Kedco plc Annual Report 2013 by charlie neville

Kedco plc

Annual Report and Accounts

2013

Contents About Us

Chairman’s Statement

Chief Executive’s Report

Board of Directors

Directors’ Report

Statement of the Directors’ Responsibilities

Corporate Governance Report

Independent Auditors’ Report

Consolidated Statement of Profit or Loss

Consolidated Statement of Other Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Company Statement of Financial Position

Company Statement of Changes in Equity

Company Statement of Cash Flows

Notes to the Consolidated Financial Statements

Advisers and Other Information

KEDCO PLC - Annual Report and Accounts 2013

We c ur r ent ly have a pipeline o f re n e w a b l e e n e r g y p r o j e c t s a t v a r i o u s s t a g e s of o p e r a t i o n a n d d e v e l op m e nt t o ta ll i n g 157M W.

About Us Strategy Our business strategy is to identify, develop, build, own and operate electricity and heat generation plants in the UK and Ireland. These plants contribute to the need for sustainable energy from renewable sources.

We possess significant knowledge of renewable energy markets, clean technologies, fuel sources, project development, project finance, project delivery and operation.

We are technology neutral and are focused on delivering optimal returns for shareholders through the diversification of technology, development and jurisdictional risks using Biomass, Wind and Solar renewable technologies.

We aim to have a minimum of 300MW in its total pipeline within three years. We currently has a pipeline of renewable energy projects at various stages of operation and development totalling 157MW.

Operational Highlights ●

Continued strong progress on the Enfield Project including the

appointment of MWH Global Inc (‘MWH’) as EPC provider and the Foresight Group as the preferred funding partner. ●

●

Successful energisation of the 800kw Pluckanes wind turbine project

and the export of electricity to the national grid. ●

●

Increased the size of development portfolio from 70MW at the end

of 2012 to 157MW at November 2013. ●

●

The handover of the Newry Biomass Advanced Gasification Plant

from final commissioning of Phase 1 and its continuing sale of electricity to the Northern Ireland Grid.

KEDCO PLC - Annual Report and Accounts 2013

Financial Highlights – Year ended 30th June 2013

●

Revenue in the period amounted to e2.6 million and was in line with

management expectations (FY 2012: e10.1m). Turnover in the Group relates to the sale of equipment to complete Phase One of the Newry joint venture project. ●

●

Administrative costs increased to e2.7m (FY 2012: e1m) primarily as a

result of a loss on foreign exchange e443K versus a gain in 2012 of e392K; impairment of freehold property in Ireland of e319K; consultancy fees of e274K charged to a jointly controlled entity in FY 2012 and credits in FY 2012 relating to revision of accounting estimates of e250K. On a like for like basis administrative expenses increased slightly to e1.93m from e1.87m, which is a result of the acquisition that took place in the year.

●

● ●

Loss for the period of e2.8m, (FY 2012 loss: e2.5m).

At 30th June 2013, the Group had net debt of e4.6m (30th June 2012:

e12m). ● ●

0.4 cent loss per share from continuing operations (FY 2012: loss per share

0.6 cent).

Share Placing / Funding ●

Raised approximately e1 million in equity and received £500,000 in

loans from existing and new shareholders in the financial year.

●

Entered into a rolling, monthly working capital facility in August 2013

with its 26.79% shareholder Farmer Business Developments plc. capped at e500,000. ●

●

The Group announced on 20th August 2013 that its wholly owned

subsidiary, Reforce Energy Limited, had raised e215,000 in loan notes from private investors and that Ulster Bank Ireland Limited have made available working capital and other facilities totalling £750,000 to be used to fund the working capital needs and the continued build out of the Newry Biomass Limited biomass project located in Newry, Northern Ireland.

KEDCO PLC - Annual Report and Accounts 2013

Acquisition and Restructuring ●

Successfully negotiated the acquisition in December 2012 of Reforce

Energy Limited, a project developer with a wind portfolio of 88MW at various stages of development. ●

●

Completed the disposal of a non-core asset being the entire interest

in Latvian subsidiary for e3m, as part of debt restructuring. ●

●

Successfully negotiated balance sheet restructuring with various

lenders, resulting in the conversion of debt to equity and a reduction of balance sheet debt.

‘

Chairman’s Statement -

The Group has performed in line with expectations and we are successfully

Kedco operates in energy markets in the UK and Ireland where the renewable energy sector remains central to the plans of both Governments for their respective energy markets. Key policy decisions on support for renewable energy both now and in the future continue to be favourable. The announcement in a joint statement by both governments in June 2013 on the development of renewable trading between the two countries illustrates this further. Rising fossil fuel prices and the security of energy supply remain an ongoing concern and reflect the need to develop greater energy independence and sustainability. The Group is a ‘technology neutral’ renewable energy business with a core focus on developing and delivering operational electricity and heat generation projects. The Group focuses on both medium sized and small-scale projects, providing flexibility to maximise existing land positions whilst diversifying development and technology risks. This flexible business model will deploy capital where it can achieve the best return for shareholders whilst still keeping the focus on the generation of clean energy from either electricity or heat. Diversification in the business model, management experience, proper structuring of contracts at an early stage and delegation of construction and operating risk to financially strong counterparties are all key aspects of Kedco’s risk mitigation.

delivering on our development plans.

During the course of the year we saw a strengthening of the business foundation of the Company. We are encouraged by our progress so far this year. The Group has performed in line with expectations and we are successfully delivering on our development plans. Important highlights include the handover of the Newry Biomass Advanced Gasification Plant from final commissioning of Phase 1 and its continuing sale of electricity to the Northern Ireland Grid, the energisation of the Pluckanes wind turbine and its commencement of the sale of electricity to the Irish Grid and the continuing progress of the Enfield Biomass Gasification Plant in North London to a stage where financial close is expected shortly. The Directors believe that the Group is well placed to successfully deliver its strategic goals, underpinned by the commitment to a cleaner and more secure energy future. On behalf of my colleagues on the board, we wish to express our thanks to the management and staff who have continued to work so diligently over the past year.

Dermot O’Connell Non-Executive Chairman p6

‘

KEDCO PLC - Annual Report and Accounts 2013

Chief Executive’s Report -

The Company currently has 157MW of potential power at various stages of development

Operational Review The Group’s strategy is to develop medium to small-scale renewable energy generation plants generally in the range of 0.5MW to 20MW. This range is considered to be optimal in terms of the energy market and in terms of the Group’s business model. The Group is operating a project development model. The Group finds project sites, then obtains planning and environmental permissions as well as developing and specifying the power project, thus generating substantial value. Debt and equity partners are then sought to enable the project build out, with the Group retaining a material equity stake of at least 50% in each project. The developer model enables the developer, the Group, to make substantial returns on its initial investment on development and permitting costs. The Group expects to generate in excess of 3 times return on individual projects that typically take three years to execute. The Group currently has 157MW of potential power at various stages of development as set out below: Biomass CHP Project Portfolio – 69MW Newry Biomass 4MW CHP Project The Company announced that the Newry Biomass CHP project had exported electricity to the grid in September 2012. Since then the Group, in conjunction with both Zeropoint and Clarke Energy, has undertaken standard reliability tests of the equipment before formally taking over the equipment from its respective partners. The GE Jenebacher engine was commissioned by Clarke Energy on 7th September 2012 with the gasifier being commissioned and taken over by the Company on 4th June 2013. Following the formal commissioning hand over, the Group has been focused on completing various tests and reports required by Ulster Bank Ireland Limited in connection with the drawdown of debt facilities for Phase 2 of the project for an additional 2MW. The bank’s technical adviser, Mott McDonald, have completed their report and submitted it to Ulster Bank for their approval. The Group is currently in discussions with Ulster Bank regarding this report and the timing for the drawdown of facilities for Phase 2.

Chief Executive’s Report - continued The electricity generated by the plant is being sold to Bord Gais Eireann under a Power Purchase Agreement (‘PPA’). The civil and on-site works for this additional 2MW have already been completed and a deposit has been paid to secure the expansion of the grid infrastructure for the project. The Group has invested £5.6m through a combination of equity and loan notes in the project corporate entity and owns 50 per cent of the ordinary equity and 92 per cent of the economic return from the project. Our major shareholder, Farmer Business Developments plc owns the remaining 50 per cent of the ordinary equity but is only entitled to 8 per cent of the economic return from the project. The balance of the project funding was arranged through a financing deal with RBS Ulster Bank, which committed project finance facilities of up to £8m. Further updates will be provided in the near future as the project moves towards full commissioning of the first phase. A pre-planning consultation process regarding the 4MW Phase 3 extension to the Newry Biomass project is currently underway and a formal planning application will be submitted shortly.

12MW Enfield Biomass CHP Project The Enfield Project has full Planning and Environmental Permission for the conversion of 60,000 tonnes of waste timber per annum into up to 12MW of electricity and heat. The project is expected to reach financial close and start construction shortly. The Group announced recently that it has chosen MWH as its preferred construction contractor for the Enfield Project following a competitive tender process, which was run earlier this year. MWH is a leading provider of EPC construction services to the utilities and renewables sectors. MWH have offered a turnkey solution for the construction of the entire project under an engineering, procurement and construction (‘EPC’) contract, which will also incorporate the supply of the gasification system. Draft EPC contracts have been exchanged and detailed negotiations are on-going. Fichnter Consulting Engineers continue to assist the Group with these negotiations and all parties are working towards finalising and signing the contract in the near future. p8

The Group also confirmed that it has chosen Statkraft Markets GmBH (‘Statkraft’) as its preferred partner for the purchase of 100% of the electricity generated by the plant. Heads of terms for a long term power purchase agreement have been agreed with Statkraft and draft contracts have been exchanged. The Group is well advanced with discussions to finalise this agreement. The Group has continued to work with a large multinational, located close to the Enfield Project, to purchase 100% of the heat generated by the Enfield Project. A detailed heat study and pipe route layout has been completed and the Group is in advanced discussions regarding the commercial terms of the offtake agreement. The grid connection agreement for the Enfield Project was secured earlier in the year with the payment of the deposit to UK Power Networks. Discussions are on-going with UK Power Networks to finalise the construction programme for the grid connection. The Group is continuing to negotiate heads of terms for the supply of feedstock to the Enfield Project with a number of suppliers. The intention is to contract the majority of the feedstock required on financial close for the funding of the project. The Group is continuing to work with the Foresight Group regarding the financing of the project and due diligence is nearly completed. Both parties continue to work towards reaching financial close shortly with construction to start immediately following this.

12MW Clay Cross Biomass CHP The Group is currently engaged in the consenting process for a 12MW site in Clay Cross in Derbyshire in cooperation with the Larkfleet Group its co-development partner on the site.

KEDCO PLC - Annual Report and Accounts 2013

Chief Executive’s Report - continued 12MW Plymouth Biomass CHP On the 2 July 2013 the Group announced that it had signed heads of terms with the London & Devonshire Trust (“LDT”) regarding a site for a 12MW biomass CHP project in Plymouth. Both the Group and LDT remain committed to the project and the expectation is that a legally binding option agreement will be signed shortly. LDT have continued with the development of the wider site and have secured a grid connection offer for the Biomass CHP project.

The Group continues to focus on single wind turbine projects in Ireland and the UK. At present the Group has five such projects in the planning process with decisions on a number expected before the end of this calendar year. The Group intends to finance groups of small-scale projects together, thereby creating a small-scale wind portfolio. Pluckanes, Altilow and Moneygorm will be the first of such portfolios into which further projects can be added.

52.5MW Wind Farm Co-Development 25MW Londonderry Port Biomass CHP The Group continues to progress the Derry Port 25MW Biomass CHP project with the cooperation of the Londonderry Port and Harbour Commissioners, the owner of the site.

Work on the four Windfarm projects, which form part of the 52.2MW Co-Development agreement is continuing. The environmental studies and initial layout has been completed on two of these projects with further ecology work required on the other two projects. The intention is to submit planning applications on the first project before the end of the year.

Wind Portfolio – 88MW Small Scale Solar 800kw Pluckanes Windfarm Project The Group announced the successful energisation of the 800kw Pluckanes wind turbine project and the export of electricity to the national grid. Enercon GmBH completed the installation and pre commissioning of the wind turbine during September 2013. ESB Networks completed the energisation of the project on 27 September 2013, which allowed the project to export electricity to the national grid. The project has commenced the sale of electricity to Energia under the power purchase agreement.

Single Wind Turbine Projects The Group has received planning permission for four separate single wind turbine projects during the year being the Altilow, Moneygorm, Knockavadra and Killuagh projects. An application for connection to the national grid has been made for all of the projects. Meteorological masts have also been installed at both the Altilow and Moneygorm sites and wind data collection is on-going. Both of these projects are on track to be construction ready by Q1 2014.

Sark Island Solar The Group announced on the 2 July 2013 that it had entered into a partnership with the Trustees of the Sark Island Community Centre and School regarding a 25kw roof top solar PV project. Following a public consultation process at the start of July 2013 the project received planning approval on the 9th July 2013. The Group has since appointed the Larkfleet Group as its preferred installer for the project and work is on-going to install the project in early 2014.

Small-Scale Solar Projects Two projects are already planning approved, with a plan to install and commission these during 2014. There are further opportunities for solar projects within the existing pipeline.

Project Portfolio The Group is currently in discussion with a number of site owners in the UK and Ireland regarding future sites for the development of renewable energy projects. The intention is to secure sites that will increase the development pipeline to a minimum 300MW within the next three years.

Chief Executive’s Report - continued Financial Review Revenue in the period amounted to e2.6m and was in line with management expectations (FY2012: e10.1m). Turnover in the Group relates to the sale of equipment to complete Phase One of the Newry joint venture project. The Group reported a loss for the period of e2.8m (FY2012 loss: e2.5m). Administrative costs increased to e2.7m (FY2012: e1m) primarily as a result of a loss on foreign exchange e443K versus a gain in 2012 of e392K; impairment of freehold property in Ireland of e319K; consultancy fees of e274K charged to a jointly controlled entity in FY2012 and credits in FY2012 relating to revision of accounting estimates of e250K. On a like for like basis administrative expenses increased slightly to e1.93m from e1.87m, which is a result of the acquisition which took place in the year.

The Company announced on 20th August 2013 that it had entered into a rolling, monthly working capital facility with its 26.79% shareholder Farmer Business Developments plc. Funds drawn down under the Facility are used by the Company to meet ongoing working capital requirements. The facility is capped at e500,000 but can be increased by agreement between the parties. The Group announced on 20th August 2013 that its wholly owned subsidiary, Reforce Energy Limited, had raised e215,000 in loan notes from private investors and that Ulster Bank Ireland Limited have made available working capital and other facilities totaling £750,000 to be used to fund working capital requirements and the continued build out of the Newry Biomass Limited biomass project located in Newry, Northern Ireland.

Outlook At 30th June 2013, the Group had net debt of e4.6m (30th June 2012: e12m) including cash balances of e22,150 (30th June 2012: e144,764). The financial information is prepared on a going concern basis, as discussed in more detail in Note 3 to the financial statements. The validity of the going concern concept is dependent upon additional finance being available for the Group’s working capital and planned development program. In the absence of new funds being raised from new investors, the Group will be reliant on the financial support of its existing shareholders and creditors to enable it to continue to trade. During the period the Company raised approximately e1m in equity and received £500,000 in loans from existing and new shareholders as previously announced on 27th November 2012 and 28th March 2013.

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Against the positive backdrop of significant progress made with the Group’s portfolio of development projects, the Group will continue to develop and review its project pipeline and focus on its funding requirements including raising additional project debt and project equity in 2014 and securing additional funds to continue with its activities and its planned development program. Looking ahead, the Board is confident that the Group has a number of key strengths, which position it to capitalise on the opportunities in this fast paced sector.

Gerry Madden CEO

KEDCO PLC - Annual Report and Accounts 2013

Kedco PLC Board of Directors Dermot O’Connell, Non-Executive Chairman Dermot O'Connell is Chairman of Cork Cooperative Marts and a former director of Kedco's largest shareholder, Farmer Business Developments plc. He joined the Board as a Non-Executive Director in March 2011 and appointed as Non-Executive Chairman in October 2011. ●

● Gerry Madden, CEO Gerry Madden has been in the role of Chief Executive of Kedco plc since March 2011, having previously joined the company in May 2007 as Finance Director. He previously set up and operated a corporate finance practice between 1998 and 2007, advising UK and Irish companies on corporate finance activities and business strategy. During this period he also acted as a Non-Executive Director for companies in the technology, healthcare, retail and renewable energy sectors. He originally worked for 16 years with international accountants KPMG and was auditor and adviser to listed companies, multinationals and private companies operating in Ireland and internationally. He is a Fellow of the Institute of Chartered Accountants in Ireland and is a graduate of University College Cork. ● Brendan Halpin, Executive Director Brendan Halpin joined Kedco plc in February 2006 as Financial Controller and joined the Board as Executive Director in March 2011. Brendan is a Fellow of the Institute of Chartered Accountants in Ireland, having qualified as an accountant with PricewaterhouseCoopers in 1998. His current responsibilities include inter alia, finance management, project management and treasury functions. ● Steve Dalton, Executive Director Steve was the previous CEO of Reforce Energy Limited, which was acquired by Kedco plc in Dec 2012. Prior to setting up Reforce he spent c.7 years working for Ulster Bank, a subsidiary of the Royal Bank of Scotland plc with responsibility for energy financing in the Irish market. Throughout this time he led the financing of over 30+ projects in the renewable energy sector with a combined capacity in excess of 550MW including the Newry Biomass project. He is also co-founder and director of Mexican Renewable Energy Limited, a renewable energy company with over 250MW’s of renewable energy projects under development in Northern Mexico. ● Edward Barrett, Non - Executive Director Eddie Barrett is a director of Kedco plc since 2008. He is experienced in executing strategic initiatives in business management and asset development in the agricultural and renewable energy sectors. He has served as a director and consultant for a number of companies in these sectors since 1993.

