The directors present the strategic report for the year ended 31 March 2022.
Principal Activity
The principal activity of the Group (being the Company and its subsidiaries together, the "Group") during the year was the operation and maintenance of a gas pipeline and gas-fired power station at Newport, South Wales.
The subsidiary and associated undertakings principally affecting the profits or net assets of the Group in the year are listed in note 15 to the financial statements.
Health, Safety and Environmental
Health and Safety (“H&S”) has and will continue to be of utmost importance to the Group, its Directors and staff.
The Directors are happy to report that Health and Safety (“H&S”) continued to be excellent with no lost time accidents, a low level of near misses and a high level of management and staff safety walks.
The Group’s excellent environmental record continued, with no operational events outside of permit limits during the year.
Financial Performance
The loss for the year before taxation, amounts to £3,859,000 (202 1 : profit of £ 466,272 ,000 ).
The current year performance is inline with the Directors’ expectations of a plant that is in a preserved state.
The prior year results are significantly impacted by an exceptional income balance in the year of £ 484,785 ,000.
On 24 th August 2020 the Company went into administration and was put into a state of managed preservation w hich triggered a number of impairments in the year ended March 2020, however on 26 th March 2021 the Company successfully exited administration via a creditors’ voluntary agreement (“CVA”).
As part of this process, £ 486,760 ,000 of liability balances were released, creating an exceptional income in the profit and loss account for the year ended 31 March 2021. This release comprised £ 475,709 ,000 of amounts previously due to group companies and £11,051,000 of trade creditor as certain external supplier contracts were terminated. The year ended 31 March 2021 also saw a further impairment being recognised against amounts due from group companies of £1,975,000, due to the impact of administration in these respective companies.
Following the restricting of liability from the CVA process, as at 31 March 202 2 the Group strengthened its balance sheet significantly with net assets of £ 195,672 ,0 0 0 (202 1 : £ 199,530 ,000) and net current liabilities of £ 5,620 ,000 (202 1 : £ 7,448 , 0 00).
On March 27 th 2022, the CVA was completed.
Future Outlook
Following the successful exit of administration, the Directors plan that the pipeline and station will be held in a managed preservation state whilst strategic options are explored.
In addition, the Directors are continually looking at ways to optimise the cost base to help the financial performance of the business.
The business still faces a number of areas of uncertainty such as those detailed in the principal risks and uncertainties section below.
The management of the Group and the execution of the Group’s strategy are subject to risks typically associated with the operation of a power plant in the UK. The key business risks and uncertainties affecting the Group when operational and other power plants in the UK market include health and safety, plant availability and volatility within the UK and European energy markets.
As noted in the Future Outlook section of this report, following the successful exit of the administration , the station will be held in a state of managed preservation, the key principal risk to the Company still remains that of Health and Safety.
Health and safety risk
The Health and Safety of all employees, contractors and visitors who attend the site is a key focus for the Group. To mitigate this risk the Group staff attend regular H&S updates. H&S KPIs are key statistics managed by the senior staff. Feedback systems and other H&S initiatives are used to help create a culture that has H&S as one of its key priorities.
Whilst in pr e se r vation , the main objective of the Group is to maintain an exemplary Health and Safety record.
|
Year ended |
Year ended |
Definition, method of calculation |
|
31-Mar-2 2 |
31-Mar-2 1 |
|
Days without lost time accidents |
1,217 |
852 |
The number of days since the last accident at the power station that requires an employee or contractor to be off work for a period greater than 24 hours. |
The Directors have selected Days without Lost Time Accident as its Health and Safety KPI due to its industry standard calculation and comparison.
Future KPIs will be reviewed by the Directors in light of the ongoing preservation status.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 March 2022.
The results for the year are set out on page 9.
The Directors cannot recommend the payment of a dividend (2021: £nil).
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Objectives and policies
The Company's operations expose it to a variety of financial risks that include the effects of interest rate risk and cash flow risk. The Company has in place a risk management program that seeks to limit the adverse effects of these risks on the financial performance of the Company.
The auditor, Azets Audit Services, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
On 24 June 2020 Calon Energy Limited ('the parent Group’) – the parent company of Severn Power Limited (‘the Group’) entered administration.
