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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Contourglobal Plc | LSE:GLO | London | Ordinary Share | GB00BF448H58 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 251.00 | 251.00 | 251.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMGLO
RNS Number : 8802J
ContourGlobal PLC
05 April 2018
ContourGlobal plc
Preliminary Results Announcement
Strong operational and financial performance. On track to at least double run-rate Adjusted EBITDA by 2022
ContourGlobal plc (the "Company"), an international operator of contracted electricity generating plants, today announces its full year results for the year ended 31 December 2017.
Joseph C. Brandt, President and Chief Executive Officer of ContourGlobal, said:
"2017 was a year of strong operational and financial performance for ContourGlobal and we delivered on the near-term operational, financial and growth commitments we made during the IPO process. We've achieved double-digit growth in revenue and Adjusted EBITDA on the back of strong operational performance. Our recent announcement of a sizable acquisition in the Spanish thermal solar space as well as the successful commencement of the repowering of the first two of our Austrian wind farms provides confidence in both the development and acquisition prongs of our growth strategy and moves forward our target of doubling adjusted run-rate EBITDA within the next five years."
KEY HIGHLIGHTS
Strong financial performance
-- Consolidated revenue growth of 13% to $1,023m -- Income from operations up 21% to $269m
-- Adjusted EBITDA up 17% to $513m, in line with expectations, driven by acquisitions in 2017 and a full year of operations of the power plants commissioned in 2016;
o Thermal energy adjusted EBITDA up 18% to $332m
o Renewable energy Adjusted EBITDA up 9% to $211m
-- Strong cashflow generation and balance sheet; funds from operations up 23% to $256m
-- $2.1bn Net Debt as of Dec 17 in line with expectations, with Adjusted Net Debt:EBITDA ratio of 4.1x (2016: 4.8x)
-- Final dividend of 2.6 cents (USD) per share declared In $ millions 2017 2016 Change ------------------------ ------ ----- ------- Revenue 1,023 905 +13% ------------------------ ------ ----- ------- Income from Operations 269 222 +21% ------------------------ ------ ----- ------- Adjusted EBITDA 513 440 +17% ------------------------ ------ ----- ------- Thermal Adj. EBITDA 332 282 +18% ------------------------ ------ ----- ------- Renewable Adj. EBITDA 211 193 +9% ------------------------ ------ ----- ------- Corporate and other costs (30) (35) -14% ------------------------ ------ ----- ------- Profit before tax 41 43 -5% ------------------------ ------ ----- ------- Funds From Operations (FFO) 256 208 +23% ------------------------ ------ ----- -------
(Adjusted EBITDA and Funds From Operations reconciled to profit before tax and operating cash flow respectively in the Financial Review)
Successful operational performance growing the portfolio and integrating assets during 2017
-- Availability factors remain strong at 94.4% combined average availability across fleet (2016: 93.7%)
o Thermal fleet availability factor in 2017 was lower than in 2014-16 primarily due to a higher amount of planned maintenance works during the year - remains ahead of top decile of peers
o Renewable availability factor in line with targets at 97.6%
Hot Features
Premium
-- Total production increased 6% to 13,047GWh (2016: 12,351GWh)
-- Industry leader in Health and Safety with 0.03 LTI Rate
FY 2017 FY 2016 Change
------------------------------ -------- -------- -------
GWh produced Thermal 8,594 7,999 +7%
----------------- ----------- -------- -------- -------
Renewable 4,454 4,352 +2%
----------------------------- -------- -------- -------
MW in operation Thermal 2,640 2,564 +3%
----------------- ----------- -------- -------- -------
Renewable 1,518 1,368 +11%
----------------------------- -------- -------- -------
Availability
factor Thermal 92.6% 93.0% -0.4%
----------------- ----------- -------- -------- -------
Renewable 97.6% 95.0% +2.6%
----------------------------- -------- -------- -------
Delivered growth through developments and asset acquisitions
-- Successful integration of our recently constructed power plants in Senegal (Cap des Biches I and II)
-- Completed the acquisition of a portfolio of assets in Brazil in March 2017, which includes a total of 130 MW hydro plants and thermal cogeneration plants totaling 76 MW
-- Continued to grow European solar portfolio and acquired 19 MW PV portfolio in Italy from ErgyCapital S.p.A.
-- In December 2017, we signed the acquisition of a 23.4 MW renewable portfolio; 10 photovoltaic plants in Italy (14.6 MW), one photovoltaic plant in Romania (6.8 MW) and 2 biogas plants in Italy (2 MW)
Continued delivery towards our strategy of doubling Adjusted EBITDA by 2022
-- In December 2017, we signed an agreement with Kosovo's government to build a 500 MW coal-fired power plant
-- In February 2018, we signed the acquisition of a 250 MW CSP portfolio in Spain for a purchase price of approximately EUR806 million; closing expected in Q2 2018
-- Continuing to pursue M&A opportunities outlined at IPO
EPS
-- Profit attributable to ContourGlobal plc shareholders was $19.4 million in 2017, resulting in basic EPS of 2.9 cents (USD) per share
Dividend
-- The Board of Directors is recommending a final dividend of 2.6 cents (USD) per share, $17.5m in total, in respect of the year ending 31 December 2017. The dividend will be paid on 31 May 2018 to shareholders on the register on 4(th) May 2018. The dividend will be paid in UK pounds sterling.
-- Dividends ranging from $75m to $80m are expected to be recommended for the full year ending on 31 December 2018.
-- Directors expect to increase the dividend by a minimum of high single digits growth rate each year over the next five years dependent upon ContourGlobal's ability to maintain its strategic goals.
EGM
Further to its announcement on 27 February 2018, in which the Company announced that it had reached agreement with Acciona Energía, S.A.U. regarding the acquisition of Acciona Energía's 250 MW portfolio of five 50 MW Concentrated Solar Power plants in South-West Spain, the Company will host an Extraordinary General Meeting for Shareholders at the offices of Davis Polk & Wardwell London LLP on Tuesday, 10 April 2018 at 11.00 a.m. (London).
AGM
The Company will host an Annual General Meeting for shareholders at the offices of Linklaters LLP, 1 Silk Street, London EC2Y 8HQ on 25 May 2018.
Presentation and conference call
The Company will host a presentation for analysts and investors at 9.30 a.m. (UK time) at Goldman Sachs International, Peterborough Court | 133 Fleet Street | London EC4A 2BB.
The meeting can also be accessed remotely via a live webcast and dial-in, as detailed below. If connecting remotely, please connect to both the webinar (visuals only) and dial-in (audio only).
1. Click here to access the webinar 2. Click here for dial in details
If you would like to attend the presentation in person, please RSVP to Natasha Helms (natasha.helms@contourglobal.com).
A copy of the presentation will be made available online ahead of the meeting on 5 April at: http://www.contourglobal.com/reports.
ENQUIRIES
Investor Relations - ContourGlobal
Alice Heathcote
Tel: +1 646 386 9901 / +55 11 3147-7113
Laurent Hullo
Tel: +33 1 53 83 96 45 / +33 6 82 01 44 60
investor.relations@contourglobal.com
Media - Brunswick
Charles Pretzlik/Simon Maine
Tel: +44 (0) 207 404 5959
Contourglobal@brunswickgroup.com
Chairman Review
OVERVIEW
I am excited to introduce ContourGlobal's 2017 Annual Report, our first as a public company. The IPO on the Main Market of the London Stock Exchange in November 2017 was a significant milestone for our business, and we were pleased to attract a strong, high-quality investor base.
As this is my first Chairman's letter, I would like to highlight two important aspects of our business approach. These have been important contributors to ContourGlobal's success as a private company and, I believe, will play an integral role in delivering robust returns for ContourGlobal's public shareholders.
1. Disciplined, opportunistic approach to allocating capital
ContourGlobal has demonstrated operational and development expertise across seven fuel types and four continents. This capability allows us to focus exclusively on the most attractive risk-adjusted growth projects, without narrowing our scope by technology or geography.
We primarily look at transactions with long-term contracted cash flows to creditworthy counterparties.
These transactions often have complexities that make it difficult for other potential buyers to compete and create opportunities for our operating team to realize material value post-transaction.
In our short time as a public company, we have signed two significant agreements. In December, we signed commercial agreements with the Government of Kosovo for a 500 MW development project. This milestone occurred because ContourGlobal's technological expertise, credibility, and experience led us to be the only company designated as the preferred developer to negotiate with the government on this transformative project for the country. In February, we signed an agreement to purchase a 250 MW concentrated solar power (CSP) operating portfolio in Spain from Acciona Energia, which was negotiated on a bilateral basis without an auction process. I expect these projects to produce attractive returns on equity and generate strong, contracted cash flows for 20 and 18 years, respectively.
Our pipeline of attractive, opportunistic projects is robust, and we are excited about our accretive growth prospects over the next several years. If we ever find ourselves in a position where growth becomes unattractive, we will accelerate the return of capital to shareholders.
2. Proven ability to create value post-acquisition
ContourGlobal's exceptional operating team has consistently reduced costs at projects, while improving operating efficiency and maintaining an excellent health and safety record. ContourGlobal has benchmarked in the top decile of operating performance in the global power industry over the past several years.
Our team has also demonstrated the ability to increase contracted revenue through: (i) expansion opportunities, where marginal economics are even more accretive due to the utilization of existing infrastructure; (ii) repowering opportunities where technology has improved dramatically; and (iii) contract extensions which extract additional profitability from assets when their useful lives extend beyond the original contracted period.
We have significant demand from financial investment partners seeking to make passive, minority investments in some of our assets on attractive terms for ContourGlobal. These "farm-downs" significantly bolster our project returns.
BOARD APPOINTMENTS
In preparation for the IPO, we welcomed Dr. Alan Gillespie and Alejandro Santo Domingo to the Board as Non-Executive Directors, both of whom bring significant UK plc and relevant industry experience. We were also delighted to appoint Ruth Cairnie as an additional Non-Executive Director in January 2018. Ruth has significant experience in the global energy sector and as a Non-Executive Director of UK-listed companies. Following Ruth's appointment, our Board (excluding me as Chairman) comprises a majority of independent Directors, and we are confident that it has the right balance of skills and experience to support the executive team. More details on the Board and appointments can be found in the Governance section.
CORPORATE GOVERNANCE
At IPO, the Company became subject to the corporate governance requirements of the UK Listing Authority's Listing Rules, and the UK Corporate Governance Code (the "Code"). In the months leading up to the listing, much work was carried out to ensure that the Board had constituted appropriate Committees and adopted relevant policies and procedures to support the development of a robust governance structure and compliance with the Code. This work is described more fully in our Corporate Governance report. The Board is satisfied that we have in place a robust governance structure, which is fit for purpose and in line with our listed status, and we will ensure that our governance arrangements will adapt if appropriate in connection with the new UK Corporate Governance Code anticipated to come into force in 2019.
DIVIDS
Our dividend policy is unchanged since the IPO. The Board is pleased to propose a final dividend of 2.6 cents (USD) per Ordinary share. The dividend will be paid, subject to shareholder approval at our 2018 Annual General Meeting, on 31 May 2018 to shareholders on the register A 4 May 2018.
2017 HIGHLIGHTS
2017 was a year of strong financial performance for the Company. We delivered year-on-year Adjusted EBITDA growth of 16.5% and achieved 2017 Adjusted EBITDA of $513.2 million and Net Debt / Adjusted EBITDA of 4.1x, both consistent with our guidance. We significantly progressed a number of major projects, successfully integrated prior acquisitions, and ended the year on strong financial footing with significant liquidity for growth. ContourGlobal also achieved the lowest Health & Safety incident rate in our history, demonstrating our commitment to providing a safe working environment for employees, contractors and sub-contractors.
2018 OUTLOOK
The global power industry continues to grow rapidly and is experiencing significant change as nations pursue policies of energy security, economic development and decarbonization. As integrated power companies continue to rethink their global asset mix, I believe ContourGlobal, as a leader in the contracted power generation space, is well positioned to capitalize on our disciplined, opportunistic growth strategy. Our focus on wholesale, contracted power generation will continue to produce low-risk, long-term cash flows, while our extraordinary operating team continues to optimize and expand our portfolio.
2017 has been a significant year in the Company's history and I feel privileged to be Chairman at this exciting time in ContourGlobal's development. On behalf of the Board, I would like to thank our management team and all of our nearly 2,000 employees across 19 countries for their continued dedication and hard work.
Craig A. Huff
Chairman
CEO Review
Introduction
Companies only IPO once and that's probably a good thing. The effort required to prepare a company to enter successfully the public markets requires an intensity and focus that is singularly disruptive of normal corporate life, yet requires that core business objectives be met as promised. This comes despite the distraction and knowledge that the outcome of the IPO will overwhelm normal measures of annual successes and failures.
Performance Review
As such, it is very pleasing, and somewhat relieving, for me to report that 2017 saw both a successful listing on the premium segment of the London Stock Exchange as well as a strong year of performance, both operationally and financially, for ContourGlobal. Moreover, 2017 was an extraordinary year for our most important operating objective, our health and safety performance. We posted a record year with our key lagging indicator, our Lost Time Incident Rate[1], ending the year at 0.03 despite over nearly 6 million hours worked in 19 countries. These results were even more remarkable given that we acquired eight new businesses last year in Brazil and Italy, each with dramatically different expectations about safe operations and, as such, requiring intensive restructuring to embrace the ContourGlobal way of health & safety.
Despite this record setting achievement, we failed to achieve "Target Zero," our health and safety goal adopted at the end of December 2016[2]. We missed our target but came ever so close. The cause of this miss was a tough blow-a car accident on an Armenian mountain pass near our Vorotan hydroelectric facility-an accident in which the other driver was conclusively "at fault." The cruel realization even led some in the company to question whether this was "really" a lost time incident which should count as an LTI-particularly as the incident didn't occur in one of our power plants.
We embraced the failure, learning that failure teaches us the most when it is used to explain and not to blame. We launched a Five Whys into the traffic accident to understand the root cause and whether there was something that we could have done to either avoid or minimize the risk to our people. This was a serious incident, one which injured two of our people and caused one of them to undergo a painful surgery and hospitalization.
The findings revealed that there was more that we could do. The air bags did not deploy on our vehicle as they should have. It turns out that the vehicle had been involved in a previous accident in the years before we acquired the plant and the airbags had not been replaced. Would air bags have made a difference in this accident? Maybe, at least in terms of the severity of the injury.
Despite this incident in Armenia, our health & safety achievements globally were extraordinary and record setting. We achieved a 0.03 LTIR and a 0.10 Total Recordable Incident Rate (TRIR[3]). Missing Target Zero in its inaugural year taught us much-to inspect all vehicles and vehicle histories when acquiring a business. To obtain training records and introduce drivers' training programs to encourage defensive driving and appropriate risk assessment particularly in remote areas. Embracing failure will make us better and safer. And with just a bit of luck, enable us to achieve Target Zero in 2018.
We also had a very strong operating year with better than target availabilities in our thermal fleet and most of our renewable fleet. In our thermal business, we are paid mainly to be available with virtually no volume risk. As a result, Equivalent Availability Factor ("EAF") is the KPI that tells us how well we are operating and maintaining our thermal plants. 2017 was a very good year in all thermal technology clusters, namely reciprocating engines, Combined Cycle Gas Turbines, Coal-fired plants and our Solutions' quad-gen facilities. Thermal Fleet Equivalent Availability Factor for 2017 was 92.6% for the year, which is better than target and in line with recent performance.
In our renewable business, we need to maintain high availabilities, but strong financial results also require the cooperation of the weather to produce acceptable irradiation, wind speeds and hydrology. As such we focus on two KPIs in our renewable business: EAF as in the thermal business but also Capacity Factor ("CF"), which measures the percentage of the time that the asset is generating electricity.
EAF in the renewable business was excellent in our solar fields, hydroelectric facilities, and wind farms in Peru, Austria and the Caribbean. The exception came in our Brazil wind farms, where early post-construction teething challenges crystallized into something that became more systemic later in the year. We react strongly to failure and our approach to our Brazil wind farms has been no exception. We've made significant organizational and people changes in the country and inside the renewable division, and are starting to see positive results from these measures in early 2018.
Capacity Factors were high in our solar fleet, which enjoyed much higher irradiation levels than normal and overproduced by 11%, while capacity factors in our hydroelectric facilities were below plan and wind performance was close to plan in Peru, slightly above plan in Austria and below plan in Brazil.
In 2017, our financial results were better than target and displayed the resilience of an operations centric business model that diversifies risk across multiple geographies and technologies. By design, ContourGlobal's financial results do not depend upon any one geography, technology or weather resource. We believe that this resilience creates a higher quality risk adjusted cash flow for shareholders. These diversification benefits were on display in 2017 as we were able to outperform our adjusted EBITDA target. Financial results were strong in all areas: revenue topped $1 billion for the first time ever, an increase of 13% year-on-year. Adjusted EBITDA and Funds from Operations ("FFO") were $513 million and $256 million, an increase of 17% and 23% respectively. As targeted, liquidity and year-end net leverage ratio (4.1x) were within targeted levels.
Market Outlook and Growth
Our business is international with a concentration in three primary regions: Europe, Latin America and, to a lesser extent, Sub-Saharan Africa. We operate in the market for electricity generation infrastructure and participate in that market through our own development ("greenfield" development which involves creating an asset by taking it through the permitting, financing and construction processes) as well as the acquisition of existing power plants. We operate, develop and acquire power plants using conventional fuel-based technologies as well as those using renewable technologies (currently wind, solar and hydro). Within both categories, we focus on two broad categories of customers: national grids and the utilities that supply these grids and commercial, and industrial customers with substantial energy needs who prefer to procure their electricity supply directly from on-site facilities.
Today's electricity space is dynamic, with new technological and commercial approaches creating opportunities and challenges in both developed and developing markets. Within established markets such as Western Europe, incumbents have embarked upon broad reviews of strategy leading to a redefinition of their core businesses and accompanying divestitures of power assets, many of which are in markets that we know and like. Within developing markets, energy demand growth continues to outstrip supply and in certain world regions such as Sub-Saharan Africa energy supply remains woefully inadequate, leaving most of the population without electricity and its indirect benefits (such as clean water and stable infrastructure).
Intriguingly, one of our early development initiatives has become trendy. "Corporate PPAs" have been a recent focus of a renewable industry in search of new credit worthy counterparties to enter into long-term offtake contracts to facilitate the development of new projects. These agreements are generally financially settled long-term arrangements in which a corporate buyer pays a renewable generator for electricity delivered to the grid. Many corporations are increasingly procuring electricity with such structures and have grown significantly in the past three years. A decade ago, our ContourGlobal Solutions business was an early pioneer of the corporate PPA market. Working with Coca-Cola HBC ("CCHBC"), we first used thermal fuels and then renewable generation technologies. We developed highly efficient and innovative energy production facilities within Coca-Cola HBC's bottling facilities in Europe and Africa that supply all of CCHBC's energy needs for electricity, hot water, chilled water and, through innovative Co2 capture technology incorporated into these power stations, carbonation. Later we worked with CCHBC to install substantial solar "fields" in Italy on the large rooftops housing their production and storage facilities, installing approximately 4.5 MW in five locations, using what today would be known as a "Corporate PPA".
Last year we extended our Solutions business into Latin America where we acquired four cogeneration facilities in Brazil which directly supply commercial customers. Through this acquisition, we are extending this "what is old is new again" business from Europe and Africa to Latin America.
As we explore new growth, we remain impressed with the number of opportunities we see to make accretive acquisitions in Europe and Latin America, while at the same time remaining cautious about the prospects to build new generation in these same markets. Historically low and extended interest rates has led to capital deployment decisions in our industry that have driven returns on new build below that of acquired assets, resulting in an historic anomaly in the power sector. One should get paid more to take the development, permitting and construction risk to build a new asset than to acquire an already functioning business. Such anomalous pricing between new build and acquisition, renewables and thermal, is not justified by technology or cost improvements but rather reflects other more strategic imperatives. We continue to believe that this dynamic creates its own set of opportunities.
In Sub-Saharan Africa, where we have long been active and successful, we are cautious outside of the industrial space. Despite much of the continent making impressive strides in governance and reform, the post financial crisis collapse in commodity prices has pressured the continent despite helpful interventions by the international development community. Although headline investment in new electricity capacity seems promising, projects across the continent struggle to make their way from signing to closing to full operations and, once operational, pressure on public finances challenges fragile states to meet their contractual commitments. With such a market backdrop we are very selective about new investment in this region.
Four important projects managed to reach critical milestones in the past several months. In Austria, the repowering of our wind farms began with two projects receiving feed-in-tariff approval enabling them to begin repowering-a process that involves replacing older wind towers and turbines with newer technology. These two projects offer a startling illustration of the dramatic improvements that have been achieved in wind turbine technology in the thirteen years that have passed since these wind farms first entered operations. Using the same physical footprint as before, new tower and turbine technology will enable us to capture more wind and thereby produce 80% more energy annually than what was achievable just over a decade ago. We increasingly see the opportunities of repowering as a way to add value to our own and others' existing assets.
Elsewhere, across Austria's southern border in Italy, we made good progress continuing to consolidate operating solar fields in the market, adding 43 MW through two acquisitions. We've been active in Italy for over eight years, seven of them in the solar sector and have a strong operating team which has improved availability, performance factor and fixed costs in every single acquisition to date.
Finally, after many years of effort and close cooperation with the Government of Kosovo and international stakeholders, we achieved the critical milestone of "commercial close" for the Kosovo E Re power plant, a critically needed infrastructure project for a country that suffers with Europe's worst pollution from two old lignite fueled power generation facilities. We will replace these facilities with efficient facilities, which will provide the necessary capacity to enable the Kosovarian energy market to develop and thereby catalyze economic growth in this poor, landlocked country. We do not take lightly our decision to sponsor a coal fired power plant. It is not our preferred fuel. But the needs and resources of Kosovo argue overwhelmingly in favor of developing this plant with this fuel now. Kosovo is Europe's poorest country and its current installed electricity generation base is Europe's largest single source of pollution including dust, other particulate matter, Nox, Sox and Co2.
ContourGlobal has always viewed itself as an investor first-allocating capital to attractive opportunities in the contracted wholesale power generation space. As such, our strategy has been highly opportunistic, preferring to maximize risk-adjusted returns rather than invest in assets or development projects that meet some pre-defined, qualitative or strategic criteria. This has served us well over the years and we continue to see significant opportunities that will enable us to benefit from this approach. As an established, and now public, operator that has managed investor capital in the power business for over a decade, we have also received interest from institutional investors to acquire stakes in our existing assets. As we continue to grow our business, we see increasing opportunities to be the asset manager of choice in the global power sector.
Outlook
It is early days. Our year-end came just six weeks after our IPO and as such we cannot say much other than that we are where we expected to be at IPO and that 2017 continued a string of successful years. I am encouraged by our ability to post such strong results despite the major undertaking for the IPO. We are on track with the commitments made to the market as part of the IPO process-in health & safety, power plant operations and growth through proprietary greenfield development and acquisitions. In the new year, our announcement of the acquisition of a large portfolio of Concentrating Solar Power assets in Spain reinforces our expectation that we are ahead of our target to double EBITDA in five years with no new share issuances and our pipeline of greenfield and acquisition opportunities supports this expectation. We move into our first full year of operating as a public company with confidence about our ability to deliver promised results.
4 April 2018
Operational review
We continue to focus on Health and Safety, operation excellence and delivering a strong financial performance.
As a high growth business, we're committed to financial and operational excellence and continuous improvement. In 2017, we gained extremely valuable experience from overcoming challenges at some of our thermal and renewables power plants and applied this experience to our Company globally to enhance performance.
Thermal
Maintaining consistent thermal availability
The technical availability of our thermal cluster was good and in line with the budgeted targets for the year. Compared to previous periods, the thermal fleet maintained consistent availability levels, in line with the long-term Global Operations and Maintenance (O&M) Strategy. The thermal fleet availability factor in 2017 was lower than in 2014-2016 primarily due to a higher amount of anticipated planned maintenance works performed in the year, as required by the planned maintenance cycle program. In particular, during the year maintenance campaigns were carried out at the Arrubal, Maritsa, KivuWatt and Togo power plants with a notable share of works performed by internal resources.
Renewable
Adding to our hydro portfolio
In 2017 we added another seven hydro power plants with 130 MW of installed capacity to our hydro portfolio in Brazil. We have successfully integrated them into our operating portfolio, obtaining targeted operational synergies and facilitating internal talent development and promotions to operate the portfolio.
Hydro portfolio II
In March 2017 we acquired our Brazil Hydro Portfolio II, consisting of 130 MW of small hydropower plants. The acquisition was part of our growth strategy in Brazil and increased our hydro presence in the country to 167 MW.
Our main focus pre-acquisition was to make sure that the teams in the plants received proper communication about ContourGlobal and to reassure them about their importance in our operating strategy for the country.
This led the way for the early implementation of ContourGlobal procedures and policies. This started with Health and Safety (H&S), compliance and internal control, but also focused on reporting practices, continuous improvement techniques and transferring the monitoring and
control of the newly acquired hydro plants to our centralized control room.
In parallel to implementing our operations and maintenance (O&M) practices, we applied our improvement plan, which focused on managing water through automation. This led to a more efficient use of water, as well as minimizing hydraulic losses and forced outages, thus increasing performance.
Availability metrics for this portfolio increased from pre-acquisition levels of 91% to 98% in 2017, while the H&S target of Zero LTIs was successfully attained by all plants in the portfolio.
Corporate Transactions
In 2017 we pursued our strategy of opportunistic acquisitions at very competitive returns.
Acquisition of a thermal and a renewable portfolio in Brazil
On March 2017, we closed the acquisition of 80% of a 206 MW Brazilian portfolio of hydro and thermal power plants. The portfolio consists of seven hydroelectric plants totaling 130 MW in the states of Bahia, Goiás and Rio de Janeiro and four high-efficiency cogeneration facilities totaling 76 MW in Paraná, Rio de Janeiro and São Paulo. The total consideration amounts to BRL 576.8m (or $182.4m) including certain price adjustments.
Additional solar photovoltaic portfolio acquisition
In December 2017, we closed the acquisition of 19.1 MW of operational solar photovoltaic plants in Italy from ErgyCapital S.p.A. The plants, located in the regions of Puglia, Piemonte, Lazio and Campania, are close to our existing Italian solar photovoltaic portfolio and benefit from approximately 12 years of Feed-in-Tariff. The total consideration for the shares amounted to EUR9.6m (or $11.4m).
Acquisition of non-controlling interests which did not result in a change of control
We completed the acquisition of 15% and 5% minority interests in Chapada I and Chapada II projects in 2017 for a total consideration for the shares of $9.8m. After this transaction, ContourGlobal owns 51% of those projects. We also completed the acquisition of 19.7% minority interests in ContourGlobal Hydro Cascade CJSC (Vorotan project) for a consideration of $16.3m. After this transaction, the Company owns 100% of the Vorotan project.
Sale of Kramatorsk Ukrainian business
We decided to exit Ukraine by selling our Kramatorsk Ukrainian power plant. The sale of the asset was closed in February 2018.
Health and Safety
Health and Safety is at the core of our Company. We are committed to setting and meeting the same industry-leading standards across all our operations wherever they may be. To this end we have a global Target Zero - zero harm; zero injuries.
2017 Health and Safety Highlights:
-- All our operating sites achieved their targets for leading indicators - see KPIs below: -- We achieved our lowest ever LTI (Lost Time Incident) rate, a 50% reduction from 2016.
-- TRIR (Total Recordable Incident Rate) well below the target and also represents the historical low incidence achieved for the Company.
-- We carried out a total of 11 Internal Health & Safety Audits in 2017. -- We undertook three Safety Interventions, with positive results.
-- All sites implemented the Power for HSE Excellence program. As a result, more robust procedures and policies are in place consistently across the Company.
-- We rolled out mobile versions of our Incident and Hazard reporting process, for iOS and Android devices.