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Directors’ Report The Directors present their annual report and the audited financial statements of the company and its subsidiaries collectively known as ‘the Group’ for the year ended 30th June 2013. Principal Activities The principal activities of the Group are to identify, develop, build, own and operate power plants in the UK and Ireland using renewable energy technologies. The Group focuses on both large and small scale projects, providing flexibility to maximize existing land positions while diversifying development and technology risks. The Group’s ultimate aim is to be one of the UK and Ireland’s largest independent renewable energy companies, with a diverse portfolio of operating and development assets across various renewable technologies. To this end, the Group will focus on developing its existing portfolio as well as considering strategic bolt-on acquisition opportunities that add generating potential to its project portfolio. Review of Business and Future Developments and Key Performance Indicators A review of the Group’s business and future developments and key performance indicators is contained in the Chairman’s Statement and the Chief Executive’s Report on pages 6 to 9. Below is a summary: Operational Highlights ● Continued strong progress on the Enfield Project including the appointment of MWH Global Inc (‘MWH’) as EPC provider and the Foresight Group as the preferred funding partner. ● Successful energisation of the 800kw Pluckanes wind turbine project and the export of electricity to the national grid. ● Increased the size of development portfolio from 70MW at the end of 2012 to 157MW at November 2013. ● The handover of the Newry Biomass Advanced Gasification Plant from final commissioning of Phase 1 and its continuing sale of electricity to the Northern Ireland Grid. Financial Highlights ● Revenue in the period amounted to e2.6m and was in line with management expectations (FY2012: e10.1m). Turnover in the Group relates to the sale of equipment to complete Phase One of the Newry joint venture project. ● Administrative costs increased to e2.7m (FY2012: e1m) primarily as a result of a loss on foreign exchange e443K versus a gain in 2012 of e392K; impairment of freehold property in Ireland of e319K; consultancy fees of e274K charged to a jointly controlled entity in FY2012 and credits in FY2012 relating to revision of accounting estimates of e250K. On a like for like basis administrative expenses increased slightly to e1.93m from e1.87m, which is a result of the acquisition which took place in the year. ● Loss for the period of e2.8m, (FY2012 loss: e2.5m). ● At 30th June 2013, the Group had net debt of e4.6m (30th June 2012: e12m). ● 0.4 cent loss per share from continuing operations (FY2012: loss per share 0.6 cent). Share Placing / Funding ● Raised approximately e1m in equity and received approximately £500,000 in loans from existing and new shareholders in the financial year. ● Entered into a rolling, monthly working capital facility in August 2013 with its 26.79% shareholder Farmer Business Developments plc. capped at e500,000. ● The Group announced on 20th August 2013 that its wholly owned subsidiary, Reforce Energy Limited, had raised e215,000 in loan notes from private investors and that Ulster Bank Ireland Limited have made available working capital and other facilities totalling £750,000 to be used to fund the working capital needs and the continued build out of the Newry Biomass Limited biomass project located in Newry, Northern Ireland. Acquisition and Restructuring ● Successfully negotiated the acquisition in December 2012 of Reforce Energy Limited, a project developer with a wind portfolio of 88 MW at various stages of development. ● Completed the disposal of a non-core asset being the entire interest in Latvian subsidiary for e3m, as part of debt restructuring. ● Successfully negotiated balance sheet restructuring with various lenders, resulting in the conversion of debt to equity and a reduction of balance sheet debt. p12

KEDCO PLC - Annual Report and Accounts 2013

Directors’ Report - (continued) Results and Dividends The results for the year are set out on page 18. No dividends have been proposed by the Directors (2012: eNil). Principal Risks and Uncertainties The Group has a risk management structure in place, which is designed to identify, manage and mitigate business risk. Risk assessment and evaluation is an essential part of the Group’s internal control system. Information about the financial risk management objectives and policies of the Group, along with exposure of the group to credit risk, liquidity risk and market risk, are disclosed in Note 4 of the notes to the consolidated financial statements. The Group is exposed to a number of other risks and uncertainties. These break into three categories: ● General risks impacting the business. ● Project development related risk. ● Going concern - this is discussed in Note 3 of the financial statements. General Risks Electricity market The Group’s plans are exposed to electricity market price risk through variations in the wholesale price of electricity. The Group manages this risk by entering into long term power purchase agreements. Legislative risk The Group is exposed to adverse changes in legislation that may impact the income for renewable energy power plants. The directors monitor possible changes to legislation and where possible engage in the consultation process to safeguard the Group’s interests. Projected project revenues could be affected by changes to the renewable legislation including for example; the number of Renewable Obligation Certificates awarded per MWh of generation under the Renewable Obligation. Any negative changes to these projected revenues could impact the ability of the group to secure debt and equity for projects. Liquidity The cash requirements of the Group are forecast by the Board annually in advance and reviewed monthly by management, enabling the Group’s cash requirements to be anticipated. The cash forecast includes assumptions with respect to working capital, development spend and the timing of planning consents and financial close of projects. Significant delays in these expected timings may lead to a requirement for additional cash and impinge on going concern. Project Development Risks Site evaluation and procurement Securing sites for the development of renewable energy power plants is a key requirement in further developing the business. This relies upon the ability of the Group to locate, evaluate, select, develop and realise appropriate opportunities, and to be able to negotiate and complete land agreements and related access/connection agreements at a cost that allows profitable projects to be developed. The Group manages these risks by continually reviewing a large number of sites in the UK and Ireland such that it is not focused on any one particular landowner or location. Planning and Development Consent Once a site is secured a planning and development consent is sought, together with any other necessary permits to allow a renewable energy power plant to be constructed and operated. During this stage of the process the Group is exposed to the following specific risks: ● Consents may be subjected to delays beyond the Group’s control, which may subsequently cause the project to be delayed or aborted. There are no guarantees that any or all of the necessary consents will be granted; ● Consents granted may be subject to conditions that affect the economic or operational viability of the proposed project. These could in turn impact the Group’s ability to raise project finance, or reduce the value of a project in the case of a sale; ● Delays or onerous planning conditions may lead to unforeseen costs which the Group may need to raise finance for; and ● Legislative changes may influence the acceptability of the site or the economic viability of the project. p13

Directors’ Report - (continued) Principal Risks and Uncertainties (continued) Planning and Development Consent (continued) The Group manages these risks through securing sites on which it believes it can secure planning and development consent, employing suitably qualified and significantly experienced staff to manage the consenting process and ensure compliance with the latest legislation, as well as ensuring maximum engagement of local authorities and interested stakeholders from a very early stage. The Group has significant experience of securing planning consents for renewable energy power plants and knowledge of the important criteria involved. The Group uses this experience when selecting sites for development. Contract Negotiation This stage of the development process involves the negotiation of contracts for the construction of the renewable energy plant, the sale of electricity and related products produced by the plant, the procurement of fuel for the plant and the operation of the plant. This stage begins during the early stages of the planning and development and concludes at the point of financial close. During this stage the Group is exposed to the following specific risks in addition to those outlined above: ● the ability to secure fixed price contracts for the construction of each power plant with the required level of guarantees that allow project finance to be secured; and ● significant changes to inflation impacting the costs of building and operating renewable energy power plants and therefore the profitability of renewable energy power plants. The Group manages these risks through soliciting bids from a number of different suppliers for the equipment required to construct the plant and any other materials or equipment required to ensure the plant can operate profitably. Financial Close This stage relates to the crystallisation of the project into the construction stage. This may involve either the sale of the project, in whole or part, or securing project finance enabling the project to be constructed. During this stage the Group is exposed to the additional risks: ● the general availability of finance to fund the construction of power plants, and the level of lending that can be secured; ● changes to interest rates which may impact the cost of financing power projects; ● the ability to secure equity on acceptable terms for the construction of projects once debt is in place; and ● depressed market for the sale of projects, leading to low prices or no willing buyers. It is the Board’s view that once the project has planning and development consent, these risks are mitigated by the potential to sell a project for at least its book value. The Group has experience in negotiating financial arrangements for power plants and understands the contract structures required to secure project finance. Additionally the Group has relationships with a number of project finance banks, utility and large industrial companies allowing project finance or sale discussions to be initiated. Construction This stage is reached once financing, both debt and equity, is secure and all project contracts are entered into. During this stage the Group is exposed to the following specific risks: ● cost overruns by contractors or claims made may result in a need for additional equity or debt funding; ● delays to the construction programme leading to higher than planned interest charges during the construction programme and may delay the commencement of operating cash flows to fund the Group’s on-going activities; ● failure of the completed plant to operate as planned; and ● supplier insolvency. The Group seeks to mitigate these risks through the negotiation of fixed price contracts with reputable contractors and by ensuring the financial plans include adequate levels of contingency to accommodate cost overruns. Additionally, the Group seeks to appoint an owner’s engineer with significant experience to oversee the project programme once construction commences.

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KEDCO PLC - Annual Report and Accounts 2013

Directorsâ&#x20AC;&#x2122; Report - (continued) Going Concern The directors have assessed going concern. See Note 3 for further details. Directors The present Directors are listed on page 11. Mr William Kingston, Mr Donal Oâ&#x20AC;&#x2122;Sullivan and Mr Diarmuid Lynch resigned as directors of the company on 19th December 2012. Mr Diarmuid Lynch also resigned from his role as company secretary on 19th December 2012 and Mr Brendan Halpin assumed the position from this date. Mr Steve Dalton was appointed to the board on 21st December 2012 and in accordance with the Articles of Association retires and offers himself for re-election. In accordance with the Articles of Association, Mr Edward Barrett retires by rotation and being eligible offers himself for re-election. The board recommends the re-election of Mr Steve Dalton and Mr Edward Barrett as directors.

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Directors’ Report - (continued) Directors’ and Secretary’s Interests in Shares The Directors and Secretary of Kedco plc who held office at 30th June 2013 had the following interests in the shares of the Company: Number of Ordinary Shares at 30th June 2013

Number of ‘A’ Ordinary Shares at 30th June 2013

Number of Ordinary Shares at 30th June 2012

Number of ‘A’ Ordinary Shares at 30th June 2012

(or at date of appointment if later)

Edward Barrett

86,194,592

3,080,000

13,571,666

3,080,000

Steve Dalton

24,146,213

Brendan Halpin

16,038,808

3,261,873

8,217,120

3,261,873

Gerard Madden

76,667

14,926,161

76,667

14,926,161

Dermot O’Connell

Remuneration Committee Report The Group’s policy on senior executive remuneration is designed to attract and retain people of the highest calibre who can bring their experience and independent views to the policy, strategic decisions and governance of the Group. In setting remuneration levels the Remuneration Committee takes into consideration the remuneration practices of other companies of similar size and scope. A key philosophy is that staff must be properly rewarded and motivated to perform in the best interests of the shareholders. Details of Directors’ remuneration are included in Note 36 of the notes to the consolidated financial statements. Books of Account To ensure that proper books and accounting records are kept in accordance with Section 202 of the Companies Act, 1990, the Directors have employed appropriately qualified accounting personnel and have maintained appropriate computerised accounting systems. The books of account are located at 4600 Airport Business Park, Cork, Ireland. Subsequent Events Details of events occurring since 30th June 2013 which impact on the Group are included in Note 42. Auditors The auditors, Deloitte & Touche, Chartered Accountants and Statutory Audit Firm, continue in office in accordance with Section 160(2) of the Companies Act, 1963. Approved by the Board on 28th November 2013.

Dermot O’Connell Chairman

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Gerry Madden Director

KEDCO PLC - Annual Report and Accounts 2013

Statement of the Directors’ Responsibilities Irish company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to: ● select suitable accounting policies for the Group and the Parent Company Financial Statements and then apply them consistently; ● make judgements and estimates that are reasonable and prudent; and ● prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union and comply with Irish statute comprising the Companies Acts, 1963 to 2012. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

p17

Corporate Governance Report The Company is not subject to the Combined UK Corporate Governance Code applicable to companies with full listing on the London Stock Exchange. The Company does however intend, so far as is practicable and desirable, given the size and nature of the business, to follow the recommendations on corporate governance for AIM companies (the ‘QCA Guidelines’) issued by the Quoted Companies Alliance (‘QCA’). The Board The board of directors of the Company is responsible to shareholders for leadership in all aspects of the business. The Board comprises five members. Two independent Non-Executive Directors contribute individual experience from diverse backgrounds. Three Executive Directors are responsible for the implementation of all board decisions and oversee the management of the Group on a day-to-day basis. In accordance with the articles of association, one-third of directors retire by rotation each year. Each director must be subject to reelection at least every three years. Role of the Board The Company has adopted a schedule of matters reserved for consideration by the whole board, including, for example: approval of the Group’s long-term objectives and commercial strategy; approval of the annual operating and capital expenditure budgets of the Group (and any material changes thereto); changes relating to the Group’s structure; major changes to the Group’s corporate structure; approval of the Group’s annual report and accounts; approval of the dividend policy; major capital projects; changes to the structure, size and composition of the board; determination of the remuneration for the directors, the Company Secretary and executive management; division of responsibilities between the Chairman, the Chief Executive and other executives of the board; and the making of political donations or political expenditure. The Board is also responsible for ensuring maintenance of sound systems of internal control and risk management and the directors confirm that they continually review the effectiveness of the system of internal control, covering all material controls including financial, operational and compliance controls and risk management. In accordance with QCA Guidelines, the board has established audit and remuneration committees, as described below, and utilises other committees as necessary in order to ensure effective governance. Audit Committee The Company’s Audit Committee comprises Dermot O’Connell as the Chairman and Edward Barrett. The Audit Committee meet at least two times a year at appropriate times in the reporting and audit cycle and otherwise as required. The Finance Director normally attends meetings of the Committee and the Chief Executive Officer attends as necessary. The external auditors are invited to attend meetings of the Audit Committee on a regular basis. The terms of reference for the Audit Committee include the following responsibilities: ● Monitoring the integrity of the reported financial performance of the Group, including its preliminary results announcement, annual report and interim report; ● Reviewing the effectiveness of the Group’s internal financial controls; ● Making recommendations to the board on the appointment and removal of the external auditors and the audit fee; ● Monitoring the objectivity and independence of the external auditors. Remuneration Committee The Company’s Remuneration Committee comprises Edward Barrett as the Chairman and Dermot O’Connell. The role of the Remuneration Committee is to review the performance of the Executive Directors and other senior executives and to set the scale and structure of their remuneration, including the implementation of any bonus arrangements, with due regard to the interests of Ordinary Shareholders. The Remuneration Committee also administers and establishes performance targets for share incentive schemes and determines the allocation of share incentives to employees. Nomination Committee The Company does not have a nomination committee. Any appointments to the Board are considered by the Board as a whole. In considering the appointment of a new director, the Board identifies the characteristics, qualities, skills and experience that it believes would complement the overall balance and composition of the Board.

p18

KEDCO PLC - Annual Report and Accounts 2013

Corporate Governance Report - (continued) Relations with Shareholders The Company believes that effective communication with shareholders is of utmost importance. It has an established cycle for communicating trading results at the interim and year end stages and, as appropriate, of providing business updates via the Regulatory News Service and press releases. The Company makes information available through regulatory announcements and its interim and annual reports. Copies of all such communications can be found on the Company website www.kedco.com. The board has adopted a code for dealings in the Companyâ&#x20AC;&#x2122;s securities by directors and applicable employees, which conforms to the requirement of the AIM Rules (Share Dealing Code). The Company will be responsible for taking all proper and reasonable steps to ensure compliance by the directors and applicable employees with the Share Dealing Code and the AIM Rules. The Company complies with the corporate governance obligations applicable to Irish registered public companies whose shares are quoted on the AIM market of the London Stock Exchange.

p19

Independent Auditor’s Report to the members of Kedco plc We have audited the financial statements of Kedco Plc for the year ended 30th June 2013 which comprise the Group Financial Statements: the Consolidated Statement of Profit or Loss, the Consolidated Statement of Profit or Loss and Other Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, and the Parent Company Financial Statements: the Parent Company Statement of Financial Position, the Parent Company Statement of Changes in Equity, the Parent Company Statement of Cash Flows and the related notes 1 to 45. The financial reporting framework that has been applied in their preparation is Irish law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Acts, 1963 to 2012. This report is made solely to the company's members, as a body, in accordance with Section 193 of the Companies Act, 1990. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective Responsibilities of Directors and Auditors As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the financial statements giving a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with Irish law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the Audit of the Financial Statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on Financial Statements In our opinion: ● the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Group’s affairs as at 30th June 2013 and of its loss for the year then ended; ● the parent company financial statements give a true and fair view, in accordance with IFRSs, as adopted by the European Union as applied in accordance with the provisions of the Companies Acts, 1963 to 2012 of the state of the parent company’s affairs as at 30th June 2013; ● the financial statements have been properly prepared in accordance with the Companies Acts, 1963 to 2012 and, as regards the Group financial statements, Article 4 of the IAS Regulation. Emphasis of Matter – Going Concern In forming our opinion, which is not modified, we draw your attention to Note 3 to the financial statements which indicates that the Group incurred a loss for the year of e2,835,452 and had net current liabilities of e4,979,501 at the balance sheet date. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern. The directors believe progress towards securing finance has been made and have a reasonable expectation that the Group will have adequate resources to continue in operational existence for at least one year from the date of approval of the financial statements. The directors have prepared the financial statements of the Company and the Group on a going concern basis. The financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.

p20

KEDCO PLC - Annual Report and Accounts 2013

Independent Auditorâ&#x20AC;&#x2122;s Report to the members of Kedco plc - continued Matters on which we are required to report by the Companies Acts, 1963 to 2012 We have obtained all the information and explanations which we consider necessary for the purposes of our audit. In our opinion proper books of account have been kept by the parent company. The parent company balance sheet is in agreement with the books of account. The net assets of the parent company, as stated in the parent company balance sheet are more than half of the amount of its called-up share capital and, in our opinion, on that basis there did not exist at 30th June 2013 a financial situation which under Section 40 (1) of the Companies (Amendment) Act, 1983 would require the convening of an extraordinary general meeting of the parent company. Matters on which we are required to report by exception We have nothing to report in respect of the provisions in the Companies Acts 1963 to 2012 which require us to report to you if, in our opinion, the disclosures of directorsâ&#x20AC;&#x2122; remuneration and transactions specified by law are not made.

