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RNS
ContourGlobal PLC   -  GLO   

Preliminary Results Announcement

Released 07:01 05-Apr-2019

RNS Number : 2570V
ContourGlobal PLC
05 April 2019
 

ContourGlobal plc

 

Preliminary Results Announcement

 

Delivering on Commitments, Proposal to raise Dividend to $90m (13.4 USD cents per share) in 2018 and Dividend Growth Guidance to 10%

 

ContourGlobal plc ("ContourGlobal" or the "Company"), an international owner and operator of contracted electricity generating plants, today announces its full year results for the year ended 31 December 2018.

 

 

Joseph C. Brandt, President and Chief Executive Officer of ContourGlobal, said:

 

"We succeeded in delivering a good set of results in 2018, our first full year since our Initial Public Offering. We delivered on our operational, financial and growth commitments, including another record-setting Health and Safety performance. Excellent progress was made on growth targets, including the acquisition and integration of our Spanish CSP portfolio, the signing of a highly accretive cogeneration acquisition in Mexico just after year end, and hitting milestones on key developments, in particular, our wind repowering projects in Austria and our development project in Kosovo. We signed two minority farm-downs at highly attractive valuations, crystallizing the value and quality of our underlying businesses. On the basis of this strong performance in 2018 and our financial strength, the board has proposed a dividend of $90 million (13.4 USD cents per share), above the high end of our previous range. We continue to make progress on our target to double run-rate 2017 Adjusted EBITDA by 2022 through profitable, selective growth and high-performance operations."

 

KEY HIGHLIGHTS

 

Strong financial performance

 

·   Consolidated revenue growth of 23% to $1,253m

·   Adjusted EBITDA up 19% to $610m, in line with expectations, reflecting growth achieved from acquisitions, the $20.9 million cash gain on sell down of minority stakes in Italy and Slovakia, off-set by lower wind production and one-off impacts explained below

·    Income from operations of $262m slightly decreasing mainly due to low wind resource and one-off impacts including acquisition costs incurred in relation to CSP Spain and CHP Mexico acquisitions and restructuring costs in certain offices, which offset growth from acquisitions in the current and prior years

·   Strong cash flow generation and balance sheet; Funds From Operations up 18% to $302m and cash conversion at 50%

·     $2.9bn Net Debt as at 31 December 2018 in line with expectations. Adjusted Net Debt to Adjusted EBITDA ratio (pro forma for full year of Spanish CSP acquisition) was 4.4x (2017: 4.1x) 

·    2018 proposed full year dividend increased from $80m (11.9 USD cents per share) to $90m (13.4 USD cents per share) (+12.5% increase from previous guidance)

·      Interim dividend of $26.7m (4.0 USD cents per share) paid in September 2018, proposed final dividend of $63.3m, or 9.4 USD cents per share, expected to be paid in May 2019

·      Dividend expected to be increased by 10% growth rate each year

·      2019 Adjusted EBITDA guidance of $720 - $770m

·      Expected Adjusted EBITDA growth rate of 15%-20% per annum

 

In $ millions

2018

2017

Change

Revenue

1,253

1,023

+23%

Income From Operations

262

269

-3%

Adjusted EBITDA

610

513

+19%

Thermal Adj. EBITDA

327

332

-2%

Renewable Adj. EBITDA

309

211

+47%

Corporate and other costs

(26)

(30)

-13%

Funds From Operations (FFO)

302

256

+18%

Net Profit

10

13

-23%

Adjusted Net Income

63

36

77%

 

 

(Adjusted EBITDA and Funds From Operations are reconciled to profit before tax and operating cash flow respectively in the Financial Review. Adjusted Net Income is reconciled to Net Profit in the Finance Director Review.)

 

Successful operational performance and growth of the portfolio

 

·      Industry leader in Health and Safety with 0.03 LTI Rate in 2018 (2017: 0.03)

·      92.9% combined Availability Factor ("AF") across fleet in 2018 (2017: 94.4%). Decrease due to thermal portfolio and had no impact on financial performance (as availability factors were still significantly above minimum required levels)

Thermal Availability Factor for 2018 decreased to 90.2% (2017: 92.6%), impacted by corrective maintenance works mainly in Arrubal, Maritsa and KivuWatt, plus planned maintenance in Caribbean. Lower availability vs 2017 had no impact on financial performance

Hydro Availability Factor for 2018 increased to 98.5% (2017: 97.8%) due to further improvements in operations

Wind Availability Factor for 2018 increased to 95.8% (2017: 92.7%) due to significant improvement in Brazil Wind operations

Solar PV Availability Factor for 2018 was the same as for 2017, 99.2%

Solar CSP was incorporated to our portfolio in 2018 and Availability Factor was 95.3%

 

·      2018 production of the renewable fleet was 7.5% below long-term average levels (P50), with Brazil wind resources particularly lower than both historical and long-term expectations.

 

 

 

 

FY 2018

FY 2017

Change

GWh produced

Thermal

7,321

8,594

-14.8%

Renewable

4,893

4,454

9.9%

MW in operation

Thermal

2,509

2,640

-5.0%

Renewable

1,808

1,518

19.1%

Availability factor

Thermal

90.2%

92.6%

-2.6%

Renewable

96.8%

97.6%

-0.8%

 

 

 Capacity Factors (%)

 

FY 2018

FY 2017

Long-Term Expected (P50)

Wind

Brazil Wind

41.0%

43.0%

44.2%

Austria Wind

22.3%

25.1%

24.1%

Peru Wind

40.6%

39.6%

46.6%

Solar

Solar PV

14.3%

14.0%

11.9%

Solar CSP

20.7%

n.a.

22.4%

Hydro

Vorotan

25.4%

26.8%

31.5%

Brazil Hydro

51.9%

39.2%

47.1%

 

 

 

Delivered growth through developments and asset acquisitions

 

·    In May 2018, we completed the acquisition of a 250 MW CSP portfolio in Spain for a purchase price of approximately €806 million. In December 2018, we signed the farm-down of 49% of the portfolio with Credit Suisse Energy Infrastructure Partners ("CSEIP") for close to 2x equity value.

·    In October 2018, we completed the 49% farm-down of Solar Italy and Solar Slovakia assets for an equity multiple of approximately 2.3x.

·    In January 2019, we signed the acquisition of 518 MW cogeneration assets in Mexico for a purchase price of approximately $724m, plus $77m VAT payment refundable within 12 months. Acquisition expected to close in Q2 2019.

·   We achieved significant progress in 2018 on building the Kosovo coal plant: we received EPC technical proposals in December 2018 and expect to select our EPC provider in April 2019.  We currently expect to start site preparation activities in Q2 2019 and to sign financing agreements in 2019. The EPC contractor is expected to start conducting the detailed design and manufacturing of major equipment and finalize site mobilization and start construction in 2019.

 

 

EPS

·       Profit attributable to ContourGlobal shareholders was $15.0 million in 2018 corresponding to an EPS of $0.02. Adjusted Net Income attributable to ContourGlobal shareholders was $67.7 million in 2018 corresponding to an Adjusted EPS of $0.10.

  

Dividend

 

·      The Company paid a dividend of $17.3 million in May 2018 as the final dividend for the year ended 31 December 2017; and a dividend of $26.7 million in September 2018 corresponding to approximately one-third of an expected full year dividend of $90.0 million (13.4 USD cents per share) for the year 2018.

·     The Directors propose a final dividend for 2018 of $63.3 million (9.4 USD cents per share) to be paid in May 2019, equating to a full year 2018 dividend of $90 million (13.4 USD cents per share), an increase of 12.5% on previous $80 million dividend guidance for the year ended 31 December 2018. The dividends are subject to approval at the 2019 annual general meeting.

·      The Directors expect to continue to increase the dividend by 10% growth rate annually and are moving to quarterly payments. 

 

 

Board appointments

 

As announced this morning, Stefan Schellinger will join the Board as Executive Director and Group Chief Financial Officer with effect from 15 April 2019. Stefan was Group Finance Director of Essentra plc from 2015 and has previously held roles in finance and corporate development with Danaher Corporation and in investment banking with J.P. Morgan. Mariana Gheorghe, previously Chief Executive Officer and President of OMV Petrom, joins as Independent Non-Executive Director with effect from 30 June 2019.

 

General Meeting

 

Further to its announcement on 7 January 2019, in which the Company announced that it had reached agreement with Alpek regarding the acquisition of Alpek's portfolio of two natural gas-fired combined heat and power plants, the Company will host a General Meeting for Shareholders at 116 Pall Mall, London SW1Y 5ED, United Kingdom, on 5 April 2019 at 11.00 a.m. (London time).

 

AGM

 

The Company will host an Annual General Meeting for shareholders on 21 May 2019.

 

Presentation and conference call

 

 The Company will host a presentation for analysts and investors at 116 Pall Mall, St. James's, London, SW1Y 5ED, United Kingdom, on 5 April 2019 at 09:00 am (London time).

 

The meeting can also be accessed remotely via  dial-in, as detailed below.

 

Click here for dial in details: https://www.contourglobal.com/sites/default/files/2019-03/2019_cg_preliminary_results_announcement_participant_dial-in_information.pdf

 

If you would like to attend the presentation in person, please RSVP to Natasha Moudarres (natasha.moudarres@contourglobal.com).

 

A copy of the presentation will be made available online ahead of the meeting on our website at https://www.contourglobal.com/reports.

 

 

 

 

 ENQUIRIES

 

 Investor Relations - ContourGlobal

Alice Heathcote

Tel: +1 646 386 9901 / +1 617 690 9633

 

investor.relations@contourglobal.com

 

 

 

Media - Brunswick

Charles Pretzlik/Simon Maine

Tel:  +44 (0) 207 404 5959

Contourglobal@brunswickgroup.com

 

 

 

 

Chairman Review

 

OVERVIEW

 

I am pleased to provide an update on ContourGlobal's exciting and largely successful first full calendar year following our IPO in November 2017.

 

Financially, 2018 was a year of strong progress for the Company - Adjusted EBITDA grew 19% to $610.1 million, which was consistent with our guidance at the half year. Strategically, we made significant progress pursuing and executing on our pipeline of attractive acquisition, development and repowering opportunities - we are ahead of the timeline we presented in our IPO prospectus and remain excited about future prospects for growth. We also continued to achieve an outstanding health and safety record, added capability to our already strong management team, and continued to add expertise to our Board.

 

We took advantage of the robust private capital markets in infrastructure and sold minority stakes in two renewable portfolios at attractive premiums to cost. Public equity markets, however, have been challenging - while we have ample liquidity and can be patient, we are disappointed that the Company's share price does not reflect our view of the intrinsic value of the Company and the progress we have made since our IPO. We remain confident that if we continue to execute value-creating projects, the share price will begin to reflect ContourGlobal's intrinsic value.

 

In last year's letter, I highlighted the importance of two aspects of ContourGlobal's approach and both proved crucial to our success in 2018.

 

1. Disciplined, opportunistic approach to allocating capital

 

The merger and acquisition environment in the power market remains active and this provides the Company with the opportunity to deliver high value growth as long as we remain disciplined and selective in our approach. We are also starting to realise potential in our greenfield projects.

 

In May 2018, we completed the acquisition of a 250 MW concentrated solar power (CSP) operating portfolio in Spain - our largest acquisition to date. Because the seller was confident that ContourGlobal would close in a timely manner, we were able to negotiate the transaction on a bilateral basis and avoid an auction process. This resulted in both certainty for the seller and an attractive risk-adjusted investment for ContourGlobal. This acquisition is expected to generate strong, regulated cash flows for the next 17 years. In part because of this transaction, our Renewable Division accounted for about half of our 2018 Adjusted EBITDA.

 

We also made significant progress on our 500 MW Kosovo greenfield lignite development project in 2018. Our next milestones will be the award of the engineering, procurement and construction (EPC) contract and the finalization of the project financing arrangements. Construction of this project, which is critical to the improvement in Kosovo's air quality and economic growth, is expected to begin by the end of 2019.

 

In January 2019 we announced the acquisition of two natural gas-fired combined heat and power plants in Mexico with a capacity of 518 MW. This investment advances our strategy to pursue high- quality accretive growth in contracted cash flows from creditworthy counter-parties - in this case, Mexican industrial companies. Subject to shareholder approval, the transaction is expected to close in the first half of 2019 and I look forward to reporting on the team's progress with the integration of this acquisition in next year's report.

 

All three of these projects are consistent with our disciplined, opportunistic approach to investing capital and they should produce strong risk-adjusted returns for the Company's shareholders for many years to come. We expect our pipeline to remain robust for the next several years. However, if that changes, we will not hesitate to meaningfully accelerate the return of capital to shareholders.

 

2. Proven ability to create value post acquisition

 

The combination of (a) our focus on generating long-term contracted and regulated cash flows, and (b) our team's proven ability to create incremental value post-acquisition, has generated significant interest from financial investment partners seeking to make passive, minority investments in some of our assets. These "farm-downs" significantly bolster our project returns and produce a meaningful amount of cash. Depending on the timing and the magnitude of the cash produced from these "farm-downs", it will either be re-invested into our robust pipeline or returned to shareholders.

 

Subsequent to the acquisition of our Spanish CSP portfolio, in December 2018 we entered into an agreement with Credit Suisse Energy Infrastructure Partners (CSEIP), one of the leaders in infrastructure investing in Europe, to sell 49% of the portfolio at an attractive premium to our cost. We expect the transaction to be completed in the first half of 2019; this achievement will allow us to crystallize significant value shortly after acquisition. This transaction followed the successful completion of the sale of 49% of our Italian and Slovakian solar photovoltaic portfolio to the same partner. In both cases, we will retain operational control and receive ongoing operational and maintenance services fees.

 

We also entered into a development agreement with CSEIP which provides mutually beneficial opportunities for value creation in the Italian and Slovakian solar sector. We welcome the opportunity to collaborate with a long-term financial partner that values our strong operational capabilities.

 

Board Appointments

 

As mentioned in last year's report, we appointed Ruth Cairnie as an independent Non-Executive Director in January 2018, and we recently appointed Mariana Gheorghe as an additional independent Non-Executive Director with effect from 30th June 2019. Mariana has significant experience in the energy sector and in eastern Europe. I am confident that the Board has the right balance of skills and experience to support the Company in the next stage of its development.

 

Corporate Governance

 

ContourGlobal has always had a strong culture of compliance but we recognize that we can never be complacent. Our systems, policies and procedures, upgraded in 2017 to support the robust governance structure required of a listed company, continued to develop throughout the year.

 

Dividend

 

Given the strong performance in 2018 and taking into account the strength of our balance sheet, the Board is proposing a final dividend above the high end of our previous guidance. The Board is pleased to propose a final dividend of 9.4 cents (US dollar) per ordinary share. The dividend will be paid, subject to shareholder approval, on 30th May 2019 to shareholders on the register at 3rd May 2019.

On behalf of the Board, I would like to thank our management team and all of our employees for their continued dedication and hard work.

 

Craig A. Huff

Chairman

 

 

 

CEO Review

 

 

Introduction


ContourGlobal, the operating business, had a strong year.  GLO, our publicly traded stock, did not.

As you will read in my letter and this report an abundance of good things happened in 2018.   

 

Performance Review


We had another extraordinary year for our most important objective-to work safely.  We equaled our a record year in 2017 with our key lagging indicator, our Lost Time Incident Rate[1], ending the year at 0.03 despite over nearly 6 million hours worked including, as in 2017, at several recently acquired businesses. 

 

Although for the second year in a row, we had only had one lost time incident ("LTI"), we failed to achieve "Target Zero," We ended the year with at least top decile H&S performance.[2]  Not too surprisingly, our one lost time incident occurred at one of our new businesses, our CSP facilities in Spain.  A speck of airborne grit, floating through the air and into one of our employee's eyes. Wind, sunshine, a large solar field, missing safety glasses…a corneal abrasion, fortunately not too serious, but a few days off work. The anatomy of an LTI.  But also a good learning experience for our new joiners to ContourGlobal about our approach to health & safety and more importantly our response to failure. Talk about it, examine it, "Five Whys" it.[3]  Don't blame, certainly don't blame the injured worker. And start over. And Target Zero for 2019.

 

We had a good operating year in the power plants. Thermal performance was not what it should have been, but it had little impact on financial performance because the minimum availabilities in our PPAs were met. The Availability Factor ("AF") was below previous years' excellent performance although the shortfall primarily impacted the gas turbine and coal fleet, with our Solutions and liquid fuel fleet performing at or better than plan.[4]  2018 was a very good year for the AF in the renewable fleet.  Karl Schnadt and I are very proud of our renewable team for improving the technical performance of the global wind fleet in 2018. As a reminder, in our renewable business, strong technical availabilities are a necessary but not sufficient condition for reaching targeted financial performance. We need the cooperation of mother nature to provide wind, sun and water.

 

In 2018, we asked our Chief Information Officer Michael Kuperman to run our renewable business.  Why our CIO? The selection reflected both Mike's five successful years as a project manager par excellence, building out our operational and corporate IT network, but also reflected as the accelerating reality of the renewable energy business-a data-intensive, people light business whose technical success increasingly depends upon sophisticated monitoring of equipment and meteorological variables and using this data to increase performance and drive down costs. We asked Mike to focus on the Brazil wind fleet, our largest, and one that did not perform well in 2017. Mike led an impressive turnaround, materially increasing availabilities by 5% in our Brazil wind farms and executing to plan an ambitious organizational, commercial and technical improvement plan.  

 

Elsewhere in the renewable fleet, we performed better than our already stretched targets in the hydro, PV solar and CSP fleet.

 

Renewable resource performance was mixed.  The wind did not blow well anywhere we had a wind turbine, and this was consistent with the entire industry's experience in 2018. As such, we experienced much lower than expected capacity factors in Peru, Brazil, Austria and Bonaire. Other than foreign currency fluctuations, wind resource was the largest detractor from Adjusted EBITDA. Both solar technologies were slightly below plan but performed well.  Our hydroelectric facilities were above plan in Brazil and below plan in Armenia. 

 

Despite the challenging weather conditions, our financial performance remained robust reflecting the diversification benefits of our multi-technology and multi-fuel portfolio. 

 

 

Financial results in 2018 followed operations and reflected our operationally led acquisition model.  Adjusted EBITDA and FFO were up  19% and 18%, respectively, and reflected operational performance, capacity additions and strategic minority sales.  Thermal Adjusted EBITDA reflected good performance in our operating fleet in all three core regions. A very slight decrease in financial results primarily reflected a one-off provision release in 2017.  The 47% growth in Adjusted EBITDA in the renewable fleet despite poor global wind resource reflected capacity additions in Spain and Italy.  Our financial results were produced by over 100 individual power plants thereby reducing over dependency upon any one asset, technology type or country.  Fixed cost control was excellent both at the asset level and at the corporate level (overhead).

 

We also did a good job getting cash up to the parent company-the entity that services the publicly traded Eurobonds, pays dividends and provides capital for new investment. We believe that the cash distributions to the parent and the ratio of the outstanding Eurobond debt to those cash distributions is the best measure of our financial leverage. 

 

 

Growth, Capital and Market Outlook

 

We grew well in 2018 and capitalized on opportunities to recycle capital that had started to emerge as the year progressed.  It was an extremely active year with meaningful capacity additions in both the greenfield and acquisition segments of our development efforts.[5]  

 

During the IPO process, we highlighted two large potential acquisitions -that fit squarely within our strategy of growing with operationally-led, opportunistic acquisitions. We achieved important milestones with both, signing and closing the acquisition of five CSP plants in Spain and, just over year-end 2018, signing the acquisition of two cogeneration plants in Mexico. These successful acquisitions show the strength of being able to participate in broad market trends within both the renewable and thermal sectors.     

 

2018 also saw us capitalize on opportunities to recycle capital by selling minority interests at a very attractive valuation in our Italian and Slovakian solar portfolio to Credit Suisse Energy Infrastructure Partners ("CSEIP") and entering into a partnership with them to further grow our solar portfolio in Italy.  Later in the year we once again teamed up with CSEIP by signing an agreement to sell to them a minority interest in our Spanish CSP portfolio that we acquired from Acciona earlier in the year. 

 

 

Bonaire and the Future of Hybrid Generation

 

Integrating thermal generation with renewables and advanced battery storage as we have done in Bonaire provides another illustration of the opportunities that exist across the thermal-renewable continuum in the aspiring low carbon world. In many emerging markets where access to electricity has not been guaranteed, thermal generation is a necessary condition for deploying renewable technologies.  In Senegal, for example, a recent high impact solar pv project would have been impossible without our placing Cap des Biches I and II into service over the past three years.

 

Contour is at the forefront of these trends. 2018 saw us begin a multi-year plan to modernize the unique hybrid facility that we own and operate on the island of Bonaire.  The Bonaire business is much more important to us than its size would indicate. An integrated renewable, storage and thermal generation facility that must produces nearly 100% of Bonaire's electricity, it is a good model for island nations and decentralizing electricity systems. Renewable generation technologies provide the opportunity to generate electricity at a much lower cost but their variability means that they require efficient and reliable complementary production from other sources-namely thermal generation and, increasingly, battery storage.  We are not yet at the point when battery storage can displace thermal generation.  That seems a long way off.  But today we can use the energy storage system to enable us to maximize the low cost renewable production and buffer the "swings" when the wind dies down before the thermal generation can kick in.  We have upgraded this buffering by installing a new lithium ion battery that increases our capacity by 100% and storage from 0.15 MWh to 6 MWh equivalent to improving the buffering from from 3 minutes to 60 minutes.  The improved storage enables us to further increase wind generation by 10%.

 

Additionally, as we are doing in Austria, we will begin to repower the wind farm in Bonaire this year to enable us to produce much more electricity with the existing wind resources.  As you may recall, last year in Austria we began repowering our first two wind farms, a process that involves replacing older wind towers and turbines with newer technology.[6]  These two projects offer a startling illustration of the dramatic improvements that have been achieved in wind turbine technology in the thirteen years that have passed since these wind farms first entered operations.  Using the same physical footprint as before, new tower and turbine technology will enable us to capture more wind and thereby produce 80% more energy annually than what was achievable just over a decade ago. We made excellent progress in 2018 on our Austrian repowering initiatives. By early in the new year 2019, our first repowering was complete and we expect the second to be placed into service shortly.

 

An Innovative Hydroelectric Refurbishment in Armenia

 

As a world-class operator with a reputation for reliability and innovation, we see opportunity to bring these capabilities to many over-looked areas of the world. We have enjoyed collaborative relationships with many of the world's leading Development Finance Institutions ("DFIs") and together mobilized investment and innovation in many marquee projects in the developing world.  One of these is the Vorotan hydro-electric complex located in southwestern Armenia, a spectacular 404 MW facility that we acquired in 2015 and simultaneously entered into a substantial commitment to rehabilitate in a unique collaboration with the Government of Armenia, the International Finance Corporation, the Dutch (FMO) and German development banks (KfW and DEG). 

 

Phase one of the rehabilitation commenced in 2018 with the upgrading of the control systems, turbines and generators. This work was executed safely, on time and on budget despite the remote conditions and significant mobilization of people and material. In addition to financing provided by DFIs who support private sector projects such as this one, we achieved a very innovative solution with the development bank of Germany (KfW) and the Government of Armenia to enable the German bank, which usually lends directly to sovereign states, to enable the Armenian government to on-lend a very long duration, low interest rate concessionary loan to the project.  This unique arrangement enables us to substantially upgrade the facility-a facility that represents 15% of the energy generated in Armenia-while keeping the price of generated electricity in our Power Purchase Agreement at a very low 2.8 USD cents per kWh.

 

2018 saw steady progress on our Kosovo project with much preparatory work conducted during the year that will provide the background for major contracting actions in 2019. We expect to announce the equipment and EPC contractor and financing parties this year and to commence construction on this much-needed project.  The existing coal fired power plant is Europe's single most polluting source with emissions, particularly of particulate matter, which would not be tolerated in any developed country. The reality of our project to develop a modern efficient coal plant is that we will directly, and dramatically reduce Co2 emissions (40%), particulate matter (93%), Sox (85%) and NOx (93%). These improvements will have an immediate, dramatic and positive impact on the population.

 

In the area of greenfield development, we believe that extending our existing platforms in the Caribbean with renewable, thermal and storage, converting liquid fuel equipment to burn natural gas and developing natural gas fired power generation in Mexico offer the most compelling new greenfield development opportunities. In Africa, we continue to develop extensions of existing businesses and have begun to see some new development opportunities within renewables and natural gas. 

 

People, Organization and Learning

 

The Contourteam takes performance management very seriously. They are unafraid to talk about failure, learn from it and share their learnings with one another. Measure, adjust and improve-it starts with being willing to recognize that there has in fact been a failure. Uniquely, every function and operation at ContourGlobal shares their internal targets and their progress against those targets with the rest of the company. Our performance management engine starts up on Sundays when our thermal Chief Operating Officer, and our Renewables Chief Operating Officer, publish their weekly operating statistics focusing on AF, EFOR and major events.  Unexpected outages or production deviations are highlighted, explained and lessons learned are presented.  Every week this document is distributed to the top 150 people in the company.  The culture encourages to get comfortable quickly with failure.

 

In many companies, particularly industrial ones, failure analysis is one-sided affairs-because of the transparency produced by modern information systems, the industrial operations are under minute by minute scrutiny but the corporate services-the functions representing areas such as finance, legal, compliance, IT, human resources-work in comfortable anonymity.  Not at ContourGlobal.  Corporate service plans, performance and failure are shared within the corporate service group as well as with our operations teams in the power plants.  This sharing produces amazing benefits-a common vocabulary for talking about performance, failure and experience and a sense of belonging to a company in which learning is embraced by everyone.

 

For six years, we have been committed to the Five Whys methodology for performing failure analysis.  The embrace of the methodology and the benefits were displayed prominently in 2018. 

Our Five Whys performance was excellent across the board but particularly so in our corporate functions where Amanda Schreiber our General Counsel and Laurent Hullo our Controller and interim Chief Financial Officer led a significant increase in high quality Five Whys. whose volume was equally met with quality and depth of analysis.  Gionata Visconti led 27 Five Whys for us in 2018 while also overseeing the operations of Cap des Biches I and II in Senegal, a business that hit every one of its operational and financial metrics in 2018[7].

***

In 2018, we welcomed over 100 new employees from our newly acquired Concentrating Solar Power facilities in Spain. I would like to thank our new Spanish colleagues for their strong performance and enthusiasm as they integrated into a company that does things a bit differently than they were accustomed to before.  This is a great team and I see many future leaders for our global business coming out of Spain.

On a similar note, early in 2018 we bid farewell to our colleagues in Kramatorsk, Ukraine, as the reality of trying to conduct business in the destabilized eastern Ukraine overwhelmed our ability to work safely and manage the business responsibly.  Kramatorsk was one of our earliest acquisitions, a prototype of sorts for the "acquire, rehabilitate, improve" model that we bring to many of our acquisitions. 

