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“The strategy for Rurelec has now evolved from survival in 2016 to stabilisation in 2020 and from this year it has become to rebuild shareholder value.
Since the appointment of turnaround specialist, Andy Coveney, in 2016 the business has been restructured, debt has been paid off, the cost base reduced, overseas assets have been sold, the share register has been freed from a controlling interest and new capital has been injected. We can now look to the future with optimism.
The Company has now delisted from the AIM market of the London Stock Exchange, which saves some cost and allows us the opportunity to negotiate and execute a transaction without the restriction of Listing rules and continuous disclosure. We are currently considering transformative acquisitions in the Oil and Gas sector which is favoured by some of our new investors and where we can see the opportunity to create value. While it is difficult to predict the outcome of negotiations with third parties and funders, we anticipate that if the current discussions are successful, we will be able to announce further details in the autumn.
Notwithstanding the short-term advantages of not being listed, we remain mindful of the importance to shareholders of being able to buy and sell shares in the Company, and our medium-term ambition is to relist on AIM or another market in order to allow our investors to crystalise value. In the meantime, we ask for your patience as we work towards this goal; relations with our investors is a high priority and we are willing to engage directly while we are not listed. Please contact us through the website initially, or on 0207 549 2839.
At the current time, the Company’s main asset is the 701 turbines (the “Turbines”). We continue to pursue a sale of the Turbines; and a number of separate discussions have taken place with third parties. Disappointingly earlier discussions were not fruitful for reasons unconnected with Rurelec, but new interest has emerged. While this is encouraging, discussions therefore remain at an early stage, and this serves to highlight the complex nature of power projects. The timing of any potential sale of the turbines remains highly uncertain owing to the limited demand and infrequent occurrence of projects into which the turbines could be injected. It is difficult to predict whether these potential counterparties will be able to enter into heads of terms and secure the necessary finance such that a deposit can be paid, or any sale could complete. If no project is found into which these assets can be included, it is becomes increasingly likely that the turbines will be scrapped or sold at less than their Net Book Value to a trader in such assets. Meanwhile there is a cost to the Company of insuring and storing the Turbines which must be balanced against the probability of a successful sale in light of the time that has elapsed since marketing began in earnest.”
RURELEC PLC is an owner of turbines.
Rurelec aims to use the most efficient and environmentally friendly power generation technologies available. This allows us to make savings in fuel efficiency whilst reducing the environmental impact of our activities, thus benefitting shareholders and local communities alike.
In particular we have had great success in implementing two combined cycle gas turbine (CCGT) projects, one in Argentina and one in Bolivia. In a CCGT, waste exhaust heat from burning gas in a gas turbine is recycled to generate more electricity. This is done by passing waste heat through a heat recovery steam generator which produces steam at a high enough pressure to drive a steam turbine. Both the gas and the steam turbines are connected to generators to produce electricity.
Combined Cycle Gas Turbine (CCGT) Diagram. Click to see larger version.
This greatly increases the efficiency of the plant. For example, our Comodoro Rivadavia plant in Argentina has, thanks to a conversion to CCGT, gone from 76 MW to 136 MW capacity.
The Group's strategy is to own and operate modern, low emission power generation plants in Latin America, paying dividends to shareholders based on strong cash flows and at the same time, developing and constructing new power generation capacity with judicious use of project and local subsidiary company debt.
The Board and Senior Officers of Rurelec are:
The Board is responsible for running the Company, including all major business and financial risks and taking strategic decisions.
The Directors communicate at least weekly on significant matters, in particular on matters affecting cashflow and on matters concerning the joint venture in Argentina.
To enable the Board to perform its duties, each director has access to advice from the Company Secretary and independent professionals at the Company's expense.
Due to the size of the Company, the Board believes that it can collectively and competently execute a clear leadership function without the appointment of a Chairman.
The Board comprises of:
| Director | Date of Appointment | Date of Resignation | Role at 30 June 2024 |
Date of (re-) appointment | Board Committee | ||
| Andrew H. Coveney | 16.11.2016 | - | Executive Director | 30.06.2022 | - | - | A |
| Paul R.A. Shackleton | 26.07.2021 | - | Senior Independent Non-Executive |
02.08.2023 | N | R | A |
| Ivan J.B. Murphy | 03.09.2024 | - | - | - | - | - | - |
N = Nomination Committee
R = Remuneration Committee
A = Audit Committee
The Board has delegated specific responsibilities to the committees below.