The Directors have prepared a cash flow forecast for the period to 31 March 2025 which represents the Directors’ best estimate of the future development of the Group.
Having consulted with the secured lender, the Directors had agreed the material terms of an appropriate funding agreement which all parties envisaged would be signed. However whilst this arrangement was being finalised, the parties operated a flexible funding arrangement which provided funding on a month-by-month basis at the discretion of the secured lender.
Whilst it is still anticipated that the funding agreement will be entered into, the directors and secured lender anticipate that the flexible funding arrangement will be retained for the foreseeable future.
Based on the ongoing positive relationship with the secured lender and following preparation of detailed forecasts, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and as such, believe that it remains appropriate to prepare the financial statements on a going concern basis. In making this judgement, the Directors expect that the Group’s principal activity of the operation of a gas pipeline and gas-fired power station at Newport, South Wales will continue.
The Directors also recognise that from an accounting perspective the absence of any formal long term funding arrangement creates a small level of uncertainty and therefore risk that the required level of support may not be received for the necessary timescales.
This constitutes a material uncertainty related to the assumptions described above which may cast doubt on the Group’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. In the event the Group ceased to be a going concern, the adjustments would include writing down the carrying value of assets, to their recoverable amount and providing for any further liabilities that might arise.
In addition to the third party funding, the directors have confirmation from the parent Group companies that the intercompany amounts due to them will not be requested within 12 months of the approval date of these accounts. The parent Group companies have confirmed that it is not currently their intention to demand repayment. Due to the relationship with the parent Group companies, the directors are of the view that the intercompany amounts will not be requested in the next 12 months, however the confirmation received does create a material uncertainty as it is not a guarantee that the intercompany creditors will not be recalled within 12 months from the approval dates of these accounts.
Notwithstanding the material uncertainties described above, on the basis of sensitivities applied to the cash flow forecast and that further support can be agreed in the relevant timescale, the Directors have a reasonable expectation that the Group can continue to meet its liabilities as they fall due, for a period of at least 12 months from the date of approval of this report.
We have audited the financial statements of Severn Power Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 March 2022 which comprise the group statement of income and retained earnings, the group balance sheet, the company balance sheet, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard , and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty relating to going concern
We draw attention to note 1 in the financial statements, which indicates that the group and its funders have put in place short-term funding arrangements sufficient for the group and parent company. However, there remains some uncertainty on the exact timing of signing the longer-term funding arrangement thus giving rise to a risk that the required level of support may not be received in the necessary timescales or at all. In addition, note 1 also details that although the group has received confirmation that it is not the current intention for the lending group entities to recall the amounts owed by the company in the 12 months from the date of the approval of these accounts, this is not a guarantee and therefore creates some additional uncertainty.
As stated in note 1, these events or conditions, along with the other matters as set forth in note 1 to the financial statements, indicate that a material uncertainty exists that may cast doubt on the group and parent company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit :
the information given in the strategic report and the directors' r eport for the financial year for which the financial statements are prepared is consistent with the financial statements ; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identifie d material misstatements in the strategic report or the directors' r eport . We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
As explained more fully in the directors' r esponsibilities s tatement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements , the directors are responsible for assessing the parent company ' s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements .
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.
We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework. Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.
In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:
Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;
Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the entity through enquiry and inspection;
Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;
Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the c ompany has not presented its own profit and loss account and related notes. The c ompany’s loss for the year was £3,564,478 (2021 - £489,597,647 profit).
Severn Power Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales . The registered office is Severn Power Station, West Nash Road, Nash, Newport, Gwent NP18 2BZ.
The group consists of Severn Power Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling , which is the functional currency of the company. Monetary a mounts in these financial statements are rounded to the nearest £'000.
The financial statements have been prepared under the historical cost convention, modified to include certain items at fair value. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues : Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’ : Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements ;
Section 33 ‘Related Party Disclosures’ : Compensation for key management personnel .
The consolidated group financial statements consist of the financial statements of the parent company Severn Power Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates .
All financial statements are made up to 31 March 2022 . Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the g roup.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the group will continue in operational existence for the foreseeable future. However, the directors are aware of certain material uncertainties which may cause doubt on the group's ability to continue as a going concern.
On 24 June 2020 Calon Energy Limited ('the parent Group’) – the parent company of Severn Power Limited (‘the Group’) entered administration.