The business will live on in Contour through its people.  Over the years, Ukraine has produced some amazing ContourGlobal people, five of whom-Andrew Berezhnoy (September 2006), Oleksii Liakhovetskyi (October 2006), Olena Stetsenko (March 2008), and Tatyana Kosarchuk (2008), Olesya Kulikova (August 2009)-have been over a decade at Contour and have risen to positions of prominent leadership. 

 

Outlook

 

As we commence our second year as a public company, I am confident that we will continue to deliver the ambitious results expected of us and to hold ourselves accountable when we fail.  In 2019, we will deliver marked increases in earnings and capacity as we close and integrate our Mexican cogeneration business into the company and expand through additional development and acquisition globally. We expect significant operational performance achievements beginning with Health & Safety.  Maybe this is the year that we reach Target Zero.  We made substantial commitments to new investors during the IPO process. We delivered in 2018 and we are on track to deliver those and then some in 2019 and beyond.  

 

Joseph C. Brandt

Chief Executive Officer

 

4 April 2019

 

 

 

Industry-leading Operational performance

 

 

Continued strong performance across Thermal and Renewables, alongside an industry leading Health & Safety record.

 

Thermal

 

The thermal fleet reached an average annual availability factor of 90.2% in 2018 (92.6% in 2017), mainly due to technical issues in Spain (Arrubal). Despite the shortfall compared to last year, the capacity payments revenue of the individual businesses were not impacted as availability remained above contractual thresholds.

 

Renewable

 

Growth in 2018

 

2018 was punctuated by an extraordinary level of activity in the Renewable division. We grew in many ways: from expansion of our business through solar acquisitions in Italy and Spain, to re-powering of our wind assets in Austria so we can take advantage of the latest, highly efficient wind turbines, to modernization of our Vorotan facility in Armenia where we are replacing aging equipment with new components at the latest technological standards.

 

Renewable fleet availability was impacted by the integration of new assets and technology as a result of the Spanish CSP acquisition as well as an integration and maintenance program.

 

 

Solar

 

Growing in Solar

 

We continued to grow our solar photovoltaic portfolio in Italy. We also added a new type of solar technology to our portfolio when we acquired five concentrated solar power plants in Spain. As a result, our solar Adjusted EBITDA grew by $99 million in 2018. In both countries, we entered into attractive farm-down agreements with Credit Suisse Energy Infrastructure Partners. We expect to close our Spanish CSP farm-down in the first half of 2019. Our total European solar portfolio is now 356 MW.

 

 

Wind

 

Repowering wind plants in Austria

 

Making the most of our Austrian assets

 

We currently have a total installed wind capacity in Austria of 155 MW - 5.1% of the overall total in the country. Our fleet consists of both old and new turbines. Our new wind farms have an industry-leading high average availability of around 99%. Our old wind farms also have a high average availability for their age, around 98%.

 

We are always looking to optimize the performance of these assets. If we see the right opportunities, we will also add to the portfolio in line with our Group-wide commitment to continuous improvement and high growth.

 

One key way we are both increasing capacity and efficiency is by repowering our old portfolio of wind assets. We acquired our Velm and Scharndorf wind farms in 2015 and throughout 2018 have been focusing on successfully repowering them.

 

Increasing production by 63% at Velm

 

We began planning the repowering of wind park Velm in August 2017. The removal of the ten old wind turbines took just two months, starting in March 2018. It was a fast, efficient process that was also completed safely, with no Lost Time Incidents (LTIs) or environmental incidents. Strong project management and well-organized scheduling was key to ensure the project stayed below budget. We were also able to resell certain components, adding further value.

 

The construction of four new Vestas V126 turbines started in June 2018. Each has a capacity of 3.3 MW and a total annual production of 34.1 GWh, which can provide electricity for 8,525 households. All four turbines reached the Commercial Operation Date (COD) of 31st January 2019 within budget and on time.

 

This repowering has reduced the number of turbines from ten to four, minimizing the wind farms' footprint while significantly increasing production by 63%.

 

Increasing production by 96% at Scharndorf 1A

 

Wind park Scharndorf consisted of 12 turbines with a capacity of 2 MW each and a total capacity of 24 MW. In Phase I, for Scharndorf 1A five turbines are repowered. The average annual production of Scharndorf 1A was 23.9 GWh, enough to provide green energy to 5,900 households.

 

In 2018 we pressed on with repowering the turbines. Rather than scrap the old turbines, we succeeded in reselling them, not only providing financial benefits for us but also prolonging their useful life.

 

We are replacing the old turbines with five new Senvion M122 turbines with a capacity of 3.4 MW each, providing a total annual energy production of 46.8 GWh. The new turbines are in the same location as the old ones, so no additional areas will be affected.

 

 

Hydro

 

Refurbishing a prominent hydro asset in Armenia

 

Our work to modernize the Vorotan hydro cascade has been progressing well - in line with budget, ahead of schedule and in accordance with our high quality standards. Unit 1 of Tatev hydro plant - the first of the seven units to be refurbished - has undergone a change in key electromechanical components and is back into operation. The second and third units of Tatev, as well as the Spandaryan and Shamb hydro plants, will follow shortly. Some of the installed equipment - like the MV switchgear and the 110kV switchyard equipment - are completely new for the Armenian energy market, serving as leading examples for other energy producers.

 

 

Health and Safety

 

Health and Safety (H&S) is absolutely fundamental to ContourGlobal. It is our highest value and we take great pride in our performance and commitment to our world-class H&S standards.

 

We continue our commitment to Target Zero - a workplace in which people are free from injuries and "everyone goes home safe, every day, everywhere." We continue to set the highest standards of H&S among our peers and in 2018 we worked over 3.8 million hours without a Lost Time Incident (LTI). Unfortunately towards the end of the third quarter one LTI occurred.

 

We already lead our peers in terms of the quantity of H&S training we give our employees - in 2018 our target was 2% of all working hours. We plan to use big data analysis to understand better the effectiveness of this training so we can create ways to improve it.

 

We carried out ten H&S audits in 2018, all of them pre-announced. In 2019, we plan to carry out a number of short notice audits at sites around the world. This will yield fresh insights into Health and Safety across our portfolio, further deepening our understanding and enabling us to explore even more improvements.

 

 

Financial Review

 

Revenue

 

Revenue continued to grow in 2018 to reach $1,253.0m (+23%) mainly resulting from the newly acquired portfolios in Europe during the year (Spanish CSP, Italian and Romanian photovoltaic portfolios) and the increase in certain components of the revenue of Thermal power plants (including passthrough revenue which does not impact margin). This increase was partially offset by low wind resource in Brazil and Austria.

 

Income from Operations (IFO)

 

IFO is an IFRS measure derived from the audited consolidated statement of income.

 

IFO slightly decreased by 2.6% as compared to 2017 (-$7.1 million) despite the positive impact of the acquisition of CSP Spain (+$43.4 million) and Solar Italy roll up (+$1.1 million). Excluding these acquisitions, IFO was principally impacted by the following effects in 2018:

 

·      Poor wind resource in our Brazilian and Austrian wind farms in 2018, which largely explains the $24.4 million decrease of Brazilian and Austrian wind farms IFO as compared to the same period in 2017.

·      One-off events which adversely impacted IFO change year-on-year: namely a non-recurring income of $6.4 million resulting from the release of bad debt provision in 2017 - positive outcome of litigation with a service provider in the Caribbean Islands - and exceptional restructuring costs in 2018 as part of the ongoing reorganization of the corporate offices in the Group ($6.7 million).

·      The significant efforts incurred to sign and/or close transactions during the year, and in particular two major transactions in Spain and Mexico, which resulted in increasing our acquisition-related costs by $10.1 million.

·      A non-cash $4.1 million charge related to the implementation of the Private Incentive Plan which does not constitute a liability for the Company.

 

Excluding these effects, IFO would have increased by $51.7 million (+16.6%), which reflects the continued growth and expansion of the Company, especially from the new CSP portfolio in Spain.

 

Adjusted EBITDA

 

Adjusted EBITDA continued to grow significantly as a result of additional growth in Spain and Italy, and the positive impact of the farm-down of the solar portfolio in Italy and Slovakia, partially offset by lower than expected wind resources in Brazil and Austria.

 

Thermal Adjusted EBITDA decreased by $5.0 million, or 2%, to $327.1 million for the year ended 31st December 2018 from $332.1 million for the year ended 31st December 2017. The scope of the Thermal segment remained globally unchanged in 2018, except for the sale of Kramatorsk power plant in February 2018 which resulted in Adjusted EBITDA decreasing by $1.2 million. Excluding one-off income of $6.4 million resulting from the release of bad debt provision in 2017 in the Caribbean, Thermal Adjusted EBITDA would have slightly increased. This demonstrates the stability of the cash flows of the portfolio, which has all its revenue contracted and established power purchase agreements in place largely protecting the segment from changes in demand, fuel prices, electricity price and CO₂ prices. The Thermal fleet is also highly diversified in terms of geography and fuel, which significantly limits its overall market exposure.

 

The thermal fleet reached an average annual availability factor of 90.2% in 2018 (92.6% in 2017), mainly due to technical issues in Spain (Arrubal). Despite the shortfall compared to last year, the capacity payments revenue of the individual businesses were not impacted as availability remained above contractual thresholds.

 

Renewable Energy Adjusted EBITDA increased by $98.3 million, or 47%, to $309.4 million for the year ended December 31st, 2018 from $211.1 million for the year ended December 31st, 2017.

 

In 2018, we continued to further diversify our technology and geographical mix after the acquisition of 5 CSP plants in Spain with 250 MW total installed capacity as well as smaller acquisitions of photovoltaic solar and biogas in Italy and Romania. The CSP plants contributed $89.2 million to Adjusted EBITDA growth from May to December 2018, while Italian and Romanian solar and biogas plants contributed to Adjusted EBITDA growth by $9.0 million in the year ended 31 December 2018. In 2018, the Renewable segment also benefited from the performance of Brazilian hydro power plants, which contributed a total of $40.8 million to 2018 Adjusted EBITDA as compared to $28.5 million in 2017, an increase of $12.3 million. This growth was mainly due to full-year effect of the seven hydro power plants acquired in March 2017, excellent Equivalent Availability Factor at 98.5% and an efficient hedging program in place in case of low hydrology. This was achieved despite a weakening of the Brazilian real against the US dollar. In 2018, we started initiating a new core Group strategy, consisting in selling minority stakes of our portfolio at a substantial premium against our initial investment. In our Renewable portfolio, we closed the sell-down of 49% of our photovoltaic portfolio in Italy and Slovakia in October 2018. We also signed the sell-down of 49% of our CSP portfolio in Spain in December 2018, a transaction expected to close in the first half of 2019. We intend to further develop this sell-down strategy in the future. The sell-down of 49% of the Italy and Slovakia portfolio resulted in a $20.9 million gain recorded directly in equity under IFRS rules and contributed to 2018 Renewable Adjusted EBITDA for the same amount.

 

The overall performance of the Renewables segment was however negatively impacted by the Brazilian wind portfolios (lower by $23.3 million compared to 2017, of which $8.1 million due to weaker Brazilian real against US dollar). The negative 2018 performance was largely driven by lower resource during the year and despite significant improvements in operational performance. Availability factor of Brazilian wind farms improved from 90.7% in 2017 to 95.0% following restructuring of local maintenance teams, tighter management of service providers and better management of component outages. We intend to continue improving technical performance and generation in 2019 with a new roadmap including implementation of a new operational analytics system.

 

Corporate and Other decreased to $(26.4) million for the year ended 31st December 2018 from $(29.9) million for the year ended 31st December 2017. This reduction was due to a reinforced monitoring of fixed costs, and the allocation of a dedicated task force to projects such as the Spain CSP and Mexican CHP acquisitions and the Kosovo development project.

 

In addition, ContourGlobal continued to focus in 2018 on mitigating its exposure risks to unexpected changes in Adjusted EBITDA. In particular:

 

·      82.3% of 2018 Adjusted EBITDA is denominated either in Euros or US dollars, and a portion of the Brazilian reals exposure is hedged to US dollars.

·      No technology cluster represents more than 23% of 2018 Adjusted EBITDA, and the acquisition of a 518 MW concentrated heat power ("CHP") portfolio is expected to further diversify the technology and region profile.

·      Approximately 82% of 2018 Adjusted EBITDA is generated under PPA concluded with Investment Grade offtakers or non-Investment Grade offtakers under political risk insurance.

 

We believe that the presentation of Adjusted EBITDA enhances an investor's understanding of ContourGlobal's financial performance, that the Adjusted EBITDA will provide investors with a useful measure for assessing the comparability between periods of ContourGlobal's ability to generate cash from operations that is sufficient to pay taxes, to service debt and to undertake capital expenditure.

 

"Adjusted EBITDA" is defined as combined profit from continuing operations for all controlled assets before income taxes, net finance costs, depreciation and amortisation, acquisition-related expenses, plus profit on sale of minority interest and specific items which have been identified and adjusted by virtue of their size, nature or incidence, less ContourGlobal's share of profit from unconsolidated entities accounted for on the equity method, plus ContourGlobal's pro rata portion of Adjusted EBITDA for such entities. In determining whether an event or transaction is specific, ContourGlobal's management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Adjusted EBITDA is not a measurement of financial performance under IFRS.

 

The following table reconciles net profit before tax to Proportionate Adjusted EBITDA and Adjusted EBITDA for each period presented:

 

 

 

In $ million

Years ended December 31

 

2018

2017

Proportionate Adjusted EBITDA

536.1

434.2

Minority interest

74.0

79.0

Adjusted EBITDA

610.1

513.2

 

 

 

Reconciliation to profit before income tax

 

 

Depreciation and Amortization (note 4.3)

(239.3)

(185.6)

Finance costs net (note 4.7)

(236.6)

(220.7)

Share of adjusted EBITDA in associates

(21.2)

(21.6)

Share of profit in associates (note 4.13)

2.9

5.0

Acquisition related items (note 4.5)

(19.6)

(9.5)

Costs related to CG Plc IPO (note 4.6)

(0.4)

(12.7)

Cash gain on sale of minority interest in assets

(20.9)

-

Restructuring costs

(6.7)

-

Private incentive plan

(4.1)

-

Other (2)

(36.3)

(27.5)

Profit before income tax

27.8

40.6

 2 Refer to note 4.1 of the Consolidated Financial Statements

 

In relation to the 2018 and 2017 financial years, these included non-recurring and non-cash items, and for 2018 also included a one-off cash gain on the sale of minority interests in the Slovakia and Italy portfolio, booked directly in equity under IFRS. Such sell-down is part of the core strategy of the Group going forward. Adjusted EBITDA is a more accurate reflection of the business performance of the Group and allows for comparability of the Group's results from period to period and with peer companies.

 

Proportionate Adjusted EBITDA

 

Considering the decision to strategically sell down minority stakes of certain of our assets at a significant premium, we have included Proportionate Adjusted EBITDA as part of our core financial metrics. Proportionate Adjusted EBITDA is calculated using Adjusted EBITDA calculated on a proportionally consolidated basis based on applicable ownership percentage. Proportionate Adjusted EBITDA increased from $434.2 million in 2017 to $536.1 million in 2018 (+23.5%), an increase comparable to Adjusted EBITDA and mostly explained by the same factors.

 

Funds from Operations

 

Funds from Operations is a non-IFRS measure that is calculated as follows:

 

In $ million

2018

2017

Cash flow from operations

578.2

420.6

Change in Working Capital

(50.9)

39.4

Interest paid

(180.9)

(169.2)

Maintenance capital expenditure1

(24.6)

(18.7)

Cash distributions to minorities

(19.5)

(16.2)

Funds From Operations (FFO)

302.3

255.9

Cash conversion rate (%)

50%

50%

 

1 Maintenance capital expenditures is defined as funds employed by us to maintain the operating capacity, asset base and/or operating income of the existing power plants. It excludes growth and development capital expenditures, which are discretionary investments incurred to sustain our revenue growth (including construction capital expenditures) 

 

Funds from operations significantly improved in 2018 achieving a 18% growth as compared to 2017. This performance is the consequence of the continuous growth of Adjusted EBITDA discussed earlier and an efficient capital structure implemented by ContourGlobal through a mix of deleveraging project level debt and refinanced corporate level financing to lower its cost of capital. In 2018, we refinanced the corporate level debt, extended its tenor to 2023 and 2025 (two tranches of 5-year and 7-year tenor), and decreased yearly corporate bond interest by more than $9.8 million. We also refinanced the Revolving Credit Facility, increasing its available amount from €50 million to €75 million and decreasing significantly its overall cost. The cash conversion rate, which compares FFO to Adjusted EBITDA, remained fairly stable at 50% during the period.

 

Leverage ratio

 

Year

 

2017

4.1x

2018

4.4x1

 

1 Including pro forma adjustment for full year of Spain CSP acquisition

 

The Group leverage ratio is measured as total net indebtedness (reported as the difference between "Borrowings" and "Cash and Cash Equivalent" under IFRS statement of financial position) to Adjusted EBITDA. Whenever the impact would be significant, such a ratio is adjusted to reflect full-year impact of acquisitions or for financial debt of projects under construction which do not generate EBITDA. The Spain CSP acquisition contributed $89 million to 2018 Adjusted EBITDA from 10 May 2018 to 31st December 2018 as compared to an expected $130 million full year contribution.

 

Adjusted for the full year contribution of Spain CSP, leverage ratio reached 4.4x as compared to 4.1x in the previous year. This change mainly resulted from the issuance of new debt to finance Spain CSP acquisition, which is rapidly deleveraging. The leverage ratio does not take into account the expected proceeds from the sell-down of 49% of the CSP portfolio (€134 million) expected to close in the first half of 2019, which will further decrease the ratio.

 

As of 31st December 2018, ContourGlobal has a total of $696.9 million of cash and cash equivalents, a significant portion of which sits at corporate level and is available to finance the future growth of the Group.

 

Finance costs - net

 

Finance costs - net increased from $220.7 million in 2017 to $236.6 million in 2018 (+7.2%). Excluding the one-off premium paid in July 2018 to prior bondholders of $21.9 million, finance costs decreased by $6.0 million in 2018 as compared to 2017.

 

Interest expense increased to $202.0 million in 2018 from $180.0 million in 2017 (+$22.0 million or 12.2%). This increase is largely driven by the Spain CSP acquisition, which contributed $24.9 million to interest expense in 2018. Interest expense was conversely positively impacted by the natural deleveraging of the project financings and by the refinancing of the corporate bond at a much lower interest rate, leading to an expected reduction of interest at corporate level of $9.8 million a year.

 

Finance costs - net, other than interest expenses decreased to $34.6 million in 2018 from $40.7 million in 2017, mainly due to positive change in line item Realized and unrealized foreign exchange gains and (losses) and change in fair value of derivatives (+$53.0 million) due to lower exposure to loans denominated in a currency other than the functional currency at corporate level and more efficient hedging program. This positive change was partially offset by the one-off bond premium of $21.9 million expensed in 2018 and described above, and other non-cash fair value adjustments.

 

Profit before tax

 

Profit before tax decreased by $12.8 million to $27.8 million in 2018 as a result of the factors previously explained.

 

Adjusted Net Income

 

Adjusted Net Income is defined as Net income excluding one-off items for the year. Reconciliation of Net income to Adjusted Net Income is as follows:

 

In $ millions

2018

2017

Net income

10.4

13.5

Bond refinancing one-off  costs (1)

21.9

-

ContourGlobal PLC IPO costs

0.4

12.7

Acquisition-related items (2)

19.6

9.5

Restructuring costs (3)

6.7

-

Private Incentive Plan (4)

4.1

-

Adjusted Net Income

63.1

35.7

Adjusted Net Income attributable to shareholders

67.7

41.6

 

(1) Exceptional premium paid to previous bondholders in relation to the refinancing of the corporate bond in July 2018;

(2) Includes pre-acquisition costs and other incremental costs incurred as part of completed or contemplated acquisitions. ContourGlobal incurred exceptional high amounts of such costs in 2018 while signing and/or closing acquisitions in Mexico, Italy and Spain in particular;

(3) Costs incurred as part of corporate offices ongoing reorganization;

(4) Non-cash impact of the Private Incentive Plan implementation, which does not constitute a liability for the Company as it is issued through existing Reservoir Capital shares.

 

 

 

Taxation

 

The Group recognized a tax charge of $17.4 million in 2018 as compared to $27.1 million in 2017. This reduction in the tax charge between periods was driven by the profit mix between territories with different income tax rates. The main jurisdictions contributing to the income tax expense in 2018 are Bulgaria, Brazil and Spain.

 

Non-current assets

 

Non-current assets mainly comprise property, plant and equipment and financial and contract assets. The increase of non-current assets by $766.3 million to $3,969.8 million as of 31st December 2018 was mainly due to the acquisition of the CSP Spanish portfolio and solar assets in Italy and Romania, partially offset by depreciation, change in foreign exchange during the period and impact of IFRS 15 on financial and contract assets.

 

Borrowings

 

Current and non-current borrowings increased by $669.9 million to $3,560.0 million as of 31 December 2018, mainly as a result of new or acquired borrowings (+$2,005.8 million, including bond refinancing in July 2018, financing acquired or drawn as part of the CSP Spain acquisition in May 2018 and refinancing of the hydro and Thermal portfolio in Brazil), partially offset by scheduled project financing repayment and early repayment of prior corporate bond (-$1,151.1 million) and currency translation differences and other (-$184.8 million).

 

Equity and non-controlling interests

 

Equity and non-controlling interests decreased by $93.0m to $680.5 million as of 31 December 2018 mainly due to the following factors: currency translation reserves recorded directly in equity (-$54.2 million) essentially due to negative change in foreign exchange rates of Brazilian real against US dollar, impact of the change to new accounting standard IFRS 15 (-$47.2 million), dividends paid to shareholders (-$44.1 million), transactions with non-controlling interests (-$5.9m) and negative change in hedging and actuarial reserves (-$4.6 million). These decreases were partially offset by the positive contribution of the sell-down of 49% of Italy and Slovakia photovoltaic portfolio recorded directly in equity ($48.9 million), Private Incentive scheme ($4.1 million) and profit for the period ($10.4 million).

 

Dividend

 

The declaration and payment by the Company of any future dividends and the amounts of any such dividends will depend upon ContourGlobal's ability to maintain its credit rating, its investments, results, financial condition, future prospects, profits being available for distribution, consideration of certain covenants under the terms of outstanding indebtedness, and any other factors deemed by the Directors to be relevant at the time, subject always to the requirements of applicable laws. The Directors expect that dividends, which were previously distributed biannually, to be distributed going forward on a quarterly basis.

 

The Company paid a dividend of $17.3 million in May 2018 corresponding to the final dividend for the year ended 31st December 2017; and a dividend of $26.7 million in September 2018 corresponding to one-third of an initial guidance of $80.0 million dividend for the year 2018. The Directors expect to pay a dividend of approximately $63.3m for the year ended 31st December 2018, increasing 2018 declared dividends from $80 million to $90.0 million to be approved at the 2019 annual general meeting.

 

The Directors expect to continue to increase the dividend by 10% growth rate annually and are moving to quarterly payments.

 

Outlook

 

We remain heavily focused on developing, acquiring and operating power generation facilities under long-term contracts providing significant protection from the risks associated with volumes, commodity prices or merchant energy prices. As we continue to pursue our growth strategy, we are active on both construction and acquisition projects. Recent developments include:

 

·      The signature of the acquisition of two natural gas-fired combined heat and power ("CHP") plants, together with development rights and permits for a third plant, in Mexico from Alpek, for $724 million in cash. An additional payment at closing estimated at $77 million represents the value added tax assessed for the transaction and is expected to be refunded in full within 12 months of closing. The CHP plants have a gross installed capacity of 518 MW. The transaction is expected to close in the second quarter of 2019.

·      The sell-down in December 2018 of 49% of our Spain CSP portfolio at a very significant premium reflecting our strategy to enhance shareholder returns and redeploy capital into our significant growth pipeline; the transaction is expected to close in the first half of 2019.

·      The refinancing of the Slovakian portfolio closed in February 2019 at very attractive terms, reflecting our capacity to decrease our cost of debt while improving shareholder returns.

 

Looking ahead, we will remain very active in developing and acquiring new projects at attractive shareholder returns as we focus on achieving the target fixed before the listing to at least double Adjusted EBITDA by the end of 2022 without requiring new equity.

 

Annual General Meeting (AGM)

 

The 2019 AGM will be held on 21st May 2019 in London. At the AGM, shareholders will have the opportunity to ask questions of the Board, including the Chairmen of the Board Committees.

 

Full details of the AGM, including explanatory notes, are contained in the Notice of the AGM. The Notice sets out the resolutions to be proposed at the AGM and an explanation of each resolution.

 

All documents relating to the AGM are available on the Company's website at www.contourglobal.com.

 

 

Year ended December 31, 2018

The financial information set out in this Preliminary Results Announcement does not constitute the Group's statutory accounts for the years ended 31 December 2018 or 2017, but is derived from those accounts. The statutory accounts for the year ended 31 December 2017 have been delivered to Companies House and those for 2018 will be delivered in due course. The Auditor has reported on those accounts: its Reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying its Report and did not contain a statement under s498(2) or (3) of the Companies Act 2006. The financial information included in this preliminary announcement has been prepared on the same basis as set out in the Annual Report 2018.


