15th Apr 2014 07:00
15 April 2014
APR Energy plc (the "Company")
Annual Report and Accounts and Notice of Annual General Meeting
Following the release on 26 March 2014 of the Company's preliminary full year results announcement for the year ended 31 December 2013 (the "Preliminary Announcement"), the Company announce that it has published its Annual Report and Accounts for 2013 (the "Annual Report and Accounts").
The Company's 2014 AGM will be held at JP Morgan Cazenove, Holborn Bars, London, EC1N 2NQ on Tuesday 20 May 2014 at 10.00 am.
Copies of the Annual Report and Accounts and the Notice of the Annual General Meeting 2014 are available to view on the Company's website: www.aprenergy.com/investors
In accordance with Disclosure and Transparency Rule 6.3.5(2)(b), additional information is set out in the appendices to this announcement. This information is extracted in full unedited text from the Annual Report and Accounts.
The Preliminary Announcement included a set of condensed financial statements and a fair review of the development and performance of the business and the position of the Company and the Group.
In accordance with Listing Rule 9.6.1, a copy of each of the Annual Report and Accounts, the 2014 Notice of Annual General Meeting and the form of proxy in relation to the 2014 Annual General Meeting has been submitted to the Financial Conduct Authority via the National Storage Mechanism and will be available for viewing shortly at www.Hemscott.com/nsm.do
Enquiries:
APR Energy plc
Karen Menzel Director of Investor Relations +44 (0) 777 590 6076
Andrew Bradshaw Company Secretary +44 (0) 207 725 0800
About APR Energy
APR Energy is the world's leading fast-track mobile turbine power business. We provide large-scale, fast-track power, providing customers with rapid access to reliable electricity when and where they need it. APR combines state-of-the-art, fuel-efficient technology with industry-leading expertise to provide turnkey power plants that are rapidly deployed, customisable, and scalable. Serving both utility and industrial segments, APR Energy provides power generation solutions to customers and communities around the world, with an emphasis on Africa, the Americas, Asia-Pacific, and the Middle East. For more information, visit the company's website at www.aprenergy.com.
Appendices
Appendix A: Directors' responsibility statement
The following directors' responsibility statement is extracted from the Annual Report and Accounts (page 74).
Directors' responsibility statement required by DTR 4.1.12R
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
· the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
· the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
On behalf of the Board
John Campion Andrew Martinez
Chief Executive Officer Chief Financial Officer
25 March 2014 25 March 2014
Appendix B: A description of the principal risks and uncertainties that the Company faces
The following factors and other information contained in this Annual Report should be carefully considered. The following is a description of the risks that may affect some or all of the Group's activities and which may affect the value of an investment in the Company's securities. If any of the events described below occurs, the business, financial condition or results of operations of the Group could be adversely affected in a material way.
Additional risks and uncertainties that the Group is unaware of, or that it currently deems immaterial, may also in the future have a material adverse effect on the Group's business, results of operations and financial condition.
Key Risk | Description | Impact | Mitigation |
Strategic | |||
Failure to deliver the growth plan envisaged as part of the recent capital injections | The Group's strategy is primarily based on organic growth via the deployment of capital into new temporary power projects that are value accretive. This organic growth is dependent on the Group's ability to effectively secure new projects and to scale the infrastructure of the business to support execution.
| The inability to deploy successfully capital into new projects and maintain its growing fleet could have a material adverse effect on the financial results of the Group.
| A detailed annual operating plan has been established, approved by the Board, and is monitored monthly. - A longer range (3-5 year) plan has been put in place and is updated annually to incorporate market changes. - Regional business development organisation fully deployed and operational. Pace of capital expenditures is aligned with the commercial pipeline.
|
Contracts are temporary in nature | The Group operates in an industry where the majority of contracts are short-term (typically 12 -18 months) and there are no assurances that any particular customer will renew or extend a contract.
| Assets may be idle for a period of time before they are redeployed in a revenue generating capacity.
| - The Group's commercial team takes a dual approach, which involves pursuing contract extensions with existing customers whilst also pre-marketing assets that may soon become available. - A commercial pipeline process tracks new contract opportunities from opportunity identification through to final contract signature. - Asset utilisation models are used to manage fleet assets.
