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Oracle Power PLC
03 May 2018
 

Final Results

3 May 2018

 



Oracle Power PLC

("Oracle", the "Company" or the "Group")

 

Results for the Year Ended 31 December 2017

 

Oracle Power PLC (AIM:ORCP), the UK energy developer of a combined lignite mineral resource and mine mouth power plant located in the Thar desert in the south-east of Sindh Province, Pakistan, today announces its audited results for  the  year ended 31 December 2017.

 

 2017/18 Highlights:

·    Memorandum of Understanding signed with two major Chinese power companies, to develop and operate the mine and power plant and to provide financing;

·    Board changes, Yves Mordacq departed from the board; Mark Steed and Andreas Migge joined; Mark Steed took over from Anthony Scutt as Interim Chairman;

·    Status in the China-Pakistan Economic Corridor raised from the "active" to the "Priority" list;

·    Progress in critical areas, including the public hearing for the Environmental and Social Impact Assessment ("ESIA") for the power plant, the update of the mine ESIA and an updated application to the Private Power Infrastructure Board. 

 

Planned Work Programme for 2018

Oracle's work in 2018 will concentrate on formalising detailed agreements with its Chinese partners including securing of the financing for their share of the equity and all project debt. Oracle will also work with relevant Pakistani Government bodies with regards to permissions, licences and other approvals that need to be obtained. 

 

 

Chairman's Statement

 

I am pleased to present the results for Oracle Power PLC for the year ended 31 December 2017.

 

Oracle is developing an integrated lignite coal mine and mine mouth power plant located in Block VI of the Thar desert in the south-east of the Sindh Province of Pakistan (the "Project").

 

In November 2017, we entered into a Memorandum of Understanding with Sichuan Provincial Investment Group Co. Limited ("SCIG") and with PowerChina International Group Limited ("PowerChina") to take this project forward to its conclusion. I take this opportunity to welcome SCIG who are new to this Project and who will bring great expertise and value. PowerChina have made significant investment already in Pakistan and we value their contribution to this partnership.

 

The involvement of SCIG and Power China in the Project is under the general auspices of the China Pakistan Economic Corridor ("CPEC"). The Project was raised to "Priority Listing" in CPEC in January 2017 which underlines the importance of this project to China as well as to Pakistan.

 

Operational highlights of the year include preparation, submission and the public hearing for the Environmental and Social Impact Assessment ("ESIA") for the power plant, the update of the mine ESIA originally carried out in 2012, an updated application to the Private Power Infrastructure Board and a population census.  These and other activities are described in detail in the Chief Executive's Report.

 

Our work in 2018 will concentrate on formalising detailed agreements with our Chinese partners including securing of the financing for their share of the equity and all project debt. We will also work with relevant Government bodies with regards to permissions, licences and other approvals that need to be obtained. 

 

In 2017, we raised £771,000 and a further £550,000 was raised in March 2018,before costs. The remaining outstanding shares in our Pakistan mining subsidiary, Sindh Carbon Energy Limited, were acquired through a share exchange in January 2018 and, as a consequence, Oracle now owns 100% of both Pakistani subsidiaries.

 

Thar coal is one of the largest resources in the world.  The Project will play a vital role in the advancement of the economy of Pakistan by creating much needed additional electricity base load.  By exploiting this national resource as a source of fuel for power, it will free up valuable foreign exchange which can then be used elsewhere.

 

The World Bank reports (November 2017) that Pakistan's growth remained strong in 2017, with agriculture and the services sector driving growth. Inflation remains under control. There are however growing fiscal and external imbalances which will need to be addressed so as not to impede the country's growth prospects.  In general, there has been improving political stability over recent years.

 

The broad parameters of security remain as last year. There have been no major incidents; as the army is providing security to CPEC projects.

 

We are most grateful to the Pakistani authorities at both federal and provincial levels for the constructive way in which they have supported and continue to support our project.