 

CONTOURGLOBAL PLC and subsidiaries

Consolidated statement of income and other comprehensive income

Year ended December 31, 2018

f income and other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

Years ended December 31

In $ millions

Note

2018

2017

Revenue

4.2

1,253.0

1,022.7

Cost of sales

4.3

(933.5)

(716.3)

Gross profit

 

319.5

306.4

Selling, general and administrative expenses

4.3

(28.3)

(31.9)

Other operating (expenses) / income - net

 

(9.7)

4.0

Acquisition related items

4.5

(19.6)

(9.5)

Income from Operations

 

261.9

269.0

Other expenses - net

4.6

(0.4)

(12.7)

Share of profit in associates

4.13

2.9

5.0

Finance income

4.7

10.6

9.8

Finance costs

4.7

(255.7)

(186.0)

Realized and unrealized foreign exchange gains and (losses) and change in fair value of derivatives

4.7

8.5

(44.5)

   Profit before income tax

 

27.8

40.6

Income tax expenses

4.8

(17.4)

(27.1)

Net profit

 

10.4

13.5

Profit / (Loss) attributable to

 

 

 

- Group

 

15.0

19.4

- Non-controlling interests

 

(4.6)

(5.9)

 

 

 

 

Earnings per share (in $)

 

 

 

- Basic

4.9

0.02

0.03

- Diluted

4.9

0.02

0.03

 

 

 

 

 

 

Years ended December 31

In $ millions

 

2018

2017

Net profit for the period

 

10.4

13.5

Items that will not be reclassified subsequently to income statement

 

(0.2)

(0.6)

Changes in actuarial gains and losses on retirement benefit, before tax

 

(0.2)

(0.7)

Deferred taxes on changes in actuarial gains and losses on retirement benefit

 

-

0.1

Items that may be reclassified subsequently to income statement

 

(58.6)

(19.7)

(Loss) / gain on hedging transactions

 

(2.7)

5.9

Deferred taxes on (loss) / gain on hedging transactions

 

(1.7)

0.6

Share of other comprehensive income of investments accounted for using the equity method

 

-

0.5

Currency translation differences

 

(54.2)

(26.7)

Other comprehensive (loss) for the period, net of tax

 

(58.8)

(20.3)

Total comprehensive (loss) for the period

 

(48.4)

(6.8)

Attributable to

 

 

 

- Group

 

(25.6)

2.8

- Non-controlling interests

 

(22.8)

(9.6)

 

 

CONTOURGLOBAL PLC and subsidiaries

Consolidated statement of financial position

Year ended December 31, 2018

 

In $ millions

Note

December 31, 2018

December 31, 2017

 

 

 

 

Non-current assets

 

3,969.8

3,203.5

Intangible assets and goodwill

4.10

117.4

137.1

Property, plant and equipment

4.11

3,253.1

2,350.3

Financial and contract assets

4.12

498.2

617.7

Investments in associates

4.13

26.6

27.1

Other non-current assets

4.18

22.9

29.5

Deferred tax assets

4.8

51.6

41.8

Current assets

 

1,178.1

1,134.1

Inventories

4.19

112.8

54.1

Trade and other receivables

4.20

337.3

271.8

Derivative financial instruments

4.15

1.1

-

Other current assets

 

30.0

27.1

Cash and cash equivalents

4.21

696.9

781.1

Assets held for sale

4.11

-

13.7

Total assets

 

5,147.9

4,351.3

 

 

 

 

In $ millions

 

December 31, 2018

December 31, 2017

 

 

 

 

Total equity and non-controlling interests

 

680.5

773.5

Issued capital

4.22

8.9

8.9

Share premium

 

380.8

380.8

Retained earnings and other reserves

 

105.6

187.3

Non-controlling interests

 

185.2

196.5

 

 

 

 

Non-current liabilities

 

3,701.2

3,016.5

Borrowings

4.23

3,286.8

2,672.6

Derivative financial instruments

4.15

53.0

49.7

Deferred tax liabilities

4.8

163.8

65.5

Provisions

4.25

41.2

62.2

Other non-current liabilities

4.24

156.4

166.5

Current liabilities

 

766.2

548.4

Trade and other payables

4.27

292.9

169.1

Borrowings

4.23

273.2

217.5

Derivative financial instruments

4.15

16.8

14.7

Current income tax liabilities

 

17.4

23.7

Provisions

4.25

17.4

10.8

Other current liabilities

4.28

148.5

112.6

Liabilities held for sale

4.11

-

12.9

Total liabilities

 

4,467.4

3,577.8

Total equity and non-controlling interests and liabilities

 

 

 

5,147.9

4,351.3

The financial statements were approved by the Board of Directors and authorized for issue on 4 April 2019 and signed on its behalf by Joseph C. Brandt.

 

CONTOURGLOBAL PLC AND SUBSIDIARIES

Consolidated statement of changes in equity

Year ended December 31, 2018

 

In $ millions

Invested capital

Share capital

Share premium

Currency Translation Reserve

Hedging reserve

Actuarial reserve

Retained earnings and other reserves

Total

Non-controlling interests

Total equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2017

980.5

-

-

(32.9)

(36.0)

(1.0)

(621.7)

288.9

152.9

441.8

Profit / (loss) for the period

-

-

-

-

-

-

19.4

19.4

(5.9)

13.5

Other comprehensive loss

-

-

-

(23.0)

7.0

(0.6)

-

(16.6)

(3.7)

(20.3)

Total comprehensive (loss) / income for the period

-

-

-

(23.0)

7.0

(0.6)

19.4

2.8

(9.6)

(6.8)

Change in invested capital

(12.8)

-

-

-

-

-

-

(12.8)

-

(12.8)

Group restructure as a result of share for share exchange (note 4.22)

(967.7)

1,320.7

-

-

-

-

(353.0)

-

-

-

Capital reduction (note 4.22)

 

(1,307.5)

-

-

-

-

1,307.5

-

-

-

Cancellation of deferred shares (note 4.22)

 

(5.9)

-

-

-

-

5.9

-

-

-

Issue of shares - Listing on the London Stock Exchange (note 4.22)

-

1.6

380.8

-

-

-

-

382.4

-

382.4

Acquisition and contribution of non-controlling interest not resulting in a change of control

-

-

-

-

(1.0)

-

(8.0)

(9.0)

(0.8)

(9.8)

Acquisition of and contribution received from non-controlling interest

-

-

-

-

-

-

-

-

54.4

54.4

Dividends

-

-

-

-

-

-

(75.5)

(75.5)

-

(75.5)

Other

-

-

-

 

-

-

0.2

0.2

(0.4)

(0.2)

Balance as of December 31, 2017

-

8.9

380.8

(55.9)

(30.0)

(1.6)

274.8

577.0

196.5

773.5

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 1, 2018

-

8.9

380.8

(55.9)

(30.0)

(1.6)

274.8

577.0

196.5

773.5

Effect of changes in accounting standards (IFRS 15)

-

-

-

-

-

-

(38.1)

(38.1)

(9.1)

(47.2)

Balance as of January 1, 2018 (restated)

-

8.9

380.8

(55.9)

(30.0)

(1.6)

236.7

538.9

187.4

726.3

Profit / (loss) for the period

-

-

-

-

-

-

15.0

15.0

(4.6)

10.4

Other comprehensive (loss)

-

-

-

(36.4)

(4.0)

(0.2)

-

(40.6)

(18.2)

(58.8)

Total comprehensive loss for the period

-

-

-

(36.4)

 

 

(4.0)

(0.2)

15.0

(25.6)

(22.8)

(48.4)

Transaction with non-controlling interests

-

-

-

-

-

-

-

-

(5.9)

(5.9)

Sale non-controlling interest not resulting in a change of control (note 3.1)

-

-

-

-

-

-

20.9

20.9

28.0

48.9

Employee share schemes

 

-

-

-

-

-

4.1

4.1

-

4.1

Dividends

-

-

-

-

-

-

(44.1)

(44.1)

(1.1)

(45.2)

Other

-

-

-

 

-

-

1.1

1.1

(0.4)

0.7

Balance as of December 31, 2018

-

8.9

380.8

(92.3)

(34.0)

(1.8)

233.7

495.3

185.2

680.5

 

CONTOURGLOBAL PLC AND SUBSIDIARIES 

Consolidated statement of cash flows

Year ended December 31, 2018

 

 

 

Years ended December 31

In $ millions

Note

2018

2017

CASH FLOW FROM OPERATING ACTIVITIES

 

 

Net profit

 

10.4

13.5

Adjustment for:

 

 

 

Amortization, depreciation and impairment expense

4.3

239.3

185.6

Change in provisions

 

(2.2)

3.8

Share of profit in associates

4.13

(2.9)

(5.0)

Realized and unrealized foreign exchange gains and losses and change in fair value of derivatives

4.7

(8.5)

44.5

Interest expenses - net

4.7

181.8

166.5

Other financial items

4.7

63.3

9.6

Income tax expense

4.8

17.4

27.1

Change in financial lease and concession assets

 

35.9

15.7

Acquisition related items

 

19.6

9.5

Other items

 

4.9

6.0

Change in working capital

 

50.9

(39.4)

Income tax paid

 

(35.1)

(23.9)

Contribution received from associates

 

3.4

7.1

Net cash generated from operating activities

 

578.2

420.6

CASH FLOW FROM INVESTING ACTIVITIES

 

 

Purchase of property, plant and equipment

 

(81.1)

(58.4)

Purchase of intangibles

 

(1.2)

(1.4)

Government grants

 

-

0.7

Acquisition of financial assets under concession agreements

4.12

-

(35.4)

Acquisition of subsidiaries, net of cash received

 

(910.4)

(170.6)

Sale of subsidiaries, net of divested cash

3.1

3.0

-

Other investing activities

 

(6.5)

(15.5)

Net cash used in investing activities

 

(996.2)

(280.6)

CASH FLOW FROM FINANCING ACTIVITIES

 

 

 

Proceeds from issuance of ContourGlobal Plc. Shares

4.22

-

402.3

Dividends paid

 

(44.1)

(75.5)

Net repayment of amounts due from relating undertakings

 

-

21.3

Proceeds from borrowings

 

1,792.0

310.9

Repayment of borrowings

 

(1,151.1)

(233.0)

Debt issuance costs - net

 

(16.1)

(1.1)

Interest paid

 

(180.9)

(169.2)

Cash distribution to non-controlling interests

 

(19.5)

(16.2)

Transactions with non-controlling interest holders

 

67.2

(9.6)

Other financing activities

4.7

(72.1)

(69.0)

Net cash generated from financing activities

 

375.4

160.9

Exchange (losses) / gains  on cash and cash equivalents

 

(41.6)

46.4

Net change in cash and cash equivalents

 

(84.2)

347.4

Cash & cash equivalents at beginning of the period

 

781.1

433.7

Cash & cash equivalents at end of the period

 

696.9

781.1

 

 CONTOURGLOBAL PLC AND SUBSIDIARIES

General information

Year ended December 31, 2018

 

General information

ContourGlobal plc (the 'Company') is a public listed company, limited by shares, domiciled in the United Kingdom and incorporated in England and Wales. It is the holding company for the group whose principal activities during the period were the operation of wholesale power generation businesses with thermal and renewables assets in Europe, Latin America and Africa, and its registered office is:

6th Floor

15 Berkeley Street

London

W1J 8DY

United Kingdom

Registered number: 10982736

ContourGlobal plc is listed on the London Stock Exchange.

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as endorsed by and adopted for use by the European Union (EU), IFRS Interpretation Committee (IFRS IC) interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared on the going concern basis under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss.

The financial information is prepared in accordance with IFRS under the historical cost convention, as modified for the revaluation of certain financial instruments. The financial information is presented in millions of U.S. Dollars, with one decimal. Thus numbers may not sum precisely due to rounding.

The principal accounting policies applied in the preparation of the consolidated financial statements are set out in note 2.3. These policies have been consistently applied to the periods presented, unless otherwise stated. In particular, as the Group has implemented IFRS 15 Revenue from contracts with customers using the modified retrospective approach, related amounts in the consolidated statement of income and comprehensive income and the consolidated statement of financial position for 2018 are not comparable with the corresponding amounts in 2017. See note 2.1 for further details. The financial information presented is at and for the financial years ended 31 December 2018 and 31 December 2017. Financial year ends have been referred to as 31 December throughout the consolidated financial statements as per the accounting reference date of ContourGlobal plc. Financial years are referred to as 2018 and 2017 in these consolidated financial statements.

The preparation of the IFRS financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results may differ from those estimates, as noted in the critical accounting estimates and judgements in note 2.4.

On 17 October 2017, the Company obtained control of the entire share capital of ContourGlobal Worldwide Holdings S.a.r.l from ContourGlobal L.P. via a share-for-share exchange. The principal operating subsidiary undertakings of the group are owned directly or indirectly by ContourGlobal Worldwide Holdings S.a.r.l. For the full year there were no changes in rights or proportion of control exercised as a result of this transaction. Although the share-for-share exchange resulted in a change of legal ownership, this was a common control transaction and therefore outside the scope of IFRS 3. In substance, these financial statements reflect the continuation of the pre-existing group and the financial statements have been prepared by applying the principles of predecessor accounting. In each period, the financial statements have been prepared by applying the principles underlying the consolidation procedures of IFRS 10 'Consolidated Financial Statements' ("IFRS 10").

The components of equity in the consolidated statement of changes in equity for the comparative period reflect the constituent parts of equity required to be separately disclosed under IAS 1, based upon the consolidated position prior to the capital reorganisation, and Non-Controlling Interests. As it is not meaningful to show the share capital for the predecessor group, as of 1 January 2017, the remaining equity of the predecessor group is represented by the cumulative investment of ContourGlobal L.P. in the group (shown as "Invested Capital"). The current and prior year consolidated statement of financial position presents the legal change in ownership of the group, including the share capital of the Company following the capital reorganization that occurred in 2017 as described in note 4.22. The revised capital structure is also presented in the consolidated statement of changes in equity, which reflects the share for share exchange, capital reduction and cancellation of deferred shares that occurred during the prior year. 

 

1.     Summary of significant accounting policies

1.1.        Application of new and revised International Financial Reporting Standards (IFRS)

IFRS 15 Revenue from contract with customers

The Group adopted IFRS 15, Revenue from Contracts with Customers, from January 1, 2018. The Group used the modified retrospective approach for the first application under which the comparative amounts in the consolidated statement of income and other comprehensive income and the consolidated statement of financial position are not restated and instead are presented in accordance with IAS 18. To determine the impact of IFRS 15 on the Group, management grouped power purchase agreements with similar contractual terms, and performed a detailed revenue accounting assessment for each group. This exercise identified the following main impacts for the Group as being:

i) An increase in revenue from grossing up certain costs that were previously netted down: the Group recognized an increase of costs of sales to match the fair value of the gas supplied to its Arrubal plant from its main client and corresponding increase in revenue; this resulted in an increase of revenue by $19.6 million for the year ended December 31, 2018;

ii) Additional performance obligations identified for service concession contracts which resulted in a decrease of revenue and an increase of costs of sales by $15.9 million for the year ended December 31, 2018 mainly due to the timing of major maintenance activities; and

iii) A modification to a contract in Maritsa that is recognised prospectively from the contract modification; this resulted in an increase of revenue by $1.3 million for the year ended December 31, 2018; 

The table below summarizes impacts of IFRS 15 implementation on the consolidated statement of income for the year ended December 31, 2018:

In $ millions

Notes

Statement of income under IAS 18

Impact of adopting IFRS 15

Statement of income under IFRS 15

 

 

 

 

 

Revenue

 

1,248.0

5.0

1,253.0

Cost of sales

 

(929.8)

(3.7)

(933.5)

Gross profit

 

318.2

1.3

319.5

Selling, general and administrative expenses

 

(28.3)

-

(28.3)

Other operating income - net

 

(9.7)

-

(9.7)

Acquisition related items

 

(19.6)

-

(19.6)

Income from Operations

 

260.6

1.3

261.9

Other income (expenses) - net

 

(0.4)

-

(0.4)

Share of profit in associates

 

2.9

-

2.9

Finance income

 

10.6

-

10.6

Finance costs

 

(255.7)

-

(255.7)

Realized and unrealized foreign exchange gains and (losses) and change in fair value of derivatives

 

8.5

-

8.5

Profit before income tax

 

26.5

1.3

27.8

Income tax expenses

 

(16.7)

(0.7)

(17.4)

Net profit

 

9.8

0.7

10.4

Profit / (Loss) attributable to

 

 

 

 

- Group

 

13.7

1.3

15.0

- Non-controlling interests

 

(4.0)

(0.6)

(4.6)

 

 

The table below summarizes impacts of IFRS 15 implementation on the consolidated statement of financial position as of January 1, 2018:

In $ millions

Notes

January 1, 2018

Restatement

January 1, 2018 restated

 

 

 

 

 

Assets

 

3,281.6

(76.9)

3,204.7

Non-current assets

 

3,009.8

(75.8)

2,934.0

Property, plant and equipment

 

2,350.3

(1.4)

2,348.9

Financial and contract assets

(1) (2)

617.7

(80.0)

537.7

Deferred tax assets

(2)

41.8

5.6

47.4

Current assets

 

271.8

(1.1)

270.7

Trade and other receivables

(3)

271.8

(1.1)

270.7

Liabilities

 

240.3

(29.7)

210.6

Non-current liabilities

 

127.7

(36.2)

91.5

Deferred tax liabilities

(2)

65.5

(8.0)

57.5

Provisions

(1)

62.2

(28.2)

34.0

Current liabilities

 

112.6

6.5

119.1

Other current liabilities

(3)

112.6

6.5

119.1

Equity and non-controlling interest

 

383.8

(47.2)

336.6

Retained earnings and other reserves

 

187.3

(38.1)

149.2

Non-controlling interests

 

196.5

(9.1)

187.4

 

 

(1) The Group has assessed the performance obligations ("POs") as defined under IFRS 15 for all its power plants under service concession agreements, namely Kivuwatt in Rwanda, Togo and Cap des Biches in Senegal.  The identification of the following POs resulted in adjusting the value of the financial and contract assets, contract liabilities, provisions and related deferred tax assets and liabilities:

-      Construction and transfer of the power plant: no change in initial values. The margin recognized during the construction period is immaterial as engineering of the project is largely outsourced.

-      Significant financing component: revenue is represented by interest generated on the funding of the total construction costs, and is recognized over the period of the contract consistent with the previous model. Under IFRS 15, the interest rate corresponds to the last USD bonds issued by the country representing the financing rate that the local government could have obtained at the time of the construction (vs incremental rate of the contract for the previous model). These changes resulted in significantly reducing the value of the line item Financial and contract assets as of January 1, 2018 for the 3 assets.

-      Operation, maintenance and major maintenance activities: Such activities are part of the services rendered to the client during the concession period. A margin is applied which falls into a reasonable range for such activities in such countries. The major maintenance is considered as a distinct PO rendered after pre-defined thresholds and operating hours. As such, under IFRS 15 a revenue and a margin is applied to this PO when costs are incurred, which resulted in removing the gross maintenance provision initially recorded and included in the line item Provisions.

 (2) As a result of (1), the identification of new POs and change in methodology resulted in adjusting the value of financial and contract assets, but also in recognizing:

-      Contract assets (within line item Financial and contract assets): the value of contract assets and liabilities is dependent in particular on the timing of operation and maintenance activities as well as major maintenance activities, for which revenue is recognized as costs are incurred.

-      Deferred tax assets and liabilities resulting from a different revenue recognition in local GAAP in Togo and Cap des Biches. The changes incurred by the implementation of IFRS 15 triggered adjustment of historical deferred taxes recognized as a result.

(3) The Maritsa power purchase agreement ("PPA") was amended in April 2016. IFRS 15 requires recognizing the effect of such amendments prospectively (vs retroactively to the initial PPA date under the previous standard). This change resulted in particular in deferring revenue recognition over time.

IFRS 9 Financial instruments

The Group adopted IFRS 9 "Financial Instruments", from January 1, 2018, which replaces IAS 39 (Financial instruments - Recognition and measurement) and addresses the classification and measurement of financial instruments, introducing new principles for hedge accounting and a new forward-looking impairment model for financial assets.

The adoption of IFRS 9 hedge accounting principles did not have any material impact on the financial statements. The adoption of IFRS 9 did not result in any changes in the measurement or classification of financial instruments at 1 January 2018. All classes of financial assets and financial liabilities had the same carrying values under IFRS 9 as they had under IAS 39 as at 1 January 2018.

 

1.2.       New standards and interpretations not yet mandatorily applicable

On 1 January 2019 the Group will adopt IFRS 16 "Leases", which has been issued by the IASB and endorsed by the EU. This is a significant new standard for the Group and the expected impacts are discussed below.

In addition to IFRS 16, a number of additional new standards and amendments and revisions to existing standards have been published which will apply to the Group's future accounting periods. They have not been early adopted. None of these are expected to have a significant impact on the consolidated results, financial position or cash flows of the Group when they are adopted.

IFRS 16 Leases

IFRS 16 "Leases" was issued in January 2016 to replace IAS 17 "Leases" and has been endorsed by the EU. The standard is effective for accounting periods beginning on or after 1 January 2019 and will be adopted by the Group on 1 January 2019.

IFRS 16 will primarily change lease accounting for lessees; lease agreements will give rise to the recognition of an asset representing the right to use the leased item and a loan obligation for future lease payables. Lease costs will be recognised in the form of depreciation of the right to use asset and interest on the lease liability. Lessee accounting under IFRS 16 will be similar in many respects to existing IAS 17 accounting for finance leases, but will be substantively different to existing accounting for operating leases where rental charges are currently recognised on a straight-line basis and no lease asset or related lease creditor is recognised.

The impact of IFRS 16 on lessor accounting is less significant and not expected to have a material impact for the Group.

The Group assessed the impact of the accounting changes that will arise under IFRS 16; the following changes to lessee accounting will have a material impact as follows:

-      Right-of-use assets will be recorded for all assets that are leased by the Group; currently no lease assets or related liabilities are included on the Group's consolidated statement of financial position for operating leases.

-      Liabilities will be recorded for future lease payments in the Group's consolidated statement of financial position for the "reasonably certain" period of the lease, which may include future lease periods for which the Group has extension options. Currently liabilities are generally not recorded for future operating lease payments, which are disclosed as commitments. The amount of lease liabilities will not exactly equal the lease commitments reported on 31 December 2018, as they will be discounted to present value and the treatment of termination and extension options may differ.

-      Currently operating lease rentals are expensed on a straight-line basis over the lease term within operating expenses and these will be replaced by a depreciation charge for right-of-use assets and interest on lease liabilities; interest will typically be higher in the early stages of a lease and reduce over the term.

-      Operating lease cash flows are currently included within operating cash flows in the consolidated statement of cash flows; under IFRS 16 these will be recorded as cash flows from financing activities reflecting the repayment of lease liabilities (borrowings) and related interest.

The right-of-use assets & liabilities for future lease payments assessed as of January, 1 2019 amounts to $24.6 million. The depreciation of the right-of-use assets and the finance charges on the liabilities assessed for 2019 are estimated at $3.5 million and $1.6 million respectively. The Group expects to apply the modified retrospective approach starting January 1, 2019.

 

1.3.       Summary of significant accounting policies

Principles of consolidation

The consolidated financial statements include both the assets and liabilities, and the results and cash flows, of the Group and its subsidiaries and the Group's share of the results and the Group's investments in associates.

Inter-company transactions and balances between Group companies are eliminated.

-      Subsidiaries

Entities over which the Group has the power to direct the relevant activities so as to effect the returns to the Group, generally through control over the financial and operating policies, are accounted for as subsidiaries. Interests acquired in subsidiaries are consolidated from the date the Group acquires control.

-      Associates

Where the Group has the ability to exercise significant influence over entities, generally from a shareholding of between 20% and 50% of the voting rights, they are accounted for as associates. The results and assets and liabilities of associates are incorporated into the consolidated financial statements using the equity method of accounting. The Group's investment in associates includes goodwill identified on acquisition.

The Group determines at each reporting date whether there is objective evidence that the investment in the associate is impaired. If there is evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the investment in the associate and its carrying value and recognizes this amount as a reduction to the amount of 'Share of profit of associates' in the consolidated statement of income.

Business combinations

The acquisition consideration is measured at fair value which is the aggregate of the fair values of the assets transferred, the liabilities incurred or assumed and the equity interests in exchange for control. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognized in the consolidated statement of income. Where the consideration transferred, together with the non-controlling interest, exceeds the fair value of the net assets, liabilities and contingent liabilities acquired, the excess is recorded as goodwill. Acquisition related costs are expensed as incurred and classified as "Acquisition related items" in the consolidated statement of income.

Goodwill is capitalized as a separate item in the case of subsidiaries and as part of the cost of investment in the case of associates. Goodwill is denominated in the currency of the operation acquired.

Changes in ownership interests in subsidiaries without change of control

Transactions with non-controlling interests that do not result in a gain or loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity.

 

 

Functional and presentation currency and currency translation

The assets and liabilities of foreign undertakings are translated into US dollars, the Group's presentation currency, at the year-end exchange rates. The results of foreign undertakings are translated into US dollars at the relevant average rates of exchange for the year. Foreign exchange differences arising on retranslation of opening net assets, and the difference between average exchange rates and year end exchange rates on the result for the year are recognised directly in the currency translation reserve.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized at period end exchange rates in the consolidated statement of income line which most appropriately reflects the nature of the item or transaction.

The following table summarizes the main exchange rates used for the preparation of the consolidated financial statements of ContourGlobal:

 

 

CLOSING RATES

 

AVERAGE RATES

 

 

Year ended December 31,

 

Year ended December 31,

Currency

 

2018

2017

 

2018

2017

 

 

 

 

 

 

 

EUR / USD

 

1.1467

1.2005

 

1.1811

1.1299

BRL / USD

 

0.2581

0.3024

 

0.2756

0.3134

BGN / USD

 

0.5863

0.6138

 

0.6040

0.5774

 

Operating and reportable segments

The Group's reporting segments reflect the operating segments which are based on the organizational structure and financial information provided to the Chief Executive Officer, who represents the chief operating decision-maker ("CODM"). The Group's organizational structure reflects the different electricity generation methods, being Thermal and Renewables. A third category, Corporate & Other, primarily reflects costs for certain centralized functions including executive oversight, corporate treasury and accounting, legal, compliance, human resources, IT, political risk insurance and facilities management and certain technical support costs that are not allocated to the segments for internal management reporting purposes.

The principal profit measure used by the CODM is "Adjusted EBITDA" as defined in note 4.1. A segmented analysis of "Adjusted EBITDA" is accordingly provided in the notes to the consolidated financial statements (see note 4.1).

Revenue recognition

IFRS 15, Revenues from contracts with customers, is effective for periods beginning January 1, 2018. Under this standard, revenue recognition is based on the transfer of control, i.e. notion of control is used to determine when a good or service is transferred to the customer. In accordance with this, the Group has adopted a single comprehensive model for the accounting for revenues from contracts with customers, using a five-step approach for revenue recognition: (1) identifying the contract; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when the Group satisfies a performance obligation.

Revenue represents amounts receivable for goods or services provided in the normal course of business excluding amounts collected on behalf of third parties such as sales taxes, goods and services taxes and value added taxes.

Revenue is recognized when it is probable that future economic benefits will flow to the entity and these benefits can be measured reliably. Revenue is measured at the fair value of the consideration received or receivable.

The Group revenue is mainly generated from the following:

(a)  revenue from power sales;

(b)  revenue from operating leases;

(c)  revenue from financial assets (concession and finance lease assets); and

(d)  construction revenue from concession arrangements.

 

Certain of the Group power plants sell their output under Power Purchase Agreements ("PPAs") and other long-term arrangements. Under such arrangements it is usual for the Group to receive payment for the provision of electrical capacity or availability whether or not the offtaker requests the electrical output (capacity payments) and for the variable costs of production (energy payments). In such situations, revenue is recognized in respect of capacity payments as:

(i)   Service income in accordance with the contractual terms, to the extent that the capacity has been made available to the contracted offtaker during the period. This income is recognized as part of revenue from power sales;

(ii)  Financial return on the operating financial asset where the PPA is considered to be or to contain a finance lease or where the contract is considered to be a financial asset under interpretation IFRIC 12: "Service Concession Arrangements".

Under finance lease arrangements, those payments which are not included within minimum lease payments are accounted for as service income (outlined in (a) above).

Energy payments under PPAs are recognized in revenue in all cases as the contracted output is delivered.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Revenues in the comparative periods are recognized in accordance with IAS 18. See note 2.1 for more details of the transition to IFRS 15.

Government grants

Grants from the government are recognized where there is reasonable assurance that the conditions associated with the grants have been complied with and the grants will be received.

Acquisition related items

Acquisition related items include pre-acquisition costs such as various professional fees and due diligence costs, earn-outs and other related incremental costs incurred as part of completed or contemplated acquisitions.

