Results for the half-year ended 30 June 2015

APR Energy plc

APR Energy plc

Results for the half-year ended 30 June 2015

· Revenue down 52% to $122.2 million (H1 2014: $254.2 million) primarily due to early termination of Libya

· Adjusted EBITDA of $48.3 million (H1 2014: $141.7 million) largely due to the Libya roll off and low utilisation, resulting in a statutory loss of $64.5 million

· 183MW of new contract wins and expansions, including in Egypt and Botswana

· Contract renewals of 762MW year to date, for a rate of 88%

· Majority of assets successfully removed from Libya; demobilization more expensive than anticipated

· Significant post-period progress on collection of outstanding receivables of $19.1 million from Libya and Yemen partially offset by provision for Angola of $7.0 million

· Impairment of $24.2 million on Yemen assets to be reassessed following post-period access to sites

· On-going discussions with the Group's lenders regarding an expected covenant breach at the end of third quarter (and subsequent covenant testing dates), in the absence of an amendment to the terms of the Group's loan facilities

APR Energy plc (LSE: APR) (the "Company" and together with its subsidiaries, "APR Energy" or the "Group"), a global leader in fast-track power solutions, announces its results for the half-year ended 30 June 2015.

Laurence Anderson, Chief Executive Officer, said:

"It was a particularly challenging first half of 2015 as the Company readjusted to the early termination of its project in Libya and controlled shutdown in Yemen, as well as the customer latency in the broader marketplace, all of which has impacted revenues and profits. We secured two new projects, including a gas turbine plant in Egypt that reinforces the applicability of our solutions to industrial applications. We had strong renewals and several expansions, demonstrating the customer satisfaction and operational excellence we bring to each project. Our pipeline of opportunities is solid, but many projects have been slower than expected to materialise and we expect near-term lumpiness in our markets to continue. In response to the financial impact of these challenges, we have recently instituted strict cost controls, and enhanced discipline around spending and inventory, and we have actively been engaged with the Group lenders regarding the expected covenant breach at the end of the third quarter."

Enquiries:

APR Energy plcLee Munro (investors) + 1 904 404 4576Manisha Patel (investors) + 1 904 517 5135Alan Chapple (media) + 1 904 223 2277

CNC CommunicationsRichard Campbell +44 (0) 20 3219 8801 / +44 (0) 7775 784 933Charukie Dharmaratne +44 (0) 20 3219 8837 / +44 (0) 79 086 38579

An analyst presentation will be held this morning at 9:00am UK time at Numis Securities, The London Stock Exchange Building, 10 Paternoster Row, St Pauls, EC4M 7LT (Please remember to bring photo ID).

A webcast will be available via the following link: http://view-w.tv/901-1205-16209/en

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About APR EnergyAPR Energy is the world's leading provider of fast-track mobile turbine power. Our fast, flexible and full-service power solutions provide customers with rapid access to reliable electricity when and where they need it, for as long as they need it. Combining state-of-the-art, fuel-efficient technology with industry-leading expertise, our scalable turnkey plants help run cities, countries and industries around the world, in both developed and developing markets. For more information, visit the Company's website at www.aprenergy.com.

Certain statements included in this announcement constitute, or may constitute, forward-looking statements. Any statement in this announcement that is not a statement of historical fact (including, without limitation, statements regarding the Company's future expectations, operations, financial performance, financial condition and business) is or may be a forward-looking statement. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected or implied in any forward-looking statement. These risks and uncertainties include, among other factors, changing economic, financial, business or other market conditions. Although any such forward-looking statements reflect knowledge and information available at the date of this announcement, reliance should not be placed on them. Without limitation to the foregoing, nothing in this announcement should be construed as a profit forecast.

Interim management review

The first half of 2015 has been challenging, with location-specific events outside our control and a pipeline of opportunities that has taken longer than anticipated to mature. We remain confident in our capacity to win large-scale, long-term power contracts, but these deals take longer to finalise. In response, management has increased its flexibility around contract size and duration. The Group's track record demonstrates that smaller, shorter deals have a high likelihood of renewal and even expansion, eventually becoming larger, longer-term projects. Management believes this diversified approach should help the Group win a greater range of contracts and optimise fleet utilisation. In addition, our supply chain enhancements and focus on financial discipline should drive operational efficiencies.

Key accomplishments

During what has been widely considered a slow period for the global interim power market, the Group secured a significant project that will feature three GE gas turbines during development of a major industrial facility in Egypt. This project will run for at least 12 months and should be commissioned in the first quarter of 2016. This contract - combined with our renewal for a mining operation in Guatemala - reinforces the applicability of our solutions to meet the power requirements of energy-intensive industries.

The Group leveraged a strong customer relationship to secure a two-year contract for 35MW of new capacity for Botswana Power Company, adjacent to an existing facility previously installed by APR Energy and later sold to the utility. The project, which will be commissioned in late third quarter, will include equipment redeployed from Libya. In addition, the Group signed new contracts for 73MW of additional generating capacity at existing projects in Indonesia, Myanmar and Senegal.

The period also saw a strong renewal rate with 762MW of contract extensions - including the 250MW project in Uruguay for Usinas y Trasmisiones Eléctrica.

The Group has now successfully removed the majority of its assets from Libya and will continue to pursue all avenues to preserve and recover the reminder. The remaining assets are insured. We expect the demobilisation will be completed in the third quarter. Post-period, the Group received $10.7 million in receivables from Libya, and it continues to work diligently to recover the outstanding balance.

Post-period, the Group also received payment of $8.4 million from Yemen. This represents payment in full on the outstanding project balance. As a result, the Group has reversed its previously recorded provision of $8.2 million in the half-year. In addition, the Group gained access to the project sites and equipment, which will result in a re-evaluation of the $24 million impairment taken in the second quarter due to the inability to safely enter the country at that time.

