27th May 2008 07:00
Andes Energia plc
("Andes" or the "Company" and with its subsidiaries the "Group")
Unaudited preliminary results for the year ended 31 December 2007
The Board of Andes, the Latin American energy group, with electricity distribution, hydroelectric power and oil and gas interests in Argentina and certain other exploration interests outside Argentina, is pleased to announce preliminary results for the year ended 31 December 2007.
The Group was created through a reverse takeover of Ragusa Capital plc. The Group's focus is on the Argentinean energy sector, which it believes offers premium assets at undervalued prices. Its principal assets are a 51% indirect controlling interest in the main electricity distribution company in the Province of Mendoza ("EDEMSA"), an indirect controlling 47% interest in a 60MW hydroelectric power plant in the Province of Chubut ("HASA") and oil and gas interests in Argentina which include four exploration licences covering nine licence blocks in the San Jorge and Neuquen basins.
Financial highlights
|
Year ended 31 December |
2007 |
2006 |
Change |
|
US$'m |
US$'m |
||
|
Revenue |
111 |
97 |
14.4% |
|
EBITDA(1) |
9 |
6 |
50.0% |
|
Profit/(loss) before tax(2) |
70 |
(22) |
n/a |
|
Profit/(loss) for the year attributable to equity holders |
7 |
(10) |
n/a |
|
Gross debt(3) |
73 |
161 |
US$(88)m |
Before exceptional charges of US$16.2m (2006: nil)
After finance income of US$89m resulting from EDEMSA debt restructure and after exceptional charges of US$16.2m
Debt stated at fair value
Operational highlights
The reverse acquisition was completed on 2 October 2007 at which date the Group acquired an indirect interest of 25.5% in EDEMSA and certain oil and gas interest in Argentina. Since then the Group has successfully completed a number of notable milestones:
Acquisition of a further 25.5% indirect interest in the share capital of EDEMSA with effect from 21 February 2008. Andes now owns indirectly 51% of EDEMSA.
Increase in EDEMSA's EBITDA for the year ended 31 December 2007 to US$11 million from US$6 million in the previous year.
Acquisition of 80% of the share capital of Hidroelectrica del Sur S.A. ("HDS") with effect from 15 October 2007. HDS owns 59% of HASA, which has a 50 year concession to operate the 60 megawatts "Ameghino" hydroelectric power plant located in the Province of Chubut, Argentina.
On 8 November 2007 entered into an option agreement to acquire a 50% interest in a producing oil field in the province of Mendoza.
Acquisition on 23 November 2007 of an option to acquire a 20% interest in the Corralera and Mata Mora blocks in the province of Neuquen, a major gas producing basin in Argentina.
Increase in electricity tariffs charged by EDEMSA by between 10% and 27%, implemented on 1 February 2008. This equates to an average tariff increase of 20%. The result of a further general tariff review is due to be implemented on 1 August 2008.
Receipt of notification that the shareholders of Patagonia Oil & Gas S.A. ("Patagonia"), Andes's consortium partner in certain oil and gas interests, had entered into a funding agreement with PetroSaudi International Limited ("PetroSaudi").
Interest maintained in certain other early stage gas and mineral exploration assets outside Argentina.
Geochemical and aerogravity/aeromagnetic exploration activities commenced on the licence blocks in the San Jorge basin.
Speaking today, Luis Alvarez Poli, Chief Executive Officer, said "Andes has made excellent progress since its re-admission to AIM. All the initial key goals and objectives set by the Board have been achieved and we believe the Group is now in an excellent position to build on these successes. The Board has strong support from its major shareholders and is focusing on developing its portfolio of energy assets in South America which it believes will deliver significant value for shareholders.".
Enquiries:
Andes Energia plc Tel: 020 7495 5326
Luis Alvarez Poli, Chief Executive Officer
Nigel Duxbury, Finance Director
Arbuthnot Securities Tel: 020 7012 2000
James Steel
Antonio Bossi
Bishopsgate Communications Tel: 020 7562 3350
Maxine Barnes
Nick Rome
CHAIRMAN'S STATEMENT
Introduction
In the year under review the Company has been transformed from a small investment company into a well-capitalised AIM quoted group with electricity distribution, hydroelectric power and oil and gas interests in Argentina.
