9th May 2007 07:01
Rurelec PLC09 May 2007 DATE: 9 May 2007 Rurelec PLC ("Rurelec" or "the Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006 (audited) Highlights •Acquisition of controlling interest in Bolivia's largest electricity generator in January 2006 •Group turnover in year to 31 December 2006 - £20.7m •Group after tax profit attributable to shareholders of the Company of £14.46m, including one-off "negative goodwill" of £13.3m arising from acquisition of assets in Bolivia and fair value adjustments •Net Asset Value per share rose from 26.7p at 31 December 2005 to 50p at 31 December 2006 •Dividend of 2.25p per share declared Jimmy West, Chairman, said: "In 2006, the Company has made very significantprogress in achieving its objective of becoming one of the leading powergenerators in South America. "The strong operating performance of the Rurelec businesses in Argentina andBolivia continue to deliver both cash flow and profits. We intend to expand ouroperations into neighbouring countries in the Southern Cone in the months tocome and look forward to continued success throughout 2007." For further information: Rurelec PLC Daniel Stewart Parkgreen CommunicationsPeter Earl, CEO Paul Shackleton Clare Irvine / Lindsay Bancroft+44 (0)20 7793 7676 +44(0) 20 7776 6550 +44 (0) 20 7851 7480 RURELEC PLC CHAIRMAN'S STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 I am pleased to report that Rurelec PLC has produced an excellent set of resultsfor the last financial year to 31 December 2006 and is today declaring adividend of 2.25 pence. In the twelve months ended 31st December 2006, Rurelec reported after tax profitattributable to shareholders of £14.5 million, inclusive of 'negative goodwill'of £13.3m. The profits after tax for the six months ended 31st December 2005were £2.1 million. Total reported equity for the Group at the end of the periodunder review was £64.3 million (£5.7 million at 31 December 2005), with netasset value standing at £34.3 million, approximately 50 pence per share (26.7pence per share as at 31 December 2005). The Company is reporting earnings per share for the current financial year of21.2 pence. For the half year ended 30th June, 2006 Rurelec reported earningsper share of 9.05 pence per share. As in the case at the half year, asignificant part of the reported earnings consists of one-off benefits due tothe treatment of negative goodwill, which the Company is required to take to itsprofit and loss account under IFRS reporting standards. These earnings cannot bedistributed to shareholders as a dividend. The reason for the uplift is the factthat the Company has been successful in adding shareholder value in both itsacquisitions of existing power plants and in its development of new powergeneration capacity at below the open market value of that new capacity, areflection of the Rurelec management team's experience and ability as powerdevelopers. While much of the Company's reported earnings relate to such revaluationuplifts, I would like to draw the attention of shareholders to the very strongoperating performance of the Rurelec businesses in Argentina and Bolivia, whichcontinue to deliver both cash flow and profits. Our markets in the Southern Coneof Latin America are achieving record economic growth and this is reflected inthe underlying growth in operating income of the Rurelec plants. In recent weeks, our Guaracachi subsidiary has paid a dividend net of Bolivianwithholding tax of US $3.0 million to Rurelec. In anticipation of the receipt ofthis dividend, our finance team locked in a foreign exchange swap at US $1.9295to the pound, the equivalent of 2.25 pence per Ordinary share in Rurelec. TheBoard is declaring a dividend to shareholders equivalent to this amount. During the last financial year, Rurelec completed the acquisition of acontrolling stake in 360 MW of existing power plant capacity and thensubstantially completed the development and installation of 79 MW of newgas-fired capacity in Bolivia. Today, Rurelec companies are constructing afurther 160 MW of new combined cycle capacity eligible for certified emissionsreduction certificates (CERs) under the United Nations Clean DevelopmentMechanism. By any standards, this has been a period of extraordinary growth. Iam pleased to report that we anticipate continued growth in the Southern Cone ofLatin America