The Group has made significant progress in its supply chain and inventory management transformation, and implementation of a supporting Enterprise Resource Planning system. These improvements should enable enhanced decision-making with real-time access to inventory, procurement and pricing data; faster and more cost-effective logistics, demobilisation and remobilisation of assets; and function-wide cost savings.

H1 2015 financial performance

Despite strong operational performance, significant contract renewals and successful demobilisation of the majority of our equipment in Libya during the first half of 2015, financial performance for the period was muted.

Average utilisation during the period decreased 25 points to 52% (H1 2014: 77%) driven primarily by the termination of the Libya project and controlled shutdown of the Yemen project. Half-year contract renewals were robust at 88%.

At the period end, total fleet capacity decreased by 2% to 2,058MW (31 December 2014: 2,108MW), resulting from the impairment of the Yemen assets and the addition of assets for our expanded Myanmar project. Fleet capital expenditure of $16 million (H1 2014: $139 million) reflects ongoing maintenance, investment in 10MW of capacity immediately deployed to Myanmar, and a decision to not acquire any additional new fleet capacity in 2015.

Revenue decreased to $122 million (H1 2014: $254 million), driven primarily by the early contract termination in Libya and roll-off of projects in Bangladesh, Canada and Martinique, as well as the controlled shutdown of the Yemen project.

Adjusted EBITDA decreased to $48.3 million (H1 2014: $142 million) and adjusted EBITDA margin decreased to 39% (H1 2014: 56%). This EBITDA performance reflects the termination of the contract in Libya and the controlled shutdown of the project in Yemen, as well as the 52% utilisation rate.

Adjusted operating loss was $21 million (H1 2014: $72 million profit), which is reflective of the challenges associated with demobilising equipment for Libya and the decreased EBITDA from this contract termination.

Adjusted basic loss per share was 43 cents (H1 2014: 55 cents earnings per share), based on a weighted average number of shares of 94.3 million (H1 2014: 94.3 million shares).

Adjusted return on capital employed decreased to (3)% (H1 2014: 12%) driven by the decrease in adjusted operating profit and the timing of redeployments.

The Group's cash flow reflected repayments of borrowings, an additional payment related to the 2014 purchase of gas turbines from strategic partner GE and Libya demobilisation costs. Net cash flow from operating activities totalled $18.5 million (H1 2014: $144 million). As a result, the Group ended the period with net debt of $602 million (31 December 2014: $546 million), excluding capitalised financing fees.

Going concern 

In determining the going concern basis on which to prepare this interim report, the Directors have considered all factors likely to affect the future development of the Group, its performance and its financial position, including cash flows, liquidity position and borrowing facilities and the risks and uncertainties associated with its business activities. Specifically, the Directors have considered the most recent financial forecasts, which have been approved by the Board, and which cover the going concern period, being a period of at least one year from the date of approval of this interim report. In the going concern period, the key assumptions within the forecasts considered by the Directors are the timing of mobilisation and revenue generation of currently unutilised assets (including the number of generators forecast to be deployed) and existing contract renewal assumptions that impact the timing of termination of existing contracts. The Directors have considered the sensitivity of the forecasts to changes in these key assumptions.

In considering the forecasts and sensitivities, and principally as a result of recent political challenges in Libya and Yemen and the associated impact on the Groups operational performance in these geographies, the Directors consider there to be significant likelihood that the Group could breach the financial covenants contained in the terms of its loan facilities during the going concern period, with an initial breach forecast to occur based on the 30 September 2015 testing date (and subsequent covenant testing dates), in the absence of amendment to the terms of the Group loan facilities. A breach of those covenants could result in these borrowings becoming repayable immediately. 

Due to this risk, the Group is currently engaging with its lenders regarding a modification of its financial covenants and loan facilities. To achieve this, the Group has proactively engaged the services of legal counsel and financial advisors with relevant experience to assist with a prospective renegotiation of the Group's current loan facilities or refinancing of the facilities, with a view to allowing the Group to avoid any breach or return the Group to compliance with its covenants and/or secure the necessary amendments thereof. 

Based on the current status of negotiations with the lenders, and considering the financial forecasts and the longer term prospects of the Company, the Directors believe that there is a reasonable prospect that the group will be able to successfully execute a renegotiation or refinancing of its loan facilities and that the Company will have sufficient financial resources to continue to operate for at least one year from the date of approval of this document. Accordingly, whilst there remains a material uncertainty as to the outcome, which casts significant doubt upon the Group's ability to continue as a going concern and that, therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business, the Board reaffirms its belief that adoption of the going concern basis for the preparation of the Group's financial statements is appropriate.

Outlook

With four months remaining in 2015, and considering the typical interval between contract signature and revenue generation, we anticipate limited additional benefit to our year-end financial performance. Nonetheless, we remain confident in our pipeline and believe a number of these opportunities will become revenue-generating projects - albeit later than anticipated.

While the near-term latency and lumpiness we are experiencing is a market-wide phenomenon, we believe our diversified approach, increased emphasis on our business development process, and reputation for operational excellence and customer satisfaction places the Group in an advantageous position as opportunities emerge.

Financial Review

Average utilisation across the first half remained subdued at 52% (H1 2014: 77%) driven primarily by the termination of the Libya contract and the controlled shutdown of the Yemen project. Contract renewals for the period were robust at 88% reflecting APR Energy's commitment to operational excellence and strong customer relationships.

At the period end, total fleet capacity decreased by 2% since 31 December 2014 (2,108MW) to 2,058MW, which is a result of the stranded Yemen assets offset by the addition of assets for our expanded Myanmar project.