We are extremely grateful to all the staff who have worked tirelessly to ensure that the initial key goals and objectives set by the Board have been achieved.
Overview
Our 2007 financial results represent the results of Andes together with its subsidiaries for the year ended 31 December 2007. These incorporate the results of the Sodem S.A. ("SODEMSA") group for the full year and for acquired subsidiaries from the date of acquisition. The acquisition of SODEMSA by the Company has been accounted for as a reverse acquisition and the consolidated results represent a continuation of the financial information of the SODEMSA group.
The Group recorded profit before tax of US$70 million on revenue of US$111 million for the year compared to a loss of US$22 million on revenue of US$97 million in 2006. Profit after tax attributable to equity shareholders was US$7 million compared to a loss of US$10 million in 2006. Basic earnings per share were $0.15 for the year compared to a loss per share of $0.35 in 2006. In line with the dividend policy set out in the Group's re-admission document, no dividend is proposed.
These results primarily reflect the US$89 million benefit of a successful restructure of EDEMSA's debt and the impact of an electricity tariff increase approved in 2006. They are also stated after exceptional charges of US$16 million for goodwill impairment.
The results of HASA, our hydroelectric power plant, were adversely impacted by historically low rain and snowfall and the resulting lower water levels.
With regard to our oil and gas interests, the consortium, in which the Group is a partner, has established a professional team and since re-admission has focused on acquiring, analysing and interpreting data. In February 2008, we received notification that Patagonia, our consortium partner in certain oil and gas interests, had entered into a funding agreement with PetroSaudi, which could provide funding up to US$95.4 million. PetroSaudi has agreed to invest US$39.5 million in the first year of the agreement with an option to invest an additional US$55 million in the second and third years.
Funding
On 2 October 2007 the Company raised approximately US$13 million at 54 pence per share at the time of its re-admission to AIM in conjunction with its acquisition of certain oil and gas interests in Argentina, a 50% indirect interest in SODEMSA, an option over the remaining 50% and an option to acquire a 80% interest in HDS. This helped to fund the exercise of the HDS option, to acquire an indirect 47.2% interest in the Ameghino hydroelectric power plant.
The Company raised a further US$18.3 million through a placing of new shares at £1.00 per share towards the end of 2007 and secured a US$5.0 million loan facility. The net proceeds of the placing and the loan facility were then used in early 2008 to part fund the acquisition of the remaining 50% indirect interest in SODEMSA and the acquisition of a 20% participation in two licence blocks in the Neuquen basin.
At the year end the parent company, Andes Energia plc, held US$21million in cash resources.
Outlook
Recent events have confirmed our belief that the electricity industry is behind the adjustment process that the Argentinean economy in general has undergone and that further tariff increases will be approved with a consequential increase in our revenues and profits. The effects of the debt restructure and part of the tariff increase implemented on 1 February 2008 are reflected in the 2008 first quarter results for EDEMSA announced earlier this month, which showed an increase in EBITDA to US$ 4.8 million from US$ 3.2 million in 2006.
In the longer term management is hopeful that tariff adjustments will be made to align investment returns with the higher returns achievable in other South American countries. Near term, however, HASA's results will be under pressure from the historically low levels of snow and rainfall so far recorded in 2008. Nonetheless, a positive result and cash flows are still anticipated.
The group's prime focus in 2008 will be the continued development of its oil and gas interests in Argentina. The Group has secured licences in prolific oil and gas provinces in Argentina all of which have the potential for significant discoveries and reserves. Six of our licence blocks are located in the same basin where Pan American Energy, which is controlled by BP Plc, recently announced a discovery of 100 million barrels of new reserves. 50% of Argentinean reserves are estimated to lie in this basin.