over the foreseeable future. In March 2007, we announced that Freddie Fisher had joined the Board of Rurelecas a non-executive director. Freddie has considerable experience in theinternational capital markets and we anticipate that he will assist the Companyas we move to more inventive ways to finance our ambitious expansion plans.Equally, we will be bidding farewell to Frank Mattos, who will retire from theRurelec Board at the next Annual General Meeting. We offer our thanks to Frankfor his service to Rurelec over the last three years. RURELEC PLC CHAIRMAN'S STATEMENT - continued FOR THE YEAR ENDED 31 DECEMBER 2006 Power development is normally a slow business, as is the case with allinfrastructure projects that require design and construction. However the speedwith which Rurelec is adding new megawatts is rapid since we are servingdeveloping markets that have little reserve capacity: any delay risks power cutswithin those markets. The excellent relations Rurelec companies enjoy with theirrespective host governments underlines the important contribution we are makingin these countries to keep the lights on when others have been slow to invest inthe past. I am delighted that the confidence we have shown in Argentina andBolivia has produced good results for Rurelec shareholders while alsocontributing to continued economic growth. We intend to build on thatrelationship of trust to expand our operations into neighbouring countries inthe Southern Cone in the months to come. Jimmy West, Chairman 8 May 2007 RURELEC PLC CHIEF EXECUTIVE'S REVIEW OF OPERATIONS FOR THE YEAR ENDED 31 DECEMBER 2006 Rurelec's power generation businesses are performing well and the markets inwhich Rurelec currently generates electricity are experiencing considerableeconomic growth. Argentina's economy continues to grow at 9 per cent. whileBolivia is enjoying GDP growth of almost 6 per cent. As we reported at the halfyear stage, demand for electricity in turn is exceeding all previous demandforecasts. As a result, the governments of both Argentina and Bolivia haverequested Rurelec's local subsidiaries to accelerate and increase expansionplans for new power capacity to match the needs of the power markets in thesouth of Latin America. Rurelec is still meeting the challenge that such rapiddemand growth represents. Today Rurelec controls a group of four major operating power plants comprising515 MW of fully operational installed capacity in Bolivia and Argentina with afurther 160 MW under construction or at the ground-breaking stage and over 120MW in advanced development. Argentina Rurelec is now six months into the construction phase of the 60 MW combinedcycle expansion of its Energia del Sur ("EdS") power plant in Patagonia. EdS is the Argentine company which owns and operates one of the most southerlypower plants in Argentina, serving the partially isolated power grid based onComodoro Rivadavia. Existing capacity is 76 MW and Rurelec owns an effective 50per cent. interest in EdS following its July 2005 purchase of a 50 per cent.stake in Patagonia Energy Limited ("PEL"). PEL is converting the original 1990s plant to combined cycle gas turbineexpansion ("CCGT") by adding a steam turbine and heat recovery steam generatorto the two open cycle General Electric 6B gas-fired turbines of EdS. During2006, PEL acquired a steam turbine and air cooling system at very favourableprices to implement the combined cycle conversion. The project is eligible forcarbon credits under the Kyoto Protocol and Rurelec is exploring innovative waysto use these carbon credits as security for project finance. The steam turbineand cooling system are now in Patagonia as part of a 96 container load shipmentof plant and construction materials. This is the first expansion of generationcapacity in Argentina since 2001 and the start of building work was a milestonein the Argentine power industry as it recovers from the economic turmoil of fiveyears ago. When completed in early 2008, the CCGT conversion will add some 60 MWof new capacity in the south of Argentina where demand growth has out-strippedreserve capacity in the southern power grid. Since the year end, EdS has achieved financial close with Standard Bank Plc,London for a medium term dollar based loan of US $18 million for the financingof the new CCGT capacity. This was the first overseas financing