may be specified by written notice by TEP Renewables to the Company. Under the terms of the TRS, TEP Renewables will make investments in target companies. On termination of the TRS any amounts in the cash account from the TRS or investments made must be paid to the Company by TEP Renewables. As at 31 December 2015 the balance on the TRS stands at €10,250,000 (30 June 2015: €13,578,000; 31 December 2014: €20,072,000).

During the period the Company paid £81,000 (30 June 2015: £385,000; 31 December 2014: £88,000) to Billiter Participações Ltda to cover its on-going operating expenses. The sums paid are not repayable. No agreement exists between the Company and Billiter Participações Ltda regarding the payment of its on-going operating expenses, and the Company is under no obligation to pay these expenses.

During the interim period the Company received cash of £8,000 (30 June 2015: £nil, 31 December 2014: £nil) in relation to CERs sold to TEP (Carbon Holdings) Limited. This receipt is repayable on demand to TEP (Carbon Holdings) Limited.

15 Provisions for Litigation Costs

The provision of £400,000 at 31 December 2015 relates to costs estimated to be incurred in relation to litigation involving six ERPAs (see note 16). The movement during the period is detailed below:

16 Contingent liabilities

In March and June 2014, the Company received notices of arbitration in respect of claims that challenge the amendments that had been made to, in total, six ERPAs, each between TEP and a project company owned by Yunnan Dianneng (Group) Holding Co. Ltd ("Dianneng").

During the reporting period two arbitration tribunals rejected three claims. The decisions of the arbitration tribunals are final and the awards are binding.

The aggregate sums claimed against the Company under the remaining three claims that had not been heard by the relevant arbitration tribunals at 31 December 2015 amounted to approximately €11,172,000 (see note 17).

The Company is party to several fixed priced ERPAs, which the Company considers to have lapsed, been terminated, or the projects are unviable or non-operational. No provision has been made for potential liabilities arising from these contracts because the Board has assessed the likelihood of any liabilities as being remote. 

17 Subsequent Events 

EEA

The Services Agreement with EEA terminated effective 5 March 2016 (see note 7).

TEP Renewables

On 7 July 2014, TEP Renewables sold its interest in EWG Slupsk to Pakenham Spolka Z Organiczona Odpowiedzialnoscia ("the Buyer") for a minimum consideration, subject to price adjustments for the completion of the project in accordance with the Share Purchase Agreement ("SPA") of €22,414,000 (£17,803,000). The consideration comprised of €7,000,000 (£5,560,000) paid to TEP Renewables in July 2014 and a deferred consideration of up to €15,414,000 (£11,358,000).

TEP Renewables provided various representations and warranties to the Buyer customary for this type of transaction. All representations and warranties were due to expire by 7 July 2016.

On 23 February 2016 amendments were made to the SPA, which changed the maximum amount of the consideration to €21,664,000 (£15,963,000). Amongst other changes made, all potential claims against TEP Renewables under the representations and warranties have been waived, except those relating to the title to shares and capacity of TEP Renewables to execute the sales and purchase agreement.

The deferred consideration is included in the estimate of fair value of the Company's investment in TEP Renewables at the reporting date.

Under the Services Agreement, EEA is entitled to an equity transaction fee equal to 2.7 per cent of the net aggregate consideration received from the Buyer, payable when TEP Renewables receives the deferred consideration.

Arbitrations

On 4 March 2016, the Company was informed by a tribunal of the termination of a further arbitration in respect of a claim of approximately €5.6 million lodged by a subsidiary of Dianneng. The tribunal also awarded the Company a total amount of HK$289,105.37 in respect of legal costs, the tribunal's fees and the administrative fees of the Hong Kong International Arbitration Centre (see note 16).