Adjusted financial results and performance review

The Group uses adjusted unaudited financial information in managing the business and evaluating the Group's underlying performance. The Group adjusts for certain items including amortisation of intangibles, founder securities revaluation movements, integration and acquisition related costs and impairments. A reconciliation to their statutory equivalents is available within this Financial Review.

The adjusted unaudited financial information has been prepared as follows:

Reconciliation of adjusted operating (loss)/profit to adjusted EBITDA:

Revenues for the first half decreased to $122.2 million (H1 2014: $254.2 million) driven primarily by the early contract termination in Libya and the roll-off of projects in Bangladesh, Canada and Martinique as well as the controlled shutdown of the project in Yemen.

Adjusted operating loss was $21.0 million (H1 2014: $71.9 million profit), which is reflective of the challenges associated with demobilizing equipment for Libya and the decreased EBITDA from this contract termination.

Adjusted net finance costs for the first half were $13.5 million (H1 2014: $12.6 million) reflecting higher net debt levels as a result of drawings made on the credit facility for the payment to GE for four turbines offset by the timing of receipt of receivables.

The Group's adjusted and reported tax charge for the first half was $6.1 million (H1 2014: $7.1 million). The charge primarily comprises withholding taxes of $2.0 million (H1 2014: $2.2 million) and corporate income taxes of $4.1 million (H1 2014: $4.9 million).

Adjusted loss for the first half was $40.3 million (H1 2014: $52.0 million profit) reflecting reduced EBITDA primarily from the early contract termination in Libya.

Adjusted basic loss per share was 43 cents (H1 2014: 55 cents earnings per share), based on a weighted average number of shares of 94.3 million in both periods.

Adjusted EBITDA decreased to $48.3 million (H1 2014: $141.7 million) and adjusted EBITDA margin decreased to 40% (H1 2014: 56%). This EBITDA performance reflects the termination of the Libya project and the 52% utilisation rate.

Financing and bank facilities

As at 30 June 2015, the Group reduced its gross debt by $48 million (excluding capitalised finance costs) to $617 million (31 December 2014: $665 million). Cash as of 30 June 2015 was $15.1 million (31 December 2014: $118.9 million) resulting in net debt of $602 million (31 December 2014: $546 million).

Adjusted Return on Capital Employed

Adjusted Return on Capital Employed (ROCE) is a key performance metric for the business. Adjusted return on capital employed decreased to (3)% (H1 2014: 12%) driven by the decrease in adjusted operating profit and the timing of redeployments.

Currencies

The Group has exposure to currency risk through a limited number of its contracts, particularly its Indonesian and Australian contracts.

Statutory financial results and performance review

The statutory results for APR Energy cover the six-month period ended 30 June 2015.

Revenue

Revenue for the period was $122.2 million (H1 2014: $254.2 million), as described above.

Operating profit

Reported operating loss was $45.2 million (H1 2014: $54.7 million profit) reflecting decreased revenues and higher depreciation charges, including the impairment of Yemen assets of $24.2 million and Libya demobilisation expense.

Doubtful accounts expense

During the period management recognised the recovery of receivables previously provided for as follows: Libya in the amount of $10.7 million, Yemen in the amount of $8.4 million and others of $1.3 million. Management provided for other receivables in the amount of $11.2 million principally related to Angola. Management continue to vigorously pursue collection of all impaired trade receivables, however ultimately the Group may have to initiate additional actions in order to recover such amounts. In light of this, management has determined to provide for these amounts at 30 June 2015, given the uncertainty around the timing or ultimate collectability of such balances.

Founder securities revaluation

Founder securities charge of $nil (H1 2014: $17.5 million) reflects the reduction in the share price and reduced timeframe for potential exercise.

Share-based payments

In accordance with IFRS 2, a non-cash credit of $2.2 million (H1 2014: $3.4 million expense) was recognised related to equity-settled share-based payment transactions.

Finance cost

Net finance costs for the first half was $13.5 million (H1 2014: $15.5 million) reflecting lower borrowing rates.

(Loss)/Earnings per share

Basic loss per share was $0.68 (H1 2014: earnings of $0.50) based on a weighted average number of shares of 94.3 million in both periods.

Liquidity and capital resources

Net debt (excluding capitalised finance fees of $13.9 million) as at 30 June 2015 was $602 million ( 31 December 2014: $546 million).

A summary analysis of cash flows is set out in the table below.

During the period, net cash flow from operating activities totalled $18.5 million (H1 2014: $143.6 million) reflecting the reduced revenue, increased expense associated with the demobilization of Libya, the timing of receipt of receivables, and the payment of taxes during the period.

Cash flow used in investing activities primarily comprised of payments related to the 2014 purchase of gas turbines from General Electric of $40 million.

Cash used in financing activities reflects the repayment of $58 million of debt (H1 2014: $45.0 million), including two quarterly repayments of $4 million in connection with the term loan.

Statement of financial position

Property, plant and equipment

As at 30 June 2015, the Group held property, plant and equipment of $1,072.6 million (31 December 2014: $1,139.3 million), reflecting movement in the period for depreciation and the impairment of the Yemen assets, offset by additions.

Fleet capital expenditure of $16 million (H1 2014: $139 million) reflects the investment in 10MW of gas reciprocating engine capacity immediately deployed to expand APR Energy's power plant in Myanmar, and a decision to not acquire any additional new fleet capacity in 2015.

Equity

As at 30 June 2015, the Group's total equity reduced to $569.0 million (31 December 2014: $635.7 million) as a result of the loss for the period.

Treasury policies and risk management

The Group's activities give rise to a number of financial risks, particularly market risk comprising foreign exchange and interest rate risk, credit risk and liquidity risk.

Market risk

Market risk includes foreign exchange risk and interest rate risk. The Group seeks to manage these risks to acceptable levels by maintaining appropriate policies and procedures. In its determination to enter into a contract, the Group will carry out a risk assessment and determine the appropriate risk mitigation strategies.

