23 June 2021
Oracle Power PLC
("Oracle", the "Company")
Final Results, Posting of 2020 Annual Report & Notice of AGM
Oracle Power PLC (AIM:ORCP, AQSE:ORCP), the international natural resources and power project developer, today announces its audited results for the year ended 31 December 2020.
Posting of Annual Report & Notice of AGM
The notice of the Company's annual general meeting ("AGM") ("Notice of AGM"), together with the Annual Report and Accounts for the year ended 31 December 2020 ("2020 Annual Report"), have been posted to shareholders and both are available to download on the Company's website. The AGM is to be held at Two Kingdom Street, London W2 6BD on Friday 16 July 2021 at 11:00 a.m.
As at the date of this Notice of AGM, it is expected that the UK Government's legal restrictions (due to Covid-19) on the ability of people to meet indoors will remain in place at the date of the AGM. Therefore, Shareholders will not be permitted to attend and the Company will arrange for the minimum quorum to be present at the AGM.
For more information, please refer to the Notice of AGM and the 2020 Annual Report, which can be found on the Company's website under 'Shareholder Circulars' and 'Financial Reports' respectively.
For further information on Oracle Power Plc, visit the Company's website http://www.oraclepower.co.uk or contact
Oracle Power PLC
Naheed Memon - CEO +44 (0) 203 580 4314
Strand Hanson Limited (Nominated Adviser)
Rory Murphy, James Harris, Rob Patrick +44 (0) 20 7409 3494
Brandon Hill Capital Limited (Joint Broker)
Oliver Stansfield +44 (0) 203 463 5000
Shard Capital (Joint Broker)
Damon Heath, Isabella Pierre +44 (0) 20 7186 9952
St Brides Partners Limited (Financial PR)
Susie Geliher, Catherine Leftley +44 (0) 20 7236 1177
This announcement contains inside information for the purposes of Article 7 of EU Regulation No. 596/2014, which forms part of United Kingdom domestic law by virtue of the European (Withdrawal) Act 2018.
I am pleased to present the results for Oracle Power Plc for the year ended 31 December 2020.
2020 has proven to be a difficult year. The COVID 19 pandemic has made travelling almost impossible for ourselves and our partners. Whilst "Zoom" and "Teams" have both been useful tools for sharing ideas and for formal meetings, nothing beats being able to sit and discuss business face to face.
Notwithstanding the above, in September 2020 a meeting was arranged between our consortium and the senior members of the Private Power & Infrastructure Board (PPIB). This was Chaired by Imran Khan's Special Advisor on Power and included a representative of CPEC and a representative of the Ministry of Energy. As a result of that meeting Oracle has been asked to assist the Pakistan government in designing the framework for a feasibility study into making gas and fertiliser from coal.
As I mentioned in my report last year, we have been approached by a number of people who are involved in mining and power related projects who feel that Oracle would be a symbiotic partner. Whilst the Thar projects are, and should remain, our primary focus, we are conscious of the need to have projects that have a faster turnaround. To this end, in November 2020, we acquired two gold licenses in Western Australia, the Jundee East Project and the Northern Zone Project. Both licenses are in world class gold mining districts and add an important new dimension and commodity exposure to our shareholders
We were sad to lose Glen Lewis from the board who was a good fit with Oracle. After six months, Glen decided to retire from the board as a non-executive director as he felt that living and working in Australia made attending Board meetings and being available for management meetings at short notice difficult with the time zone differences. In addition to this, Glen anticipated that, as we start to expand our project portfolio, conflicts of interest between his existing directorships and Oracle may occur.
In December, we appointed Nicholas Lee as Company Secretary and head of finance. Nick is a Chartered Accountant with extensive experience both as a merchant banker but also as an advisor and director with a number of listed companies.
I am also delighted that in March 2021 we appointed David Hutchins as a Non-Executive director. David is a highly experienced corporate mining and commodities professional. During his career he has held several executive roles for both listed and private companies and is currently the Chair of the FTSE Gold Mines Index Committee. David currently sits on the Board of Wishbone Gold Plc (AIM: WSBN), an Australian focussed gold specialist company operating in exploration, mining, and bullion trading. David is ideally suited to assisting us in the development of our gold projects.
Financially we are in good health. We have substantially reduced our fixed costs; we have a healthy bank account and we have not needed to go to the market to raise funds for the day to day running of the company.
Operational highlights of 2020 are described in the Chief Executive's Report.
The Government of Imran Khan remains supportive of the development of Thar coal and of relations with China. The broad parameters of security remain as last year: there have been no major incidents and, overall, the army has maintained order.