With our attractive asset portfolio, strong balance sheet and excellent contacts we believe that Andes has the potential to be a significant player in Argentinean oil and gas exploration and production.
On the operational side, airborne seismic work and interpretation of data continues. The fact that our consortium partner has entered into a funding agreement with PetroSaudi is excellent news and will aid the continued development of the consortium's licences as well as confirming the quality of the consortium's assets.
The Group is currently formalising its exploration activities for the remainder of this year and is looking forward to providing an update on exploration programs by the end of June.
We believe the Group is now in an excellent position to build on the successes we have achieved since re-admission and the next 12 months should be a very exciting period for the Group as we look to continue to grow and develop our portfolio of assets with the aim of creating substantial shareholder value.
Michael Stevens
Chairman
CHIEF EXECUTIVE'S REVIEW
Introduction
It is my pleasure to report to you for the first time on the development of our assets in Argentina. I would like to share with you the significant events that have occurred since I took office and explain the strategies which underpin them and will determine our future operations.
Much of our work during 2007 has been geared towards streamlining the organisation, setting up a professional team and developing a stable cash flow stream from our utility companies.
Our initial focus on EDEMSA has allowed us to finance and acquire sole control of the largest electricity distributor in Mendoza. However, whilst the electricity revenues from EDEMSA and potentially HASA will prove vital in the short and medium term, the oil assets still hold the most significant potential for the Group and successful development of these assets remains a priority.
Electricity distribution and power generation
EDEMSA
After several consecutive years of large losses as a result of the crisis which Argentina experienced in 2001 and 2002, EDEMSA reported a profit after tax of US$96 million in 2007. This improvement was primarily due to the successful restructuring of the company's debt, which resulted in a write back of US$89 million and a reduction in total debt from US$161 million to US$73 million (shown under IFRS at fair value). In addition EDEMSA benefited from the write-back of carried forward tax-losses in the light of improved future trading prospects. EBITDA for 2007 increased to US$11 million from US$6 million in 2006.
The operating profit of US$2.2 million, was an improvement on the US$2.3 million loss in 2006, reflecting the benefit of the 12.94% tariff increase approved in August 2006. During the year EDEMSA sold 2,877.29 GWh of energy an increase of 3.5% on the prior year.
The debt restructuring also led to significant improvements in liquidity and solvency ratios. EDEMSA continued to invest in its business, both in the transmission and distribution networks as well as the connection of new clients. During 2007, it brought into service a new 54km long high-tension transmission line in the fast growing central area of the Province, the most important investment in its history.
After long discussions and negotiations with the Government, an increase in tariffs of an average of 20% effective from 1 February 2008 was agreed, to compensate for cost increases up to the end of 2007. This has already had a positive effect on the operating results for the first quarter of 2008. Furthermore, a general tariff review is due under the concession agreement in the first half of 2008, to be effective from 1 August 2008. The Company has complied with all the legal requirements to allow this general tariff review to go ahead.
HASA
On 14 June 2007 record demand was registered in the Argentine electricity market with a gross maximum power of 18,345 MW.
Spot prices in the wholesale electricity market throughout the year oscillated between a minimum of 69.71 ARS/MWh (May) to a maximum of 83.73 ARS/MWh (July).
The rainfalls and thawing allowed the dam from being half-full (640Hm³) in September to reach 1,252.28 Hm³ by the end of the year. During the year the water levels reached a minimum height of 146.50 m and maximum level of 160.93m.
In 2007 the power station generated 186.49 GWh, 2.4% above its historical average, but only 44% of the amount generated in 2006. The output was restricted by the low water levels and the maximum volume of water that the river below the dam can drain.
The maximum historical annual output is 383.96 GWh, which was achieved in 2006, compared to a minimum of 31.9 GWh (recorded in 1989) and a historical average 182.12 GWh.
HASA reported a profit after tax for the year of US$0.75 million compared to US$2.34 million in 2006. The Group's consolidated results include a loss after taxation of US$0.43 million for the period from the date of acquisition.