 

As a newcomer to the Board and to the Chairmanship, I would like especially to thank my predecessor, Anthony Scutt, for his valued contribution to the company as Chairman. I am grateful that we can continue to benefit from Anthony's experience as he has agreed to continue as a Director and for his resumption as Senior Independent Director.  I would also like to thank Shahrukh Khan, our CEO, for his patience in introducing me to Oracle as well as Yves Mordacq who had to resign as a Director in October 2017 for personal reasons; his service was also valued. Andreas Migge joined the Board in August 2017.  As an investment banker, he brings cross border experience in the resource and energy sector and will be of much value to the company going forward. Our management is unchanged, and I would also like to acknowledge their major contribution to the Company.

 

Above all, I wish to thank our shareholders for their continued confidence, patience and support, enabling us to bring the project towards realisation.

 

Mark Steed

Chairman

 

 

Chief Executive Officer's Report

 

Economic growth in Pakistan was estimated by the World Bank to be 5.2% in 2017 and is predicted to increase to 5.5% in 2018. Investment in the infrastructure and energy sectors currently underway will improve Pakistan's competitiveness. At the same time electricity shortfalls continue to restrict the country's development and, in its 2017 State of Industry Report, the National Electric Power Regulatory Authority ("NEPRA") states that 8,800MW of new generation is planned over the coming two years. Indeed, in 2017 two major plants based on imported coal have been commissioned at Sahiwal and at Port Qasim, each of 1,320 MW capacity. Other projects under the China Pakistan Economic Corridor ("CPEC") in the Thar Coalfield, including our Thar Block VI project, once developed, will be major contributors to this increased generation capacity. In 2017, our Thar Block VI integrated mine and power plant project was elevated to the Priority List of approved CPEC projects confirming both Chinese and Pakistan Government support for the development.

 

NEPRA also states "Major power generation projects being developed under CPEC umbrella or otherwise need to achieve target completion dates, so that confidence of the national and international stakeholders, in Government of Pakistan energy policies, is not lost and the present momentum of economic turnaround is maintained." NEPRA also reports that the transmission and distribution networks need considerable upgrading to accommodate the new generation planned. 

 

As reported last year, Oracle`s subsidiary Thar Electricity Private Limited ("TEPL") made an application in January 2017 to the Private Power and Infrastructure Board ("PPIB") to secure a Letter of Intent ("LOI") which would enable a Generation Licence and Tariff application to be submitted to NEPRA as the next stage in the approval process.  An updated application was submitted to PPIB following the announcement by NEPRA in July 2017 of a new Upfront Tariff for Thar Coal.  The new Upfront Tariff regime also specified that all new power plants would have to employ supercritical technology.

 

Following discussions with our Chinese partners we entered a new Memorandum of Understanding with Sichuan Provincial Investment Group Company Limited. ("SCIG") and PowerChina International Group Limited ("PowerChina") to progress the updated application to PPIB for the LOI for initially a 700MW supercritical plant with plans to increase it by an additional 700W in the second phase, to provide 1,400MW of capacity at our Block VI site.  It is to be noted that the increase in power plant size from 660MW to 700MW is based on heightened demand.  The Chinese would take a majority shareholding in the project with SCIG having 78%, PowerChina 9.9% and Oracle 12.1% of the project companies with Oracle having the opportunity to increase its shareholding. A Consortium Agreement was submitted to PPIB to reflect this.

 

In February 2018, PPIB confirmed that they would issue the LOI along with a Notice to Proceed so that the applications for a Generation Licence and new Upfront Tariff can be made to NEPRA within 3 months of the issuance of the LOI. Following this, PPIB would issue a Letter of Support so that the Power Purchase Agreement ("PPA") can be finalised with the Central Power Purchasing Authority along with the Implementation Agreement with the Government of Pakistan which guarantees payment under the PPA. All of this will enable financial close to be achieved.

 

In addition to the regulatory processes in Pakistan, we will be finalising Engineering and Procurement Contracts ("EPC") with our Chinese partners along with Operation and Maintenance contracts for the construction and operation of the mine and power plant.

 

In March 2017, Mott MacDonald completed the Environmental and Social Impact Assessment ("ESIA") for the power plant and we submitted it to the Sindh Environmental Protection Agency ("SEPA") for approval. A public hearing was held on the site in July 2017 and was attended by the local community and other stakeholders; the proposal was well received. Also, in March 2017 Wardell Armstrong updated the original mine ESIA and brought it up to full international standards.