Finance income and finance costs

Finance income primarily consists of interest income on funds invested. Finance costs primarily comprise interest expense on borrowings, unwinding of the discount/step up on financial and contract assets and provisions, interests and penalties that arise from late payments of suppliers or taxes, swap margin calls, bank charges, changes in fair value of the debt payable to non-controlling interests in our Bulgarian power plant, changes in the fair value of derivatives not qualifying for hedge accounting and unrealized & realized foreign exchange gains and losses.
 

Intangible assets and goodwill

Goodwill

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash generating units ("CGUs"), or groups of CGUs that is expected to benefit from the synergies of the combination. Each unit or group of units represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

The reporting units (which generally correspond to power plants) or group of reporting units have been identified as its cash-generating units.

Goodwill impairment reviews are undertaken at least annually.

Intangible assets

Intangible assets include licenses and permits when specific rights and contracts are acquired. Intangible assets separately acquired in the normal course of business are recorded at historic cost, and intangible assets acquired in a business combination are recognized at fair value at the acquisition date. When the power plant achieves its commercial operations date, the related intangible assets are amortized using the straight-line method over the life of the PPA, generally over 20 years (excluding software). Software is amortized over 3 years. A different amortization method may be used if it better reflects the pattern of economic benefits derived from the asset over time.

Property, plant and equipment

Initial recognition and subsequent measurement

Property, plant and equipment are stated at historical cost, less depreciation, or at fair value if acquired in the context of a business combination. Historical cost includes an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, when the entity has a present legal or constructive obligation to do so.

Property, plant and equipment acquired under finance leases is carried at the lower of market value and the present value of the related minimum lease payments.

Costs relating to major inspections and overhauls are capitalized. Minor replacements, repairs and maintenance, including planned outages to our power plants that do not improve the efficiency or extend the life of the respective asset, are expensed as incurred.

The Group capitalizes certain direct pre-construction costs associated with its power plant project development activities when it has been determined that it is more likely than not that the opportunity will result in an operating asset. Factors considered in this determination include (i) the availability of adequate funding, (ii) the likelihood that the Group will be awarded with the project or the barriers are not likely to prohibit closing the project, and (iii) there is an available market and the regulatory, environmental and infrastructure requirements are likely to be met. Capitalized pre-construction costs include initial engineering, environmental and technical feasibility studies, legal costs, permitting and licensing and direct internal staff salary and travel costs, among others. Pre-construction costs are charged to expense if a project is abandoned or if the conditions stated above are not met. Construction work in progress ("CWIP") assets are transferred out of CWIP when construction is substantially completed and the power plant achieves its commercial operations date ("COD"), at which point depreciation commences.

 

 

Depreciation

Property, plant and equipment are depreciated using the straight-line method over the following estimated useful lives:

  

 

 

Useful lives as of December 31, 2017 and 2018

Generating plants and equipment

 

 

Lignite, coal, gas, oil, biomass power plants

12 to 40 years

 

Hydro plants and equipment

25 to 75 years

 

Wind farms

16 to 25 years

 

Tri and quad-generation combined heat power plants

15 years

 

Solar plants

14 to 22 years

Other property, plant and equipment

3 to 10 years

 

The range of useful lives is due to the diversity of the assets in each category, which is partly due to acquired assets and from assets groupings.

The residual values and useful lives are reviewed at least annually and if expectations differ from previous estimates, the remaining useful lives are reassessed and adjustments are made. The remaining useful lives are assessed when acquisitions are made by performing technical due diligence procedures.

Impairment of non-financial assets

Assets that are subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that carrying values may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount.  The recoverable amount is the higher of an asset's fair value less costs of disposal (market value) and value in use determined using estimates of discounted future net cash flows of the asset or group of assets to which it belongs. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units).

Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and whether the arrangement conveys the right to use the asset, or assets.

Accounting for arrangements that contain a lease as lessee

a)    Accounting for finance leases as lessee

Leases of property, plant and equipment where the Group holds substantially all the risks and rewards of ownership are classified as finance lease and such assets are capitalised at the commencement of the lease term at the lower of the present value of the minimum lease payments or the fair value of the leased asset. The asset is depreciated over the shorter of the useful life of the asset and the lease term. The obligations relating to finance leases, net of finance charges in respect of future periods, are recognised as liabilities. Leases are subsequently measured at amortised cost using the effective interest method.

 

 

b)    Accounting for operating leases as lessee

Leases where a significant portion of the risks and rewards are held by the lessor are classified as operating leases. Rentals are charged to the statement of income on a straight line basis over the period of the lease.

Accounting for arrangements that contain a lease as lessor - Power purchase arrangements ("PPA") and other long-term contracts may contain, or may be considered to contain, leases where the fulfilment of the arrangement is dependent on the use of a specific asset such as a power plant and the arrangement conveys to the customer the right to use that asset. Such contracts may be identified as either operating leases or finance leases.

(i) Accounting for finance leases as lessor

Where the Group determines that the contractual provisions of a long-term PPA contain, or are a lease and result in the offtaker assuming the principal risks and rewards of ownership of the power plant, the arrangement is a finance lease. Accordingly the assets are not reflected as PP&E and the net investment in the lease, represented by the present value of the amounts due from the lessee is recorded within financial assets as a finance lease receivable.

The capacity payments as part of the leasing arrangement are apportioned between minimum lease payments (comprising capital repayments relating to the plant and finance income) and service income. The finance income element is recognized as revenue, using a rate of return specific to the plant to give a constant rate of return on the net investment in each period. Finance income and service income are recognized in each accounting period at the fair value of the Group's performance under the contract.

(ii) Accounting for operating leases as lessor

Where the Group determines that the contractual provisions of the long-term PPA contain, or are, a lease, and result in the Group retaining the principal risks and rewards of ownership of the power plant, the arrangement is an operating lease. For operating leases, the power plant is, or continues to be, capitalized as property, plant and equipment and depreciated over its useful economic life. Rental income from operating leases is recognized on a straight-line basis over the term of the arrangement.

Concession arrangements

The interpretation IFRIC 12 governs accounting for concession arrangements. An arrangement within the scope of IFRIC 12 is one which involves a private sector entity (known as 'an operator') constructing infrastructure used to provide a public service, or upgrading it (for example, by increasing its capacity) and operating and maintaining that infrastructure for a specified period of time.

IFRIC 12 applies to public-to-private service concession arrangements if:

(a)  The 'grantor' (i.e. the public sector entity - the offtaker) controls or regulates what services the operator must provide with the infrastructure, to whom it must provide them, and at what price, and

(a)  The grantor controls through ownership, beneficial entitlement or otherwise any significant residual interest in the infrastructure at the end of the term of the arrangement. Infrastructure used in a public-to-private service concession arrangement for its entire useful life (a whole of life asset) is within the scope of IFRIC 12 if the conditions in a) are met.

Under concession arrangements within the scope of IFRIC 12, which comply with the 'financial asset' model requirements, the operator recognizes a financial asset, attracting income in consideration for the services it provides (design, construction, etc.), to the extent that it has an unconditional contractual right to receive cash or another financial asset from or at the direction of the grantor for the construction services; the grantor has little, if any, discretion to avoid payment, usually because the agreement is enforceable by law. The Group has an unconditional right to receive cash if the grantor contractually guarantees to pay the Group (a) specified or determinable amounts or (b) the shortfall, if any, between amounts received from users of the public service and specified or determinable amounts, even if payment is contingent on the Group ensuring that the infrastructure meets specified quality or efficiency requirements. This model is based on input assumptions such as budgets and cash flow forecasts. Any change in these assumptions may have a material impact on the measurement of the recoverable amount and could result in reducing the value of the asset. Such financial assets are recognized in the consolidated statement of financial position in an amount corresponding to the fair value of the infrastructure on first recognition and subsequently at amortized cost. The receivable is settled by means of the grantor's payments being received.  The financial income calculated on the basis of the effective interest rate, equivalent to the project's internal rate of return, is reflected within the 'Revenue from concession and finance lease assets' line in the note 4.2 'Revenue' to the consolidated financial statement. Cash outflows relating to the acquisition of financial assets under concession agreements are presented as part of cash flow from investing activities. Net cash inflows generated by the financial assets' operations are presented as part of cash flow from operating activities.

Under arrangements within the scope of IFRIC 12 which complies with the 'intangible asset' model requirements, the operator recognizes an intangible asset in accordance with IAS 38 to the extent that it has a right to charge users of the public service. Such intangible asset is recognized in the consolidated statement of financial position at cost on first recognition and subsequently measured over its useful economic life at cost less accumulated amortization and impairment losses. Net cash inflows generated by the intangible asset's operations are presented as part of Cash Flow from operating activities.

Financial assets

Classification of financial assets

The Group classifies its financial assets in the following categories: at fair value through statement of income and loans and receivables.

(i)   Financial assets at fair value through statement of income

Financial assets have been acquired principally for the purpose of selling, or being settled, in the short term. Financial assets at fair value through statement of income are "Cash and cash equivalents" which includes restricted cash and derivatives held for trading unless they are designated as hedges.

a)    Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except those that mature greater than 12 months after the end of the reporting period, which are classified in non-current assets. The Group's loans and receivables comprise "Trade and other receivables" and "Financial and contract assets" in the consolidated statement of financial position.

The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows.

Recognition and measurement

Regular way purchases and sales of financial assets are recognised on trade date (that is, the date on which the group commits to purchase or sell the asset).

At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through income, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through income are expensed in the consolidated statement of income and other comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

(1)  Financial assets at fair value through statement of income

Gains or losses on financial assets at fair value through statement of income are recognised in the consolidated statement income and other comprehensive income. These are presented within finance income and finance costs respectively.

(2)  Loans and receivable

These financial assets are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, and are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on de-recognition is recognised directly in profit or loss and presented in finance income.

Impairment

The Group assesses, on a forward-looking basis, the expected credit losses associated with its financial assets carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

Allowances for expected credit losses are made based on the risk of non-payment taking into account ageing, previous experience, economic conditions and forward looking data. Such allowances are measured as either 12-months expected credit losses or lifetime expected credit losses depending on changes in the credit quality ofthe counterparty.

While the financial assets of the company are subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.

Derivative financial instruments and hedging activities

Derivative instruments are measured at fair value upon initial recognition in the consolidated statement of financial position and subsequently are re-measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged.

Derivative instruments are presented according to their maturity date, regardless of whether they qualify for hedge accounting under IFRS 9 (hedging instruments versus trading instruments). Derivatives are classified as a separate line item in the consolidated statement of financial position.

As part of its overall foreign exchange and interest rate risk management policy, the Group enters into various hedging transactions involving derivative instruments.

The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months.

The group designates certain derivatives as either:

(1)  Hedges of fair value of recognized assets or liabilities (fair value hedges);

In connection with the Group's hedging policy, the Group uses forward exchange contracts for currency risk management as well as foreign exchange options.

(2)  Hedges of a particular risk associated with the cash flows of recognized assets and liabilities and highly probable forecast transactions (cash flow hedges).

The Group uses interest rate swap contracts for interest rate risk management in order to hedge certain forecasted transactions and to manage its anticipated cash payments under its variable rate financing by converting a portion of its variable rate financing to a fixed rate basis through the use of interest rate swap agreements, and a cross currency swap contract for both currency and interest rate risk management.

Items qualifying as hedges

The Group formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking hedge transactions and the method used to assess hedge effectiveness. Hedging transactions are expected to be highly effective in achieving offsetting changes in cash flows and are regularly assessed to determine that they actually have been highly effective throughout the financial reporting periods for which they are implemented.

When derivative instruments qualify as hedges for accounting purposes, as defined in IFRS 9 "Financial instruments", they are accounted for as follows:

(1)  Cash flow hedges that qualify for hedge accounting

-      The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in the cash flow hedge reserve within equity and through the consolidated statement of other comprehensive income ("OCI"). The gain or loss relating to the ineffective portion is recognized immediately within the consolidated statement of income. Amounts recognized directly in OCI are reclassified to the consolidated statement of income when the hedged transaction affects the consolidated statement of income.

-      If a forecast transaction or firm commitment is no longer expected to occur, amounts previously recognized in OCI are reclassified to the consolidated statement of income as finance income or finance costs.

If a hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognized in OCI remain in accumulated OCI until the forecast transaction or firm commitment occurs, at which point they are reclassified to the consolidated statement of income.

(2)  Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in profit or loss and are included in finance income / finance costs.

In connection with the Group's hedging policy, the Group uses forward exchange contracts for currency risk management as well as foreign exchange options, interest rate swap contracts for interest rate risk management in order to hedge certain forecasted transactions and to manage its anticipated cash payments under its variable rate financing by converting a portion of its variable rate financing to a fixed rate basis through the use of interest rate swap agreements, and a cross currency swap contract for both currency and interest rate risk management.

 

 

Inventories

Inventories consist primarily of power generating plant fuel and non-critical spare parts that are held by the Group for its own use. Inventories are stated at the lower of cost, using a first-in, first-out method, and net realizable value, which is the estimated selling price in the ordinary course of business, less applicable selling expenses.

Emission quotas

Some companies of the Group emit CO2 and have as a result obligations to buy emission quotas on the basis of local legislation. The emissions made by the company emitting CO2 which are in excess of any allocated quotas are purchased at free market price and shown as inventories before their effective use. If emissions are higher than allocated quotas, the company recognises an expense and respective liability for those emissions. At the end of each reporting period, CO2 quotas that remain available to the company are revalued at the lower of costs or prevailing market value.

Trade receivables

Trade receivables are recognized initially at fair value, which is usually the invoiced amount, and subsequently carried at amortized cost using the effective interest method, less provision for impairment. Details about the Group's impairment policies on financial assets and the calculation of the provision for impairment are provided on page 20.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and current balances with banks and similar institutions and short term investments, all of which are readily convertible to cash and are subject to insignificant risk of changes in value and have an original maturity of three months or less. Bank overdrafts are included within current borrowings. Cash and cash equivalents also includes cash deposited on accounts to cover for short-term debt service of certain project financings and which can be drawn for short term related needs.

Maintenance reserves held for the purpose of covering long-term major maintenance and long-term deposits kept as collateral to cover decommissioning obligations are excluded from cash and cash equivalents and included in non-current assets.

Share capital and share premium

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds.

The premium received on the issue of shares in excess of the nominal value of shares is credited to the share premium account and included within shareholders' equity.

Financial liabilities

(1)  Borrowings

Borrowings are recognized initially at fair value of amounts received, net of transaction costs. Borrowings are subsequently measured at amortized cost using the effective interest method; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the consolidated statement of income over the period of the borrowings using the effective interest method.

Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled or expired.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(2)  Trade and other payables

Financial liabilities within trade and other payables are initially recognized at fair value, which is usually the invoiced amount, and subsequently carried at amortized cost using the effective interest method.

Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.

Unless otherwise stated, carrying value approximates to fair value for all financial liabilities.

Provisions

Provisions principally relate to decommissioning, maintenance, environmental, tax and legal obligations and which are recognised when there is a present obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount can be reliably estimated.

Provisions are re-measured at each statement of financial position date and adjusted to reflect the current best estimate. Any change in present value of the estimated expenditure attributable to changes in the estimates of the cash flow or the current estimate of the discount rate used are reflected as an adjustment to the provision. The increase in the provisions due to passage of time are recognised as finance costs in the consolidated statement of income.

Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognized in the consolidated statement of income, except to the extent that it relates to items recognized in other comprehensive income. In this case, the tax is also recognized in other comprehensive income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the statement of financial position date in the countries where the Group and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not recognized if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the statement of financial position date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

 

1.4.       Critical accounting estimates and judgments

The preparation of the consolidated financial statements in line with the Group's accounting policies set out in note 2.3 involves the use of judgment and/or estimation.  These judgments and estimates are based on management's best knowledge of the relevant facts and circumstances, giving consideration to previous experience, and are regularly reviewed and revised as necessary.  Actual results may differ from the amounts included in the consolidated financial statements. The estimates and judgments that have the most significant effect on the carrying amounts of assets and liabilities are presented below.

Critical accounting judgements

Accounting for long-term power purchase agreements and related revenue recognition

When power plants sell their output under long-term power purchase agreements ("PPA"), it is usual for the operator of the power plant to receive payment (known as a capacity payment) for the provision of electrical capacity whether or not the offtaker requests electrical output. There is a degree of judgement as to whether a long-term contract to sell electrical capacity constitutes a service concession arrangement, a form of lease, or a service contract. This determination is made at the inception of the PPA, and is not required to be revisited in subsequent periods under IFRS, unless the agreement is renegotiated. 

Given that the fulfilment of the PPAs is dependent on the use of a specified asset, the key judgement in determining if the PPA contains a lease is the assessment of whether the PPA conveys a right for the offtaker to use the assets.  In practice, the key criteria in assessing if that right exists is the judgement whether there is only a remote possibility that parties other than the offtaker will take more than an insignificant amount of the power output and the price the offtaker will pay is neither fixed nor at market price rates. 

In assessing whether the PPA contains a service concession, the Group considers whether the arrangement (i) bears a public service obligation; (ii) has prices that are regulated by the offtaker; and (iii) the residual interest is transferred to the offtaker at an agreed value. 

All other PPAs are determined to be service contracts. 

Concession arrangements - For those agreements which are determined to be a concession arrangement, there are judgements as to whether the infrastructure should be accounted for as an intangible asset or a financial asset depending on the nature of the payment entitlements established in the agreement. 

Concession arrangements determined to be a financial asset - The Group recognises a financial asset when demand risk is assumed by the grantor, to the extent that the contracted concession holder has an unconditional right to receive payments for the asset. The asset is recognised at the fair value of the construction services provided. The fair value is based on input assumptions such as budgets and cash flow forecasts, future costs include maintenance costs which impact the overall calculation of the estimated margin of the project. The inputs include in particular the budget for fixed and variable costs. Any change in these assumptions may have a material impact on the measurement of the recoverable amount and could result in reducing the value of the asset. The financial asset is subsequently recorded at amortized cost calculated according to the effective interest rate method. Revenue for operating and managing the asset is recorded as revenue in each period.

Leases - For those arrangements determined to be or to contain leases, further judgment is required to determine whether the arrangement is finance or operating lease. This assessment requires an evaluation of where the substantial risks and rewards of ownership reside, for example due to the existence of a bargain purchase option that would allow the offtaker to buy the asset at the end of the arrangement for a minimal price. 

 

 

Assessing property, plant and equipment for impairment triggers

The Group's property, plant and equipment are reviewed for indications of impairment (an impairment "trigger"). Judgement is applied in determining whether an impairment trigger has occurred, based on both internal and external sources.  External sources may include:  market value declines, negative changes in technology, markets, economy, or laws.  Internal sources may include: obsolescence or physical damage, or worse economic performance than expected, including from adverse weather conditions for renewable plants.  In the current year, impairment triggers were noted for Brazilian wind power plants (see note 4.11). 

Provisions for claims

The Group receives legal or contractual claims against it from time to time, in the normal course of business. Judgments are made as to the potential likelihood of any claim succeeding when making a provision or disclosing a contingent liability. The timeframe for resolving legal or contractual claims may be judgemental, as is the amount of possible outflow of economic benefits. 

Critical accounting estimates

Service concession arrangements

The Group has service concession arrangements for Senegal, Rwanda, Togo and Brazil. In order to calculate the gross profit margin that is recognised in relation to operation, maintenance and major maintenance activities during the concession period, the Group makes an estimate of the future costs of these activities that will be incurred over the remaining contract life. Whilst the level and related costs of such activities is generally predictable with a reasonable degree of accuracy, should significant unanticipated costs be incurred, this would reduce gross profit margins for these activities over the future life of the contract.

Estimation of useful lives of property, plant and equipment

Property, plant and equipment represents a significant proportion of the asset base of the Group, primarily due to power plants owned, being 63.2% (2017: 54.0%) of the Group's total assets. Estimates and assumptions made to determine their carrying value and related depreciation are significant to the Group's financial position and performance. The annual depreciation charge is determined after estimating an asset's expected useful life and its residual value at the end of its life. The useful lives and residual values of the Group's assets are determined by management at the time the asset is acquired and reviewed annually for appropriateness. The Group derives useful economic lives based on experience of similar assets, which may exceed the period covered by contracted power purchase agreements.

Recoverable amount of property, plant and equipment

Where an impairment trigger has been identified (see critical accounting judgements section), the Group makes significant estimates in its impairment evaluations of long-lived assets. The determination of the recoverable amount is typically the most judgmental part of an impairment evaluation.  The recoverable amount is the higher of (i) an asset's fair value less costs of disposal (market value), and (ii) value in use determined using estimates of discounted future net cash flows ("DCF") of the asset or group of assets to which it belongs. 

The Group generally uses value in use to derive the recoverable amount of property, plant and equipment.  Management applies considerable judgment in selecting several input assumptions in its DCF models, including discount rates and capacity / availability factors.  These assumptions are consistent with the Group's internal budgets and forecasts for such valuations.  Examples of the input assumptions that budgets and cash-flow forecasts are sensitive to include macroeconomic factors such as growth rates, inflation, exchange rates, and, in the case of renewables plants, environmental factors such as wind, solar and water resource forecast. Any changes in these assumptions may have a material impact on the measurement of the recoverable amount and could result in impairing the tested assets.  See note 4.11 for further information on the impairment tests performed, and relevant sensitivity analysis. 

Provisions

The Group makes provisions when an obligation exists, resulting from a past event and it is probable that cash will be paid to settle it, but the exact amount of cash required can only be estimated on a reliable basis.  Major provisions are detailed in note 4.25. The main estimates relate to site decommissioning and maintenance costs, and environmental remediation for various sites owned.

Site decommissioning, maintenance and environmental provisions are recognized based on management's assessment of future costs which would need to be incurred in accordance with existing legislation or contractual obligations to restore the sites or make good any environmental damage. These costs are measured at the present value of the future expenditures expected to be required to settle the obligation using a pre-tax discount rate which reflects current market assessments of the time value of money and the risks specific to the obligation. Management apply judgement in the estimation of future cash flows to settle these obligations and in the estimation of an appropriate pre-tax discount factor. The pre-tax discount rate used varies from 2.0% to 11.0%. If this was to decrease by 1% it would increase decommissioning, environmental and maintenance provisions by $3.5 million and $3.2 million for the years ended December 31, 2018 and December 31, 2017.

Fair value of assets acquired and liabilities assumed in a business combination

Business combinations are recorded in accordance with IFRS 3 using the acquisition method. Under this method, the identifiable assets acquired and the liabilities assumed are recognized at their fair value at the acquisition date.

Therefore, through a number of different approaches and with the assistance of external independent valuation experts for acquisitions as considered appropriate by management, the Group identifies what it believes is the fair value of the assets acquired and liabilities assumed at the acquisition date. These valuations involve the use of judgement and include a number of estimates.  Judgement is exercised in identifying the most appropriate valuation approach which is then used to determine the allocation of fair value. The group typically uses one of the cost approach, the income approach and the market approach.

Each of these valuation approaches involve the use of estimates in a number of areas, including the determination of cash flow projections and related discount rates, industry indices, market prices regarding replacement cost and comparable market transactions. While the Group believes that the estimates and assumptions underlying the valuation methodologies are reasonable, different assumptions could result in different fair values. 

Taxes

Significant judgment is sometimes required in determining the accrual for income taxes as there are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognizes liabilities based on estimates of whether additional taxes will be due. These areas include, but are not limited to, the deductibility of interest on certain borrowings used to finance acquisitions made by the Group and the price at which goods and services are transferred between Group companies. Where the final tax outcome of these matters is different from the amounts that were recorded, such differences will impact the current and deferred income tax provisions, results of operations and possibly cash flows in the year in which such determination is made.

Deferred tax assets are recognized on tax loss carry-forwards when it is probable that taxable profit will be available against which the tax loss carry-forwards can be utilized. Estimates of taxable profits and utilizations of tax loss carry-forwards are prepared on the basis of profit and loss forecasts as included in the medium-term business plan and, if necessary, on the basis of additional forecasts.

 

2.    Major events and changes in the scope of consolidation

2.1.       2018 transactions

Sale of Ukrainian assets

On 26th February 2018, the Group sold 100% of its stake in Ukrainian power plant Kramatorsk representing a total of 120 MW for a cash amount of $3.0 million (see note 4.11). This asset was presented as an asset held for sale as of 31 December 2017. The sale has no material impact on the full year 2018 financial statements.

Additional solar portfolio acquisition

On 23rd December 2017, the Group signed the acquisition of a 23 MW renewable portfolio consisting of 10 photovoltaic plants in Italy (15 MW), one photovoltaic plant in Romania (7 MW) and 2 biogas plants in Italy (2 MW).

The transaction closed on March 22, 2018 for the Italian plants. The total cash consideration amounts to €22.6 million ($27.7 million) including €17.0 million ($20.8 million) for the acquisition of 100% of the shares and €5.6 million ($6.9 million) for the repayment of shareholders loans.

The transaction closed on June 26, 2018 for the Romania plant. The total cash consideration amounts to €7.7 million ($9.0 million) including €0.3 million ($0.4 million) for the acquisition of 100% of the shares and €7.4 million ($8.6 million) for the repayment of shareholders loans.

On a consolidated basis, had these acquisitions taken place as of January 1, 2018, the Group would have recognized 2018 consolidated revenue of $1,256.1 million and consolidated net profit of $14.5 million.

Determination of fair value of assets acquired and liabilities assumed at acquisition date of:

In $ millions

Solar portfolio

 

 

Intangible assets

2.6

Property, plant and equipment

53.9

Other assets

13.8

Cash and cash equivalents

6.0

Total assets

76.2

Borrowings

27.4

Other liabilities

27.6

Total liabilities

55.0

Total net identifiable assets

21.2

Net purchase consideration

21.2

Goodwill

-

 

These acquisitions contributed to consolidated revenue and net result for the year respectively of $8.4 million and $0.3 million.

Acquisition of Spanish CSP portfolio

On February 27, 2018, the Group signed the acquisition of Acciona Energia's 250 MW portfolio of five 50 MW Concentrating Solar Power plants ("CSP") in South-West Spain. The total enterprise value amounts to €962.8 million, including an amount payable to Acciona Energía of approximately €806.8 million ($956.6 million) and existing net debt (including adjustment for working capital) of €156.0 million ($184.4 million). The acquisition agreement also includes earn-out payments to Acciona Energía of up to €27 million ($32 million). As of December 31, 2018 a €9.4 million ($10.8) million earn-out was recognized.

The acquisition combines the Group's solar and Spanish thermal operating expertize into a sizable portfolio of assets enabling synergies with existing European operations.

The acquisition closed on May 10, 2018.

On a consolidated basis, had this acquisition taken place as of January 1, 2018, the Group would have recognized 2018 consolidated revenue of $1,316.8 million and consolidated net profit of $16.0 million.