Oil and gas interests
Our focus has been on the implementation of the consortium agreement with our partner Patagonia to explore and hopefully enter into production on 7 licence blocks currently held by the consortium. In addition during the year the Group exercised its option to acquire a 20% interest in two further licence blocks in the Province of Neuquen. The 9 licence blocks cover over 26,000 square kilometres.
Chubut
The licence blocks in the Province of Chubut all lie within the Golfo San Jorge basin. The Golfo San Jorge basin is a prolific hydrocarbon province, with a thick sedimentary section and several source rocks and proven reservoir horizons. It is estimated to hold about 50 per cent. of Argentina's total oil inventory and its production is steadily increasing as new acreage is opened and tied up.
Confluencia
This licence covers an area of 794km² and has 9 existing exploration wells.
San Bernardo
This licence covers and area of 2,680km² and has 5 existing exploration wells.
Pampa Salamanca Norte
This licence covers an area of 1,042km² and has 1 existing exploration well.
Bueno Pasto
This licence covers an area of 8,588km² and has 5 existing exploration wells.
Sierra Cuardrada
This licence covers an area of 9,040km² and has 9 existing exploration wells.
Rio Senguerr
This licence covers an area of 2,790km² and has 1 existing exploration well.
Rio Negro and Neuquen
The licence blocks in the Provinces of Rio Negro and Neuquen lie in the Neuquen basin. This is also a proven hydrocarbon province, the second largest in Argentina after Golfo San Jorge, containing an estimated 36 per cent. of the country's known oil reserves. In contrast to the Golfo San Jorge basin, the Neuquen basin is more gas prone, holding over half the country's gas reserves.
Laguna el Loro
This licence covers an area of 505km² and has 8 existing exploration wells.
Corralera
This licence covers an area of 356km² and has 10 existing exploration wells.
Mata Mora
This licence covers an area of 224km² and has 1 existing exploration well.
A "Union Transitoria de Empresas" (UTE), a registered joint venture, was established in March 2007 to manage the Confluencia, San Bernardo and Pampa Salamanca Norte areas, a second UTE was also set up in March 2007 to manage the Laguna el Loro area and a third UTE was set up in June 2007 to manage the Buen Pasto, Rio Senguer and Sierra Cuadrada areas. We have established a professional team (the technical team has a combined basin experience of more than 60 years), which has initially been focused on information gathering.
The initial months have been devoted to acquiring, analysing, interpreting and re-interpreting all available information. We have reached some promising conclusions with the reasonable expectation that we should be in a position to define some work-overs and drill some new wells during 2008.
Geochemical sampling was carried out in October 2007 and 1,205 samples from the Confluencia, Buen Pasto and Pampa Salamanca Norte areas were gathered. In addition, an airborne survey was commenced in October to acquire airborne gravity and magnetometric data. At the end of 2007 6,232 km lines of data had been acquired.
In 2008 we will continue our focus on exploration of the seven licence blocks in Chubut and Rio Negro. The quality of the preliminary data set produced from the geochemical sampling carried out in 2007 is generally good with several anomalies, which when collected in a grid will provide better geochemical leads for prospective areas in the licence blocks.
In addition, airborne survey work continues and a total of 16,355km lines of data have now been acquired representing approximately 47% of the scope of the work. This aerogravity and aeromagnetic survey and interpretation work will enable us to mature leads to drill-ready prospects. In addition we will be conducting integrity tests on key existing wells to identify the best targets for workover or twinning.
The Company has also entered into an option agreement to acquire a 50% interest in a producing oil field in the province of Mendoza. Work on the evaluation of the field is in its final stages and a competent person's report is expected to be completed within the next few weeks.
Other interests
The Group has also maintained its interest in certain non-Argentine assets acquired at the time of the reverse acquisition. These are primarily investments in early stage gas and mineral exploration assets located in North America, Europe and Mauritania.