|
Asset concentration | Given the scale of the Group's, albeit growing, customer base, the loss of any single major customer, and/or high concentration of assets could have an adverse impact on the results of its operations. | Any such loss of a major customer contract could materially impact revenues and associated profitability. | - The Group is pursuing a strategy of geographic and market diversification as demonstrated via our hub strategy, with a focus on continued expansion of its customer base in order to lessen the impact of any single customer loss. The placing of assets across multiple sites, helps to mitigate the impact pertaining to any given location. - Commercial opportunities are segmented across regions, customer segments and technology to align with strategic growth objectives. - The Group maintains a regular dialogue with major customers at a senior level to help understand and anticipate their future plans. - The acquisition of the GE Power Rental Business increased the scale and diversification of APR Energy's business.
|
Key Risk | Description | Impact | Mitigation |
Market | |||
Global political and economic conditions | The global footprint of the Group's business exposes it to risks of change in economic conditions and political regimes.
| Declines in economic activity, slowing of growth rates and customer access to funding could impact the growth strategies of the business.
Additionally, changes in political regimes pose potential risk to existing contracts and/or the timing of potential new contract opportunities.
| - The Group is pursuing a strategy of geographic and market diversification with a focus on continuing to expand its customer base in order to lessen the impact of economic cycles and/or political changes. - A commercial pipeline process has been established to track new contract opportunities and includes risk management elements. - APR recognises that some of the countries in which it operates have experienced political, social, economic and security instability. The Group is proactive about mitigating all or a portion of its international currency and asset exposures through various risk mitigation tools, including the use or purchasing of insurance, bonds, guarantees, and cash advances to protect its assets, both financial and operational.
|
Volatility in customer demand, including event driven demand | Customer demand inherently fluctuates and, in many cases it is driven by external events that are difficult to predict.
| Fluctuating demand can create volatility in trading results. Higher margin event (emergency) driven contracts may not be sustainable on a consistent basis.
| - By developing a global expanded customer base, the impact of any single event can be mitigated. - A regional hub strategy has been implemented to help ensure that equipment is available nearby to customers and that it is able to be utilised in the event that a short-term market opportunity arises.
|
Increase in competitive environment | While barriers to entry in the temporary power space remain high, there is the potential for new or expanding entrants to compete with the Group. | New entrants may create pricing pressure in the market and lead to reduced margins. | - The Group's commercial team regularly monitors competitive activity and publicly available pricing dynamics to help understand changes in the market. - The Group focuses on maintaining a world-class competitive offering using best-in-class technology.
|
Key Risk | Description | Impact | Mitigation |
Operations | |||
Asset security
| The Group's operations are highly capital intensive and, in many cases, projects require the placement of high-value equipment into volatile environments. | The potential exists for nationalisation, expropriation and/or theft of high-value assets.
| - The Group maintains a comprehensive global property insurance programme. - In addition, there is a global political risk insurance programme that can be implemented on a country-by-country basis to protect against government actions relative to assets such as expropriation or nationalisation. - In many cases, standby letters of credit from customers are required for asset security.
|
Focus on developing markets - operations in difficult regions of the world
| The Group's operations are highly decentralised and in many cases the Group operates in regions of the world where corruption and bribery are commonplace.
| This may expose the Group to unethical behaviour and potential legal/regulatory violations that could have a significant financial and reputational impact.
| - The Group has instituted a comprehensive compliance programme that includes a broad anti-corruption policy, extensive training, and monitoring on a regular basis, with all new employees required to undertake training upon joining. - Third-party agents/ contractors are thoroughly vetted prior to any engagement and are required to provide compliance certifications.
|
Recruitment and retention of key staff
| The Group depends on the recruitment and retention of key senior management in order to effectively manage the business. | The loss of key senior individuals in the organisation or the inability to recruit sufficient talent could jeopardise APR Energy's ability to execute its growth plans.
| - Competitive remuneration policies, including a performance share plan, have been put in place to attract and retain key personnel. - A talent review and development process is in place across the organisation with a focus on providing growth opportunities across the organisation.
|
Environment, health and safety | The Group's operations involve the movement, installation, and operation of large electrical equipment, which often operates at high voltage.