Market risk also includes the risk that cash derived from income for services fulfilled under contract terms will become restricted and not available for use in the on-going activities of the business.

Foreign exchange risk

The Group has an exposure to transactional foreign exchange from purchases or sales in currencies other than US dollars. In order to minimise exposure to foreign exchange risk, the Group primarily contracts in US dollars or in contracts with a price based on US dollars at the date of transaction or payment if possible. In some cases, the Group transacts in local currencies when purchasing materials and supplies for project operations.

In limited circumstances, the Group may use derivative instruments to hedge economically against foreign exchange risk. Any hedges are limited in duration and correspond to the applicable contract payments or receipts to which the derivatives are associated. No such contracts have been entered into in 2015.

Interest rate risk

The Group is primarily exposed to interest rate risk on its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. When applicable, the Group may elect to hedge interest rate risk associated with debt or borrowings under the credit facility by purchasing derivative instruments. As at 30 June 2015 and 31 December 2014 there was an interest rate hedge in place; see note 11 for further details.

Credit risk

Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as exposures to outstanding receivables from customers. Due to the nature of the Group's business in emerging markets, management believes the most significant of these to be exposures to outstanding receivables from customers.

To minimise the risk of a significant impact on the business due to a customer defaulting on its commitments, the Group closely monitors trade receivables. In addition, the Group utilises letters of credit, contract insurance policies and up front deposits to mitigate this risk.

Liquidity risk

Liquidity risk results from insufficient funding being available to meet the Group's funding requirements as they arise. The Group manages liquidity risk by maintaining adequate reserves of cash and available committed facilities to meet the Group's short and long-term funding requirements. The Group monitors the short-term forecast and actual cash flows on a daily basis and medium- and long-term requirements in line with the Group's long-term planning processes.

Financing and bank facilities

On 31 March 2015, the Group completed an amendment to its senior syndicated credit facilities, comprising a $450 million revolving credit facility and a $320 million Term Loan through August 2019. The amendment to the facilities provides the Group with additional flexibility around certain financial covenants, notably an increased leverage profile and the inclusion of a Fixed Charge Coverage Ratio, which replaced the previous Interest Coverage Ratio covenant for the remainder of the facilities' term; see note 2 Going Concern in the financial statements for further details.

Going concern

See note 2 for Going Concern statement.

Dividends

The Company did not declare a dividend at 30 June 2015 related to its interim financial results.

Principal risks and uncertainties

There are a number of potential risks and uncertainties that could have a material impact on the Group's performance over the remaining six months of the financial year and that could cause actual results to differ materially from expected and historical results. A detailed explanation of the risks summarised below can be found on pages 26 to 29 of the 2014 Annual Report, which is available at www.aprenergy.com.

Strategic:

• Failure to deliver the growth plan;

• Contracts are temporary in nature and may be nonstandard;

• Asset concentration.

Market:

• Global political and economic conditions;

• Volatility in customer demand, including event-driven demand;

• Increase in competitive environment.

Operational:

• Employee, contractor, and asset security;

• Focus on developing markets - operations in difficult regions of the world;

• Recruitment and retention of key staff;

• Environmental, health and safety.

Financial:

• Movement in cost inputs;

• Payment default;

• Funding risk.

The Directors consider that the principal risks and uncertainties as discussed in the Annual Report for the year ended 31 December 2014 will continue to be the same in the second half of the year. The Directors consider that the funding risk has increased since the publishing of the Annual Report. See note 2 Going Concern in the financial statements.

Related party transactions

Related party transactions are disclosed in note 12 to the condensed set of financial statements.

There have been no material changes in the related party transactions described in the last annual report.

Responsibility Statement

We confirm that to the best of our knowledge:

(a) the condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting;

(b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board

Laurence Anderson

Chief Executive Officer

26 August 2015

INDEPENDENT REVIEW REPORT TO APR ENERGY PLC

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 30 June 2015 which comprises the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Financial Position, the Condensed Consolidated Statement of Changes in Equity, the Condensed Consolidated Cash Flow Statement and related notes 1 to 14. 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 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. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review 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 formed.

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 Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union and IFRSs as issued by the IASB. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting," as adopted by the European Union.

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

Except as explained in the following paragraph, 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 United Kingdom. A review of interim financial information consists of making inquiries, 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.

Basis for qualified conclusion

Libya assets - During our audit of the 31 December 2014 financial statements, due to the unstable security conditions, we were unable to travel to the Group's sites in Libya to observe the existence and condition of the Group's property plant and equipment and inventory assets of $300.6 million and $24.7 million respectively, resulting in a qualified audit opinion.

During the six months ended 30 June 2015, the Group has demobilised and relocated the majority of the property, plant and equipment and inventory out of Libya to other locations. Due to the continuing unstable security conditions in that country, the review evidence available to us remained limited for those assets remaining in Libya because we were unable to travel to the Group's sites in Libya to observe the existence and condition of the Group's remaining property plant and equipment and inventory assets. In addition, for the reasons set out below under 'Warehouse assets', we did not perform review procedures in respect of the property, plant and equipment and inventory demobilised and relocated out of Libya.

Warehouse assets - During our audit of the 31 December 2014 financial statements, physical verification testing of some other fixed assets at locations where the Group's accounting records indicated the assets were located (predominantly three warehouses), identified $20.9 million of discrepancies. In total, through a combination of the items tested and extrapolation thereof, we estimated that there were $97.9 million assets at 31 December 2014 for which the location could not be adequately determined from the accounting records. At that time, following further investigation, we understood that the reason for the discrepancies was that the assets had been transported to other sites and operational locations (including Libya and Yemen) but we were unable to confirm this from the Group's shipping documentation or from physical verification, in part due to the security conditions in Libya and Yemen, resulting in a further qualification to our audit opinion.