Honor Moore For and on behalf of Deloitte & Touche Chartered Accountants and Statutory Audit Firm Cork

Date: 28th November 2013

Notes: An audit does not provide assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular on whether any changes may have occurred to the financial statements since first published. These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area. Legislation in Ireland governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.

p21

Consolidated Statement of Profit or Loss for the year ended 30th June 2013

Notes

Revenue Cost of Sales

8 9

Gross Profit / (Loss)

2013 h 2,664,088 (2,662,922) 1,166

Operating Expenses Administrative Expenses Other Operating Income

Operating Loss

2012 h 10,083,158 (10,123,726) (40,568)

(2,662,980) 20,500

(953,705) 11,100

(2,641,314)

(983,173)

Finance Costs Share of profits / (losses) on Joint Ventures after Tax Finance Income

11 23 11

(353,733) 3,811 328

(414,424) (213,923) 333

Loss Before Taxation

(2,990,908)

(1,611,187)

Income Tax Expense

Loss for the Year from Continuing Operations

(2,990,908)

(1,611,187) 493,911 (1,364,082)

Profit for the year from discounted operations Loss on disposal of subsidiary of discontinued operations Losses arising on the remeasurement of assets held for sale

15 39 15

164,322 (8,866) -

Net Profit /(Loss) for the year from discontinued operations

155,456

(870,171)

Loss for the year - total

(2,835,452)

(2,481,358)

Loss Attributable To: Owners of the Owners of the Company Non-Controlling Interests

(2,868,316) 32,864

(2,580,140) 98,782

(2,835,452)

(2,481,358)

Euro Per Share Basic and Diluted Loss Per Share: From Continuing Operations From Continuing and Discontinued Operations

17 17

(0.004) (0.004)

Euro Per Share (0.006) (0.009)

The financial statements were approved by the Board of Directors on 28th November 2013 and signed on its behalf by:

p22

Dermot Oâ&#x20AC;&#x2122;Connell

Gerry Madden

Chairman

Director

KEDCO PLC - Annual Report and Accounts 2013

Consolidated Statement of Other Comprehensive Income for the year ended 30th June 2013

2013 h Loss for the Financial Year Other comprehensive income Items that will not be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss Exchange differences arising on retranslation of foreign operations

(2,835,452)

2012 h (2,481,358)

192,788

(310,844)

192,788

(310,844)

Total comprehensive income and expense for the year

(2,642,664)

(2,792,202)

Attributable to: Owners of the company Non-controlling interests

(2,675,528) 32,864

(2,890,984) 98,782

(2,642,664)

(2,792,202)

p23

Consolidated Statement of Financial Position As at 30th June 2013 2013 h

2012 h

18 19 20 23 21

2,249,200 1,638,352 187,068 6,233,268 10,307,888

757,329 7,608,687 8,366,016

24 25 26 36

293,637 2,219,305 22,150 2,535,092 2,535,092

50,000 1,355,212 1,605,518 144,764 3,155,494 6,584,239 9,739,733

12,842,980

18,105,749

27 27 28 38

12,176,200 19,090,865 600,000 (27,883,201) 3,983,864 3,983,864

4,106,808 19,375,525 (25,207,673) (1,725,340) 898,010 (827,330)

29 30 23 32

1,344,523 1,344,523

2,525,025 509,599 3,034,624

25 31 29 30

1,019,307 3,228,557 3,266,729 7,514,593 7,514,593

1,110,090 2,495,766 9,661,645 373 13,267,874 2,630,581 15,898,455

12,842,980

18,105,749

Notes ASSETS Non-Current Assets Goodwill Intangible assets Property, plant and equipment Share of net assets in joint ventures Financial assets Total Non-Current Assets

Current Assets Inventories Amounts due from customers under construction contracts Trade and other receivables Cash and cash equivalents Assets classified as held for sale Total Current Assets

TOTAL ASSETS EQUITY and LIABILITIES Equity Share capital Share premium Shared based payment reserves Deferred consideration Retained earnings â&#x20AC;&#x201C; deficit Equity /(deficit) attributable to equity holders of the parent Non-controlling interests Total Equity /(Deficit) Non-Current Liabilities Borrowings Finance lease liabilities Share of net liabilities of jointly controlled entities Deferred tax liability Total Non-Current Liabilities Current Liabilities Amounts due to customers under construction contracts Trade and other payables Borrowings Finance lease liabilities Liabilities associated with assets held for sale Total Current Liabilities TOTAL EQUITY and LIABILITIES

The financial statements were approved by the Board of Directors on 28th November 2013 and signed on its behalf by:

p24

Dermot Oâ&#x20AC;&#x2122;Connell

Gerry Madden

Chairman

Director

KEDCO PLC - Annual Report and Accounts 2013

Consolidated Statement of Changes in Equity for the year ended 30th June 2013 Share Capital

Share Premium

e Balance at 1st July 2011 Issue of ordinary shares in Kedco plc Share issue costs

Retained Earnings

Deferred Share-based Attributable Non Consider- payment to equity Controlling ation reserve holders of interests the parent e e e e e

3,543,999 19,038,300 (22,316,689)

Total

492,580

758,190

799,228

1,557,418

562,809

378,701

941,510

(41,476)

Loss for the financial year

- (2,580,140)

Unrealised foreign exchange loss

(310,844)

Credit arising on not meeting non-market based vesting conditions

(492,580)

4,106,808 19,375,525 (25,207,673)

- (1,725,340)

898,010

(827,330)

Balance at 30th June 2012 Issue of ordinary shares in Kedco plc

98,782 (2,481,358)

951,296

4,959

956,255

Conversion of debt into equity

5,724,229

44,046

5,768,275

Issue of ordinary shares and contingent equity consideration on acquisition of subsidiary

1,393,867

6,133

600,000

2,000,000

Share issue costs

(339,798)

Loss for the financial year

- (2,868,316)

Unrealised foreign exchange gain

192,788

Disposal on non-controlling interest in subsidiary (Note 39)

(930,874)

12,176,200 19,090,865 (27,883,201)

600,000

3,983,864

Balance at 30th June 2013

32,864 (2,835,452)

p25

Consolidated Statement of Cash Flows for the year ended 30th June 2013

p26

Notes Cash Flows from Operating Activities Loss for the financial year Adjustments for: Income tax Credit arising on not meeting non-market based vesting conditions Depreciation of property, plant and equipment Amortisation of intangible assets Profit on disposal of property, plant and equipment Impairment of property, plant and equipment Impairment of assets held for sale Impairment of amounts due from customers under construction contracts Allowance against amounts due in unpaid share capital Unrealised foreign exchange movements Share of (profits) /losses of jointly controlled entities after tax Decrease in allowance for impairment of trade receivables (Decrease) / Increase in impairment of inventories Decrease in deferred income Interest expense Loss on disposal of share in subsidiary undertaking Interest income

2013 h (2,835,452)

2012 h (2,481,358)

272,156 (83,537) 318,750 102,657 624,810 (3,811) (177,571) (4,293) 411,620 8,866 (328)

69,731 (492,580) 596,418 2,275 (67,236) 1,364,082 492,563 163,677 213,923 (71,924) (294,715) (10,302) 506,754 (338)

Operating cash flows before working capital changes Decrease/(Increase) in: Amounts due from customers under construction contracts Trade and other receivables Inventories (Decrease)/increase in: Amounts due to customers under construction contracts Trade and other payables

(1,366,133)

(9,030)

1,223,650 (1,303,384) 656,403

8,070,067 4,336 276,377

(90,783) 502,514

(162,645) (2,476,219)

Cash (Used in) / from Operations Income taxes paid Net Cash (Used in) / from Operating Activities

(377,733) (377,733)

5,702,886 (9,108) 5,693,778

Cash Flows from Investing Activities Additions to property, plant and equipment Proceeds from sale of property, plant and equipment Additions to intangible assets Additions to investments in jointly controlled entities Net cash inflow from acquisition of subsidiaries Net cash inflow from disposal of subsidiaries Interest received Net Cash Used in Investing Activities

(872,222) 109,585 156,781 226,094 328 (379,434)

(644,737) 126,951 (1,770) (6,660,010) 338 (7,179,228)

38 39

KEDCO PLC - Annual Report and Accounts 2013

Consolidated Statement of Cash Flows (continued) for the year ended 30th June 2013 Notes

2013 h

2012 h

Cash Flows from Financing Activities Proceeds from borrowings Repayments of borrowings Proceeds from issuance of ordinary shares Share issue costs Payments of finance leases Interest paid Net Cash from Financing Activities

719,101 (248,555) 956,255 (221,115) (31,424) (217,222) 957,040

2,896,483 (2,293,628) 685,726 (41,476) (58,496) (255,842) 932,767

Net Increase / (Decrease) in Cash and Cash Equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year

199,873 (344,096) (144,223)

(552,683) 208,587 (344,096)

p27

Company Statement of Financial Position As at 30th June 2013 Notes ASSETS Non-Current Assets Intangible Assets Investment in Subsidiary Undertakings Total Non-Current Assets Current Assets Trade and other receivables Cash and bank balances Total Current Assets

2013 h

2012 h

19 21

2,000,003 2,000,003

24,941,463 24,941,463

26 36

11,904,568 20,654 11,925,222

18,336,014 14,331 18,350,345

13,925,225

43,291,808

12,176,200 38,024,944 600,000 (38,287,015)

4,106,808 38,309,604 (11,835,887)

12,514,129

30,580,525

599,523

29 31

5 811,568 811,573

6,680,402 6,030,881 12,711,283

13,925,225

43,291,808

TOTAL ASSETS EQUITY and LIABILITIES Equity Share Capital Share Premium Share based payment reserve Deferred consideration Retained earnings - deficit

27 27 28 38 44

Equity attributable to equity holders of the parent Non-Current Liabilities Borrowings Current Liabilities Borrowings Trade and other payables Total Current Liabilities TOTAL EQUITY and LIABILITIES

The financial statements were approved by the Board of Directors on 28th November 2013 and signed on its behalf by:

Dermot Oâ&#x20AC;&#x2122;Connell

Gerry Madden

Chairman

Director

p28

KEDCO PLC - Annual Report and Accounts 2013

Company Statement of Changes in Equity for the Year Ended 30th June 2013

Balance at 1st July 2011 Issue of ordinary shares in Kedco plc

Share Capital

Share Premium

Retained Earnings

Share-Based Payment Reserve h

(11,550,529)

492,580

30,458,429

37,972,379

562,809

378,701

941,510

(41,476)

(285,358)

(492,580)

Loss for the financial year

Credit arising on not meeting non-market based vesting conditions

4,106,808

38,309,604

951,296

4,959

Conversion of debt into equity 5,724,229 Issue of ordinary shares and contingent equity consideration on acquisition of subsidiary 1,393,867

Issue of ordinary shares in Kedco plc

(285,358)

30,580,525

956,255

44,046

5,768,275

6,133

600,000

2,000,000

(339,798) (26,451,128)

(339,798)

(11,835,887)

(492,580)

Share issue costs

Loss for the financial year

(26,451,128)

12,176,200

38,024,944

(38,287,015)

600,000

Balance at 30th June 2013

Total

3,543,999

Share issue costs

Balance at 30th June 2012

Deferred Consideration

12,514,129

p29

Company Statement of Cash Flows for the Year Ended 30th June 2013 Notes

2013 u

Cash Flows from Operating Activities Loss before taxation Adjustments for: Credit arising from not meeting non-market based vesting conditions Interest expense Interest income Provision for impairment of investment in subsidiaries Amortisation of intangible assets Foreign currency losses arising from retranslation of borrowings Operating cash flows before working capital changes

(26,451,128)

(285,358)

133,547 24,941,460 42,624

(492,580) 160,926 (333) 1,770 430,401

(1,333,497)

(185,174)

Decrease /(increase) in: Trade and other receivables (Decrease) / increase in: Trade and other payables Cash used in operations Income taxes paid

5,445,970

(7,485,824)

(5,422,344) (1,309,871) -

5,551,138 (2,119,860) (695)

Net Cash Used in Operating Activities

(1,309,871)

(2,120,555)

Cash Flows from Investing Activities Additions to intangible assets Interest received

(1,770) 333

Net Cash (used in) / from Investing Activities

(1,437)

581,049 956,255 (221,115) -

1,200,000 (95,979) 685,726 (41,476) (14,666)

1,316,189

1,733,605

Cash Flows from Financing Activities Proceeds from borrowings Repayments of borrowings Proceeds from issuance of ordinary shares Share issue costs Interest paid Net Cash from Financing Activities Net (Decrease) / Increase in Cash and Cash Equivalents

6,318

Cash and cash equivalents at the beginning of the Financial Year Cash and Cash Equivalents at the end of the Financial Year

p30

2012

(388,387)

14,331

402,718

20,649

14,331

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements for the Year Ended 30th June 2013 1 General Information Kedco plc (‘the Company’) was incorporated in Ireland on 2nd October 2008. The address of its registered office and principal place of business is Building 4600, Cork Airport Business Park, Kinsale Road, Cork. On 13th October 2008 the Group, previously headed by Kedco Block Holdings Limited, underwent a re-organisation by virtue of which Kedco Block Holdings Limited’s shareholders, in their entirety, exchanged their shares for shares in Kedco plc, a newly-formed company. Kedco plc then became the ultimate parent company of the Group. These financial statements for the year ended 30th June 2013 consolidate the individual financial statements of the Company and its subsidiaries (together referred to as ‘the Group’). On 20th October 2008 the Company’s shares were admitted to trading on the London Stock Exchange’s AIM market. The principal activity of the Group is to identify, develop, build, own and operate renewable energy electricity and heat generating power plants in the UK and Ireland. The Group focuses on both large and small scale projects, providing flexibility to maximise existing land positions while diversifying development and technology risks.

2 Application of New and Revised International Financial Reporting Standards (IFRSs) The following new and revised Standards and Interpretations have been adopted by the Group with no significant impact on its consolidated results or financial position, but may impact the accounting for future transactions or arrangements: Amendments to IAS 1 Presentation of Financial Statements revise the way other comprehensive income is presented. The amendments introduce new terminology, whose use is not mandatory, for the statement of comprehensive income and income statement. Under these amendments, the ‘Statement of comprehensive income’ is renamed as the ‘Statement of profit or loss and other comprehensive income’, and the ‘Income statement’ is renamed as the ‘Statement of profit or loss’. The amendments retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to IAS 1 require items of other comprehensive income to be grouped in two categories in the other comprehensive income statement: a) Items that will not be reclassified subsequently to profit or loss; and b) Items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to IAS 1 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income. Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets provides a presumption that recovery of the carrying amount of an asset measured using the fair value method in IAS 40 Investment Property will, normally, be through sale. As a result, SIC 21 Income Tax – Recovery of Revalued Non-Depreciable Assets would no longer apply to investment properties carried at fair value. The following new and revised Standards and Interpretations have not been adopted by the Group, whether endorsed by the European Union or not. The Group is currently analysing the practical consequences of the new Standards and the effects of applying them to the financial statements. The related standards and interpretations are: ●

IFRS 9 Financial Instruments and subsequent amendments (effective for annual periods beginning on or after 1st January 2015, not yet endorsed by the European Union);

●

IFRS 10 Consolidated Financial Statements (effective for annual periods beginning on or after 1st January 2014; endorsed by the European Union on 11th December 2012).

●

IFRS 11 Joint Arrangements (effective for annual periods beginning on or after 1st January 2014; endorsed by the European Union on 11th December 2012).

●

IFRS 12 Disclosure of Interest in Other Entities (effective for annual periods beginning on or after 1st January 2014; endorsed by the European Union on 11th December 2012).

●

IFRS 13 Fair Value Measurement (effective for annual periods beginning on or after 1st January 2014; endorsed by the European Union on 11th December 2012).

●

IAS 27 Separate Financial Statements (Amended 2011) (effective for annual periods beginning on or after 1st January 2014; endorsed by the European Union on 11th December 2012).

p31

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 2 Application of New and Revised International Financial Reporting Standards (IFRSs) -(continued) ● IAS 28 Investments in Associates and Joint Ventures (Amended 2011) (effective for annual periods beginning on or after 1st January 2014; endorsed by the European Union on 11th December 2012). ●

Amendments to IFRS 1 First Time Adoption of International Financial Reporting Standards (effective for annual periods beginning on or after 1st January 2013; endorsed by the European Union on 11th December 2012).

●

Amendments to IFRS 7 Financial Instruments: Disclosures (effective for annual periods beginning on or after 1st January 2013; endorsed by the European Union on 13th December 2012).

●

Amendments to IAS 32 Financial Instruments: Presentation (effective for annual periods beginning on or after 1st January 2014; endorsed by the European Union on 13th December 2012).

●

Annual improvements to IFRSs 2009-2011 Cycle (effective for annual periods beginning on or after 1st January 2013; endorsed by the European Union on 27th March 2013).

●

Consolidated Financial Statements, Joint Arrangements and Disclosures of Interests in Other Entities: Transition Guidance (effective for annual periods beginning on or after 1st January 2013; endorsed by the European Union on 4th April 2013).

●

Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities (effective for annual periods beginning on or after 1st January 2014; not yet endorsed by the European Union).

●

Amendments to IAS 19 Employee Benefits (effective for annual periods beginning on or after 1st January 2013; endorsed by the European Union 5th June 2012).

●

Amendments to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets (effective for annual periods beginning on or after 1st January 2014; not yet endorsed by the European Union).

●

Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting (effective for annual periods beginning on or after 1st January 2014; not yet endorsed by the European Union).

●

IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine (effective for annual periods beginning on or after 1st January 2013; endorsed by the European Union on 11th December 2012).

●

IFRIC 21 Levies (effective for annual periods beginning on or after 1st January 2014; not yet endorsed by the European Union).

3 Statement of Accounting Policies Basis of Preparation and Going Concern The Group’s consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) effective at 30th June 2013 for all periods presented as issued by the International Accounting Standards Board. The consolidated financial statements are also prepared in accordance with IFRS as adopted by the European Union (‘EU’). The consolidated financial statements are prepared under the historical cost convention except for certain financial assets and financial liabilities which are measured at fair value. The principal accounting policies set out below have been applied consistently by the parent Company and by all of the Company’s subsidiaries to all periods presented in these consolidated financial statements. The financial statements of the parent company, Kedco plc have been prepared in accordance with International Financial Reporting Standards (IFRS) effective at 30th June 2013 for all periods presented as issued by the International Accounting Standards Board and Irish Statute comprising the Companies Acts 1963 to 2012. The Group continues to invest capital in developing and expanding its portfolio of renewable energy projects. The nature of the Group’s development programme means that the timing of funds generated from developments is difficult to predict. Management have prepared financial forecasts to estimate the likely cash requirements of the Group over the next twelve months. The forecasts include certain assumptions with regard to the costs of ongoing development projects, overheads and the timing and amount of any funds generated from developments. The forecasts indicate that the Group will require additional funds to continue with its activities and its planned development program. Whilst the strategy is to build, own and operate plants, once a site has been secured and planning and permitting obtained the Group would be in a position, if it so chose, to monetise the value of the project. p32

Additional funds can be secured either through an equity fundraise, the issuance of further loan notes, monetisation of project assets, or a combination of all three options.

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 3 Statement of Accounting Policies (continued) Basis of Preparation and Going Concern (continued) The group incurred a loss of e2,835,452 (2012: e2,481,358) during the year, and it had net current liabilities of e4,979,501 (2012: e6,158,722) and net assets of e3,983,864 (2012: net liabilities e827,330) at 30th June 2013. In the year to 30th June 2013, the Company raised approximately e1m in equity and received £500,000 in loans from existing and new shareholders. The Company announced in August 2013 that it had entered into a rolling, monthly working capital facility with its 26.79% shareholder Farmer Business Developments plc. Funds drawn down under the Facility are used by the Company to meet ongoing working capital requirements. The facility is capped at e500,000 but can be increased by agreement between the parties. The Group announced in August 2013 that its wholly owned subsidiary, Reforce Energy Limited, had raised e215,000 in loan notes from private investors. The proceeds from the loan notes will be used to fund development costs and equity related to single wind turbine projects. The Group also announced that Ulster Bank Ireland Limited have made available working capital and other facilities totalling £750,000 to be used to fund the working capital needs and the continued build out of the Newry Biomass Limited biomass project located in Newry, Northern Ireland. The financial statements have been prepared on a going concern basis. The Directors have given careful consideration to the appropriateness of the going concern basis in the preparation of the financial statements. The validity of the going concern basis is dependent upon finance being available for the Group’s working capital requirements and for the continued investment in the Group’s strategy of identifying, developing, building and operating power generating plants so that the Group can continue to realise its assets and discharge its liabilities in the normal course of business. After making enquiries and considering the matters referred to above, the Directors believe that progress towards securing finance has been made. The Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. For these reasons the Directors continue to adopt the going concern basis of accounting in preparing the financial statements. The financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.

