Final Results

Rurelec PLC
07 November 2005



RURELEC PLC

PRELIMINARY ANNOUNCEMENT

RESULTS FOR THE YEAR ENDED 30 JUNE 2005

CHAIRMAN'S STATEMENT
                                                                                

This is the first Chairman's Statement for Rurelec PLC and it follows the
successful admission of the Company's shares to the AIM market of the London
Stock Exchange in August 2004. I am pleased to report that in its first year as
a quoted company Rurelec has produced a profit after tax of £132,350 from the
sale of 6 Jenbacher machines and now announces a proposed dividend of 0.5 pence
per share payable on 14 December 2005 to all shareholders on record as at 18
November 2005.


Rurelec began its life as a public company aiming to fulfil two principal
functions in Latin America. The first was the management of public sector rural
electrification projects and the second was the provision of new power
generation installations for regional communities. Since flotation, your Company
has made significant progress on new generation projects.


Since August 2004 Rurelec has initiated projects in Trinidad and Yacuiba in
Bolivia using Worthington dual fuel motors and General Electric Jenbacher gas
engines. At the time of writing, the Company's two Worthingtons are disassembled
and ready for transportation to new Amazonian sites while the three Jenbachers
have successfully been shipped from the Isle of Wight to Bolivia and are now
awaiting their generation licences for the new Yacuiba power plant, on the
border with Argentina.


On 29 July 2005 the Company completed the acquisition of a 50% interest in
Energia del Sur S.A., the 76 MW gas fired open cycle power plant in Comodoro
Rivadavia which supplies much needed power to the south of Argentina. This plant
has enjoyed a good season since re-starting power production at the beginning of
2005 and is trading profitably. In recent weeks the authorities in Argentina
have indicated their approval for the expansion of the plant by the addition of
up to 50 MW of new combined cycle capacity for commissioning as soon as possible
to deal with power shortages in Patagonia. This expansion project is now due to
break ground at the beginning of 2006.

 
At present Rurelec is exploring new expansion opportunities in Argentina and
Bolivia with a view to becoming an important force in the regional power
industry. Communities in Riberalta and Guayamerin on the Amazon Basin have
requested Rurelec's local power subsidiary, Energais, to install new capacity in
these isolated areas. Negotiations have begun for new power purchase agreements
in each city. The Company is also considering new isolated generation and rural
electrification projects in Northern Argentina.
 

At the same time the company intends to continue to take advantage of suitable
opportunities to trade in portfolios of power generation equipment where the
management's knowledge of the second hand equipment market can help source good
value motors and turbines for Rurelec projects while at the same time produce a
trading profit from the onward sale of surplus machines.
 

The Board is confident that the demand in Latin America which has led to
Rurelec's strong start as a generation company will be matched by a steady flow
of new power projects. With this in mind, the Board is pleased to recommend to
shareholders a first dividend of 0.5 pence per share from the Company's reported
profits as a mark of our confidence in the future of Rurelec in Latin America.
 

Jimmy West
Chairman
Date: 7 November 2005
 


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RURELEC PLC


CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 2005
                                                                              

                                                     Unaudited
                                                          2005            2004
                                          Notes              £               £
 
Turnover                                      2      1,000,000               -

Cost of sales                                         (666,666)              -

Gross profit                                           333,334               -

Administrative expenses                               (178,632)            (22)

Operating profit / (loss)                              154,702             (22)

Interest receivable                                     10,648              65

Profit on ordinary activities                          165,350              43
before taxation

Taxation                                      3        (33,000)              -

Profit after taxation                                  132,350              43

Dividends                                     4       (106,750)              -

Retained profit                                         25,600              43



Earnings per share (basic)                    5           1.09p              -

Earnings per share (diluted)                  5           1.09p              -

 
All transactions arose from continuing operations.