Determination of fair value of assets acquired and liabilities assumed at acquisition date of:

In $ millions

Spanish CSP portfolio

 

 

Intangible assets

-

Property, plant and equipment

1,202.8

Other assets

89.2

Cash and cash equivalents

76.1

Total assets

1,368.1

Borrowings

186.4

Other liabilities

225.2

Total liabilities

411.5

Total net identifiable assets

956.6

Net purchase consideration

956.6

Goodwill

-

 

The acquisition contributed to consolidated revenue and net loss for the year respectively of $112.8 million and $6.6 million.

Sale of non-controlling interests which did not result in a change of control

Solar Italy and Slovakia portfolio

The Group completed in October 2018 the sale of 49% minority interest of the Italian and Slovakian portfolio with Credit Suisse Energy Infrastructure Partners for an amount of €63.4 million ($73.1 million), of which €3.3 million ($3.8 million) consists of working capital adjustments. Cash amount received at closing amounted to €60.1 million ($69.3 million), of which €42.4 million ($48.9 million) was for the sale of shares and €17.7 million ($20.4 million) was for the sale of existing shareholder loans.

In line with IFRS 10 "consolidated financial statements", this transaction is considered as an equity transaction as it does not result in a loss of control. Therefore, the net cash gain on sale of these assets, which represented an amount of €18.2 million or $20.9 million, was recorded as an increase in the equity attributable to owners of the parent. It corresponds to the difference between the consideration received for the sale of shares (€42.4 million or $48.9 million) and of the carrying amount of non-controlling interest sold (€24.2 million or $28.0 million).

Spanish CSP portfolio

The Group signed in December 2018 an agreement to sell a 49% minority interest of the Spanish CSP portfolio with Credit Suisse Energy Infrastructure Partners for an amount of €134 million. The sale is expected to close in the first half of 2019 and is not expected to result in a change of control.

 

2.2.       2017 transactions

Acquisition of a thermal and a renewable portfolio in Brazil

On March 17, 2017, the Group closed the acquisition of 80% of a 206 MW Brazilian portfolio. The portfolio consists of seven hydroelectric plants totalling 130 MW in the states of Bahia, Goiás and Rio de Janeiro and four high-efficiency cogeneration facilities ("Solutions") totalling 76 MW in Paraná, Rio de Janeiro and São Paulo. The total consideration amounts to BRL 576.8 million (or $182.4 million) including certain price adjustments. A total of BRL 547.3 million (or $173.1 million) was paid in cash at the closing date.

On a consolidated and annualized basis, had this acquisition taken place as of January 1, 2017, the Group would have recognized 2017 consolidated revenue of $1,037.9 million and consolidated net profit of $18.5 million.

Determination of fair value of assets acquired and liabilities assumed at acquisition date:

In $ millions

Hydro Brazil

Solutions Brazil

Total Brazilian portfolio acquired

 

 

 

 

Intangible assets

28.4

-

28.4

Property, plant and equipment

160.0

38.1

198.1

Other assets

17.9

10.8

28.7

Cash and cash equivalents

17.9

15.3

33.2

Total assets

224.2

64.2

288.4

Borrowings

61.1

-

61.1

Other liabilities

19.6

11.5

31.1

Total liabilities

80.7

11.5

92.2

Total net identifiable assets

143.5

52.7

196.2

Total net identifiable assets % acquired

129.7

52.7

182.4

Net purchase consideration

129.7

52.7

182.4

Goodwill

-

-

-

 

The acquisition contributed to 2017 consolidated revenue and net result for respectively $57.8 million and $18.9 million.

Additional solar portfolio acquisition

In December 2017, the Group closed the acquisition of 100% of a 19.1 MW operational solar photovoltaic plants in Italy from ErgyCapital S.p.A. The plants, located in the regions of Puglia, Piemonte, Lazio and Campania, are in close proximity to ContourGlobal's existing Italian solar portfolio and benefit from approximately 12 years of Feed-in-Tariff. The total consideration amounts to €9.6 million (or $11.4 million) corresponding to acquisition of shares.

Subsequent to the closing the Group refinanced the portfolio and issued new facilities for a total of €55.8 million (or $66.4 million), of which €38.8 million (or $46.2 million) was drawn in 2017, at an interest rate of Euribor 6M+2.35% per annum, 70% of which is swapped at 0.653%+2.35% per annum, maturing on June 30, 2028.

On a consolidated and annualized basis, had this acquisition taken place as of January 1, 2017, the Group would have recognized 2017 consolidated revenue of $1,032.9 million and consolidated net profit of $14.3 million.

Preliminary determination of fair value of assets acquired and liabilities assumed at acquisition date:

 

 

In $ millions

Solar portfolio

 

 

Intangible assets

0.1

Property, plant and equipment

75.7

Other assets

11.4

Cash and cash equivalents

3.6

Total assets

90.7

Borrowings

70.6

Other liabilities

8.8

Total liabilities

79.4

Total net identifiable assets

11.4

Net purchase consideration

11.4

Goodwill

-

 

The acquisition contributed to 2017 consolidated revenue and net result for respectively $0.5 million and $0.6 million.

Acquisition of non-controlling interests which did not result in a change of control

The Group also completed in 2017 the acquisition of 19.7% minority interests in ContourGlobal Hydro Cascade CJSC (Vorotan project) for a consideration of $9.8 million. After this transaction, the Group owns 100% of the Vorotan project.

This transaction did not result in a change of control and have therefore been accounted for within shareholder's equity as transactions with owners without change of control acting in their capacity of owners.

 

CONTOURGLOBAL PLC AND SUBSIDIARIES 

Notes to the consolidated financial statements

Year ended December 31, 2018

3.    Notes to the consolidated financial statements

3.1.       Segment reporting

The Group's reportable segments are the operating segments overseen by distinct segment managers responsible for their performance with no aggregation of operating segments.  

Thermal Energy for power generating plants operating from coal, lignite, natural gas, fuel oil and diesel. Thermal plants include Maritsa, Arrubal, Togo, Kramatorsk (sold in February 2018), Cap des Biches, KivuWatt, Energies Antilles, Energies Saint-Martin, Bonaire and our equity investees (primarily Termoemcali and Sochagota). Our thermal segment also includes plants which provide electricity and certain other services to beverage bottling companies.

Renewable Energy for power generating plants operating from renewable resources such as wind, solar and hydro in Europe and South America. Renewables plants include Asa Branca, Chapada I, II, III, Inka, Vorotan, Austria Portfolio 1 & 2, Spanish Concentrated Solar Power and our other European and Brazilian plants.

The Corporate & Other category primarily reflects costs for certain centralized functions including executive oversight, corporate treasury and accounting, legal, compliance, human resources, IT, political risk insurance and facilities management and certain technical support costs that are not allocated to the segments for internal management reporting purposes.

The CODM assesses the performance of the operating segments based on Adjusted EBITDA which is defined as profit for the period from continuing operations before income taxes, net finance costs, depreciation and amortization, acquisition related expenses and specific items which have been identified and adjusted by virtue of their size, nature or incidence.  In determining whether an event or transaction is specific, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence.

The Group also believes Adjusted EBITDA is useful to investors because it is frequently used by security analysts, investors, ratings agencies and other interested parties to evaluate other companies in our industry and to measure the ability of companies to service their debt.

The CODM does not review nor is presented a segment measure of total assets and total liabilities.

All revenue is derived from external customers. 

Geographical information

The Group also presents revenue in each of the geographical areas in which it operates as follows: 

-      Europe (including our operations in Austria, Armenia, Northern Ireland, Italy, Romania, Poland, Bulgaria, Slovakia, Czech Republic, Spain and Ukraine)

-      South America (including Brazil, Peru and Colombia) and Caribbean Islands (including Dutch Antilles and French Territory)

-      Africa (including Nigeria, Togo, Senegal and Rwanda)

 

 

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Revenue

 

 

Thermal Energy

850.1

730.2

Renewable Energy

402.9

292.5

Total revenue

1,253.0

1,022.7

 

 

 

Adjusted EBITDA

 

 

Thermal Energy

327.1

332.1

Renewable Energy

309.4

211.1

Corporate & Other (1)

(26.4)

(29.9)

Total adjusted EBITDA

610.1

513.2

 

 

 

 

 

 

Reconciliation to profit before income tax

 

 

Depreciation and Amortization (note 4.3)

(239.3)

(185.6)

Finance costs net (note 4.7)

(236.6)

(220.7)

Share of adjusted EBITDA in associates (2)

(21.2)

(21.6)

Share of profit in associates (note 4.13)

2.9

5.0

Acquisition related items (note 4.5)

(19.6)

(9.5)

Costs related to CG Plc IPO (note 4.6) (3)

(0.4)

(12.7)

Cash gain on sale of minority interest in assets (4)

(20.9)

-

Restructuring costs (5)

(6.7)

-

Private incentive plan (6)

(4.1)

-

Other (7)

(36.3)

(27.5)

Profit before income tax

27.8

40.6

 

(1)  Includes corporate costs of $26.9 million (December 31, 2017: $29.7 million) and other income for $0.5 million (December 31, 2017: costs of $0.2 million). Corporate costs corresponds to selling, general and administrative expenses before depreciation and amortization (December 31, 2018: $1.4 million, December 31, 2017: $2.2 million).

(2)  Corresponds to our share of Adjusted EBITDA of plants accounted for under the equity method (Sochagota, Termoemcali and Productora de Energia de Boyaca) which are reviewed by our CODM as part of our Thermal Energy segment.

(3)  The Group successfully completed the Initial Public Offering in the United Kingdom of ContourGlobal Plc. Costs associated with this project were separately analyzed by our CODM.

(4)  Represents the cash gain on the divestment of 49% stake of our Italian and Slovakian solar portfolio.

(5)  Represents redundancy and staff related restructuring costs.

(6)  Represents the private incentive plan as described in note 4.26 share-based compensation plan.

(7)  Mainly reflects the non-cash impact of finance lease and financial concession payments.

 

 

Cash outflows on capital expenditure

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Thermal Energy

31.2

28.6

Renewable Energy

49.9

29.8

Total capital expenditure

81.1

58.4

 

Geographical information

The geographical analysis of revenue, based on the country of origin in which the group's operations are located, and Adjusted EBITDA is as follows:  

 

Years ended December 31

 

In $ millions

2018

2017

 

 

 

 

 

Europe (1)

864.3

627.9

 

South America and Caribbean (2)

250.0

254.4

 

Africa

138.7

140.3

 

Total revenue

1,253.0

1,022.7

 

 

(1)  Revenue generated in 2018 in Bulgaria and Spain amounted to $383.0 million and $333.8 million respectively (December 31, 2017: $298.2 million and $178.7 million respectively).

(2)  Revenue generated in 2018 in Brazil amounted to $163.4 million (December 31, 2017: $180.5 million).

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Europe

374.3

268.1

South America and Caribbean

180.8

196.9

Africa

81.4

78.2

Corporate & Other

(26.4)

(29.9)

Total adjusted EBITDA

610.1

513.2

 

 

3.2.       Revenue

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Revenue from power sales

965.2

757.3

Revenue from operating leases

104.0

96.8

Revenue from concession and finance lease assets

60.5

89.9

Other revenue (1)

123.3

78.8

Total revenue

1,253.0

1,022.7

 

(1) Other revenue primarily relates to environmental, operational and maintenance services rendered to offtakers in our Bulgaria, Togo, Rwanda and Senegal power plants. Other revenue increased mainly as a result of the adoption of IFRS 15, Revenue from contract with customers.

Some of our main plants are operating under specific accounting principles:

-      Our Togo, Rwanda (Kivuwatt) and Senegal (Cap des Biches) plants are operating pursuant to concession agreements that are under the scope of IFRIC 12.

-      Our Energies Saint Martin and Bonaire plants are operating pursuant to power purchase agreements that have the characteristics of a finance lease.

-      Our Vorotan plant in Armenia is operating pursuant to a power purchase agreement that has the characteristics of an operating lease.

The Group has one customer contributing more than 10% of Group's revenue.

 

Years ended December 31

 

2018

2017

 

 

 

Customer A

30.6%

29.2%

 

 

3.3.       Expenses by nature

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Fuel costs

244.9

234.0

Depreciation, amortization and impairment

239.3

185.6

Operation and maintenance costs (1)

77.8

67.0

Employee costs

76.1

67.5

Emission allowance utilized (2)

138.9

47.1

Professional fees

19.6

9.0

Purchased power

64.9

48.2

Insurance costs

20.9

18.5

Other expenses (3)

79.4

71.3

Total  cost of sales and selling, general and administrative expenses

961.8

748.2

 

(1) Operation and maintenance costs include ongoing costs associated with the operation and maintenance of all plants.

(2) Emission allowances utilized corresponds mainly to the costs of CO2 quotas in Maritsa which are passed through to its offtaker as well as changes in fair value of CO2 quotas in the period.

(3) Other expenses include operating consumables and supply costs of $15.8 million (2017: $14.0 million) and facility costs of $16.5 million (2017: $14.6 million). Facility costs include operating leases expenses of $4.1 million (2017: $3.5 million).

 

3.4.       Employee costs and numbers

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Wages and salaries

(57.8)

(52.4)

Social security costs

(12.0)

(10.7)

Share-based payments

(0.7)

-

Pension and other post-retirement benefit costs

(0.8)

(0.8)

Other

(4.9)

(3.5)

Total employee costs before private incentive plan

(76.1)

(67.5)

Private incentive plan (1)

(4.1)

-

Total employee costs

(80.2)

(67.5)

Annual average number of full-time equivalent employees

1,472

1,873

- Thermal

930

1,441

- Renewable

341

265

- Corporate

201

167

 

(1) See note 4.26 Share-based compensation plans for a description of the private incentive plan.

The decrease in annual average number of full-time equivalent employees is related to the sale of our Ukrainian assets in February 2018.

 

3.5.       Acquisition related items

 

Years ended December 31,

In $ millions

2018

2017

 

 

 

Acquisition costs (1)

(19.6)

(9.5)

Acquisition related items

(19.6)

(9.5)

 

(1)  Acquisition costs include notably pre-acquisition costs such as due diligence costs and professional fees, earn-outs and other related incremental costs incurred as part of completed acquisitions or contemplated acquisitions. In 2018, costs incurred primarily related to completed acquisition in Spain and Italy or contemplated acquisition in Mexico. In 2017, costs incurred primarily related to completed acquisitions in Brazil and Italy, and contemplated acquisition projects in Spain, Peru, Mexico, Austria and Italy.

 

3.6.       Other expenses - net

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Costs related to CG Plc IPO (1)

(0.4)

(12.7)

Other income (expenses) - net

(0.4)

(12.7)

 

(1)  Represents costs recognized in the consolidated statement of income resulting from the Initial Public Offering ("IPO") in the United Kingdom of ContourGlobal Plc in November 2017. In 2017, an additional $19.9 million of IPO costs were recognized as a deduction of share premium. Also in 2017, cash outflows of $19.2 million related to these costs are disclosed in the "other financing activities" line of the consolidated statement of cash-flows.

 

3.7.       Finance costs - net

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Finance income

10.6

9.8

Net change in fair value of derivatives (1)

11.4

(13.5)

Net realized foreign exchange differences

1.4

(38.0)

Net unrealized foreign exchange differences (2)

(4.3)

7.0

Realized and unrealized foreign exchange gains and (losses) and change in fair value of derivatives

8.5

(44.5)

Interest expenses on borrowings

(192.4)

(176.3)

Finance charges related to corporate bond refinancing (3)

(21.9)

-

Other (4)

(41.4)

(9.6)

Finance costs

(255.7)

(186.0)

Finance costs - net

(236.6)

(220.7)

 

(1)  Change in fair value of derivatives relates primarily to interest rate swaps and interest rate options.

(2)  Unrealized foreign exchange differences primarily relate to loans in subsidiaries that have a functional currency different to the currency in which the loans are denominated.

(3)  Fees in conjunction with the refinancing of our initial €750 million bond in July 2018.

(4)  Other mainly includes costs associated with other financing, fair valuation of debt to non-controlling interests, the unwinding effect of certain liabilities as well as income and expenses related to interests and penalties for late payments. The movement during the year is mainly due to the loss on fair value on debt to non-controlling interest and increased amortization of deferred financing costs due to new borrowings in Brazil and borrowings acquired in our Spanish CSP portfolio.

 

3.8.      Income tax expense and deferred income tax

Income tax expense

 

Years ended December 31,

In $ millions

2018

2017

 

 

 

Current tax expense

(34.6)

(27.7)

Deferred tax (expense) benefit

17.1

0.6

Income tax expense

(17.4)

(27.1)

 

The main jurisdictions contributing to the income tax expense for the year ending December 31, 2018 are i) Bulgaria, ii) Brazil and iii) Spain. The tax on the group's profit before income tax differs from the theoretical amount that would arise from applying the statutory tax rate of the parent company applicable to the results of the consolidated entities as follows:

Effective tax rate reconciliation

 

Years ended December 31,

In $ millions

2018

2017

 

 

 

Profit before income tax

27.8

40.6

 

 

 

Profit before income tax at statutory tax rate

(5.3)

(7.8)

 

 

 

Statutory tax rate (UK) (1)

19.0%

19.25%

 

 

 

Tax effects of:

 

 

Differences between statutory tax rate and foreign statutory

 tax rates

9.8

5.7

Changes in unrecognized deferred tax assets (2)

(17.4)

(40.1)

Reduced rate and specific taxation regime

6.1

6.6

Change in tax laws & rates

-

(0.7)

Impact of foreign currencies on deferred tax basis (3)

(0.3)

1.6

Permanent differences and other items

(10.3)

7.6

 

 

 

Income tax expense

(17.4)

(27.1)

 

 

 

Effective rate of income tax

62.6%

66.7%

 

(1) Deferred taxes have been measured using tax rates substantively enacted at the balance sheet date.

(2) Mainly relates to tax losses in Luxembourg and Brazil where deferred tax assets are not recognized.

(3) Relates to entities which have a functional currency different from their local currency.

 

 

Net deferred tax movement

The gross movements of net deferred income tax assets (liabilities) were as follows:

 

Years ended December 31,

In $ millions

2018

2017

 

 

 

Net deferred tax assets (liabilities) as of January, 1

(23.7)

(21.2)

Effects of change in accounting standards (IFRS 15)

13.6

-

Net deferred tax assets (liabilities) as of January, 1 (restated)

(10.1)

(21.2)

Statement of income

17.1

0.6

Deferred tax recognized directly in other comprehensive income

(1.7)

0.7

Acquisitions

(120.9)

(1.4)

Currency translation differences and other

3.4

(2.4)

Net deferred tax assets (liabilities) as of December, 31

(112.2)

(23.7)

Including net deferred tax assets balance of:

51.6

41.8

Deferred tax liabilities balance of:

(163.8)

(65.5)

 

Analysis of the net deferred tax position recognized in the consolidated statement of financial position

The net deferred tax positions and their movement can be broken down as follows:

 

In $ millions

Tax losses

Long term

assets

Derivative financial instruments

Other (1)

Total

 

 

 

 

 

 

As of January 1, 2017

16.4

(43.4)

8.2

(2.4)

(21.2)

Statement of income

0.3

(6.4)

(0.3)

7.0

0.6

Other comprehensive income

-

-

0.7

-

0.7

Acquisitions

1.5

(5.2)

0.4

1.8

(1.4)

Currency translations and other

1.4

(4.0)

(0.7)

0.9

(2.4)

As of December 31, 2017

19.7

(58.9)

8.3

7.2

(23.7)

 

 

 

 

 

 

Effect of changes in accounting standards (IFRS 15)

-

18.9

-

(5.3)

13.6

As of January 1, 2018 (restated)

19.7

(40.0)

8.3

1.9

(10.1)

Statement of income

(11.3)

14.4

(1.1)

15.1

17.1

Other comprehensive income

-

-

(1.7)

-

(1.7)

Acquisitions

8.7

(143.8)

7.8

6.4

(120.9)

Currency translations and other

(0.5)

5.8

(1.0)

(0.9)

3.4

As of December 31, 2018

16.6

(163.6)

12.3

22.5

(112.2)

 

(1) Other mainly relates to deferred interest, foreign currency differences and tax credits.
 

Analysis of the deferred tax position unrecognized in the consolidated statement of financial position

Unrecognized deferred tax assets amount to $190.9 million as of December 31, 2018 (December 31, 2017: $187.7 million) and can be broken down as follows:

 

Years ended December 31,

In $ millions

2018

2017

 

 

 

Unrecognized deferred tax assets on tax losses

168.8

167.7

Unrecognized deferred tax assets on deductible temporary differences

22.1

20.0

Total unrecognized deferred tax assets

190.9

187.7

 

Main tax losses and deductible temporary differences not recognized reside in i) Luxembourg, ii) Brazil, iii) Colombia, iv) Spain and v) UK. The related deferred tax assets were not recognized as sufficient taxable profit is not expected to be generated in the foreseeable future.

 

3.9.       Earnings per share

 

Years ended December 31,

 

2018

2017

 

Basic

Diluted

Basic

Diluted

 

 

 

 

 

Profit attributable to CG plc shareholders (in $ millions)

15.0

15.0

19.4

19.4

 

 

 

 

 

Number of shares (in millions)

 

 

 

 

Weighted average number of shares outstanding

670.7

670.7

614.2

614.2

Potential dilutive effects related to share-based compensation

 

0.8

 

-

Adjusted weighted average number of shares

 

671.5

 

614.2

 

 

 

 

 

Profit attributable to CG plc shareholders per share (in $)

0.02

0.02

0.03

0.03

 

There is no dilutive impact from the Private Incentive Plan (PIP) on the earnings per share as the shares are settled in full by existing shares held by Reservoir Capital Group.

 

3.10.    Intangible assets and goodwill

In $ millions

Goodwill

Project development rights

Software and Other

Total

 

 

 

 

 

Cost

0.5

121.7

14.6

136.8

Accumulated amortisation and impairment

-

(8.9)

(9.2)

(18.1)

Carrying amount as of December 31, 2016

0.5

112.8

5.4

118.7

Additions

-

0.5

0.9

1.4

Acquired through business combination

-

29.2

-

29.2

Currency translation differences

0.1

(2.9)

0.3

(2.5)

Reclassification

-

-

0.1

0.1

Amortisation charge

-

(8.0)

(1.8)

(9.8)

Closing net book amount

0.6

131.6

4.9

137.1

Cost

0.6

166.2

16.7

183.5

Accumulated amortisation and impairment

-

(34.6)

(11.7)

(46.3)

Carrying amount as of December 31, 2017

0.6

131.6

4.9

137.1

Additions

-

0.5

0.8

1.3

Disposals

-

(0.1)

-

(0.1)

Acquired through business combination

-

2.6

-

2.6

Currency translation differences

(0.1)

(15.8)

(0.2)

(16.1)

Reclassification

-

0.4

1.8

2.1

Amortisation charge

-

(8.0)

(1.6)

(9.6)

Closing net book amount

0.5

111.2

5.7

117.4

Cost

0.5

149.0

18.7

168.2

Accumulated amortisation and impairment

-

(37.8)

(13.0)

(50.8)

Carrying amount as of December 31, 2018

0.5

111.2

5.7

117.4

 

The project development rights mainly relate to the fair value of licenses acquired from the initial developers for our wind parks in Peru and Brazil.

Acquisitions in 2017 relate to the acquisition of an intangible asset related to a concession arrangement in the thermal and renewable portfolio in Brazil. Acquisitions through business combinations in 2018 mainly related to green certificates in Romania.

For the years ended December 31, 2017, and 2018, certain triggering events were identified, and the related intangible assets were tested for impairment. These impairment tests did not result in any impairment (refer to note 4.11).

 

3.11.     Property, plant and equipment

Assets acquired through business combinations are explained in Note 3 Major events and changes in the scope of consolidation.

The power plant assets predominantly relate to wind farms, natural gas plants, fuel oil or diesel plants, coal plants, hydro plants, solar plants and other buildings.

Other assets mainly include IT equipment, furniture and fixtures, facility equipment, asset retirement obligations and vehicles, and project development costs.

 

In $ millions

Land

Power plant assets

Construction work in progress

Other

Total

Cost

27.7

3,194.9

26.5

216.6

3,465.6

Accumulated depreciation and impairment

(0.5)

(1,028.2)

-

(86.6)

(1,115.3)

Carrying amount as of January 1, 2017

27.2

2,166.7

26.5

130.1

2,350.3

Additions

-

10.7

66.8

26.3

103.8

Disposals

(0.2)

(0.3)

(0.6)

(0.1)

(1.2)

Reclassification

-

10.1

(12.7)

2.6

-

Acquired through business combination

44.4

1,141.6

-

70.7

1,256.7

Currency translation differences

(3.7)

(204.4)

(19.4)

0.6

(226.9)

Depreciation charge

-

(216.0)

-

(13.6)

(229.6)

Closing net book amount

67.7

2,908.3

60.6

216.6

3,253.1

Cost

68.2

4,440.8

60.6

333.5

4,903.1

Accumulated depreciation and impairment

(0.5)

(1,532.5)

-

(116.9)

(1,649.9)

Carrying amount as of December 31, 2018

67.7

2,908.3

60.6

216.6

3,253.1

 

Construction work in progress in 2018 predominantly related to our Austria Wind project repowering, our Vorotan refurbishment project and our Bonaire and Maritsa plants.

Additions in 2018 mainly related to the projects and plants in construction work in progress and project development costs related to our Kosovo project.

Assets acquired through business combination mainly relate to the acquisition of a Spanish CSP portfolio and are detailed in note 3.1.

Depreciation included in 'cost of sales' in the consolidated statement of income amounted to $229.4 million in the period ended December 31, 2018 whereas depreciation included in 'selling, general and administrative expenses' amount to $0.2 million in the year ended December 31, 2018.

In 2018, the Group did not capitalise any significant borrowing costs in relation to project financing.

 

 

In $ millions

Land

Power plant assets

Construction work in progress

Other

Total

Cost

17.8

2,706.1

20.9

123.4

2,868.2

Accumulated depreciation and impairment

(0.3)

(699.9)

-

(53.9)

(754.1)

Carrying amount as of January 1, 2017

17.5

2,006.2

20.9

69.5

2,114.0

Additions

-

8.4

16.6

22.7

47.7

Disposals

(0.1)

(4.0)

(0.6)

(0.6)

(5.3)

Reclassification

-

11.8

(12.2)

(0.9)

(1.3)

Acquired through business combination

8.1

216.0

1.0

52.0

277.1

Currency translation differences

1.7

95.9

0.9

(0.3)

98.2

Depreciation charge

-

(161.4)

-

(11.0)

(172.4)

Impairment charge

-

(2.7)

-

(0.6)

(3.3)

Transferred to disposal group classified as held for sale (1)

-

(3.5)

(0.1)

(0.7)

(4.3)

Closing net book amount

27.2

2,166.7

26.5

130.1

2,350.3

Cost

27.7

3,194.9

26.5

216.6

3,465.6

Accumulated depreciation and impairment

(0.5)

(1,028.2)

-

(86.6)

(1,115.3)

Carrying amount as of December 31, 2017

27.2

2,166.7

26.5

130.1

2,350.3

 

(1) The Group decided to sell its Kramatorsk Ukrainian power plant and signed a share purchased agreement on December 22, 2017. The Group classified the asset as Assets held for sale in conformity with IFRS 5 and tested the asset for impairment on the basis of the share purchase price less costs to sell. As a result, the Group recorded an impairment charge of $3.3 million in 2017.