Luis Alvarez Poli
Chief Executive
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
|
2007 |
2006 |
|||
|
US$ |
US$ |
|||
|
Revenue |
111,303,946 |
96,899,672 |
||
|
Cost of sales |
(95,441,770) |
(87,091,181) |
||
|
Gross profit |
15,862,176 |
9,808,491 |
||
|
Other operating income |
1,322,306 |
1,296,358 |
||
|
Distribution costs |
(8,825,841) |
(7,814,559) |
||
|
Administrative expenses before exceptional expense |
(7,891,138) |
(5,569,082) |
||
|
Exceptional expenses |
(16,163,584) |
0 |
||
|
Total administrative expenses |
(24,054,722) |
(5,569,082) |
||
|
Operating loss |
(15,696,081) |
(2,278,792) |
||
|
Analysed as |
||||
|
Operating profit/(loss) before exceptional expenses |
467,503 |
(2,278,792) |
||
|
Exceptional expenses |
(16,163,584) |
0 |
||
|
Operating loss |
(15,696,081) |
(2,278,792) |
||
|
Finance income |
89,848,953 |
1,301,328 |
||
|
Finance costs |
(4,570,943) |
(21,209,394) |
||
|
Profit/(loss) before taxation |
69,581,929 |
(22,186,858) |
||
|
Taxation |
8,544,207 |
3,390,522 |
||
|
Profit/(loss) for the year |
78,126,136 |
(18,796,336) |
||
|
Attributable to: |
||||
|
Equity holders of the parent |
7,083,993 |
(9,686,172) |
||
|
Minority interests |
71,042,143 |
(9,110,164) |
||
|
|
78,126,136 |
(18,796,336) |
||
|
Earnings/(loss) per ordinary share |
||||
|
Basic and diluted |
US$0.15 |
US$(0.35) |
||
|
Diluted |
US$0.14 |
US$(0.35) |
||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2007
|
Group |
Share |
Share |
Profit and |
Merger |
Reverse |
Other |
Minority |
Total |
||
|
|
capital |
premium |
loss |
reserve |
acquisition |
reserves |
interest |
|||
|
reserve |
||||||||||
|
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
US$ |
|||
|
At 1 January 2006 |
76,438,000 |
0 |
(39,980,620) |
0 |
0 |
159,265 |
35,208,861 |
71,825,506 |
||
|
Loss for the year |
0 |
0 |
(9,686,172) |
0 |
0 |
0 |
(9,110,164) |
(18,796,336) |
||
|
Fair value adjustment |
0 |
0 |
0 |
0 |
0 |
200,491 |
0 |
200,491 |
||
|
Total recognised income and expenses for the period |
0 |
0 |
(9,686,172) |
0 |
0 |
200,491 |
(9,110,164) |
(18,595,845) |
||
|
At 31 December 2006 |
76,438,000 |
0 |
(49,666,792) |
0 |
0 |
359,756 |
26,098,697 |
53,229,661 |
||
|
Profit for the period |
0 |
0 |
7,083,993 |
0 |
0 |
0 |
71,042,143 |
78,126,136 |
||
|
Fair value of share based payments |
0 |
0 |
103,250 |
0 |
0 |
0 |
0 |
103,250 |
||
|
Total recognised income and expenses for the period |
0 |
0 |
7,187,243 |
0 |
0 |
0 |
71,042,143 |
78,229,386 |
||
|
Issue of ordinary shares |
18,615,890 |
90,310,029 |
0 |
0 |
0 |
0 |
0 |
108,925,919 |
||
|
Share issue costs |
0 |
(1,180,139) |
0 |
0 |
0 |
0 |
0 |
(1,180,139) |
||
|
Reverse acquisition |
(71,634,970) |
(60,180,630) |
170,968 |
66,195,556 |
42,045,342 |
(142,132) |
21,724,625 |
(1,821,241) |
||
|
At 31 December 2007 |
23,418,920 |
28,949,260 |
(42,308,581) |
66,195,556 |
42,045,342 |
217,624 |
118,865,465 |
237,383,586 |
||
CONSOLIDATED BALANCE SHEET 31 DECEMBER 2007
|
2007 |
2006 |
|||
|
US$ |
US$ |
|||
|
Non-current assets |
||||
|
Intangible assets |
109,837,883 |
50,550,028 |
||
|
Property, plant and equipment |
165,503,182 |
162,778,005 |
||
|
Investments |
4,576,208 |
0 |
||
|
Trade and other receivables |
0 |
131,267 |
||
|
Available for sale financial assets |
599,571 |
783,728 |
||
|
Deferred income tax assets and other credits |
5,228,769 |
0 |
||
|