Board Committees
The three principal standing committees of the Board are the Audit, Nominations and Remuneration Committees.
Audit committee
The Audit Committee has an oversight of the group as a whole. It monitors the integrity of the financial statements of the Company, including its annual and interim reports relating to the Company’s financial performance. Last year the Audit Committee reviewed the content of the Annual Report and Accounts and the Interims. It made recommendations to the board in relation to the external auditor and approved their remuneration and terms of engagement and scope of audit.
| Member | Non-Member | |
| Audit Committee | Paul R.A. Shackleton | Andrew H. Coveney |
The Company does not issue an Audit Committee Report.
Remuneration and Nomination Committees
The Company is not compliant with their terms of reference or the requirements under the QCA Code, which requires that only independent Non-Executive Directors should sit on them.
| Member | |
| Remuneration Committee | Paul R.A. Shackleton |
| Nomination Committee | Paul R.A. Shackleton |
Attendance at Board and Committee meetings
The Board meetings are scheduled in advance for each calendar year. There are 12 scheduled Board meetings (one per month) and additional meetings are arranged as necessary to consider particular issues.
The Board and Committee meetings and attendance during the year ended 30 June 2024 were as follows:
| Director | Board (29 formal meetings) |
Audit Committee (4 meetings) |
Remuneration Committe |
| Andrew H. Coveney | lllllllllll llllllll llllllllll |
A*A*A*A* | - |
| Paul R.A. Shackleton | lllllllllll llllllll llllllllll |
AAAA | - |
A* = Audit Committee attendance not as member
Due to the size of the Company, the Board has not and does not comply with the principle that the Board and Audit Committee should at least have two independent directors. Given the current level of transactions within the Company, the Board considers that adequate resources are available at Board level, although a further non-executive director is currently being sought.
The executive directors are part time directors of the Company although all directors are expected to commit sufficient time to the Company in addition to attending the Board meetings.
The Directors are responsible for preparing the Strategic Report, the Directors’ Report, Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have to prepare the financial statements in accordance with International Financial Reporting Standards (“IFRSs”) as adopted by the European Union. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period. In preparing these financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein
Rurelec is backed by strong team with experience in power generation projects around the world. Its associate companies, IPSA Group PLC ("IPSA") and Independent Power Corporation PLC ("IPC") have owned or developed power generation projects in Central Asia, Southern Africa, the Middle East and the US.
The ability to marry disparate financial and engineering skills has been at the centre of Rurelec's success. Our local partners on the ground in Bolivia and Argentina are backed up by our network of specialist engineers who are available for operations and maintenance as well as for the development of new plant capacity. These specialist engineers have typically worked in the past for Britain's Central Electricity Generating Board (CEGB) and for National Power PLC, formerly England's largest power generator.
Furthermore, Rurelec benefits from significant project finance expertise with particular experience within the energy sector. The company signed a project loan agreement in 2007 which was the first power generation bank financing in Argentina since the 2001 Peso Crash. Rurelec also works closely with key regional financial institutions in Bolivia including CAF, the Andean Development Corporation, and the Bolivian state pension funds.
Rurelec is an AIM listed, international utility focused on the development and ownership of power generation. Our current activities include an operational plant in Argentina and several developments in both Chile and Peru, as well as sponsorship of new capacity in Bangladesh.
Rurelec has a 50 per cent stake in Energia del Sur S.A. (“EdS”), which owns and operates a 136 MW Combined Cycle Gas Turbine (CCGT) power plant in Southern Patagonia.
Rurelec’s Bolivian subsidiary, Empresa Eléctrica Guaracachi S.A. (“Guaracachi”), was nationalised by the Bolivian government on 1 May, 2010. Not only is it the largest power producer in the country but whilst under Rurelecs’ control, it was also the largest investor in new generation capacity in Bolivia under the presidency of Evo Morales.
Rurelec announced that it won its claim against the Plurinational State of Bolivia (“Bolivia”) on the 3rd February 2014. The Tribunal concluded that the expropriation was unlawful and calculated aggregate compensation in the amount of US$35,539,598 (approximately £21.6m) as of 31 January 2014, now increasing by daily compounded interest at the rate of 5.6331% a year until the date of payment. The award is higher than the £20.582 million which Rurelec paid to acquire its controlling stake in Guaracachi in 2006.
In accordance with the Bilateral Investment Treaty and the UNCITRAL rules, the award is final and binding on Bolivia and shall be carried out without delay. Rurelec is confident that Bolivia will comply with its obligations towards Rurelec and the United Kingdom undet the Treaty and looks forward to prompt settlement of the amount awarded.