Basis of Consolidation The consolidated financial statements incorporate the financial information of the Company and its subsidiaries. The financial year-ends of all entities in the Group are coterminous. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control over the operating and financial decisions is obtained and cease to be consolidated from the date on which control is transferred out of the Group. Control exists where the Company has the power, directly or indirectly, to govern the financial and operating policies of the entity so as to obtain economic benefits from its activities. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group. The results and assets and liabilities of subsidiaries are incorporated in these financial statements, except when the subsidiary is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non – Current Assets Held for Sale and Discontinued Operations. On 13th October 2008 the Group, previously headed by Kedco Block Holdings Limited, underwent a re-organisation by virtue of which Kedco Block Holdings Limited’s shareholders, in their entirety, exchanged their shares for shares in Kedco plc, a newly formed Company. Kedco plc then became the ultimate parent company of the Group. Notwithstanding the change in the legal parent of the Group, this transaction was accounted for as a reverse acquisition under IFRS 3 Business Combinations and these consolidated financial statements are prepared on the basis of the new legal parent, Kedco plc, having been acquired by the existing Group. As a result of applying reverse acquisition accounting, the consolidated financial statements are a continuation of the financial statements of Kedco Block Holdings Limited and its subsidiaries. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling share of changes in equity since the date of the combination. Losses applicable to the non-controlling interest in excess of its interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the noncontrolling interest has a binding obligation and is able to make an additional investment to cover the losses. p33

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 3 Statement of Accounting Policies (continued) Business Combination Acquisitions of subsidiaries and businesses from third parties are accounted for using the purchase method. The cost of the business combination is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations, are recognised at their fair values at the acquisition date, except for non-current assets that are classified as held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. The interest of non-controlling shareholders in the acquiree is measured at the non-controlling interest’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. Goodwill For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss for goodwill is immediately recognised in profit or loss and not reversed in a subsequent year. On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Interests in Jointly Controlled Entities Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The Group reports its interests in jointly controlled entities using the equity method of accounting except when the investment is classified as held for sale, in which case it is accounted for in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in jointly controlled entities are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the jointly controlled entity, less any impairment in the value of individual investments. Losses of jointly controlled entities in excess of the Group’s interest in that jointly controlled entity (which includes any long-term interests that, in substance, form part of the Group’s net investment in the jointly controlled entities) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the jointly controlled entity. Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the jointly controlled entity recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss. Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent of the Group’s interest in the joint venture. Investments Investments in subsidiary undertakings are accounted for at cost less provisions for diminution in value. Revenue Recognition Revenue is measured at fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

p34

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 3 Statement of Accounting Policies (continued) Rendering of services The Group recognises revenue from a contract to provide services by reference to the stages of completion of the contract. The stages of completion of the contract are determined as follows: ● Installation fees are recognised by reference to the stage of completion of the installation, determined as the proportion of the total time expected to install that has elapsed at the end of the reporting period; ● Servicing fees included in the price of products are recognised by reference to the proportion of the total cost of providing the servicing for the product sold; ● Revenue from time and material contracts is recognised at the contractual rates as labour hours and direct expenses are incurred. The Group’s policy for recognition of revenue from construction contracts is described below. Interest Revenue Interest revenue 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. Leasing The Group as Lessee Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at their fair value, or if lower, at the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss. Operating lease payments are recognised as an expense on a straight-line basis over the lease term. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The benefit of incentives is recognised as a reduction of rental expense on a straight-line basis over the lease term. Foreign Currencies For the purposes of the consolidated financial statements, the results and financial position of each group entity are expressed in Euro, which is the functional currency of the Company and its subsidiaries, except for Kedco Fabrication Limited and Enfield Biomass Limited, where the functional currency is Sterling. Transactions in currencies other than the functional currencies are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. For the purpose of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are expressed in Euro using exchange rates prevailing at the balance sheet date. Income and expense items are translated at the rates at the dates of the transactions. For practical reasons, in some cases a rate that approximates the exchange rates at the dates of the transactions is used if exchange rates do not fluctuate significantly. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or resale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the year in which they are incurred. p35

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 3 Statement of Accounting Policies (continued) Government Grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received. Government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred income in the balance sheet within either non-current liabilities or current liabilities, as appropriate and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets and included in the line item â&#x20AC;&#x2DC;administrative expensesâ&#x20AC;&#x2122; as an offset against depreciation of the relevant asset. Other government grants are recognised as income over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis. Government grants that are receivable as compensation for expenses or losses already incurred or for the purposes of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the year in which they become receivable. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. Current Tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Groupâ&#x20AC;&#x2122;s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred Tax Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A deferred tax liability is recognised for all taxable temporary differences associated with investments in subsidiaries except where the Company controls the timing of the reversal of the temporary difference and where the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities, when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and Deferred Tax for the Financial Year Current and deferred tax are recognised as an expense or income in profit or loss, except where they relate to items credited or debited directly in equity.

p36

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 3 Statement of Accounting Policies (continued) Share-Based Payments The Group operates an equity settled share-based long-term incentive plan (the ‘LTIP’). Group share schemes allow employees to acquire shares in the Company. The fair value of the share entitlements is recognised as an employee expense in the income statement with a corresponding increase in equity. Share entitlement granted by the Company under the LTIP are subject to non-market vesting conditions. Non-market vesting conditions are not taken into account when estimating the fair value of entitlements as at the grant date. The expense for the share entitlements shown in the income statement is based on the fair value of the total number of entitlements expected to vest and is allocated to accounting periods on a straight-line basis over the vesting period. The cumulative charge to the income statement is reversed only where entitlements do not vest because non-market performance conditions have been met or where an employee in receipt of share entitlements leaves the Group before the end of the vesting period. Property, Plant and Equipment Property, plant and equipment are stated in the balance sheet at cost, less accumulated depreciation and any accumulated impairment losses. The cost of plant, property and equipment and construction in progress comprises purchase price and other directly attributable costs. Freehold land and construction in progress are not depreciated. Depreciation is charged so as to write off the cost of assets, other than freehold land and construction in progress, over their estimated useful lives to estimated residual value, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at each year end. The following estimated useful lives are used in the calculation of depreciation:

● ● ● ● ●

Buildings Plant and Machinery Office Equipment Fixtures and Fittings Motor Vehicles

5 - 50 years 2 - 5 years 2 - 5 years 2 - 5 years 5 years

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease. The gain or loss on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Held for Sale Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets and disposal groups classified as held for sale are measured at the lower of the assets’ carrying amount and fair value less costs to sell. Where the criteria are no longer met the non-current asset or disposal group is reclassified to the appropriate balance sheet heading and is measured at the lower of its recoverable amount at the date of the decision not to sell and its carrying amount before being reclassified as held for sale, adjusted for any depreciation, amortisation or revaluation that would have been recognised had the asset not been classified as held for sale. Intangible Assets Internally-generated Intangible Assets – Research and Development Expenditure Expenditure on research activities is recognised as an expense in the year in which it is incurred. Intangible assets arising from development are only recognised if the Group has the necessary technical, financial and other resources to complete the development, the asset has the ability to generate future cash flows and other economic benefits for the Group and the Group can measure the expenditure attributable to the intangible asset. The amount initially recognised for internally-generated intangible assets is the amount of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognised, development expenditure is charged to profit or loss in the year in which it is incurred. p37

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 3 Statement of Accounting Policies (continued) Internally-generated Intangible Assets – Research and Development Expenditure (continued) Subsequent to initial recognition, internally-generated assets are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged on a straight line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual reporting year. The following useful lives are used in the calculation of amortisation of intangible assets: ● ● ● ●

Website Software Trademarks Development costs

2 years 3 years 4 years 5 years

Impairment of Tangible and Intangible Assets Excluding Goodwill At each balance sheet date, the Group reviews the carrying amount of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the assets may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on an average cost basis and includes all expenditure incurred in the normal course of business in bringing the products to their present location and condition. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. Construction Contracts Where the outcome of a construction contract can be estimated reliably, revenue and costs are recognised by reference to the stage of completion of the contract activity at the balance sheet date, measured based on the proportion of contract costs incurred for work performed to date relative to the estimated total contract costs, except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer. Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the year in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Trade and Other Receivables Trade and other receivables are initially recognised at fair value plus transaction cost. Impairment is recognised for trade receivables where there is objective evidence that the Group will not be able to collect amounts due according to the original terms of the receivable indicated by a default in payment terms and significant financial difficulty. Cash and Cash Equivalents Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash with maturities of three months or less from the date of acquisition and that are subject to an insignificant risk of change in value.

p38

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 3 Statement of Accounting Policies (continued) Financial Liabilities and Equity Instruments Issued by the Group Measurement Financial liabilities are initially measured at fair value net of transaction costs. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that forms an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition. Classification as Debt or Equity Debt and equity instruments are classified as either financial liabilities or as an equity instrument in accordance with the substance of the contractual arrangement and the definitions of a financial liability and an equity instrument. Equity Instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. A financial instrument is classified as an equity instrument if, and only if, the instrument includes a contractual obligation to deliver cash or other financial assets to another entity and if the instrument will or may be settled in the issuer’s own equity instruments, it is a nonderivative with no contractual obligation to deliver a variable number of its own equity instruments or a derivative that will be settled by the issuers exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments. Financial instruments which do not meet the recognition criteria of equity instruments are classified as financial liabilities. Financial Liabilities Financial liabilities are classified as either financial liabilities at fair value through profit or loss (‘at FVTPL’) or other financial liabilities. Financial Liabilities at FVTPL Financial liabilities are classified as at FVTPL when the financial liability is either held for trading or it is designated as at FVTPL. A financial liability is classified as held for trading if: ● It has been acquired principally for the purpose of repurchasing it in the near term; or ● On initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or ● It is a derivative that is not designated and effective as a hedging instrument. A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if: ● Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or ● The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or ● It forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset and liability) to be designated as at FVTPL. Financial liabilities at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability and is included in the ‘other gains or losses’ line item in the consolidated income statement. Other Financial Liabilities Other financial liabilities (including borrowings) are subsequently measured at amortised cost using the effective interest method. Derecognition of Financial Liabilities The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

p39

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 4 Critical Accounting Judgements and Key Sources of Estimation of Uncertainty In the application of the Group’s accounting policies, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the year in which the estimate is revised if the revision affects only that year or in the year of the revision and future years if the revision affects both current and future years. The following are the critical judgments, apart from those involving estimations, that management have made in the process of applying the entity’s accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements. Going Concern As described in the basis of preparation and going concern in Note 3 above, the validity of the going concern concept is dependent upon finance being available for the Group’s working capital requirements and for the continued investment in the Group’s strategy of identifying, developing, building and operating power generating plants so that the Group can continue to realise its assets and discharge its liabilities in the normal course of business. After making enquiries and considering the matters referred to above, the Directors believe that solid progress towards securing finance has been and is being made. The Directors have a reasonable expectation that the Group will have adequate resources to continue in operational existence for the foreseeable future. Recoverability of Amounts Due Under Construction Contracts The directors considered the recoverability of the Group’s balances due under construction contracts which is included in the balance sheet at 30th June 2013 at e293,637 (2012: e1,355,212). The directors have reviewed the relevant costs incurred to date and expected costs for completion. They have also been in contact with the ultimate beneficiaries of the construction contracts and have considered the ability of these customers to have the relevant facilities available to pay for these contracts. Based on these reviews, the directors are satisfied with the recoverability of balances due under construction contracts at the balance sheet date. Allowances for Impairment of Trade Receivables The Group estimates the allowance for doubtful trade receivables based on assessment of specific accounts where the Group has objective evidence comprising default in payment terms or significant financial difficulty that certain customers are unable to meet their financial obligations. In these cases, judgment used was based on the best available facts and circumstances including but not limited to, the length of relationship. At 30th June 2013, provisions for doubtful debts amounted to €Nil which represents 0% of trade receivables at that date (2012: eNil – 0%). Of the trade receivables outstanding at 30th June 2013 of e1,959,737; e1,959,228 is due from Newry Biomass Limited (‘Newry’), a jointly controlled entity of the group, to Kedco Fabrication Limited, a subsidiary of the group and the EPC contractor for the Newry project. Newry has banking facilities available from Ulster Bank Ireland Limited. The GE Jenebacher engine was commissioned by Clarke Energy on 7th September 2012 with the gasifier commissioned and taken over by Newry on 4th June 2013. Following the formal commissioning hand over Kedco Fabrication Limited has been focused on completing various tests and reports required by Ulster Bank Ireland Limited in connection with the drawdown of debt facilities for Phase 2 of the project. The banks technical adviser, Mott McDonald, have completed their report and submitted it to Ulster Bank for their approval. Newry is currently in discussions with Ulster Bank regarding this report and the timing for the drawdown of facilities for Phase 2, which will facilitate the payment of the above trade receivable. Impairment of Goodwill Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires the directors to estimate the future cash flows to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual cash flows are less than expected, a material impairment may arise. The carrying amount of the goodwill at 30th June 2013 was e2,249,200 (2012: eNil) after an impairment loss of eNil was recognised in 2013 (2012: eNil). Details of the review of goodwill are set out in Note 18.

p40

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 4 Critical Accounting Judgements and Key Sources of Estimation of Uncertainty (continued) Provision for impairment of financial assets Determining whether the carrying value of financial assets has been impaired requires an estimation of the value in use of the investment in subsidiaries and joint venture vehicles. The value in use calculation requires the directors to estimate the future cash flows expected to arrive from these vehicles and a suitable discount rate in order to calculate present value. After reviewing these calculations, the directors are satisfied that an impairment of e24,941,460 should be recognised in the company accounts of Kedco plc. Details of this impairment are set out in Note 21. Determining useful lives of property, plant and equipment The annual depreciation charge depends primarily on the estimated lives of each type of asset and, in certain circumstances, estimates of fair values and residual values. The Directors annually review these asset lives and adjust them as necessary to reflect current thinking on remaining lives in light of technological change, prospective economic utilisation and physical condition of the assets concerned. Changes in asset lives can have significant impact on depreciation charges for the period. It is not practical to quantify the impact of changes in asset lives on an overall basis, as asset lives are individually determined, and there are a significant number of asset lives in use. Details of useful lives are included in the accounting policy in Note 3 above. The impact of any change would vary significantly depending on the individual changes in assets and the classes of assets impacted. 5 Financial Risk Management Financial Risk Management Objectives and Policies The Group’s activities expose it to a variety of financial risks: credit risk, liquidity risk and interest rate risk. The Group’s financial risk management programme aims to manage the Group’s exposure to the aforementioned risks in order to minimise the potential adverse effects on the financial performance of the Group. The Group seeks to minimise the effects of these risks by monitoring the working capital position, cash flows and interest rate exposure of the Group. There is close involvement by members of the Board of Directors in the day-to-day running of the business. One of the Group’s former subsidiaries operated in Latvia and the fluctuations in the Latvian Lat compared to the Euro have not been significant for the financial periods presented. Another subsidiary’s reporting currency is Sterling and the fluctuation in Sterling compared to Euro has not been significant for the financial periods presented. The Group’s exposure to price risk is not a significant risk as the company does not currently hold a portfolio of securities which may be materially impacted by a decline in market values. Credit Risk The Group’s maximum exposure to credit risk is represented by the balance sheet amount of each financial asset:

Amounts due from customers under construction contracts Trade and other receivables Cash and cash equivalents

2013 e 293,637 2,219,305 22,150

2012 e 1,355,212 1,605,518 144,764

The Group’s credit risk is primarily attributable to its amounts due from customers under construction contracts and to its trade and other receivables. The amounts due from customers under construction contracts represents the total costs incurred to date on the Group’s projects less recognised losses to date. These customers are jointly controlled entities in which the Group is a 50% partner. The directors of the Group are in constant contact with the other partners of the jointly controlled entities. The Group’s exposure to credit risk arises from the failure of the ultimate customer to raise the appropriate finance, with a maximum exposure equal to the carrying amount of the related costs. The Group has adopted procedures in extending credit terms to customers and in monitoring its credit risk. The Group’s exposure to credit risk arises from defaulting customers, with a maximum exposure equal to the carrying amount of the related receivables. Provisions are made for impairment of trade receivables when there is default of payment terms and significant financial difficulty. On-going credit evaluation is performed on the financial condition of accounts receivable at operating unit level at least on a monthly basis. Apart from Newry Biomass Limited, the largest customer of the Group (see below and refer to Notes 3, 4 and 26), the Group does not have significant risk exposure to any single counterparty. Concentration of credit risk relating to Newry Biomass Limited did not exceed 25% of gross monetary assets at any time during the year. Concentration of credit risk to any other counterparty did not exceed 5% of gross monetary assets at any time during the financial year. The Group defines counterparties as having similar characteristics if they are related parties.

p41

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 5 Financial Risk Management (continued) Credit Risk (continued) Exposure to credit risk on cash deposits and liquid funds is monitored by Directors. Cash held on deposit is with financial institutions in the Ba rating category of Moody’s. The directors are of the opinion that the likelihood of default by a counter party leading to material loss is minimal. Liquidity Risk The Group’s liquidity is managed by ensuring that sufficient facilities are available for the Group’s operations from diverse funding sources. The Group uses cash flow forecasts to regularly monitor the funding requirements of the Group. The Group’s operations are funded by cash generated from financing activities, borrowings from banks and investors and proceeds from the issuance of ordinary share capital. The table below details the maturity of the Group’s liabilities as at 30th June 2013: Up to 1 Year a Trade and Other Payables Amounts Due to Customers under Construction Contracts Investor Loans Preference Shares BES Shares Bank Overdrafts Bank Loans

1 – 5 Years a

After 5 Years a

Total a

3,228,557

1,019,307 166,373 3,100,356

599,523 640,000 105,000 -

1,019,307 599,523 640,000 105,000 166,373 3,100,356

7,514,593

1,344,523

8,859,116

The table below details the maturity of the Group’s liabilities as at 30th June 2012: Up to 1 Year a Trade and Other Payables Amounts Due to Customers under Construction Contracts Liabilities associated with assets held for sale Investor Loans Vudlande Loan Zero Coupon Loan Notes Preference Shares Bank Overdrafts Bank Loans Finance Leases

p42

1 – 5 Years a

After 5 Years a

Total a

2,495,766

1,110,090

2,630,581 3,311,191 1,050,000 3,956,621 150,000 1,193,833 373

600,000 -

1,925,025 -

2,630,581 3,311,191 1,050,000 3,956,621 600,000 150,000 3,118,858 373

15,898,455

600,000

1,925,025

18,423,480

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 5 Financial Risk Management (continued) Liquidity Risk (continued) The Group expects to meet its obligations from operating cash flows and from access to additional funds, secured through equity fundraise, the issuance of further loan notes and monetisation of project assets. Details of loan notes and other finance raised post year end are outlined in Note 42 to the financial statements. Future interest payments on borrowings which are repayable after more than one year are at carrying rates as follows:

Investor Loans Preference Shares

Amount 599,523 640,000

Interest Rate 10% 8%

The future finance charges on finance leases are disclosed in Note 30 to the financial statements. Interest Rate Risk The primary source of the Group’s interest rate risk relates to bank loans and other debt instruments. The interest rates on these assets and liabilities are disclosed above. Bank loans and other debt instruments amounted to a4,611,252 and a12,186,670 in 2013 and 2012 respectively. The interest rate risk is managed by the Group by maintaining an appropriate mix of fixed and floating rate borrowings. The Group does not engage in hedging activities. Bank loans and certain debt instruments are arranged at floating rates which are mainly based upon EURIBOR and the prime lending rate of financial institutions thus exposing the Group to cash flow interest rate risk. The other remaining debt instruments were arranged at fixed interest rates and expose the Group to a fixed cash outflow. These bank loans and debt instruments are mostly medium-term to long-term in nature. Interest rates on loans received from investors and shareholders are fixed in some cases while others are a fixed percentage greater than current prime lending rates. ‘Medium-term’ refers to bank loans and debt instruments repayable between 2 and 5 years and ‘long-term’ to bank loans repayable after more than 5 years. The sensitivity analysis below has been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming that the amount of the liability outstanding at the end of the year was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible changes in interest rates. If interest rates have been 50 basis points higher / lower and all other variables were held constant, the Group’s loss for the year ended 30th June 2013 would decrease/increase by a16,334 (2012: decrease / increase by a16,344). This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings. The Group’s sensitivity to interest rates has remained constant during the current year mainly due to the consistency in value of variable rate debt instruments.

p43

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 5 Financial Risk Management (continued) Foreign Exchange Risk The Group is exposed to future changes in the Sterling relative to the Euro. It was previously exposed to future changes in Latvian Lats up to the date of disposal of its Latvian subsidiary, SIA Vudlande. These risks are managed by monthly review of Sterling and previously Latvian Lats denominated monetary assets and monetary liabilities and assessment of the potential exchange rate fluctuation exposure. The Group’s exposure to foreign exchange risk is not actively managed. Management will reassess their strategy to foreign exchange risk in the future. The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows: Liabilities

Sterling Latvian Lats

2013 e 2,210,837 -

2012 e 4,824,901 1,848,783

Assets 2013 e 7,877,297 -

2012 e 8,519,149 1,968,803

The group is mainly exposed to Sterling. The following table details the Group’s sensitivity to a 10% increase and decrease in the Euro against Sterling. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 10% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the Group where the denomination of the loan is in the currency other than the currency of the lender or the borrower. A positive number below indicates an increase in profit and other equity where the Euro strengthens 10% against Sterling. For a 10% weakening of the Euro against Sterling, there would be a comparable impact on the loss and other equity, and the balances below will be negative.

Sterling Impact

Profit or Loss

2013 e 699,282

2012 e 463,318

The Group’s sensitivity to foreign currency has increased during the current year mainly due to the decrease in investor loans denominated in sterling. Market Risk The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates, which are detailed above. There has been no change to the Group’s exposure to market risks or the manner in which it manages and measures the risk.

p44

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 6 Capital Management The Group manages its capital to ensure that the Group is able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance. The capital structure of the company consists of financial liabilities, cash and cash equivalents and equity attributable to the equity holders of the parent company. The Group’s management reviews the capital structure on a periodic basis. As part of the review, management considers the cost of capital and risks associated with it. The Group’s overall strategy on capital risk management is to continue to improve the ratio of debt to equity. The gearing ratio of the Group for the year presented is as follows: 30th June 2013 30th June 2012

Debt Cash and Bank Balances Finance Leases Net Debt

s 4,611,252 (22,150) 4,589,102

s 12,186,670 (144,764) 373 12,042,279

Equity

3,983,864

(1,725,340)

Net Debt to Equity Ratio

115%

(698%)

Debt is defined as financial liabilities and borrowings of the Group while equity includes all capital, reserves and retained earnings attributable to equity holders of the parent. The improvement in the net debt to equity ratio is as a result of the restructuring process that took place during the financial year, which involved the disposal of the Latvian subsidiary undertaking, SIA Vudlande, and the conversion of investor loans into equity.

7 Segment Information Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the products sold to customers. The Group’s reportable segments under IFRS 8 Operating Segments are as follows: Power Generation: Being the development and operation of renewable energy electricity and heat generating plants; and Renewable Energy Solutions: Being the supply of combined heat and power units, domestic boilers, solar panels and other related products. The Group is no longer acting in this segment. The chief operating decision maker is the Chief Executive. Information regarding the Group’s reportable segments is presented below. The following is an analysis of the Group’s revenue and results from continuing operations by reportable segment:

Power Generation Renewable Energy Solutions

Segment Revenue 2013 2012 q q 2,663,824 10,036,547 264 46,611

Segment Profit / (Loss) 2013 2012 q w (1,271,165) (106,404) (437,026) (145,779)

Total from continuing operations

2,664,088

(1,708,191)

(252,183)

(953,623) 20,500 3,811 (353,733) 328 (2,990,908)

(742,090) 11,100 (213,923) (414,424) 333 (1,611,187)

Central administration costs and directors’ salaries Other operating income Share of profits / (losses) on joint ventures Interest costs Interest income Loss Before Taxation (continuing operations)

10,083,158

p45

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 7 Segment Information (continued) Revenue reported above represents revenue generated from jointly controlled entities and external customers. Inter-segment sales for the year amounted to eNil (2012: eNil). Included in revenues in the Power Generation Segment are revenues of e2,663,824.(2012: e10,031,773) which arose from sales to Newry Biomass Limited, a company which is under the joint control of Kedco plc. No other single customer contributed 10% or more to the Group’s Revenue for both 2013 and 2012.

Revenues from external customers for each product and service have not been disclosed, as the necessary information is not available, and the cost to develop it would be excessive. The accounting policies of the reportable segments are the same as the Group’s accounting policies described in Note 3. Segment profit or loss represents the profit or loss earned by each segment without allocation of central administration costs and directors’ salaries, other operating income, share of profit or loss of jointly controlled entities, profit on disposal of jointly controlled entities, interest costs, interest income and income tax expense. This is the measure reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance.

Other segment information: Depreciation and Amortisation 2013 2012 e e Power Generation 15,123 14,795 Renewable energy solutions 15,624 15,625 30,747

30,420

Additions to Non-Current Assets 2013 2012 e e 725,625 6,299 725,625

6,299

In addition to the depreciation and amortisation reported above, impairment losses of e318,750 (2012: eNil) were recognised in respect of property, plant and equipment. These impairment losses were attributable as follows: Renewable Energy Solutions Segment, e318,750 (2012:eNil); Power Generation Segment, eNil (2012: eNil). The Group operates in two principal geographical areas: Republic of Ireland (country of domicile), and the United Kingdom. The Group’s revenue from continuing operations from external customers and information about its non-current assets* by geographical location are detailed below:

Republic of Ireland United Kingdom

Revenue from Jointly Controlled Entities and External Customers 2013 2012 e e 264 51,385 2,663,824 10,031,773

2013 e 623,345 1,015,007

2012 e 757,329 -

2,664,088

1,638,352

757,329

10,083,158

Non-Current Assets*

* Non-current assets excluding goodwill, financial instruments and investment in jointly controlled entities. The management information provided to the chief operating decision maker does not include an analysis by reportable segment of assets and liabilities and accordingly no analysis by reportable segment of total assets or total liabilities is disclosed.

p46

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 8 Revenue An analysis of the Groupâ&#x20AC;&#x2122;s revenue for the year (excluding interest revenue), from continuing operations, is as follows:

Revenue from construction contracts Revenue from sale of goods

9 Cost of Sales

Opening Inventory Purchases Provision for Impairment of Inventory to Net Realisable Value Freight Closing Inventory

10 Administrative Expenses

2013 h

2012 h

2,663,824 264 2,664,088

10,036,547 46,611 10,083,158

2013 h

2012 h

50,000 2,612,922 2,662,922

2013 h

Employee Expenses 1,053,047 Recharge Consultancy Fee Office Expenses 164,446 Marketing Expenses 857 Professional Fees 267,681 Depreciation and Impairment of Property, Plant and Equipment 349,497 Profit on disposal of property, plant and equipment Amortisation and Impairment of Intangible Assets Travel and Subsistence 101,217 Allowance against balances due on unpaid share capital re LTIP (Note 34) Other receivables written off 125,987 Bad Debt Expense (644) Allowance for Impairment of Trade Receivables Other Miscellaneous Expenses 6,467 Loss / (Gain) on Foreign Exchange 442,530 Expenses capitalised (8,105) Regulatory Expenses 160,000 2,662,980

11 Finance Costs and Income Finance Costs Interest on loans, bank facilities and overdraft Interest on preference shares Lease interest charges

Finance Income Interest on deposit accounts

142,894 9,968,170 60,237 2,425 (50,000) 10,123,726

2012 h 515,920 (274,012) 164,984 2,456 373,141 30,420 (13,072) 1,770 (10,898) 492,563 20,220 30,384 (25,750) 19,495 (391,816) 17,900 953,705

2013

2012

h 313,710 40,000 23

h 374,247 40,000 177

353,733

414,424

328

333

p47

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 12 Employee Data Employee Costs (including Executive Directors): Salaries Social Insurance Costs Credit arising on not meeting non-market based vesting conditions (Note 34)

Average Number of Employees (including Executive Directors)

2013

2012

865,040 93,625

792,278 82,924

958,665

(492,580) 382,622

No. 10

No. 9

Company All group employees are employed in subsidiary companies.

13 Loss Before Taxation Loss before taxation is stated after charging /(crediting): Depreciation of Property, Plant and Equipment Loss / (gain) on Foreign Exchange Amortisation of Intangible Assets Directors’ Remuneration: for Services as Directors (Note 35) Directors’ Remuneration: for Other Services (Note 35) Other Redundancy Costs Impairment Losses of Property, Plant and Equipment charged to Profit and Loss Profit on Disposal of Property, Plant and Equipment Provision for Impairment of Trade Receivables Provision for Impairment of Inventory to Net Realisable Value Auditor’s Remuneration Audit of Group Companies Other Assurance Services Tax Advisory Services Other Non-Audit Services

p48

2013

2012

30,747 442,530 39,000 392,500 -

30,420 (391,816) 1,770 67,000 325,000 2,784

318,750 -

(13,072) (25,750) 60,237

65,000 15,000 80,000

38,700 13,400 52,100

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 14 Income Taxes Relating to Continuing Operations

2013

2012

Income Tax Expense Comprises: Current Tax Deferred Tax

Income Tax Expense Recognised in Profit or Loss

Loss before taxation Applicable Tax 12.5% (2012: 12.5%)

Effects of: Amortisation and depreciation in excess of capital allowances Lease payments Expenses not deductible for tax purposes Non-taxable income Other Timing Differences Income taxed at higher rate Losses carried forward

2013 j (2,990,908)

2012 j (1,611,187)

(373,864)

(201,398)

(101) 112,185 (16,451) 278,231 -

(7,990) (581) 75,826 (12,860) (18,072) 3,589 161,486 -

The tax rate used for 2013 and 2012 reconciliation above is the corporate rate of 12.5% payable by corporate entities in Ireland on taxable profits under tax law in that jurisdiction.

p49

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 15 Discontinued Operations Di s po sa l o f SI A Vud la nd e ( Wo od P ro du ct s B us in es s ) In its interim results for the six months to 31st December 2011, the Group announced that it was seeking purchasers for its 80% interest in its Latvian wood processing facility, SIA Vudlande, as it was deemed non-core to the Group’s focus on the conversion of biomass to renewable energy. The company sought purchasers for its interest in SIA Vudlande over a considerable period. The highest offer received for the Group’s interest as a result of this process was d2.5m. On 10th September 2012, the Group announced a proposed restructuring of the debts of the Group. As part of the restructuring, the Group had agreed in principle to allow the holders of Zero-Coupon Secured Notes in the company to acquire the entire share capital of Kedco Block Limited for d3m (£2,379,253), the proceeds of which will correspondingly reduce amounts due to the holders of the Zero-Coupon Secured Notes. Kedco Block Limited is the registered shareholder of the Group’s 80% shareholding in SIA Vudlande. This proposal was approved by shareholders at an Extraordinary General Meeting held on 5th October 2012 and the disposal was completed on 27th November 2012, on which date control of Kedco Block Limited and SIA Vudlande passed to the acquirer. Details of the assets and liabilities disposed of, and the calculation of the profit or loss on disposal, are disclosed in Note 39. The results of the discontinued wood products operations included in the consolidated income statement are set out below. The comparative profit and cash flows from discontinued operations have been represented to include those operations classified as discontinued in the current year. P ro fi t / (L o s s ) fo r t h e y e a r f ro m d i s c o n t in u e d o p e r a t i o n s

Revenues Other Gains Expenses Profit before tax Attributable income tax expense Profit for the year from discontinued operations Loss on disposal of operation (see Note 39) Loss on remeasurement to fair value less costs to sell of assets held for sale

2013 d 4,554,862 4,554,862 (4,390,540) 164,322 164,322 (8,866)

2012 d 9,456,422 5 9,456,427 (8,892,785) 563,642 (69,731) 493,911 -

(1,364,082)

Net profit / (loss) for the year from discontinued operations

155,456

(870,171)

Attributable to the owners of the Company

122,592

(968,953)

2013 d 508,956 (37,013) (180,938) 291,005

2012 d 643,548 (524,555) (365,555) (246,562)

C a s h fl o w s f ro m d i s c o n ti n u e d o p e r a t io n s

Net cash inflows from operating activities Net cash outflows used in investing activities Net cash outflows used in financing activities Net cash inflows / (outflows)

The wood products business has been classified and accounted for at 30th June 2012 as a disposal group held for sale (see Note 16).

p50

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 16 Assets Classified as Held For Sale

Assets related to the wood products business

2013 e -

2012 e 6,584,239

Liabilities associated with assets held for sale

2,630,581

As described in Note 15 above and in Note 39, the Group completed the disposal of the wood products business being the entire interest in its Latvian subsidiary for e3m, as part of a debt restructuring in the current year. The major classes of assets and liabilities of the wood products business at the end of the reporting period are as follows: 2013 e

2012 e

Property, plant and equipment Inventories Trade and other receivables Cash and bank balances

3,782,884 1,581,364 1,091,711 128,280

Assets of wood products operations classified as held for sale

6,584,239

Trade and other payables Current borrowings Current finance lease liabilities Current deferred income Non-current borrowings Non-current finance lease liabilities Non-current deferred income Non-current deferred tax liability

(512,482) (687,937) (74,014) (10,302) (804,487) (177,811) (25,755) (337,793)

Liabilities of wood products operations associated with assets classified as held for sale

(2,630,581)

Net assets of wood products operations classified as held for sale

3,953,658

p51

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 17 Loss Per Share

Basic and Diluted Loss Per Share From continuing operations From discontinued operations Total basic and diluted loss per share

2013

2012

Euro per share

(0.004) -

(0.006) (0.003)

(0.004)

(0.009)

The loss and weighted average number of ordinary shares used in the calculation of the basic and diluted loss per share are as follows:

Loss for year attributable to equity holders of the parent Profit /(loss) for the year from discontinued operations used in the calculation of basic earnings / (loss) per share from discontinued operations Losses used in the calculation of basic loss per share from continuing operations Weighted average number of ordinary shares for the purposes of basic loss per share

2013 d (2,868,316)

122,592 (2,990,908)

767,965,770

2012 d (2,580,140)

(968,953) (1,611,187)

274,612,376

Anti-Dilutive Potential Ordinary Shares The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of ordinary shares for the purposes of diluted loss per share: 2013 2012 â&#x20AC;&#x2DC;Aâ&#x20AC;&#x2122; Shares in issue Ordinary shares to be issued as part of the purchase of Reforce Energy Limited on the satisfaction of certain conditions Share warrants in issue

p52

Number

99,117,952

2,489,048

54,149,107

27,392,915

Convertible preference shares in issue

3,125,000

Convertible loans in issue

6,583,363

21,942,154

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 18 Goodwill

Cost Accumulated impairment losses

Cost Balance at beginning of year Reclassified as held for resale Additional amounts recognised from business combinations occurring during the year (Note 38) Balance at end of year Accumulated impairment losses Balance at beginning and at end of year

2013 d

2012 d

2,249,200 2,249,200

2013 d

2012 d

549,451 (549,451)

2,249,200 2,249,200

Cash-Generating Units Goodwill acquired in business combinations is allocated, at acquisition, to the cash-generating units (CGUs) that are expected to benefit from that business combination. A CGU is the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or group of assets. The CGUs represent the lowest level within the Group at which the associated goodwill is assessed for internal management purposes and are not larger than the operating segments determined in accordance with IFRS 8 Operating Segments. A total of two CGUs (2012: Nil) have been identified and these are all associated with the Power Generation Segment. The carrying value of the goodwill within the Power Generation Segment is d2,249,200 (2012: dNil). In accordance with IAS 36 Impairment of Assets, the CGUs to which significant amounts of goodwill have been allocated are as follows:

Enfield Biomass Reforce Energy

2013 d 438,083 1,811,117 2,249,200

2012 d -

For the purpose of impairment testing, the discount rates applied to these CGUs to which significant amounts of goodwill have been allocated were 12% (2012: N/a) for the Reforce Energy CGU and 15% (2012: N/a) for the Enfield Biomass CGU. Annual Test for Impairment The Group tests goodwill annually for impairment in accordance with IAS 36 Impairment of Assets, or more frequently if there is indication that the goodwill might be impaired. The recoverable amount of the cash-generating units have been determined based on a value-in-use calculation which uses cash flow projections based on financial budgets approved by the Board of Directors covering the next five year period. Cash flows after Year 5 are assumed to continue in perpetuity as a rate of 2.5% reflecting inflation.

p53

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 18 Goodwill (continued) The key assumptions used in the value-in use calculations for the above cash-generating units are: (A) Budgeted sales price: ● Reforce Energy: The budgeted sales prices are based on the Renewable Energy Feed in Tariff (‘REFIT’) scheme published by the Department of Communications, Energy and Natural Resources in Ireland. This scheme guarantees a floor price for the production of electricity through wind energy in Ireland and has been applied to the value in use calculated on the Reforce Energy CGU. ●

Enfield Biomass: The budgeted sales prices are based on the average market terms for a typical Power Purchase Agreement (PPA), which includes payments for Renewable Obligation Certificates (ROCs), wholesale electricity prices, climate change Levy Exemption Certificates (LECs) and embedded benefits. ROCs and LECs have a guaranteed floor price for the production of electricity through renewable sources in the UK and have been applied to the value in use calculated on the Enfield Biomass CGU.