Financial Review
In 2017, our consolidated revenue exceeded $1bn - for the first time in the Company's history. At $1,023m, consolidated revenue was $118m more than in 2016. Moreover, in 2017, we achieved a significant improvement in Adjusted EBITDA - one of our key financial profitability metrics. It went up from $440m in 2016 to $513m in 2017. This 17% growth was primarily driven by acquisitions in 2017 and a full year of operations of the power plants commissioned in 2016.
Revenue
In 2017, ContourGlobal's revenue exceeded $1bn for the first time, to reach $1,022.7m (+13%). This is another significant milestone for the Company as we pursue our objective of continuous growth. The rise in revenue was mainly the result of successfully integrating our recently constructed power plants (Cap des Biches I and II) and the businesses acquired in 2017, including the Brazilian renewable and thermal portfolio as well as the new Italian solar photovoltaic portfolio.
Income From Operations (IFO)
IFO is an IFRS measure derived from audited consolidated statement of income. IFO has significantly increased during 2017, to 2016 (+$47.2m). This performance was achieved despite the expected increase of Depreciation and amortization expenses (+$16.2m) resulting in particular from assets integrated to the Group during the period. The IFO performance was primarily driven by the full-year impact of assets which came into operation during year 2016 and by new acquisitions closed in 2017, as well as our close monitoring of fixed costs, in particular of employee costs, operation and maintenance costs (excluding non-cash concession construction costs recognized in 2016 under IFRS standards), facility costs and professional fees which remain fairly stable despite the growth of the Group.
Adjusted EBITDA
In 2017, we saw another year of strong growth of Adjusted EBITDA, rising by 17% to $513.2m - above the middle of the range announced during the listing process ($500 to $520m). Growth was achieved in both thermal and renewables. Corporate and other costs were reduced.
Thermal Adjusted EBITDA increased by $50.2m, or 18%, to $332.0m for the year ended 31st December 2017, from $281.8m for the year ended 31st December 2016. This growth was first the result of the growth strategy, including the full-year effect of the COD of Cap des Biches in Senegal (+$14.1m) and the acquisition of a Thermal Solutions fleet in Brazil in March 2017 (+$12.2m). The growth in thermal was also driven by organic growth (+$17.6m) including revenue related to SO2 and NOX environmental investments in Maritsa and the impact of a bad debt recovery following a positive second instance judgment on French Caribbean assets (+$6.4m). This trend is the result of nearly fully contracted thermal power generation across different technologies and geographies, stable or lower fixed costs and strong operational performance. The thermal fleet reached an average annual availability of 92.6% in 2017, way above the minimal contractual thresholds required for eligibility to capacity payments. This structure allows Adjusted EBITDA to be improved in periods of lower production by lowering fixed costs, for instance in the Togo power plant in 2017. It also includes recovery in the tariff of some significant environmental investments such as an SO2 and NOX upgrade in Maritsa.
Renewable Energy Adjusted EBITDA increased by $18.0m, or 9%, to $211.1m for the year ended 31st December 2017, from $193.1m for the year ended 31st December 2016. Renewable fleet performance was also positively impacted by the growth strategy after the acquisition of seven hydro power plants in Brazil in March 2017, which contributed $21.3m to Adjusted EBITDA growth in 2017. The change in scope also included the full-year effect of the sale of Czech solar photovoltaic assets in 2016, which negatively impacted Adjusted EBITDA by $2.9m. Excluding these two acquisition and sale effects, Renewable Adjusted EBITDA slightly decreased by $0.5m, impacted by a combination of severe weather conditions in Peru in 1Q 2017 (flooding) and low wind and hydro conditions in Brazil combined with technical issues in the summer in the Brazil wind fleet. This was offset by a strong performance of the Inka wind farms from 2nd to 4th quarters and by the strong performance of Austrian wind farms and European solar photovoltaic farms (Italy and Slovakia) throughout 2017. The combination of contracted revenue, diversified energy type (solar photovoltaic, wind, hydro) and diversified geographies allowed the Group to mitigate the lower than expected wind and hydro resources in Brazil and, for the first quarter of 2017, in Peru.
Corporate and other costs decreased to $(29.9)m for the year ended 31st December 2017, from $(34.6)m for the years ended 31st December 2016. This reduction was achieved despite the continuous growth of the company thanks to the reinforced monitoring of fixed costs, including allocating a dedicated task force to growth projects such as the Kosovo and Austria repowering projects, which both reached significant milestones in 2017.
In addition, we continued to focus in 2017 on mitigating our exposure to unexpected changes in Adjusted EBITDA. In particular:
-- 75% of 2017 Adjusted EBITDA is denominated either in euros or US dollars, and a portion of the Brazilian reals exposure is hedged to US dollars.
-- No technology cluster represents more than 26% of 2017 Adjusted EBITDA and the current expected acquisition of a 250 MW concentrated solar photovoltaic power (CSP) portfolio in Spain would further diversify our technology profile.
-- Almost all of 2017 Adjusted EBITDA is generated under PPA concluded with Investment Grade offtakers or non-Investment Grade offtakers under political risk insurance. The expected acquisition of the Spanish CSP portfolio would reinforce the Investment Grade profile of our investments.
We believe the presentation of Adjusted EBITDA enhances investor understanding of ContourGlobal's financial performance. It enables investors to assess, from period to period, ContourGlobal's ability to generate cash from operations sufficient to pay taxes, service debt, undertake capital expenditures and pay dividends.
We use Adjusted EBITDA for business planning and to measure our performance relative to competitors.
Adjusted EBITDA is defined as combined profit from continuing operations for all controlled assets before income taxes, net finance costs, depreciation and amortization, acquisition-related expenses and specific items which have been identified and adjusted by virtue of their size, nature or incidence, less ContourGlobal's share of profit from unconsolidated entities accounted for on the equity method, plus ContourGlobal's pro rata portion of Adjusted EBITDA for such entities. In determining whether an event or transaction is specific, we consider quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Adjusted EBITDA is not a measurement of financial performance under IFRS.
The following table reconciles net profit to Adjusted EBITDA for each period presented:
Years ended December
31,
---------------------------------------------------------- ----------------------
In $ millions 2017 2016
---------------------------------------------------------- ---------- ----------
Total adjusted EBITDA 513.2 440.4
---------------------------------------------------------- ---------- ----------
Reconciliation to profit/(loss) before income tax
---------------------------------------------------------- ---------- ----------
Depreciation and Amortization (185.6) (169.4)
---------------------------------------------------------- ---------- ----------
Finance costs net (220.7) (201.9)
---------------------------------------------------------- ---------- ----------
Share of profit in joint ventures and associates 5.0 7.3
---------------------------------------------------------- ---------- ----------
Share of adjusted EBITDA in joint ventures and associates (21.6) (21.4)
---------------------------------------------------------- ---------- ----------
Acquisition related items (9.5) (12.3)
---------------------------------------------------------- ---------- ----------
Costs related to CG PLC IPO (12.7) -
---------------------------------------------------------- ---------- ----------
Other (27.5) 0.2
---------------------------------------------------------- ---------- ----------
Profit/(loss) before income tax 40.6 42.9
---------------------------------------------------------- ---------- ----------
The Company reports non-underlying items in the Income Statement to show one-off items and to allow better interpretation of the underlying performance of the business. In relation to the 2017 and 2016 financial years, these included one-off and non-cash items. Adjusted EBITDA is a more accurate reflection of the business performance of the Company and allows the Company's results to be compared from period to period and with peer companies.
Funds from operations
Funds from operations is a non-IFRS measure that is calculated as follows:
In $ million 2017 2016 --------------------------------- ------- ------- Cash flow from operations 420.6 532.6 --------------------------------- ------- ------- Change in Working Capital 39.4 (135.6) --------------------------------- ------- ------- Interest paid (169.2) (154.3) --------------------------------- ------- ------- Maintenance capital expenditure (18.7) (14.5) --------------------------------- ------- ------- Cash distributions to minorities (16.2) (20.3) --------------------------------- ------- ------- Funds From Operations (FFO) 255.9 207.9 --------------------------------- ------- ------- Cash conversion rate (%) 50% 47% --------------------------------- ------- -------
Fund from operations (FFO) significantly improved in 2017, growing by 23% compared to 2016. This performance is the consequence of the continuous growth of Adjusted EBITDA discussed earlier and an efficient capital structure implemented by ContourGlobal through a mix of project level and corporate level financing to lower its cost of capital. The cash conversion rate, which compares FFO to Adjusted EBITDA, improved during the period essentially as a result of the new acquisitions (new Brazilian portfolio), the low leverage of certain highly cash generating assets and the capacity to keep maintenance capital expenditures at a low level despite the growth.
Leverage ratio
Year ----- ---- 2016 4.8x ----- ---- 2017 4.1x ----- ----
The Company leverage ratio is measured as total net indebtedness (reported as the difference between Borrowings and Cash and Cash Equivalent under IFRS statement of financial position) to Adjusted EBITDA. Whenever significant, such a ratio is adjusted to reflect the full-year impact of acquisitions or for financial debt of projects under construction which do not generate EBITDA. No such adjustment was made in 2017. ContourGlobal aims to maintain its leverage ratio on the long-term in a range from 4.0x to 4.5x. As of 31st December 2017, the leverage ratio significantly dropped to 4.1x from 4.8x in the previous year. This change mainly resulted from the primary proceeds following the listing of ContourGlobal plc, net of costs, of approximately $368m and from the high level of cash conversion during the period. As of 31st December 2017, ContourGlobal has a total of $781.1m of cash and cash equivalents, a significant portion of which sits at corporate level and is available to finance the future growth of the Company.
One-off items
One-off items are reported under Acquisition related items and Other income (expenses) - net in the IFRS Consolidated statement of income. Acquisition related items essentially include pre-acquisition costs and other incremental costs incurred as part of completed or contemplated acquisitions. It represented a total amount of $9.5m in 2017. The Company has mainly incurred such costs in 2017 in relation to a number of acquisition projects in Brazil, Mexico, Italy, Peru and Spain in particular. Other income (expenses) of $(12.7) million are fully related in 2017 to the non-capitalized portion of costs incurred as part of the listing of ContourGlobal plc on the UK market. In 2016, a $15.6m income was recognized and related to the impact of the sale of Solutions Kiev power plant to Coca Cola Hellenic and the sale of three solar photovoltaic energy plants in Czech Republic, representing a total of 6.0 MW, in November 2016.
Finance costs - net
Finance costs - net increased from $201.9m in 2016 to $220.7m in 2017. Interest expenses remained relatively stable (+3.6%) at $176.3m in 2017 despite the growth. This is mainly the result of access to attractive project financing (for instance Cap des Biches in 2016 and 2017) and refinancing of the corporate bond in June 2016 at a much lower cost. Other financing costs were mainly impacted by the foreign exchange variations during the period (Euro/US dollars and Brazilan Real/US dollar), which affected the derivative fair value and revaluation of loans denominated in a currency other than the functional currency at corporate level. The increase related to foreign exchange was partially offset by one-off costs in 2016, notably the called premium paid and accelerated amortization of deferred financing costs following the refinancing of ContourGlobal's $500m bond in June 2016.
Profit before tax
Profit before tax remained relatively stable at $40.6m in 2017 (-5%). Adjusted for the negative effect of listing costs and realized and unrealized foreign exchange movements recognized in the statement of income during the period, profit before tax would have reached $84.3m (+94%) movement.
Taxation
The Company recognized a tax charge of $27.1m in 2017 as compared to $22.1m in 2016 as a result of increasing taxes in Brazil (extended portfolio), the French Caribbean and Bulgaria (higher taxable profits).
Non-current assets
Non-current assets mainly comprise of Property, plant and equipment and financial assets. The increase of noncurrent assets by $284.1m to $3,203.5m as of 31st December 2017 was mainly due to the acquisition of the Brazilian hydro and Solutions portfolio in Brazil (+$230.7m) and solar assets in Italy (+$75.7m), as well as change in foreign exchange, partially offset by normal depreciation over the period.
Equity and non-controlling interests
Equity and non-controlling interests increased by $331.7m to $773.5m as of 31st December 2017 mainly as the result of the primary proceeds received following the listing process on the London Stock Exchange, net of related costs recognized directly in equity (+$382.4m), increased by profit of the period ($13.5m) and contribution received in Brazil from non-controlling interests ($54.4m), partially offset by dividends paid to sole shareholder prior to the listing ($75.5m), items directly recognized in Other comprehensive income ($20.3m) and acquisition of non-controlling interests ($9.8m).
Borrowings
Current and non-current borrowings increased by $360.2m to $2,890.1m, mainly as a result of new or acquired borrowings (+$367.9m, including bond tap in February 2017, financing acquired or drawn for the acquisitions closed in Brazil in March and Italy in December, and Cap des Biches final issuance), foreign exchange changes (+$169.6m), partially offset by scheduled repayment ($160.5m) and early repayment of loan at Galheiros hydro plant ($13.4m).
Outlook
We remain heavily focused on developing, acquiring and operating power generation facilities under long-term contracts providing significant protection from the risks associated with volumes, commodity prices or merchant energy prices. As we continue to pursue our growth strategy, we are active on both construction and acquisition projects. Recent developments include:
-- In December 2017, we signed an agreement with Kosovo's government to build a 500 MW coal-fired power plant.
-- In December 2017, we signed the acquisition of a 23.4 MW renewable portfolio consisting of 10 solar photovoltaic plants in Italy (15 MW), one solar photovoltaic plant in Romania (7 MW) and 2 biogas plants in Italy (2 MW).
-- In February 2018, we signed the acquisition of a 250MW CSP portfolio in Spain for a purchase price of approximately EUR806m. The portfolio has an average remaining regulated tariff of approximately 18 years.
Looking ahead, we will remain very active in developing and acquiring new projects at attractive shareholder returns as we focus on achieving the target fixed before the listing to at least double Adjusted EBITDA by the end of 2022 without requiring new equity.
Dividend
The declaration and payment by the Company of any future dividends and the amounts of any such dividends will depend upon ContourGlobal's ability to maintain its credit rating, its investments, results, financial condition, future prospects, profits being available for distribution, consideration of certain covenants under the terms of outstanding indebtedness and any other factors deemed by the Directors to be relevant at the time, subject always to the requirements of applicable laws. The Directors expect that dividends will be distributed bi-annually, with one-third of expected dividends payable at the first bi-annual distribution, and two-thirds payable at the second bi-annual distribution.
As at the date of this report, the Directors expect to pay (i) a dividend of approximately $17.5m in May 2018 for the year ended 31st December 2017, to be approved at the 2018 annual general meeting; and (ii) dividends totaling approximately $75.0m for the year ending 31st December 2018, one-third of which is expected to be paid in August 2018 and two-thirds of which is expected to be paid in May 2019, after the 2019 annual general meeting. The Directors also expect to increase the dividend by a minimum of high single-digit growth rate each year over the next five years, in line with ContourGlobal's operational scale.
Annual General Meeting (AGM)
The 2018 AGM will be held on 25th May 2018 in London. At the AGM, shareholders will have the opportunity to ask questions of the Board, including the Chairmen of the Board Committees.
Full details of the AGM, including explanatory notes, are contained in the Notice of the AGM, which will be distributed at least 20 working days before the meeting. The Notice sets out the resolutions to be proposed at the AGM and an explanation of each resolution.
All documents relating to the AGM are available on the Company's website at www.ContourGlobal.com.
Financial Statements
ih
Consolidated statement of income and other comprehensive income
Years ended December 31,
----------------------------------------------------------------------------------------- ---------------------------
In $ millions Note 2016 2017
---------------------------------------------------------------------------------- ----- ------------- ------------
Revenue 4.2 905.2 1,022.7
---------------------------------------------------------------------------------- ----- ------------- ------------
Cost of sales 4.3 (636.0) (716.3)
---------------------------------------------------------------------------------- ----- ------------- ------------
Gross profit 269.2 306.4
---------------------------------------------------------------------------------- ----- ------------- ------------
Selling, general and administrative expenses 4.3 (36.6) (31.9)
---------------------------------------------------------------------------------- ----- ------------- ------------
Other operating income - net 1.5 4.0
---------------------------------------------------------------------------------- ----- ------------- ------------
Acquisition related items 4.5 (12.3) (9.5)
---------------------------------------------------------------------------------- ----- ------------- ------------
Income from Operations 221.8 269.0
---------------------------------------------------------------------------------- ----- ------------- ------------
Other income (expenses) - net 4.6 15.6 (12.7)
---------------------------------------------------------------------------------- ----- ------------- ------------
Share of profit in associates 4.13 7.3 5.0
---------------------------------------------------------------------------------- ----- ------------- ------------
Finance income 4.7 6.9 9.8
---------------------------------------------------------------------------------- ----- ------------- ------------
Finance costs 4.7 (261.6) (186.0)
---------------------------------------------------------------------------------- ----- ------------- ------------
Realized and unrealized foreign exchange gains and (losses) and change in fair
value of derivatives 4.7 52.9 (44.5)
---------------------------------------------------------------------------------- ----- ------------- ------------
Profit before income tax 42.9 40.6
---------------------------------------------------------------------------------- ----- ------------- ------------
Income tax expenses 4.8 (22.1) (27.1)
---------------------------------------------------------------------------------- ----- ------------- ------------
Net profit 20.8 13.5
---------------------------------------------------------------------------------- ----- ------------- ------------
Profit / (Loss) attributable to
----------------------------------------------------------------------------------------------------------------------
- Group 37.5 19.4
---------------------------------------------------------------------------------- ----- ------------- ------------
- Non-controlling interests (16.7) (5.9)
---------------------------------------------------------------------------------- ----- ------------- ------------
Earnings per share (in $)
----------------------------------------------------------------------------------------------------------------------
- Basic 4.9 0.06 0.03
---------------------------------------------------------------------------------- ----- ------------- ------------
- Diluted 4.9 0.06 0.03
---------------------------------------------------------------------------------- ----- ------------- ------------
In $ millions Years ended December 31,
----------------------------------------------------------------------------------------- ---------------------------
2016 2017
----------------------------------------------------------------------------------------- ------------ -------------
Net profit for the period 20.8 13.5
----------------------------------------------------------------------------------------- ------------ -------------
Items that will not be reclassified subsequently to income statement (0.1) (0.6)
----------------------------------------------------------------------------------------- ------------ -------------
Changes in actuarial gains and losses on retirement benefit, before tax (0.1) (0.7)
----------------------------------------------------------------------------------------- ------------ -------------
Deferred taxes on changes in actuarial gains and losses on retirement benefit - 0.1
----------------------------------------------------------------------------------------- ------------ -------------
Items that may be reclassified subsequently to income statement 2.1 (19.7)
----------------------------------------------------------------------------------------- ------------ -------------
Gain on hedging transactions 2.5 5.9
----------------------------------------------------------------------------------------- ------------ -------------
Deferred taxes on gain on hedging transactions 0.7 0.6
----------------------------------------------------------------------------------------- ------------ -------------
Share of other comprehensive income of investments accounted for using the equity
method 1.1 0.5
----------------------------------------------------------------------------------------- ------------ -------------
Currency translation differences (2.2) (26.7)
----------------------------------------------------------------------------------------- ------------ -------------
Other comprehensive profit / (loss) for the period, net of tax 2.0 (20.3)
----------------------------------------------------------------------------------------- ------------ -------------
Total comprehensive profit / (loss) for the period 22.8 (6.8)
----------------------------------------------------------------------------------------- ------------ -------------
Attributable to
----------------------------------------------------------------------------------------- ---------------------------
- Group 24.4 2.8
----------------------------------------------------------------------------------------- ------------ -------------
- Non-controlling interests (1.6) (9.6)
----------------------------------------------------------------------------------------- ------------ -------------
Consolidated statement of financial position
In $ millions Note December 31, 2016 December 31, 2017 ------------------------------------ ----- ------------------ ------------------ Non-current assets 2,919.4 3,203.5 ------------------------------------ ----- ------------------ ------------------ Intangible assets and goodwill 4.10 118.7 137.1 ------------------------------------ ----- ------------------ ------------------ Property, plant and equipment 4.11 2,114.0 2,350.3 ------------------------------------ ----- ------------------ ------------------ Financial assets 4.12 604.8 617.7 ------------------------------------ ----- ------------------ ------------------ Investments in associates 4.13 25.7 27.1 ------------------------------------ ----- ------------------ ------------------ Other non-current assets 4.18 20.6 29.5 ------------------------------------ ----- ------------------ ------------------ Deferred tax assets 4.8 35.6 41.8 ------------------------------------ ----- ------------------ ------------------ Current assets 676.5 1,134.1 ------------------------------------ ----- ------------------ ------------------ Inventories 4.19 31.7 54.1 ------------------------------------ ----- ------------------ ------------------ Trade and other receivables 4.20 166.9 271.8 ------------------------------------ ----- ------------------ ------------------ Derivative financial instruments 4.15 6.3 - ------------------------------------ ----- ------------------ ------------------ Other current assets 37.9 27.1 ------------------------------------ ----- ------------------ ------------------ Cash and cash equivalents 4.21 433.7 781.1 ------------------------------------ ----- ------------------ ------------------ Assets held for sale 4.11 - 13.7 ------------------------------------ ----- ------------------ ------------------ Total assets 3,595.9 4,351.3 ------------------------------------ ----- ------------------ ------------------ In $ millions Note December 31, 2016 December 31, 2017 -------------------------------------------------------------- ----- ------------------ ------------------ Issued capital 4.22 - 8.9 -------------------------------------------------------------- ----- ------------------ ------------------ Share premium - 380.8 -------------------------------------------------------------- ----- ------------------ ------------------ Retained earnings and other reserves (691.6) 187.3 -------------------------------------------------------------- ----- ------------------ ------------------ Invested capital 980.5 - -------------------------------------------------------------- ----- ------------------ ------------------ Non-controlling interests 152.9 196.5 -------------------------------------------------------------- ----- ------------------ ------------------ Total equity and non-controlling interests 441.8 773.5 -------------------------------------------------------------- ----- ------------------ ------------------ Non-current liabilities 2,673.4 3,016.5 -------------------------------------------------------------- ----- ------------------ ------------------ Borrowings 4.23 2,372.6 2,672.6 -------------------------------------------------------------- ----- ------------------ ------------------
Derivative financial instruments 4.15 37.8 49.7 -------------------------------------------------------------- ----- ------------------ ------------------ Deferred tax liabilities 4.8 56.8 65.5 -------------------------------------------------------------- ----- ------------------ ------------------ Provisions 4.3 38.3 62.2 -------------------------------------------------------------- ----- ------------------ ------------------ Other non-current liabilities 4.24 167.9 166.5 -------------------------------------------------------------- ----- ------------------ ------------------ Current liabilities 480.7 548.4 -------------------------------------------------------------- ----- ------------------ ------------------ Trade and other payables 4.26 179.8 169.1 -------------------------------------------------------------- ----- ------------------ ------------------ Borrowings 4.23 157.3 217.5 -------------------------------------------------------------- ----- ------------------ ------------------ Derivative financial instruments 4.15 13.4 14.7 -------------------------------------------------------------- ----- ------------------ ------------------ Current income tax liabilities 20.1 23.7 -------------------------------------------------------------- ----- ------------------ ------------------ Provisions 4.25 33.5 10.8 -------------------------------------------------------------- ----- ------------------ ------------------ Other current liabilities 4.27 76.6 112.6 -------------------------------------------------------------- ----- ------------------ ------------------ Liabilities held for sale 4.11 - 12.9 -------------------------------------------------------------- ----- ------------------ ------------------ Total liabilities 3,154.1 3,577.8 -------------------------------------------------------------- ----- ------------------ ------------------ Total equity and non-controlling interests and liabilities 3,595.9 4,351.3 -------------------------------------------------------------- ----- ------------------ ------------------
Consolidated statement of changes in equity and non-controlling interest
In $ millions Invested Share Share Currency Hedging Actuarial Retained Total Non-controlling Total
capital capital premium Translation reserve reserve earnings interests equity
Reserve and
other
reserves
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Balance as of
January
1, 2016 981.7 - - (16.4) (40.3) (0.9) (653.0) 271.1 146.2 417.3
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Profit / (loss)
for
the period - - - - - - 37.5 37.5 (16.7) 20.8
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Other
comprehensive
income (loss) - - - (16.5) 4.3 (0.1) (0.8) (13.1) 15.1 2.0
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Total
comprehensive
profit for the
period - - - (16.5) 4.3 (0.1) 36.7 24.4 (1.6) 22.8
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Change in
invested
capital (1.2) - - - - - - (1.2) - (1.2)
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Acquisition of
and
contribution to
non-controlling
interest not
resulting
in a change of
control - - - - - - (4.6) (4.6) 4.1 (0.5)
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Contribution
received
from
non-controlling
interest - - - - - - - - 4.3 4.3
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Other - - - - - (0.8) (0.8) (0.1) (0.9)
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Balance as of
December
31, 2016 980.5 - - (32.9) (36.0) (1.0) (621.7) 288.9 152.9 441.8
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Balance as of
January
1, 2017 980.5 - - (32.9) (36.0) (1.0) (621.7) 288.9 152.9 441.8
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Profit / (loss)
for
the period - - - - - - 19.4 19.4 (5.9) 13.5
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Other
comprehensive
loss - - - (23.0) 7.0 (0.6) - (16.6) (3.7) (20.3)
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Total
comprehensive
loss for the
period - - - (23.0) 7.0 (0.6) 19.4 2.8 (9.6) (6.8)
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Change in
invested
capital (12.8) - - - - - - (12.8) - (12.8)
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Group
restructure
as a result of
share
for share
exchange
(note 4.22) (967.7) 1,320.7 - - - - (353.0) - - -
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Capital
reduction
(note 4.22) (1,307.5) - - - - 1,307.5 - - -
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Cancellation of
deferred
shares (note
4.22) (5.9) - - - - 5.9 - - -
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Issue of shares
-
Listing on the
London
Stock Exchange
(note
4.22) - 1.6 380.8 - - - - 382.4 - 382.4
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Acquisition and
contribution
of
non-controlling
interest not
resulting
in a change of
control - - - - (1.0) - (8.0) (9.0) (0.8) (9.8)
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Acquisition of
and
contribution
received
from
non-controlling
interest - - - - - - - - 54.4 54.4
----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Dividends - - - - - - (75.5) (75.5) - (75.5) ----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- ------- Other - - - - - 0.2 0.2 (0.4) (0.2) ----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- ------- Balance as of December 31, 2017 - 8.9 380.8 (55.9) (30.0) (1.6) 274.8 577.0 196.5 773.5 ----------------- --------- ---------- -------- ------------ -------- ---------- --------- ------- ---------------- -------
Consolidated statement of cash flows
In $ millions Note 2016 2017
------------------------------------------------------------------------------------- ------- ---------- ----------
CASH FLOW FROM OPERATING ACTIVITIES
----------------------------------------------------------------------------------------------------------------------
Net profit 20.8 13.5
------------------------------------------------------------------------------------- ------- ---------- ----------
Adjustment for:
------------------------------------------------------------------------------------- ------- ---------- ----------
Amortization, depreciation and impairment expense 4.3 169.4 185.6
------------------------------------------------------------------------------------- ------- ---------- ----------
Change in provisions (1.6) 3.8
------------------------------------------------------------------------------------- ------- ---------- ----------
Share of profit in associates 4.13 (7.3) (5.0)
------------------------------------------------------------------------------------- ------- ---------- ----------
Realized and unrealized foreign exchange gains and losses and change in fair
value of derivatives 4.7 (52.8) 44.5
------------------------------------------------------------------------------------- ------- ---------- ----------
Interest expenses - net 4.7 163.2 166.5
------------------------------------------------------------------------------------- ------- ---------- ----------
Other financial items 4.7 91.5 9.6
------------------------------------------------------------------------------------- ------- ---------- ----------
Income tax expense 4.8 22.1 27.1
------------------------------------------------------------------------------------- ------- ---------- ----------
Change in financial lease and concession assets 2.4 15.7
------------------------------------------------------------------------------------- ------- ---------- ----------
Acquisition related items 12.3 9.5
------------------------------------------------------------------------------------- ------- ---------- ----------
Other items (12.0) 6.0
------------------------------------------------------------------------------------- ------- ---------- ----------
Change in working capital 135.6 (39.4)
------------------------------------------------------------------------------------- ------- ---------- ----------
Income tax paid (14.8) (23.9)
------------------------------------------------------------------------------------- ------- ---------- ----------
Contribution received from associates 3.8 7.1
------------------------------------------------------------------------------------- ------- ---------- ----------
Net cash generated from operating activities 532.6 420.6
------------------------------------------------------------------------------------- ------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
----------------------------------------------------------------------------------------------------------------------
Purchase of property, plant and equipment (58.0) (58.4)
------------------------------------------------------------------------------------- ------- ---------- ----------
Purchase of intangibles (1.5) (1.4)
------------------------------------------------------------------------------------- ------- ---------- ----------
Proceeds from the sale of property, plant and equipment 16.2 -
------------------------------------------------------------------------------------- ------- ---------- ----------
Governments grants 6.5 0.7
------------------------------------------------------------------------------------- ------- ---------- ----------
Acquisition of financial assets under concession agreements 4.12 (49.0) (35.4)
------------------------------------------------------------------------------------- ------- ---------- ----------
Acquisition of subsidiaries, net of cash received (92.2) (170.6)
------------------------------------------------------------------------------------- ------- ---------- ----------
Sale of subsidiaries, net of divested cash 9.4 -
------------------------------------------------------------------------------------- ------- ---------- ----------
Other investing activities 3.5 (15.5)
------------------------------------------------------------------------------------- ------- ---------- ----------
Net cash used in investing activities (165.0) (280.6)
------------------------------------------------------------------------------------- ------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
----------------------------------------------------------------------------------------------------------------------
Proceeds from issuance of ContourGlobal Plc. Shares 4.22 - 402.3
------------------------------------------------------------------------------------- ------- ---------- ----------
Dividends paid - (75.5)
------------------------------------------------------------------------------------- ------- ---------- ----------
Net repayment of amounts due from relating undertakings - 21.3
------------------------------------------------------------------------------------- ------- ---------- ----------
Proceeds from borrowings 889.0 310.9
------------------------------------------------------------------------------------- ------- ---------- ----------
Repayment of borrowings (845.9) (233.0)
------------------------------------------------------------------------------------- ------- ---------- ----------
Debt issuance costs - net (18.3) (1.1)
------------------------------------------------------------------------------------- ------- ---------- ----------
Interest paid (154.3) (169.2)
------------------------------------------------------------------------------------- ------- ---------- ----------
Cash distribution to non-controlling interests (20.3) (16.2)
------------------------------------------------------------------------------------- ------- ---------- ----------
Transactions with non-controlling interest holders 9.7 (9.6)
------------------------------------------------------------------------------------- ------- ---------- ----------
Other financing activities 4.7 (47.4) (69.0)
------------------------------------------------------------------------------------- ------- ---------- ----------
Net cash generated from (used in) financing activities (188.7) 160.9
------------------------------------------------------------------------------------- ------- ---------- ---------- Exchange gains (losses) on cash and cash equivalents (6.7) 46.4 ------------------------------------------------------------------------------------- ------- ---------- ---------- Net change in cash and cash equivalents 172.2 347.4 ------------------------------------------------------------------------------------- ------- ---------- ---------- Cash & cash equivalents at beginning of the period 261.5 433.7 ------------------------------------------------------------------------------------- ------- ---------- ---------- Cash & cash equivalents at end of the period 433.7 781.1 ------------------------------------------------------------------------------------- ------- ---------- ----------
Notes to the consolidated financial statements
1. General information
ContourGlobal plc (the 'Company') is a public listed company, limited by shares, domiciled in the United Kingdom and incorporated in England and Wales. It is the holding company for the group whose principal activities during the period were the operation of wholesale power generation businesses with thermal and renewables assets in Europe, Latin America and Africa, and its registered office is:
6th Floor
15 Berkeley Street
London
W1J 8DY
United Kingdom
Registered number: 10982736
ContourGlobal plc is listed on the London Stock Exchange.