for a powerplant in Argentina since the peso crash of 2001. Again, this is an importantmilestone in the regional banking sector and opens the way to further projectfinancing for new Rurelec projects in Argentina. Bolivia In January 2006, Rurelec completed the acquisition of a controlling stake inEmpresa Guaracachi SA, Bolivia's largest power generation company and thebiggest consumer of natural gas in the country. All of Guaracachi's powerplants, consisting of 360 MW of nominal capacity at the time of the take-over,are thermal plants running on natural gas. Bolivia has the second largestreserves of natural gas in Latin America and has been looking to expand themarket for its single most important resource. RURELEC PLC CHIEF EXECUTIVE'S REVIEW OF OPERATIONS - continued FOR THE YEAR ENDED 31 DECEMBER 2006 For the two years prior to the Rurelec acquisition, Guaracachi had been operatedby the senior officers of Independent Power Corporation PLC, the British powerdeveloper founded in 1995 whose management created Rurelec. The transfer ofcontrol to Rurelec was therefore completed swiftly and this permitted Guaracachito accelerate its plans for expansion within Bolivia through organic growth. The first new capacity completed in 2006 was the successful commissioning inAugust of four new Jenbacher 616 gas engines at Guaracachi's Aranjuez plant inSucre. With a 42 per cent. thermal efficiency, these machines are now in serviceand are baseload providers of power for Bolivia's original capital and the seatof its Supreme Court. The new capacity was installed in time for the constituentassembly that was launched in Sucre in August 2006. A far larger expansion was substantially completed in 2006 in the form of theGeneral Electric 6 FA gas turbine installed in Santa Cruz de la Sierra,Bolivia's principal commercial centre to the east of the country and the home ofBolivia's oil and gas industry. This turbine, now unromantically named GCH 11,was successfully commissioned in early 2007 and was officially inaugurated bythe Minister of Public Works and the British Ambassador to Bolivia on 13 March,2007. It has a nominal capacity of 71 MW though the high ambient temperature ofSanta Cruz, which is on the edge of Amazonia, means that it is de-rated to 62 MWfor practical purposes. Together, these two new power facilities in Sucre and Santa Cruz represent some10 per cent. of the peak demand of Bolivia. Today, Guaracachi's installednominal capacity in Bolivia has increased by 22 per cent. from 360 MW to just on440 MW. At the same time as completing its current additions to plant capacity,Guaracachi has been working on two further expansion projects. The first project is the 80 MW CCGT expansion which consists of the conversionin Santa Cruz of two existing General Electric 6FA gas turbines to combinedcycle operation. This project is Bolivia's first carbon credit power generationproject under the Kyoto Protocol. Following extensive discussions with theGovernment of Bolivia, the Board of Guaracachi has given its approval to proceedwith the CCGT conversion and a provisional generation licence is to be granted,allowing Guaracachi to initiate the project. A Siemens steam turbine has beenreserved in Germany and is to be acquired on excellent terms following recentengineering due diligence. The turbine which has been reserved will allow theCCGT project capacity to be increased from the 80 MW originally announced tojust under 100 MW using ancillary firing. This increase in the size of theproject is necessary to meet Bolivia's growing demand for new power capacity.Guaracachi has received funding offers for the CCGT conversion from a number oflocal and regional banks. Acquisition of the steam turbine and the decision tocommence construction are expected within weeks. The CCGT project is due to becommissioned in the first half of 2008. The second project is the 120 MW greenfield power plant to be based in Yacuibain Bolivia's Department of Tarija close to the border with Argentina. This newplant is intended to stimulate economic growth to the south of Bolivia where thenational transmission grid has not yet been extended. The plant will also beinterconnected to the northern grid system of Argentina which currently suffersfrom power shortages. RURELEC PLC CHIEF EXECUTIVE'S REVIEW OF OPERATIONS - continued FOR THE YEAR ENDED 