The Directors have prepared a cash flow forecast for the period to 31 March 2025 which represents the Directors’ best estimate of the future development of the Group.
Having consulted with the secured lender, the Directors had agreed the material terms of an appropriate funding agreement which all parties envisaged would be signed. However whilst this arrangement was being finalised, the parties operated a flexible funding arrangement which provided funding on a month-by-month basis at the discretion of the secured lender.
Whilst it is still anticipated that the funding agreement will be entered into, the directors and secured lender anticipate that the flexible funding arrangement will be retained for the foreseeable future.
Based on the ongoing positive relationship with the secured lender and following preparation of detailed forecasts, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and as such, believe that it remains appropriate to prepare the financial statements on a going concern basis. In making this judgement, the Directors expect that the Group’s principal activity of the operation of a gas pipeline and gas-fired power station at Newport, South Wales will continue.
The Directors also recognise that from an accounting perspective the absence of any formal long term funding arrangement creates a small level of uncertainty and therefore risk that the required level of support may not be received for the necessary timescales.
This constitutes a material uncertainty related to the assumptions described above which may cast doubt on the Group’s ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group were unable to continue as a going concern. In the event the Group ceased to be a going concern, the adjustments would include writing down the carrying value of assets, to their recoverable amount and providing for any further liabilities that might arise.
In addition to the third party funding, the directors have confirmation from the parent Group companies that the intercompany amounts due to them will not be requested within 12 months of the approval date of these accounts. The parent Group companies have confirmed that it is not currently their intention to demand repayment. Due to the relationship with the parent Group companies, the directors are of the view that the intercompany amounts will not be requested in the next 12 months, however the confirmation received does create a material uncertainty as it is not a guarantee that the intercompany creditors will not be recalled within 12 months from the approval dates of these accounts.
Notwithstanding the material uncertainties described above, on the basis of sensitivities applied to the cash flow forecast and that further support can be agreed in the relevant timescale, the Directors have a reasonable expectation that the Group can continue to meet its liabilities as they fall due, for a period of at least 12 months from the date of approval of this report.
Turnover represents amounts receivable for services provided in the normal course of business, net of trade discounts, power buy-backs, VAT and other sales-related taxes derived from the production of electricity for customers. All turnover has arisen in the United Kingdom.
Revenues from the sale of electricity represent the value of the actual generated output from the plant provided to customers at the net rates reflected in the associated contract terms with customers or prevailing market rates as applicable to the extent there is a right to consideration and is recorded at the value of the consideration due.
Other revenue, e.g., Capacity market revenue, is recognised when there is a right to consideration and is recorded at the value of the consideration due. Capacity market income is an income to the Group to ensure sufficient reliable capacity is available.
Fixed asset investments are shown at cost less any provision for impairment.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account .
Assets are assessed for indicators of impairment at each statement of financial position date. If there is objective evidence of impairment, an impairment loss is recognised in profit or loss as described below.
Non-financial assets
An asset is impaired where there is objective evidence that, as a result of one or more events that occurred after initital recognition, the estimater recoverable value of the asset has been reduced to a level below book value. The recoverable amount is calculated based on the Directors' best estimate of the present value of the future cash flows of the business.
Financial assets
For financial assets carried at cost less impairment, the impairment loss is the difference between the asset's carrying amount and the best estimate of the amount that would be received for the asset if it were to be sold at the reporting date.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price .
Financial assets are derecognised when substantially all the risks and rewards of the ownership of the asset are transferred to another party.
Basic financial liabilities, including creditors , bank loans and loans from fellow G roup companies are initially recognised at transaction price.
Debt is initially stated at the amount of the net proceeds after deduction of issue costs. The carrying amount is increased by the finance cost in respect of the accounting period and reduced by payments made in the period.
Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.
The Company uses derivative financial instruments to reduce exposure to foreign exchange risk and commodity price movements. The Company does not hold or issue derivative financial instruments for speculative purposes.
Derivatives are intitally recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designed and effective as a hedging instrument, in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship.
Current tax, including UK corporation tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the statement of financial position date.