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by and adopted for use by the European Union (EU), IFRS Interpretation Committee (IFRS IC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on the going concern basis under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.
The preparation of the IFRS financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may differ from those estimates, as noted in the critical accounting estimates and judgements in note 2.4.
The principal accounting policies applied in the preparation of the consolidated financial statements are set out in note 2.3. These policies have been consistently applied to the periods presented, unless otherwise stated. The financial information presented is at and for the financial years ended 31 December 2017 and 31 December 2016. Financial year ends have been referred to as 31 December throughout the consolidated financial statements as per the accounting reference date of ContourGlobal plc. Financial years are referred to as 2017 and 2016 in these consolidated financial statements.
On 17 October 2017, the Company obtained control of the entire share capital of ContourGlobal Worldwide Holdings S.a.r.l from ContourGlobal L.P. via a share-for-share exchange. The principal operating subsidiary undertakings of the group are owned directly or indirectly by ContourGlobal Worldwide Holdings S.a.r.l. There were no changes in rights or proportion of control exercised as a result of this transaction. Although the share-for-share exchange resulted in a change of legal ownership, this was a common control transaction and therefore outside the scope of IFRS 3. In substance, these financial statements reflect the continuation of the pre-existing group and the financial statements have been prepared by applying the principles of predecessor accounting. As a result, and because the Company was incorporated in 2017, the comparatives presented in these financial statements are the consolidated results of ContourGlobal Worldwide Holdings S.a.r.l. In each period, the financial statements have been prepared by applying the principles underlying the consolidation procedures of IFRS 10 'Consolidated Financial Statements' ("IFRS 10").
The prior year balance sheet reflects the constituent parts of equity required to be separately disclosed under IAS 1, based upon the consolidated position prior to the capital reorganization, and Non-Controlling Interests. As it is not meaningful to show the share capital for the predecessor group, the remaining equity of the predecessor group is represented by the cumulative investment of ContourGlobal L.P. in the group (shown as "Invested Capital"). The current period balance sheet presents the legal change in ownership of the group, including the share capital of the Company and the capital reorganization described in note 4.22. The revised capital structure is also presented in the current period statement of changes in equity, which reflects the share for share exchange, capital reduction and cancellation of deferred shares that occurred during the year.
As the capital reorganization occurred in 2017, it is not meaningful to measure earnings per share based on the invested capital of the predecessor group. In order to comply with the requirements of IAS 33 'Earnings per Share' however, a proforma calculation of earnings per share as at 31 December 2016 has been disclosed, using the weighted average number of shares in issue at 31 December 2017 (note 4.9).
The financial information is prepared in accordance with IFRS under the historical cost convention, as modified for the revaluation of certain financial instruments. The financial information is presented in millions of US dollars, with one decimal. Thus numbers may not sum precisely due to rounding.
2. Summary of significant accounting policies 2.1. Application of new and revised International Financial Reporting Standards (IFRS)
No new standards were applied for the first time from 1 January 2017. There were only a few amendments of standards applying mandatorily to periods beginning in 2017:
- Amendments to IAS 7 "Statement of Cash Flows";
The adoption of IAS7 amendment has resulted in additional disclosures as included on note 4.23.
- Amendments to IAS 12 "Income Tax"- Recognition of Deferred Tax Assets for Unrealised Losses.
These amendments clarify how an entity should evaluate whether there will be sufficient taxable profits against which it can utilize a deductible temporary difference. The group already assesses the sufficiency of future taxable profits in a manner consistent with these amendments and hence the adoption of this amendment has had no impact.
2.2. New standards and interpretations not yet mandatorily applicable
The Group has not applied early the following standards and interpretations that could impact the Group and of which application was not mandatory at 1 January 2017:
- IFRS 9 "Financial Instruments"; - IFRS 15 "Revenue from Contracts with Customers"; - IFRS 16 "Leases"; - IFRIC 22 "Foreign Currency Transactions and Advance Consideration". - IFRIC 23 "Uncertainty over income tax treatments".
Among the above mentioned standards, the following might affect the ContourGlobal's future consolidated financial information:
Standard/Interpretation Description
(application
date for the
Group)
IFRS 9 IFRS 9, Financial Instruments IFRS
Financial instruments 9 is effective from 1 January 2018.
(January 1, In summary, it has an impact on three
2018) areas:
- Classification and measurement
- the rules based approach of IAS
39 is replaced by principles based
approach with refers to the asset's
cash flow characteristics and the
business model in which it is held.
- Impairment of financial assets
- this moves to a more forward looking
expected loss model.
- Hedge accounting - the changes
align the accounting treatment with
the Company's risk management activities.
As a result of the adoption of this
standard, the measurement basis for
most of the Group's financial assets
is unchanged, although the classification
and corresponding disclosures of
financial assets in the 2018 Annual
Report and Accounts will be impacted.
The changes to impairment and hedge
accounting are not expected to have
a material impact on the results
of the Group.
IFRS 15 IFRS 15, Revenue from Contracts with
Revenue from Customers and clarifications. The
Contracts with Group will adopt IFRS 15, Revenue
Customers from Contracts with Customers, from
(January 1, 1 January 2018. IFRS 15 introduces
2018) a five-step model to be applied to
all contracts with customers. In
addition, a number of new disclosures
will be required. When IFRS 15 is
adopted in 2018, the Group will use
the modified retrospective approach.
To determine the impact of IFRS 15
on the Group, management grouped
power purchase agreements with similar
contractual terms, and performed
a detailed revenue accounting assessment
for each group. This exercise identified
the following main impacts for the
Group as being:
i) An increase in revenue from grossing
up certain costs that are currently
being netted down, which will result
in higher revenue and a corresponding
increase in cost of sales;
ii) An additional performance obligation
being identified for service concession
contracts; and
iii) A minor modification to a contract
in Maritsa that will be recognized
prospectively.
The impact of IFRS 15 on revenue
in 2018 is expected to be an increase
of between $14m and $20m, the vast
majority of which is driven by the
grossing up of certain costs on the
Arrubal contract in Spain, for which
costs will be grossed up for the
same amount. IFRS 15 is not expected
to have a material impact on the
profitability (adjusted EBITDA, income
from operations or profit before
tax) of the Group.
IFRS 16 This standard relates to the accounting
Leases for leases and will be compulsory
(January 1, applicable from January 1, 2019.
2019) This standard will mainly change
the lease accounting for lessees
with the recognition of an asset
and a liability which represents
the right of use granted by the lessor.
ContourGlobal is still assessing
the impacts where it acts as lessee
or lessor.
IFRIC 22 This standard relates to purchase
Foreign currency or sale transactions that must be
transactions translated at the exchange rate prevailing
and advance on the date the asset or liability
consideration is initially recognized. In practice,
(January 1, this is usually the date on which
2018) the advance payment is paid or received.
In the case of multiple advances,
the exchange rate must be determined
for each payment and collection transaction.
The interpretation is mandatory for
financial years beginning on or after
January 1, 2018, subject to its adoption
by the European Union. Its implementation
is not expected to have a significant
impact on the Group's consolidated
financial statements.
IFRIC 23 This standard clarifies the recognition
Uncertainty and valuation principles applicable
over income to income
tax treatments tax risks. These risks arise when
(January 1, there is uncertainty related to a
2019) tax
position adopted by the Group that
could be challenged by the
tax administration.
This interpretation is applicable
for financial years beginning on
January 1, 2019, subject to its
adoption by the European Union and
subject to retrospective application,
with or without comparative
information restatement for the
first year of application. ContourGlobal
is still assessing the impacts.
2.3. Summary of significant accounting policies
Principles of consolidation
The consolidated financial statements include both the assets and liabilities, and the results and cash flows, of the Group and its subsidiaries and the Group's share of the results and the Group's investments in associates.
Inter-company transactions and balances between Group companies are eliminated.
(a) Subsidiaries
Entities over which the Group has the power to direct the relevant activities so as to affect the returns to the Group, generally through control over the financial and operating policies, are accounted for as subsidiaries. Interests acquired in entities are consolidated from the date the Group acquires control.
(b) Associates
Where the Group has the ability to exercise significant influence over entities, generally accompanying a shareholding of between 20% and 50% of the voting rights, they are accounted for as associates. The results and assets and liabilities of associates are incorporated into the consolidated financial statements using the equity method of accounting. The Group's investment in associates includes goodwill identified on acquisition.
The Group determines at each reporting date whether there is objective evidence that the investment in the associate is impaired. If there is evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the investment in the associate and its carrying value and recognizes this amount in 'share of profit of associates' in the consolidated statement of income.
Business combinations
The acquisition consideration is measured at fair value which is the aggregate of the fair values of the assets transferred, the liabilities incurred or assumed and the equity interests in exchange for control. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognized in the statement of income. Where the consideration transferred, together with the non-controlling interest, exceeds the fair value of the net assets, liabilities and contingent liabilities acquired, the excess is recorded as goodwill. Acquisition related costs are expensed as incurred and classified as "Acquisition related items" in the consolidated statement of income.
Goodwill is capitalized as a separate item in the case of subsidiaries and as part of the cost of investment in the case of associates. Goodwill is denominated in the currency of the operation acquired.
Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in a gain or loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity.
Functional and presentation currency and currency translation
The assets and liabilities of foreign undertakings are translated into US dollars, the Group's presentation currency, at the year-end exchange rates. The results of foreign undertakings are translated into US dollars at the relevant average rates of exchange for the year. Foreign exchange differences arising on retranslation are recognized directly in the currency translation reserve.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized at period end exchange rates in the statement of income line which most appropriately reflects the nature of the item or transaction.
The following table summarizes the main exchange rates used for the preparation of the consolidated financial statements of ContourGlobal:
CLOSING RATES AVERAGE RATES
------------- -------------------------- --------------------------
Year ended December 31, Year ended December 31,
------------- -------------------------- --------------------------
Currency 2016 2017 2016 2017
------------- ------------ ------------ ------------ ------------
EUR / USD 1.0517 1.2005 1.1070 1.1299
------------- ------------ ------------ ------------ ------------
BRL / USD 0.3069 0.3024 0.2884 0.3134
------------- ------------ ------------ ------------ ------------
BGN / USD 0.5377 0.6138 0.5658 0.5774
------------- ------------ ------------ ------------ ------------
Operating and Reportable Segments
Operating segments are reported based on the organizational structure and financial information provided to the Chief Executive Officer, who represents the chief operating decision-maker ("CODM"). The Group's organizational structure reflects the different electricity generation methods, being Thermal and Renewables. A third category, Corporate & Other, primarily reflects costs for certain centralized functions including executive oversight, corporate treasury and accounting, legal, compliance, human resources, IT, political risk insurance and facilities management and certain technical support costs that are not allocated to the segments for internal management reporting purposes.
Revenue recognition
Revenue represents amounts receivable for goods or services provided in the normal course of business excluding amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes.
Revenue is recognized when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable.
The Group revenue is mainly generated from the following:
(i) revenue from power sales;
(ii) revenue from operating leases;
(iii) revenue from financial assets (concession and finance lease assets); and
(iv) construction revenue from concession arrangements.
Certain Group power plants sell their output under Power Purchase Agreements ("PPAs") and other long-term arrangements. Under such arrangements it is usual for the Group to receive payment for the provision of electrical capacity or availability whether or not the offtaker requests the electrical output (capacity payments) and for the variable costs of production (energy payments). In such situations, revenue is recognized in respect of capacity payments as:
a) Service income in accordance with the contractual terms, to the extent that the capacity has been made available to the contracted offtaker during the period. This income is recognized as part of revenue from power sales;
b) Financial return on the operating financial asset where the PPA is considered to be or to contain a finance lease or where the contract is considered to be a financial asset under interpretation IFRIC 12: "Service Concession Arrangements".
Under finance lease arrangements, those payments which are not included within minimum lease payments are accounted for as service income (outlined in (a) above).
Energy payments under PPAs are recognized in revenue in all cases as the contracted output is delivered.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.
Acquisition related items
Acquisition related items include notably pre-acquisition costs such as various professional fees and due diligence costs, earn-outs and other related incremental costs incurred as part of completed or contemplated acquisitions.
Finance income and finance costs
Finance income primarily consists of interest income on funds invested. Finance costs primarily comprise interest expense on borrowings, unwinding of the discount/step up on financial assets and provisions, interests and penalties that arise from late payments of suppliers or taxes, swap margin calls, bank charges, changes in fair value of the debt payable to non-controlling interests in our Bulgarian power plant, changes in the fair value of derivatives not qualifying for hedge accounting and unrealized & realized foreign exchange gains and losses.
Property, plant and equipment
Initial recognition and subsequent measurement
Property, plant and equipment are stated at historical cost, less depreciation, or at fair value if acquired in the context of a business combination. Historical cost includes an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, when the entity has a present legal or constructive obligation to do so.
Property, plant and equipment acquired under finance leases is carried at the lower of market value and the present value of the related minimum lease payments.
Costs relating to major inspections and overhauls are capitalized. Minor replacements, repairs and maintenance, including planned outages to our power plants that do not improve the efficiency or extend the life of the respective asset, are expensed as incurred.
The Group capitalizes certain direct preconstruction costs associated with its power plant project development activities when it has been determined that it is more likely than not that the opportunity will result in an operating asset. Factors considered in this determination include (i) the availability of adequate funding, (ii) the Group is likely to be awarded with the project or the barriers are not likely to prohibit closing the project, and (iii) there is an available market and the regulatory, environmental and infrastructure requirements are likely to be met. Capitalized costs include initial engineering, environmental and technical feasibility studies, legal costs, permitting and licensing and direct internal staff salary and travel costs, among others. Capitalized costs are charged to expense if a project is abandoned or if the conditions stated above are not met. Construction work in progress ("CWIP") assets are transferred out of CWIP when construction is substantially completed and the power plant achieves its commercial operations date ("COD"), at which point depreciation commences.
Depreciation
Property, plant and equipment are depreciated using the straight-line method over the following estimated useful lives:
Generating plants and equipment Useful lives as of December 31, 2016 and 2017 ---------------------------------------------------- ---------------------------------------------- Lignite, coal, gas, oil, biomass power plants 12 to 40 years ---------------------------------------------------- ---------------------------------------------- Hydro plants and equipment 25 to 75 years ---------------------------------------------------- ---------------------------------------------- Wind farms 16 to 25 years ---------------------------------------------------- ---------------------------------------------- Tri and quad-generation combined heat power plants 15 years ---------------------------------------------------- ---------------------------------------------- Solar plants 14 to 22 years ---------------------------------------------------- ---------------------------------------------- Other property, plant and equipment 3 to 10 years ---------------------------------------------------- ----------------------------------------------
The range of useful lives is due to the diversity of the assets in each category.
The asset residual values and useful lives are reviewed at least annually and if expectations differ from previous estimates.
Intangible assets and goodwill
Goodwill
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units ("CGUs"), or groups of CGUs that is expected to benefit from the synergies of the combination. Each unit or group of units represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.
The reporting units (which generally correspond to power plants) or group of reporting units have been identified as its cash-generating units.
Goodwill impairment reviews are undertaken at least annually.
Intangible assets
Intangible assets include licenses and permits when specific rights and contracts are acquired. Intangible assets acquired in a business combination are recognized at fair value at the acquisition date. When the power plant achieves its commercial operations date, the related intangible assets are amortized using the straight-line method over the life of the PPA, generally over 20 years (excluding software). Software is amortized over 3 years. A different amortization method may be used if it better reflects the pattern of economic benefits derived from the asset over time.
Impairment of non-financial assets
Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that carrying values may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal (market value) and value in use determined using estimates of discounted future net cash flows of the asset or group of assets to which it belongs. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units).
Financial assets
Classification of financial assets
The Group classifies its financial assets in the following categories: at fair value through statement of income and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.
(a) Financial assets at fair value through statement of income
Financial assets have been acquired principally for the purpose of selling, or being settled, in the short term. Financial assets at fair value through statement of income are "Restricted cash", "Cash and cash equivalents" and derivatives held for trading unless they are designated as hedges.
(b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except those that mature greater than 12 months after the end of the reporting period, which are classified in non-current assets. The Group's loans and receivables comprise "Trade and other receivables" and "Financial assets" in the consolidated statement of financial position.
Recognition and measurement of financial assets
Regular purchases and sales of financial assets are recognized on the trade-date, which is the date on which the Group commits to purchase or sell the asset. Financial assets carried at fair value through statement of income are initially recognized at fair value, and transaction costs are expensed in the statement of income. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortized cost using the effective interest method.
Impairment of financial assets
The Group assesses loans and receivables at the end of each reporting period to determine whether there is objective evidence that a financial asset is impaired.
The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the consolidated statement of income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
Unless otherwise stated carrying value approximates to fair value for all financial assets.
Derivative financial instruments and hedging activities
As part of its overall foreign exchange and interest rate risk management policy, the Group enters into various hedging transactions involving derivative instruments.
In connection with the Group's hedging policy, the Group uses forward exchange contracts for currency risk management as well as foreign exchange options, interest rate swap contracts for interest rate risk management in order to hedge certain forecasted transactions and to manage its anticipated cash payments under its variable rate financing by converting a portion of its variable rate financing to a fixed rate basis through the use of interest rate swap agreements, and a cross currency swap contract for both currency and interest rate risk management.
Items qualifying as hedges
The Group formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking hedge transactions and the method used to assess hedge effectiveness. Hedging transactions are expected to be highly effective in achieving offsetting changes in cash flows and are regularly assessed to determine that they actually have been highly effective throughout the financial reporting periods for which they are implemented.
When derivative instruments qualify as hedges for accounting purposes, as defined in IAS 39 "Financial instruments: recognition and measurement", they are accounted for as follows:
- The effective portion of the gain or loss on an outstanding hedge is recognized directly in the consolidated statement of other comprehensive income ("OCI"), while any ineffective portion is recognized immediately in the consolidated statement of income.
- Amounts recognized directly in OCI are reclassified to the consolidated statement of income when the hedged transaction affects the consolidated statement of income.
- If a forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in OCI are reclassified to the consolidated statement of income as Finance income or Finance costs.
If a hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognized in OCI remain in accumulated OCI until the forecast transaction or firm commitment occurs, at which point they are reclassified to the consolidated statement of income.
Concession arrangements
The interpretation IFRIC 12 governs accounting for concession arrangements. An arrangement within the scope of IFRIC 12 is one which involves a private sector entity (known as 'an operator') constructing infrastructure used to provide a public service, or upgrading it (for example, by increasing its capacity) and operating and maintaining that infrastructure for a specified period of time.
IFRIC 12 applies to public-to-private service concession arrangements if:
(a) The 'grantor' (i.e. the public sector entity - the offtaker) controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price, and
(b) The grantor controls through ownership, beneficial entitlement or otherwise any significant residual interest in the infrastructure at the end of the term of the arrangement. Infrastructure used in a public-to-private service concession arrangement for its entire useful life (a whole of life asset) is within the scope of IFRIC 12 if the conditions in a) are met.
The Group entered into three concession arrangements under the scope of IFRIC 12 in Rwanda, Senegal and Togo, which comply with the 'financial asset' model requirements. Under this model, the operator recognizes a financial asset, attracting interest in consideration for the services it provides (design, construction, etc.). This model is based on input assumptions such as budgets and cash flow forecasts. Any change in these assumptions may have a material impact on the measurement of the recoverable amount and could result in reducing the value of the asset. Such financial assets are recognized in the Statement of Financial Position in an amount corresponding to the fair value of the infrastructure on first recognition and subsequently at amortized cost. The receivable is settled by means of the grantor's payments received. The financial income calculated on the basis of the effective interest rate, equivalent to the project's internal rate of return, is reflected within the 'Revenue from concession and finance lease assets' line in the note 4.2 'Revenue' to the consolidated financial statement. Cash outflows relating to the acquisition of financial assets under concession agreements are presented as part of Cash flow from investing activities. Net cash inflows generated by the financial assets' operations are presented as part of Cash Flow from operating activities.
The Group acquired a concession arrangement under the scope of IFRIC 12 in Brazil which complies with the 'intangible asset' model requirements. Under this model, the operator recognizes an intangible asset in accordance with IAS 38 to the extent that it has a right to charge users of the public service. Such intangible asset is recognized in the Statement of Financial Position at cost on first recognition and subsequently measured over its useful economic life at cost less accumulated amortization and impairment losses. Net cash inflows generated by the intangible asset's operations are presented as part of Cash Flow from operating activities.
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and whether the arrangement conveys the right to use the asset, or assets.
Accounting for arrangements that contain a lease as lessee
(i) Accounting for finance leases as lessee
Leases of property, plant and equipment where the Group holds substantially all the risks and rewards of ownership are classified as finance lease and such assets are capitalized at the commencement of the lease term at the lower of the present value of the minimum lease payments or the fair value of the leased asset. The asset is depreciated over the shorter of the useful life of the asset and the lease term. The obligations relating to finance leases, net of finance charges in respect of future periods, are recognized as liabilities. Leases are subsequently measured at amortized cost using the effective interest method.
(ii) Accounting for operating leases as lessee
Leases where a significant portion of the risks and rewards are held by the lessor are classified as operating leases. Rentals are charged to the statement of income on a straight line basis over the period of the lease.
Accounting for arrangements that contain a lease as lessor - Power purchase arrangements ("PPA") and other long-term contracts may contain, or may be considered, leases where the fulfilment of the arrangement is dependent on the use of a specific asset such as a power plant and the arrangement conveys to the customer the right to use that asset. Such contracts may be identified as either operating leases or finance leases.
(i) Accounting for finance leases as lessor
Where the Group determines that the contractual provisions of a long-term PPA contain, or are a lease and result in the offtaker assuming the principal risks and rewards of ownership of the power plant, the arrangement is a finance lease. Accordingly, the assets are not reflected as PP&E and the net investment in the lease, represented by the present value of the amounts due from the lessee is recorded as a Financial asset as a finance lease receivable.
The capacity payments as part of the leasing arrangement are apportioned between minimum lease payments (comprising capital repayments relating to the provision of the plant and finance income) and service income. The finance income element is recognized as revenue, using a rate of return specific to the plant to give a constant rate of return on the net investment in each period. Finance income and service income are recognized in each accounting period at the fair value of the Group's performance under the contract.
(ii) Accounting for operating leases as lessor
Where the Group determines that the contractual provisions of the long-term PPA contain, or are, a lease, and result in the Group retaining the principal risks and rewards of ownership of the power plant, the arrangement is an operating lease. For operating leases, the power plant is, or continues to be, capitalized as property, plant and equipment and depreciated over its useful economic life. Rental income from operating leases is recognized on a straight-line basis over the term of the arrangement.
Inventories
Inventories consist primarily of power generating plant fuel and spare parts that are held by the Group for its own use. Inventories are stated at the lower of cost, using a first-in, first-out method, and net realizable value, which is the estimated selling price in the ordinary course of business, less applicable selling expenses.
Emission quotas
Some companies of the Group emit CO2 and have as a result obligations to buy emission quotas on the basis of local legislation. The emissions made by the company emitting CO2 which are in excess of any allocated quotas are purchased at free market and shown as inventories before their effective use. If emissions are higher than allocated quotas, the company recognizes an expense and respective liability for those emissions. At the end of each reporting period, CO2 quotas that remain available to the company are revalued based on available market prices.
Trade receivables
Trade receivables are recognized initially at fair value, which is usually the invoiced amount, and subsequently carried at amortized cost using the effective interest method, less provision for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions and short-term investments, all of which are readily convertible to cash and are subject to insignificant risk of changes in value and have an original maturity of three months or less. Bank overdrafts are included within current Borrowings.
Share capital and share premium
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds.
The premium received on the issue of shares in excess of the nominal value of shares is credited to the share premium account and included within shareholders' equity.
Restricted cash
Restricted cash includes cash balances which have restrictions as to withdrawal or usage of funds. In particular, maintenance reserves held for the purpose of covering long-term major maintenance and long-term deposits kept as collateral to cover decommissioning obligations are excluded from cash and cash equivalents and included in non-current assets.
Provisions
Provisions principally relate to decommissioning, maintenance, environmental, tax and legal obligations and which are recognized when there is a present obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.