(B) Operational costs price inflation: Forecast consumer price indices during the budget period for Ireland and the UK. The values assigned to the key assumption are consistent with external sources of information. The directors believe that any reasonably possible change in key assumptions on which the value-in-use is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the cash-generating unit. A 1% increase in the discount rate would not result in an impairment charge for the years presented. No impairment losses have arisen in the current financial year, and the impairment testing carried out on goodwill at 30th June 2013 identified significant headroom in the recoverable amount of the related cash generating units as compared to their carrying value.

p54

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 19 Intangible Assets Group Cost

Website

Trademarks

Software

Development Costs

Total

At 1st July 2011 Additions Reclassified as held for sale

1,770 -

1,128 -

11,025 (11,025)

412,349 -

424,502 1,770 (11,025)

At 30th June 2012 Acquisitions through business combinations Reclassified to property, plant and equipment (See Note 20) At 30th June 2013

1,770

1,128

412,349

415,247

114,343

1,770

1,128

(114,343) 412,349

(114,343) 415,247

1,770 -

1,128 -

10,520 (10,520)

412,349 -

423,997 1,770 (10,520)

1,770

1,128

412,349

415,247

Accumulated Amortisation At 1st July 2011 Amortisation Expense Reclassified as held for sale At 30th June 2012 and at 30th June 2013

Carrying Amount At 30th June 2012 and at 30th June 2013

Development expenditure, substantially all of which was incurred in 2006, in respect of anaerobic digestion, gasification and biomass heating technologies has been recognised as an intangible asset. The expenditure incurred related to engineering costs, surveys and consultants fees. These costs are associated with technologically feasible processes which will be used in the business in future and accordingly have been capitalised. These costs have been fully amortised as at 30th June 2013. All other research costs incurred during the year presented relate to other research activities and do not represent capitalisable development costs. Amortisation expense has been included in the line item ‘administrative expenses’. The reclassification to construction in progress noted above reflects assets purchased as part of the purchase of Reforce Energy Limited (see Note 38), which was reclassified as construction in progress to be in line with Kedco plc’s policies.

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Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 19 Intangible Assets (continued)

p56

Website

Total

Company Cost At 1st July 2012 Additions

1,770

At 30th June 2012 and at 30th June 2013

1,770

Accumulated Amortisation At 1st July 2012 Amortisation expense

1,770

At 30th June 2012 and at 30th June 2013

1,770

Carrying Amount At 30th June 2012 and at 30th June 2013

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 20 Property, Plant and Equipment Land and Buildings f Cost At 1st July 2011 Additions Disposals Reclassified as held for sale At 30th June 2012 Additions Acquisitions through business combinations Disposals Reclassification from intangible assets (Note 19) Foreign currency adjustment

3,173,960 -

Office Equipment f

Plant and Machinery f

160,076 6,299 (38,178)

5,271,339 (87,697)

101,294 -

190,299 (150,484)

(5,183,642) -

(101,294) -

(39,815) -

(1,513,917) 1,660,043 128,197

Construction Fixtures and Motor In Progress Fittings Vehicles f f f 93,804 (93,804)

Total f 8,990,772 6,299 (370,163)

(6,838,668) 1,788,240

235

725,390

725,625

(667)

430,839 -

430,839 (667)

114,343

(40,287)

1,660,043

127,765

1,230,285

3,018,093

1,434,144 -

128,625 (38,178)

2,096,017 (87,696)

177,939 (150,483)

(524,100) 15,625

14,795

(2,008,321) -

(27,456) -

At 30th June 2012

925,669

105,242

On Disposals Impairment Charge for the Year

318,750 15,624

At 30th June 2013

Accumulated Depreciation At 1st July 2011 On Disposals Reclassified as held for sale Charge for the Year

(667) 15,123

93,804 (93,804)

3,930,529 (370,161)

(2,559,877) 30,420 1,030,911

(667) 318,750 30,747

At 30th June 2013

1,260,043

119,698

1,379,741

Carrying Amount At 30th June 2012

734,374

22,955

757,329

At 30th June 2013

400,000

8,067

1,638,352

1,230,285

Impairment Losses Recognised in the Current Year The Group carried out a review of the recoverable amount of property held by the Renewable Energy Solutions operating segment at 30th June 2013, as a result of falls in the property market in Ireland. The review led to recognition of an impairment loss of f318,750, which has been recognised in profit or loss. The recoverable amount of the assets has been determined on the basis of their fair value, less costs to sell. The impairment losses have been included in the line item â&#x20AC;&#x2DC;Administrative Expensesâ&#x20AC;&#x2122; in the consolidated income statement.

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Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 21 Financial Assets Group Loan Advanced to Jointly Controlled Entities At 1st July Additions in year Eliminated on consolidation (See note below) Foreign currency exchange movement At 30th June

2013 f 7,608,687 (990,000) (385,419)

2012 f 990,000 6,618,687 -

6,233,268

7,608,687

During the year ended 30th June 2012, Newry Biomass Limited, a joint venture vehicle which was established to develop a biomass electricity and heat generating plant in Newry, Northern Ireland, issued loan notes to the Group of ÂŁ5,330,691. These loan notes will be redeemed in full on 1st November 2026, and entitle the holder to a share of the earnings after tax of Newry Biomass Limited in the ratio of the loan notes issued to the relevant loan note holders. During the year ended 30th June 2013, Kedco Investment Co. 2 Limited, a subsidiary undertaking of Kedco plc, acquired the remaining 50% shareholding of Enfield Biomass Limited (see Note 38), which previously operated as a joint venture vehicle of the Group to develop a biomass electricity and heat generating plant in Enfield, London. As a result of the acquisition, the loan notes issued by Enfield Biomass Limited to the Group have been eliminated on consolidation. Company Investment in subsidiary undertakings At 1st July Provision for impairment of investment in subsidiaries Additions (See Note 38) At 30th June

2013 f

2012 f

24,941,463 (24,941,460) 2,000,000

24,941,463 -

2,000,003

24,941,463

The opening investment in subsidiary undertakings has been calculated by reference to the number of shares issued by Kedco plc in the share for share exchange with Kedco Block Holdings Limited, multiplied by the share price on the day of the Companyâ&#x20AC;&#x2122;s admission to the AIM, less provision for impairment. During the year, the Company purchased Reforce Energy Limited and subsidiaries. Details of this acquisition are set out in Note 38. During the year, the Directors reviewed the carrying value of Kedco Block Holdings Limited and its subsidiaries (Kedco Energy Limited, Granig Trading Limited, Kedco Power Limited, Castle Home Supplies Limited, Kedco Group Holdings USA Inc and Ardstown Investments Limited). The directors noted that these companies are now dormant and no longer trading. Based on this, the directors believed that it was prudent to write down the cost of the investment in Kedco Block Holdings Limited to fNil. The future cash flows to be generated by the company will be achieved through the projects in existence in the other subsidiaries of Kedco plc, namely Kedco Investment Co. 1 Limited, Kedco Investment Co. 2 Limited, Reforce Energy Limited, Kedco Fabrication Limited and all of the subsidiary undertakings of these undertakings. In the opinion of the directors, the shares in the remaining subsidiary undertakings as at 30th June 2013 are worth at least the amounts at which they are stated in the balance sheet. Details of subsidiary undertakings are set out in Note 22. The Group carried out a further assessment of the carrying value of the investment with reference to the future cash flows of projects currently undertaken by the Group as at 30th June 2013, and has determined that no additional impairment is required for the current period.

p58

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 22 Subsidiaries Details of Kedco plc subsidiaries at 30th June 2013 are as follows: Name

Country of Incorporation

Shareholding

Principal Activity

Kedco Investment Co. 1 Limited Kedco Investment Co. 2 Limited Reforce Energy Limited Pluckanes Windfarm Limited Kedco Fabrication Limited Enfield Biomass Limited Reforce Energy (West) Limited Kedco Block Holdings Limited Kedco Power Limited Granig Trading Limited Castle Home Supplies Limited Kedco Energy Limited Kedco Group Holdings USA Inc. Ardstown Investments Limited

Republic of Ireland Republic of Ireland Republic of Ireland Republic of Ireland Republic of Ireland United Kingdom Republic of Ireland Republic of Ireland Republic of Ireland Republic of Ireland Republic of Ireland Republic of Ireland United States of America Republic of Ireland

100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Investment company Investment company Renewable energy development company Generation of electricity through wind Contracting company Energy utility company Dormant company Investment / dormant company Cost centre / dormant company Dormant company Dormant company Dormant company Dormant company Dormant company

The shareholding in each company above is equivalent to the proportion of voting power held. The registered office for all of the above companies is Building 4600, Cork Airport Business Park, Kinsale Road, Cork, except for Enfield Biomass Limited, whose registered office is Gibbs Road, Montagu Industrial Estate, London N18 3PU, England; and Kedco Group Holdings USA Inc., whose registered office is 2711 Centreville Road Suite 400, Wilmington, DE 19808, USA. Details of acquisition and disposal of subsidiary undertakings during the year are described in notes 38 and 39 of the financial statements.

p59

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 23 Investment in Jointly Controlled Entities Details of the Group’s interests in jointly controlled entities at 30 June 2013 are as follows: Name of Jointly Controlled Entity Newry Biomass Limited Asdee Renewables Limited Bridegreen Energy Limited

Country of Incorporation Northern Ireland Republic of Ireland Republic of Ireland

Shareholding 50%* 50% 50%

Principal Activity Energy Utility Company Energy Utility Company Energy Utility Company

* The Group owns 50% of the shares of Newry Biomass Limited. However, as noted in Note 21 above, during the year ended 30th June 2012, the Group received loan notes from Newry Biomass Limited which entitles the holders to a share of the profits of the company. Based on the holding of shares and loan notes, the Group is entitled to a share of 92% of the profits and losses of the company. Apart from Newry Biomass Limited, none of the above companies have commenced trading as at 30th June 2013. During the year ended 30th June 2013, the Group acquired the remaining 50% of the share capital of Enfield Biomass Limited, transforming the company from a jointly controlled entity to a subsidiary undertaking of the company. Details of this acquisition are noted in Note 38 of the financial statements. Summarised financial information in respect of the group’s interests in jointly controlled entities is as follows:

Non-Current Assets Current Assets Non-Current Liabilities Current Liabilities

2013 f 14,347,412 71,142 (6,491,371) (7,456,417)

2012 f 11,095,301 4,863,923 (6,892,749) (9,705,017)

Net Assets / (Liabilities)

470,766

(638,542)

Group’s Share of Net Assets / (Liabilities) of Jointly Controlled Entities

187,068

(509,599)

Total Revenue Total Expenses Total Gain / (Loss) for the Year

16,610 (12,790) 3,820

(321,078) (321,078)

3,811

(213,923)

2013 f

2012 f

50,000 50,000

Group’s share of profits / (losses) of jointly controlled entities

24 Inventories Group Raw Materials Finished Goods

The cost of inventories recognised as an expense during the year in respect of continuing operations was f2,662,922 (2012: f10,123,726). The cost of inventories recognised as an expense during the year in respect of write-downs of inventory to net realisable value amounted to fNil (2012: f60,237).

p60

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 25 Construction Contracts Contracts in progress at the Balance Sheet Date: Construction Costs Incurred Plus Recognised Profits Less Recognised Losses To Date Less Payment Received In Advance

Recognised and Included in the Financial Statements as amounts due: From Customers Under Construction Contracts To Customers Under Construction Contracts

2013 o 12,405,063 (13,130,733) (725,670)

2012 o 11,386,985 (11,141,863) 245,122

293,637 (1,019,307) (725,670)

1,355,212 (1,110,090) 245,122

At 30th June 2013, retentions held by customers for contract work amounted to oNil (2012: oNil). Advances received from customers for contract work amounted to o13,130,733 (2012: o11,141,863). The following table shows an aged analysis of amounts due from customers under construction contracts (being construction costs incurred on projects plus recognised profits less recognised losses to date):: 2013 2012 o o Costs incurred in the past twelve months 244,126 850,996 Costs incurred between twelve and twenty-four months 6,844 35,453 Costs incurred between twenty-four and sixty months 42,667 468,763 293,637 1,355,212 Of the balance of o293,637 (2012: o1,355,212), oNil (2012: o832,612) relates to the construction of a 4MW Gasification plant in Northern Ireland. The principal customer for this contract is Newry Biomass Limited, a jointly controlled entity of the Group. Newry Biomass Limited has put in place financing facilities and is paying the Group for work carried out on a regular basis. The directors of the Group are satisfied, from this review, that the Groupâ&#x20AC;&#x2122;s exposure to credit risk with respect to the above projects is manageable, as described in Note 5. During the year, the group acquired o162,075 of project costs by way of business acquisition (2012: oNil).

26 Trade and Other Receivables Group Trade Receivables Provision for Impairment of Trade Receivables

Amounts Due from Jointly Controlled Entities VAT Receivable Prepayments Corporation Tax Other Receivables

2013 f

2012 f

1,959,737 1,959,737

2,325 2,325

63,153 38,166 115,982 101 42,166 2,219,305

1,469,169 47,972 43,785 101 42,166 1,605,518

p61

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 26 Trade and Other Receivables (continued) The following table shows an analysis of trade receivables split between past due and within terms accounts. Past due is when an account exceeds the agreed terms of trade, which are typically 60 days. 2012 2013 f f Within Terms Past due more than one month but less than two months Past due more than two months 1,959,737 2,325 1,959,737

2,325

Included in the Group’s trade receivables balance are debtors with carrying amount of f1,959,737 (2012: f2,325) which are past due at year end and for which the Group has not provided. Of this f1,959,228 is due from Newry Biomass Limited (‘Newry’), a jointly controlled entity of the group, to Kedco Fabrication Limited, a subsidiary of the group and the EPC contractor for the Newry project. Newry has banking facilities available from Ulster Bank Ireland Limited. The GE Jenebacher engine was commissioned by Clarke Energy on 7th September 2012 with the gasifier commissioned and taken over by Newry on 4th June 2013. Following the formal commissioning hand over, Kedco Fabrication Limited has been focused on completing various tests and reports required by Ulster Bank Ireland Limited in connection with the drawdown of debt facilities for Phase 2 of the project. The banks technical adviser, Mott McDonald, have completed their report and submitted it to Ulster Bank for their approval. Newry is currently in discussions with Ulster Bank regarding this report and the timing for the drawdown of facilities for Phase 2, which will facilitate the payment of the above trade receivable. The Group does not hold any collateral over these balances. No interest is charged on overdue receivables. The quality of past due not impaired trade receivables is considered good. The carrying amount of trade receivables approximates to their fair values. Apart from Newry Biomass Limited, which is explained in detail above, the Group has recognised an allowance for doubtful debts of 100% where appropriate against all receivables over 120 days because historical experience has been that trade receivables that are past due beyond 120 days are not recoverable. Allowances for doubtful debts are recognised against trade receivables between 60 days and 120 days based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty and an analysis of the counterparty’s current financial position. In determining the recoverability of a trade receivable, the Group considers any changes in the credit quality of the trade receivable from the date credit was initially granted up to the end of the current reporting period. Apart from Newry Biomass Limited, which is explained in detail above, the concentration of the credit risk is limited due to the customer base being large and unrelated, and the fact that no one customer holds balances that exceeds 10% of the gross assets of the Group. The maximum exposure risk to trade and other receivables at the reporting date by geographic region is as follows:

Ireland United Kingdom Eurozone Countries

p62

2013 f 509 1,959,228 1,959,737

2012 f 2,325 2,325

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 26 Trade and Other Receivables (continued) Other receivables related to unpaid share capital of f40,000 (2012: f40,000) and deposits on rental contracts amounting to f2,166 (2012: f2,166). Apart from receivables relating to share capital, the aged analysis of other receivables is within terms. Other receivables relating to share capital, totalling f40,000 (2012: f40,000) are older than two years but have been reviewed by management and it is believed that the credit risk is limited due to the matching of liabilities. There is no concentration of credit risk with respect to receivables as disclosed in Note 5 under credit risk.

Company Amounts due from subsidiary undertakings Prepayments Corporation Tax VAT Receivable Other receivables

2013 f 11,852,313 11,722 96 437 40,000

2012 f 18,282,438 13,045 96 435 40,000

11,904,568

18,336,014

The concentration of credit risk in the individual financial statements of Kedco plc relates to amounts due from subsidiary undertakings. The directors have reviewed these balances in the light of the impairment review carried out on the investments by Kedco plc in its subsidiaries. The Directors considered the future cash flows arising from subsidiaries and are satisfied that no impairment is required on these balances. The reduction in amounts due from subsidiary undertakings is due to the offset of group balances, together with the write off of balances totalling f1,078,402.

27 Share Capital Kedco plc At 30th June 2012

Authorised Number

Allotted and Called up Number

Authorised f

Allotted and Called up f

Ordinary Shares of f0.01 each

10,000,000,000

311,562,785

100,000,000

3,115,628

‘A’ Shares of f0.01 each

10,000,000,000

99,117,952

100,000,000

991,180

Authorised Number

Allotted and Called up Number

Authorised

At 30th June 2013

Allotted and Called up f

Ordinary Shares of f0.01 each

10,000,000,000

1,118,502,058

100,000,000

11,185,020

‘A’ Shares of f0.01 each

10,000,000,000

99,117,952

100,000,000

991,180

p63

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 27 Share Capital (continued) The holders of the ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of the company. All ordinary shares are fully paid up, with the exception of f40,000 which is disclosed in Note 26. The Company was incorporated on 2nd October 2008 with an initial authorised share capital of f100,000,000 divided into 100,000,000 ordinary shares of f1.00 each of which 38,100 ordinary shares of f1.00 each fully paid up were issued. On 14th October 2008 the ordinary shares were subdivided so that each ordinary share had a nominal value of f0.01 each as opposed to the previous nominal value of f1.00 each. On 3rd December 2010, the trading denomination of the Company’s ordinary shares of f0.01 each changed from Euro to pounds sterling. This does not affect the nominal valuation of the shares.

Reverse asset acquisition On 13th October 2008, the Company acquired the entire issued share capital of Kedco Block Holdings Limited (‘KBHL’) in consideration for the allotment and issue of 2,493,081 ordinary shares of f1.00 each to the former members of KBHL. Pursuant to the agreement, the Company allotted and issued one ordinary share of f1.00 each in consideration for the transfer to it of each share held in KBHL. The fair value of the shares in Kedco Block Holdings Limited received as consideration for the issue of these shares in Kedco plc was f34,903,134 which resulted in a share premium in the Company of f32,908,669. From a Group perspective, since the acquisition was accounted for as a reverse asset acquisition, the shares of the new legal parent (Kedco plc) were recognised and the shares of the accounting parent (Kedco Block Holdings Limited) were derecognised. A reverse acquisition adjustment has been made for the share capital of the accounting parent and was offset against the share premium of the new legal parent.