Total non-current assets |
285,745,613 |
214,243,028 |
||
|
Current assets |
||||
|
Inventories |
3,792,216 |
3,416,719 |
||
|
Investments |
2,347,154 |
0 |
||
|
Trade and other receivables |
34,194,011 |
26,844,886 |
||
|
Cash and cash equivalents |
23,347,231 |
5,527,051 |
||
|
Total current assets |
63,680,612 |
35,788,656 |
||
|
Current liabilities |
||||
|
Trade and other payables |
30,085,155 |
25,045,438 |
||
|
Financial liabilities |
6,565,197 |
161,292,286 |
||
|
Provisions |
7,381,332 |
6,801,063 |
||
|
Current tax liabilities |
125,546 |
0 |
||
|
Total current liabilities |
44,157,230 |
193,138,787 |
||
|
Non-current liabilities |
||||
|
Trade and other payables |
1,766,705 |
0 |
||
|
Financial liabilities |
66,118,704 |
0 |
||
|
Deferred tax liabilities |
0 |
3,663,236 |
||
|
Total non-current liabilities |
67,885,409 |
3,663,236 |
||
|
Net assets |
237,383,586 |
53,229,661 |
||
|
Capital and reserves |
||||
|
Called up share capital |
23,418,920 |
76,438,000 |
||
|
Share premium account |
28,949,260 |
0 |
||
|
Profit and loss account |
(42,308,581) |
(49,666,792) |
||
|
Merger reserve |
66,195,556 |
0 |
||
|
Reverse acquisition reserve |
42,045,342 |
0 |
||
|
Other reserves |
217,624 |
359,756 |
||
|
Equity attributable to equity holders of the parent |
118,518,121 |
27,130,964 |
||
|
Minority Interest |
118,865,465 |
26,098,697 |
||
|
Total equity |
237,383,586 |
53,229,661 |
||
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007
|
2007 |
2006 |
|||
|
US$ |
US$ |
|||
|
Net cash generated from operating activities |
6,418,939 |
2,573,957 |
||
|
Cash flows from investing activities |
||||
|
Purchase of property, plant and equipment |
(6,296,322) |
(4,619,974) |
||
|
Purchase of exploration assets |
(480,000) |
0 |
||
|
Purchase of investments |
(697,098) |
(26,480) |
||
|
Proceeds form available for sale shares |
42,025 |
0 |
||
|
Proceeds from grants |
0 |
1,369,181 |
||
|
Acquisition of subsidiary |
(2,523,232) |
0 |
||
|
Net cash generated used in investing activities |
(9,954,627) |
(3,277,273) |
||
|
Cash flows from financing activities |
||||
|
Repayments of borrowings |
(8,735,105) |
0 |
||
|
Proceeds on issue of shares |
31,271,112 |
0 |
||
|
Share issue costs |
(1,180,139) |
0 |
||
|
Net cash generated from financing activities |
21,355,868 |
0 |
||
|
Net increase/(decrease) in cash and cash equivalents |
17,820,180 |
(703,316) |
||
|
Cash and cash equivalents at the beginning of the year |
5,527,051 |
6,230,367 |
||
|
Cash and cash equivalents at the end of the year |
23,347,231 |
5,527,051 |
||
1. GENERAL INFORMATION
1.1 Introduction
The financial information set out in this announcement does not constitute the group's statutory accounts for the years ended 31 December 2007 and 31 December 2006. The financial information for the year ended 31 December 2006 is unaudited and has been prepared in accordance with International Financial Reporting Standards ("IFRS") on a basis consistent with the accounting policies used in the preparation of the financial information of the parent company, SODEMSA, for the year ended 31 December 2006, published in the Re-admission document posted to shareholders of the Company on 7 September 2007. The audit of the statutory accounts for the year ended 31 December 2007 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements that comply with IFRS in due course.