We are most grateful to the Pakistani Authorities at both Federal and Provincial levels, to the Chinese Authorities through China Coal and the Joint Cooperation Committee (JCC) of CPEC for the constructive way in which they have all supported and continue to support our project.
Above all, I wish to thank our shareholders for their continued confidence, patience, and support, enabling us to move the project towards realisation.
Mark W Steed
CHIEF EXECUTIVE'S REPORT
I am pleased to present a report on the Company's progress for the year ended 31 December 2020.
Oracle entered 2020 on the back of success, following the finalisation of an important partnership with His Highness Sheikh Ahmed Bin Dalmook Al Maktoum and China National Coal Development Company. A consortium agreement detailing planned proportional investments for the project at Thar, Pakistan, was signed in February 2020. We proceeded to apply for an LOI (letter of intent) for a 1320MW mine mouth power plant, to PPIB. The consortium partners jointly paid the application fees, endorsing their role as applicants and developers of Block VI. On issuance of the LOI, the consortium will proceed to apply to NEPRA (National Electric Power Regulatory Authority) for a cost plus tariff and generation license.
After the breakthrough development in November 2019, with respect to obtaining support for Coal to Gas (CTG) in CPEC, significant progress was made towards the development of CTG and CTL (coal to liquid) projects at Block VI, in 2020. China Coal, Oracle's principal technical consortium partner, prepared a pre-feasibility to mobilise work on these projects at Block VI. It was also decided after discussions with the Ministry of Planning and Development and the Ministry of Energy, that in order to expedite CTG/L project development, a policy proposal based on input received from China Coal, should be submitted to the Government of Pakistan, in order for an appropriate commercial incentive package for CTG/L projects to be approved. Consequentially, consultants were engaged in December 2020 for this task. Post period, this policy proposal was jointly submitted to the Ministry of Energy (Petroleum Division) and it is expected that a firm policy built on the commercial viability of CTG/L projects would be made available to investors in 2021, so that they can proceed with the feasibility studies. In the next phase, once approval is given for the CTG/L policy by the Pakistan Cabinet, China Coal will conduct a technical feasibility for CTG/L and the consortium will engage with the Government to firm a pricing structure that could potentially secure financing.
I can confirm that Oracle continued to make very good progress in 2020 in Pakistan, overcoming delays and numerous Covid related issues. We essentially upgraded the size and value of our project in Pakistan, in preparation of an imminent critical gas shortage in the country. Oracle has received tremendous support from the Government of Pakistan for an enhanced development plan at Block VI and during the course of 2020, the government of Pakistan endorsed its support for a diversified usage of Thar Coal. In a meeting called by the Special Assistant to the PM on Power, at the PPIB, and attended by His Highness Sheikh Ahmed Bin Dalmook Al Maktoum, the President of China Coal, and the Chairman of Oracle Power, the Company presented this enhanced investment proposal to develop the mine, power plant, CTG facility, urea manufacturing, and CTL processing as part of an Industrial Park at Block VI, with a gross value in excess of 6 billion USD. Oracle has moved from being a mine and power plant developer to a mine and coal developer for multiple uses and is now recognised as a committed and qualified front runner for the development of Pakistan's principal indigenous energy resource.
I am also very pleased to report that despite all challenges presented by the ongoing pandemic, Oracle successfully diversified its portfolio of projects, enhancing value for its shareholders by extending its commodity focus and also mitigating single jurisdiction risk. The economical acquisition of two gold projects in Western Australia in November, amidst a global downturn, has we believe increased the inherent value of the Company significantly. We have made very quick progress in early-stage exploration within months of acquiring the tenements. Post period results from these two tenements have proved very positive and it is expected that resource scale will be suitably estimated in 2021. Project management and geological consulting have been set up in Perth and, despite travel restrictions, the mining industry in WA has proved to be very efficient and economically priced. Work on the ground continues at a fast pace as drilling programs post surveys and chemical testing are set up for 2021. The Company also shared a development plan for the WA projects post period and we expect to keep pace with our exploration goals in 2021.
Many proposals were shown to us for joint ventures and acquisitions in Africa, South America, Europe and Asia during the course of 2020 as we continue to establish ourselves as a reputable and effective project development platform committed to high returns in various growth sectors. I can confirm that the Company deployed appropriate resources to assess various projects and continues to do so.
The Company also took a decision to access financing through a pre-paid subscription facility of £1.5 million and an arrangement to have access to a further £45 million.
Unfortunately, 2021 has not yet signalled global economic recovery in many parts of the world and travel still remains restricted. However, our management model is conducive for working remotely and outsourcing. Our business operations are strictly goal oriented and the management structure remains lean.