Provisions are re-measured at each statement of financial position date and adjusted to reflect the current best estimate. Any change in present value of the estimated expenditure attributable to changes in the estimates of the cash flow or the current estimate of the discount rate used are reflected as an adjustment to the provision. The increase in the provisions due to passage of time are recognized as finance costs in the Consolidated statement of income.
Financial liabilities
a) Borrowings
Borrowings are recognized initially at fair value of amounts received, net of transaction costs. Borrowings are subsequently measured at amortized cost using the effective interest method; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the statement of income over the period of the borrowings using the effective interest method.
b) Trade and other payables
Financial liabilities within trade and other payables are initially recognized at fair value, which is usually the invoiced amount, and subsequently carried at amortized cost using the effective interest method.
Unless otherwise stated carrying value approximates to fair value for all financial liabilities.
Government grants
Grants from the government are recognized where there is a reasonable assurance that the conditions associated with the grants have been complied with and the grants will be received.
Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognized in the statement of income, except to the extent that it relates to items recognized in other comprehensive income. In this case, the tax is also recognized in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the countries where the Group and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not recognized if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.
Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
2.4. Critical accounting estimates and judgments
The preparation of the consolidated financial statements in line with the Group's accounting policies set out in note 2.3 involves the use of judgment and/or estimation. These judgments and estimates are based on management's best knowledge of the relevant facts and circumstances, giving consideration to previous experience, and are regularly reviewed and revised as necessary. Actual results may differ from the amounts included in the consolidated financial statements. The estimates and judgments that have the most significant effect on the carrying amounts of assets and liabilities are presented below.
Critical accounting estimates
Recoverable amount of property, plant and equipment
Where an impairment trigger has been identified (see critical accounting judgements section), the Group makes significant judgments in its impairment evaluations of long-lived assets. The determination of the recoverable amount is typically the most judgmental part of an impairment evaluation. The recoverable amount is the higher of (i) an asset's fair value less costs of disposal (market value), and (ii) value in use determined using estimates of discounted future net cash flows ("DCF") of the asset or group of assets to which it belongs.
The Group generally uses value in use to derive the recoverable amount of property, plant and equipment. Management applies considerable judgment in selecting several input assumptions in its DCF models, including discount rates and capacity / availability factors. These assumptions are consistent with the Group's internal budgets and forecasts for such valuations. Examples of the input assumptions that budgets and cash-flow forecasts are sensitive to include macroeconomic factors such as growth rates, inflation, exchange rates, and, in the case of renewables plants, environmental factors such as wind, solar and water resource forecast. Any changes in these assumptions may have a material impact on the measurement of the recoverable amount and could result in impairing the tested assets. See note 4.11 for further information on the impairment tests performed.
Provisions
The Group makes provisions when an obligation exists, resulting from a past event and it is probable that cash will be paid to settle it, but the exact amount of cash required can only be estimated on a reliable basis. Major provisions are detailed in note 4.25. The main estimates relate to site decommissioning and maintenance costs, and environmental remediation for various sites owned.
Site decommissioning, maintenance and environmental provisions are recognized based on management's assessment of future costs which would need to be incurred in accordance with existing legislation or contractual obligations to restore the sites or make good any environmental damage. These costs are measured at the present value of the future expenditures expected to be required to settle the obligation using a pre-tax discount rate which reflects current market assessments of the time value of money and the risks specific to the obligation. Management apply judgement in the estimation of future cash flows to settle these obligations and in the estimation of an appropriate pre-tax discount factor. The pre-tax discount rate used varies from 5.0% to 11.0%. If this was to decrease by 1% it would increase decommissioning, environmental and maintenance provisions by $3.2 million.
Fair value of assets acquired and liabilities assumed in a business combination
Business combinations are recorded in accordance with IFRS 3 using the acquisition method. Under this method, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date.
Therefore, through a number of different approaches and with the assistance of external independent valuation experts for acquisitions as considered appropriate by management, the Group identifies what it believes is the fair value of the assets acquired and liabilities assumed at the acquisition date. These valuations involve the use of judgement and include a number of estimates. Judgement is exercised in identifying the most appropriate valuation approach which is then used to determine the allocation of fair value. The group typically uses one of the cost approach, the income approach and the market approach.
Each of these valuation approaches involve the use of estimates in a number of areas, including the determination of cash flow projections and related discount rates, industry indices, market prices regarding replacement cost and comparable market transactions. While the Group believes that the estimates and assumptions underlying the valuation methodologies are reasonable, different assumptions could result in different fair values.
Taxes
Significant judgment is sometimes required in determining the accrual for income taxes as there are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities based on estimates of whether additional taxes will be due. These areas include, but are not limited to, the deductibility of interest on certain borrowings used to finance acquisitions made by the Group and the price at which goods and services are transferred between Group companies. Where the final tax outcome of these matters is different from the amounts that were recorded, such differences will impact the current and deferred income tax provisions, results of operations and possibly cash flows in the year in which such determination is made.
Deferred tax assets are recognized on tax loss carry-forwards when it is probable that taxable profit will be available against which the tax loss carry-forwards can be utilized. Estimates of taxable profits and utilizations of tax loss carry-forwards are prepared on the basis of profit and loss forecasts as included in the medium-term business plan and, if necessary, on the basis of additional forecasts.
Critical accounting judgements
Assessing property, plant and equipment for impairment triggers
The Group's property, plant and equipment are reviewed for indications of impairment (an impairment "trigger"). Judgement is applied in determining whether an impairment trigger has occurred, based on both internal and external sources. External sources may include: market value declines, negative changes in technology, markets, economy, or laws. Internal sources may include: obsolescence or physical damage, or worse economic performance than expected, including from adverse weather conditions for renewable plants. In the current year, impairment triggers were noted for Brazilian wind power plants and Brazilian hydro power plants (see note 4.11).
Accounting for long-term power purchase agreements and related revenue recognition
When power plants sell their output under long-term power purchase agreements ("PPA"), it is usual for the operator of the power plant to receive payment (known as a capacity payment) for the provision of electrical capacity whether or not the offtaker requests electrical output. There is a degree of judgement as to whether a long-term contract to sell electrical capacity constitutes a service concession arrangement, a form of lease, or a service contract. This determination is made at the inception of the PPA, and is not required to be revisited in subsequent periods under IFRS, unless the agreement is renegotiated.
Given that the fulfilment of the PPAs is dependent on the use of a specified asset, the key judgement in determining if the PPA contains a lease is the assessment of whether the PPA conveys a right for the offtaker to use the assets. In practice, the key criteria in assessing if that right exists is the judgement whether there is only a remote possibility that parties other than the offtaker will take more than an insignificant amount of the power output and the price the offtaker will pay is neither fixed nor at market price rates.
In assessing whether the PPA contains a service concession, the Group considers whether the arrangement (i) bears a public service obligation; (ii) has prices that are regulated by the offtaker; and (iii) the residual interest is transferred to the offtaker at an agreed value.
All other PPAs are determined to be service contracts.
Concession arrangements - For those agreements which are determined to be a concession arrangement, there are judgements as to whether the infrastructure should be accounted for as an intangible asset or a financial asset depending on the nature of the payment entitlements established in the agreement.
Concession arrangements determined to be a financial asset - The Group recognizes a financial asset when demand risk is assumed by the grantor, to the extent that the contracted concession holder has an unconditional right to receive payments for the asset. The asset is recognized at the fair value of the construction services provided. The fair value is based on input assumptions such as budgets and cash flow forecasts. The inputs include in particular the budget for fixed and variable costs. Any change in these assumptions may have a material impact on the measurement of the recoverable amount and could result in reducing the value of the asset. The financial asset is subsequently recorded at amortized cost calculated according to the effective interest rate method. Revenue for operating and managing the asset is recorded as revenue in each period.
Leases - For those arrangements determined to be or to contain leases, further judgment is required to determine whether the arrangement is finance or operating lease. This assessment requires an evaluation of where the substantial risks and rewards of ownership reside, for example due to the existence of a bargain purchase option that would allow the offtaker to buy the asset at the end of the arrangement for a minimal price.
3. Major events and changes in the scope of consolidation 3.1. 2016 transactions
Sale of Czech assets
On November 14, 2016, the Group sold 100% of its stake in Czech solar assets representing a total of 6.0 MW. The sale resulted in a gain in the statement of income of $3.0 million.
The cession contributed to consolidated revenue and net result for respectively $3.4 million and $1.2 million.
Termination of CG Solutions Kiev
In August 2016, Coca Cola Beverages Ukraine, the offtaker of the Ukrainian Solutions power plant under the master agreement signed with Coca-Cola Hellenic, terminated the local agreement between ContourGlobal Solutions Ukraine LLC and Coca Cola Beverages Ukraine resulting in the transfer of the ownership of the power plant and spare parts to Coca Cola Beverages Ukraine. Consequently, and as contractually agreed in such situation, ContourGlobal Solutions Ukraine LLC sold the related assets to the offtaker and received the remaining discounted cash flows due under the Power Purchase Agreement, resulting in a gain in the statement of income of $12.1 million.
The cession contributed to consolidated revenue and net result for respectively $2.7 million and $(2.7) million.
3.2. 2017 transactions
Acquisition of a thermal and a renewable portfolio in Brazil
On March 17, 2017, the Group closed the acquisition of 80% of a 206 MW Brazilian portfolio. The portfolio consists of seven hydroelectric plants totaling 130 MW in the states of Bahia, Goiás and Rio de Janeiro and four high-efficiency cogeneration facilities ("Solutions") totaling 76 MW in Paraná, Rio de Janeiro and São Paulo. The total consideration amounts to BRL 576.8 million (or $182.4 million) including certain price adjustments. A total of BRL 547.3 million (or $173.1 million) was paid in cash at the closing date.
On a consolidated and annualized basis, had this acquisition taken place as of January 1, 2017, the Group would have recognized 2017 consolidated revenue of $1,037.9 million and consolidated net profit of $18.5 million.
Determination of fair value of assets acquired and liabilities assumed at acquisition date:
In $ millions Hydro Brazil Solutions Brazil Total Brazilian portfolio acquired -------------------------------------------- ------------- ----------------- ----------------------------------- Intangible assets 28.4 - 28.4 -------------------------------------------- ------------- ----------------- ----------------------------------- Property, plant and equipment 160.0 38.1 198.1 -------------------------------------------- ------------- ----------------- ----------------------------------- Other assets 17.9 10.8 28.7 -------------------------------------------- ------------- ----------------- ----------------------------------- Cash and cash equivalents 17.9 15.3 33.2 -------------------------------------------- ------------- ----------------- ----------------------------------- Total assets 224.2 64.2 288.4 -------------------------------------------- ------------- ----------------- ----------------------------------- Borrowings 61.1 - 61.1 -------------------------------------------- ------------- ----------------- ----------------------------------- Other liabilities 19.6 11.5 31.1 -------------------------------------------- ------------- ----------------- ----------------------------------- Total liabilities 80.7 11.5 92.2 -------------------------------------------- ------------- ----------------- ----------------------------------- Total net identifiable assets 143.5 52.7 196.2 -------------------------------------------- ------------- ----------------- ----------------------------------- Total net identifiable assets % acquired 129.7 52.7 182.4 -------------------------------------------- ------------- ----------------- ----------------------------------- Net purchase consideration 129.7 52.7 182.4 -------------------------------------------- ------------- ----------------- ----------------------------------- Goodwill - - - -------------------------------------------- ------------- ----------------- -----------------------------------
The acquisition contributed to consolidated revenue and net result for respectively $57.8 million and $18.9 million.
Additional solar portfolio acquisition
In December 2017, the Group closed the acquisition of 100% of a 19.1 MW operational solar photovoltaic plants in Italy from ErgyCapital S.p.A. The plants, located in the regions of Puglia, Piemonte, Lazio and Campania, are in close proximity to ContourGlobal's existing Italian solar portfolio and benefit from approximately 12 years of Feed-in-Tariff. The total consideration amounts to EUR9.6 million (or $11.4 million) corresponding to acquisition of shares.
Subsequent to the closing the Group refinanced the portfolio and issued new facilities for a total of EUR55.8 million (or $66.4 million), of which EUR38.8 million (or $46.2 million) has been drawned in 2017, at an interest rate of Euribor 6M+2.35% per annum, 70% of which is swapped at 0.653%+2.35% per annum, maturing on June 30, 2028.
On a consolidated and annualized basis, had this acquisition taken place as of January 1, 2017, the Group would have recognized 2017 consolidated revenue of $1,032.9 million and consolidated net profit of $14.3 million.
Preliminary determination of fair value of assets acquired and liabilities assumed at acquisition date:
In $ millions Solar portfolio --------------------------------- ---------------- Intangible assets 0.1 --------------------------------- ---------------- Property, plant and equipment 75.7 --------------------------------- ---------------- Other assets 11.4 --------------------------------- ---------------- Cash and cash equivalents 3.6 --------------------------------- ---------------- Total assets 90.7 --------------------------------- ---------------- Borrowings 70.6 --------------------------------- ---------------- Other liabilities 8.8 --------------------------------- ---------------- Total liabilities 79.4 --------------------------------- ---------------- Total net identifiable assets 11.4 --------------------------------- ---------------- Net purchase consideration 11.4 --------------------------------- ---------------- Goodwill - --------------------------------- ----------------
The acquisition contributed to consolidated revenue and net result for respectively $0.5 million and $0.6 million.
Acquisition of non-controlling interests which did not result in a change of control
The Group also completed in 2017 the acquisition of 19.7% minority interests in ContourGlobal Hydro Cascade CJSC (Vorotan project) for a consideration of $9.8 million. After this transaction, the Group owns 100% of the Vorotan project.
This transaction did not result in a change of control and have therefore been accounted for within shareholder's equity as transactions with owners without change of control acting in their capacity of owners.
4. Notes to the consolidated financial statements 4.1. Segment reporting
The Group's reportable segments are the operating segments overseen by distinct segment managers responsible for their performance with no aggregation of operating segments.
Thermal Energy for power generating plants operating from coal, lignite, natural gas, fuel oil and diesel. Thermal plants include Maritsa, Arrubal, Togo, Kramatorsk, Cap des Biches, KivuWatt, Energies Antilles, Energies Saint-Martin, Bonaire and our equity investees (primarily Termoemcali and Sochagota). Our thermal segment also includes plants which provide electricity and certain other services to beverage bottling companies.
Renewable Energy for power generating plants operating from renewable resources such as wind, solar and hydro in Europe and South America. Renewables plants include Asa Branca, Chapada I, II, III, Inka, Vorotan, Austria Portfolio 1 & 2 and our other European and Brazilian plants.
The Corporate & Other category primarily reflects costs for certain centralized functions including executive oversight, corporate treasury and accounting, legal, compliance, human resources, IT, political risk insurance and facilities management and certain technical support costs that are not allocated to the segments for internal management reporting purposes.
The CODM assesses the performance of the operating segments based on Adjusted EBITDA which is defined as profit for the period from continuing operations before income taxes, net finance costs, depreciation and amortization, acquisition related expenses and specific items which have been identified and adjusted by virtue of their size, nature or incidence. In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.
The CODM does not review nor is presented a segment measure of total assets and total liabilities.
All revenue is derived from external customers.
Geographical information
The Group also presents revenue in each of the geographical areas in which it operates as follows:
- Europe (including our operations in Austria, Armenia, Northern Ireland, Italy, Romania, Poland, Bulgaria, Slovakia, Czech Republic, Spain and Ukraine)
- Latin America (including Brazil, Peru and Colombia)
- Africa (including Nigeria, Togo, Senegal and Rwanda)
- Caribbean islands (including Dutch Antilles and French Territory)
In $ millions Years ended December 31,
------------------------- ---------------------------
2016 2017
------------------------- ------------ -------------
Revenue
------------------------- ------------ -------------
Thermal Energy 659.5 730.2
------------------------- ------------ -------------
Renewable Energy 245.7 292.5
------------------------- ------------ -------------
Total revenue 905.2 1,022.7
------------------------- ------------ -------------
Adjusted EBITDA
------------------------------------------------------
Thermal Energy 281.8 332.1
------------------------- ------------ -------------
Renewable Energy 193.1 211.1
------------------------- ------------ -------------
Corporate & Other (1) (34.6) (29.9)
------------------------- ------------ -------------
Total adjusted EBITDA 440.4 513.2
------------------------- ------------ -------------
Reconciliation to profit / (loss) before income tax
---------------------------------------------------------------------------------------- Depreciation and Amortization (note 4.3) (169.4) (185.6) ---------------------------------------------------------------- ---------- ---------- Finance costs net (note 4.7) (201.9) (220.7) ---------------------------------------------------------------- ---------- ---------- Share of profit in associates 7.3 5.0 ---------------------------------------------------------------- ---------- ---------- Share of adjusted EBITDA in associates (2) (21.4) (21.6) ---------------------------------------------------------------- ---------- ---------- Acquisition related items (12.3) (9.5) ---------------------------------------------------------------- ---------- ---------- Gain on termination of Solutions - Kiev plant (note 4.6) (3) 12.1 - ---------------------------------------------------------------- ---------- ---------- Gain on sale of Czech assets (note 4.6) (4) 3.0 - ---------------------------------------------------------------- ---------- ---------- Costs related to CG Plc IPO (note 4.6) (5) - (12.7) ---------------------------------------------------------------- ---------- ---------- Non-cash major overhaul provision (6) (3.1) (9.8) ---------------------------------------------------------------- ---------- ---------- Government grants (7) (6.5) - ---------------------------------------------------------------- ---------- ---------- Other (8) (5.3) (17.7) ---------------------------------------------------------------- ---------- ---------- Profit / (loss) before income tax 42.9 40.6 ---------------------------------------------------------------- ---------- ----------
(1) Includes Corporate costs for $29.7 million (December 31, 2016: $33.4 million) and other costs for $0.2 million (December 31, 2016: $1.2 million). Corporate costs correspond to SG&A before depreciation and amortization (December 31, 2017: $2.2 million, December 31, 2016: $2.9 million).
(2) Corresponds to our share of Adjusted EBITDA of plants accounted for under the equity method (Sochagota, Termoemcali and Productora de Energia de Boyaca) which are reviewed by our CODM as part of our Thermal Energy segment.
(3) Corresponds to the gain resulting from the sale of Solutions Kiev power plant to Coca Cola Hellenic occurred in August 2016.
(4) Corresponds to the gain resulting from the sale of three solar energy plants in Czech Republic representing a total of 6.0 MW in November 2016.
(5) The Group successfully completed the Initial Public Offering in the United Kingdom of ContourGlobal Plc. Costs associated with this project were separately analyzed by our CODM.
(6) Represents the accretion for the year in respect of our long-term overhaul provision in relation to our Togo and Senegal power plants under a concession arrangement. The overhaul program is expected to start in 2021 in Togo and 2019 in Senegal.
(7) Represents the Spanish long-term capacity incentives payable in relation to our Arrubal power plant. These incentives, which ended in February 2017, were granted for the construction of the plant with payment from authorities.
(8) Mainly reflects the non-cash impact of finance lease and financial concession payments. 'Other' increased mainly as a result of the full commercial operations in 2017 of our Cap des Biches I and II power plants in Senegal.
Capital expenditures
In $ millions Years ended December 31,
------------------------------ ---------------------------
2016 2017
------------------------------ ------------- ------------
Thermal Energy 19.3 28.6
------------------------------ ------------- ------------
Renewable Energy 38.7 29.8
------------------------------ ------------- ------------
Total capital expenditures 58.0 58.4
------------------------------ ------------- ------------
Geographical information
The geographic analysis of revenue, based on the country of origin in which the group's operations are located, and Adjusted EBITDA is as follows:
In $ millions Years ended December 31,
--------------------- ---------------------------
2016 2017
--------------------- ------------ -------------
Europe (1) 523.2 627.9
--------------------- ------------ -------------
South America (2) 152.1 214.0
--------------------- ------------ -------------
Africa 184.2 140.3
--------------------- ------------ -------------
Caribbean islands 45.7 40.4
--------------------- ------------ -------------
Total revenue 905.2 1,022.7
--------------------- ------------ -------------
(1) Revenue generated in 2017 in Bulgaria and Spain amounted to $298.2 million and $178.7 million respectively (December 31, 2016: $244.5 million and $131.2 million respectively).
(2) Revenue generated in 2017 in Brazil amounted to $180.5 million (December 31, 2016: $113.1 million).
In $ millions Years ended December 31,
------------------------- ---------------------------
2016 2017
------------------------- ------------- ------------
Europe 254.8 268.1
------------------------- ------------- ------------
South America 140.8 170.1
------------------------- ------------- ------------
Africa 58.4 78.2
------------------------- ------------- ------------
Caribbean islands 21.0 26.8
------------------------- ------------- ------------
Corporate & Other (34.6) (29.9)
------------------------- ------------- ------------
Total adjusted EBITDA 440.4 513.2
------------------------- ------------- ------------
The geographic analysis of non-current assets, excluding derivative financial instruments and deferred tax assets, based on the location of the assets, is as follows:
In $ millions Years ended December 31,
---------------------------- ---------------------------
2016 2017
---------------------------- ------------- ------------
Europe 1,072.2 1,174.2
---------------------------- ------------- ------------
South America 1,179.4 1,347.1
---------------------------- ------------- ------------
Africa 558.6 572.1
---------------------------- ------------- ------------
Caribbean islands 70.0 64.3
---------------------------- ------------- ------------
Other 3.7 3.9
---------------------------- ------------- ------------
Total non-current assets 2,883.9 3,161.6
---------------------------- ------------- ------------
4.2. Revenue
Years ended December 31,
--------------------------------------------------------- ---------------------------
In $ millions 2016 2017
--------------------------------------------------------- ------------ -------------
Revenue from power sales 623.8 757.3
--------------------------------------------------------- ------------ -------------
Revenue from operating leases 86.0 96.8
--------------------------------------------------------- ------------ -------------
Revenue from concession and finance lease assets 74.3 89.9
--------------------------------------------------------- ------------ -------------
Construction revenue from concession arrangements (1) 74.3 -
--------------------------------------------------------- ------------ -------------
Other revenue (2) 46.7 78.8
--------------------------------------------------------- ------------ -------------
Total revenue 905.2 1,022.7
--------------------------------------------------------- ------------ -------------
(1) Construction revenue from concession arrangements corresponds to revenue generated in accordance with IFRIC 12 for the construction of our plants in Cap des Biches, Senegal in 2016.
(2) Other revenue primarily relates to environmental, operational and maintenance services rendered to offtakers in our Maritsa, Togo, Kivuwatt and Cap des Biches power plants. Other revenue increased mainly as a result of the full commercial operations of Cap des Biches I and II in 2017.
Years ended December 31,
-------------- ---------------------------
2016 2017
-------------- ------------- ------------
Customer A 26.7% 29.2%
-------------- ------------- ------------
The Group has one customer contributing more than 10% of Group's revenue.
4.3. Expenses by nature
Years ended December 31,
----------------------------------------------------------------------- ---------------------------
In $ millions 2016 2017
----------------------------------------------------------------------- ------------- ------------
Fuel costs 163.5 234.0
----------------------------------------------------------------------- ------------- ------------
Depreciation, amortization and impairment 169.4 185.6
----------------------------------------------------------------------- ------------- ------------
Operation and maintenance costs 138.3 67.0
----------------------------------------------------------------------- ------------- ------------
Employee costs (1) 63.9 67.5
----------------------------------------------------------------------- ------------- ------------
Emission allowance utilized (2) 15.5 47.1
----------------------------------------------------------------------- ------------- ------------
Professional fees 16.2 9.0
----------------------------------------------------------------------- ------------- ------------
Purchased power 28.4 48.2
----------------------------------------------------------------------- ------------- ------------
Insurance costs 18.3 18.5
----------------------------------------------------------------------- ------------- ------------
Other expenses (3) 59.0 71.3
----------------------------------------------------------------------- ------------- ------------
Total cost of sales and selling, general and administrative expenses 672.5 748.2
----------------------------------------------------------------------- ------------- ------------
(1) Operation and maintenance costs include costs associated with the construction phase of a plant under service concession arrangements as well as on going costs associated with the operation and maintenance of all plants.
(2) Emission allowance utilized corresponds mainly to the costs of CO2 quotas in Maritsa which are passed through to its offtaker as well as changes in fair value of CO2 quotas in the period.
(3) Other expenses include operating consumables and supply costs for $14.0 million in December 31, 2017 (December 31, 2016: $14.8 million) and facility costs for $14.6 million in December 31, 2017 (December 31, 2016: $14.2 million).
4.4. Employee costs and numbers
Years ended December 31,
---------------------------------------------------------- ---------------------------
In $ millions 2016 2017
---------------------------------------------------------- ------------- ------------
Wages and salaries (50.1) (52.4)
---------------------------------------------------------- ------------- ------------
Social security costs (10.4) (10.7)
---------------------------------------------------------- ------------- ------------
Share-based payments - -
---------------------------------------------------------- ------------- ------------
Pension and other post-retirement benefit costs (0.8) (0.8)
---------------------------------------------------------- ------------- ------------
Other (2.8) (3.5)
---------------------------------------------------------- ------------- ------------
Total employee costs (64.0) (67.5)
---------------------------------------------------------- ------------- ------------
Annual average number of full-time equivalent employees 1,855 1,873
---------------------------------------------------------- ------------- ------------
* Thermal 1,415 1,441
---------------------------------------------------------- ------------- ------------
* Renewable 280 265
---------------------------------------------------------- ------------- ------------
* Corporate 160 167
---------------------------------------------------------- ------------- ------------
4.5. Acquisition related items
Years ended December 31,
----------------------------- ---------------------------
In $ millions 2016 2017
----------------------------- -------------- -----------
Acquisition costs (1) (12.3) (9.5)
----------------------------- -------------- -----------
Acquisition related items (12.3) (9.5)
----------------------------- -------------- -----------
(1) Acquisition costs include notably pre-acquisition costs such as due diligence costs and professional fees, earn-outs and other related incremental costs incurred as part of completed or contemplated acquisitions. In 2017, costs incurred primarily related to contemplated acquisition projects in Brazil, Spain, Peru, Mexico, Austria and Italy. In 2016, cost incurred primarily related to contemplated acquisition projects in Brazil, Mexico, Spain, Peru, Austria and Italy, and to abandoned projects in Africa.
4.6. Other income (expenses) - net
In $ millions Years ended December 31,
--------------------------------------------------- -----------------------------
2016 2017
--------------------------------------------------- ------------ ---------------
Gain on termination of Solutions Kiev plant (1) 12.1 -
--------------------------------------------------- ------------ ---------------
Gain on sale of Czech assets (2) 3.0 -
--------------------------------------------------- ------------ ---------------
Costs related to CG Plc IPO (3) - (12.7)
--------------------------------------------------- ------------ ---------------
Other 0.5 -
--------------------------------------------------- ------------ ---------------
Other income (expenses) - net 15.6 (12.7)
--------------------------------------------------- ------------ ---------------
(1) Corresponds to the gain resulting from the sale of Solutions Kiev power plant which occurred in August 2016 (note 3.1).
(2) Corresponds to the gain resulting from the sale of three solar energy plants in Czech Republic representing a total of 6.0 MW in November 2016 (note 3.1).
(3) Represents costs recognized in the statement of income resulting from the Initial Public Offering ("IPO") in the United Kingdom of ContourGlobal Plc in November 2017. An additional $19.9 million of IPO costs was recognized as a deduction of share premium. Cash outflows for $19.2 million related to these costs are disclosed in the "other financing activities" line of the statement of cash-flows.
4.7. Finance costs - net
In $ millions Years ended December 31,
------------------------------------------------------------- ---------------------------
2016 2017
------------------------------------------------------------- ------------- ------------
Finance income 6.9 9.8
------------------------------------------------------------- ------------- ------------
Interest expenses on borrowings (170.1) (176.3)
------------------------------------------------------------- ------------- ------------
Net change in fair value of derivatives (1) 4.3 (13.5)
------------------------------------------------------------- ------------- ------------
Net realized foreign exchange differences (0.3) (38.0)
------------------------------------------------------------- ------------- ------------
Net unrealized foreign exchange differences (2) 48.7 7.0
------------------------------------------------------------- ------------- ------------
Finance charges related to corporate bond refinancing (3) (29.2) -
------------------------------------------------------------- ------------- ------------
Other (4) (62.3) (9.6)
------------------------------------------------------------- ------------- ------------
Finance costs - net (201.9) (220.7)
------------------------------------------------------------- ------------- ------------
(1) Change in fair value of derivatives relates primarily to interest rate swaps, interest rate options and a EUR / USD forward contract which has also generated realized foreign exchange differences.