During the six months ended 30 June 2015, the Group has commenced an asset tagging and reconciliation process, which aims to remediate discrepancies between operational and financial system data. As the asset tagging and reconciliation activity is in process but incomplete, we have not performed further asset verification procedures during the half year review.

Qualified conclusion

Except for the possible effects of the matters described in the basis for qualified conclusion section, 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 30 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Emphasis of matter

In forming our conclusion on our review of the condensed financial statements, we have considered the adequacy of the disclosure made in note 2 to the condensed financial statements concerning the Group's ability to continue as a going concern. The Group had net debt of $601.9 million at 30 June 2015 and consider that there is significant likelihood that the Group could breach financial covenants within its loan facilities within the going concern period, with an initial breach forecast to occur based on the 30 September 2015 testing date and on subsequent covenant testing dates in absence of amendment to the terms of the loan facilities. If a covenant is breached, the lenders are able to call the outstanding debt immediately. As explained in note 2 to the condensed financial statements, the Group is engaged in a prospective renegotiation of the Group's loan facilities. However, these conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern. Our review conclusion is not qualified in respect of this matter.

Deloitte LLP

Chartered Accountants and Statutory Auditor

25 August 2015

London, United Kingdom

Condensed Consolidated Statement of Comprehensive Income

Condensed Consolidated Statement of Financial Position

Condensed Consolidated Statement of Changes in Equity

For the six month period ended 30 June 2015

Condensed Consolidated Cash Flow Statement

Included within cash and cash equivalents at 30 June 2015 is an amount of $8.4 million which backs letters of credit and as such is classified as restricted cash (31 December 2014: $10.7 million).

Notes to the Condensed Consolidated Financial Statements

1. General information

APR Energy plc ("the Company" and together with its subsidiaries, "APR Energy" or "the Group") is incorporated in the United Kingdom under the Companies Act. The address of the registered office is 5th Floor, 6 St. Andrew Street, London EC4A 3AE, United Kingdom.

This condensed consolidated set of financial statements was approved by the Board of Directors on [25 August 2015].

The information for the year ended 31 December 2014 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The auditor reported on those accounts and their report was qualified because the auditor was not able to observe the existence and condition of property plant and equipment, and inventory assets with a value of $325.3 million in Libya, and also because their physical verification testing in certain other locations identified discrepancies between the accounting records and where certain assets were located with a value of $97.9 million. As a result of this, the audit report also contained statements under section 498(2) in relation to the auditor being unable to determine whether adequate accounting records had been kept and section 498(3) in relation to the auditor's failure to obtain necessary information and explanations for the purpose of their audit. The auditor did not draw attention to any matters by way of emphasis.

2. Accounting policies

Basis of preparation

The annual financial statements of APR Energy plc are prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have also been prepared in accordance with IFRS as adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS regulation. The Group financial statements also comply with IFRS issued by the IASB.

The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting, as adopted by the European Union and have been prepared on the basis of the accounting policies set out in the Group's financial statements for the year ended 31 December 2014.

Changes in accounting policy

Since the 2014 Annual report and accounts was published no significant new standards and interpretations have been issued.

Management will continue to monitor any developing standards which it believes will have a material impact on the Group's financial statements.

Going concern

In reaching their view on the preparation of the Group's financial statements on a going concern basis, the directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

 In determining the basis on which to prepare this interim report, the Directors have considered all factors likely to affect the future development of the Group, its performance and its financial position, including cash flows, liquidity position and borrowing facilities and the risks and uncertainties associated with its business activities. Specifically, the directors have considered the most recent financial forecasts, which have been approved by the Board, and which cover the going concern period, being a period of at least one year from the date of approval of this interim report. In the going concern period, the key assumptions within the forecasts considered by the Directors are the timing of mobilisation and revenue generation of currently unutilised assets (including the number of generators forecast to be deployed) and existing contract renewal assumptions that impact the timing of termination of existing contracts. The Directors have considered the sensitivity of the forecasts to changes in these key assumptions.

In considering the forecasts and sensitivities, and principally as a result of recent political challenges in Libya and Yemen and the associated impact on the Group's operational performance in these geographies, the directors consider there to be significant likelihood that the Group could breach the financial covenants contained in the terms of its loan facilities during the going concern period, with an initial breach forecast to occur based on the 30 September 2015 testing date (and subsequent covenant testing dates), in the absence of amendment to the terms of the Group's loan facilities. A breach of those covenants could result in these borrowings becoming repayable immediately. 

Due to this risk, the Group is currently engaging with its lenders regarding a modification of its financial covenants and loan facilities. To achieve this, the Group has proactively engaged the services of legal counsel and financial advisors with relevant experience to assist with a prospective renegotiation of the Group's current loan facilities or refinancing of the facilities, with a view to allowing the Group to avoid any breach or return the Group to compliance with its covenants and/or secure the necessary amendments thereof. 

Based on the current status of negotiations with the lenders, and considering the financial forecasts and the longer term prospects of the Company, the directors believe that there is a reasonable prospect that the Group will be able successfully to execute a renegotiation or refinancing of its loan facilities and that the Company will have sufficient financial resources to continue to operate for at least one year from the date of approval of this document. Accordingly, whilst there remains a material uncertainty as to the outcome, which casts significant doubt upon the Group's ability to continue as a going concern and that, therefore, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business, the Board reaffirms its belief that adoption of the going concern basis for the preparation of the Group's financial statements is appropriate.

During the period, the Company impaired its Yemen assets by $24.2 million at 30 June 2015 because, as a result of the security circumstances in Yemen during the period, it did not maintain control of these assets at that date.