Further, whilst global conditions remain uncertain, Oracle's projects in Pakistan and Australia are centred on the development of assets which provide a hedge against economic insecurity. In Pakistan, Oracle's work has become more important as it can set up ways for Pakistan to become self-sufficient in energy and even food. Similarly, upon successful development of gold mines in WA, the Company would deliver returns through production of a commodity which sits on an upward trajectory of prices in a fragile financial world. I am optimistic about the future and we see many opportunities amidst the current global crisis.
I remain grateful to the Government of Pakistan for its continuing support for the Block VI project, which we strongly believe will produce cheaper abundant power and become an important feedstock for Pakistan's agriculture sector in the future. I am also indebted to many mining professionals in WA for their dedication and efficient work on the ground. We would be unable to develop these projects without their commitment to our success. I would also like to express my gratitude to all those who support Oracle in the UK, and help us to manage regulatory affairs, public relations, accounting compliance, brokerage and market trading.
I also extend my greatest thanks to the shareholders for their support and belief in the Company, and for placing their trust in its management.
Ms Naheed Memon
Chief Executive Officer
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2020
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 DECEMBER 2020
COMPANY STATEMENT OF FINANCIAL POSITION
31 DECEMBER 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
31 DECEMBER 2020
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2020
NOTES TO THE CONSOLIATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2020
1. STATUTORY INFORMATION
Oracle Power PLC is a public company, limited by shares and registered and domiciled in England and Wales. It is the ultimate holding company of the Oracle Power Plc Group. The Group is primarily involved in an energy project, based on the exploration and development of coal and building a mine-mouth power plant in Pakistan. The presentation currency of the financial statements is the Pound Sterling (£). The Company's registered number and registered office address can be found on the General Information page.
2. ACCOUNTING POLICIES
The Directors have considered the cashflow requirements of the Group over the next 12 months and believe there are sufficient existing funds to meet overhead requirements. It will be necessary to raise additional funds to bring the project to financial close. The Directors expect to meet the funding requirements and therefore believe that the going concern basis is appropriate for the preparation of the financial statements.
The Directors have also considered the COVID-19 global pandemic and whether any adjustments are required to reported amounts in the financial statements. Subsequent to the reporting date with social distancing and restrictions on travel and in person meetings business has had to be carried out in a very different way which can delay or stop critical decisions being made.
The Directors have been able to continue with aspects of the project despite the restrictions put in place to deal with the pandemic. They have been able to carry out all internal functions as normal and progress the project.
Compliance with accounting standards
These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and IFRIC interpretations and with those parts of the Companies Act 2006 applicable to reporting groups under IFRS.
The financial statements have been prepared under the historical cost convention.
Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for revenues and expenses during the year and the amounts reported for assets and liabilities at the statement of financial position date. However, the nature of estimation means that the actual outcomes could differ from those estimates.
The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement of any impairment on intangible assets and the estimation of share-based payment costs.
The principal risk and uncertainty of the intangible assets (exploration assets) is that the Group may not reach financial close - as disclosed in Note 9. The board have tested the intangible assets for impairment. For this test, the board considered market values of the assets (where applicable); results from technical and feasibility studies and reports; and the possibility of future project options available. Based on this, the board have concluded that no impairment provision is required.
The Group determines whether there is any impairment of intangible assets on an annual basis.
At the balance sheet date, the intangible assets are carried forward at their cost of £5,256,313.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
Business acquisitions have been accounted for in accordance with IFRS 3, 'Business Combinations'. Fair values are attributed to the Group's share of net assets. Where the cost of acquisition exceeds the fair values attributed to such assets, the difference is treated as purchased goodwill and is capitalised. In the case of subsequent acquisitions of minority interests, the difference between the consideration payable for the additional interest in the subsidiary and the minority interest's share of the assets and liabilities reflected in the consolidated statement of financial position at the date of acquisition of the minority interest has been treated as goodwill.
Intangible fixed assets - exploration costs
Expenditure on the acquisition costs, exploration and evaluation of interests in licences, including related finance and administration costs, are capitalised. Such costs are carried forward in the statement of financial position under intangible assets and amortised over the minimum period of the expected commercial production of coal in respect of each area of interest where:
a) such costs are expected to be recouped through successful development and exploration of the area of interest or alternatively by its sale;
b) exploration activities have not yet reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active operations in relation to the areas are continuing.