Statement of total recognised gains and losses


Profit for the financial year                           25,600              43

Exchange differences                                     1,198               -

Total recognised gains and losses                       26,798              43

  

The accompanying accounting policies and notes form an integral part of these
financial statements.


                                      -2-                                       
                                                                                
 
RURELEC PLC


CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2005

                                                                                

                                          Unaudited
                                               2005               2004
                                   Notes          £          £        £        £

Fixed assets
Intangible assets                                      147,294                -
Tangible assets                        6               570,814                -

                                                       718,108                -

Current assets
Debtors                                     239,412                   -
Cash at bank and in hand                    463,348             200,043

                                            702,760             200,043

Creditors: amounts falling
due within one year                        (344,972)                  -

Net current assets                                     357,788          200,043

Total assets less current liabilities                1,075,896          200,043

Provision for liabilities                              (33,000)               -
and charges

                                                     1,042,896          200,043


Capital and reserves
Called up share capital                7               252,000          200,000
Share premium account                                  764,055                -
Profit and loss account                                 26,841               43

Shareholders' funds
- equity interests                     8             1,042,896          200,043

 

 

The accompanying accounting policies and notes form an integral part of these
financial statements.

 
                                                                                

                                      -3-                                       

 

RURELEC PLC


CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2005
                                                                               

                                                     Unaudited
                                                          2005            2004
                                          Notes              £               £

Net cash inflow / (outflow) from                       143,304             (22)
operating activities

Returns on investments
Interest received                                       10,648              65

Capital expenditure
Fixed assets                                          (414,592)              -

Acquisitions and disposals
Purchase of subsidiary                        9       (292,110)              -

Net cash (outflow) / inflow                           (552,750)             43
before financing

Financing
Shares issued less issue expenses                      816,055         200,000

Net cash inflow from financing                         816,055         200,000

Increase in net cash                                   263,305         200,043

 
Reconciliation of operating profit to net cash outflow from operating activities

                                                          2005            2004
                                                             £               £

Group operating profit / (loss)                        154,702             (22)
Amortisation of goodwill                                 5,739               -
Increase in debtors                                   (239,412)              -
Increase in creditors                                  222,275               -
Net cash inflow / (outflow) from operating activities  143,304             (22)


Reconciliation of net cash flow to movement in net funds

Increase in cash during year                           263,305         200,043

Net funds at beginning of the year                     200,043               -

Net cash at end of year                                463,348         200,043

Analysis of change in net funds

                                            1.7.2004     Cash flow     30.6.2005
                                                   £             £             £
Cash at bank and in hand                     200,043       263,305       463,348

 
                                                                                

                                      -4-                                       


RURELEC PLC


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2005


1   Accounting policies


The financial statements have been prepared in accordance with applicable
accounting standards under the historical cost convention. The policies have
been reviewed and have remained unchanged from the previous year.
 

1.1 Basis of consolidation

The financial statements include the financial results of the company and its
subsidiary undertaking to 30 June 2005. The financial results of the subsidiary,
which has a non-coterminous year end, are consolidated using interim accounts
prepared to 30 June 2005. The results of subsidiaries acquired are included in
the consolidated profit and loss account from the date when control passes using
the acquisition method of accounting.


1.2 Turnover and revenue recognition

Turnover represents amounts receivable for goods and services provided,
including the sale of power generation equipment, net of trade discounts, VAT
and other related taxes. Revenue is recognised when the risks and rewards of the
goods and services have been passed on to the customer.


1.3 Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost less depreciation. Depreciation is
provided at rates calculated to write off the cost, less estimated residual
value, of each asset over its expected useful economic life, as follows:


Plant and equipment                         over 15 to 20 years


1.4 Goodwill

Goodwill represents the difference between the fair values of assets and
liabilities acquired and the consideration paid. Goodwill arising in respect of
acquisitions is capitalised and included in the group balance sheet under
intangible assets. It is amortised on a straight line basis over 20 years which
is deemed to be its useful economic life. It is reviewed for impairment at the
end of the first full year following the acquisition and in other periods if
events or changes in circumstances indicate that the carrying value may not be
recoverable.