In relation to this, as at 31 December 2017, $13.7m of assets were classified as Assets held for sale and $12.9m of liabilities were classified as Liabilities held for sale. Of the $13.7m, $4.3m related to Property, plant and equipment, $8.0 million related to working capital and $1.4 million related to cash and cash equivalents. Of the $12.9m, $0.9m related to provisions, $9.2 million related to working capital and $2.8 million related to borrowings. The disposal was completed in February 2018.

Construction work in progress in 2017 predominantly relates to our Maritsa plant and Austria Wind project repowerment.

Depreciation included in 'cost of sales' in the consolidated statement of income amount to $171.8 million in the year ended December 31, 2017 whereas depreciation included in 'selling, general and administrative expenses' amount to $0.7 million in the year ended December 31, 2017.

Assets acquired through business combination relate to the acquisition of a thermal and renewable portfolio in Brazil and Italy, and are detailed in note 3.2.

In 2017, the Group did not capitalise any significant borrowing costs in relation to project financing.

Impairment tests on tangible and intangible assets

For the years ended December 31, 2017 and 2018 certain triggering events were identified primarily driven by lower performance of the assets, change of regulation and environmental factors, requiring an impairment test of the relevant assets.

The recoverable amount is determined as the higher of the value in use determined by the discounted value of future cash flows (discounted cash flow method or "DCF", determined by using cash flows projections consistent with the following year budget and the most recent forecasts prepared by management and approved by the Board) and the fair value (less costs to sell), determined on the basis of market data (comparison with the value attributed to similar assets or companies in recent transactions).

Impairment tests were performed for the year ended December 31, 2018 using the following assumptions and related sensitivity analysis.

In $ million

Net book value

Valuation approach

Discount rate

Capacity factor

Sensitivity analysis

 

Brazilian wind power plants

655.9

DCF

10%

Wind scenario at P90

Discount rate increased by 1%

Wind scenario at P95

 

 

The sensitivity calculations show that an increase by 1% of the discount rate and a wind scenario at P95 for Brazilian wind power plants assets would not have a material impact on the results of impairment tests or, therefore, on the Group's consolidated financial statements as of December 31, 2018.

Changes to be made to the key impairment test assumptions to reduce the value in use to net book value would not correspond to the definition of a reasonable change as defined by IAS 36.

For the year ended December 31, 2017, in relation to the sale of its Ukrainian power plant, the Group conducted an impairment test which resulted in an impairment charge of $3.3 million based on the sales proceeds.

For the year ended December 31, 2017 impairment tests were performed in relation with Brazilian wind and hydro power plants and confirmed the carrying value of the assets.

Impairment tests were also performed for the year ended December 31, 2017 using the following assumptions and related sensitivity analysis.

In $ million

Net book value

Valuation approach

Discount rates

Capacity factor

Sensitivity analysis

Brazilian wind power plants

801.6

DCF

11%

Wind scenario at P50

Discount rate increased by 1%

Wind scenario at P75

Brazilian hydro power plants

255.8

DCF

11%

Hydro scenario at P75

Discount rate increased by 1%

5% cut in EBITDA margin

 

The sensitivity calculations show that an increase by 1% of the discount rate and a wind scenario at P75 for Brazilian wind power plant assets or a 5% cut in EBITDA margin for Brazilian hydro power plants would not have a material impact on the results of impairment tests or, therefore, on the Group's consolidated financial statements as of December 31, 2017.

The P-factor quantifies the uncertainty of annual energy yield predictions. P75 is the energy level that  wind turbines are 75% likely to produce over an average year, given the uncertainties in the measurement, analysis and operations of wind turbines. P50 is the average annual energy yield predicted for wind farms, which corresponds to the annual energy output that wind farms are most likely to achieve.

Changes to be made to the key impairment test assumptions to reduce the value in use to net book value would not correspond to the definition of a reasonable change as defined by IAS 36.

 

3.12.    Financial and contract assets

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Contract assets - Concession arrangements (1)

437.6

550.0

Finance lease receivables (2)

54.3

62.0

Other

6.3

5.7

Total financial and contract assets

498.2

617.7

 

(1) The Group operates plants in Togo, Rwanda and Senegal which are in the scope of the financial model of IFRIC 12 'Service Concession Arrangements'.

Our Togo power plant was commissioned in 2010 and is operated under a power purchase agreement with a unique offtaker, Compagnie Energie Electrique du Togo ("CEET") which has an average remaining contract life of approximately 16.8 years as of December 31, 2018 (December 31, 2017: 17.8 years). At expiration, the Togo plant, along with all equipment necessary for the operation of the plant, will be transferred to the Republic of Togo. This arrangement is accounted for as a concession arrangement and the value of the asset is recorded as a financial asset. The all-in base capacity tariff under the Togo power purchase agreement is adjusted annually for a combination of U.S., Euro and local consumer price index related to the cost structure. 

Our Rwanda power plant consists of the development, construction and operation of Gas Extraction Facilities ("GEF") and an associated power plant. The GEF is used to extract methane and biogas from the depths of Lake Kivu in Rwanda and deliver the gas via submerged gas transport pipelines to shore-based power production facilities totalling 26 MW of gross capacity. The PPA runs for 25 years starting on the commercial operation date and ending in 2040.

Our Cap des Biches power plant in Senegal consists of the development, construction and operation of five engines with a flexi-cycle system technology based on waste heat recovery totalling about 86MW. A PPA integrating all the Cap des Biches requirements and agreements on price was signed for 20 years starting on the commercial operation date of the project and ending in 2036.

(2) Relates to finance leases where the Group acts as a lessor, and includes our Bonaire plant in the Dutch Caribbean and our Saint Martin plant in the French Territory. Bonaire has an average remaining contract life of approximately 6.6 years as of December 31, 2018 (December 31, 2017: 7.6 years); Saint Martin has an average remaining contract life of approximately 4.3 years as of December 31, 2018 (December 31, 2017: 5.3 years).

No losses from impairment of contracted concessional assets and finance lease receivables in the above projects were recorded during the years ended December 31, 2018 and 2017.

Cash outflows relating to the acquisition of financial assets under concession agreements amounted to $0.0 million as of December 31, 2018 (December 31, 2017: $35.4 million). Net cash inflows generated by the financial assets' operations amounted to $83.1 million as of December 31, 2018 (December 31, 2017: $52.7 million).

 

3.13.    Investments in associates

Set out below are the associates of the Group as of December 31, 2018:

Operational plant

Country of incorporation

Ownership interests

Date of acquisition

 

 

 

 

 

Sochagota

Associate

Colombia

49.0%

2006 and 2010

Termoemcali

Associate

Colombia

37.4%

2010

Productora de Energia de Boyaca

Associate

Colombia

50.0%

2016

Evacuacion Villanueva del Rey, S.L.

Associate

Spain

39.9%

2018

 

Evacuacion Villanueva des Rey, S.L. is a facility designated to evacuate solar energy from the Spain CSP plants acquired in 2018.

Set out below is the summarized financial information for the investments which are accounted for using the equity method (presented at 100%):

In $ millions

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Revenue

Net income

 

 

 

 

 

 

 

Years ended December 31, 2017

 

 

 

 

 

 

Sochagota

70.0

4.4

22.1

8.2

35.1

5.8

Termoemcali

24.6

49.5

15.6

32.1

32.9

6.2

Productora de Energia de Boyaca

0.0

-

0.0

0.0

-

(0.3)

Years ended December 31, 2018

 

 

 

 

 

 

Sochagota

38.0

13.4

12.7

1.0

29.8

(0.7)

Termoemcali

23.2

47.3

12.2

24.2

33.5

9.3

Productora de Energia de Boyaca

0.3

-

0.7

-

-

(0.5)

Evacuacion Villanueva del Rey, S.L.

0.3

3.2

0.4

3.1

-

-

 

The reconciliation of the investments in associates for each year is as follows:

 

Years ended December 31

In $ millions

2018

2017

Balance as of January 1,

27.1

25.7

 

 

 

Share of profit

2.9

5.0

Dividends

(3.4)

(4.3)

Other comprehensive income

-

0.6

Balance as of December 31,

26.6

27.1

 

3.14.    Management of financial risk

The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

Interest Rate Risk

Interest rate risk arises primarily from our long-term borrowings. Interest cash flow risk arises from borrowings issued at variable rates, partially offset by cash held at variable rates. Typically for any new investments, the Group hedges variable interest risk on newly issued debt in a range of 75% to 80% of the nominal debt value. Interest rate risk is managed on an asset by asset basis through entering into interest rate swap agreements, entered into with commercial banks and other institutions. The interest rate swaps qualify as cash flow hedges. Their duration matches the duration of the debt instruments. Approximately 22.9% the Group's existing debt obligations carry variable interest rates in 2018 (2017: 30.7%) (taking into account the effect of interest rate swaps).

These agreements involve the receipt of variable payments in exchange for fixed payments over the term of the agreements without the exchange of the underlying principal amounts. The main interest rate exposure for the Group relates to the floating rates with the TJLP, EURIBOR and LIBOR (refer to note 4.23). A change of 0.5% of those floating rates would result in an increase in interest expenses by $4.1 million in the year ended December 31, 2018 (2017: $4.5 million).

Foreign Currency Risk

Foreign exchange risk arises from various currency exposures, primarily with respect to the Euro, Brazilian Real and Bulgarian Lev. Currency risk comprises (i) transaction risk arising in the ordinary course of business, including certain financial debt denominated in a currency other than the currency of the operations; (ii) transaction risk linked to investments or mergers and acquisition; and (iii) translation risk arising on the consolidation in US dollars of the consolidated financial statements of subsidiaries with a functional currency other than the US dollar. However the exposure to the Bulgarian Lev is considered remote due to the pegging mechanism of the Lev on the Euro.

To mitigate foreign exchange risk, (i) most revenues and operating costs incurred in the countries where the Group operates are denominated in the functional currency of the project company, (ii) the external financial debt is mostly denominated in the currency that matches the currency of the revenue expected to be generated from the benefiting project, thereby reducing currency risk, and (iii) the Group enters into various foreign currency sale / forward and / or option transactions at a corporate level to hedge against the risk of lower distribution. Typically, the Group hedges its future distributions in Brazil through a combination of forwards and options for any new investment in the country. The analysis of financial debt by currency is presented in note 4.23.

Potential sensitivity on the post-tax profit result for the year linked to financial instruments is as follows:

-      if the US dollar had weakened/strengthened by 10% against the Euro, post-tax profit for the year ended December 31, 2018 would have been $5.4 million higher/lower (2017: $0.5 million higher/lower).

-      if the US dollar had weakened/strengthened by 10% against the Brazilian Real, post-tax profit for the year ended December 31, 2018 would have been $1.8 million higher/lower (2017: $2.2 million higher/lower).

Commodity and electricity pricing risk

The Group's current and future cash flows are generally not impacted by changes in the prices of electricity, gas, oil and other fuel prices as most of the Group's non-renewable plants operate under long-term power purchase agreements and fuel purchase agreements.  These agreements generally mitigate against significant fluctuations in cash flows as a result in changes in commodity prices by passing through changes in fuel prices to the offtaker.

In the particular case of the Brazilian hydro power plants, the Group hedges most of its exposure against the change in local electricity price in case of low generation. In such a case, Brazilian hydro power plants may be required to buy electricity on the market.

Credit risk

Credit risk relates to risk arising from customers, suppliers, partners, intermediaries and banks on its operating and financing activities, when such parties are unable to honor their contractual obligations. Credit risk results from a combination of payment risk, delivery risk (failure to deliver services or products) and the risk of replacing contracts in default (known as mark to market exposure - i.e. the cost of replacing the contract in conditions other than those initially agreed). The Group analyzes the credit risk for each new client prior to entering into an agreement. In addition, in order to minimize risk, the Group contracts Political Risk Insurance policies from multilateral organizations or commercial insurers which usually provide insurance against government defaults. Such policies cover project companies in Armenia, Bulgaria, Colombia, Nigeria, Peru, Rwanda, Togo, Senegal and Slovakia.

Where possible, the Group restricts exposure to any one counterparty by setting credit limits based on the credit quality as defined by Moody's and S&P and by defining the types of financial instruments which may be entered into. The minimum credit ratings the Group generally accepts from banks or financial institutions are BBB- (S&P) and Baa3 (Moody's). For offtakers, where credit rating are CCC+ or below, the Group generally hedges its counterparty risk by contracting Political Risk Insurance.

If there is no independent rating, the Group assesses the credit quality of the customer, taking into account its financial position, past experience and other factors.

Trade receivables can be due from a single customer or a few customers who will purchase all or a significant portion of a power plant's output under long-term power purchase agreements. This customer concentration may impact the Group's overall exposure to credit risk, either positively or negatively, in that the customers may be affected by changes in economic, industry or other conditions.

Ageing of trade receivables - net are analyzed below:

 

Years ended December 31

 

In $ millions

2018

2017

 

Trade receivables not overdue

97.7

105.7

 

Past due up to 90 days

11.5

31.1

 

Past due between 90 - 180 days

0.7

1.9

 

Past due over 180 days

15.6

3.0

 

Total trade receivables

125.5

141.7

 

 

As of December 31, 2018, $49.3 million (December 31, 2017: $65.4 million) of trade receivables were outstanding in connection with our Bulgarian power plant, Maritsa East 3.  

The Group deems the associated credit risk of the trade receivables not overdue to be suitably low.

Liquidity risk

Liquidity risk arises from the Group not being able to meet its obligations. The Group mainly relies on long-term debt obligations to fund its acquisitions and construction activities. All significant long-term financing arrangements are supported locally and covered by the cash flows expected from the power plants when operational. The Group has, to the extent available at acceptable terms, utilized non-recourse debt to fund a significant portion of the capital expenditures and investments required to construct and acquire its electric power plants and related assets.

On September 6, 2017, the Group also entered into a €50 million revolving credit facility available for general corporate purposes, maturing in September 2020, and which remained undrawn as of December 31, 2017.

On November 9, 2018, the Group also entered into a €75 million revolving credit facility available for general corporate purposes, maturing in November 2021, and which remains undrawn as of December 31, 2018. A $7.5 million letter of credit was issued but not drawn under this facility.

A rolling cash flow forecast of the Group's liquidity requirements is prepared to confirm sufficient cash is available to meet operational needs and to comply with borrowing limits or covenants. Such forecasting takes into consideration the future debt financing strategy, covenant compliance, compliance with internal statement of financial position ratio targets and, if applicable external regulatory or legal requirements - for example, cash restrictions.

The subsidiaries are separate and distinct legal entities and, unless they have expressly guaranteed any of the holding company  indebtedness, have no obligation, contingent or otherwise, to pay any amounts due pursuant to such debt or to make any funds available whether by dividends, fees, loans or other payments.

Some of the Group's subsidiaries have given guarantees on the credit facilities and outstanding debt securities of certain holding companies in the Group.

The table below analyses the Group's financial liabilities into relevant maturity groupings based on the remaining period to the contractual maturity date: 

 

In $ millions

Less than 1 year

 

Between 1 and 5 years

 

Over 5 years

 

Total

 

 

 

 

 

 

 

 

Year ended December 31, 2017

402.1

 

1,819.0

 

1,079.6

 

3,300.7

Borrowings (1)

200.1

 

1,690.1

 

1,035.9

 

2,926.1

Trade and other payables

169.1

 

-

 

-

 

169.1

Derivative financial instruments

14.7

 

27.9

 

21.8

 

64.4

Other non current liabilities (2)

18.2

 

101.0

 

21.9

 

141.1

Year ended December 31, 2018

592.9

 

1,614.4

 

1,864.1

 

4,071.4

Borrowings (1)

244.7

 

1,532.8

 

1,838.8

 

3,616.3

Trade and other payables

292.9

 

-

 

-

 

292.9

Derivative financial instruments

16.8

 

35.7

 

17.3

 

69.8

Other non current liabilities (2)

38.5

 

45.9

 

8.0

 

92.4

 

(1) Borrowings represent the outstanding nominal amount (note 4.23). Short-term debt of $244.7 million as of December 31, 2018 relates to the short term portion of long term financings that mature within the next twelve months, that we expect to repay using cash on hand and cash received from operations.

(2) This corresponds to the debt to non-controlling interest that is described in note 4.24

 

 

The table below analyses the Group's forecasted interest to be paid into relevant maturity groupings based on the interests maturity date:

Year ended December 31, 2018

 

 

 

 

 

 

 

In $ millions

Less than 1 year

 

Between 1 and 5 years

 

Over 5 years

 

Total

Forecast interest expense to be paid

181.0

 

584.1

 

421.4

 

1,186.5

 

The Group's forecasts and projections, taking into account reasonably possible changes in operating performance, indicate that the Group has sufficient financial resources, together with assets that are expected to generate free cash flow to the Group. As a consequence, the Group has reasonable expectation to be well placed to manage its business risks and to continue in operational existence for the foreseeable future (at least for the twelve month period from the approval date of these financial statements). Accordingly, the Group continues to adopt the going concern basis in preparing the consolidated financial statements.

Capital risk management

The Company considers its capital and reserves attributable to equity shareholders to be the Company's capital.

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern while providing adequate returns for shareholders and benefits for other stakeholders and to maintain a capital structure to optimise the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. It may also increase debt provided that the funded venture provides adequate returns so that the overall capital structure remains supportable.

 

3.15.    Derivative financial instruments

The Group uses interest rate swaps to manage its exposure to interest rate movements on our borrowings, a foreign exchange forward contract to mitigate its currency risk and cross currency swap contracts in Cap des Biches project in Senegal to manage both currency and interest rate risks. The fair value of derivative financial instruments are as follows:

 

Year ended December 31

 

2018

2017

In $ millions

Assets

Liabilities

Assets

Liabilities

Interest rate swaps - Cash flow hedge (1)

-

49.0

-

35.4

Cross currency swaps - Cash flow hedge (2)

1.1

14.0

-

20.9

Foreign exchange forward contracts - Trading (2)

-

1.3

-

3.0

Foreign exchange option contracts - Trading (2)

-

5.4

-

5.1

Total

1.1

69.8

-

64.4

 

 

 

 

 

Less non-current portion:

 

 

 

 

Interest rate swaps - Cash flow hedge

-

33.8

-

23.8

Cross currency swaps - Cash flow hedge

-

14.0

-

20.8

Foreign exchange forward contracts - Trading

-

1.3

-

-

Foreign exchange option contracts - Trading

-

3.9

-

5.1

Total non-current portion

-

53.0

-

49.7

Current portion

1.1

16.8

-

14.7

 

(1) Interest rate swaps - Cash flow hedge relates to the hedging of the variable elements for certain project financing.

(2) The Group has also executed a series of offsets to protect the value, in USD terms, of the BRL-denominated expected distributions from the new Brazilian portfolio. The first two years of BRL-denominated distributions have been hedged using a series of forward exchange contracts and the distributions expected in years three to five have been protected against material depreciation of the BRL using option contracts. If hedge accounting does not apply, change in fair value is recognized in the consolidated statement of income.

The notional principal amount of:

-              the outstanding interest rate swap contracts and cross currency swap qualified as cash-flow hedge amounted to $645.2 million as of December 31, 2018 (December 31, 2017: $572.0 million).

-              the outstanding foreign exchange forward and option contracts amount to $71.8 million as of December 31, 2018 (December 31, 2017: $92.8 million).

In 2015, the Group entered into cross currency swaps in our Cap des Biches project in Senegal. The fair value of the instruments as of December 31, 2018 amounts to $12.8 million (December 31, 2017: $20.9 million). The accounting and risk management policies, and further information about the derivative financial instruments that we use, are set out in note 4.14.

The Group recognized an income of $10.7 million in December 31, 2018 in relation to its interest rate and cross currency swaps within Finance costs net (December 31, 2017: loss of $12.1 million).

 

3.16.    Fair value measurements

Fair value measurements of financial instruments are presented through the use of a three-level fair value hierarchy that prioritises the valuation techniques used in fair value calculations. The group's policy is to recognise transfers into and out of fair value hierarchy levels as at the end of the reporting period.

The levels in the fair value hierarchy are as follows:

-      Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group has the ability to access at the measurement date.

-      Level 2 inputs are inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly.

-      Level 3 inputs are unobservable inputs for the asset or liability.

There were no transfers between fair value measurement levels between December 31, 2018 and December 31, 2017.

When measuring our interest rate, cross currency swaps and foreign exchange forward and option contracts at fair value on a recurring basis at both December 31, 2018 and 2017, we have measured these at level 2 in the fair value hierarchy with the exception of the debt to non-controlling interests which is level 3. The fair value of those financial instruments is determined by using valuation techniques. These valuations techniques maximise the use of observable data where it is available and rely as little as possible on entity specific estimates.

The Group uses a market approach as part of their available valuation techniques to determine the fair value of derivatives.  The market approach uses prices and other relevant information generated from market transactions.

The Group's finance department performs valuation of financial assets and liabilities required for financial reporting purposes as categorized at level 2. The Group's only derivatives are interest rate swaps, foreign exchange forward contracts, foreign exchange option contracts and cross currency swap contracts in our Cap des Biches project in Senegal.

 

3.17.     Financial instruments by category

In $ millions

Financial asset category

Years ended December 31, 2017

Loans and receivables

Assets at fair value through profit and loss

Derivative used for hedging

Total net book value per balance sheet

 

 

 

 

 

Financial and contract assets

617.7

-

-

617.7

Trade and other receivables

215.4

-

-

215.4

Other non-current assets (1)

18.4

0.7

-

19.1

Cash and cash equivalents

-

781.1

-

781.1

Total

851.5

781.8

-

1,633.3

 

In $ millions

Financial asset category

Years ended December 31, 2018

Loans and receivables

Assets at fair value through profit and loss

Derivative used for hedging

Total net book value per balance sheet

 

 

 

 

 

Derivative financial instruments

-

-

1.1

1.1

Financial and contract assets

498.2

-

-

498.2

Trade and other receivables

284.5

-

-

284.5

Other non-current assets (1)

2.6

-

-

2.6

Cash and cash equivalents

-

696.9

-

696.9

Total

785.3

696.9

1.1

1,483.3

 

In $ millions

Financial liability category

Years ended December 31, 2017

Liabilities at fair value through profit and loss

Other financial liabilities at amortised cost

Derivative used for hedging

Total net book value per balance sheet

 

 

 

 

 

Borrowings

-

2,890.1

-

2,890.1

Derivative financial instruments

8.1

-

56.3

64.4

Trade and other payables

-

169.1

-

169.1

Other current liabilities (1)

-

67.5

-

67.5

Other non current liabilities

85.0

81.5

-

166.5

Total

93.1

3,208.2

56.3

3,357.6

 

In $ millions

Financial liability category

Years ended December 31, 2018

Liabilities at fair value through profit and loss

Other financial liabilities at amortised cost

Derivative used for hedging

Total net book value per balance sheet

 

 

 

 

 

Borrowings

-

3,560.0

-

3,560.0

Derivative financial instruments

6.7

-

63.1

69.8

Trade and other payables

-

292.9

-

292.9

Other current liabilities (1)

-

100.5

-

100.5

Other non current liabilities

69.2

87.2

-

156.4

Total

75.9

4,040.6

63.1

4,179.6

(1) These balances exclude receivables and payables balances in relation to taxes disclosed in notes 4.18, 4.20 and 4.28 respectively.

 

3.18.    Other non-current assets

 

Years ended December 31

In $ millions

2018

2017

 

 

 

CO2 quotas receivable (1)

-

3.6

VAT receivables (2)

6.0

10.3

Advance to supplier (3)

9.7

9.5

Restricted cash

-

0.7

Other

7.2

5.4

Total other non-current assets

22.9

29.5

 

(1) Long term receivables relating to the Maritsa power plant and to be received through a pass-through mechanism agreed with its offtaker. A similar liability is presented in note 4.24.

(2) VAT receivables mainly relate to the Vorotan project. The amount is expected to be recovered over a five-year period from the acquisition date in 2015 and was discounted using a rate of 10.0%. A current portion of $3.4 million is presented in "trade and other receivables" in the consolidated statement of financial position as of December 31, 2018 ($4.7 million as of December 31, 2017).

(3) Advance payment to supplier relates to Vorotan EPC contract as part of the refurbishment program.

 

3.19.    Inventories

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Fuel 

13.0

12.8

Spare parts

35.6

25.3

Other (1)

68.7

21.0

Total

117.3

59.1

Provision

(4.5)

(5.0)

Total inventories

112.8

54.1

 

(1) Increase mainly relates to emission allowances purchased and in transit by our Maritsa business.

 

3.20.   Trade and other receivables

 

Years ended December 31

In $ millions

2018

2017

Trade receivables - gross

127.9

144.1

Accrued revenue (unbilled)

145.2

57.4

Provision for impairment of trade receivables

(2.5)

(2.4)

Trade receivables - Net

270.6

199.1

 

 

 

Other receivables

66.7

72.7

 

 

 

Trade and other receivables

337.3

271.8

 

All trade and other receivables are short term and the net carrying value of trade receivables is considered a reasonable approximation of the fair value. The ageing of trade receivables - net is presented in note 4.14. 

All trade and other receivables are pledged as security in relation with the Group's project financings.

The increase in accrued revenue (unbilled) is primarily related to the acquisition of our Spanish CSP assets, to CO2 quotas in connection with our Maritsa plant and to our Arrubal plant.

Other receivables primarily correspond to indirect tax receivables, mainly in our power plants in Rwanda, Senegal and Armenia and to the current portion of our financial lease assets.

 

3.21.    Cash and cash equivalents

Certain restrictions on our cash and cash equivalents have been primarily imposed by financing agreements or long term obligations. They mainly include short-term security deposits kept as collateral and debt service reserves that cover short-term repayments and which meet the definition of cash and cash equivalents. 49.2% of our cash and cash equivalents as of December 31, 2018 is pledged as security in relation with the Group's project financings (December 31, 2017: 41.0%); cash and cash equivalents also includes $212.9 million as of December 31, 2018 (December 31, 2017: $107.2 million) of cash balances relating to debt service reserves required by project finance agreements.

 

3.22.    Issued capital

Issued capital of the Company amounted to $8.9 million as at 31 December 2018, with changes as follows:

Allotted, authorised, called up and fully paid

Number

Nominal value

£ million

$ million

Incorporation on 26 September 2017

100

1.00

-

-

Issue of shares - 17 October 2017

1,002,000,000

1.00

1,002.0

1,320.7

As at 17 October 2017

1,002,000,100

1.00

1,002.0

1,320.7

 

 

 

 

 

Share capital reduction - 19 October 2017

-

(0.99)

(992.0)

(1,307.5)

As at 19 October 2017

1,002,000,100

0.01

10.0

13.2

 

 

 

 

 

Issue of ordinary shares - Listing on the London Stock Exchange

122,399,020

0.01

1.2

1.6

Issue of ordinary shares - Management

712,920

0.01

-

-

Share reorganisation - cancellation of deferred shares

(454,399,120)

0.01

(4.5)

(5.9)

As at 31 December 2017

670,712,920

0.01

6.7

8.9

 

 

 

 

 

As at 31 December 2018

670,712,920

0.01

6.7

8.9

 

On incorporation, 26 September 2017, the Company issued 100 ordinary shares with a nominal value of £1.00 to its Parent Company, ContourGlobal LP. The amount due was settled through an intercompany receivable.