In addition, the handling of fuel, oil and other hazardous materials is a common part of the day to-day activity. | Plant personnel could be subject to safety hazards that lead to injury or loss of life.
Operations could be subject to an accidental spill of fuel or other hazardous materials. | - The Group has implemented comprehensive health and safety policies and procedures at all sites. An extensive training programme has been rolled out to all personnel. - The Group has strengthened its security arrangements, including the introduction of a Group Security Director, Country security managers in higher-risk countries and the introduction of a Group security standard setting out mandatory principles and procedures for all our locations. - The development of environment, health and safety performance indicators is ongoing and will be reviewed regularly with the Board.
|
Key Risk | Description | Impact | Mitigation |
Financial | |||
Movements in cost inputs
| The business model is dependent on the procurement of capital equipment, services, labour and other cost inputs to operate temporary power plants around the world.
| Changes in the cost of key inputs could have a material adverse effect on the operating margins of the business.
| - The Group has two key supplier framework agreements with GE and Caterpillar that have fixed pricing and are indexed to an annual inflation indicator thereafter. - Significant cost efficiency projects are underway to post standby, and in some cases, documentary letters of credit as payment security.
|
Payment default
| The Group has a number of contracts with customers in developing countries where payment practices can be lengthy and unpredictable.
| Delay in payments or default could adversely affect the financial performance of the business. | - Prior to contracting with a customer, a thorough risk assessment is completed including a credit risk review. - In many cases, the Group requires the customer to post standby, and in some cases, documentary letters of credit as payment security, decreasing the impact of any individual contract default. - The Group's strategy is focused on increasing the scale and diversification of the business.
|
Funding risk | The business model is dependent on external funding for the procurement of capital equipment, services, labour, and other costs to operate the business. | Adverse changes affecting access to funding or the higher costs associated with replacing maturing debt could have a material adverse effect on the business. | - The Group increased its credit facility to $650 million during 2013 with its group of lending banks. The credit facility includes provisions allowing for amendments to be requested, if necessary. - The Group enjoys good ongoing relationships with its lenders and has commenced discussions regarding its refinancing strategy in light of the term-loan which matures on 1 January 2015. - Alternative financing opportunities which are available to APR Energy are continuously evaluated by the Group.
|
Appendix C: Related party transactions
The following related party transactions are extracted from the Annual Report and Accounts (page 122).
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
JCLA Holdings LLC is a related party due to its owners being the CEO and COO of APR Energy plc. Consulting services from JCLA Holdings LLC (and its subsidiaries) were incurred by the Group during the year. These consulting services were made at an arm's length market price. The total expense for the year was $0.4 million (2012: $0.3 million). The services rendered were all paid in cash. No guarantees have been given or received.
CJJ LLC is a related party due to its owner being the CEO of APR Energy plc. CJJ LLC provides travel arrangement services to the Group. These services were made at an arm's length market price. The total expense for the year was $0.3 million (2012: $nil). The services rendered were all paid in cash. No guarantees have been given or received.
JCLA Development II LLC is a company related by common control by the CEO and COO. JCLA Development II LLC rents office space to the Group. These rental services were made at an arm's length market price. The total expense for the year was $nil (2012: $0.1 million). The services rendered were all paid in cash. No guarantees have been given or received.
Remuneration of key management personnel
The remuneration of key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures. Further information about the remuneration of certain key management personnel is provided in the audited part of the Directors' Remuneration Report on pages 75 to 91.
$ million | 2013 | 2012 |
Remuneration | 7.0 | 2.5 |
Post-employment benefits | - | - |
Other long-term benefits | 0.1 | 0.1 |
Termination benefits | - | 0.9 |
Equity-settled share-based payment expense | 2.8 | 0.8 |
9.9 | 4.3 |
The group of individuals designated as key management personnel has been expanded from 5 to 9 individuals in the current year.
Related Shares:
APR.L