 

Work is continuing on site in preparation for development in particular to establish land ownership so that land acquisition and resettlement can be undertaken in accordance with the Resettlement Policy Framework published by the Sindh Coal Authority Energy Department in May 2015 which has been written to conform to international best practice. In March 2017, we conducted a census of the six villages in Block VI to establish population and livestock numbers. In addition, we are working to implement a Corporate Social Responsibility Programme ("CSR") to provide early benefits to the local community in terms of water, basic healthcare, education and veterinary support.

 

Our work in 2018 will concentrate on formalising agreements and contracts with our Chinese partners to bring the project to full implementation along with securing all the financing arrangements, including our equity funding.

 

I am most grateful to both the Provincial Government of Sindh and the Federal Government of Pakistan for their continuing support for developments in the Thar Coalfield, and our Block VI project in particular, which should be a major contributor to alleviating the electricity shortfall in the country. The Company again extends its thanks to the shareholders for their continued patience and support.

 

 

Shahrukh Khan,

Chief Executive Officer

 

 

 

 

Consolidated income Statement

for the year ended 31 December 2017

 


2017

2016

CONTINUING OPERATIONS

£

£

 

Revenue

-

-

Other operating income

-

-

Administrative expenses

(1,027,951)

(919,190)

OPERATING LOSS

(1,027,951)

(919,190)

Finance costs

(21,544)

-

Finance income

2,141

5,726

LOSS BEFORE INCOME TAX

(1,047,354)

(913,464)

Income tax

-

-

LOSS FOR THE YEAR

(1,047,354)

(913,464)

Loss attributable to:



Owners of the parent

(1,047,269)

(913,258)

Non-controlling interests

(85)

(206)


(1,047,354)

(913,464)

Earnings per share expressed in pence per share:



Basic

(0.11)

(0.10)

Diluted

(0.11)

(0.10)

 

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2017

 


2017

£

2016

£

LOSS FOR THE YEAR

(1,047,354)

(913,464)

OTHER COMPREHENSIVE INCOME



Exchange difference on consolidation

(239,356)

278,662

Income tax relating to components of other comprehensive income

-

-

OTHER COMPREHENSIVE INCOME FOR THE YEAR, NET OF INCOME TAX

(239,356)

278,662

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

(1,286,710)

(634,802)

Total comprehensive income attributable to:



Owners of the parent

(1,281,884)

(624,574)

Non-controlling interests

(4,826)

(10,228)


(1,286,710)

(634,802)

 Consolidated Statement of Financial Position

31 December 2016

 


2017

£

2016

£

ASSETS



NON-CURRENT ASSETS



Intangible assets

4,839,316

4,779,496

Property, plant and equipment

18,076

23,790

Loans and other financial assets

370,291

405,446


5,227,683

5,208,732

CURRENT ASSETS



Trade and other receivables

72,546

98,851

Cash and cash equivalents

126,178

505,904

TOTAL CURRENT ASSETS

198,724

604,755

TOTAL ASSETS

5,426,407

5,813,487

EQUITY



SHAREHOLDERS' EQUITY



Called up share capital

961,884

911,783

Share premium

11,622,166

10,900,723

Translation reserve

(96,030)

143,326

Share scheme reserve

-

109,588

Retained earnings

(7,355,072)

(6,417,391)


5,132,948

5,648,029

Non-controlling interests

12,841

17,667

TOTAL EQUITY

5,145,789

5,665,696

LIABILITIES



CURRENT LIABILITIES



Trade and other payables

280,618

147,791

TOTAL LIABILITIES

280,618

147,791

TOTAL EQUITY AND LIABILITIES

5,426,407

5,813,487

 

 Consolidated Statement of Changes in Equity

for the year ended 31 December 2017

 


Called up

share

capital

£

Retained earnings

£

Share

premium

£

Translation

Reserve

£

Balance at 1 January 2016

911,783

(5,534,399)