Critical judgements and estimates

Impairment

Additionally, the Group identified an indicator of impairment on the remaining balance of property, plant and equipment (PP&E) at 30 June 2015. Because the Group had not previously identified indicators of impairment on the whole balance of PP&E, the Group assessed its methodology for testing PP&E for impairment, including assessing the cash-generating unit ("CGU") at which PP&E should be tested for impairment. As a result, an impairment test was then performed.

The Directors have determined the business to have one CGU focusing on the deployment, generation and sale of fast-track power solutions.

The CGU to which PP&E has been allocated is tested for impairment when there is an indication that the CGU may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated to reduce the carrying amount of the individual CGU asset that is impaired. Consistent with management's assessment that all PP&E is contained in a single CGU, the Group allocates impairment of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

At 30 June 2015, the market capitalisation of the Group was lower than its net asset carrying value, which was considered to represent an indicator of impairment. However, based on the impairment analysis subsequently performed, the Company has concluded that, with the exception of Yemen impaired assets as detailed above, no further impairment existed as of 30 June 2015.

3. Segment reporting

Consistent with the Group's latest annual audited financial statements, the Group continues to identify one operating segment based on the financial information regularly provided to the chief operating decision maker and the methods by which the chief operating decision maker assesses the Group's performance and makes decisions about resource allocation. As such, no segment reporting is shown in these condensed consolidated financial statements.

4. Revenue

The following is an analysis of the Group's revenue from continuing operations from its major products and services:

* Six months ended 30 June 2014 includes revenues of $13.5 million related to the terminated Australian contract, which includes the drawdown of the letter of credit.

** Other revenues include penalties incurred during the period in respect of contractual performance.

5. Taxation

Tax for the six month period comprises a current tax charge of $5.3 million (H1 2014: $10.3 million) and a deferred tax charge of $0.8 million (H1 2014: $3.2 million credit). Tax has been calculated by using the forecast annual effective tax rate for each tax-paying jurisdiction, applied to the actual pre-tax income of each jurisdiction for the six month period, adjusted where appropriate for any discrete items arising in the period.

The Group is not taxable in certain jurisdictions where either the jurisdictions do not impose an income tax or the entity is treated as a flow-through entity for local country tax purposes.

The structure of the Group generally results in each entity or branch operating within only one tax jurisdiction. In general, income tax is imposed on taxable income earned in the applicable tax jurisdiction. Withholding taxes are imposed based upon local country tax laws. In the jurisdictions where the Group operates, these taxes may be imposed on cross border payments to related parties. In general, withholding taxes are imposed on payments such as rents, dividends and certain service payments or gross receipts from customers.

6. Earnings per share 

From continuing operations

The calculation of the basic and diluted (loss)/earnings per share is based on the following data:

1 Founder securities are not considered dilutive for the periods ended 30 June 2015, 30 June 2014 and 31 December 2014 as the exercise price was above the period end share price. The Founder securities are also not considered dilutive as the associated performance conditions had not been met at 30 June 2015, 30 June 2014 and 31 December 2014. Additionally, all outstanding, unexercised stock options are not considered dilutive for the periods ended 30 June 2015 and 31 December 2014.

7. Property, plant and equipment

Depreciation and impairment (see note 2) is presented within cost of sales in the condensed consolidated statement of comprehensive income.

As of 30 June 2015, the Group's commitments related to the purchase of property, plant and equipment were $nil million (31 December 2014: $9.9 million).

8. Trade and other receivables

During 2014, the Group recognised a $32.9 million finance lease receivable associated with the planned disposal of certain non-core assets in Uruguay. The remaining balance at 30 June 2015 of $16.8 million is expected to be recovered in 2015.

Trade receivables

The average credit period on the sales of goods at 30 June 2015 was 195 days (31 December 2014: 98 days). The Group assesses its ability to collect receivables that are past due and provides for an adequate allowance for doubtful accounts based on the financial stability, recent payment history of the customer, letters of credit in place and other pertinent factors related to the creditworthiness of the customer. The allowance for doubtful accounts includes specific amounts for those accounts that are deemed likely to be uncollectable.

The movement in respect of the provision for impairment of trade receivables in the year was as follows:

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period. There is a concentration of credit risk because there are a limited number of customers and as at 30 June 2015 the three individually significant aggregate amounts owed by individual customers after the provision of impairment was applied, were $26.0 million, $18.3 million and $10.7 million (31 December 2014: three individual customers of $34.7 million, $18.5 million and $16.5 million). The risk associated with individual customers is partially mitigated by the letters of credit we obtain from customers on commencement of a contract. Management reviews concentration credit risk on a regular basis and ensures that where the net exposure exceeds certain thresholds appropriate actions are taken. This is performed on a customer by customer basis and takes account of the billing terms, letters of credit and local customs and practices.

The Directors believe that the carrying value of trade and other receivables after the provision of impairment approximate their fair value.

During the period management recognised the recovery of receivables previously provided for as follows: Libya in the amount of $10.7 million, Yemen in the amount of $8.4 million and others of $1.3 million. Management provided for other receivables in the amount of $11.2 million principally related to Angola. Management continue to vigorously pursue collection of all impaired trade receivables, however ultimately the Group may have to initiate additional actions in order to recover such amounts. In light of this, management has determined to provide for these amounts at 30 June 2015, given the uncertainty around the timing or ultimate collectability of such balances.

9. Borrowings

In 2011, the Group entered into a committed, secured revolving credit facility of $400 million with a group of international banks, with a maturity date of 28 November 2016.

In May 2013, the Group entered into a committed, secured term loan of $150 million with several of the existing group of international banks involved with the revolving credit facility. This term loan was then subsequently extended in October 2013 by an additional $100 million to $250 million, with a maturity date of 1 January 2015, with quarterly repayments of $12.5 million commencing on 31 March 2014.