The parties' filings may be viewed at the PCA website http://www.pca-cpa.org/ , in accordance with the agreement on full transparency reached with Bolivia's Attorney General.
In 2012, Rurelec acquired its first projects in hydro-electric power generation in Peru with the acquisition of the 255 MW run-of-river Santa Rita project and the portfolio of small hydro projects owned by Rurelec's subsidiary, Cascade Hydro Limited ("Cascade"). Rurelec has a 100 per cent stake in Cascade. Canchayllo, the first Cascade project, has secured a US $7.2 million financing agreement with IIC, a financing arm of the Inter-American Development Bank. Construction of the project has now begun and the plant size has been increased to just over 5 MW at a total cost of US $11 million. Commercial operation is targeted fro August 2014.
The financing of the Canchayllo project has acted as the catalyst for a substantial private equity capital raising effort for Cascade. The increase in capital will dilute Rurelec's shareholding below its current 100 per cent interest in Cascade, a company with a strong management team that is expected to build up a substantial portfolio of hydropower plants in Peru.
Rurelec's target in Chile is to own 50 per cent of over 1,250 MW of new Clean Tech generation capacity in the coming years and to obtain a quotation on the Santiago Stock Exchange.
Rurelec holds a 100 per cent stake in Termoeléctrica del Norte S.A.C. ("Termonor"), a Chilean project development company which is developing Parinacota, a 40 MW greenfield thermal power plant. In due course, Rurelec intends to reduce its stake to 50 per cent as it partners with Chilean investors.
The Parinacota project has the potential to convert to a 120 MW combined cycle power plant as part of its second stage development. Commercial operation of phase one is expected by the end of 2013.
Rurelec has also acquired 100 per cent of Central Illapa S.A. ("Central Illapa"), a Chilean project company developing a 250 MW open cycle gas fired peaking plant in Mejillones, one of the key power hubs on the SING system of the Chilean power grid.
Central Illapa has been shortlisted by an international mining group under a tender to supply 500 MW of power to its operations in northern Chile. If awarded the PPA, Rurelec would work with substantial industry partners to construct, own and operate this high efficiency liquefied natural gas ("LNG") fired combined cycle gas turbine ("CCGT") plant operating in tandem with the 250 MW Illapa peaking plant.
Rurelec and its subsidiary IPC have together pre-qualified for a further 500 MW CCGT project to be constructed in northern Chile also to run on LNG with capacity to be contracted to another mining group.
The PPA proposals are scheduled to be evaluated and PPA's awarded in the latter half of 2013.
Working with local partners, Energypac Confidence Power Ventures ("ECVP"), Rurelec sponsored a 108 MW project in Chittagong, Bangladesh. Rurelec is hoping to develop a follow-on CCGT project of some 400 to 500 MW in Bangladesh.
Our subsidiary IPC, provides engineering, O&M services to third parties including governments and multinational corporations. These are provided through IPC's wholly owned subsidiary Independent Power Operations Limited ("IPOL").
Power Plant Development under IPC
IPC is currently developing new power plant capacity in Myanmar, Gibraltar, Kazakhstan, Russia and Malta for governments and state owned corporations.
Rurelec currently has two projects benefitting from the production of carbon credits under the Kyoto Protocol of the United Nations Framework Convention on Climate Change (UNFCCC). The agreement put a cap on the level of emissions that the industrial countries which ratified the protocol (Annex 1 countries) could emit. The protocol came into force in 2005 with the first compliance period lasting for four years from January 1st, 2008.
Under the Clean Development Mechanism ("CDM") of the Protocol, Annex I countries can meet their emission reduction targets by offsetting their emissions with credits known as Certified Emission Reductions ("CERs"). A CER is created when a project developer such as Rurelec invests in emission reducing projects in non-Annex I countries that have ratified the Kyoto protocol (e.g. Argentina and Bolivia).
A reduction of one tonne of Carbon Dioxide generates one CER. Other polluting greenhouse gases are also included and assigned a carbon equivalent value which allows them to generate CERs. The CERs can then be sold to those parties in Annex I countries with a requirement to reduce emissions. Rurelec can thus ensure an increased revenue stream through the adoption of cleaner technology.
The revenue from the sale of CERs generated by Rurelec's combined cycle gas turbine (CCGT) projects allow the company to invest in the most up-to-date and environmentally friendly power generation technologies available.