Movements in the year to 30th June 2013 Kedco plc: ● On 27th November 2012, as part of a restructuring process designed to strengthen the Company’s balance sheet by the reduction of debt, the Company issued 540,070,386 new ordinary shares of f0.01 each at a premium of f41,388 in exchange for debt in the Group totalling f5,442,091. At the same time, the Company’s major shareholder, Farmer Business Developments plc (‘FBD’) agreed to convert f326,184 of its unsecured notes into 32,352,620 warrants so as not to trigger the mandatory bid requirements of the Irish Takeover Code. The warrants, which do not carry a coupon, are convertible to ordinary shares, on a one-for-one basis, at any time by FBD. Further details of the debt converted into equity under this process are discussed in Note 29 of the financial statements. ●

On 27th November 2012, in conjunction with the above restructuring process, the Company issued 95,129,619 ordinary shares of f0.01 each at a premium of f4,959.

●

On 21st December 2012, the Company issued 139,386,678 ordinary shares of f0.01 each at a premium of f6,133 as part satisfaction of the acquisition of Reforce Energy Limited. Further details of this acquisition are disclosed in Note 38 of the financial statements.

●

On 21st December 2012, as a result of the above acquisition, FBD converted its 32,352,620 warrants as disclosed above into 32,352,620 ordinary shares of f0.01 each at a premium of f2,658.

Share premium relates to the share premium arising on share issues.

p64

KEDCO PLC - Annual Report and Accounts 2013 Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 28 Reserves Equity Settled Employee Benefits Reserve Balance at Beginning of the Financial Year Credit arising on not meeting non-market based vesting conditions Balance at End of the Financial Year

2013 s -

2012 s 492,580 (492,580) -

The equity settled employee benefits reserve arises on the grant of share options to employees under the employee share option plan. The expense was reversed in the prior year as conditions attaching were not met. Further information about share-based payments to employees is set out in Note 34.

29 Borrowings

Non-Current Liabilities Group Secured at amortised cost Investor Loan (ii) Secured at 10% Bank Loans (iv) Financial liabilities carried at fair value through profit or loss Preference shares (v) at 8% Business Expansion Scheme Shares (vi)

Current Liabilities Bank Overdrafts Investor Loans (ii) - Secured - Unsecured Zero-Coupon Loan Notes (i) Vudlande Loan (iii) Bank Loans (iv)

2013

2012

599,523 599,523

1,925,025 1,925,025

640,000 105,000 745,000

600,000 600,000

1,344,523

2,525,025

2013 s 166,373 3,100,356

2012 s 150,000 400,000 2,911,191 3,956,621 1,050,000 1,193,833

3,266,729

9,661,645

p65

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 29 Borrowings (continued) Company Non-Current Liabilities Secured at amortised cost Investor Loan (ii) Secured at 10% Current Liabilities Bank Overdrafts Zero-Coupon Loan Notes (i) Investor Loans (ii) - Secured - Unsecured

2013 s

2012 s

599,523

2013 s 5 -

2012 s 3,956,620 400,000 2,323,782

6,680,402

Summary of Borrowing Arrangements The Group has secured debt funding from banks and from its equity investors throughout the reporting year in order to finance capital investment and working capital. The principal loan arrangements entered into are as follows: (i) On 5th July 2010, the Company raised e3.2m (£2.6m) from the issue of 3,588,583 Zero-Coupon Secured Loan Notes. On 10th September 2012, the Group announced a proposed restructuring to remove debt obligations from the Company such that it would have a suitable basis on which to raise further equity finance. As part of this restructuring, it was agreed that the holders of the Zero-Coupon Secured Notes would take on a 40% reduction in the interest payable on the Notes, equivalent to £401,921 (s499,033), and this reduction was recorded in the financial statements for the year ended 30th June 2012. On 27th November 2012, the restructuring process was completed, and the Zero-Coupon Secured Note holders was satisfied by (a) the transfer of the group’s interest in Kedco Block Limited, which included the Group’s 80% interest in SIA Vudlande, to Cornhill Asset Management Limited, acting on behalf of the holders of the Zero-Coupon Secured Notes for consideration of s3,000,000; and (b) the issue of 99,236,914 ordinary shares of s0.01 each in Kedco plc to the holders of the Zero-Coupon Secured Notes. The total value of loans and accrued interest converted was s3,997,542. The loan note holders have entered into a ‘lock-in’ restriction whereby they are unable to dispose of the new Ordinary Shares that they have received pursuant to the restructuring for a period of two years from the date of admission. (ii) A loan of s1,000,000 was received from equity investors during the year ended 30th April 2007 to finance the general working capital requirements of the Group. These equity investors are a director and his close family. At 30th June 2013, a balance of s587,409 remained payable. The remaining s587,409 loan is repayable on demand between 24th May 2012 and 24th November 2013. This loan is unsecured and carries an annual interest rate of 2% over the prime lending rate of Allied Irish Banks plc Interest is payable monthly. On 10th September 2012, the Group announced a proposed restructuring to remove debt obligations from the Company such that it would have a suitable basis on which to raise further equity finance. As part of this restructuring, it was agreed that the holders of the above investor loan would take on a 40% reduction in the interest payable on the loan to date, ie s7,440. This accrued interest was included in accruals under the category ‘Trade and Other Payables’ in the prior year. On 27th November 2012, the restructuring process was completed, and the holders of the above mentioned loan was satisfied by the issue of 59,922,665 ordinary shares of s0.01 each in Kedco plc. The total value of loans and accrued interest converted was s604,149. The loan note holders have entered into a ‘lock-in’ restriction whereby they are unable to dispose of the new Ordinary Shares that they have received pursuant to the restructuring for a period of two years from the date of admission. Investor loans of s1,219,028 were received during the year ended 30th June 2010. Of the total s1,219,028 received, s250,000 is secured on the 75kW combined heat and power modular bio power system included in inventories at 30th June 2012 and s150,000 is secured by personal guarantees from certain directors. On 10th September 2012, the Group announced a proposed restructuring to remove debt obligations from the Company such that it would have a suitable basis on which to raise further equity finance. As part of this restructuring, it was agreed that the holders of the above Investor Loans would take on a 40% reduction in all interest that had been accrued and remained unpaid to date, equivalent to s60,258. At 30th June 2012, the outstanding loan balance and accrued interest was s365,387. p66

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 29 Borrowings (continued) Summary of Borrowing Arrangements (continued) (ii) (Continued) On 27th November 2012, the restructuring process was completed, and the holders of the above Investor Loans was satisfied by (a) the transfer of the Group’s interest in 75kW combined heat and power modular bio power system to one of the holders of the Investor loan for consideration of s50,000; and (b) the issue of 31,281,705 ordinary shares of s0.01 each in Kedco plc to the holders of the above investor loans. The total value of loans and accrued interest converted was s365,367. The loan note holders have entered into a ‘lock-in’ restriction whereby they are unable to dispose of the new Ordinary Shares that they have received pursuant to the restructuring for a period of two years from the date of admission. The remaining investor loans of s819,028 received during the year ended 30th June 2010 are unsecured, have no fixed interest rate and have no fixed repayment date. These funds were advanced to finance working capital. At 30th June 2012, a balance of s64,638 was payable to investors at 30th June 2012. As part of the above restructuring process noted above, the holders of the remaining unsecured investor loans were satisfied by the issue of 64,111,146 ordinary shares of s0.01 each in Kedco plc. The value of the loans converted was s64,638. The loan note holders have entered into a ‘lock-in’ restriction whereby they are unable to dispose of the new Ordinary Shares that they have received pursuant to the restructuring for a period of two years from the date of admission. During the year ended 30th June 2011 s1,200,000 was received from its 26.79% shareholder, Farmer Business Developments plc (‘FBD’) to assist its short term working capital requirements. These funds were repayable as from 1st May 2011, with an interest payment on outstanding capital of 10% per annum. During the year ended 30th June 2012, a further s1,200,000 was received from FBD to assist its short term working capital requirements. These funds were repayable as from 1st April 2012, with an interest payment on outstanding capital of 10% per annum. At 30th June 2012, the outstanding loan balance and accrued interest was s2,293,757. On 10th September 2012, the Group announced a proposed restructuring to remove debt obligations from the Company such that it would have a suitable basis on which to raise further equity finance. As part of this restructuring, it was agreed that FBD would accept a 40% reduction in all interest that had been accrued and remained unpaid to date, equivalent to s99,694. At 30th June 2012, the outstanding loan balance and accrued interest was s2,293,757. A further s32,428 interest was accrued from the period 1st July 2012 to the date the restructuring was agreed with FBD. On 27th November 2012, the restructuring process was completed, and the FBD loan was satisfied by the issue of 198,370,398 ordinary shares of s0.01 each and the issue of 32,352,620 warrants, convertible into ordinary shares of s0.01 each in Kedco plc, on a one-for-one basis, at any time of FBD’s choosing. FBD exercised their option to convert these warrants into shares on 21st December 2012. The total value of loan and accrued interest converted was s2,326,184. FBD have entered into a ‘lock-in’ restriction whereby they are unable to dispose of the new Ordinary Shares that they have received pursuant to the restructuring for a period of two years from the date of admission. On 28th March 2013, £500,000 was received from investors, including £400,000 from FBD, by way of unsecured loans to fund its on-going development and working capital requirements. These funds are repayable as from 1st April 2016, with an interest payment on outstanding capital of 10% per annum, such interest to be accrued and rolled up to 1st April 2016. The drawdown portion of the facility may be converted at any time after 15th April 2013 into Ordinary Shares in Kedco; with the conversion price being the average of the closing mid-market price of the ten working days prior to conversion or the placing price achieved under any future equity fundraising. FBD would not be able to convert any proportion of the Facility into Kedco ordinary shares if to do so would result in FBD holding in excess of 29.9% of Kedco’s issued share capital. At 30th June 2013, the balance of the accrued loans and interest totalled s599,523. (iii) A loan of s1,650,000 was received from directors (s500,000) and external investors (s1,150,000) during the year ended 30th April 2007 to develop the SIA Vudlande plant in Latvia. s340,000 was repaid to directors during the year ended 30th June 2010. During the year ended 30th June 2011, s260,000 was converted by the investors into Zero-Coupon secured loan notes as described in note (i) above, resulting in an outstanding balance of s1,050,000 at year end. This loan is unsecured and carries an annual interest rate of 15%. The term is five years with repayment dates between 31st January 2011 and 26th March 2012. Interest is repayable annually. On 10th September 2012, the Group announced a proposed restructuring to remove debt obligations from the Company such that it would have a suitable basis on which to raise further equity finance. As part of this restructuring, it was agreed that the holders of the above loan would take on a 40% reduction in the interest payable on the loan ie s104,500. This accrued interest is included in accruals under the category ‘Trade and Other Payables’. p67

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 29 Borrowings (continued) Summary of Borrowing Arrangements (continued) (Continued) On 27th November 2012, the restructuring process was completed, and the above loan and accrued interest was satisfied by the issue of 122,034,964 ordinary shares of s0.01 each. The total value of loans and accrued interest converted was s1,230,375. The loan note holders have entered into a ‘lock-in’ restriction whereby they are unable to dispose of the new Ordinary Shares that they have received pursuant to the restructuring for a period of two years from the date of admission. (iv) Bank loans were entered into in the year ended 30th April 2006 to fund acquisition of freehold land and buildings by Castle Home Supplies Limited. The loan balance at 30th June 2013 was s1,890,201 (2012: s1,925,025). This loan carries interest at base rate varying plus 2.5% and is repayable in 2031 according to the terms of the original agreement. This loan is secured by personal guarantees from three former directors and one current director, totalling s750,000 and a charge over the freehold land and buildings of Castle Home Supplies Limited, a subsidiary company. Bank loans were entered into in the year ended 30th April 2007 to fund working capital: ●

An additional bank loan of s599,568 was taken out during the year ended 30th April 2007 for the purpose of meeting working capital requirements. This loan carries an interest rate of base rate varying plus 3.1%. This loan is secured by personal guarantees from three former directors and one current director. The balance at 30th June 2013 was s655,614 (2012: s633,603). This is presented within current bank loans

●

Liabilities include bank loans in the amount of sNil (2012: s80,230) for a stocking loan. This is secured by a letter of guarantee from three former directors and one current director, a floating charge over assets of Kedco Energy Limited, a subsidiary company, and assignments over policies on the life of nominated individuals. Interest on the stocking loan is the Ulster Bank’s cost of funds rate plus 2.75%. This loan is presented within current bank loans.

●

Business credit lines were received in 2007 for working capital. The balance outstanding at 30th June 2013 was s554,541 (2012: s499,999). Interest is a varying business credit line rate. The facility is secured by letters of guarantee from three former directors and one current director as noted above and a charge over the commercial warehouse at Portgate Business Park, Monkstown, Co. Cork. This is presented within current bank loans.

(v) Preference Shares Kedco Power Limited issued 500,000 8% cumulative redeemable convertible preference shares of s1 each at par to Enterprise Ireland, the Irish Government agency responsible for the global expansion of Irish companies, in the year ended 30th June 2010, realising s500,000. The preference shares will be convertible at the option of the holder in the event that investment of at least s2m is secured by Kedco plc, or Kedco Power Limited, within five years from the date of allotment of the preference shares and would convert into ordinary shares in either Kedco plc or Kedco Power Limited respectively. The shares are unsecured borrowings of the Group and are designated as fair value through profit or loss.

(vi) BES Shares As part of the acquisition of Reforce Energy Limited and subsidiaries, the group took responsibility over 105,000 ‘B’ Ordinary Shares of s1 each issued by Reforce Energy Limited as part of the Business Expansion Scheme. As part of this scheme, Kedco Investment Co. 1 Limited entered into a put and call option agreement, dated 20th December 2012, whereby Kedco Investment Co. 1 Limited may be required to purchase the outstanding ‘B’ Ordinary Shares in Reforce Energy Limited at a price to be agreed with between Kedco Investment Co. 1 Limited and the holders of the ‘B’ Ordinary Shares in Reforce Energy Limited. The option may be exercised on any date between 1st January 2017 and 31st March 2017. Under the provisions of IAS 32 Financial Instruments: Presentation, the above shares have been disclosed as a financial liability. The directors consider the carrying amount of borrowings approximates to their fair values.

p68

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 30 Finance Lease Liabilities Finance lease liabilities relate to motor vehicles and plant and machinery. Lease terms vary from 3-5 years. The Group has options to purchase the related assets for a nominal amount at the conclusion of the lease agreements. The Groupâ&#x20AC;&#x2122;s obligations under finance leases are secured by lessorsâ&#x20AC;&#x2122; title to the leased assets. 2013 2012 h h Minimum Lease Payments No later than 1 Year 375 Later than 1 Year and not later than 5 Years 375 Less Future Finance Charges (2) Present Value of Minimum Lease Payments 373 Present Value of Minimum Lease Payments No later than 1 Year Later than 1 Year and not later than 5 Years Present Value of Minimum Lease Payments

373 373

Included in the financial information as: Current Liabilities Non-Current Liabilities

373 -

The fair value of finance lease liabilities is approximately equal to their carrying amount.

31 Trade and Other Payables Group VAT Payable Trade Payables Other Payables Accruals Amounts due to Jointly Controlled Entities PAYE and Social Welfare

2013 h 499,603 1,070,777 42,144 1,540,030 1 76,002

2012 h 531,374 646,646 42,291 1,250,954 2 24,499

3,228,557

2,495,766

The carrying amount of trade and other payables approximates fair value. All trade and other payables fall due within one year. Company Trade Payables Amounts Due to Subsidiary Undertakings PAYE and Social Welfare Accruals

h 207,912 41,490 562,166

h 64,261 5,711,206 255,414

811,568

6,030,881

The carrying amount of trade and other payables approximates fair value. All trade and other payables fall due within one year.

p69

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 32 Deferred Tax Liability

2013 h

At the beginning of the financial year Reclassified as liabilities associated with assets held for sale At the end of the financial year

2012 h 268,062 (268,062) -

The deferred tax liability recognised in the prior year has now been reclassified as liabilities associated with assets held for sale in the current year (See Note 16). A deferred tax asset has not been recognised at the balance sheet date in respect of trading tax losses. Due to the history of past losses, the company has not recognised any deferred tax asset in respect of tax losses to be carried forward which are approximately h12.6m at 30th June 2013.