1.5 Deferred taxation

The charge for tax is based on the profit for the year and takes into account
tax deferred or accelerated because of timing differences between the treatment
of certain items for accounting and tax purposes. Full provision is made for
deferred tax resulting from timing differences between profits computed for tax
purposes and profits stated in the financial statements to the extent that there
is an obligation to pay more tax in the future as a result of the reversal of
those timing differences. Deferred tax assets and liabilities are recognised to
the extent that they are expected to be recoverable and are measured on a
non-discounted basis based on tax rates and laws substantially enacted at the
balance sheet date.


1.6 Financial instruments

Financial assets are recognised in the balance sheet at the lower of cost and
net realisable value. Provision is made for diminution in value where
appropriate. Income and expenditure arising on financial instruments is
recognised on the accruals basis, and credited or charged to the profit and loss
account in the financial period to which it relates.

                                                                                

                                      -5-                                       


RURELEC PLC

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2005


1 Accounting policies - continued

1.7 Foreign currency

Transactions in foreign currencies are translated at the exchange rate ruling at
the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the balance sheet
date. The financial statements of foreign subsidiaries are translated at the
rate of exchange ruling at the balance sheet date. The exchange differences
arising on the retranslation of the opening net investment in subsidiaries are
taken directly to reserves. Any gain or loss arising from a change in exchange
rates subsequent to the date of the transaction is included as an exchange gain
or loss in the profit and loss account.


2 Turnover

 

The total turnover of the group for the year has been derived from the disposal
of 6 power generation machines which were originally acquired as a part of a
larger set and which were surplus to the group's immediate requirements.


3 Taxation                                                  2005          2004
                                                               £             £
UK corporation tax                                             -             -
Deferred tax                                              33,000             -
Tax charge for the year                                   33,000             -

Deferred tax at a rate of 19% has been fully provided for in relation to
accelerated capital allowances.


4 Dividends                                                 2005          2004
                                                               £             £
Proposed dividend at the rate of 0.5p per share          106,750             -


5 Earnings per share

The calculation of earnings per share is based on the profit on ordinary
activities after taxation, namely a profit of £132,350 (2004 - £43) and on
12,121,096 (2004 - 10,000,000) ordinary shares, being the average weighted
number of ordinary shares in issue and ranking for dividend during the year. The
fully diluted calculation of earnings per share, which is based on the same
profit figures and on 13,051,781 ordinary shares, is unchanged from the basic
calculation as the warrants are anti-dilutive.

                                                            2005          2004

Earnings per share (basic)                                  1.09p            -

Earnings per share (diluted)                                1.09p            -

                                                                            

                                      -6-                                       
  

RURELEC PLC


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2005

6 Tangible fixed assets

                                                       Plant and
                                                       equipment
                                                               £
Cost - at 1 July 2004                                          -
Additions                                                414,592
Additions (arising on acquisition of subsidiary)         156,222
At 30 June 2005                                          570,814
Net book value - 30 June 2005                            570,814
Net book value - 30 June 2004                                  -

Fixed assets includes £67,300 of fees charged by Independent Power Corporation
PLC (see note 10) and £7,585 of capitalised costs. No depreciation has been
charged in the year as the assets are in the course of construction.


7 Share Capital                                              2005         2004
                                                                £            £
a) Authorised
    30,000,000 ordinary shares of 2p each                 600,000      250,000
   (2004 - 12,500,000 ordinary shares of 2p each)

b) Allotted, called up and fully paid
    12,600,000 ordinary shares of 2p each                 252,000      200,000
   (2004 - 10,000,000 ordinary shares of 2p each)


Reconciliation of movement in share capital during the year
                                                                             £
At 1 July 2004                                                         200,000
Allotment of 2,000,000 shares on 18 August 2004                         40,000
Allotment of 600,000 shares on 5 November 2004                          12,000
At 30 June 2005                                                        252,000

On 18 August 2004, the company issued as fully paid 2,000,000 ordinary 2p shares
for cash at 40p per share on initial listing. The difference between the total
consideration of £800,000 and the nominal value of £40,000 has been credited to
the share premium account (£760,000).