(2) Unrealized foreign exchange differences primarily relate to loans in subsidiaries that have a functional currency different to the currency in which the loans are denominated.
(3) In conjuction with the refinancing of our initial $500 million bond in June 2016, we paid a call premium of $18.3 million to prior bondholders (classified as 'other financing activities' in the Consolidated statement of cash-flows) and recognized the accelerated amortization of the related deferred financing costs for $10.9 million.
(4) Other mainly includes costs associated with other financing, the unwinding effect of certain liabilities as well as income and expenses related to interests and penalties for late payments.
4.8. Income tax expense and deferred income tax
Income tax expense
Years ended December 31,
---------------------------------- ---------------------------
In $ millions 2016 2017
---------------------------------- ------------- ------------
Current tax expense (23.1) (27.7)
---------------------------------- ------------- ------------
Deferred tax (expense) benefit 1.1 0.6
---------------------------------- ------------- ------------
Income tax expense (22.0) (27.1)
---------------------------------- ------------- ------------
The main jurisdictions contributing to the income tax expense for the year ending December 31, 2017 are i) Brazil, ii) Bulgaria, iii) Spain and iv) French Caribbean. The tax on the group's income / (loss) before tax differs from the theoretical amount that would arise using the statutory tax rate of the parent company applicable to profits of the consolidated entities as follows:
Effective tax rate reconciliation
Years ended December 31,
------------------------------------------------------------------------------------ ---------------------------
In $ millions 2016 2017
------------------------------------------------------------------------------------ ------------- ------------
Profit before income tax 42.8 40.6
------------------------------------------------------------------------------------ ------------- ------------
Share of profit in associates 7.3 5.0
------------------------------------------------------------------------------------ ------------- ------------
Profit before income tax and share of profit in associates 35.6 35.6
------------------------------------------------------------------------------------ ------------- ------------
Profit before income tax and share of profit in associates at statutory tax rate (7.1) (6.9)
------------------------------------------------------------------------------------ ------------- ------------
Statutory tax rate (UK) (1) 20.0% 19.25%
------------------------------------------------------------------------------------ ------------- ------------
Tax effects of:
-----------------------------------------------------------------------------------------------------------------
Differences between statutory tax rate and foreign statutory tax rates 8.9 5.7
------------------------------------------------------------------------------------ ------------- ------------
Changes in unrecognized deferred tax assets (2) (22.3) (40.1)
------------------------------------------------------------------------------------ ------------- ------------
Reduced rate and specific taxation regime 2.2 6.6
------------------------------------------------------------------------------------ ------------- ------------
Change in tax laws & rates 0.3 (0.7)
------------------------------------------------------------------------------------ ------------- ------------
Non deductible expenses (5.8) (4.3)
------------------------------------------------------------------------------------ ------------- ------------
Impact of foreign currencies on deferred tax basis (3) 6.8 1.6
------------------------------------------------------------------------------------ ------------- ------------
Permanent differences and other (5.0) 11.0
------------------------------------------------------------------------------------ ------------- ------------
Income tax expense (22.0) (27.1)
------------------------------------------------------------------------------------ ------------- ------------
Effective rate of income tax 51.4% 66.7%
------------------------------------------------------------------------------------ ------------- ------------
(1) On 26 October 2015, Finance (No.2) Act 2015 was substantively enacted, reducing the main rate of corporation tax in the UK from 20% to 19% from 1 April 2017. On 6 September 2016, Finance Act 2016 was substantively enacted, further reducing the rate to 17% from 1 April 2020. Deferred taxes have been measured using tax rates substantively enacted at the balance sheet date.
(2) Mainly relates to tax losses in Luxembourg and Brazil where deferred tax assets are not recognized.
(3) Relates to entities which have a functional currency different from their local currency.
Net deferred tax movement
The gross movements of net deferred income tax assets (liabilities) were as follows:
Years ended December 31,
------------------------------------------------------------------ ---------------------------
In $ millions 2016 2017
------------------------------------------------------------------ ------------- ------------
Net deferred tax assets (liabilities) as of January, 1 (24.6) (21.2)
------------------------------------------------------------------ ------------- ------------
Statement of income 1.1 0.6
------------------------------------------------------------------ ------------- ------------
Deferred tax recognized directly in other comprehensive income 1.0 0.7
------------------------------------------------------------------ ------------- ------------
Acquisitions 2.3 (1.4)
------------------------------------------------------------------ ------------- ------------
Currency translation differences and other (1.0) (2.4)
------------------------------------------------------------------ ------------- ------------
Net deferred tax assets (liabilities) as of December, 31 (21.2) (23.7)
------------------------------------------------------------------ ------------- ------------
Analysis of the net deferred tax position recognized in the consolidated statement of financial position
The net deferred tax positions and their movement can be broken down as follows:
In $ millions As of January Statement of Other Acquisitions Currency As of
1, 2016 income comprehensive translations December 31,
income and other 2016
----------------- ---------------- --------------- --------------- ------------- --------------- ---------------
Tax losses 20.1 (4.3) - - 0.6 16.4
----------------- ---------------- --------------- --------------- ------------- --------------- ---------------
Long term
assets (45.1) (0.1) - 2.3 (0.5) (43.4)
----------------- ---------------- --------------- --------------- ------------- --------------- ---------------
Derivative
financial
instrument 7.6 (0.2) 1.0 - (0.2) 8.2
----------------- ---------------- --------------- --------------- ------------- --------------- ---------------
Other (1) (7.2) 5.7 - - (0.9) (2.4)
----------------- ---------------- --------------- --------------- ------------- --------------- ---------------
Total net
deferred tax
assets
(liabilities) (24.6) 1.1 1.0 2.3 (1.0) (21.2)
----------------- ---------------- --------------- --------------- ------------- --------------- ---------------
In $ millions As of Statement of Other Acquisitions Currency As of
January 1, income comprehensive translations December 31,
2017 income and other 2017
----------------- --------------- ---------------- --------------- ------------- --------------- ---------------
Tax losses 16.4 0.3 - 1.5 1.4 19.7
----------------- --------------- ---------------- --------------- ------------- --------------- ---------------
Long term
assets (43.4) (6.4) - (5.2) (4.0) (58.9)
----------------- --------------- ---------------- --------------- ------------- --------------- ---------------
Derivative
financial
instrument 8.2 (0.3) 0.7 0.4 (0.7) 8.3
----------------- --------------- ---------------- --------------- ------------- --------------- ---------------
Other (1) (2.4) 7.0 - 1.8 0.9 7.2
----------------- --------------- ---------------- --------------- ------------- --------------- ---------------
Total net
deferred tax
assets
(liabilities) (21.2) 0.6 0.7 (1.4) (2.4) (23.7)
----------------- --------------- ---------------- --------------- ------------- --------------- ---------------
(1) Other mainly relate to deferred interest and to foreign currency differences.
Analysis of the deferred tax position unrecognized in the consolidated statement of financial position
Unrecognized deferred tax assets amount to $187.7 million as of December 31, 2017 (December 31, 2016: $139.4 million) and can be broken down as follows:
Years ended December 31,
------------------------------------------------------------------------ ---------------------------
In $ millions 2016 2017
------------------------------------------------------------------------ ------------- ------------
Unrecognized deferred tax assets on tax losses 122.7 167.7
------------------------------------------------------------------------ ------------- ------------
Unrecognized deferred tax assets on deductible temporary differences 16.7 20.0
------------------------------------------------------------------------ ------------- ------------
Total unrecognized deferred tax assets 139.4 187.7
------------------------------------------------------------------------ ------------- ------------
Main tax losses and deductible temporary differences not recognized reside in i) Luxembourg, ii) Brazil, iii) Colombia, iv) UK and v) Poland. The related deferred tax assets were not recognized as sufficient taxable profit is not expected to be generated in the foreseeable future.
4.9. Earnings per share
Years ended December 31,
------------------------------------------------------------------------ --------------------------------------
2016 (1) 2017 (1)
------------------ ------------------
Basic Diluted Basic Diluted
------------------------------------------------------------------------ -------- -------- -------- --------
Profit attributable to CG plc shareholders (in $ millions) 37.5 37.5 19.4 19.4
------------------------------------------------------------------------ -------- -------- -------- --------
Number of shares (in millions)
------------------------------------------------------------------------ -------- -------- -------- --------
Weighted average number of shares outstanding 614.2 614.2 614.2 614.2
------------------------------------------------------------------------ -------- -------- -------- --------
Potential dilutive effects related to share-based compensation - -
------------------------------------------------------------------------ -------- -------- -------- --------
Adjusted weighted average number of shares - 614.2 - 614.2
------------------------------------------------------------------------ -------- -------- -------- --------
Profit / (Loss) attributable to CG plc shareholders per share (in $) 0.06 0.06 0.03 0.03
------------------------------------------------------------------------ -------- -------- -------- --------
(1) For both years, the Adjusted weighted average number of shares has been calculated starting from the date of incorporation through to 31 December 2017.
4.10. Intangible assets and goodwill
In $ millions Goodwill Project Software Total
development and Other
rights
----------------------------- --------- ------------- ----------- ---------
Cost 0.5 105.6 12.7 118.8
----------------------------- --------- ------------- ----------- ---------
Accumulated amortization
and impairment - (2.8) (7.2) (10.0)
----------------------------- --------- ------------- ----------- ---------
Carrying amount as
of December 31, 2015 0.5 102.8 5.5 108.8
----------------------------- --------- ------------- ----------- ---------
Additions - 0.5 1.4 1.9
----------------------------- --------- ------------- ----------- ---------
Currency translation
differences - 15.3 - 15.3
----------------------------- --------- ------------- ----------- ---------
Reclassification - 0.7 0.8 1.5
----------------------------- --------- ------------- ----------- ---------
Amortization charge - (6.5) (2.3) (8.8)
----------------------------- --------- ------------- ----------- ---------
Closing net book amount 0.5 112.8 5.4 118.7
----------------------------- --------- ------------- ----------- ---------
Cost 0.5 121.7 14.6 136.8
----------------------------- --------- ------------- ----------- ---------
Accumulated amortization
and impairment - (8.9) (9.2) (18.1)
----------------------------- --------- ------------- ----------- ---------
Carrying amount as
of December 31, 2016 0.5 112.8 5.4 118.7
----------------------------- --------- ------------- ----------- ---------
Additions - 0.5 0.9 1.4
----------------------------- --------- ------------- ----------- ---------
Acquired through business
combination - 29.2 - 29.2
----------------------------- --------- ------------- ----------- ---------
Currency translation
differences 0.1 (2.9) 0.3 (2.5)
----------------------------- --------- ------------- ----------- ---------
Reclassification - - 0.1 0.1
----------------------------- --------- ------------- ----------- ---------
Amortization charge - (8.0) (1.8) (9.8)
----------------------------- --------- ------------- ----------- ---------
Closing net book amount 0.6 131.6 4.9 137.1
----------------------------- --------- ------------- ----------- ---------
Cost 0.6 166.2 16.7 183.5
----------------------------- --------- ------------- ----------- ---------
Accumulated amortization
and impairment - (34.6) (11.7) (46.3)
----------------------------- --------- ------------- ----------- ---------
Carrying amount as
of December 31, 2017 0.6 131.6 4.9 137.1
----------------------------- --------- ------------- ----------- ---------
The project development rights mainly relate to the fair value of licenses acquired from the initial developers for our wind parks in Peru and Brazil. Acquisitions in 2017 relate to the acquisition of an intangible asset related to a concession arrangement in the thermal and renewable portfolio in Brazil.
For the years ended December 31, 2016, and 2017, certain triggering events were identified, and the related intangible assets were tested for impairment. These impairment tests did not result in any impairment.
4.11. Property, plant and equipment
Assets acquired through business combinations are explained in Note 3 Major events and changes in the scope of consolidation.
The power plant assets predominantly relate to wind farms, natural gas plants, fuel oil or diesel plants, coal plants, hydro plants, solar plants and other buildings.
Other assets mainly include IT equipment, furniture and fixtures, facility equipment, asset retirement obligations and vehicles, and project development costs.
In $ millions Land Power Construction Other Total
plant work in
assets progress
---------------------------- -------- ---------- ------------- --------- ----------
Cost 19.4 2,474.2 191.8 102.7 2,788.1
---------------------------- -------- ---------- ------------- --------- ----------
Accumulated depreciation
and impairment (0.3) (580.6) - (44.1) (625.0)
---------------------------- -------- ---------- ------------- --------- ----------
Carrying amount
as of January
1, 2016 19.1 1,893.6 191.8 58.6 2,163.1
---------------------------- -------- ---------- ------------- --------- ----------
Additions - 11.6 12.9 10.3 34.8
---------------------------- -------- ---------- ------------- --------- ----------
Disposals (1.4) (14.7) - (2.3) (18.4)
---------------------------- -------- ---------- ------------- --------- ----------
Reclassification 0.1 188.9 (203.8) 8.6 (6.1)
---------------------------- -------- ---------- ------------- --------- ----------
Currency translation
differences (0.3) 78.5 20.0 4.0 102.1
---------------------------- -------- ---------- ------------- --------- ----------
Depreciation charge (0.1) (151.7) - (9.7) (161.5)
---------------------------- -------- ---------- ------------- --------- ----------
Closing net book
amount 17.5 2,006.2 20.9 69.5 2,114.0
---------------------------- -------- ---------- ------------- --------- ----------
Cost 17.8 2,706.1 20.9 123.4 2,868.1
---------------------------- -------- ---------- ------------- --------- ----------
Accumulated depreciation
and impairment (0.3) (699.9) - (53.9) (754.1)
---------------------------- -------- ---------- ------------- --------- ----------
Carrying amount
as of December
31, 2016 17.5 2,006.2 20.9 69.5 2,114.0
---------------------------- -------- ---------- ------------- --------- ----------
Construction work in progress in 2016 predominantly relates to our Maritsa project.
Additions in 2016 mainly relate to the construction of Chapada II and III projects in Brazil and Maritsa.
Depreciation included in 'cost of sales' in the consolidated statement of income amount to $160.6 million in the period ended December 31, 2016 whereas depreciation included in 'selling, general and administrative expenses' amount to $0.9 million in the year ended December 31, 2016.
In 2016, the group did not capitalize borrowing costs on qualifying assets in relation to project financing costs.
In $ millions Land Power Construction Other Total
plant work in
assets progress
---------------------------- -------- ------------ ------------- --------- ------------
Cost 17.8 2,706.1 20.9 123.4 2,868.1
---------------------------- -------- ------------ ------------- --------- ------------
Accumulated depreciation
and impairment (0.3) (699.9) - (53.9) (754.1)
---------------------------- -------- ------------ ------------- --------- ------------
Carrying amount
as of January
1, 2017 17.5 2,006.2 20.9 69.5 2,114.0
---------------------------- -------- ------------ ------------- --------- ------------
Additions - 8.4 16.6 22.7 47.7
---------------------------- -------- ------------ ------------- --------- ------------
Disposals (0.1) (4.0) (0.6) (0.6) (5.3)
---------------------------- -------- ------------ ------------- --------- ------------
Reclassification - 11.8 (12.2) (0.9) (1.3)
---------------------------- -------- ------------ ------------- --------- ------------
Acquired through
business combination 8.1 216.0 1.0 52.0 277.1
---------------------------- -------- ------------ ------------- --------- ------------
Currency translation
differences 1.7 95.9 0.9 (0.3) 98.2
---------------------------- -------- ------------ ------------- --------- ------------
Depreciation charge - (161.4) - (11.0) (172.4)
---------------------------- -------- ------------ ------------- --------- ------------
Impairment charge - (2.7) - (0.6) (3.3)
---------------------------- -------- ------------ ------------- --------- ------------
Transferred to
disposal group
classified as
held for sale
(1) - (3.5) (0.1) (0.7) (4.3)
---------------------------- -------- ------------ ------------- --------- ------------
Closing net book
amount 27.2 2,166.7 26.5 130.1 2,350.3
---------------------------- -------- ------------ ------------- --------- ------------
Cost 27.7 3,194.9 26.5 216.6 3,465.6
---------------------------- -------- ------------ ------------- --------- ------------
Accumulated depreciation
and impairment (0.5) (1,028.2) - (86.6) (1,115.3)
---------------------------- -------- ------------ ------------- --------- ------------
Carrying amount
as of December
31, 2017 27.2 2,166.7 26.5 130.1 2,350.3
---------------------------- -------- ------------ ------------- --------- ------------
(1) The Group decided to sell its Kramatorsk Ukrainian power plant and signed a share purchased agreement on December 22, 2017. The Group classified the asset as Assets held for sale in conformity with IFRS 5 and tested the asset for impairment on the basis of the share purchase price less costs to sell. As a result, the Group recorded an impairment charge of $3.3 million in 2017.
In relation to this, as at 31 December 2017, $13.7m of assets were classified as Assets held for sale and $12.9m of liabilities were classified as Liabilities held for sale. Of the $13.7m, $4.3m related to Property, plant and equipment.
Construction work in progress in 2017 predominantly relates to our Maritsa plant and Austria Wind project repowerment.
Depreciation included in 'cost of sales' in the consolidated statement of income amount to $171.8 million in the year ended December 31, 2017 whereas depreciation included in 'selling, general and administrative expenses' amount to $0.7 million in the year ended December 31, 2017.
Assets acquired through business combination relate to the acquisition of a thermal and renewable portfolio in Brazil and Italy are detailed in Note 3.2.
In 2017, the Group did not capitalize any borrowing costs in relation to project financing.
Construction work in progress in 2016 predominantly relates to our Maritsa project.
Additions in 2016 mainly relate to the construction of Chapada II and III projects in Brazil and Maritsa.
Impairment tests on tangible and intangible assets
For the years ended December 31, 2016 and 2017 certain triggering events were identified primarily driven by lower performance of the assets, change of regulation and local environment, requiring an impairment test of the relevant assets.
The recoverable amount is determined as the higher of the value in use determined by the discounted value of future cash flows (discounted cash flow method or "DCF", determined by using cash flows projections consistent with the following year budget and the most recent forecasts prepared by management) and the fair value (less costs to sell), determined on the basis of market data (comparison with the value attributed to similar assets or companies in recent transactions).
For the year ended December 31, 2016 impairment tests were performed in relation with Brazilian wind power plants, Bonaire (financial asset) and Ukrainian power plant and confirmed the carrying value of the assets.
Impairment tests were performed for the year ended December 31, 2016 using the following assumptions and related sensitivity analysis.
In $ Net Valuation Discount Capacity Sensitivity analysis
million book approach rates factor
value
------------- ------- ---------- --------- -------------- ---------------------
Discount rate
Brazilian increased by
wind 1%
power Wind scenario Wind scenario
plants 843.6 DCF 13% at P50 (1) at P75
------------- ------- ---------- --------- -------------- ---------------------
Discount rate
increased by
1%
5% cut in operating
Kramatorsk 8.4 DCF 21.9% n.a cash-flows
------------- ------- ---------- --------- -------------- ---------------------
Discount rate
increased by
Bonaire 1%
(financial 5% cut in operating
assets) 45.2 DCF 6.5% n.a cash-flows
------------- ------- ---------- --------- -------------- ---------------------
The sensitivity calculations show that an increase by 1% of the discount rate and a wind scenario at P75 for Brazilian wind power plants assets or a 5% cut in operating cash-flows for Bonaire and Kramatorsk assets would not have a material impact on the results of impairment tests or, therefore, on the Group's consolidated financial statements as of December 31, 2016.
For the year ended December 31, 2017, in relation to the share purchase agreement of its Ukrainian power plant, the Group conducted an impairment test which resulted in an impairment charge of $3.3 million.
For the year ended December 31, 2017 impairment tests were performed in relation with Brazilian wind and hydro power plants and confirmed the carrying value of the assets.
Impairment tests were also performed for the year ended December 31, 2017 using the following assumptions and related sensitivity analysis.
In $ Net Valuation Discount Capacity factor Sensitivity analysis
million book approach rates
value
----------- ------- ---------- --------- ---------------- ---------------------
Discount rate
Brazilian increased by
wind 1%
power Wind scenario Wind scenario
plants 801.6 DCF 11% at P50 at P75
----------- ------- ---------- --------- ---------------- ---------------------
Discount rate
Brazilian increased by
hydro 1%
power Hydro scenario 5% cut in Ebitda
plants 255.8 DCF 11% at P75 margin
----------- ------- ---------- --------- ---------------- ---------------------
The sensitivity calculations show that an increase by 1% of the discount rate and a wind scenario at P75 for Brazilian wind power plants assets or a 5% cut in Ebitda margin for Brazilian hydro power plants would not have a material impact on the results of impairment tests or, therefore, on the Group's consolidated financial statements as of December 31, 2017.
The P-factor quantifies the uncertainty of annual energy yield predictions. P75 is the energy level that wind turbines are 75% likely to produce over an average year, given the uncertainties in the measurement, analysis and wind turbines operation. P50 is the average annual energy yield predicted for wind farms, which corresponds to the annual energy output that wind farms are most likely to achieve.
Changes to be made to the key impairment test assumptions to reduce the value in use to net book value would not correspond to the definition of a reasonable change as defined by IAS 36.
4.12. Financial assets
Years ended December 31,
-------------------------------------------------- ---------------------------
In $ millions 2016 2017
-------------------------------------------------- ------------- ------------
Financial assets - Concession arrangements (1) 536.2 550.0
-------------------------------------------------- ------------- ------------
Financial lease receivables (2) 63.0 62.0
-------------------------------------------------- ------------- ------------
Other 5.6 5.7
-------------------------------------------------- ------------- ------------
Total financial assets 604.8 617.7
-------------------------------------------------- ------------- ------------
(1) The Group operates plants in Togo, Rwanda and Senegal which are in the scope of the financial model of IFRIC 12 'Service Concession Arrangements'.
Our Togo power plant was commissioned in 2010 and is operated under a power purchase agreement with a unique offtaker, Compagnie Energie Electrique du Togo ("CEET") which has an average remaining contract life of approximately 17.8 years as of December 31, 2017 (December 31, 2016: 18.8 years). At expiration, the Togo plant, along with all equipment necessary for the operation of the plant, will be transferred to the Republic of Togo. This arrangement is accounted for as a concession arrangement and the value of the asset is recorded as a financial asset. The all-in base capacity tariff under the Togo power purchase agreement is adjusted annually for a combination of U.S., Euro and local consumer price index related to the cost structure.
Our Rwanda power plant consists of the development, construction and operation of Gas Extraction Facilities ("GEF") and an associated power plant. The GEF is used to extract methane and bio gas from the depths of Lake Kivu in Rwanda and deliver the gas via submerged gas transport pipelines to shore-based power production facilities totaling 26 MW of gross capacity. The PPA runs for 25 years starting on the commercial operation date and ending in 2040.
Our Cap des Biches power plant in Senegal consists of the development, construction and operation of five engines with some with a flexi-cycle system technology based on waste heat recovery totaling about 86MW. A PPA integrating all the Cap des Biches requirements and agreements on price was signed for 20 years starting on the commercial operation date of the project and ending in 2036.
(2) Relates to financial leases where the Group acts as a lessor, and includes our Bonaire plant in the Dutch Caribbean and our Saint Martin plant in the French Territory. Bonaire has an average remaining contract life of approximately 7.6 years as of December 31, 2017 (December 31, 2016: 8.6 years); Saint Martin has an average remaining contract life of approximately 5.3 years as of December 31, 2017 (December 31, 2016: 6.3 years).
No losses from impairment of contracted concessional assets and financial lease receivables in the above projects were recorded during the years ended December 31, 2017 and 2016 (refer to note 4.11).
Cash outflows relating to the acquisition of financial assets under concession agreements amounted to $35.4 million as of December 31, 2017 (December 31, 2016: $49.0 million). Net cash inflows generated by the financial assets' operations amounted to $52.7 million as of December 31, 2017 (December 31, 2016: $47.2 million).
4.13. Investments in associates
Set out below are the associates of the Group as of December 31, 2017:
Operational plant Country of incorporation Ownership interests Date of acquisition
----------------------------------------------- ------------------------- -------------------- --------------------
Sochagota Associate Colombia 49.0% 2006 and 2010
--------------------------------- ------------ ------------------------- -------------------- --------------------
Termoemcali Associate Colombia 37.4% 2010
--------------------------------- ------------ ------------------------- -------------------- --------------------
Productora de Energia de
Boyaca Associate Colombia 50.0% 2016
--------------------------------- ------------ ------------------------- -------------------- --------------------
The Group is currently analyzing the feasibility of an extension of the Sochagota power plant through a newly formed entity, Productora de Energia de Boyaca. The entity did not have significant activity in 2016 and 2017.
Set out below is the summarized financial information for the investments which are accounted for using the equity method (presented at 100%):
In $ millions Current assets Non-current assets Current Non-current Revenue Net
liabilities liabilities income
------------------- --------------- ------------------- ------------------- ------------------ -------- --------
Years ended
December 31, 2016
------------------- -------------------------------------------------------------------------------------------------
Sochagota 56.8 26.2 20.9 19.7 42.0 5.4
------------------- --------------- ------------------- ------------------- ------------------ -------- --------
Termoemcali 29.7 51.0 19.1 36.7 87.5 13.7
------------------- --------------- ------------------- ------------------- ------------------ -------- --------
Productora de
Energia de
Boyaca 0.2 - 0.0 - - (0.9)
------------------- --------------- ------------------- ------------------- ------------------ -------- --------
Years ended December 31, 2017
----------------------------------------------------------------------------------------------------------------------
Sochagota 70.0 4.4 22.1 8.2 35.1 5.8
------------------- --------------- ------------------- ------------------- ------------------ -------- --------
Termoemcali 24.6 49.5 15.6 32.1 32.9 6.2
------------------- --------------- ------------------- ------------------- ------------------ -------- --------
Productora de
Energia de
Boyaca 0.0 - 0.0 0.0 - (0.3)
------------------- --------------- ------------------- ------------------- ------------------ -------- --------
The reconciliation of the investments in associates for each year is as follows:
In $ millions Years ended December 31,
------------------------------- ---------------------------
2016 2017
------------------------------- ------------- ------------
Balance as of January 1, 19.0 25.7
------------------------------- ------------- ------------
Share of profit 7.3 5.0
------------------------------- ------------- ------------
Capital increase (decrease) 0.5 -
------------------------------- ------------- ------------
Dividends (3.8) (4.3)
------------------------------- ------------- ------------
Other comprehensive income 0.9 0.6
------------------------------- ------------- ------------
Scope changes 1.8 -
------------------------------- ------------- ------------
Balance as of December 31, 25.7 27.1
------------------------------- ------------- ------------
4.14. Management of financial risk
The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.
Interest Rate Risk
Interest rate risk arises primarily from our long-term borrowings. Interest cash flow risk arises from borrowings issued at variable rates, partially offset by cash held at variable rates. Interest rate risk is managed through entering into interest rate swap agreements, entered into with commercial banks and other institutions. The interest rate swaps qualify as cash flow hedges. Their duration matches the duration of the debt instruments. Approximately 30.7% the Group's existing debt obligations carry variable interest rates in 2017 (2016: 28.9%) (taking into account the effect of interest rate swaps).
These agreements involve the receipt of variable payments in exchange for fixed payments over the term of the agreements without the exchange of the underlying principal amounts. The main interest rates exposure for the Group relates to the floating rates with the TJLP, EURIBOR and LIBOR (refer to note 4.23). A change of 0.5% of those floating rates would result in an increase in interest expenses by $4.5 million in the year ended December 31, 2017 (2016: $3.7 million).