On 17 October 2017, the Company issued to its Parent Company, ContourGlobal L.P. 1,002,000,000 ordinary shares with a nominal value of £1.00 each as payment for its acquisition of ContourGlobal Worldwide Holdings S.à r.l. 

On 19 October 2017, the Company passed a special resolution supported by a solvency statement to reduce its share capital under s641(a) of the Companies Act 2006 by reducing the share capital of the Company of $1,320,736,335 divided into 1,002,000,100 ordinary shares of £1.00, each fully paid, to $13,207,366 divided into 1,002,000,100 ordinary shares of £0.01, each fully paid, by the cancellation of the paid up share capital to the extent of £0.99 per share upon each of the 1,002,000,100 ordinary shares reducing the nominal amount of all such shares  from £1.00 to £0.01.

On 8 November 2017, the Company passed a resolution to consolidate the 1,002,000,100 ordinary shares of £0.01 each in the share capital of the Company into 1 ordinary share of £10,020,001 and the sub-division of that share into 547,600,980 ordinary shares and 454,399,120 deferred shares each of £0.01.

On 14 November 2017, the Company completed the pricing of its initial public offering of ordinary shares at £2.50 per share, comprising 122,399,020 new shares and 54,026,083 existing shares. The Company also issued additional 712,920 new shares subscribed by its management. The issuance of these new shares resulted in the recognition of a share premium of £306.5 million ($400.7 million), net of listing costs deducted of $19.9 million, resulting in total share premium of $380.8 million.

The Group restructure resulted in a $353.0 million debit to retained earnings and other reserves, which represents a capital reorganisation reserve.

Finally, the Company cancelled all existing 454,399,120 deferred shares, resulting in a total net ordinary shares of 670,712,920 shares as of 31 December 2017.

There have been no share transactions in the year ended 31 December 2018.

During the year the Group paid dividends of $17.3 million on May 31, 2018 and $26.7 million on September 7, 2018.

 

Years ended December 31

In $ millions

2018

2017

Declared during the financial year:

 

 

Final dividend for the year ended 31 December 2018: 2.6000 US cents per share (2017: nil)

17.3

-

Interim dividend for the year ended 31 December 2019: 3.9659 US cents per share (2017: nil)

26.7

-

Total dividends provided for or paid

44.1

-

 

During the year 2017, ContourGlobal LP paid dividends of $54.2m on 19th April 2017 and ContourGlobal plc paid dividends of $21.3m on 8th November 2017.

 

3.23.    Borrowings

Certain power plants have financed their electric power generating projects by entering into external financing arrangements which require the pledging of collateral and may include financial covenants as described below. The financing arrangements are generally non-recourse (subject to certain guarantees) and the legal obligation for repayment is limited to the borrowing entity. 

The Group's principal borrowings with a nominal outstanding amount of $3,616.3 million in total as of December 31, 2018 (December 31, 2017: $2,926.1 million) primarily relate to the following:

Type of borrowing

Currency

Project Financing

Issue

Maturity

Outstanding nominal amount 12.31.18

($ million)

Outstanding nominal amount 12.31.17

($ million)

Rate

 

 

 

 

 

 

 

 

EUR

Corporate Indenture

2018

2023 2025

860.0

840.4

3.375%, 4.125%

EUR

Spanish CSP

2018

2036

722.1

-

3.438%

USD

Inka

2014

2034

184.6

189.0

6.0%

EUR

Spanish CSP

2009

2029

168.0

-

EURIBOR 6M + Variable

BRL

Chapada I

2015

2032 2029

166.2

198.7

TJLP + 2.18% / IPCA + 8%

EUR

Arrubal

2011

2021

165.8

207.9

4.9%

EUR

Maritsa

2006

2023

163.3

200.8

EURIBOR + 0.125%

USD

Vorotan

2016

2034

142.0

137.3

LIBOR + 4.625%

BRL

Chapada II

2016

2032

132.1

165.1

TJLP + 2.18%

EUR

Solar Italy

2017

2024-2028

116.3

125.4

Mix of fix and variable rates

USD

Cap des Biches

2015

2033

105.5

110.1

USD-LIBOR BBA (ICE)+3.20%

USD

Togo

2008

2028

96.1

102.9

7.16% (Weighted average)

BRL

Asa Branca

2011

2030

95.0

120.1

TJLP+ 1.92%

Loan Agreement

EUR

Austria Wind

2013

2027

83.6

98.7

EURIBOR 6M + 2.45% and 4.305% / EURIBOR 3M+1.95% and 4.0%

USD

KivuWatt

2011

2026

74.1

82.0

LIBOR plus 5.50% and mix of fixed rates

Debentures (5)

BRL

Hydro Brazil Portfolio II

2018

2026

72.7

52.5

CDI +3%, 4.2%

BRL

Hydro Brazil portfolio I

2013

2027

43.2

53.0

8.8%

EUR

Solar Slovak

2009 - 2015

2023 - 2026

41.0

50.4

Mix of fix and variable rates

Bridge loan

BRL

Hydro Brazil Portfolio II and Solutions Brazil

2017

2020

-

83.1

CDI + 5%

Other Credit facilities (individually < $40 million)

Various

Various

2012 -

2013

2016 -

2034

184.7

108.7

 

 

 (1) Corporate bond issued by ContourGlobal Power Holdings S.A. in June 2016 for €550 million with two additional €50 million and €100 million taps in July 2016 and February 2017 was fully refinanced in July 2018. A new €750 million dual-tranche corporate bond was issued by ContourGlobal Power Holdings S.A. in July 2018, it includes €450 million bearing a fixed interest rate of 3.375% maturing in 2023 and €300 million bearing a fixed interest rate of 4.125% maturing in 2025.

(2) On May 10, 2018, the Group acquired a renewable portfolio in Spain representing a total of 250 MW, including a pre-existing debt due in 2029 with an outstanding nominal of €146.5 million ($168.0 million) at December 31, 2018 and a new debt issued in 2018 and due in 2036 with an outstanding nominal of €629.7 million ($722.1 million) at December 31, 2018.

(3) Taxa de Juros de Longo Prazo ("TJLP") represents the Brazil Long Term Interest Rate, which was approximately 6.98% at December 31, 2018 (December 31, 2017: 7.0%).

(4) On December 4, 2017, the Group acquired a renewable portfolio in Italy representing a total of 19.1 MW and subsequently to the closing the Group refinanced the portfolio. On March 22, 2018, the Group acquired a renewable portfolio in Italy representing a total of 15 MW.

(5) On March 17, 2017, the Group acquired a thermal and renewable portfolio in Brazil representing a total of 205.6 MW.

With the exception of our corporate bond and revolving credit facility, all external borrowings relate to project financings. Such project financings are generally non-recourse (subject to certain guarantees).

The carrying amounts of the Group's borrowings are denominated in the following currencies:

Years ended December 31

In $ millions

2018

2017

US Dollars

625.4

645.4

Euros

2,338.8

1,525.1

Brazilian Reals

595.8

719.6

Total

3,560.0

2,890.1

 

The carrying amounts and fair value of the current and non-current borrowings are as follows:

 

Carrying amount

Fair Value

 

Years ended December 31,

Years ended December 31,

In $ millions

2018

2017

2018

2017

 

 

 

 

 

Credit facilities

2,472.0

1,787.0

2,617.9

1,861.5

Bonds

1,088.0

1,103.1

1,058.8

1,175.9

Total

3,560.0

2,890.1

3,676.7

3,037.4

 

 

 

Net debt as of December 31, 2018 and 2017 is as follows:

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Cash and cash equivalents

696.9

781.1

Borrowings - repayable within one year

(244.7)

(200.1)

Borrowings - repayable after one year

(3,371.6)

(2,726.0)

Interests payable, deferred financing costs and other

56.3

36.0

Net debt

(2,863.1)

(2,109.0)

 

 

 

Cash and cash equivalents

696.9

781.1

Borrowings - fixed interest rates

(2,790.3)

(2,028.1)

Borrowings - variable interest rates

(826.0)

(898.0)

Interests payable, deferred financing costs and other

56.3

36.0

Net debt

(2,863.1)

(2,109.0)

 

 

In $ millions

Cash and cash equivalents

Borrowings

Total net debt

 

 

 

 

As of January 1,2017

433.7

(2,529.9)

(2,096.2)

 

 

 

 

Cash-flows

263.5

-

263.5

Acquisitions / disposals

37.4

(116.0)

(78.6)

Proceeds of borrowings

-

(310.9)

(310.9)

Repayments of borrowings

-

233.0

233.0

Currency translations differences and other

46.4

(166.2)

(119.8)

 

 

 

 

As of December 31,2017

781.1

(2,890.1)

(2,109.0)

 

 

 

 

Cash-flows

(124.7)

-

(124.7)

Acquisitions / disposals

82.1

(213.8)

(131.7)

Proceeds of borrowings

-

(1,792.0)

(1,792.0)

Repayments of borrowings

-

1,151.1

1,151.1

Currency translations differences and other

(41.6)

184.8

143.2

 

 

 

 

As of December 31,2018

696.9

(3,560.0)

(2,863.1)

 

 

 

Debt Covenants and restrictions

The main long term financial debts include certain financial covenants, principally as follows:

-      debt Service Coverage Ratio greater than 1.05, 1.10, 1.15, 1.20, 1.30 depending on borrowings,

-      net debt/EBITDA lower than 7.5 (Sao Domingo II), 3.25 (Brazil Hydro and Solutions),

-      decreasing Senior Debt and Total Debt (Arrubal),

-      debt / Equity ratio : 85/15, 80/20, 75/25, 64.16/35.84  depending on borrowings,

-      equity / Asset ratio above 15% or 25% depending on borrowings,

-      loan Life Coverage Ratio greater than 1.10 (Solar Italy) or 1.35 (Projected - Kivuwatt).

Non-financial covenants includes the requirement to maintain proper insurance coverage, enter into hedging agreements, maintain certain cash reserves, restrictions on dispositions, scope of the business, and mergers and acquisitions.

These covenants are monitored appropriately to ensure that the contractual conditions are met.

Securities given

Corporate bond and Revolving Credit Facility at CG Power Holdings level are secured by pledges of shares of certain subsidiaries (ContourGlobal LLC, ContourGlobal Spain HoldingSàrl, ContourGlobal Bulgaria Holding Sàrl, ContourGlobal Latam Holding Sàrl, ContourGlobal Terra Holdings Sàrl and ContourGlobal Worldwide Holdings Sàrl), and guarantees from ContourGlobal plc, and the above subsidiaries.

 

 

The Group typically grants securities in relation to the issuance of project financing. The table below provides an overview of the main guarantees provided under existing project financing as of December 31, 2018:

Project financing

Facility

Maturity

Security / Guarantee given

CSP Spain (excluding Alvarado)

Long Term Facility

2036

First ranking security interest in the shares of all the entities in the borrower group plus pledge of receivables and project accounts . Assignment of insurances.

CSP Spain Alvarado

Long Term Facility

2029

First ranking security interest in the shares of the borrower group plus pledge of project accounts. Assignment of rights under project contracts.

 

Inka

Senior secured notes

2034

Pledge of shares of Energia Eolica SA, EESA assets, accounts, assignment of receivables of the project contracts and insurances.

Inka

Letter of Credit Agreement

2019

$8.5m ContourGlobal Plc guarantee to Credit Suisse.

Chapada I

Long Term Facility

2032

Pledge of shares of Chapada I SPVs and Holding, SPVs assets, accounts, assignment of receivables of the project contracts and insurances.

Arrubal

Arrubal Term Loan

2021

Pledge of (i) the shares of CG La Rioja, (ii) project accounts, (iii) insurance policies, (iv) receivables on project documents (PPA, Operations & Maintenance, Gas Supply Agreement…), (v) mortgage over the power station and industrial items.

Maritsa

Credit Facility

2023

Pledge of the shares, any dividends on the pledged shares and the entire commercial enterprise of ME-3, including the receivables from the ME-3 PPA.

Vorotan

Long Term Facility

2034

Pledge of shares of ContourGlobal HydroCascade CSJC assets and project accounts, assignment of receivables arising from the project contracts and insurances.

Chapada II

Long Term Facility

2032

Pledge of shares of Chapada II SPVs and Holding, SPVs assets, accounts, assignment of receivables of the project contracts and insurances.

Cap des Biches

Credit Facility

2033

Pledge over CG Senegal and CG Cap des Biches Sénégal shares, pledge over the project accounts, charge over the assets of CG Cap des Biches Sénégal, assignment of receivables of CG Cap des Biches Sénégal and the insurance policies, direct agreement on the project contracts.

Togo

Loan agreement

2028

ContourGlobal Plc guarantee on cash shortfall for Debt service, and (i) a pledge of CG Togo LLC and CG Togo SA capital stock, (ii) a charge on equipment, material and assets of CG Togo SA, (iii) the assignment of receivables of CG Togo SA, (iv) the assignment of insurance policies, and (v) a pledge on the project accounts.

Asa Branca

Credit facility

2030

Pledge of shares of Asa Branca Holding SA, pledge of the receivables under the Asa Branca PPA, pledge on certain project accounts,  mortgage of assets of the Asa Branca Windfarm Complex, assignment of credit rights under project contracts (EPC, land leases, O&M...).

Energie Europe Wind & Solar

Credit Facilities

2023-28

Pledge of the shares, assets, cash accounts and receivables. €10.3m CG Solar Holdings guarantee for the benefit of UBI and Natixis covering a Primavera plant potential adverse impact on FiT further to a GSE inspection.

Kivuwatt

Financing Arrangement

2026

- Secured by, among others, (i) KivuWatt Holdings' pledge of all of the shares of KivuWatt held by KivuWatt Holdings, (ii) certain of KivuWatt's bank accounts and (iii) KivuWatt's movable and immovable assets.

- ContourGlobal Plc $1.2 million guarantee for the benefit of KivuWatt under the PPA and Gas

Concession to the Government of Rwanda and to Electrogaz (outside of the loan guarantee).

-  $8.5million UK Plc guarantee to cover DSRA as of December 31,2018.

Hydro Brazil Portfolio II and Solutions Brazil

Debentures

2026

First ranking security interest in the shares of all the entities in the borrower group (ex-minorities) plus pledge of receivables.

Sunburn

Letter of Credit Agreement

2021

On December 22, 2010, a €2.4 million letter of credit facility was entered into to fund obligations under the debt service reserve account (in accordance with the Saint Martin loan agreement). This letter of credit expires in June 2021. No amounts have been recognized in relation to letter of credit in either period.

Chapada III

Long Term Facility

2032

Pledge of shares of Chapada III SPVs and Holding, SPVs assets, accounts, assignment of receivables of the project contracts and insurances.

Corporate guarantee from ContourGlobal do Brazil Holding Ltda until Financial Completion.

 

 

3.24.    Other non-current liabilities

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Debt to non-controlling interest (1)

69.2

85.0

Deferred payments on acquisitions (2)

23.2

52.4

CO2 quotas payables (3)

-

3.7

Other (4)

64.0

25.4

Total other non-current liabilities

156.4

166.5

 

(1) Debt to non-controlling interests: in 2011, the Group purchased a 73% interest in Maritsa power plant. NEK owns the remaining 27% of Maritsa power plant. The shareholders' agreement states that all distributable results available should be distributed to their shareholders, with no unconditional right to avoid dividends. Consequently and in accordance with IAS 32 'Financial Instruments: presentation', shares held by NEK do not qualify as equity instruments and are recorded as a liability to non-controlling interests in the Group's consolidated statement of financial position. The fair value of the debt to non-controlling interest is determined using a discounted cash flow method based on management's current best estimate of the future distributable profits to the minority shareholder NEK over the PPA period. This debt is discounted using a European risk free rate and adding the credit default swap ("CDS") spread for Bulgaria.

The change in the debt to Maritsa non-controlling interest is presented below:

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Beginning of the period

85.0

93.1

Dividends

(19.5)

(16.2)

Change in fair value recognized in profit and loss

7.2

(3.8)

Currency translation adjustments

(3.5)

11.9

End of the period

69.2

85.0

 

(2) As of December 31, 2018, deferred payments and earn-outs on acquired entities mainly relate to deferred payments to be made to initial developers.

(3) CO2 quotas are described in note 4.18.

(4) The increase is primarily related to contractual obligations in Brazil, including penalties where wind asset capacity falls below contracted PPA, and to our Spanish CSP acquisition.

 

3.25.    Provisions

In $ millions

Decommissioning / Environmental / Maintenance provision

Legal and other

Total

 

 

 

 

As of January 1, 2017

33.8

38.0

71.8

 

 

 

 

Acquired through business combination

2.8

5.3

8.1

Additions

15.5

6.0

21.5

Unused amounts reversed

(0.5)

(24.4)

(24.9)

Amounts used during the period

-

(3.3)

(3.3)

Currency translation differences and other

1.8

(2.0)

(0.2)

As of December 31, 2017

53.4

19.6

73.0

 

 

 

 

Effect of changes in accounting standards (IFRS 15)

(28.3)

-

(28.3)

As of January 1, 2018

as restated

25.1

19.6

44.7

 

 

 

 

Acquired through business combination

9.8

-

9.8

Additions

10.2

2.6

12.8

Unused amounts reversed

-

(4.9)

(4.9)

Amounts used during the period

-

(0.1)

(0.1)

Currency translation differences and other

(2.5)

(1.3)

(3.8)

As of December 31, 2018

42.7

15.9

58.6

 

Provisions have been analyzed between current and non-current as follows:

In $ millions

Decommissioning / Environmental / Maintenance provision

Legal and other

Total

 

 

 

 

Current liabilities

1.0

9.8

10.8

Non-current liabilities

52.4

9.8

62.2

As of December 31, 2017

53.4

19.6

73.0

 

 

 

 

Current liabilities

-

17.4

17.4

Non-current liabilities

32.9

8.3

41.2

As of December 31, 2018

32.9

25.7

58.6

Site decommissioning provisions are recognized based on assessment of future decommissioning costs which would need to be incurred in accordance with existing legislation to restore the sites. Maintenance provisions mainly related to our maintenance obligations under our concession agreement contract in Togo and Senegal. These amounts are no longer recognized as provisions following the transition to 15 (see note 2.1).

Legal and other provisions include amounts arising from claims, litigation and regulatory risks which will be utilized as the obligations are settled and includes sales tax and interest or penalties associated with taxes.

Legal and other provisions have some uncertainty over the timing of cash outflows.

 

3.26.    Share-based compensation plans

Private Incentive Plan

The President & CEO ("CEO"), along with certain members of the ContourGlobal management team, have interests in a 'Private Incentive Plan' (PIP). This is a legacy equity arrangement established by Reservoir Capital (the major shareholder in the Company) and no new allocations will be made under this plan. The Company is not a party to the PIP and has no financial obligation, or obligation to issue shares, in connection with it, although it is required to recognize the plan as an expense in accordance with IFRS 2. All shares that might be delivered under the award will be funded by Reservoir Capital.

While the allocations and terms of the CEO's award were substantially agreed prior to IPO, Reservoir Capital finalized the implementation of CEO award on 27 December 2018 and of other managers awards in January 2019. As a result, the PIP charge recognized in personnel expenses in 2018 line relates only to the CEO and will increase in 2019 and 2020. The charge is recognized in the consolidated statement of income with line item "Other operating income/expense - net" and is excluded from Adjusted EBITDA calculation as it does not constitute a present or future liability nor a cash out for the Company and will be fully funded by Reservoir Capital.

The award is in the form of partnership units in Contour Management Holdings LLC which is a partner in ContourGlobal L.P. (the limited partnership through which Reservoir Capital owns shares in the Company). The award comprises Class S units, Class C units and Class B units. All units deliver an award of shares in ContourGlobal plc.

Under the terms of the PIP, those units entitle the award-holder to have shares in the Company delivered to him if certain financial performance conditions are achieved.

The CEO's holding of units in ContourGlobal L.P. is as follows:

Basis of awards

 

Class S Units

Up to 6,943,864 Contour Global plc shares (excluding the impact of any accrued dividends)

Class C Units

Value share between management and Reservoir Capital Group

Class B Units

 

The terms of the value share between management and Reservoir Capital are based on a 'waterfall' which operates broadly as follows:

i)     Class S Units are similar in nature to a restricted stock award, subject to an underpin share price. At final allocation, Reservoir Capital Group set the underpin share price for the Class S units at $2.23 (£1.74), rather than the £2.57 threshold referred to in the Prospectus, to reflect the share price at the time of final allocation.

ii)    Class C Units are based on sharing 12% of value above a 6% p.a. threshold on $2.0bn of total value to ContourGlobal L.P., but after deducting value arising from Class S Units.

iii)  Class B Units are based on sharing 18% of value above a 9% p.a. threshold on $2.4bn of total value to ContourGlobal L.P., but after deducting value arising from Class C Units and Class S Units. The Class B Units also have a catch-up feature that, at valuations significantly above the threshold value, allow management to receive additional value.

Distributions from Class B and C Units are subject to Reservoir Capital realising value from its investment in ContourGlobal, and the scheme stays in effect until Reservoir Capital has disposed of all its Ordinary Shares in the Group. Class B Units are fully vested and are not forfeitable. Class C and S Units vest in equal tranches over the three-year period from IPO. The date of full vesting is 27 December 2020. Unvested units will ordinarily be forfeited in the event of resignation or termination for cause.

As of 31 December 2018, in accordance with IFRS 2, the Company recognized a personnel charge of $4.1 million in relation with the PIP.

ContourGlobal long-term incentive plan

Effective June 28, 2018, ContourGlobal implemented a long term incentive plan ("LTIP") consisting of the free attribution of up 1,818,441 ordinary shares to certain executive managers (the "grantees"). These shares will vest on 31 December 2020 subject to the grantee's continued service and to the extent to which some of the four performance conditions set for the awards are satisfied at the vesting date:

iv)  EBITDA condition: 50.0 % of award to the compounded annual growth rate of the Company's EBITDA between the grant date and the vesting date.

v)    IRR condition: 12.5 % of award to the internal rate of return on qualifying Company projects between the grant date and the vesting date.

vi)  LTIR condition: 25.0 % of award to the lost time incident rate of the Company as at the vesting date.

vii) Project Milestones condition: 12.5 % of award to the number of corporate milestones completed on qualifying projects conditions between the grant date and the vesting date.

The LTIP awards have been valued using the Monte Carlo model and the resulting share-based payments charge is being spread evenly over the period between the grant date and the vesting date (30 months). Fair value at the grant date was estimated to be $1.48.

Key assumptions used in valuing this plan were:

 

 

Expected life

2 years

Vesting period

2.5 years

Expecting vesting

75%

Expected volatility

16.8%

Risk-free interest rate

0.82%

 

Dividend yield of 0% has been assumed since grantees are compensated for dividends under clause 6.3 of the Long Term Incentive Plan.

Expected volatility is a measure of the amount by which the Group's shares are expected to fluctuate during the life of an option.

 

Number of shares

 

 

Outstanding as of December 31, 2017

-

Granted during the year

1,818,441

Forfeited

(264,688)

Vested

-

Outstanding as of December 31, 2018

1,553,753

The Group's charge for equity-settled share-based incentives for the year of $0.7 million (2017: $nil) has been included within selling, general and administrative expenses in the consolidated statement of income.

 

3.27.    Trade and other payables

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Trade payables

98.2

53.9

Accrued expenses

194.7

115.2

Trade and other payables

292.9

169.1

 

The increase in trade and other payables mainly comes from CO2 emission quotas purchased in our Maritsa power plant.

 

3.28.   Other current liabilities

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Deferred revenue

10.1

6.0

Deferred payment on acquisition (1)

23.3

1.8

Other taxes payable

48.0

45.1

Other (2)

67.1

59.7

Other current liabilities

148.5

112.6

 

(1) Relates to the deferred payment of the renewable portfolio in Europe, Brazil and Peru as of December 31, 2018 and to the deferred payment of the thermal and renewable portfolio in Brazil as of December 31, 2017.

(2) Mainly relates to contractual obligations in Brazil, including penalties and other commitments where wind asset capacity falls below contracted PPA.

 

3.29.    Group undertakings

ContourGlobal PLC owns (directly or indirectly) only ordinary shares of its subsidiaries. There are no preferred shares scheme in place in the Group.

ContourGlobal plc

 

United Kingdom

15 Berkeley Street 6th Floor, London, United Kingdom, W1J 8DY

 

 

 

 

Consolidated subsidiaries

Ownership

Country of incorporation

Registered address

ContourGlobal Hydro Cascade CJSC

100%

Armenia

AGBU building; 2/2 Meliq-Adamyan str.,0010 Yerevan, Armenia

ContourGlobal erneuerbare Energie Europa GmbH

100%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

Windpark HAGN GmbH & Co KG

95%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

Windpark Deutsch Haslau GmbH

62%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

ContourGlobal Windpark Zistersdorf Ost GmbH

100%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

ContourGlobal Windpark Berg GmbH

100%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

ContourGlobal Windpark Scharndorf GmbH

100%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

ContourGlobal Windpark Trautmannsdorf GmbH

100%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

ContourGlobal Windpark Velm GmbH

100%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

ContourGlobal Management Europa GmbH

100%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

ContourGlobal Wind Holding GmbH

100%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

ContourGlobal Development GmbH

100%

Austria

Fleischmarkt 1, Top 01, Vienna 1010, Austria 

ContourGlobal Maritsa East 3 AD

73%

Bulgaria

48 Sitnyakovo Blvd; 9-th fl., Sofia 1505, Bulgaria

ContourGlobal Operations Bulgaria AD

73%

Bulgaria

TPP ContourGlobal Maritsa East 3, Mednikarovo village 6294, Galabovo District, Stara Zagora Region, Bulgaria

ContourGlobal Management Sofia EOOD

100%

Bulgaria

48 Sitnyakovo Blvd; 9-th fl., Sofia 1505, Bulgaria

Galheiros Geração de Energia Elétrica S.A.

77%

Brazil

Rua Leopoldo Couto Magalhães Junior, 758, 3º andar, São Paulo 04542-000, Brazil

Santa Cruz Power Corporation Usinas Hidroelétricas S.A.

72%

Brazil

Rua Leopoldo Couto Magalhães Junior, 758, 3º andar, Itaim Bibi , São Paulo 04542-000, Brazil

Contour Global Do Brasil Holding Ltda

100%

Brazil

Rua Leopoldo Couto Magalhães Júnior, 758, 3º andar, Sao Paulo 04542-000, Brazil 

Contour Global Do Brasil Participações Ltda

80%

Brazil

Rua Leopoldo Couto Magalhães Júnior, 758, 3º andar, Sao Paulo 04542-000, Brazil 

Abas Geração de Energia Ltda.