33 Operating Lease Arrangements Operating leases relate to office facilities with lease terms varying from 5 years to 25 years and a rent review every 5 years. The Group does not have an option to purchase the leased asset at the expiry of the lease period. 2013 h 20,000

Operating lease charges

2012 h 20,000

At the balance sheet date, the Group has commitments under non-cancellable operating leases which fall due as follows: Within one year Longer than 1 year and not longer than 5 years Longer than 5 years

20,000 -

34 Share Based Payments On 16th October 2008, the Group established a Long-Term Incentive Plan (the ‘LTIP’) under the terms of which certain employees subscribed for ‘A’ Shares at a subscription price being the par value of h0.01 each that reflected the restricted nature and contingent value attaching to such shares. In the year ended 30th June 2012, the Group determined that the conditions attaching to the conversion of these shares were not met and so reversed the share-based payment reserve. The movement relating to the prior year is as follows:

p70

Issue Date

Number of ‘LTIP’ ‘A’ Shares

Issue Price

Fair Value at Issue Date

16th October 2008

49,256,332

g0.01

Expense in Income Statement for the year ended 30th June 2013 -

Credit in Income Statement for the year ended 30th June 2012 (g492,580)

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 35 Related Party Transactions Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation. Details of transactions between the Group and other related parties are disclosed below. During the reporting year the Group received finance from its related parties. There were no further related party transactions other than the remuneration of key management. Financing Transactions The following transactions have taken place with members of the Board:

Amounts Owed to Directors: Zero-Coupon Loan Notes (Note 29) Investor loans (Note 29)

2013 e -

2012 e 612,838 587,909

Financing transactions During the year ended 30th June 2013 e1,200,747 of the investor loans was repaid to members of the Board by means of converting the debt into 75,293,398 Ordinary shares of e0.01 each in the Company (2012: e12,500 repaid to members of the board). Details of the debt-to-equity conversion are detailed in Note 29 of the financial statements The company entered into a put and call option and a second call option relating to the shares in Enfield Biomass Limited with the other party in the joint venture, Wellwin Investments Limited, a company incorporated in Ireland. One of the shareholders of Wellwin Investments Limited, who controls 32.5% of the company, is a director of Kedco plc. As part of the agreement, Kedco plc had guaranteed to repay the debt of e990,000 owed by Enfield Biomass Limited to Wellwin Investments Limited, and to pay a facility fee of 5% of the loan outstanding to Wellwin Investments Limited. During the year ended 30th June 2012, Kedco plc paid e272,500 to Wellwin Investments Limited by way of its own investment in Enfield Biomass Limited. At 30th June 2012, the debt stood at e220,000. Warrants attaching to these loans total 4,050,000 at a subscription price of the lowest listed share price between signing of the agreement and the date that the outstanding balance of the loan is paid to Wellwin Investments Limited, exercisable at any date up to 30th June 2014. On 10th October 2012, the Group announced a restructuring to remove debt obligations from the Company. Included in this restructuring is the conversion of the Wellwin Investments loan plus accrued facility fee less a discount of 40% to equity in Kedco plc. Wellwin have entered into a â&#x20AC;&#x2DC;lock-inâ&#x20AC;&#x2122; restriction whereby they are unable to dispose of the new Ordinary Shares that they have received pursuant to the restructuring for a period of two years from the date of admission. On 27th November 2012, the group converted the Wellwin Investments loan plus accrued interest into 22,812,593 ordinary shares of e0.01 each in Kedco plc. The amount of the loan converted was e220,000. A development fee of e255,000 will be paid to Wellwin within five business days of the financial close of project finance for the project known as the Enfield Biomass project. Finance costs recognised in the income statement in respect of loans from members of the Board amounted to:

Zero-Coupon Loan Notes (Note 29) Investor loans (Note 29) Wellwin Facility Charge (See above)

2013 e (5,982) (6,946) (12,928)

2012 e 14,039 29,760 15,813 59,612

p71

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 35 Related Party Transactions (continued) Included in accruals at 30th June 2013 is finance costs payable of cNil relating to loans from members of the Board (2012: c29,668). One current director and three former directors have provided personal guarantees to Allied Irish Bank plc for bank loans and business credit line facilities – see Note 29 for details. Key Management Remuneration Key management personnel of Kedco plc consist of the Board of Directors as they are responsible for planning, directing and controlling the activities of the Group. The remuneration of directors during the year presented was as follows:

Fees for services as directors Remuneration for other services

2013 c 39,000 392,500

2012 c 67,000 325,000

431,500

392,000

Remuneration earned by each director during the financial year ended 30th June 2013 is as follows:

Emoluments and Compensation h William Kingston Gerry Madden Edward Barrett Brendan Halpin Dermot O’Connell Steve Dalton Diarmuid Lynch Donal O’Sullivan

5,000 250,000 75,000 24,000 67,500 5,000 5,000 431,500

Long Term Incentive Plan h

Pension Contributions h

Termination Payments h -

At 30th June 2013, directors’ remuneration unpaid amounted to h268,577 (2012: h242,167). The Company and the Group are controlled by the Board of Directors. No long term incentive plan (‘LTIP’) shares were issued during the financial year ended 30th June 2013. At 30th June 2012, 49,256,332 ‘LTIP’ shares were in issue (see Note 34). Details of each director’s shareholding that were in office at the year-end are shown in the Directors’ Report. Consultancy costs paid to a company controlled by one of the directors amounted to h52,000 in the year to 30th June 2013 (2012: h53,000). Included in trade payables at 30th June 2013 is h6,150 payable with respect to these consultancy costs (2012: hNil). During the year, the Board agreed to grant warrants to Mr Gerry Madden over a total of 30,000,000 ordinary shares of the company. The purpose of the warrants is to incentivise the CEO during a key phase in the development of the company. The warrants are exercisable by Mr Madden at a price of £0.016 per ordinary share and are exercisable at any time prior to the third anniversary of their issue.

p72

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 35 Related Party Transactions (continued) Other Related Party Transactions Amounts owed to external investors: Investor loans (Note 29) Vudlande loan (Note 29)

2013 h

2012 h

479,772 -

2,293,757 700,000

The loan of h2,293,757 at 30th June 2012 was advanced by Farmer Business Development plc, the 26.79% shareholder of the Company to the Group. This was converted into equity during the year as part of the Groupâ&#x20AC;&#x2122;s restructuring process. Full details of the restructuring process are outlined in Note 29 of the financial statements. During the year, Farmer Business Developments plc advanced GBÂŁ400,000 to the group. Details of this facility are outlined in Note 29 of the financial statements. The Vudlande loan relates to monies advanced by close family members of one of the directors. These loans and the accrued interest were converted into 82,187,324 ordinary shares of Kedco plc as part of the restructuring process outlined in detail in Note 29 of the financial statements. Finance costs recognised in the income statement in respect of loans from related parties amounted to:

Investor loans (Note 29) Vudlande loan (Note 29)

2013 h

2012 h

44,884 15,750 60,634

96,555 29,750 126,305

Included in accruals at 30th June 2013 is finance costs payable on Vudlande loan of hNil relating to loans from related parties (2012: h112,875). Interest from investor loan has been rolled up into loan balance when converted into ordinary shares, as noted above.

Jointly Controlled Entities Details of amounts advanced to and received from jointly controlled entities are as follows:

Amounts advanced to Jointly Controlled Entities: Loans to Jointly Controlled Entities (disclosed under Financial Assets in Note 21) Balances Due from Jointly Controlled Entities (disclosed under Trade and Other Receivables in Note 26) Amounts Payable to Jointly Controlled Entities: Balances due to Jointly Controlled Entities (disclosed under Trade and Other Payables in Note 31)

2013 h

2012 h

6,233,268

7,608,687

63,153

1,469,169

During the year ended 30th June 2013, sales of h2,663,824 were made to jointly controlled entities (2012: h10,031,773). During the year a consultancy fee of hNil (2012: h548,025) was charged to Enfield Biomass Limited for services provided. Included in trade and other receivables at 30th June 2013 are balances of h1,959,228 relating to jointly controlled entities (2012: h538,602). Included in amounts due to customers under construction contracts is h1,019,307 (2012:h1,110,090) relating to amounts received from jointly controlled entities. During the year ended 30th June 2013, Kedco Investment Co.2 Limited, a subsidiary undertaking of Kedco plc, acquired the remaining 50% shareholding of Enfield Biomass Limited (see Note 38), which previously operated as a joint venture vehicle of the Group to develop a biomass electricity and heat generating plant in Enfield, London. As a result of the acquisition, the loan notes issued by Enfield Biomass Limited to the Group, valued at h990,000 on 30th June 2012, have been eliminated on consolidation.

p73

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 36 Cash and Cash Equivalents For the purposes of the cash flow statement, cash and cash equivalents include cash on hand and in banks and bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the cash flow statement can be reconciled to the related items in the balance sheet as follows: Group

2013 g

Cash and Bank Balances Cash and Bank Balances included in Assets Held for Sale (Note 16) Bank Overdrafts Bank Overdrafts Associated with Assets Held for Sale (Note 16) Company Cash and Bank Balances Bank Overdrafts

2012 g

22,150 (166,373) (144,223)

144,764 128,280 (150,000) (467,140) (344,096)

20,654 (5) 20,649

14,331 14,331

37 Major Non-Cash Transactions During the current year, the Group entered into the following non-cash investing and financing activities which are not reflected in the consolidated statement of cash flows: The Group settled a total of g8,492,091 of debt as follows: (i) Issuing ordinary shares in Kedco plc at a value of g5,442,091 (see Note 29 for more details); (ii) The disposal of a subsidiary at a value of g3,000,000 (see Note 39 for details); and (iii) The transfer of inventory valued at g50,000.

38 Business Combinations Subsidiaries Acquired Name of Subsidiary

Principal Activity

Date of Acquisition

Enfield Biomass Limited Reforce Energy and subsidiaries

Energy Utility Company Renewable energy development company

27th November 2012 21st December 2012

Proportion of Voting Consideration Equity Interests Acquired Transferred % e 50 10,000 100

2,000,000 2,010,000

Enfield Biomass Limited (‘Enfield’) was acquired as part of restructuring process undertaken by the Group. The Group had previously owned 50% of the share capital of Enfield Biomass Limited and had accounted for it in the prior year as a jointly controlled entity. Enfield is the special purpose vehicle for developing the 12MW CHP project in Enfield, London. Reforce Energy Limited and its 100% subsidiaries, Pluckanes Windfarm Limited and Reforce Energy (West) Limited, (‘Reforce’) was acquired with the objective of increasing the Group’s pipeline of projects under development and to add depth to the management team.

p74

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 38 Business Combinations (continued)

Consideration Transferred Reforce

Shares issued (139,396,679) Ordinary Shares Conversion of equity in jointly controlled entity into Ordinary Shares Contingent equity consideration (see (i) below)

Enfield

Total

e 1,400,000

e -

e 1,400,000

600,000

10,000 -

10,000 600,000

2,000,000

10,000

2,010,000

Thecontingent contingentequity equityconsideration considerationrequires requiresthe theGroup Groupto tomake makeaafurther furtherissue issueof of59,737,418 59,737,418ordinary ordinaryshares sharesininKedco Kedcoplc plctotothe the (i) The former shareholders of Reforce Reforce obtains eight planning permissions for renewable energy from projects from its project former shareholders of Reforce whenwhen Reforce obtains eight planning permissions for renewable energy projects its project pipeline. pipeline.represents e600,000the represents of the obligation. e600,000 estimatedthe fairestimated value of fair the value obligation. With respect to the share issued contingent equity consideration,the thenew newshareholders shareholdershave haveentered enteredinto intoan anorderly orderlymarket market With respect to the share issued andand thethe contingent equity consideration, arrangement in relation to the ordinary shares which they have or will acquire a period twelve months from date issue. arrangement in relation to the ordinary shares which they have or will acquire forfor a period of of twelve months from thethe date ofof issue.

Assets Acquired and Liabilities Recognised at the Date of Acquisition Reforce Non-Current Assets Property, plant and equipment Development Costs Current Assets Amounts due to customers under construction contracts Trade and other receivables Cash and cash equivalents Current Liabilities Trade and other payables Non-Current Liabilities Borrowings

Goodwill Arising on Acquisition (Note 18) Consideration transferred Add: fair value of previously held equity interests Less: fair value of identifiable net (assets) / liabilities acquired

Enfield e

Total e

114,343

702,256 -

702,256 114,343

162,075 10,152 156,647

1,176,538 134

162,075 1,186,690 156,781

(149,334)

(1,745,093)

(1,894,427)

(105,000) 188,883

(900,000) (856,165)

(1,095,000) (667,282)

2,000,000 -

10,000 (428,082)

2,010,000 (428,082)

(188,883)

856,165

667,282

1,811,117

438,083

2,249,200

p75

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 38 Business Combinations (Continued) Goodwill arose in the acquisition of Reforce because the purchase included the project pipeline and customer relationships of Reforce Energy Limited as part of the acquisition. These assets could not be separately recognised from goodwill because they are not capable of being separated from the Group and sold, transferred, licenced, rented or exchanged, either individually or together with any related contracts. None of the goodwill arising on acquisition is expected to be deductible for tax purposes. Goodwill arose in the acquisition of Enfield because the purchase included the future potential arising from the 12MW Enfield project as part of the acquisition. These assets could not be separately recognised from goodwill because they are not capable of being separated from the Group and sold, transferred, licenced, rented or exchanged, either individually or together with any related contracts. None of the goodwill arising on acquisition is expected to be deductible for tax purposes.

Net Cash Inflow on Acquisition of Subsidiaries

2013 e

Consideration paid in cash Cash and cash equivalent acquired

156,781

Net cash inflow on acquisition of subsidiaries

156,781

Impact of acquisitions on the results of the Group Included in the loss for the year is a gain of e3,013 related to Enfield and a loss of e111,827 relating to Reforce. Revenue for the period includes eNil in respect of Reforce and Enfield. Had the acquisition of Reforce been effected at 1st July 2012, the revenue of the group from continuing operations for the year ended 30th June 2013 would not have changed; and the loss for the period from continuing operations of the group would have been increased by e115,896. Had the acquisition of Enfield been effected at 1st July 2012, the revenue of the group from continuing operations for the year ended 30th June 2013 would not have changed, and the loss for the period from continuing operations of the group would have been increased by e8,774. Enfield was accounted for as a jointly controlled entity up to 27th November 2012; therefore the results for the year include the Groupâ&#x20AC;&#x2122;s share of the profits of Enfield up to that date, totalling e83. The directors of the Group consider these pro-forma numbers to represent an approximate measure of the performance of the combined group on an annualised basis and to provide a reference point for comparison in future periods.

p76

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 39 Disposal of Subsidiaries On 27th November 2012, the group disposed of Kedco Block Limited, a holding company registered in England and Wales; and SIA Vudlande, a company registered in Latvia and a 80% subsidiary of Kedco Block Limited, which carried out all of its Wood Products operations, being the production of sawn timber, realisation of wood and the supply of wood chips. Consideration received TOTAL e Part settlement of Zero-Coupon Loan Notes (See Note 29)

3,000,000

Total consideration received

3,000,000

Analysis of assets and liabilities over which control was lost Non-Current Assets Property, plant and equipment

3,662,026

Current Assets Inventories Trade and other receivables Cash and cash equivalents

1,152,532 1,303,194 213,075

Current Liabilities Trade and other payables Borrowings Deferred income

(428,299) (659,969) (10,302)

Non-Current Liabilities Borrowings Finance lease liabilities Deferred income Deferred tax liabilities

(712,487) (220,773) (21,463) (337,793)

Net assets disposed of

3,939,741

Loss on disposal of subsidiary Consideration received Net assets disposed of Non-controlling interests

3,000,000 (3,939,741) 930,875

Loss on disposal

(8,866)

The loss on disposal is included in the profit for the year on discontinued operations (Note 15).

Net Cash Inflow on Disposal of Subsidiaries

2013

Consideration received in cash Cash and cash equivalents disposed of (net liability)

226,094

Net cash inflow on disposal of subsidiaries

226,094

p77

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 40 Contingent Liabilities In the normal course of business, the Group has contingent liabilities arising from various legal proceedings with third parties, the outcome of which is uncertain. Provision for a liability is made when the directors believes that it is probable that an outflow of funds will be required to settle the obligation where it arises from an event prior to the year end. It is the policy of the Group to rigorously defend all legal actions taken against the Group. During the year ended 30th June 2012, Newry Biomass Limited, a jointly controlled entity of the Group, entered into a binding facilities agreement with Ulster Bank Group. Pursuant to this agreement, Ulster Bank will advance up to £9.44m to enable the completion of construction, installation and commissioning of a 4MW biomass electricity and heat generating plant in Newry, Northern Ireland. As part of this agreement, Kedco plc has: ● ● ●

Assigned all relevant licences and permits held by the Group with respect to the Newry project; Provided a guarantee guaranteeing the obligations of Kedco Fabrication Limited with respect to the construction, installation and commissioning of the plant; and As a joint venture partner, has jointly and severally guaranteed the obligations of Newry Biomass Limited.

Details of other guarantees are disclosed in Note 29. As disclosed in Note 35, and as part of the restructuring carried out by the Group, Wellwin Investments Limited have been guaranteed a development fee of e255,000 upon financial close of project finance for the project known as the Enfield Biomass project.

41 Commitments At the balance sheet date, the group has commitments of e1,047,500 (2012: € Nil) with respect to the purchase of equipment in relation to the construction of a wind farm by one of its subsidiaries, Pluckanes Windfarm Limited. The cost of this commitment is to be met by the senior term loans obtained from Allied Irish Banks plc as disclosed in Note 42 below.

42 Events After the Balance Sheet Date On 20th August 2013, the Group announced that it has entered into a rolling, monthly working capital facility with Farmer Business Developments plc (‘FBD’), who holds 26.79% of the ordinary share capital of the company. The facility, which has no maturity date and is repayable on demand, is unsecured and any drawdowns will accrue interest at a rate of 5% per annum. The facility is capped at e500,000 but may be increased by agreement between the parties. As at 27th November 2013, the full facility has been drawn down. On 20th August 2013, the Group announced that its wholly owned subsidiary, Reforce Energy Limited, had raised e215,000 in loan notes from private investors. The proceeds from the loan notes will be used to fund development costs and equity related to single wind turbine projects. On 20th August 2013, the Group announced that its wholly owned subsidiary, Pluckanes Windfarm Limited, had reached financial close with Allied Irish Banks plc for the funding of the 800kW Pluckanes Windfarm project, totalling e1.15m in senior term loans. On 20th August 2013, the Group announced that its jointly controlled entity, Newry Biomass Limited, secured working capital and other facilities from Ulster Bank Ireland Limited totalling £750,000. This is to be used to fund the working capital needs and the continued build out of biomass project located in Newry, Co. Down.

43 Classification of Comparative Amounts Accrued preference share dividends had previously been accounted for as part of accruals in Trade and Other Payables. The directors have reviewed this and feel that it is better to present this as part of the related borrowings. The comparative amounts have been reclassified accordingly. The effect on the comparative amounts had been to decrease trade and other payables by e100,000 and to increase borrowings included in non-current liabilities by e100,000. p78

KEDCO PLC - Annual Report and Accounts 2013

Notes to the Consolidated Financial Statements - (continued) for the Year Ended 30th June 2013 44 Company Profit and Loss In accordance with Section 148(8) of the Companies Act, 1963 and Section 7(1A) of the Companies (Amendment) Act, 1986, the Company is availing of the exemption from presenting its individual profit and loss account to the Annual General Meeting and from filing it with the Registrar of Companies. The Companyâ&#x20AC;&#x2122;s loss for the financial year was e26,451,128 (2012: e285,358). 45 Approval of Financial Statements These consolidated financial statements were approved by the Board of Directors on 28th November 2013.

p79

p80

KEDCO PLC - Annual Report and Accounts 2013

Advisors and Other Information ●

DIRECTORS: Dermot O’Connell, Non-Executive Chairman Gerry Madden, Chief Executive Officer Brendan Halpin, Executive Director Steve Dalton, Executive Director Edward Barrett, Non-Executive Director

●

SECRETARY: Brendan Halpin

●

NOMINATED ADVISER: Shore Capital & Corporate Limited, Bond Street House, 14 Clifford Street, London W1S 4JU, United Kingdom

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AUDITORS: Deloitte & Touche, No 6 Lapps Quay, Cork, Ireland.

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BANKERS: Allied Irish Bank, Main Street, Carrigaline, Co. Cork, Ireland. Ulster Bank, George’s Quay, Dublin 2, Ireland.

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SOLICITORS: Brown Rudnick, 8 Clifford Street, London, W15 2LQ, United Kingdom.

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BROKER: Shore Capital Stockbrokers Limited, Bond Street House, 14 Clifford Street, London W1S 4JU, United Kingdom

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REGISTRAR: Capita Corporate Registrars plc, 2 Grand Canal Square, Dublin 2, Ireland.

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REGISTERED OFFICE: Kedco plc, 4600 Airport Business Park, Kinsale Road, Cork, Ireland.

p81

Kedco plc

4600 Cork Airport Business Park Kinsale Road Cork

t +353 (0)21 483 9104 f +353 (0)21 483 9112 e info@kedco.com w www.kedco.com

design: Charlie Neville, Cork

Ireland