Foreign Currency Risk
Foreign exchange risk arises from various currency exposures, primarily with respect to the Euro, Brazilian Real and Bulgarian Lev. Currency risk comprises (i) transaction risk arising in the ordinary course of business, including certain financial debt denominated in a currency other than the currency of the operations; (ii) transaction risk linked to investments or mergers and acquisitions; and (iii) translation risk arising on the consolidation in US dollars of the consolidated financial statements of subsidiaries with a functional currency other than the US dollar.
To mitigate foreign exchange risk, (i) most revenues and operating costs incurred in the countries where the Group operates are denominated in the functional currency of the project company, (ii) the external financial debt is mostly denominated in the currency that matches the currency of the revenue expected to be generated from the benefiting project, thereby reducing currency risk, and (iii) the Group enters into various foreign currency sale / forward and / or option transactions at a corporate level. The analysis of financial debt by currency is presented in note 4.23.
Potential sensitivity on the post-tax net result for the year linked to financial instruments is as follows:
- if the US dollar had weakened/strengthened by 10% against the Euro, post-tax loss for the year ended December 31, 2017 would have been $0.5 million higher/lower (2016: $1.0 million higher/lower).
- if the US dollar had weakened/strengthened by 10% against the Brazilian Real, post-tax loss for the year ended December 31, 2017 would have been $2.2 million higher/lower (2016: $4.6 million higher/lower).
Commodity pricing risk
The Group's current and future cash flows are generally not impacted by changes in the prices of electricity, gas, oil and other fuel prices as most of the Group's non-renewable plants operate under long-term power purchase agreements and fuel purchase agreements. These agreements generally mitigate against significant fluctuations in cash flows as a result in changes in commodity prices by passing through changes in fuel prices to the offtaker.
Credit risk
Credit risk relates to risk arising from customers, suppliers, partners, intermediaries and banks on its operating and financing activities, when such parties are unable to honor their contractual obligations. Credit risk results from a combination of payment risk, delivery risk (failure to deliver services or products paid for) and the risk of replacing contracts in default (known as mark to market exposure - i.e. the cost of replacing the contract in conditions other than those initially agreed). The Group analyzes the credit risk for each new client prior to entering into an agreement. In addition, in order to minimize risk, we contract Political Risk Insurance policies from multilateral organizations or commercial insurers which usually provide us with insurance against government defaults. Such policies cover our project companies in Armenia, Bulgaria, Colombia, Nigeria, Peru, Rwanda, Togo, Senegal and Slovakia.
We restrict exposure to any one counterparty by setting credit limits based on the credit quality as defined by Moody's and S&P and by defining the types of financial instruments which may be entered into. The minimum credit ratings the Group generally accepts from banks or financial institutions are BBB- (S&P) and Baa3 (Moody's). For offtakers, where credit rating are CCC+ or below, the Group generally hedges its counterparty risk by contracting Political Risk Insurance.
If there is no independent rating, the Group assesses the credit quality of the customer, taking into account its financial position, past experience and other factors.
Trade receivables can be due from a single customer or a few customers who will purchase all or a significant portion of a power plant's output under long-term power purchase agreements. This customer concentration may impact the Group's overall exposure to credit risk, either positively or negatively, in that the customers may be affected by changes in economic, industry or other conditions.
Ageing of trade receivables - net are analyzed below:
In $ millions Years ended December
31,
---------------------------------- -----------------------
2017
---------------------------------- ---------- -----------
Trade receivables not overdue 59.6 105.7
---------------------------------- ---------- -----------
Past due up to 90 days 7.2 31.1
---------------------------------- ---------- -----------
Past due between 90 - 180 days 3.1 1.9
---------------------------------- ---------- -----------
Past due over 180 days 1.1 3.0
---------------------------------- ---------- -----------
Total trade receivables 71.0 141.7
---------------------------------- ---------- -----------
As of December 31, 2017, $65.4 million (December 31, 2016: $12.2 million) of trade receivables and $27.2 million (December 31, 2016: $17.4 million) of CO2 quotas receivables were outstanding in connection with our Bulgarian power plant, Maritsa East 3 of which $16.8 million was overdue as of December 31, 2017 and fully paid in January 2018.
Past due up to 90 days also included $8.4 million from Cap de Biches project which were fully paid in January 2018.
The Group deems the associated credit risk of the trade receivables not overdue to be suitably low.
Liquidity risk
Liquidity risk arises from the Group not being able to meet its obligations. The Group mainly relies on long-term debt obligations to fund its acquisitions and construction activities. All significant long-term financing arrangements are supported locally and covered by the cash flows expected from the power plants when operational. The Group has, to the extent available at acceptable terms, utilized non-recourse debt to fund a significant portion of the capital expenditures and investments required to construct and acquire its electric power plants and related assets.
On September 6, 2017, the Group also entered into a EUR50 million revolving credit facility available for general corporate purposes, maturing in September 2020, and which remains undrawn as of December 31, 2017.
A rolling cash flow forecast of the Group's liquidity requirements is prepared to confirm sufficient cash is available to meet operational needs and to comply with borrowing limits or covenants. Such forecasting takes into consideration the future debt financing strategy, covenant compliance, compliance with internal statement of financial position ratio targets and, if applicable external regulatory or legal requirements - for example, cash restrictions.
The subsidiaries are separate and distinct legal entities and, unless they have expressly guaranteed any of the holding company indebtedness, have no obligation, contingent or otherwise, to pay any amounts due pursuant to such debt or to make any funds available whether by dividends, fees, loans or other payments. Some of the Group's subsidiaries guarantee indebtedness under one or more credit facilities and certain of the holding company outstanding debt securities.
The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period to the contractual maturity date:
In $ millions Less than 1 year Between 1 and 5 years Over 5 years Total
------------------------------------- ----------------- ---------------------- ------------- ----------
Year ended December 31, 2016 347.3 1,396.3 1,147.8 2,891.4
------------------------------------- ----------------- ---------------------- ------------- ----------
Borrowings (1) 141.8 1,321.1 1,104.4 2,567.3
------------------------------------- ----------------- ---------------------- ------------- ----------
Trade and other payables 179.8 - - 179.8
------------------------------------- ----------------- ---------------------- ------------- ----------
Derivative financial instruments 13.4 27.3 10.5 51.2
------------------------------------- ----------------- ---------------------- ------------- ----------
Other non-current liabilities (2) 12.3 47.9 32.9 93.1
------------------------------------- ----------------- ---------------------- ------------- ----------
Year ended December 31, 2017 398.4 1,766.6 1,079.6 3,244.6
------------------------------------- ----------------- ---------------------- ------------- ----------
Borrowings (1) 200.1 1,690.1 1,035.9 2,926.1
------------------------------------- ----------------- ---------------------- ------------- ----------
Trade and other payables 169.1 - - 169.1
------------------------------------- ----------------- ---------------------- ------------- ----------
Derivative financial instruments 14.7 27.9 21.8 64.4
------------------------------------- ----------------- ---------------------- ------------- ----------
Other non-current liabilities (2) 14.5 48.6 21.9 85.0
------------------------------------- ----------------- ---------------------- ------------- ----------
(1) Borrowings represent the outstanding nominal amount (note 4.23). Short-term debt of $200.1 million as of December 31, 2017 relate to the short-term portion of long term financings that mature within the next twelve months, that we expect to repay using cash on hand and cash received from operations.
(2) This corresponds to the debt to non-controlling interest that is described in note 4.24
The table below analyses the Group's forecasted interests to be paid into relevant maturity groupings based on the interests maturity date:
Year ended December 31, 2017 Less than 1 year Between 1 and 5 years Over 5 years Total ---------------------------------------- ----------------- ---------------------- ------------- ---------- In $ millions ---------------------------------------- ----------------- ---------------------- ------------- ---------- Forecast interest expense to be paid 170.2 492.7 342.0 1,004.9 ---------------------------------------- ----------------- ---------------------- ------------- ----------
The Group's forecasts and projections, taking into account reasonably possible changes in operating performance, indicate that the Group has sufficient financial resources, together with assets that are expected to generate free cash flow to the Group. As a consequence, the Group has reasonable expectation to be well placed to manage its business risks and to continue in operational existence for the foreseeable future (at least for the twelve-month period from the approval date of these financial statements). Accordingly, the Group continues to adopt the going concern basis in preparing the consolidated financial statements.
Capital risk management section
The Company considers its capital and reserves attributable to equity shareholders to be the Company's capital.
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern while providing adequate returns for shareholders and benefits for other stakeholders and to maintain a capital structure to optimize the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. It may also increase debt provided that the funded venture provides adequate returns so that the overall capital structure remains supportable.
4.15. Derivative financial instruments
The Group uses interest rate swaps to manage its exposure to interest rate movements on our borrowings, a foreign exchange forward contract to mitigate its currency risk and cross currency swap contracts in Cap des Biches project in Senegal to manage both currency and interest rate risks. The fair value of derivative financial instruments are as follows:
Year ended December 31,
----------------------------- ----------------------------------------------------
2016 2017
----------------------------- ------------------------- -------------------------
In $ millions Assets Liabilities Assets Liabilities
----------------------------- --------- -------------- --------- --------------
Interest rate swaps
- Cash flow hedge (1) - 41.2 - 35.4
----------------------------- --------- -------------- --------- --------------
Interest rate swaps
- Trading - 0.3 - -
----------------------------- --------- -------------- --------- --------------
Cross currency swaps
- Cash flow hedge (3) - 4.3 - 20.9
----------------------------- --------- -------------- --------- --------------
Foreign exchange forward
contracts - Trading
(3) 0.5 2.6 - 3.0
----------------------------- --------- -------------- --------- --------------
Foreign exchange option
contracts - Trading
(3) - 2.8 - 5.1
----------------------------- --------- -------------- --------- --------------
Acquisition hedge -
Trading (2) 5.8 - - -
----------------------------- --------- -------------- --------- --------------
Total 6.3 51.2 - 64.4
----------------------------- --------- -------------- --------- --------------
Less non-current portion:
----------------------------- --------- -------------- --------- --------------
Interest rate swaps
- Cash flow hedge - 29.4 - 23.8
----------------------------- --------- -------------- --------- --------------
Cross currency swaps
- Cash flow hedge - 4.3 - 20.8
----------------------------- --------- -------------- --------- --------------
Foreign exchange forward
contracts - Trading - 1.2 - -
----------------------------- --------- -------------- --------- --------------
Foreign exchange option
contracts - Trading - 2.9 - 5.1
----------------------------- --------- -------------- --------- --------------
Total non-current portion - 37.8 - 49.7
----------------------------- --------- -------------- --------- --------------
Current portion 6.3 13.4 - 14.7
----------------------------- --------- -------------- --------- --------------
(1) Interest rate swap - cash flow hedge relates to the hedging of the variable elements for certain project financing.
(2) Upon execution of the share purchase agreement in November 2016 for the expected acquisition of the new Brazilian portfolio described in note 3.2, the Group entered into a forward exchange contract to hedge against increases (caused by any future appreciation of the BRL against the U.S. Dollar) in the total expected cash investment to be paid at closing of the acquisition. The nominal value of this acquisition hedge was $164.0 million as of December 31, 2016; hedge accounting has not been applied. On March 17, 2017, at acquisition date, the Group settled the acquisition hedge which resulted in a net gain of $11.7 million recognized in the income statement, of which $5.7 million in 2017.
(3) The Group has also executed a series of offsets to protect the value, in USD terms, of the BRL-denominated expected distributions from the new Brazilian portfolio. The first two years of BRL-denominated distributions have been hedged using a series of forward exchange contracts and the distributions expected in years three to five have been protected against material depreciation of the BRL using option contracts. Hedge accounting does not apply, change in fair value is recognized in the consolidated statement of income.
The notional principal amount of:
- the outstanding interest rate swap contracts and cross currency swap qualified as cash-flow hedge amounted to $572.0 million as of December 31, 2017 (December 31, 2016: $475.1 million).
- the outstanding foreign exchange forward and option contracts amount to $92.8 million as of December 31, 2017 (December 31, 2016: $225.7 million).
The Group also entered in 2015 into a cross currency swap in our Cap des Biches project in Senegal. The fair value of the instrument as of December 31, 2017 amounts to $20.9 million (December 31, 2016: $4.3 million). The accounting and risk management policies, and further information about the derivative financial instruments that we use, are set out in note 4.14.
The cross-currency swap subscribed for 2016 to protect the Group from a change of interest rates and foreign exchange rates on the Cap des Biches project before project financing disbursement which occurred in January 2017 was settled in January 2017 and had a notional value of $21.8 million as of December 31, 2016.
The Group recognized a loss of $12.1 million in December 31, 2017 in relation with its interest rate and cross currency swaps within Finance costs net (December 31, 2016: income of $5.5 million).
4.16. Fair value measurements
The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety as defined below:
- Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group has the ability to access at the measurement date.
- Level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.
- Level 3 inputs are unobservable inputs for the asset or liability.
There were no transfers between fair value measurement levels between December 31, 2016 and 2017.
When measuring our interest rate, cross currency swaps and foreign exchange forward and option contracts at fair value on a recurring basis at both December 31, 2017 and 2016, we have measured these at level 2 in the fair value hierarchy with the exception of the debt to non-controlling interests which is level 3. The fair value of those financial instruments is determined by using valuation techniques. These valuations techniques maximize the use of observable data where it is available and rely as little as possible on entity specific estimates.
The Group uses a market approach as part of their available valuation techniques to determine the fair value of derivatives. The market approach uses prices and other relevant information generated from market transactions.
The Group's finance department performs valuation of financial assets and liabilities required for financial reporting purposes as categorized at level 2. The Group's only derivatives are interest rate swaps, foreign exchange forward contracts, foreign exchange option contracts and cross currency swap contracts in our Cap des Biches project in Senegal.
4.17. Financial instruments by category
In $ millions Financial asset category
---------------------- --------------------------------------------------------------------------------------------
Loans and receivables Assets at fair value Derivative used for Total net book value
Years ended December through profit and hedging per balance sheet
31, 2016 loss
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Derivative financial
instruments - 6.3 - 6.3
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Financial assets -
Concession
arrangements,
financial lease
receivables and
other 604.8 - - 604.8
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Trade and other
receivables 128.4 - - 128.4
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Other non-current
assets (1) 6.5 0.6 - 7.1
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Cash and cash
equivalents - 433.7 - 433.7
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Total 739.7 440.6 - 1,180.3
---------------------- ---------------------- --------------------- ---------------------- ---------------------
In $ millions Financial asset category
---------------------- --------------------------------------------------------------------------------------------
Loans and receivables Assets at fair value Derivative used for Total net book value
Years ended December through profit and hedging per balance sheet
31, 2017 loss
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Derivative financial
instruments - - - -
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Financial assets -
Concession
arrangements,
financial lease
receivables and
other 617.7 - - 617.7
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Trade and other
receivables 215.4 - - 215.4
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Other non-current
assets (1) 18.4 0.7 - 19.1
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Cash and cash
equivalents - 781.1 - 781.1
---------------------- ---------------------- --------------------- ---------------------- ---------------------
Total 851.5 781.8 - 1,633.3
---------------------- ---------------------- --------------------- ---------------------- ---------------------
In $ millions Financial liability category
----------------------- ---------------------------------------------------------------------------------------------
Liabilities at fair Other financial Derivative used for Total net book value
Years ended December value through profit liabilities at hedging per balance sheet
31, 2016 and loss amortized cost
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Borrowings - 2,529.9 - 2,529.9
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Derivative financial
instruments 5.7 - 45.5 51.2
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Trade and other
payables - 179.8 - 179.8
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Other current
liabilities (1) - 50.1 - 50.1
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Other non-current
liabilities 93.1 74.8 - 167.9
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Total 98.8 2,834.6 45.5 2,978.9
----------------------- --------------------- ---------------------- ---------------------- ----------------------
In $ millions Financial liability category
----------------------- ---------------------------------------------------------------------------------------------
Liabilities at fair Other financial Derivative used for Total net book value
Years ended December value through profit liabilities at hedging per balance sheet
31, 2017 and loss amortized cost
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Borrowings - 2,890.1 - 2,890.1
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Derivative financial
instruments 8.1 - 56.3 64.4
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Trade and other
payables - 169.1 - 169.1
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Other current
liabilities (1) - 67.5 - 67.5
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Other non-current
liabilities 85.0 81.5 - 166.5
----------------------- --------------------- ---------------------- ---------------------- ----------------------
Total 93.1 3,208.2 56.3 3,357.6
----------------------- --------------------- ---------------------- ---------------------- ----------------------
(1) These balances exclude receivables and payables balances in relation to taxes disclosed in notes 4.18 and 4.27 respectively.
4.18. Other non-current assets
Years ended December 31,
---------------------------------- ---------------------------
In $ millions 2016 2017
---------------------------------- ------------- ------------
CO2 quotas receivable (1) 6.3 3.6
---------------------------------- ------------- ------------
VAT receivables (2) 13.4 10.3
---------------------------------- ------------- ------------
Advance to supplier (3) - 9.5
---------------------------------- ------------- ------------
Restricted cash 0.6 0.7
---------------------------------- ------------- ------------
Other 0.3 5.4
---------------------------------- ------------- ------------
Total other non-current assets 20.6 29.5
---------------------------------- ------------- ------------
(1) Long term receivables relating to our Maritsa power plant and to be received through a pass-through mechanism agreed with its offtaker. A similar liability is presented in note 4.24.
(2) VAT receivables mainly relate to the Vorotan project. The amount is expected to be recovered over a five-year period from the acquisition date in 2015 and was discounted using a rate of 10.0%. A current portion of $4.7 million is presented in "trade and other receivables" in the consolidated statement of financial position as of December 31, 2017 ($4.9 million as of December 31, 2016).
(3) Advance payment to supplier relate to Vorotan EPC contract as part of the refurbishment program.
4.19. Inventories
Years ended December 31,
--------------------- ---------------------------
In $ millions 2016 2017
--------------------- ------------- ------------
Fuel 10.8 12.8
--------------------- ------------- ------------
Spare parts 18.3 25.3
--------------------- ------------- ------------
Other 7.1 21.0
--------------------- ------------- ------------
Total 36.2 59.1
--------------------- ------------- ------------
Provision (4.5) (5.0)
--------------------- ------------- ------------
Total inventories 31.7 54.1
--------------------- ------------- ------------
4.20. Trade and other receivables
In $ millions Years ended December 31,
------------------------------------------------- ---------------------------
2016 2017
------------------------------------------------- ------------- ------------
Trade receivables - Gross 78.6 144.1
------------------------------------------------- ------------- ------------
Accrued revenue (unbilled) 41.6 57.4
------------------------------------------------- ------------- ------------
Provision for impairment of trade receivables (7.6) (2.4)
------------------------------------------------- ------------- ------------
Trade receivables - Net 112.6 199.1
------------------------------------------------- ------------- ------------
Other receivables 54.3 72.7
------------------------------------------------- ------------- ------------
Trade and other receivables 166.9 271.8
------------------------------------------------- ------------- ------------
All trade and other receivables are short term and the net carrying value of trade receivables is considered a reasonable approximation of the fair value. The ageing of trade receivables - net is presented in note 4.14.
All trade and other receivables are pledged as security in relation with the Group's project financings.
Other receivables primarily correspond to indirect tax receivables, mainly in our power plants in Rwanda, Senegal and Armenia.
4.21. Cash and cash equivalents
Certain restrictions on our cash and cash equivalents have been primarily imposed by financing agreements or long-term obligations. They mainly include short-term security deposits kept as collateral and debt service reserves that cover short-term repayments and which meet the definition of cash and cash equivalents. 41.0% of our cash and cash equivalents as of December 31, 2017 is pledged as security in relation with the Group's project financings (December 31, 2016: 50.0%); cash and cash equivalents also includes $107.2 million as of December 31, 2017 (December 31, 2016: $95.6 million) of cash balances relating to debt service reserves required by project finance agreements.
4.22. Issued capital and reserves
Issued capital of the Company amounted to $8.9 million as at 31 December 2017, with changes as follows:
Alloted, called up and fully paid Number Nominal value GBP million $ million
-------------------------------------------------------- ---------------- -------------- ------------ ------------
As at 26 September 2017 100 1.00 - -
-------------------------------------------------------- ---------------- -------------- ------------ ------------
Issue of shares - 17 October 2017 1,002,000,000 1.00 1,002.0 1,320.7
-------------------------------------------------------- ---------------- -------------- ------------ ------------
As at 17 October 2017 1,002,000,100 1.00 1,002.0 1,320.7
-------------------------------------------------------- ---------------- -------------- ------------ ------------
Share capital reduction - 19 October 2017 1,002,000,100 (0.99) (992.0) (1,307.5)
-------------------------------------------------------- ---------------- -------------- ------------ ------------
As at 19 October 2017 1,002,000,100 0.01 10.0 13.2
-------------------------------------------------------- ---------------- -------------- ------------ ------------
Issue of ordinary shares - Listing on the London Stock
Exchange 122,399,020 0.01 1.2 1.6
-------------------------------------------------------- ---------------- -------------- ------------ ------------
Issue of ordinary shares - Management 712,920 0.01 - -
-------------------------------------------------------- ---------------- -------------- ------------ ------------
Share reorganization - cancellation of deferred shares (454,399,120) 0.01 (4.5) (5.9)
-------------------------------------------------------- ---------------- -------------- ------------ ------------
As at 31 December 2017 670,712,920 0.01 6.7 8.9
-------------------------------------------------------- ---------------- -------------- ------------ ------------
On incorporation, 26 September 2017, the Company issued 100 ordinary shares with a nominal value of GBP1.00 to its Parent Company, ContourGlobal LP. The amount due was settled through an intercompany receivable.
On 17 October 2017, the Company issued to its Parent Company, ContourGlobal L.P. 1,002,000,000 ordinary shares with a nominal value of GBP1.00 each as payment for its acquisition of ContourGlobal Worldwide Holdings S.à r.l.
On 19 October 2017, the Company passed a special resolution supported by a solvency statement to reduce its share capital under s641(a) of the Companies Act 2006 by reducing the share capital of the Company of $1,320,736,335 divided into 1,002,000,100 ordinary shares of GBP1.00, each fully paid, to $13,207,366 divided into 1,002,000,100 ordinary shares of GBP0.01, each fully paid, by the cancellation of the paid up share capital to the extent of GBP0.99 per share upon each of the 1,002,000,100 ordinary shares reducing the nominal amount of all such shares from GBP1.00 to GBP0.01.
On 8 November 2017, the Company passed a resolution to consolidate the 1,002,000,100 ordinary shares of GBP0.01 each in the share capital of the Company into 1 ordinary share of GBP10,020,001 and the sub-division of that share into 547,600,980 ordinary shares and 454,399,120 deferred shares each of GBP0.01.
On 14 November, the Company completed the pricing of its initial public offering of ordinary shares at GBP2.50 per share, comprising 122,399,020 new shares and 54,026,083 existing shares. The Company also issued additional 712,920 new shares subscribed by its management. The issuance of these new shares resulted in the recognition of a share premium of GBP306.5 million ($400.7 million), net of listing costs deducted of $19.9 million, resulting in total share premium of $380.8 million.
The Group restructure resulted in a $353.0 million debit to retained earnings and other reserves, which represents a capital reorganization structure reserve.
Finally, the Company cancelled all existing 454,399,120 deferred shares, resulting in a total net ordinary shares of 670,712,920 shares as of 31 December 2017.
Retained earnings and other reserves comprise retained earnings of ($7.9m) (2016: ($621.7m)) and capital reorganization reserve of $353.0m (2016: nil).
During the year the Group paid dividends of $54.2m on 19th April 2017 and $21.3m on 8th November 2017 to ContourGlobal L.P. Due to the fact that both of these were paid out prior to the IPO and full restructuring of the shares, dividends per share in relation to each payment has not been disclosed as it would not be relevant to the user of the accounts.
4.23. Borrowings
Certain power plants have financed their electric power generating projects by entering into external financing arrangements which require the pledging of collateral and may include financial covenants as described below. The financing arrangements are generally non-recourse (subject to certain guarantees) and the legal obligation for repayment is limited to the borrowing entity.
The Group's principal borrowings amount to $2,926.1 million in total as of December 31, 2017 (December 31, 2016: $2,567.4 million) and primarily relate to the following:
Type of borrowing Currency Project Financing Issue Maturity Outstanding nominal amount 12.31.16 Outstanding nominal amount 12.31.17 Rate
($ million) ($ million)
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Corporate
Corporate bond (1) EUR Indenture 2016 2021 631.0 840.4 5.125%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Loan Agreement EUR Arrubal 2011 2021 206.0 207.9 4.9%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
EURIBOR +
Loan Agreement EUR Maritsa 2006 2023 200.9 200.8 0.125%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Loan Agreement / TJLP + 2.18% /
Debentures (2) BRL Chapada I 2015 2032 2029 205.5 198.7 IPCA + 8%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Project bond USD Inka 2014 2034 193.0 189.0 6.0%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Loan Agreement (2) BRL Chapada II 2016 2032 177.2 165.1 TJLP + 2.18%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Loan Agreement USD Vorotan 2016 2034 140.0 137.3 LIBOR + 4.625%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Loan Agreement (2) BRL Asa Branca 2011 2030 130.5 120.1 TJLP+ 1.92%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
USD-LIBOR BBA
Loan Agreement USD Cap des Biches 2015 2033 76.3 110.1 (ICE)+3.20%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Loan Agreement /
Corp. Financing Mix of fix and
(3) EUR Solar Italy 2017 2024-2028 62.7 125.4 variable rates
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
7.16% (Weighted
Loan Agreement USD Togo 2008 2028 109.3 102.9 average)
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Loan Agreement EUR Austria Wind 2013 2027 98.1 98.7 EURIBOR 6M +
2.45% and
4.305% /
EURIBOR
3M+1.95% and
4.0%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Bridge loan BRL Hydro Brazil 2017 2020 - 83.1 CDI + 5%
Portfolio II and
Solutions Brazil
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
LIBOR plus
5.50% and mix
Loan Agreement USD KivuWatt 2011 2026 89.0 82.0 of fixed rates
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Hydro Brazil
Debentures BRL portfolio I 2013 2027 56.2 53.0 8.8%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Loan Agreement (2) BRL Hydro Brazil 2007 - 2024 - 52.5 TJLP + 1.92%,
(4) Portfolio II 2009 2.28 and 2.27%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
2009 - 2023 - Mix of fix and
Loan Agreement EUR Solar Slovak 2015 2026 50.5 50.4 variable rates
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Loan Agreement (2) BRL Chapada III 2015 2032 52.7 49.1 TJLP + 2.18%
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
Other Credit
facilities
(individually < 2012 - 2016 -
$40 million) Various Various 2013 2034 88.5 59.6
------------------- ---------- ------------------- ------- ----------- ------------------------------------ ------------------------------------ ----------------
(1) Corporate bond issued by ContourGlobal Power Holdings in May 2014 ($400 million) and November 2015 ($100 million) was fully refinanced in June 2016. A new EUR550 million corporate bond was issued in June 2016, with two additional EUR50 million and EUR100 million taps in July 2016 and February 2017. This bond bears a fixed interest of 5.125% and matures in June 2021.
(2) Taxa de Juros de Longo Prazo ("TJLP") represents the Brazil Long Term Interest Rate, which was approximately 7.0% at December 31, 2017 (December 31, 2016: 7.5%).
(3) On December 4, 2017, the Group acquired a renewable portfolio in Italy representing a total of 19.1 MW and subsequently to the closing the Group refinanced the portfolio. Refer to Note 3 Major events and changes in the scope of consolidation.
(4) On March 17, 2017, the Group acquired a thermal and renewable portfolio in Brazil representing a total of 205.6 MW. Refer to Note 3.2 Major events and changes in the scope of consolidation.
With the exception of our corporate bond and revolving credit facility, all external borrowings relate to project financings. Such project financings are generally non-recourse (subject to certain guarantees).