100%

Brazil

Rua Leopoldo Couto Magalhães Junior, 758, 3º andar, São Paulo 04542-000, Brazil

Ventos de Santa Joana IX Energias Renováveis S.A.

51%

Brazil

Rodovia Dr. Mendel Steinbruch, S/N - Km, 08 Sala 182 - Distrito Industrial - Maracanaú - CE

Calcedônia Geração de Energia Ltda.

100%

Brazil

Rua Leopoldo Couto Magalhães Junior, 758, 3º andar, São Paulo 04542-000, Brazil

Ventos de Santa Joana X Energias Renováveis S.A.

51%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000 ,Brazil

Ventos de Santa Joana XI Energias Renováveis S.A

51%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000

Ventos de Santa Joana XII Energias Renováveis S.A.

51%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000 ,Brazil

Ventos de Santa Joana XIII Energias Renováveis S.A.

51%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000 ,Brazil

Ventos de Santa Joana XV Energias Renováveis S.A.

51%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000 ,Brazil

Ventos de Santa Joana XVI Energias Renováveis S.A.

51%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000 ,Brazil

 

 

Consolidated subsidiaries

Ownership

Country of incorporation

Registered address

Asa Branca Holding S.A.

100%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000, Brazil

Tespias Geração de Energia Ltda.

80%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000, Brazil

Asa Branca IV Energias Renováveis SA

100%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000, Brazil

Asa Branca V Energias Renováveis SA

100%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000, Brazil 

Asa Branca VI Energias Renováveis SA

100%

Brazil

Rua Leopoldo Couto Magalhães Júnior, 758, 3º andar, Sao Paulo 04542-000, Brazil 

Asa Branca VII Energias Renováveis SA

100%

Brazil

Rua Leopoldo Couto Magalhães Júnior, 758, 3º andar, Sao Paulo 04542-000, Brazil 

Asa Branca VIII Energias Renováveis SA

100%

Brazil

Rua Leopoldo Couto Magalhães Júnior, 758, 3º andar, Sao Paulo 04542-000, Brazil 

Ventos de Santa Joana I Energias Renováveis S.A.

51%

Brazil

Rodovia Dr. Mendel Steinbruch, S/N - Km, 08 Sala 182 - Distrito Industrial - Maracanaú - CE

Ventos de Santa Joana III Energias Renováveis S.A.

51%

Brazil

Rodovia Dr. Mendel Steinbruch, S/N - Km, 08 Sala 182 - Distrito Industrial - Maracanaú - CE

Ventos de Santa Joana IV Energias Renováveis S.A.

51%

Brazil

Rodovia Dr. Mendel Steinbruch, S/N - Km 08 ,Sala 182 , Distrito Industrial - Maracanaú - CE

Ventos de Santa Joana V Energias Renováveis S.A.

51%

Brazil

Rodovia Dr. Mendel Steinbruch, S/N - Km, 08 Sala 182 - Distrito Industrial - Maracanaú - CE

Ventos de Santa Joana VII Energias Renováveis S.A.

51%

Brazil

Rodovia Dr. Mendel Steinbruch, S/N - Km, 08 Sala 182 - Distrito Industrial - Maracanaú - CE

Ventos de Santo Augusto IV Energias Renováveis S.A.

51%

Brazil

Rodovia Dr. Mendel Steinbruch, S/N - Km, 08 Sala 182 - Distrito Industrial - Maracanaú - CE

Chapada do Piauí I Holdings S.A.

51%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000

Ventos de Santo Augusto III Energias Renováveis S.A.

100%

Brazil

Rodovia Dr. Mendel Steinbruch, S/N - Km, 08 Sala 182 - Distrito Industrial - Maracanaú - CE

Ventos de Santo Augusto V Energias Renováveis S.A.

100%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000 ,Brazil

ContourGlobal Desenvolvimento S.A.

100%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31 São Paulo 04542-000, Brazil 

Chapada do Piauí II Holding S.A.

51%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000

Chapada do Piauí III Holding S.A.

100%

Brazil

Rua Leopoldo Couto de Magalhães Jr., 758 - cj. 31, São Paulo 04542-000

Capuava Energy Ltda

80%

Brazil

Av. Presidente Costa e Silva, 1178, parte, Santo André/

Afluente Geração de Energia Eletrica S.A.

79%

Brazil

Praia do Flamengo, 70 - 1º andar Rio de Janeiro - RJ

Goias Sul Geração De Energia S.A.

80%

Brazil

Praia do Flamengo, 70 - 2º andar, parte. Rio de Janeiro - RJ

RIO PCH I S.A.

56%

Brazil

Praia do Flamengo, 70 - 4º andar Rio de Janeiro - RJ

Bahia PCH I S.A.

80%

Brazil

Praia do Flamengo, 70 - 6º andar, parte. Rio de Janeiro - RJ

ContourGlobal Swiss Holdings GmBH

100%

Swiss

Kholrainstrasse 8 - 8700 Küsnacht, Switzerland

ContourGlobal LATAM S.A.

100%

Colombia

Carrera 7 No. 74-09, Bogota, Colombia

ContourGlobal Solutions Holdings Ltd

100%

Cyprus

Capital Center, 2-4 Arch, Makarios III Avenue, 9th Floor, Nicosia 1065, Cyprus

ContourGlobal Solutions Ltd

100%

Cyprus

Capital Center, 2-4 Arch, Makarios III Avenue, 9th Floor, Nicosia 1065, Cyprus

Selenium Holdings Ltd

100%

Cyprus

Capital Center, 2-4 Arch, Makarios III Avenue, 9th Floor, Nicosia 1065, Cyprus

ContourGlobal La Rioja, S.L

100%

Spain

Arrúbal Power Plant, Polígono Industrial El Sequero,

 26150 Arrúbal, La Rioja, Spain.

 

 

Consolidated subsidiaries

Ownership

Country of incorporation

Registered address

Contourglobal Termosolar Operator S.L.

100%

Spain

Calle Orense, número 34, 7° piso - 28020 Madrid, Spain

ContourGlobal Termosolar, S.L.

100%

Spain

Calle Orense, número 34, 7° piso - 28020 Madrid, Spain

Rústicas Vegas Altas, S.L.

100%

Spain

Calle Orense, número 34, 7° piso - 28020 Madrid, Spain

Termosolar Majadas, S.L. 

100%

Spain

Calle Orense, número 34, 7° piso - 28020 Madrid, Spain

Termosolar Palma Saetilla, S.L.

100%

Spain

Calle Orense, número 34, 7° piso - 28020 Madrid, Spain

Termosolar Alvarado, S.L.

100%

Spain

Calle Orense, número 34, 7° piso - 28020 Madrid, Spain

Evacuación Villanueva del Rey, S.L.

40%

Spain

Calle Orense, número 34, 7° piso - 28020 Madrid, Spain

Energies Antilles

100%

France

8, Avenue Hoche 75008 Paris

Energies Saint-Martin

100%

France

8, Avenue Hoche 75008 Paris

ContourGlobal Saint-Martin SAS

100%

France

5 Rue du Gal de Gaulle, 8 Immeuble le Colibri Marigot,97150 Saint-Martin

ContourGlobal Management France SAS

100%

France

Immeuble Imagine

20-26 boulevard du Parc 92200 Neuilly-sur-Seine

ContourGlobal Worldwide Holdings Limited

100%

Gibraltar

Hassans, Line Holdings Limited, 57/63 Line Wall Road, Gibraltar

ContourGlobal Helios S.r.l.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

ContourGlobal Solar Holdings (Italy) S.r.l.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

ContourGlobal Oricola S.r.l.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

ContourGlobal Solutions (Italy) S.R.L.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Portoenergy S.r.l.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Officine Solari Barone S.r.l.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Officine Solari Camporeale S.r.l.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Contourglobal Mediterraneo S.r.l

51%

Italy

Via Cusani 5, Milan 20121, Italy 

PVP 2 S.R.L.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

ContourGlobal Sarda S.r.l

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Officine Solari Kaggio S.r.l.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Officine Solari Aquila S.r.l.

51%

Italy

Contrada Piana del Signore s.n.c.

93012 Gela (CL)

CONTOURGLOBAL

ENERGETICA S.R.L.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Ergyca Eight Srl

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Ergyca Green Srl

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Ergyca Industrial Srl

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Ergyca Light Srl

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Ergyca One Srl

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Ergyca Sole Srl

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Ergyca Tracker Srl

51%

Italy

Via Cusani 5, Milan 20121, Italy 

 

 

 

Consolidated subsidiaries

Ownership

Country of incorporation

Registered address

Sungea S.R.L.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Rinnovabili Bari Max S.R.L.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Solar 6 S.R.L.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Solar Realty S.R.L. 

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Solar 5 S.R.L.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

BS Energia New S.R.L. 

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Campoverde Societa' Agricola S.R.L.

51%

Italy

Via Cusani 5, Milan 20121, Italy 

Ecoenergia S.R.L. - Societa' Agricola

51%

Italy

Via Cusani 5, Milan 20121, Italy 

ContourGlobal Management Italy S.R.L.

100%

Italy

Via Cusani 5, Milan 20121, Italy 

ContourGlobal Kosovo L.L.C.

100%

Kosovo

Anton çeta 5a 1000 Pristina Republic of Kosovo

ContourGlobal Luxembourg S.àr.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

Kani Lux Holdings S.à r.l.

80%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Africa Holdings S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Bulgaria Holding S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Spain Holding S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Latam Holding S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

Vorotan Holding S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Terra 2 S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Terra 3 S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Terra 4 S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Terra 5 S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Terra 6  S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Solutions Holdings S.a.r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Senegal Holdings S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Terra Holdings S.à r.l

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Power Holdings S.A.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Worldwide Holdings S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Mirror 1 S.à.r.l

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Mirror 2 S.à.r.l

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Mirror 3 S.à.r.l

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Spain O&M HoldCo S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

 

 

 

Consolidated subsidiaries

Ownership

Country of incorporation

Registered address

ContourGlobal Intermediate O&M S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

Aero Flash Wind, S.A.P.I. DE C.V.

75%

Mexico

Mexico City, Mexico / Tax Address : Ciudad de Tecate, Baja California

KivuWatt Holdings

100%

Mauritius

4th Floor, Tower A, 1CyberCity, c/o Citco (Mauritius) Limited, Ebene, Mauritius

ContourGlobal Solutions (Nigeria) Ltd

100%

Nigeria

St. Nicholas House, 10th Floor, Catholic Mission Street, Lagos, Nigeria

ContourGlobal Solutions Nigeria Holdings B.V.

100%

Netherlands

Keplerstraat 34, Badhoevedorp 1171CD, Netherlands

Contourglobal Bonaire B.V.

100%

Netherlands

Kaya Carlos A. Nicolaas 3 , Bonaire, Netherlands

Energía Eólica S.A.

100%

Peru

Av. Ricardo Palma 341, Office 306, Miraflores, Lima 18, Peru

ContourGlobal Peru SAC

100%

Peru

Av. Ricardo Palma 341, Office 306, Miraflores, Lima 18, Peru

Energía Renovable Peruana S.A.

100%

Peru

Av. Ricardo Palma 341, Office 306, Miraflores, Lima 18, Peru

Energía Renovable del Norte S.A.

100%

Peru

Av. Ricardo Palma 341, Office 306, Miraflores, Lima 18, Peru

ContourGlobal Solutions (Poland) Sp. Z o.o.

100%

Poland

ul. Przemyslowa 2A, Radzymin 05-250 - Poland

ContourGlobal Paraguay Holdings SA

100%

Paraguay

Simon Bolivar, # 914 casi Parapiti, Asuncion, Paraguay

ContourGlobal Solutions (Ploiesti) S.R.L.

100%

Romania

Ploeisti, 285 Gheorge Grigore, Cantacuzino street, Prahova County, Ploeisti, Romania

Petosolar S.R.L.

100%

Romania

7 Ghiocei street, ap. 1, Panciu locality, Panciu city, Vrancea county, Romania 

Kivu Watt Ltd

100%

Rwanda

Plot 9714, Nyarutarama, P. O. Box 6679, Kigali, Rwanda 

RENERGIE Solarny Park Holding SK I a.s.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

PV Lucenec S.R.O.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Rimavské Jánovce s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Dulovo s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Gemer s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Hodejov s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Jesenské s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Nižná Pokoradz s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Riečka s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Rohov s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Starňa s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Včelince 2 s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Solárny park Hurbanovo s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

AlfaPark s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

RENERGIE Druhá slnečná s.r.o.

51%

Slovak Republic

Pribinova 25, 811 09 Bratislava,Slovakia

 

 

 

Consolidated subsidiaries

Ownership

Country of incorporation

Registered address

SL03 s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Bánovce nad Ondavou s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Bory s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Budulov s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Kalinovo s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

ZetaPark Lefantovce s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny Lefantovce s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Michalovce s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Nižný Skálnik s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Otročok s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Paňovce s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Gomboš s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Rimavská Sobota s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Horné Turovce s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Uzovská Panica s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

RENERGIE Solárny park Zemplínsky Branč s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

ZetaPark s.r.o.

51%

Slovak Republic

25 Pribinova Str., Bratislava 811 09, Slovakia

ContourGlobal Cap des Biches Senegal S.à r.l.

100%

Senegal

2, Place de L'Indépendance, Dakar, BP 23607, Senegal

ContourGlobal Togo S.A.

80%

Togo

Route D'Aného, Baguida, BP 3662 , Lomé - Togo

ContourGlobal Services Africa S. à r.l.

100%

Togo

Immeuble SCI - Direction de l'administration pénitentiaire & de la réinsertion - Angle Rue Agbata, Boulevard du 13 Janvier - 01 BP 3662, Lomé -TOGO

Co-Generation Technologies B1 LLC

38%

Ukraine

77701  51 Schevchenko Street, Bogorychany city, Ivano-Frankivsk region,Ukraine

AMC Energy LLC

75%

Ukraine

02125 ,1 Prospect Vyzvolyteliv,  Kiev, Ukraine

ContourGlobal Solutions Ukraine LLC

100.0

Ukraine

32, Konstantiniska street, 04071 Kiev, Ukraine

ContourGlobal Solutions (Northern Ireland) Limited

100%

United Kingdom

6th Floor Lesley Tower, 42-26 Fountain Street, Belfast BT1 5EF, Ireland

ContourGlobal Europe Limited

100%

United Kingdom

15 Berkeley Street, 6th Floor, London, United Kingdom, W1J 8DY

ContourGlobal Yield Limited

100%

United Kingdom

15 Berkeley Street, London, W1J 8DY

Contour Global LLC

100%

US

1209 Orange Street, Corporation Trust Center, Wilmington, Delaware 19801 

Contour Global Management Inc

100%

US

1209 Orange Street, Corporation Trust Center, Wilmington, Delaware 19801 

ContourGlobal Services Brazil LLC

100%

US

650 Fifth Ave - 17th Fl., New York, New York 10019

ContourGlobal Togo LLC

100%

US

2711 Centerville Road, Suite 400, Wilmington, Delaware 19808

 

 

 

Consolidated subsidiaries

Ownership

Country of incorporation

Registered address

ContourGlobal A Funding LLC

100%

US

1209 Orange Street, Corporation Trust Center, Wilmington, Delaware 19801

ContourGlobal Senegal Holdings LLC

100%

US

2711 Centerville Road, Suite 400, Wilmington, Delaware 19808

ContourGlobal Senegal LLC

100%

US

1209 Orange Street, Corporation Trust Center, Wilmington, Delaware 19801

CG Solutions Global Holding Company LLC

100%

US

Corporation Trust Center, 1209 Orange Street, Corporation Trust Center, Wilmington, Delaware 19801

ContourGlobal Mirror 6 S. à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Mirror 5 S. à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Mirror 7 S.à.r.l

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Mirror 4 S.à.r.l

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

ContourGlobal Ursaria 3 S.à r.l.

100%

Luxembourg

35-37 Avenue de la Liberté L-1931 Luxembourg, Grand Duchy of Luxembourg

 

 

 

 

Investments in associates accounted

 under the equity method:

Ownership

Country of incorporation

Registered address

 

 

 

 

TermoemCali I S.A. E.S.P.

37%

Colombia

Carrera 5A Nº 71-45, Bogotá, Colombia

Compañía Eléctrica de Sochagota S.A. E.S.P.

49%

Colombia

Carrera 14 No. 20-21 Local 205A, Plaza Real, Tunja, Colombia

Productora de Energía de Boyacá S.A.S. E.S.P

50%

Colombia

Cr. 9 No. 74-08 Of. 105, Bogotá, Colombia

 

 

3.30.   Related party disclosure

ContourGlobal L.P. and Reservoir Capital Group

As of December 31, 2018 ContourGlobal plc and its subsidiaries have no significant trading relationship with the Group's main shareholder, ContourGlobal L.P., and Reservoir Capital Group which ultimately controls ContourGlobal L.P.

Key management personnel

Compensation paid to key management (executive committee members) amounted to $11.8 million in December 31, 2018 (December 31, 2017: $8.7 million).

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Salaries and short term employee benefits

5.9

4.8

Termination benefits

2.8

0.8

Post employment benefits

0.1

0.2

Profit-sharing and bonus schemes

2.8

2.9

Private incentive plan (1)

4.1

-

Other share based payments

0.2

-

Total

15.9

8.7


(1) Refer to note 4.26.

Directors' emoluments are disclosed within the Annual Report on Remuneration for the year ended 31 December 2018, and in relation to the period post incorporation of the company for the year ended 31 December 2017.

Certain members of management are party to an agreement with a company that co-owns (but has a minority share) with ContourGlobal certain assets in Brazil.  Under this arrangement, such members of management may receive distributions if the minority co-owner company achieves a certain level of return on its investment in those Brazilian assets.  This minority co-owner company is a related party to ContourGlobal as it is owned and controlled by one of the ContourGlobal directors. ContourGlobal is not party to the arrangement and has no financial obligation related to it. 

 

3.31.    Financial commitments and contingent liabilities

a/ Commitments

The Group has contractual commitments with, among others, equipment suppliers, professional service organizations and EPC contractors in connection with its power projects under construction that require payment upon reaching certain milestones. As of December 31, 2018, the Group has completed all its construction projects and had $2.6 million of firm purchase commitments of property plant and equipment outstanding in connection with its Maritsa facilities and $14.0 million towards its EPC contractors for its Scharndorf wind farm. The Group has also contractual arrangements with Operating and Maintenance (O&M) providers and transmission operators as it relates to certain of its operating assets.

Maritsa has a long term Lignite Supply Agreement (LSA) with Maritsa Iztok Mines (MMI) for the purchase of lignite. According to the agreement, Maritsa has to purchase minimum monthly quantities, amounting to 6,187 thousand standard tons per calendar year. The total commitment through the remaining term of the LSA (February 2024) is 31,451 thousand standard tons, equal to $304.3 million at December 2018 prices ($9.67 per standard ton), as compared to 37,638 thousands standard tons equal to $381.2 million at the end of 2017 ($10.13 per standard ton). In the event of a failure on the part of CG Maritsa East 3 AD (ME-3) to take a minimum monthly quantity in any month, ME-3 shall, except in cases caused by Force Majeure and certain actions of Bulgarian authorities as described in the contract, pay to MMI an amount equal to the difference between (i) the aggregate amount paid or payable in respect of lignite delivered during such month and (ii) the aggregate amount that would have been payable had the minimum monthly quantity been taken during such month.

Pursuant to Vorotan acquisition, the Group has agreed to refurbish the hydro power plants and intends to invest approximately $70 million over six years in a refurbishment program started in 2017 to modernize Vorotan and improve its operational performance, safety, reliability and efficiency. As of December 31, 2018 Vorotan disbursed $17.5 million of which $9.5 million was an advance payment to the EPC contractor.

b/ Contingent liabilities

The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business. The Group reviews these matters in consultation with internal and external legal counsel to make a determination on a case-by-case basis whether a loss from each of these matters is probable, possible or remote. These claims involve different parties and are subject to substantial uncertainties.

Operation & Maintenance contractor litigation (Energies Antilles)

In 2015, a €5 million legal claim was brought against EA by the O&M contractor in relation to cost overruns following changes in French labor laws ("IEG status"-Industries Electriques et Gazières). On September 21, 2018, judgment was rendered by the Commercial Court of Paris in favor of the O&M Contractor. The Commercial Court appointed an expert to determine the amount of costs for which EA should be liable, as opposed to those costs that were attributable to the O&M contractor's management decisions. To date, several meetings with the expert have already taken place. In parallel with the expert proceeding, EA appealed before the Paris Court of Appeal against the Commercial Court's decision on legal grounds. The expert proceeding is not expected to conclude before the second half of 2019.

Kivuwatt arbitration (KivuWatt Ltd)

On December 12, 2018, the Government of Rwanda filed a request for arbitration before the International Centre for the Settlement of Investment Disputes naming KivuWatt Ltd. as the respondent, alleging that it had suffered damages of approximately $80 million arising from KivuWatt's delay in entering into commercial service.  KivuWatt contests the Government's right to damages over and above the $1.2 million in liquidated damages provided for in the PPA and already paid by KivuWatt and is preparing its response.

No provision has been recorded as of December 31, 2018 in relation to the above claims as the Group considers that it is less than probable that liabilities will arise from these claims.

The Group from time to time is involved in disputes in relation to ongoing tax matters in a number of jurisdictions around the world. Where appropriate, provisions are recorded, based on the assessment of each case.

c/ Lease commitments

Operating lease as a lessee

The Group is lessee under non-cancellable operating leases, primarily for office space and land to conduct its business. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

 

Years ended December 31

In $ millions

2018

2017

 

 

 

No later than 1 year

5.9

5.9

Later than 1 year and no later than 5 years

19.4

21.0

Later than 5 years

213.9

243.3

Total

239.2

270.2

 

 

 

Finance lease as a lessee

The future aggregate minimum lease payments under non-cancellable finance leases (Inka project) are as follows:

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Minimum lease payments

 

 

No later than 1 year

0.3

0.3

Later than 1 year and no later than 5 years

1.3

1.3

Later than 5 years

3.1

3.4

Gross investment in the lease

4.7

5.0

Future finance interest

(1.7)

(1.9)

Present value of finance lease obligation

3.0

3.1

 

Operating lease as a lessor

The Group is lessor under non-cancellable operating leases.  The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Minimum lease payments

 

 

No later than 1 year

62.1

62.0

Later than 1 year and no later than 5 years

231.4

249.4

Later than 5 years

527.6

577.5

Total

821.1

888.9

Finance lease as a lessor

The future aggregate minimum lease payments under non-cancellable finance leases (relating to our operation of Energies Saint Martin and Bonaire) are as follows:

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Minimum lease payments

 

 

No later than 1 year

11.6

12.0

Later than 1 year and no later than 5 years

45.8

47.2

Later than 5 years

26.5

38.1

Gross investment in the lease

83.9

97.3

Less: unearned finance income

(20.2)

(26.1)

Total

63.7

71.2

 

 

 

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Analysed as:

 

 

Present value of minimum lease payments:

 

 

No later than 1 year

11.0

11.4

Later than 1 year and no later than 5 years

35.4

36.4

Later than 5 years

17.3

23.4

Total

63.7

71.2

 

3.32.    Guarantees and letters of credit

The Group and its subsidiaries enter into various contracts that include indemnification and guarantee provisions as a routine part of the Group's business activities. Such contracts generally indemnify the counterparty for tax, environmental liability, litigation, and other matters, as well as breaches of representations, warranties, and covenants set forth in the agreements.  In many cases, the Group's maximum potential liability cannot be estimated, since some of the underlying agreements contain no limits on potential liability.

The Group also acts as guarantor to certain of its subsidiaries and obligor with respect to some long-term arrangements contracted at project level. 

For the financial guarantees and letters of credit, refer to note 4.23 Borrowings.

3.33.    Statutory Auditors fees

 

Years ended December 31

In $ millions

2018

2017

 

 

 

Fees payable to the Group's auditor for the audit of the Group's annual accounts and consolidated financial statements

1.2

1.3

Fees payable to the Group's auditor and its associates for other services:

 

 

- The audit of the Group's subsidiaries

1.4

1.1

- Audit- related assurance services

0.3

-

- Other assurance services

1.1

6.6

- Tax compliance services

-

-

- Tax advisory services

-

-

- Other non-audit services

0.1

0.1

Total (net of out of pocket expenses)

4.1

9.1

 

In 2018 work was performed in respect of acquisitions ($0.8 million) and on bond refinancing ($0.4). In 2017 other assurance services mainly included exceptional events which included the Initial Public Offering in the United Kingdom of ContourGlobal Plc ($5.7 million) in November 2017.

 

3.34.    Subsequent events

Acquisition of a portfolio in Mexico

On January 7, 2019, the Group signed the acquisition of two natural gas-fired combined heat and power ("CHP") plants, together with development rights and permits for a third plant, in Mexico from Alpek, for $724 million in cash. An additional payment at closing estimated at $77 million represents the value added tax assessed for the transaction and is expected to be refunded in full within 12 months of closing. The CHP plants have a gross installed capacity of 518 MW.

The transaction is expected to close in the second quarter of 2019.

 

 

 

[1] "LTIR" measures recordable lost time incident ("LTI") rates on the basis of 200,000 working hours.

    "LTI" is an employment related incident that results in serious injury or illness which results in one or more days away from work.

[2] Meridith Armstrong Whitney, Charles J. Bennett, "Driving Toward "0": Best Practices in Corporate Safety and Health, The Conference Board Research Report R-1334-03-RR (2003)

[3] "Five Whys" is a technique for performing failure analysis originally developed by Sikichi Toyoda of "Toyota Production System" fame. The technique involves asking five times why a failure occurred thereby arriving at the root cause and enabling the development of a proportional response

 

[4] Thermal Fleet Equivalent Availability Factor for 2018 was 90.2% for the year, which was 2.6% below 2017.  The most significant underperformance occurred in our Combined Cycle Gas Turbine facility in Spain which was 5.1% worse than the previous year albeit with little financial impact.

 

[5] Our business is international with a concentration in three primary regions: Europe, Latin America and, to a lesser extent, Sub-Saharan Africa We operate in the market for electricity generation infrastructure and participate in that market through our own development ("greenfield" development which involves creating an asset by taking it through the permitting, financing and construction processes) as well as the acquisition of existing power plants.  We operate, develop and acquire power plants using conventional fuel-based technologies as well as those using renewable technologies (currently wind, solar and hydro).  Within both categories, we focus on two broad categories of customers: national grids and the utilities that supply these grids and commercial, and industrial customers with substantial energy needs who prefer to procure their electricity supply directly from on-site facilities. 

[6] Myles McCormick, "Wind Farmers Look to the New Wave of Turbines" Financial Times, March 12, 2019

[7] Francisco Javier Martinez Garcia, our plant manager at the Alvarado CSP participated in 11 Five Whys which, on a pro-rata basis, was the most in the company since he was part of the acquisition of the five CSP plants from Acciona and didn't even join until May! 


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