In August 2014, the Group announced that it had closed and funded a new syndicated credit facility for the Group. The expanded $770 million facility, comprising a $450 million revolving credit facility and $320 million term loan, replaced the Group's previous $400 million revolving credit facility and $250 million term loan.

On 31 March 2015, the Group has successfully completed an amendment to its new senior syndicated credit facilities, comprising a $450 million revolving credit facility and a $320 million Term Loan through August 2019. The amendment to the facilities provides the Group with additional flexibility around certain financial covenants, notably an increased leverage profile and the inclusion of a Fixed Charge Coverage Ratio, which replaced the previous Interest Coverage Ratio covenant for the remainder of the facilities' term.

As of 30 June 2015, $55.2 million (31 December 2014: $60.0 million) of letters of credit are outstanding against the revolving credit facility. As of 30 June 2015, the available amount of the undrawn facilities was $89.8 million (31 December 2014: $45.0 million).

The facilities provide for the funding of capital expenditures, working capital requirements and letters of credit. Key financial covenants include a Total Leverage Ratio and a Fixed Charge Coverage Ratio. The LIBOR spread on the facilities is dependent on the Total Leverage Ratio and the Term Loan requires quarterly repayments of 1.25%-3.75% throughout the term.

See note 2 Going Concern for further discussion.

The revolving credit facility and term loan are secured with the equity and assets of the majority of the Group's subsidiary undertakings. The Directors believe that the carrying value of borrowings approximate their fair value.

If the interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group's total comprehensive profit would have increased/decreased by $1.4 million (H1 2014: $0.7 million). This is mainly due to the Group's exposure to interest rates on its variable rate borrowings.

Bid/performance bonds

The Group has a need to post bid or performance bonds associated with customer contracts. These bonds are typically issued from the Group's revolving credit facility or backed by a cash deposit. As of 30 June 2015 the Group had $7.2 million (31 December 2014: $9.9 million) backed by cash deposits.

10. Dividends

The Company did not declare a dividend at 30 June 2015 related to its interim financial results (2014: $5.3 million at 3.3 pence per share).

The Company did not declare at 31 December 2014 or pay and dividends related to its year-end financial results. (2013: $10.6 million at 6.7 pence per share paid in 2014).

11. Derivative financial instruments

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

· Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

· Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

· Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

There were no transfers between Level 1 and 2 during the current or prior period.

In November 2014, the Group entered into a 5 year interest rate swap on a notional amount of $80 million, which swapped variable one month LIBOR rate for a fixed rate. The Group has not applied hedge accounting on this instrument and the change in fair value is therefore recognised directly in the statement of comprehensive income through finance costs.

The Founder securities revaluation in the current period resulted in a gain of $nil (H1 2014: $17.5 million) recognised in the condensed consolidated statement of comprehensive income.

Subject to the satisfaction of the performance condition, the holders of the Founder securities have the right to require the Company to acquire the Founder securities in exchange for the issue to the holders of the Founder securities of such number of ordinary shares, as described in the 2014 Annual report and accounts.

For 30 June 2015, the Group continues to use a Monte Carlo simulation model to value the Founder securities, which incorporates a binomial tree to value the Founder securities as of the date of the performance condition being achieved within the Monte Carlo simulation. This model simulates the future Company ordinary share price, on a daily basis, using a Geometric Brownian Motion in a risk-neutral framework. The valuation output of this model is then discounted to reflect the lack of marketability of the Founder securities using a protective put option method. The inputs used for the Monte Carlo simulation model were:

A change in the expected volatility by 1% would have a $nil (H1 2014: $0.3 million) impact on the reported fair value.

The expected volatility was determined by calculating the historical and implied volatilities of the Company and several comparable listed entity share prices over the previous three years.

12. Related party transactions

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 Chairman and CEO of APR Energy plc.

Consulting services from JCLA Holdings, LLC (and its subsidiaries) were incurred by the Group during the period presented. These consulting services were made at an arm's length market price. The total expense for the period was $0.2 million (H1 2014: $0.1 million). The services rendered were all paid in cash. No guarantees have been given or received.

CJJ Aviation II, LLC is a related party due to its owner being the Chairman of APR Energy plc. CJJ Aviation II, LLC provides travel arrangement services to the Group. These services were made at an arm's length market price. The total expense for the period was $nil (H1 2014: $0.2). The services rendered were all paid in cash. No guarantees have been given or received.

At 30 June 2015, JCLA Holdings, LLC and CJJ Aviation II, LLC were owed $nil by the Group due to expenses having been paid by the Group (31 December 2014: $nil).

13. Contingent liabilities

Impact of operating in First, Second and Third-Tier countries

At 30 June 2015, the Group had operations in various countries across several continents. Operating in these countries subjects the Group to the inherent risk of changes in law, regulations, and governmental policy and stability. The Group has utilised insurance and letters of credit to help mitigate these risks and no provision has been recorded.

Legal and environmental

From time to time, the Group is subject to litigation or environmental claims. The Group uses various means to limit its exposure to such contingencies including risk management strategies and insurance coverage. These claims can involve highly complex issues, actual damages, and other matters.

These issues are subject to substantial uncertainties and, therefore, the probability of loss and an estimation of damages are difficult to ascertain.

Management's assessments can involve complex judgements about future events and can rely heavily on estimates and assumptions. The Group's assessments are based on estimates and assumptions that have been deemed reasonable by management. The Group recognises a liability for contingencies when it is more likely than not that the Group will sustain a loss and the amount can be estimated.