31 DECEMBER 2006 Guaracachi is in the closing stages of a protracted negotiation with theBolivian national oil and gas company, YPFB, for a long term gas supply for theYacuiba plant. A preliminary agreement for the sale of electricity was signedwith CEMSA, the Argentine power trading subsidiary of Endesa of Spain, some timeago and has recently been extended. A study is also under way to increase thesize of the Yacuiba project from the previously announced 120 MW in anticipationof an extension of the Bolivian national grid from Tarija to Yacuiba. Guaracachihas now completed the purchase of a site for the Yacuiba plant. This is adjacentto the site acquired by Rurelec's wholly-owned subsidiary, Energais, which hasbeen developing in parallel an isolated generation project using Jenbacher gasengines to serve the local community in Yacuiba and Villa Montes. Energaisrecently obtained all necessary environmental consents for its own project siteand Guaracachi expects to receive similar consents on a fast track basis. Energais continues to negotiate the installation of its two 3 MW Worthingtondual fuel engines in Riberalta and Guayamerin. As part of a move to greatersustainability in isolated generation, Energais is now actively exploring theuse of bio-fuels in its dual fuel motors and is working to replace the use ofimported and expensive mineral diesel in its new local power plants. Expansion Rurelec is studying a number of expansion possibilities in line with itsintention to become one of the leading power generation companies in SouthernCone of Latin America. At the present time, Rurelec has over US $ 200 million ofunused debt capacity between its own balance sheet and those of its variouscompanies. The policy of Rurelec is now to bring the Company in line withgearing ratios typical in other parts of the world for power companies withstrong cash producing operations. While rapid growth is expected to continue inboth Argentina and Bolivia from the development projects already in train, theCompany hopes to add capacity in both Chile and Peru in future years boththrough greenfield development and by means of acquisition to create a balancedportfolio of profitable power plants on both sides of the Andes. Peter Earl Chief Executive Date: 8 May 2007 RURELEC PLC CONSOLIDATED INCOME STATEMENT AND STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2006 Consolidated income statement Year ended 6 months ended 31.12.06 31.12.05 Notes £'000 £'000 Revenue 4 20,660 1,864Cost of sales (15,853) (1,502) Gross profit 4,807 362Administrative expenses (2,426) (308)Other income 5 2,426 - Negative goodwill arising on 6 13,313 2,067acquisition of subsidiary Finance income 200 8Finance expense (632) - Profit before tax 17,688 2,129Tax expense 7 (1,296) (76) Profit for the year / period 16,392 2,053 Attributable to minority interests 1,934 -Attributable to shareholders of 14,458 2,053Rurelec Plc 16,392 2,053 Earnings per share (basic) 8 21.17p 10.28pEarnings per share (diluted) 8 21.17p 10.28p Statement of recognised income and expense Exchange differences on translation (4,564) (385)of foreign operationsProfit for the financial year / period 14,458 2,053 Total recognised income and expense for the year / period 9,894 1,668 RURELEC PLC CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2006 31.12.06 31.12.05 Notes £'000 £'000AssetsNon-current assetsProperty, plant and equipment 9 70,886 4,853Intangible assets 3 7Trade and other receivables 442 406Deferred tax assets 359 327 71,690 5,593Current assetsInventories 3,146 460Trade and other receivables 8,530 2,578Cash and cash equivalents 3,179 424 14,855 3,462 Total assets 86,545 9,055 Equity and liabilitiesEquity attributable to equity holders of the parentShare capital 10 1,366 427Share premium account 11 21,303 3,568Foreign currency reserve 11 (4,948) (384)Retained earnings 11 16,542 2,084 Total equity attributable to 34,263 5,695shareholders of Rurelec Plc Minority interests 29,985 - Total equity 64,248 5,695 Non-current liabilitiesTrade and other payables 247 431Deferred tax liabilities 739 -Borrowings 10,522 - Total non-current liabilities 11,508 431 Current liabilitiesTrade and other payables 5,935 2,478Borrowings 4,854 451 Total current liabilities 10,789 2,929 Total liabilities 22,297 3,360 Total equity and liabilities 86,545 9,055 RURELEC PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 Year ended 6 months ended 31.12.06 31.12.05 Notes £'000 £'000Net cash inflow / (outflow) 12 505 (58)from operating activities Cash flows from investing activitiesPurchase of plant and equipment (7,157) (387)Sale of fixed assets and spares 2,426 -Interest received 200 8Acquisition of interest in (7,166) -subsidiary (net of cash)Acquisition of interest in joint venture (863) (2,474) (net of cash) Net cash used in investing activities (12,560) (2,853) Net cash outflow before financing activities (12,055) (2,911) Cash flows from financing activities Issue of shares (net of costs) 18,674 2,979Proceeds from bank loans 1,301 -Repayment of bank loans (1,761) -Interest paid (478) -Tax paid (1,004) -Payment of dividend to minorities (1,922) -Dividend paid - (107) Net cash in from financing activities 14,810 2,872 Increase / (decrease) in cash and cash equivalents 2,755 (39) Reconciliation and analysis of change in net funds Increase / (decrease) in cash during year / period 2,755 (39) Cash and cash equivalents at start of year / period 424 463 Cash and cash equivalents at end of year / period 3,179 424 NOTES TO THE PRELIMINARY RESULTSFOR THE YEAR ENDED 31 DECEMBER 2006 1 Nature of operations Rurelec PLC and its subsidiary and joint venture entities ('The Group')principal activity is the operation of electricity generation assets and thesupply of electricity to the wholesale market and major end-users. The Groupalso buys and sells related assets as opportunities arise. During the periodunder review, all of the Group's electricity generation assets were located inSouth America. 2 General information Rurelec PLC is the Group's ultimate parent company. It is incorporated anddomiciled in England and Wales. Rurelec PLC's shares are traded on theAlternative Investment Market ("AIM") in London. The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards as adopted by the EU andInternational Financial Reporting Standards as issued by the InternationalAccounting Standards Board. The consolidated financial statements for the year ended 31 December 2006(including the comparatives for the six months period ended 31 December 2005)were approved by the Board of directors on 8 May 2007. 3 Basis of preparation The financial statements have been prepared under the historical cost conventionand in accordance with applicable International Financial Reporting Standards("IFRS") as adopted by the European Union. 4 Segment analysis During the year to 31 December 2006 and the six months to 31 December 2005, allof the Group's revenues arose from electricity generating activities. There wereno revenues derived from the sale of equipment purchased with a view tosubsequent resale. The following table provides a segmental analysis by geographic region: Argentina Bolivia UK Intra-Group Total £'000 £'000 £'000 £'000 £'000 Revenue 3,735 16,925 - - 20,660Cost of sales (3,105) (12,748) - - (15,853)Administrative expenses (515) (1,125) (515) - (2,155)Exchange gains / (losses) (2) (497) 228 - (271)Other income - 2,426 - - 2,426Negative goodwill - 13,313 - - 13,313Finance income - 181 19 - 200Finance expense (28) (601) (3) - (632)Dividend received - - 1,841 (1,841) -Profit before tax 85 17,874 1,570 (1,841) 17,688Tax expense (310) (986) - - (1,296)Profit/(loss) for the year (225) 16,888 1,570 (1,841) 16,392 Segment analysis (continued) Total assets 7,775 78,630 26,425 (26,285) 86,545Total liabilities 3,368 18,763 2,094 (1,928) 22,297 Capital expenditure 2,320 4,837 - - 7,157Depreciation 327 2,258 - - 2,585 5 Other income Other income represents the book profit on the sale of surplus plant andequipment. 6 Negative goodwill arising on acquisition of subsidiary Negative goodwill arising on acquisition of subsidiary represents the excess ofthe provisional fair values of the assets less the liabilities acquiredfollowing the acquisition of the 50.00125% interest in Empresa ElectricaGuaracachi S.A. over the cost of acquiring the shares - see note 13. In 2005, negative goodwill arising on acquisition represents the excess of theprovisional fair values of the assets less the liabilities acquired followingthe acquisition of the 50% interest in Patagonia Energy Limited and itssubsidiary company, over the cost of acquiring the shares. 