1.2 Reverse acquisition
Under IFRS 3 "Business Combinations" the acquisition of SODEMSA, through its two intermediate holding companies Inversora Andina de Electricidad S.A. and Mendinvert S.A., by the Company has been accounted for as a reverse acquisition. Although the consolidated financial statements have been prepared in the name of the legal parent, the Company, they are in substance a continuation of the consolidated financial statements of the SODEMSA group. The following accounting treatment has been applied in respect of the reverse acquisition:
(a) The assets and liabilities of the SODEMSA group are recognised and measured in the consolidated financial statements at the pre-combination carrying amounts, without restatement for fair value;
(b) The retained losses and other equity balances reflect the retained losses and other equity balances of the SODEMSA group immediately before the business combination and the results of the period from 1 January 2007 to the date of the business combination 2 October 2007, are those of the SODEMSA group. However, the equity structure appearing in the consolidated financial statements reflects the equity structure of the legal parent, the Company, including the equity instruments issued under the business combination; and
(c) Comparative numbers presented in the consolidated financial statements are those reported in the consolidated financial statements of the SODEMSA group for the year ended 31 December 2006.
1.3 Business and geographical segments
|
Revenue |
Segment profit |
|||||
|
2007 |
2006 |
2007 |
2006 |
|||
|
US$ |
US$ |
US$ |
US$ |
|||
|
Electricity distribution |
110,700,763 |
96,899,672 |
2,188,968 |
(2,278,792) |
||
|
Electricity generation |
603,183 |
0 |
(655,619) |
0 |
||
|
111,303,946 |
96,899,672 |
1,533,349 |
(2,278,792) |
|||
|
Central administration costs |
(1,065,846) |
0 |
||||
|
Finance income |
89,848,953 |
1,301,328 |
||||
|
Finance costs |
(4,570,943) |
(21,209,394) |
||||
|
Exceptional items |
(16,163,584) |
0 |
||||
|
Profit/(loss) before tax (continuing operations) |
69,581,929 |
(22,186,858) |
||||
|
2007 |
2006 |
||||
|
US$ |
US$ |
||||
|
Electricity distribution |
252,089,194 |
250,031,684 |
|||
|
Electricity generation |
24,643,043 |
0 |
|||
|
Oil and gas interests |
40,626,893 |
0 |
|||
|
Total segment assets |
317,359,130 |
250,031,684 |
|||
|
Unallocated assets |
32,067,095 |
0 |
|||
|
Consolidated total assets |
349,426,225 |
250,031,684 |
|||
|
2007 |
2006 |
||||
|
US$ |
US$ |
||||
|
Electricity distribution |
103,032,277 |
196,802,023 |
|||
|
Electricity generation |
3,812,679 |
0 |
|||
|
Oil and gas interests |
19,679 |
0 |
|||
|
Total segment liabilities |
106,864,635 |
196,802,023 |
|||
|
Unallocated liabilities |
5,178,004 |
0 |
|||
|
Consolidated total liabilities |
112,042,639 |
196,802,023 |
|||
1.4 Earnings/(loss) per share
Earnings/(loss) per share is presented on three bases: basic earnings/(loss) per share; diluted earnings/(loss) per share; and adjusted basic earnings/(loss) per share. Basic earnings/(loss) per share is in respect of all activities and diluted earnings/(loss) per share takes into account the dilution effects which would arise on conversion or vesting of warrants in issue. Adjusted basic earnings/(loss) per share excludes exceptional items to enable comparison of the underlying earnings/(losses) of the business with prior periods.