As part of the acquisition of General Electric's Power Rental Business in October 2013, APR Energy, through one of its affiliates, acquired the beneficial interest of a contract between General Electric International Inc. ("GE") and the Forge Group Power Party Limited ("Forge") in Australia, including the ownership of four mobile gas turbines ("Turbines"). In February 2014, Forge, Forge Group Limited, and a number of its other affiliated companies commenced voluntary insolvency proceedings and, on the next day, Administrators and Receivers were appointed. APR Energy is in a proceeding regarding the Turbines with the Administrators and Receivers. At issue in that proceeding is the claim of the Administrators and Receivers that Australia's insolvency law affords them superior title over APR Energy to the Turbines. APR Energy disagrees with this claim and is contesting it vigorously. In advance of the proceedings, APR Energy entered into an Interim Arrangement Deed with the Administrators and Receivers, whereby, after 30 June 2014, APR Energy posted a $44 million bond for its unfettered use of the Turbines and, as such, APR Energy can legally deploy the Turbines unencumbered in Australia or anywhere else in the world, indefinitely for the life of the Turbines.

The anticipated date of final resolution of this matter is unknown, however, at this time, we anticipate the first trial date to be set for the end of 2015. As stated, APR Energy has been contesting, and will continue to contest, vigorously the title claim alleged by the Administrators and Receivers. At this stage of the dispute, it is difficult to predict the outcome or accurately estimate the precise exposure for APR Energy (if any), whilst noting that the maximum exposure is ultimately capped at the value of the bond. Upon advice of counsel, it is believed that it is probable that APR Energy will be successful in this proceeding and therefore no reserve has been established in the condensed consolidated statement of financial position.

14. Events after the balance sheet date

On 1 July, 2015 APR Energy announced that it has reached agreement with Usinas y Trasmisiones Eléctricas (UTE), the Uruguayan state power company, for the continuation of its 300MW power generation project through the end of 2015. Terms of the contract will include an agreement for the continued operation and support of 50MW of legacy gas turbines, which, as announced on 11 November 2014, are under option to purchase by the customer from APR Energy. The Company is working through the process for sale and transfer of these two turbines, targeted for late 2015.

On 2 July, 2015, APR Energy announced that it had signed a contract to provide a gas turbine power plant for an industrial customer in Egypt. The project, which is for a minimum of 12 months, has an estimated value exceeding $30 million. APR Energy's plant will feature three GE aeroderivative mobile turbines that will run on clean-burning natural gas. The plant is expected to begin generation by Q1 2016.

On 9 July, 2015 APR Energy announced that it had extended and expanded its interim power solution for Société Nationale d'Éléctricité du Sénégal (Senelec), Senegal's national electric utility. The requirements include installation and operation of an additional 48MW of mobile diesel-powered generation, including assets being redeployed from Libya, to supplement an existing 20MW block of power at APR Energy's Kounoune site. The contract term for the combined 68MW extends into the fourth quarter of 2015.

On 15 July, 2015, APR Energy announced that it had signed an extension for its 16MW power project supporting a mining customer in Guatemala. APR Energy's mobile diesel generators have served as the sole power source for the crucial operations of the mine, which operates independently from the local grid system. The project, which began in January 2013, now is contracted to run into the first quarter of 2016.

On 12 August, 2015, APR Energy announced that due to the inability to enter Yemen to safely demobilise and remove the assets, the Group has taken a second-quarter impairment of property, plant and equipment of approximately $24 million. The assets in Yemen are insured. The Group intends to continue to pursue all avenues to preserve and recover them. The Group will provide the market with updates in due course.

On 12 August, 2015, APR Energy also announced that it received a payment of $10.7 million as payment for a portion of the receivables outstanding from its Libyan contract. APR Energy terminated its operations in Libya in the first-quarter of 2015, due to not receiving government ratification of its contract. The Group has reversed $10.7 million of its previously recorded provision in the half-year results.

On 21 August, 2015 APR Energy announced that the Group had received a payment of $8.4 million from its project in Yemen. This represents payment in full on the outstanding project balance. The Group has reversed its previously recorded provision of $8.2 million in the half-year results. In addition, during the past week, the Group has gained access to the Yemen project sites and its equipment, which will result in a re-evaluation of the $24 million impairment taken in the second quarter due to its inability to safely enter the sites at that time.

Following its 12 August announcement about the receipt of $10.7 million in receivables for its terminated Libya projects, the Group continues to work diligently to recover all of the remaining outstanding balance.

APPENDIX: Key financial definitions:

Adjusted EBITDA

Operating profit adjusted to add back depreciation of property, plant and equipment, equity-settled share-based payment expense, amortisation of intangible assets and exceptional items. Exceptional items are those items believed to be exceptional in nature by virtue of size and/or incidence.

Adjusted EBITDA margin

Adjusted EBITDA divided by adjusted revenue.

Adjusted earnings per share

Adjusted net income divided by the weighted average number of ordinary shares. The weighted average number of ordinary shares used to calculate the 30 June 2015 adjusted basic earnings per share was 94,251,622. Adjusted net income is net income adjusted to add back amortisation of intangible assets, Founder securities revaluation and exceptional items. Exceptional items are those items believed to be exceptional in nature by virtue of size and/or incidence.

Adjusted ROCE (return on capital employed)

Operating profit for the previous twelve months adjusted to add back amortisation of intangible assets and exceptional items divided by the average of the net operating assets at the previous three balance sheet dates (for 30 June 2015 this comprises the 30 June 2015, 31 December 2014 and 30 June 2014 and for 30 June 2014 this comprises the 30 June 2014, 31 December 2013 and 30 June 2013). "Net operating assets" is defined as total equity adjusted to exclude goodwill, intangible assets, borrowings, Founder securities, deferred tax assets and liabilities and current tax assets and liabilities.

Renewal rate

Renewal rate is calculated based on the number of contracts that renew in a given period as a percentage of the total number of contracts.