7 Tax expense The relationship between the expected tax expense at the basic rate of 30% (31December 2005 - 30%) and the tax expense actually recognised in the incomestatement can be reconciled as follows: Year ended 6 months 31.12.06 31.12.05 £'000 £'000Result for the period before tax 17,688 2,129Standard rate of corporation tax in UK 30% 30%Expected tax expense 5,306 639Adjustment for tax exempt income relating to negative goodwill (3,994) (620)Effect of lower rate (19% vs. 30%) on UK result - 20Adjustment for different overseas tax rates (205) 12Accelerated allowances (229) -Consolidation adjustments with no tax effect 73 -Tax on overseas dividends, less double tax relief 345 -Other timing differences and non-deductible expenses - 25Actual tax charge 1,296 76 8 Earnings per share a) Basic and diluted earnings per share: Basic earnings per share is calculated by dividing the profit for the periodattributable to shareholders by the weighted average number of shares in issueduring the period. For diluted earnings per share, the weighted average numberof shares is adjusted to assume conversion of all dilutive potential ordinaryshares. The fully diluted calculation of earnings per share is unchanged fromthe basic calculation as the warrants are anti-dilutive since the warrants havenot been exercised and have expired. Year ended 6 months 31.12.06 31.12.05Profit attributable to equity holders of the Company (£'000) £14,458 £2,053Total shares in issue (average during the period) 68,288,775 19,970,924Basic EPS 21.17p 10.28pDiluted EPS 21.17p 10.28p b) Underlying earnings per share: Income, or expenses, of a one-off nature do not relate to the profitability ofthe Group on an on-going basis and the calculation of underlying earnings pershare excludes such items. The average weighted number of shares in issue duringthe period is unchanged from the numbers used in the calculation of the basicearnings per share. £'000 £'000Profit attributable to equity holders of the Company £14,458 £2,053(as above)Less: non-recurring "negative goodwill" (£13,313) (£2,067)Underlying profit / (loss) attributable to equity holders £1,145 (£14)of the CompanyUnderlying EPS 1.68p (0.07p) 9 Property, plant and Land Plant and Plant under Total equipment equipment construction £'000 £'000 £'000 £'000Cost at 1 July 2005 - - 724 724Additions - 181 206 387Assets acquired on acquisition 115 4,036 - 4,151Exchange adjustments (7) (278) - (285)Cost at 31 December 2005 108 3,939 930 4,977Additions 9 3,366 3,782 7,157Assets acquired on acquisition 4,934 54,520 10,470 69,924Exchange differences (567) (6,602) (1,309) (8,478)Cost at 31 December 2006 4,484 55,223 13,873 73,580 Depreciation at 1 July 2005 - - - -Charge for year - 128 - 128Exchange adjustments - (4) - (4)Depreciation at 31 December 2005 - 124 - 124Charge for period - 2,585 - 2,585Exchange adjustments - (15) - (15)Depreciation at 31 December 2006 - 2,694 - 2,694 Net book value - 31.12.06 4,484 52,529 13,873 70,886Net book value - 31.12.05 108 3,815 930 4,853 9 Property, plant and equipment (continued) The value of property, plant and equipment recognised upon the initial inclusionof Empresa Electrica Guaracachi S.A. in the financial statements was£69,924,000. This amount includes a positive fair value adjustment of£14,293,000 resulting from a professional valuation carried out at the date ofthe acquisition. 10 Share capital 31.12.06 31.12.05 £'000 £'000a) Authorised 120,000,000 ordinary shares of 2p each 2,400 600 (31 December 2005 - 30,000,000)b) Allotted, called up and fully paid 68,288,775 ordinary shares of 2p each 1,366 427 (31 December 2005 - 21,350,000) Reconciliation of movement in share capital during the period Number £'000 At 1 July 2005 12,600,000 252Allotment on 29 July 2005 8,750,000 175Balance at 31 December 2005 21,350,000 427Allotment on 6 January 2006 46,938,775 939At 31 December 2006 68,288,775 1,366 11 Statement of changes in shareholders' equity Share Share Foreign Retained Total capital premium currency earnings equity reserve £'000 £'000 £'000 £'000 £'000 Balance at 1.7.05 252 764 1 138 1,155Allotment on 29.7.05 175 3,325 - - 3,500Share issue costs written-off - (521) - - (521)Dividend paid - - - (107) (107)Translation differences - - (385) - (385)Profit for the period - - - 2,053 2,053Balance at 31.12.05 427 3,568 (384) 2,084 5,695 Balance at 1.1.06 427 3,568 (384) 2,084 5,695Allotment on 6.1.06 939 18,775 - - 19,714Share