|
2007 |
2006 |
||||
|
US$ |
US$ |
||||
|
Basic earnings/(loss) per share |
0.15 |
(0.35) |
|||
|
Diluted earnings/(loss) per share |
0.14 |
(0.35) |
|||
|
Adjusted basic earnings/(loss) per share |
0.48 |
(0.35) |
|||
|
Profit/(loss) for the financial year attributable to equity holders |
7,083,993 |
(9,686,172) |
|||
|
Adjustments: |
|||||
|
Exceptional items |
16,163,584 |
0 |
|||
|
Adjusted profit/(loss) for the financial year attributable to equity holders |
23,247,577 |
(9,686,172) |
|||
|
Weighted average number of shares |
48,133,737 |
27,851,851 |
|||
|
Effect of dilutive warrants |
3,693,146 |
0 |
|||
|
Diluted weighted average number of shares |
51,826,883 |
27,851,851 |
|||
1.5 Exceptional items
The directors believe that due to the nature of the goodwill arising on the reverse takeover, which will not directly generate cash flows in the legal parent, the recoverable amount of the net assets acquired is less than the carrying value and have therefore recognised an impairment loss in the income statement.
|
2007 |
2006 |
||||
|
US$ |
US$ |
||||
|
Impairment of goodwill |
16,163,584 |
0 |
|||
1.6 Operating loss
|
2007 |
2006 |
||||
|
US$ |
US$ |
||||
|
This is stated after charging: |
|||||
|
Amortisation |
91,903 |
0 |
|||
|
Depreciation |
8,505,847 |
8,295,197 |
|||
|
Loss on foreign exchange |
730,841 |
963,196 |
|||
1.7 Finance income
|
2007 |
2006 |
||||
|
US$ |
US$ |
||||
|
Effect of debt restructuring |
88,569,685 |
0 |
|||
|
Interest receivable and similar income |
1,279,268 |
1,301,328 |
|||
|
89,848,953 |
1,301,328 |
||||
1.8 Finance cost
|
2007 |
2006 |
||||
|
US$ |
US$ |
||||
|
Interest costs |
4,570,943 |
21,209,394 |
|||
|
4,570,943 |
21,209,394 |
||||
1.9 Net cash generated from operating activities
|
2007 |
2006 |
||||
|
US$ |
US$ |
||||
|
Operating profit/(loss) before tax |
69,581,929 |
(22,186,858) |
|||
|
Depreciation and amortisation |
8,597,750 |
8,295,197 |
|||
|
Impairment write off |
16,163,584 |
0 |
|||
|
Share based payments |
103,250 |
0 |
|||
|
Profit on sale of property, plant and equipment |
343,696 |
156,841 |
|||
|
Movement in net debt |
(84,205,842) |
19,908,066 |
|||
|
Increase in inventories |
(5,255,853) |
(6,912,521) |
|||
|
Increase in trade and other receivables |
(2,731,522) |
(4,539,160) |
|||
|
Increase in creditors and other payables |
1,667,667 |
7,397,161 |
|||
|
Increase in provisions for liabilities and charges |
1,921,659 |
2,197,166 |
|||
|
Tax |
232,621 |
(1,741,935) |
|||
|
6,418,939 |
2,573,957 |
||||
1.10 Post Balance Sheet Events
On 23 January 2008 the Government of Mendoza passed a decree authorising EDEMSA to adjust electricity tariffs by an increase of between 10% and 27%, to be implemented on 1 February 2008.
On 21 February 2008 the Group completed the acquisition of the remaining 50% indirect interest in SODEMSA. As a consequence the Group now owns the entire issued share capital of SODEMSA, which as a 51% controlling interest in EDEMSA. The cash consideration of approximately $30 million was funded partly by a US$3 million advance payment made by the Company, partly by the loan facility made available to the Group, partly by certain advance payments made by Ketsal S.A, which obligation has been assumed by the Group and partly from the funds raised through the share placing on 7 December 2007.
Related Shares:
PGR.L