On 5 November 2004, the company issued as fully paid 600,000 ordinary 2p shares
for cash at 42.5p per share to provide additional capital for development of
equipment. The difference between the total consideration of £255,000 and the
nominal value of £12,000 has been credited to the share premium account
(£243,000).

 
c) Warrants

On 18 August 2004, the company issued:

i)      75,000 warrants to subscribe for ordinary shares on a 1:1 basis at 40p
per share. These warrants expire on 17 August 2006.
ii)    1,000,000 warrants to subscribe for ordinary shares on a 1:1 basis at 60p
per share (if exercised prior to 12 August 2005) or 80p per share if exercised
after 12 August 2005 but before 17 August 2006. These warrants expire on 17
August 2006.

 

                                      -7-                                       

RURELEC PLC


NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2005


8 Reconciliation of movement in shareholders' funds

                                                                            £
At 1 July 2004                                                        200,043
Profit for the year                                                    25,600
Foreign exchange movement                                               1,198
New share capital                                                      52,000
Share premium account                                                 764,055
At 30 June 2005                                                     1,042,896


9 Acquisition of subsidiary

On 8 October 2004, the company acquired 100% of the equity of Energia Para
Sistemas Aislados S.A., a company incorporated in Bolivia. Its principal
activity is the implementation of power generation projects in Bolivia.

                                                                            £
Fixed assets acquired                                                 156,222
Current liabilities acquired:
Creditors                                                             (17,145)
Net assets acquired                                                   139,077
Purchased goodwill                                                    153,033
Cash consideration                                                    292,110

The provisional fair values of the assets and liabilities acquired were equal to
their book values.


10 Related party transactions

During the year, the company:

i) paid £110,000 to Independent Power Corporation PLC under a 'Shared Services
Agreement'. Of this sum, £67,300 has been capitalised in fixed assets as fees
directly attributable to specific projects undertaken in relation to the group's
plant and equipment and £42,700 has been expensed as fees relating to the
provision of serviced offices and other administrative overheads. P R Earl is a
shareholder and director of Independent Power Corporation PLC and J G West and E
R Shaw are directors. A sum of £11,750 was outstanding at the year end.

ii) paid £7,750 to Jimmy West Associates Ltd, a company in which J G West is a
shareholder and director, for management services.


11 Post balance sheet date events

On 29 July 2005, the company issued 8,750,000 ordinary 2p shares for 40p each
for cash by way of placing, raising £3m, net of expenses.

Subsequent to the placing, on 29 July 2005 the company acquired a 50% interest
in Patagonia Energy Limited, a company registered in the British Virgin Islands
for a consideration of up to US$6m in cash. The first tranche of US $4.5m has
been paid. The balance payable, up to a maximum of US$1.5m, is dependent upon
the future profits of Energia del Sur S.A., a company incorporated in Argentina.

Patagonia Energy Limited wholly owns directly (and indirectly through Electrica
del Sur S.A.) Energia del Sur S.A., a company which is registered in Argentina
and which owns and operates a generating plant supplying electricity in Southern
Patagonia, Argentina.


                                      -8-                                       


RURELEC PLC

NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2005


12 Financial information

The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.

The preliminary announcement includes the consolidated profit and loss account,
the consolidated balance sheet, the consolidated cash flow statement and other
primary statements and associated notes that have been extracted from the
group's financial statements for the year to 30 June 2005. Those financial
statements have not yet been delivered to the Registrar, nor have the auditors
reported on them. The comparative figures relating to the year to 30 June 2004
are taken from the audited statutory accounts for that year.
                                                                              

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END 

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