issue costs written-off - (1,040) - - (1,040)Translation differences - - (4,564) - (4,564)Profit for the year - - - 14,458 14,458Balance at 31.12.06 1,366 21,303 (4,948) 16,542 34,263 12 Reconciliation of profit before tax to cash generated from operations 12 months 6 months 31.12.06 31.12.05 £'000 £'000Result for the period before tax 17,688 2,129 Add: Depreciation and amortisation 2,588 130 Deduct: Other income (2,426) - Negative goodwill (13,313) (2,067) Changes in working capital: Inventories (545) 33Trade and other receivables - current (4,080) (1,368)Trade and other payables - current 161 1,093 Interest received (200) (8)Interest paid 632 - Net cash inflow / (outflow) from operating activities 505 (58) 13 Acquisition In January 2006, the Company acquired 100% of the issued share capital ofBolivia Integrated Energy Limited (BIE), a company registered in the BritishVirgin Islands, under registration number 510247. BIE owns, through anintermediary holding company, 50.00125% of the issued share capital of EmpresaElectrica Guaracachi S.A. (EGSA), a company registered in Bolivia. EGSA is agenerator and supplier of electricity to the national grid in Bolivia. The provisional fair values of the assets and liabilities acquired were as follows: Book value Fair value Provisional adjustments fair values £'000 £'000 £'000Property, plant and machinery 55,631 14,293 69,924Trade and other receivables > 1 year 14 - 14Inventories 2,475 - 2,475Trade and other receivables < 1 year 3,311 - 3,311Cash 12,018 - 12,018Trade and other payables > 1 year (285) - (285)Borrowings > 1 year (15,125) 1,352 (13,773)Deferred tax liability - (460) (460)Trade and other payables < 1 year (4,199) - (4,199)Borrowings < 1 year (1,361) 124 (1,237)Total net assets 52,479 15,309 67,788Less: Minority interest (26,239) (7,654) (33,893)Total net assets acquired 26,240 7,655 33,895Excess of net assets acquired over cost (13,313) ('negative goodwill')Purchase consideration 20,582 Paid during the year 19,184Loan note outstanding at 31 December 2006 1,265Exchange gain 133Total 20,582 13 Acquisition (continued) The purchase consideration for the shares was $35m, of which $30m was paid incash on completion and $3m was paid in cash in April 2006. The final instalmentof $2m is due to be paid by 31 December 2007. Costs associated with the purchaseof the shares amounted to £128,000. The 'provisional fair value' adjusted net assets acquired represent a surplusover the amount paid - 'negative goodwill'. In accordance with the Group'saccounting policy on goodwill, this negative goodwill has been credited to theincome statement (note 6). 14 Related party transactions a) Company - during the year the Company entered into material transactions withrelated parties as follows: i) Paid £120,000 to Independent Power Corporation PLC under a "Shared ServicesAgreement". P R Earl is a shareholder and director of Independent PowerCorporation PLC and J G West and E R Shaw are directors. An amount of £11,750was outstanding at 31 December 2006. ii) Advanced funds of £114,000, by way of a working capital loan, to EnergiaPara Sistemas Aislados S.A. (ESA). At 31 December 2006, the balance due by ESAwas £1,202,000 (31.12.2005 - £1,088,000). iii) Advance funds of £727,000, by way of a working capital loan, to PatagoniaEnergy Limited (PEL). At 31 December 2006, the balance due by PEL was £727,000(31.12.2005 - nil). iv) Acquired 100% of the share capital of Bolivia Integrated Energy S.A. fromSouthern Integrated Energy S.A., a wholly owned subsidiary of Independent PowerCorporation PLC, for a total consideration of US$35m (see note 13). At 31December 2006, an amount of £1,265,000 was owing to SIE in respect of deferredconsideration. b) Group - during the year, companies in the Group entered into materialtransactions with related parties as follows: i) Empresa Electrica Guaracachi S.A. (EGSA) paid for engineering servicesamounting to £130,000 to Independent Power Operations Ltd, a wholly ownedsubsidiary of Independent Power Corporation PLC. An amount of £10,000 was owingat 31 December 2006. ii) Energia Para Sistemas Aislados S.A. (ESA) owed, at 31 December 2006, £33,000to Independent Power Operations (Bolivia) Ltd, a 100% subsidiary of IndependentPower Corporation PLC in respect of engineering services. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
RUR.L