10,900,723

(132,534)

Loss for the year

-

(913,258)

-

-

Other comprehensive income

-

-

-

288,684

Increased investment in subsidiary

-

(9,928)

-

(12,824)

Share options expired

-

40,194

-

-

Balance at 31 December 2016

911,783

(6,417,391)

10,900,723

143,326

Loss for the year

-

(1,047,269)

-

-

Other comprehensive income

-

-

-

(239,356)

Issue of Share Capital

50,101

-

721,443

-

Share options expired

-

22,876

-

-

Share options exercised

-

86,712

-

-

Balance at 31 December 2017

961,884

(7,355,072)

11,622,166

(96,030)












Share

Scheme

Reserve

£

Total

£

Non-controlling interests

£

Total

Equity

£

Balance at 1 January 2016

149,782

6,295,355

5,143

6,300,498

Loss for the year

-

(913,258)

(206)

(913,464)

Other comprehensive income


288,684

(10,022)

278,662

Increased investment in subsidiary


(22,752)

22,752

-

Share options expired

(40,194)

-

-

-

Balance at 31 December 2016

109,588

5,648,029

17,667

5,665,696

Loss for the year

-

(1,047,269)

(85)

(1,047,354)

Other comprehensive income

-

(239,356)

(4,741)

(244,097)

Issue of Share Capital

-

771,544

-

771,544

Share options expired

(22,876)

-

-

-

Share options exercised

(86,712)

-

-

-

Balance at 31 December 2017

-

5,132,948

12,841

5,145,789

 

 Consolidated Statement of Cash Flows

for the year ended 31 December 2016

 


2017

£

2016

£

Cash flows from operating activities



Cash generated from operations

(830,845)

(1,028,337)

Interest paid

(21,544)

-

Net cash from operating activities

(852,389)

(1,028,337)

Cash flows from investing activities



Purchase of intangible fixed assets

(294,548)

(334,044)

Purchase of tangible fixed assets

(2,840)

(1,663)

Interest received

2,141

5,726

Net cash from investing activities

(295,247)

(329,981)

Cash flows from financing activities



Proceeds of share issue

771,544

-

Net cash from financing activities

771,544

-




Increase/((Decrease) in cash and cash equivalents

(376,092)

(1,358,318)

Cash and cash equivalents at beginning of year

505,904

1,860,662

Effect of exchange rate changes

(3,634)

3,560

Cash and cash equivalents at end of year

126,178

505,904

                                                                                                                                               

 

 

 

The financial information set out above does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.

 

The consolidated statement of financial position at 31 December 2017, the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended have been extracted from the Company's statutory financial statements upon which the auditor's opinion is unqualified, includes an emphasis of matter paragraph, and does not include any statement under Section 498 (2) or (3) of the Companies Act 2006. The emphasis of matter concerns the raising of finance for the opening up of the mine and construction of the power plant. 

 

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), as adopted by the European Union (EU), this announcement does not in itself contain sufficient information to comply with IFRSs. 

 

The statutory accounts for the year ended 31 December 2017 will be delivered to the Registrar of Companies following the Annual General Meeting.  The statutory accounts, Notice of Annual General Meeting to be held at 43 Brook Street, London, W1K 4HJ on Wednesday 13 June 2018 at 2:00 pm and Proxy Forms will be posted to shareholders shortly and will be available for download on the Company's website at www.oraclepower.co.uk.

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

For further information:

Oracle Power PLC

Shahrukh Khan

 

+44 (0) 203 580 4314

Brandon Hill Capital Limited

Oliver Stansfield

 

+44 (0)203 463 5000

Peterhouse Corporate Finance

Charles Goodfellow

 

+44 (0)20 7220 9791

Grant Thornton UK LLP (Nominated Adviser)

Salmaan Khawaja, Richard Tonthat

 

+44 (0) 207 383 5100

Blytheweigh                                                  

Tim Blythe, Camilla Horsfall, Megan Ray 

 

+44 (0) 207 138 3204

Fortbridge                                                

Matt Beale, Bill Kemmery

 

+44 (0)7966 389196

    

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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