An annual impairment review is carried out by the Directors to consider whether any exploration or development costs have suffered impairment in value where a site has been abandoned or confirmed as no longer technically feasible. Accumulated costs in respect of areas of interest that have been abandoned are written off to the profit and loss account in the year in which the area is abandoned.
Exploration costs are carried at cost less any provision for impairment.
Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.
Fixtures and fittings - 15% on reducing balance
Motor vehicles - 20% on reducing balance
Computer equipment - 30% on reducing balance
Fixed asset investments are stated at cost. The investments are reviewed annually and any impairment is taken directly to the statement of profit or loss. Investments in subsidiaries are fully consolidated within the Group financial statements.
Financial assets and liabilities are recognised on the statement of financial position when the Group becomes a party to the contractual provisions of the instrument.
- Cash and cash equivalents comprise cash held at bank and short term deposits
- Trade payables are not interest bearing and are stated at their nominal value
- Receivables denominated in foreign currency are retranslated at the balance sheet date
- Equity instruments issued by the Company are recorded at the proceeds received except where those proceeds appear to be less than the fair value of the equity instruments issued, in which case the equity instruments are recorded at fair value. The difference between the proceeds received and the fair value is reflected in the share based payments reserve.
Current taxes are based on the results shown in the financial statements and are calculated according to local tax rules, using tax rates enacted or substantially enacted by the statement of financial position date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the statement of financial position date.
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the statement of financial position date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.
Profit and losses of overseas subsidiary undertakings are translated into sterling at average rates for the year. The statements of financial position of overseas subsidiary undertakings are translated at the rate ruling at the statement of financial position date. Differences arising from the translation of Group investments in overseas subsidiary undertakings are recognised as a separate component of equity.
Net exchange differences classified as equity are separately tracked and the cumulative amount disclosed as a translation reserve.
The principal place of business of the Group is the United Kingdom with sterling being the functional currency. Funds are advanced to Pakistan as required to finance the exploration costs which are payable locally.
All leases held are either short-term leases or are for low value assets. The rentals paid are charged to the statement of profit or loss on a straight line basis over the period of the lease.
Employee benefit costs
The group operates a defined contribution pension scheme. Contributions payable to the group's pension scheme are charged to the income statement in the period to which they relate.
Share-based payment transactions
Where equity settled share warrants are awarded to employees, the fair value of the warrants at the date of grant is charged to the statement of profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of warrants that eventually vest. Market vesting conditions are factored into the fair value of all warrants granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where terms and conditions of warrants are modified before they vest, the increase in the fair value of the warrants, measured immediately before and after the modification, is also charged to the statement of profit or loss over the remaining vesting period.
Where equity instruments are granted to persons other than employees, the statement of profit or loss is charged with the fair value of goods and services received.
Cash and cash equivalents
Cash and cash equivalents for the purpose of the cash flow statement comprise cash and bank balances.
New standards and interpretations applied
In preparing these financial statements the Company has reviewed all new standards and interpretations.
New Standards, Interpretations and Amendments effective from 1 January 2020
The following new and revised Standards and Interpretations have been adopted in these financial statements but their adoption has not had any significant impact on the amounts reported in these financial statements:
- IFRS 3 Business Combinations (amended 2018)
- IFRS 7 Financial Instruments: Disclosures (amended 2019)
- IFRS 9 Financial Instruments (amended 2017)
- IAS 1 Presentation of Financial Statements (amended 2018)
- IAS 8 Accounting Policies (amended 2018)
The other new and revised Standards and Interpretations are not considered to be relevant to the Company's financial reporting and operations and are not detailed in these financial statements.
New Standards, Interpretations and Amendments that are not yet effective and have not been adopted early
The following new and revised Standards and Interpretations are relevant to the Company but not yet effective for the year commencing 1 January 2020 and have not been applied in preparing these financial statements:
- IAS 37 Provisions, Contingent Liabilities and Contingent Assets (amended 2020)
- IFRS 9 Financial Instruments (amended August 2020)
- IFRS 7 Financial Instruments: Disclosures (amended 2020)
- IFRS 16 Leases (amended August 2020)
The Directors do not consider that the implementation of any of these new standards will have a material impact upon reported income or reported net assets.
3. SEGMENTAL REPORTING
The principal activity of the Group is an energy project, based on the exploration and development of coal mining and building a mine-mouth power plant in Pakistan. Group intangible non-current assets of £4,694,855 (2019: £4,633,022) are attributable to the project in Pakistan. The remaining Group intangible non-current assets of £561,459 relate to an investment in Western Australia for the exploration and future extraction of gold.
To-date the Group has raised a total £20.6m and spent £17.8m on Thar Block VI and £0.6m on the Western Australia gold project.