The carrying amounts of the Group's borrowings are denominated in the following currencies:
In $ millions Years ended December 31,
------------------- ---------------------------
2016 2017
------------------- ------------- ------------
US Dollars 631.2 645.4
------------------- ------------- ------------
Euros 1,250.7 1,525.1
------------------- ------------- ------------
Brazilian Reals 645.1 719.6
------------------- ------------- ------------
Other 2.9 -
------------------- ------------- ------------
Total 2,529.9 2,890.1
------------------- ------------- ------------
The carrying amounts and fair value of the current and non-current borrowings are as follows:
In $ millions Carrying amount Fair Value
--------------------- ----------------------- -----------------------
Years ended December Years ended December
31, 31,
--------------------- ----------------------- -----------------------
2016 2017 2016 2017
--------------------- ----------- ---------- ----------- ----------
Credit facilities 1,634.5 1,787.0 1,704.4 1,861.5
--------------------- ----------- ---------- ----------- ----------
Bonds 895.4 1,103.1 953.9 1,175.9
--------------------- ----------- ---------- ----------- ----------
Total 2,529.9 2,890.1 2,658.3 3,037.4
--------------------- ----------- ---------- ----------- ----------
Net debt as of December 31, 2016 and 2017 is as follows:
In $ millions Years ended December
31,
----------------------------------------- --------------------------
2016 2017
----------------------------------------- ------------ ------------
Cash and cash equivalents 433.7 781.1
----------------------------------------- ------------ ------------
Borrowings - repayable within
one year (141.8) (200.1)
----------------------------------------- ------------ ------------
Borrowings - repayable after
one year (2,425.5) (2,726.0)
----------------------------------------- ------------ ------------
Interests payable, deferred financing
costs and other 37.4 36.0
----------------------------------------- ------------ ------------
Net debt (2,096.2) (2,109.0)
----------------------------------------- ------------ ------------
Cash and cash equivalents 433.7 781.1
----------------------------------------- ------------ ------------
Borrowings - fixed interest rates (1,825.4) (2,028.1)
----------------------------------------- ------------ ------------
Borrowings - variable interest
rates (741.9) (898.0)
----------------------------------------- ------------ ------------
Interests payable, deferred financing
costs and other 37.4 36.0
----------------------------------------- ------------ ------------
Net debt (2,096.2) (2,109.0) ----------------------------------------- ------------ ------------ In $ millions Cash and cash equivalents Borrowings Total net debt ----------------------------------------------- -------------------------- ------------ --------------- As of January 1,2016 261.5 (2,413.1) (2,151.6) ----------------------------------------------- -------------------------- ------------ --------------- Cash-flows 178.9 - 178.9 ----------------------------------------------- -------------------------- ------------ --------------- Change in scope - 13.6 13.6 ----------------------------------------------- -------------------------- ------------ --------------- Proceeds of borrowings - (889.0) (889.0) ----------------------------------------------- -------------------------- ------------ --------------- Repayments of borrowings - 845.9 845.9 ----------------------------------------------- -------------------------- ------------ --------------- Currency translations differences and other (6.7) (87.3) (94.0) ----------------------------------------------- -------------------------- ------------ --------------- As of December 31,2016 433.7 (2,529.9) (2,096.2) ----------------------------------------------- -------------------------- ------------ --------------- Cash-flows 263.5 - 263.5 ----------------------------------------------- -------------------------- ------------ --------------- Change in scope 37.4 (116.0) (78.6) ----------------------------------------------- -------------------------- ------------ --------------- Proceeds of borrowings - (310.9) (310.9) ----------------------------------------------- -------------------------- ------------ --------------- Repayments of borrowings - 233.0 233.0 ----------------------------------------------- -------------------------- ------------ --------------- Currency translations differences and other 46.4 (166.2) (119.8) ----------------------------------------------- -------------------------- ------------ --------------- As of December 31,2017 781.1 (2,890.1) (2,109.0) ----------------------------------------------- -------------------------- ------------ ---------------
Debt Covenants and restrictions
The main long term financial debts include certain financial covenants, of which the principal ones are as follows:
- debt Service Coverage Ratio greater than 1.05, 1.10, 1.15, 1.20, 1.30 depending on borrowings,
- net debt/EBITDA lower than 7.5 (Santa Cruz), - decreasing Senior Debt and Total Debt (Arrubal), - debt / Equity ratio: 85/15, 80/20, 75/25, 64.16/35.84 depending on borrowings, - equity / Asset ratio above 12%, 15%, 25% or 30% depending on borrowings,
- loan Life Coverage Ratio greater than 1.10 (Solar Italy and Trinity) or 1.35 (Projected - Kivuwatt).
Non-financial covenants includes the requirement to maintain proper insurance coverage, enter into hedging agreements, maintain certain cash reserves, restrictions on dispositions, scope of the business, and mergers and acquisitions.
These covenants are monitored appropriately to ensure that the contractual conditions are met.
As of December 31, 2017, the Group and its subsidiaries did not breach any financial covenant which would trigger early mandatory repayment.
Securities given
The Group typically grants securities in relation with the issuance of project financing. The table below provides an overview of the main guarantees provided under existing project financing as of December 31, 2017:
Project Facility Maturity Security / Guarantee given
financing
----------- ------------- --------- ---------------------------------------
Arrubal Arrubal 2021 Pledge of (i) the shares of
Term CG La Rioja, (ii) project
Loan accounts, (iii) insurance
policies, (iv) receivables
on project documents (PPA,
Operations & Maintenance,
Gas Supply Agreement...),
(v) mortgage over the power
station and industrial items.
----------- ------------- --------- ---------------------------------------
Asa Branca Credit 2030 Pledge of shares of Asa Branca
facility Holding SA, pledge of the
receivables under the Asa
Branca PPA, pledge on certain
project accounts, mortgage
of assets of the Asa Branca
Windfarm Complex, assignment
of credit rights under project
contracts (EPC, land leases,
O&M...).
----------- ------------- --------- ---------------------------------------
Sunburn Letter 2021 On December 22, 2010, a EUR2.4
of Credit million letter of credit facility
Agreement was entered into to fund obligations
under the debt service reserve
account (in accordance with
the Saint Martin loan agreement).
This letter of credit expires
in June 2021. No amounts have
been recognized in relation
to letter of credit in either
period.
----------- ------------- --------- ---------------------------------------
Togo Loan 2028 ContourGlobal Plc guarantee
agreement on cash shortfall for Debt
service, and (i) a pledge
of CG Togo LLC and CG Togo
SA capital stock, (ii) a charge
on equipment, material and
assets of CG Togo SA, (iii)
the assignment of receivables
of CG Togo SA, (iv) the assignment
of insurance policies, and
(v) a pledge on the project
accounts.
----------- ------------- --------- ---------------------------------------
Inka Senior 2034 Pledge of shares of Energia
secured Eolica SA, EESA assets, accounts,
notes assignment of receivables
of the project contracts and
insurances.
----------- ------------- --------- ---------------------------------------
Inka Letter 2019 $8.5m ContourGlobal Plc guarantee
of Credit to Credit Suisse.
Agreement
----------- ------------- --------- ---------------------------------------
Energie Credit 2023-28 Pledge of the shares, assets,
Europe Facilities cash accounts and receivables.
Wind EUR10.3m CG Solar Holdings
& Solar guarantee for the benefit
of UBI and Natixis covering
a Primavera plant potential
adverse impact on FiT further
to a GSE inspection.
----------- ------------- --------- ---------------------------------------
Maritsa Credit 2023 Pledge of the shares, any
Facility dividends on the pledged shares
and the entire commercial
enterprise of ME-3, including
the receivables from the ME-3
PPA.
----------- ------------- --------- ---------------------------------------
Kivuwatt Financing 2026 - Secured by, among others,
Arrangement (i) KivuWatt Holdings' pledge
of all of the shares of KivuWatt
held by KivuWatt Holdings,
(ii) certain of KivuWatt's
bank accounts and (iii) KivuWatt's
movable and immovable assets.
- ContourGlobal Plc $1.2
million guarantee for the
benefit of KivuWatt under
the PPA and Gas
Concession to the Government
of Rwanda and to Electrogaz
(outside of the loan guarantee).
- ContourGlobal Plc guarantee
of $55 million to fund any
cost overruns up to $25 million
and $30 million debt buydown.
- $8.5million UK Plc guarantee
to cover DSRA as of December
31,2017.
----------- ------------- --------- ---------------------------------------
Cap des Credit 2033 Pledge over CG Senegal and
Biches Facility CG Cap des Biches Sénégal
shares, pledge over the project
accounts, charge over the
assets of CG Cap des Biches
Sénégal, assignment
of receivables of CG Cap des
Biches Sénégal and
the insurance policies, direct
agreement on the project contracts.
----------- ------------- --------- ---------------------------------------
Vorotan Long 2034 Pledge of shares of ContourGlobal
Term HydroCascade CSJC assets and
Facility project accounts, assignment
of receivables arising from
the project contracts and
insurances.
----------- ------------- --------- ---------------------------------------
Chapada Long 2032 Pledge of shares of Chapada
I Term I SPVs and Holding, SPVs assets,
Facility accounts, assignment of receivables
of the project contracts and
insurances.
----------- ------------- --------- ---------------------------------------
Chapada Long 2032 Pledge of shares of Chapada
II Term II SPVs and Holding, SPVs
Facility assets, accounts, assignment
of receivables of the project
contracts and insurances.
----------- ------------- --------- ---------------------------------------
Chapada Long 2032 Pledge of shares of Chapada
III Term III SPVs and Holding, SPVs
Facility assets, accounts, assignment
of receivables of the project
contracts and insurances.
Corporate guarantee from
ContourGlobal do Brazil Holding
Ltda until Financial Completion.
----------- ------------- --------- ---------------------------------------
Hydro Bridge 2020 First ranking security interest
Brazil Facility in the shares of all the entities
Portfolio in the borrower group (ex-minorities)
II and plus pledge of receivables.
Solutions
Brazil
----------- ------------- --------- ---------------------------------------
4.24. Other non-current liabilities
In $ millions Years ended December 31,
----------------------------------------- ---------------------------
2016 2017
----------------------------------------- ------------- ------------
Debt to non-controlling interest (1) 93.1 85.0
----------------------------------------- ------------- ------------
Deferred payments on acquisitions (2) 61.1 52.4
----------------------------------------- ------------- ------------
CO2 quotas payables (3) 6.3 3.7
----------------------------------------- ------------- ------------
Other (4) 7.4 25.4
----------------------------------------- ------------- ------------
Total other non-current liabilities 167.9 166.5
----------------------------------------- ------------- ------------
(1) Debt to non-controlling interests: in 2011, the Group purchased a 73% interest in Maritsa power plant. NEK owns the remaining 27% of Maritsa power plant. The shareholders' agreement states that all distributable results available should be distributed to their shareholders, with no unconditional right to avoid dividends. Consequently and in accordance with IAS 32 'Financial Instruments: presentation', shares held by NEK do not qualify as equity instruments and are recorded as a liability to non-controlling interests in the Group's Statement of Financial Position. The fair value of the debt to non-controlling interest is determined using a discounted cash flow method based on management's current best estimate of the future distributable profits to the minority shareholder NEK over the PPA period. This debt is discounted using a European risk free rate and adding the credit default swap ("CDS") spread for Bulgaria.
The change in the debt to Maritsa non-controlling interest is presented below:
In $ millions Years ended December
31,
------------------------------------ -----------------------
2016 2017
------------------------------------ ----------- ----------
Beginning of the period 117.2 93.1
------------------------------------ ----------- ----------
Dividends (20.3) (16.2)
------------------------------------ ----------- ----------
Change in fair value recognized
in profit and loss (1.2) (3.8)
------------------------------------ ----------- ----------
Currency translation adjustments (2.6) 11.9
------------------------------------ ----------- ----------
End of the period 93.1 85.0
------------------------------------ ----------- ----------
(2) As of December 31, 2017, deferred payments and earn-outs on acquired entities mainly relate to deferred payments to be made to initial developers and earn-out payment of Inka due four years after the Commercial Operational Date.
(3) CO2 quotas are described in note 4.18.
(4) The increase is primarily related to contractual obligations in Brazil.
4.25. Provisions
In $ millions Decommissioning / Environmental / Legal and other Total
Maintenance provision
-------------------------------------------- ------------------------------------------- ---------------- ---------
As of January 1, 2016 28.9 44.9 73.8
-------------------------------------------- ------------------------------------------- ---------------- ---------
Additions 5.3 3.0 8.3
-------------------------------------------- ------------------------------------------- ---------------- ---------
Unused amounts reversed - (5.4) (5.4)
-------------------------------------------- ------------------------------------------- ---------------- ---------
Amounts used during the period - (2.6) (2.6)
-------------------------------------------- ------------------------------------------- ---------------- ---------
Currency translation differences and
other (0.4) (1.9) (2.3)
-------------------------------------------- ------------------------------------------- ---------------- ---------
As of December 31, 2016 33.8 38.0 71.8
-------------------------------------------- ------------------------------------------- ---------------- ---------
Acquired through business combination 2.8 5.3 8.1
-------------------------------------------- ------------------------------------------- ---------------- ---------
Additions 15.5 6.0 21.5
-------------------------------------------- ------------------------------------------- ---------------- ---------
Unused amounts reversed (0.5) (24.4) (24.9)
-------------------------------------------- ------------------------------------------- ---------------- ---------
Amounts used during the period - (3.3) (3.3)
-------------------------------------------- ------------------------------------------- ---------------- ---------
Currency translation differences and
other 1.8 (2.0) (0.2)
-------------------------------------------- ------------------------------------------- ---------------- ---------
As of December 31, 2017 53.4 19.6 73.0
-------------------------------------------- ------------------------------------------- ---------------- ---------
Site decommissioning provisions are recognized based on assessment of future decommissioning costs which would need to be incurred in accordance with existing legislation to restore the sites. Environmental provisions primarily relate to obligations of our Spanish power plant. Maintenance provisions mainly relate to our maintenance obligations under our concession agreement contract in Togo and Senegal.
Legal and other provisions include amounts arising from claims, litigation and regulatory risks which will be utilized as the obligations are settled and includes sales tax and interest or penalties associated with taxes.
Other than the provision in Togo and Senegal for the overhaul which are expected to start respectively in 2021 and 2019, the other provisions have some uncertainty over the timing of cash outflows.
4.26. Trade and other payables
In $ millions Years ended December
31,
---------------------------- -----------------------
2016 2017
---------------------------- ----------- ----------
Trade payables 87.6 53.9
---------------------------- ----------- ----------
Accrued expenses 92.2 115.2
---------------------------- ----------- ----------
Trade and other payables 179.8 169.1
---------------------------- ----------- ----------
4.26. Other current liabilities
In $ millions Years ended December
31,
----------------------------------- -------------------------
2016 2017
----------------------------------- ----------- ------------
Deferred revenue 11.9 6.0
----------------------------------- ----------- ------------
Deferred payment on acquisition
(1) - 1.8
----------------------------------- ----------- ------------
Other taxes payable 26.5 45.1
----------------------------------- ----------- ------------
Other (2) 38.2 59.7
----------------------------------- ----------- ------------
Other current liabilities 76.6 112.6
----------------------------------- ----------- ------------
(1) Relates to the deferred payment of the thermal and renewable portfolio in Brazil as of December 31, 2017.
(2) The increase is primarily related to contractual obligations in Brazil partially offset by the completion of the acquisition of 15% and 5% minority interests in Chapada I and Chapada II projects in 2017 for a total consideration of $21.3 million. After this transaction, the Group owns directly 51% of those projects.
4.28. Group undertakings
ContourGlobal PLC United 15 Berkeley Street
Kingdom 6th Floor, London,
W1J 8DY
------------------------------------------------ ------------------ -----------------------------
Consolidated subsidiaries Ownership Country Registered address
of incorporation
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Hydro 100% Armenia AGBU building; 2/2
Cascade CJSC Meliq-Adamyan str.,0010
Yerevan, Armenia
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal erneuerbare 100% Austria Fleischmarkt 1, Top
Energie Europa 01, Vienna 1010,
GmbH Austria
------------------------------------ ---------- ------------------ -----------------------------
Windpark HAGN GmbH 95% Austria Fleischmarkt 1, Top
& Co KG 01, Vienna 1010,
Austria
------------------------------------ ---------- ------------------ -----------------------------
Windpark Deutsch 62% Austria Fleischmarkt 1, Top
Haslau GmbH 01, Vienna 1010,
Austria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Windpark 100% Austria Fleischmarkt 1, Top
Zistersdorf Ost 01, Vienna 1010,
GmbH Austria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Windpark 100% Austria Fleischmarkt 1, Top
Berg GmbH 01, Vienna 1010,
Austria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Windpark 100% Austria Fleischmarkt 1, Top
Scharndorf GmbH 01, Vienna 1010,
Austria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Windpark 100% Austria Fleischmarkt 1, Top
Trautmannsdorf 01, Vienna 1010,
GmbH Austria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Windpark 100% Austria Fleischmarkt 1, Top
Velm GmbH 01, Vienna 1010,
Austria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Management 100% Austria Fleischmarkt 1, Top
Europa GmbH 01, Vienna 1010,
Austria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Wind 100% Austria Fleischmarkt 1, Top
Holding GmbH 01, Vienna 1010,
Austria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Development 100% Austria Fleischmarkt 1, Top
GmbH 01, Vienna 1010,
Austria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Maritsa 73% Bulgaria 48 Sitnyakovo Blvd;
East 3 AD 9-th fl., Sofia 1505,
Bulgaria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Operations 73% Bulgaria TPP ContourGlobal
Bulgaria AD Maritsa East 3, Mednikarovo
village 6294, Galabovo
District, Stara Zagora
Region, Bulgaria
------------------------------------ ---------- ------------------ -----------------------------
ContourGlobal Management 100% Bulgaria 48 Sitnyakovo Blvd;
Sofia EOOD 9-th fl., Sofia 1505,
Bulgaria
------------------------------------ ---------- ------------------ -----------------------------
Galheiros Geração 77% Brazil Rua Leopoldo Couto
de Energia Elétrica Magalhães Junior,
S.A. 758, 3 andar, São
Paulo 04542-000,
Brazil
------------------------------------ ---------- ------------------ -----------------------------
Santa Cruz Power 72% Brazil Rua Leopoldo Couto
Corporation Usinas Magalhães Junior,
Hidroelétricas 758, 3 andar, Itaim
S.A. Bibi, São Paulo
04542-000, Brazil
------------------------------------ ---------- ------------------ -----------------------------
Contour Global 100% Brazil Rua Leopoldo Couto
Do Brasil Holding Magalhães Júnior,
Ltda 758, 3 andar, Sao
Paulo 04542-000,
Brazil
------------------------------------ ---------- ------------------ -----------------------------
Contour Global 80% Brazil Rua Leopoldo Couto
Do Brasil Participações Magalhães Júnior,
Ltda 758, 3 andar, Sao
Paulo 04542-000,
Brazil
------------------------------------ ---------- ------------------ -----------------------------
Abas Geração 100% Brazil Rua Leopoldo Couto
de Energia Ltda. Magalhães Junior,
758, 3 andar, São
Paulo 04542-000,
Brazil
------------------------------------ ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rodovia Dr. Mendel
Joana IX Energias Steinbruch, S/N -
Renováveis Km, 08 Sala 182 -
S.A. Distrito Industrial
- Maracanaú
- CE
------------------------------------ ---------- ------------------ -----------------------------
Calcedônia 100% Brazil Rua Leopoldo Couto
Geração Magalhães Junior,
de Energia Ltda. 758, 3 andar, São
Paulo 04542-000,
Brazil
------------------------------------ ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rua Leopoldo Couto
Joana X Energias de Magalhães
Renováveis Jr., 758 - cj. 31,
S.A. São Paulo 04542-000,
Brazil
------------------------------------ ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rua Leopoldo Couto
Joana XI Energias de Magalhães
Renováveis Jr., 758 - cj. 31,
S.A São Paulo 04542-000
------------------------------------ ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rua Leopoldo Couto
Joana XII Energias de Magalhães
Renováveis Jr., 758 - cj. 31,
S.A. São Paulo 04542-000,
Brazil
------------------------------------ ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rua Leopoldo Couto
Joana XIII Energias de Magalhães
Renováveis Jr., 758 - cj. 31,
S.A. São Paulo 04542-000,
Brazil
------------------------------------ ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rua Leopoldo Couto
Joana XV Energias de Magalhães
Renováveis Jr., 758 - cj. 31,
S.A. São Paulo 04542-000,
Brazil
------------------------------------ ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rua Leopoldo Couto
Joana XVI Energias de Magalhães
Renováveis Jr., 758 - cj. 31,
S.A. São Paulo 04542-000,
Brazil
------------------------------------ ---------- ------------------ -----------------------------
Consolidated subsidiaries Ownership Country Registered address
of incorporation
----------------------------- ---------- ------------------ -----------------------------
Asa Branca Holding 100% Brazil Rua Leopoldo Couto
S.A. de Magalhães
Jr., 758 - cj. 31,
São Paulo 04542-000,
Brazil
----------------------------- ---------- ------------------ -----------------------------
Tespias Geração 80% Brazil Rua Leopoldo Couto
de Energia Ltda. de Magalhães
Jr., 758 - cj. 31,
São Paulo 04542-000,
Brazil
----------------------------- ---------- ------------------ -----------------------------
Asa Branca IV 100% Brazil Rua Leopoldo Couto
Energias Renováveis de Magalhães
SA Jr., 758 - cj. 31,
São Paulo 04542-000,
Brazil
----------------------------- ---------- ------------------ -----------------------------
Asa Branca V Energias 100% Brazil Rua Leopoldo Couto
Renováveis de Magalhães
SA Jr., 758 - cj. 31,
São Paulo 04542-000,
Brazil
----------------------------- ---------- ------------------ -----------------------------
Asa Branca VI 100% Brazil Rua Leopoldo Couto
Energias Renováveis Magalhães Júnior,
SA 758, 3 andar, Sao
Paulo 04542-000,
Brazil
----------------------------- ---------- ------------------ -----------------------------
Asa Branca VII 100% Brazil Rua Leopoldo Couto
Energias Renováveis Magalhães Júnior,
SA 758, 3 andar, Sao
Paulo 04542-000,
Brazil
----------------------------- ---------- ------------------ -----------------------------
Asa Branca VIII 100% Brazil Rua Leopoldo Couto
Energias Renováveis Magalhães Júnior,
SA 758, 3 andar, Sao
Paulo 04542-000,
Brazil
----------------------------- ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rodovia Dr. Mendel
Joana I Energias Steinbruch, S/N
Renováveis - Km, 08 Sala 182
S.A. - Distrito Industrial
- Maracanaú
- CE
----------------------------- ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rodovia Dr. Mendel
Joana III Energias Steinbruch, S/N
Renováveis - Km, 08 Sala 182
S.A. - Distrito Industrial
- Maracanaú
- CE
----------------------------- ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rodovia Dr. Mendel
Joana IV Energias Steinbruch, S/N
Renováveis - Km, 08 Sala 182,
S.A. Distrito Industrial
- Maracanaú
- CE
----------------------------- ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rodovia Dr. Mendel
Joana V Energias Steinbruch, S/N
Renováveis - Km, 08 Sala 182
S.A. - Distrito Industrial
- Maracanaú
- CE
----------------------------- ---------- ------------------ -----------------------------
Ventos de Santa 51% Brazil Rodovia Dr. Mendel
Joana VII Energias Steinbruch, S/N
Renováveis - Km, 08 Sala 182
S.A. - Distrito Industrial
- Maracanaú
- CE
----------------------------- ---------- ------------------ -----------------------------
Ventos de Santo 51% Brazil Rodovia Dr. Mendel
Augusto IV Energias Steinbruch, S/N
Renováveis - Km, 08 Sala 182
S.A. - Distrito Industrial
- Maracanaú
- CE
----------------------------- ---------- ------------------ -----------------------------
Chapada do Piauí 51% Brazil Rua Leopoldo Couto
I Holdings S.A. de Magalhães
Jr., 758 - cj. 31,
São Paulo 04542-000
----------------------------- ---------- ------------------ -----------------------------
Ventos de Santo 100% Brazil Rodovia Dr. Mendel
Augusto III Energias Steinbruch, S/N
Renováveis - Km, 08 Sala 182
S.A. - Distrito Industrial
- Maracanaú
- CE
----------------------------- ---------- ------------------ -----------------------------
Ventos de Santo 100% Brazil Rua Leopoldo Couto
Augusto V Energias de Magalhães
Renováveis Jr., 758 - cj. 31,
S.A. São Paulo 04542-000,
Brazil
----------------------------- ---------- ------------------ -----------------------------
ContourGlobal 100% Brazil Rua Leopoldo Couto
Desenvolvimento de Magalhães
S.A. Jr., 758 - cj. 31
São Paulo 04542-000,
Brazil
----------------------------- ---------- ------------------ -----------------------------
Chapada do Piauí 51% Brazil Rua Leopoldo Couto
II Holding S.A. de Magalhães
Jr., 758 - cj. 31,
São Paulo 04542-000
----------------------------- ---------- ------------------ -----------------------------
Chapada do Piauí 100% Brazil Rua Leopoldo Couto
III Holding S.A. de Magalhães
Jr., 758 - cj. 31,
São Paulo 04542-000
----------------------------- ---------- ------------------ -----------------------------
Energyworks Do 80% Brazil Praia do Flamengo,
Brasil Ltda 70 - 10 andar, parte.
Rio de Janeiro -
RJ
----------------------------- ---------- ------------------ -----------------------------
Capuava Energy 80% Brazil Av. Presidente Costa
Ltda e Silva, 1178, parte,
Santo André/
----------------------------- ---------- ------------------ -----------------------------
Afluente Geração 79% Brazil Praia do Flamengo,
de Energia Eletrica 70 - 1 andar Rio
S.A. de Janeiro - RJ
----------------------------- ---------- ------------------ -----------------------------
Goias Sul Geração 80% Brazil Praia do Flamengo,
De Energia S.A. 70 - 2 andar, parte.
Rio de Janeiro -
RJ
----------------------------- ---------- ------------------ -----------------------------
RIO PCH I S.A. 56% Brazil Praia do Flamengo,
70 - 4 andar Rio
de Janeiro - RJ
----------------------------- ---------- ------------------ -----------------------------
Bahia PCH I S.A. 80% Brazil Praia do Flamengo,
70 - 6 andar, parte.
Rio de Janeiro -
RJ
----------------------------- ---------- ------------------ -----------------------------
ContourGlobal 100% Swiss
Swiss Holdings
GmBH
----------------------------- ---------- ------------------ -----------------------------
ContourGlobal 100% Colombia Carrera 7 No. 74-09,
LATAM S.A. Bogota, Colombia
----------------------------- ---------- ------------------ -----------------------------
ContourGlobal 100% Cyprus Capital Center,
Solutions Holdings 2-4 Arch, Makarios
Ltd III Avenue, 9th
Floor, Nicosia 1065,
Cyprus
----------------------------- ---------- ------------------ -----------------------------
ContourGlobal 100% Cyprus Capital Center,
Solutions Ltd 2-4 Arch, Makarios
III Avenue, 9th
Floor, Nicosia 1065,
Cyprus
----------------------------- ---------- ------------------ -----------------------------
ContourGlobal 80.0 Cyprus Capital Center,
Aguila Holdings 2-4 Arch, Makarios
Ltd III Avenue, 9th
Floor, Nicosia 1065,
Cyprus
----------------------------- ---------- ------------------ -----------------------------
Hamachi Limited 100% Cyprus Capital Center,
2-4 Arch, Makarios
III Avenue, 9th
Floor, Nicosia 1065,
Cyprus
----------------------------- ---------- ------------------ -----------------------------
Selenium Holdings 100% Cyprus Capital Center,
Ltd 2-4 Arch, Makarios
III Avenue, 9th
Floor, Nicosia 1065,
Cyprus
----------------------------- ---------- ------------------ -----------------------------
Consolidated subsidiaries Ownership Country Registered address
of incorporation
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal 100% Spain Arrúbal Power
La Rioja, S.L Plant, Polígono
Industrial El Sequero,
26150 Arrúbal,
La Rioja, Spain.
