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 strategy for Rurelec has now evolved as the disposal of the Argentinian interests and the reduction of the cost base over recent years has stabilised the financial position of the Group. We will continue to seek to sell the turbines which may take some time and concurrently we will recapitalise the business through a transformative acquisition to deliver shareholder value. We are in the early stages of considering opportunities which will take some months to prepare. We are also mindful of our obligations to complete an AIM Rule 14 compliant acquisition with the relevant timelines. Any such AIM Rule 14 compliant acquisition will be subject to shareholder approval; will be notified without delay and will be accompanied by the publication of an AIM Rule compliant admission document in respect of the proposed enlarged entity. The proposed acquisition may or may not be in the power and energy sector.

For a number of years, the Company’s shares have traded at a significant discount to net asset value making it dilutive to issue new shares. The Directors believe that this discount can be reduced or be eliminated if the turbines are sold, or their value can be ringfenced for the benefit existing shareholders. This is now a priority for us in the short term and ahead of any acquisition.

Non-Executive Director’s Statement of the 2022 Annual Report and Accounts.

In Accordance with the QCA Code and Principle 1, the Board is committed to strengthening the Group’s underlying financial position. The Board sets out to deliver long-erm value to shareholders in the following ways:

• Stabilising the Group’s position by reducing cash outflows;
• Reducing the Company’s vulnerability to fluctuations in the timing of debt repayments receivable from subsidiaries and JV;
• Working with joint venture partners to ensure that debts from those entities are repaid to the fullest extent possible;
• Using that financial stability to permit an orderly realisation of assets and investments in a timescale that allows maximisation of the proceeds of such sales;
• Where asset realisations are not possible in the short term due to market conditions, preserving the value of those assets and/ or maximising the cashflow generated by those assets and
• Look to recapitalise the business through a transformative acquisition

The execution of this strategy presents key challenges in the maximisation of returns on assets given market conditions. Those challenges are addressed by ensuring that the Company is stable enough to be able to avoid having to offload such assets when to do so would minimise value, instead choosing to seek opportunities to maximise the long-term returns that will optimise value for shareholders.

The business model as to how the Company plans to make money for its investors revolves around maximising the long term collection of debts owed in connection with the joint venture formed to develop the EdS business in Argentina, and the maximisation of dividend payments after those debts are repaid, whilst repaying Rurelec’s own creditors and continually assessing the value and saleability of its assets with a view to developing and/or realising those assets in such a way as to maximise the returns to all shareholders.

The Group and the Company are fully compliant with this principle.

For further information on our strategy please read the Strategic Report of the 2022 Annual Report and Accounts

The Board and Senior Officers of Rurelec are:

Rurelec PLC (the “Company”) is now an AIM Rules 15 cash shell following the sale of the Argentinian Assets on 9th June 2023, which was a fundamental disposal pursuant to the AIM Rules, the Company’s shares will be suspended on 11 December 2023 and ultimately delisted in June 2024 if a suitable acquisition constituting a Reverse Take-over has not occurred. The Directors are keen to retain the listing as a mechanism to maximise shareholder value, by making the Company attractive to potential high- quality acquisitions. The priority is, however, to maintain the resource necessary to preserve and realise the value of the Turbines which are the Company’s largest asset. The directors will only pursue acquisition opportunities that are both deliverable in the time frame available and which have a compelling investment case.

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:

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.

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.

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 31 December 2022 were as follows:

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:

• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping 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.

Website publication

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.

Plants in Operation

Argentina

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.

Bolivia

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.

Plants under Development

Peru

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.

Chile

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.

Engineering Services & O&M Services

Bangladesh

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.