--------------------------- ---------- ------------------ ---------------------------------
Energies Antilles 100% France 8, Avenue Hoche 75008
Paris
--------------------------- ---------- ------------------ ---------------------------------
Energies Saint-Martin 100% France 8, Avenue Hoche 75008
Paris
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal Saint-Martin 100% France 5 Rue du Gal de Gaulle,
SAS 8 Immeuble le Colibri
Marigot,97150 Saint-Martin
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal Management 100% France Immeuble Imagine
France SAS 20-26 boulevard
du Parc 92200 Neuilly-sur-Seine
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal Worldwide 100% Gibraltar Hassans, Line Holdings
Holdings Limited Limited, 57/63 Line
Wall Road, Gibraltar
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal Helios 100% Italy Via Cusani 5, Milan
S.r.l. 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal Solar 100% Italy Via Cusani 5, Milan
Holdings (Italy) 20121, Italy
S.r.l.
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal Oricola 100% Italy Via Cusani 5, Milan
S.r.l. 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal Solutions 100% Italy Via Cusani 5, Milan
(Italy) S.R.L. 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Portoenergy S.r.l. 100% Italy Via Cusani 5, Milan
20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Officine Solari 100% Italy Via Cusani 5, Milan
Barone S.r.l. 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Officine Solari 100% Italy Via Cusani 5, Milan
Camporeale S.r.l. 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Contourglobal Mediterraneo 100% Italy Via Cusani 5, Milan
S.r.l 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
PVP 2 S.R.L. 100% Italy Via Cusani 5, Milan
20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal Sarda 100% Italy Via Cusani 5, Milan
S.r.l 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Officine Solari 100% Italy Via Cusani 5, Milan
Kaggio S.r.l. 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Officine Solari 100% Italy Contrada Piana del
Aquila S.r.l. Signore s.n.c.
93012 Gela (CL)
--------------------------- ---------- ------------------ ---------------------------------
CONTOURGLOBAL 100% Italy Via Cusani 5, Milan
ENERGETICA S.R.L. 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Ergyca Eight Srl 100% Italy Via Cusani 5, Milan
20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Ergyca Green Srl 100% Italy Via Cusani 5, Milan
20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Ergyca Industrial 100% Italy Via Cusani 5, Milan
Srl 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Ergyca Light Srl 100% Italy Via Cusani 5, Milan
20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Ergyca One Srl 100% Italy Via Cusani 5, Milan
20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Ergyca Sole Srl 100% Italy Via Cusani 5, Milan
20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
Ergyca Tracker 100% Italy Via Cusani 5, Milan
Srl 20121, Italy
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal Solutions 100% Kenya LR NO 209 311 5 9th
Kenya Ltd floor williamson
House 4th Ngong avenue,
PO box 40111-00100,
Nairobi, Kenya
--------------------------- ---------- ------------------ ---------------------------------
ContourGlobal Luxembourg 100% Luxembourg 35-37 Avenue de la
S.àr.l. Liberté L-1931
Luxembourg, Grand
Duchy of Luxembourg
--------------------------- ---------- ------------------ ---------------------------------
Consolidated subsidiaries Ownership Country Registered address
of incorporation
-------------------------- ---------- ------------------ ---------------------------
Kani Lux Holdings 80% Luxembourg 35-37 Avenue de la
S.à r.l. Liberté L-1931
Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Africa 100% Luxembourg 35-37 Avenue de la
Holdings S.à Liberté L-1931
r.l. Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Bulgaria 100% Luxembourg 35-37 Avenue de la
Holding S.à Liberté L-1931
r.l. Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Spain 100% Luxembourg 35-37 Avenue de la
Holding S.à Liberté L-1931
r.l. Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Latam 100% Luxembourg 35-37 Avenue de la
Holding S.à Liberté L-1931
r.l. Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
Vorotan Holding 100% Luxembourg 35-37 Avenue de la
S.à r.l. Liberté L-1931
Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Terra 100% Luxembourg 35-37 Avenue de la
2 S.à r.l. Liberté L-1931
Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Terra 100% Luxembourg 35-37 Avenue de la
3 S.à r.l. Liberté L-1931
Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Terra 100% Luxembourg 35-37 Avenue de la
4 S.à r.l. Liberté L-1931
Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Terra 100% Luxembourg 35-37 Avenue de la
5 S.à r.l. Liberté L-1931
Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Terra 100% Luxembourg 35-37 Avenue de la
6 S.à r.l. Liberté L-1931
Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Solutions 100% Luxembourg 35-37 Avenue de la
Holdings S.a.r.l. Liberté L-1931
Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Senegal 100% Luxembourg 35-37 Avenue de la
Holdings S.à Liberté L-1931
r.l. Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal Terra 100% Luxembourg 35-37 Avenue de la
Holdings S.à Liberté L-1931
r.l Luxembourg, Grand
Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% Luxembourg 35-37 Avenue de
Power Holdings la Liberté
S.A. L-1931 Luxembourg,
Grand Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% Luxembourg 35-37 Avenue de
Worldwide Holdings la Liberté
S.à r.l. L-1931 Luxembourg,
Grand Duchy of Luxembourg
-------------------------- ---------- ------------------ ---------------------------
Aero Flash Wind, 75% Mexico Mexico City, Mexico
S.A.P.I. DE C.V. / Tax Address: Ciudad
de Tecate, Baja
California
-------------------------- ---------- ------------------ ---------------------------
KivuWatt Holdings 100% Mauritius 4th Floor, Tower
A, 1CyberCity, c/o
Citco (Mauritius)
Limited, Ebene,
Mauritius
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% Nigeria St. Nicholas House,
Solutions (Nigeria) 10th Floor, Catholic
Ltd Mission Street,
Lagos, Nigeria
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% Netherlands Keplerstraat 34,
Solutions Nigeria Badhoevedorp 1171CD,
Holdings B.V. Netherlands
-------------------------- ---------- ------------------ ---------------------------
Contourglobal 100% Netherlands Kaya Carlos A. Nicolaas
Bonaire B.V. 3, Bonaire, Netherlands
-------------------------- ---------- ------------------ ---------------------------
Energía Eólica 100% Peru Av. Ricardo Palma
S.A. 341, Office 306,
Miraflores, Lima
18, Peru
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% Peru Av. Ricardo Palma
Peru SAC 341, Office 306,
Miraflores, Lima
18, Peru
-------------------------- ---------- ------------------ ---------------------------
Energía Renovable 100% Peru Av. Ricardo Palma
Peruana S.A. 341, Office 306,
Miraflores, Lima
18, Peru
-------------------------- ---------- ------------------ ---------------------------
Energía Renovable 100% Peru Av. Ricardo Palma
del Norte S.A. 341, Office 306,
Miraflores, Lima
18, Peru
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% Poland ul. Przemyslowa
Solutions (Poland) 2A, Radzymin 05-250
Sp. Z o.o. - Poland
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% Paraguay Simon Bolivar, #
Paraguay Holdings 914 casi Parapiti,
SA Asuncion, Paraguay
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% Romania Ploeisti, 285 Gheorge
Solutions (Ploiesti) Grigore, Cantacuzino
S.R.L. street, Prahova
County, Ploeisti,
Romania
-------------------------- ---------- ------------------ ---------------------------
Kivu Watt Ltd 100% Rwanda Plot 9714, Nyarutarama,
P. O. Box 6679,
Kigali, Rwanda
-------------------------- ---------- ------------------ ---------------------------
RENERGIE Solarny 100% Slovak 25 Pribinova Str.,
Park Holding SK Republic Bratislava 811 09,
I a.s. Slovakia
-------------------------- ---------- ------------------ ---------------------------
PV Lucenec S.R.O. 100% Slovak Pribinova 25, 811
Republic 09 Bratislava, Slovakia
-------------------------- ---------- ------------------ ---------------------------
Consolidated subsidiaries Ownership Country Registered address
of incorporation
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Rimavské Republic 09 Bratislava, Slovakia
Jánovce s.r.o.
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Dulovo s.r.o. Republic 09 Bratislava, Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Gemer s.r.o. Republic 09 Bratislava, Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Hodejov s.r.o. Republic 09 Bratislava, Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Jesenské Republic 09 Bratislava, Slovakia
s.r.o.
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Ni ná Republic 09 Bratislava, Slovakia
Pokoradz s.r.o.
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Riečka Republic 09 Bratislava, Slovakia
s.r.o.
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Rohov s.r.o. Republic 09 Bratislava, Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Star a s.r.o. Republic 09 Bratislava, Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Včelince Republic 09 Bratislava, Slovakia
2 s.r.o.
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak Pribinova 25, 811
park Hurbanovo Republic 09 Bratislava, Slovakia
s.r.o.
-------------------------- ---------- ------------------ -------------------------
AlfaPark s.r.o. 100% Slovak Pribinova 25, 811
Republic 09 Bratislava, Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Druhá 100% Slovak Pribinova 25, 811
slnečná Republic 09 Bratislava, Slovakia
s.r.o.
-------------------------- ---------- ------------------ -------------------------
SL03 s.r.o. 100% Slovak 25 Pribinova Str.,
Republic Bratislava 811 09,
Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Bánovce Republic Bratislava 811 09,
nad Ondavou s.r.o. Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Bory s.r.o. Republic Bratislava 811 09,
Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Budulov s.r.o. Republic Bratislava 811 09,
Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Kalinovo Republic Bratislava 811 09,
s.r.o. Slovakia
-------------------------- ---------- ------------------ -------------------------
ZetaPark Lefantovce 100% Slovak 25 Pribinova Str.,
s.r.o. Republic Bratislava 811 09,
Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
Lefantovce s.r.o. Republic Bratislava 811 09,
Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Michalovce Republic Bratislava 811 09,
s.r.o. Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Ni ný Republic Bratislava 811 09,
Skálnik s.r.o. Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Otročok Republic Bratislava 811 09,
s.r.o. Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Pa ovce s.r.o. Republic Bratislava 811 09,
Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Gomboš Republic Bratislava 811 09,
s.r.o. Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Rimavská Republic Bratislava 811 09,
Sobota s.r.o. Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Horné Republic Bratislava 811 09,
Turovce s.r.o. Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Uzovská Republic Bratislava 811 09,
Panica s.r.o. Slovakia
-------------------------- ---------- ------------------ -------------------------
RENERGIE Solárny 100% Slovak 25 Pribinova Str.,
park Zemplínsky Republic Bratislava 811 09,
Branč s.r.o. Slovakia
-------------------------- ---------- ------------------ -------------------------
Consolidated subsidiaries Ownership Country Registered address
of incorporation
-------------------------- ---------- ------------------ ---------------------------------
ZetaPark s.r.o. 100% Slovak 25 Pribinova Str.,
Republic Bratislava 811 09,
Slovakia
-------------------------- ---------- ------------------ ---------------------------------
ContourGlobal 100% 2, Place de L'Indépendance,
Cap des Biches Dakar, BP 23607,
Senegal S.à Senegal
r.l. Senegal
-------------------------- ---------- ------------------ ---------------------------------
80% Route D'Aného,
ContourGlobal Baguida, BP 3662,
Togo S.A. Togo Lomé - Togo
-------------------------- ---------- ------------------ ---------------------------------
ContourGlobal 100% Togo Immeuble SCI - Direction
Services Africa de l'administration
S. à r.l. pénitentiaire
& de la réinsertion
- Angle Rue Agbata,
Boulevard du 13
Janvier - 01 BP
3662, Lomé
-TOGO
-------------------------- ---------- ------------------ ---------------------------------
Mega-resurs CJSC 51% Ukraine 84301, Donetsk oblast,
Kramatorsk city,
26 19th Partsiezda
str, Ukraine
-------------------------- ---------- ------------------ ---------------------------------
Kramatorskteploenergo 60% Ukraine 5 Ordjonikidze Street,
LLC Kramatorsk city,
Donetsk region,
Ukraine 84305
-------------------------- ---------- ------------------ ---------------------------------
Co-Generation 38% Ukraine 77701 51 Schevchenko
Technologies B1 Street, Bogorychany
LLC city, Ivano-Frankivsk
region, Ukraine
-------------------------- ---------- ------------------ ---------------------------------
99% 5/2c Yaroslavska
ContourGlobal Street, 4th Floor,
Ukraine LLC Ukraine Kyiv 04071, Ukraine
-------------------------- ---------- ------------------ ---------------------------------
75% 02125 ,1 Prospect
Vyzvolyteliv, Kiev,
AMC Energy LLC Ukraine Ukraine
-------------------------- ---------- ------------------ ---------------------------------
ContourGlobal 100% United 6th Floor Lesley
Solutions (Northern Kingdom Tower, 42-26 Fountain
Ireland) Limited Street, Belfast
BT1 5EF, Ireland
-------------------------- ---------- ------------------ ---------------------------------
ContourGlobal 100% United Oceana House, 39-49
Europe Limited Kingdom Commercial Road,
Southampton SO15
1 GA, United Kingdom
-------------------------- ---------- ------------------ ---------------------------------
ContourGlobal 100% United Jordans Limited,
Yield Limited Kingdom 20-22 Bedford Row,
London WC1R4JS,
United Kingdom
-------------------------- ---------- ------------------ ---------------------------------
Contour Global 100% US 1209 Orange Street,
LLC Corporation Trust
Center, Wilmington,
Delaware 19801
-------------------------- ---------- ------------------ ---------------------------------
Contour Global 100% US 1209 Orange Street,
Management Inc Corporation Trust
Center, Wilmington,
Delaware 19801
-------------------------- ---------- ------------------ ---------------------------------
ContourGlobal 100% US 650 Fifth Ave -
Services Brazil 17th Fl., New York,
LLC New York 10019
-------------------------- ---------- ------------------ ---------------------------------
ContourGlobal 100% US 2711 Centerville
Togo LLC Road, Suite 400,
Wilmington, Delaware
19808
-------------------------- ---------- ------------------ ---------------------------------
Consolidated subsidiaries Ownership Country Registered address
of incorporation
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% US 1209 Orange Street,
A Funding LLC Corporation Trust
Center, Wilmington,
Delaware 19801
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% US 2711 Centerville
Senegal Holdings Road, Suite 400,
LLC Wilmington, Delaware
19808
-------------------------- ---------- ------------------ ---------------------------
ContourGlobal 100% US 1209 Orange Street,
Senegal LLC Corporation Trust
Center, Wilmington,
Delaware 19801
-------------------------- ---------- ------------------ ---------------------------
CG Solutions Global 100% US Corporation Trust
Holding Company Center, 1209 Orange
LLC Street, Corporation
Trust Center, Wilmington,
Delaware 19801
-------------------------- ---------- ------------------ ---------------------------
Investments in Ownership Country Registered address
associates accounted of incorporation
under the equity
method:
---------------------- ---------- ------------------ -----------------------
TermoemCali I 37% Colombia Carrera 5A N 71-45,
S.A. E.S.P. Bogotá, Colombia
---------------------- ---------- ------------------ -----------------------
Compañía 49% Colombia Carrera 14 No. 20-21
Eléctrica Local 205A, Plaza
de Sochagota S.A. Real, Tunja, Colombia
E.S.P.
---------------------- ---------- ------------------ -----------------------
Productora de 50% Colombia Cr. 9 No. 74-08 Of.
Energía de 105, Bogotá,
Boyacá S.A.S. Colombia
E.S.P
---------------------- ---------- ------------------ -----------------------
4.29. Related party disclosure
ContourGLobal L.P. and Reservoir Capital Group
As of December 31, 2017 we have no significant financial relationship with the Group's main shareholder, ContourGlobal L.P., and Reservoir Capital Group which ultimately controls ContourGlobal L.P.
ContourGlobal L.P.
ContourGlobal L.P. had intercompany relations with the Group which are reflected in the consolidated statement of financial position as related parties within "Other current assets". The net position was an asset receivable by the Group which amounted to $19.2 million as of December 31, 2016 and to $21.3 million as of November 8, 2017. At this date, prior to the listing, ContourGlobal Plc distributed a dividend in cash of $21.3 million to ContourGlobal L.P. which was used to repay in full the assets receivable to ContourGlobal L.P. As a result, there are no related party positions remaining as of December 31, 2017 with ContourGlobal L.P.
Key management personnel
Compensation paid to key management (executive committee members) amounted to $8.7 million in December 31, 2017 (December 31, 2016: $9.7 million).
In $ millions Years ended December 31,
--------------------------------------------- ---------------------------
2016 2017
--------------------------------------------- ------------- ------------
Salaries and short-term employee benefits 5.9 4.8
--------------------------------------------- ------------- ------------
Termination benefits - 0.8
--------------------------------------------- ------------- ------------
Post-employment benefits 0.2 0.2
--------------------------------------------- ------------- ------------
Profit-sharing and Bonus schemes 3.6 2.9
--------------------------------------------- ------------- ------------
Total 9.7 8.7
--------------------------------------------- ------------- ------------
4.30. Financial commitments and contingent liabilities
a/ Commitments
The Group has contractual commitments with, among others, equipment suppliers, professional service organizations and EPC contractors in connection with its power projects under construction that require payment upon reaching certain milestones. As of December 31, 2017, the Group has completed all its construction projects and had $3.5 million of firm purchase commitments of property plant and equipment outstanding in connection with its Maritsa facilities. The Group has also contractual arrangements with Operating and Maintenance (O&M) providers and transmission operators as it relates to certain of its operating assets.
Maritsa has a long-term Lignite Supply Agreement (LSA) with Maritsa Iztok Mines (MMI) for the purchase of lignite. According to the agreement, Maritsa has to purchase minimum monthly quantities, amounting to 6,187 thousand standard tons per calendar year. The total commitment through the remaining term of the LSA (February 2024) is 37,638 thousand standard tons, equal to $381.2 million at December 2017 prices ($10.13 per standard ton), as compared to 43,825 thousand standard tons equal to $388.8 million at the end of 2016 ($8.87 per standard ton). In the event of a failure on the part of CG Maritsa East 3 AD (ME-3) to take a minimum monthly quantity in any month, ME-3 shall, except in cases caused by Force Majeure and certain actions of Bulgarian authorities as described in the contract, pay to MMI an amount equal to the difference between (i) the aggregate amount paid or payable in respect of lignite delivered during such month and (ii) the aggregate amount that would have been payable had the minimum monthly quantity been taken during such month.
Pursuant to Vorotan acquisition, the Group has agreed to refurbish the hydro power plants and intends to invest approximately $70 million over six years in a refurbishment program started in 2017 to modernize Vorotan and improve its operational performance, safety, reliability and efficiency. As of December 31, 2017 Vorotan disbursed $9.8 million of which $9.5 million advance payment to EPC contractor.
b/ Contingent liabilities
The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business. The Group reviews these matters in consultation with internal and external legal counsel to make a determination on a case-by-case basis whether a loss from each of these matters is probable, possible or remote. These claims involve different parties and are subject to substantial uncertainties.
Operation & Maintenance contractor litigation (Energies Antilles)
In 2011, Energies Antilles ("EA") was forced to pay to EDF, the offtaker under the PPA, a EUR5 million penalty in relation to damages following labor strikes by the operator's employees and related disruptions. EA subsequently raised a claim against the power plant's operation and maintenance ("O&M") contractor for the same amount and collected certain amounts under related performance bonds. On June 5, 2015, EA received a favorable judgment in its proceeding against the O&M contractor, as the court awarded EA substantially all of the amounts claimed, including both the unpaid portion of the performance bond and all other penalty amounts not covered by the performance bonds. The O&M contractor appealed the decision. In April 2017, the Court of Appeal confirmed the first instance favorable judgment. The O&M contractor brought the claim to the Supreme Court in May 2017. No decision from the Supreme Court is expected before 2018.
In 2010, a EUR5 million legal claim was brought against EA by the O&M contractor in relation to cost overruns following changes in French labor laws ("IEG status" - Industries Electriques et Gazières). Last briefs have been filed in January 2017. On February 22, 2018, the Paris Commercial Tribunal fixed the pleading hearings on May 24, 2018.
Minority shareholder litigation (ContourGlobal Latam S.A.)
In July 2015, CG Latam S.A. received a notice of arbitration under International Chamber of Commerce rules from a minority shareholder in the Inka project alleging fraud in the negotiation and performance of that project's investment agreement and shareholder agreement, seeking nullification of those agreements and return of the majority shareholding in Energía Eólica S.A. ("EESA"), the entity that owns the project, or, in the alternative, restitution of an amount equivalent to the value of EESA. CG Latam S.A. received the claimant's statement of claim in January 2017 and filed its statement of defense on August 14, 2017. An evidentiary hearing of fact witnesses was held in early February 2018, and the tribunal will schedule a second hearing for expert witnesses. The Group expect the second hearing to be scheduled for the second quarter of 2018.
No provision has been recorded as of December 31, 2017 in relation to the above claims as the Group considers that it is less than probable that liabilities will arise from these claims.
The Group from time to time is involved in disputes in relation to ongoing tax matters in a number of jurisdictions around the world. Where appropriate, provisions are recorded, based on the assessment of each case.
c/ Lease commitments
Operating lease as a lessee
The Group is lessee under non-cancelable operating leases, primarily for office space and land to conduct its business. The future aggregate minimum lease payments under non-cancellable operating leases are as follows
In $ millions Years ended December 31,
----------------------------------------------- ---------------------------
2016 2017
----------------------------------------------- ------------- ------------
No later than 1 year 5.5 5.9
----------------------------------------------- ------------- ------------
Later than 1 year and no later than 5 years 21.0 21.0
----------------------------------------------- ------------- ------------
Later than 5 years 283.5 243.3
----------------------------------------------- ------------- ------------
Total 310.0 270.2
----------------------------------------------- ------------- ------------
In $ millions Years ended December
31,
---------------------------------- -----------------------
2016 2017
---------------------------------- ----------- ----------
Minimum lease payments
---------------------------------- ----------- ----------
No later than 1 year 0.3 0.3
---------------------------------- ----------- ----------
Later than 1 year and no later
than 5 years 1.3 1.3
---------------------------------- ----------- ----------
Later than 5 years 3.7 3.4
---------------------------------- ----------- ----------
Gross investment in the lease 5.4 5.0
---------------------------------- ----------- ----------
Future finance interest (2.1) (1.9)
---------------------------------- ----------- ----------
Present value of financial
lease obligation 3.3 3.1
---------------------------------- ----------- ----------
Financing lease as a lessee
The future aggregate minimum lease payments under non-cancellable financing leases (Inka project) are as follows:
In $ millions Years ended December
31,
---------------------------------- -----------------------
2016 2017
---------------------------------- ----------- ----------
Minimum lease payments
---------------------------------- ----------- ----------
No later than 1 year 0.3 0.3
---------------------------------- ----------- ----------
Later than 1 year and no later
than 5 years 1.3 1.3
---------------------------------- ----------- ----------
Later than 5 years 3.7 3.4
---------------------------------- ----------- ----------
Gross investment in the lease 5.4 5.0
---------------------------------- ----------- ----------
Future finance interest (2.1) (1.9)
---------------------------------- ----------- ----------
Present value of financial
lease obligation 3.3 3.1
---------------------------------- ----------- ----------
Operating lease as a lessor
The Group is lessor under non-cancelable operating leases. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Years ended December 31,
----------------------------------------------- ---------------------------
In $ millions 2016 2017
----------------------------------------------- ------------- ------------
Minimum lease payments
----------------------------------------------- ------------- ------------
No later than 1 year 43.8 62.0
----------------------------------------------- ------------- ------------
Later than 1 year and no later than 5 years 188.5 249.4
----------------------------------------------- ------------- ------------
Later than 5 years 622.5 577.5
----------------------------------------------- ------------- ------------
Total 854.8 888.9
----------------------------------------------- ------------- ------------
Finance lease as a lessor
The future aggregate minimum lease payments under non-cancellable finance leases (relating to our operation of Energies Saint Martin and Bonaire) are as follows:
In $ millions Years ended December 31,
----------------------------------------------- ---------------------------
2016 2017
----------------------------------------------- ------------- ------------
Minimum lease payments
----------------------------------------------- ------------- ------------
No later than 1 year 11.3 12.0
----------------------------------------------- ------------- ------------
Later than 1 year and no later than 5 years 44.5 47.2
----------------------------------------------- ------------- ------------
Later than 5 years 48.4 38.1
----------------------------------------------- ------------- ------------
Gross investment in the lease 104.2 97.3
----------------------------------------------- ------------- ------------
Less: unearned finance income (30.6) (26.1)
----------------------------------------------- ------------- ------------
Total 73.6 71.2
----------------------------------------------- ------------- ------------
In $ millions Years ended December 31,
----------------------------------------------- ---------------------------
2016 2017
----------------------------------------------- ------------- ------------
Analyzed as:
----------------------------------------------- ------------- ------------
Present value of minimum lease payment
----------------------------------------------- ------------- ------------
No later than 1 year 10.7 11.4
----------------------------------------------- ------------- ------------
Later than 1 year and no later than 5 years 34.5 36.4
----------------------------------------------- ------------- ------------
Later than 5 years 28.4 23.4
----------------------------------------------- ------------- ------------
Total 73.6 71.2
----------------------------------------------- ------------- ------------
4.31. Guarantees and letters of credit
The Group and its subsidiaries enter into various contracts that include indemnification and guarantee provisions as a routine part of the Group's business activities. Such contracts generally indemnify the counterparty for tax, environmental liability, litigation, and other matters, as well as breaches of representations, warranties, and covenants set forth in the agreements. In many cases, the Group's maximum potential liability cannot be estimated, since some of the underlying agreements contain no limits on potential liability.
The Group also acts as guarantor to certain of its subsidiaries and obligor with respect to some long-term arrangements contracted at project level.
For the financial guarantees and letters of credit, refer to note 4.23 Borrowings.
4.32. Statutory Auditors fees
In $ millions Years ended December 31,
----------------------------------------------------------------------------------------- ---------------------------
2016 2017
----------------------------------------------------------------------------------------- ------------- ------------
Fees payable to the Group's auditor for the audit of the Group's annual accounts and
consolidated
financial statements 0.9 1.3
Fees payable to the Group's auditor and its associates for other services:
- The audit of the Group's subsidiaries 0.9 1.1
- Other assurance services 0.7 6.6
- Tax compliance services - -
- Tax advisory services - -
- Other non-audit services 0.2 0.1
Total 2.7 9.1
The increase in other assurance services relate to exceptional events of the period which includes the Initial Public Offering in the United Kingdom of ContourGlobal Plc ($5.7 million) in November 2017 and February 2017 bond issuance ($0.3 million).
4.33. Subsequent events
Acquisition of a renewable portfolio in Italy
On December 23, 2017, the Group signed the acquisition of a 24 MW renewable portfolio consisting of 10 photovoltaic plants in Italy (15 MW), one photovoltaic plant in Romania (7 MW) and 2 biogas plants in Italy (2 MW).
The transaction closed in March 2018.
Acquisition of a renewable portfolio in Spain
On February 27, 2018, the Group signed the acquisition of Acciona Energia's 250 MW portfolio of five 50 MW Concentrating Solar Power plants in South-West Spain. The total enterprise value amounts to EUR962 million, including an amount payable to Acciona Energía of approximately EUR806 million and existing net debt (including adjustment for working capital) of EUR156 million. The Group has also agreed to make earn-out payments to Acciona Energía of up to EUR27 million.
The acquisition combines the Group's solar and Spanish thermal operating expertise into a sizable portfolio of assets enabling synergies with existing European operations.
The acquisition is expected to close in the second quarter of 2018 and is subject to various conditions.
Sale of Ukrainian assets
On February 26, 2018, the Group sold 100% of its stake in Ukrainian power plant Kramatorsk representing a total of 120 MW.
[1] "LTIR" measures recordable lost time incident ("LTI") rates on the basis of 200,000 working hours.
"LTI" is an employment related incident that results in serious injury or illness which results in one or more days away from work.
[2] Meridith Armstrong Whitney, Charles J. Bennett, "Driving Toward "0": Best Practices in Corporate Safety and Health, The Conference Board Research Report R-1334-03-RR (2003)
[3] "TRIR" measures amount of the total number of all work-related cases (restricted work days, medical treatment, and lost time incidents).
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EADLSESAPEEF
(END) Dow Jones Newswires
April 05, 2018 02:00 ET (06:00 GMT)
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