Deferred tax is recognised without discounting, in respect of all timing differences that have originated but not reversed at the statement of financial position date where transactions or events that result in an obligation to pay more or a right to pay less tax in the future have occurred at the statement of financial position date, with the following exceptions:
provision is made for gains on disposal of fixed assets that have been rolled over into replacement assets only where, at the statement of financial position date, there is a commitment to dispose of the replacement assets with no likely subsequent rollover or available capital losses;
provision is made for gains on revalued fixed assets only where there is a commitment to dispose of the revalued assets and the attributable gain can neither be rolled over nor eliminated by capital losses; and
deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing difference can be deducted.
For defined contribution schemes, the amount charged to the statement of income and retained earnings in respect of pension costs and other post-retirement benefits is the contribution payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the statement of financial position.
Rentals under operating leases are charged to the statement of income and retained earnings on a straight-line basis over the lease term, even if the payments are not made on such a basis.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term.
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction or, if hedged, at the forward contract rate. Monetary assets and liabilities denominated in foreign currencies at the statement of financial position date are reported at the rates of exchange prevailing at that date or, if appropriate, at the forward contract rate.
EU Emissions trading scheme
A liability is recognised when the level of emissions exceeds the level of allowances granted. The liability is measured at the cost of purchased allowances up to the level of purchased allowances held, and then at market price of allowances ruling at the statement of financial position date. Certificates are surrendered at the end of the compliance period reflecting the consumption of economic benefit.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following are the critical judgements that the Directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amount recognised in the financial statements.
The following are the critical judgements that the Directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
An estimation is required of the value in use of the cash-generating unit to which the fixed assets belong. The value in use post-tax cash flow projections are based on the Group’s business plan. The business plan is based on past experience, and adjusted to reflect market trends, economic conditions, key risks, the implementation of strategic objectives and changes in commodity prices, as appropriate. Commodity prices used in the planning process are based on observable market data. In completing the impairment review the Directors have satisfied themselves that the estimates made are reasonable. However, the Group’s activities are in a complex market and historically challenging conditions, and a number of sensitivities indicate impairments, highlighting the importance of those judgements taken.
In order to assess whether it is appropriate for the Group to be reported as a going concern, the Directors apply judgement, having considered the business activities, the Group's principal risks and uncertainties, cash flow projections and external factors. In arriving at this judgement there are a large number of assumptions and estimates involved in calculating these future cash flow projections and the prospect of securing the additional support that will be required.
The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date, that have a risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Determining whether fixed assets and investments are impaired requires an estimation of the value in use of the cash-generating unit to which the fixed assets belong. The value in use calculation requires the Directors to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The future cash flows are based on estimates of commodity prices, plant activity and market conditions which are inherently uncertain.
The useful economic lives of the plants were determined on purchase of each company in accordance with the contracts in place with the operators. In addition, the Directors review the useful economic life of each plant following any major upgrade in order to determine the most appropriate period of use.
The estimated costs of decommissioning at the end of the useful economic life of the plant is reviewed periodically and provision is made for the estimated cost at the statement of financial position date. The total expected future decommissioning costs are uncertain and dependent on the life of the plant and the future interest rates applied to the most recent valuation of decommissioning costs. The provision is also dependent on the selection of a suitable discount rate to calculate present value. Changes to these selected rates produce material changes in the value of the provision as shown below.
|
|
|
£'000 |
Provision at 31 March 2022 |
8,002 |
||
Discount rate changed to 1.78% |
8,132 |
||
Inflation changed to 5% |
9,608 |
Determining whether inter-company debt is impaired requires an estimation of the value in use of the underlying business of the counterparty. This value in use calculation requires the Directors to estimate the future cash flows expected to arise from the counterparty and a suitable discount rate in order to calculate present value. The future cash flows of the counterparty are based on estimates of commodity prices, plant activity and market conditions which are inherently uncertain.
Turnover, which is stated net of value added tax, arises entirely in the United Kingdom and is attributable to the activity of operating gas-fired power stations at Newport, South Wales.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Two directors were remunerated by the Group through salaries for services to the Group as a whole in the prior year . Their total remuneration paid by the Group was £ 0 (202 1 - £ 626 ,000) with pension contributions for one Director of £0 (202 1 - £ 17,000 ). The highest paid director received emoluments from the Group of £ 0 (202 1 - £424,000) and pension contributions of £ 0 (202 1 £ 0 ).
Of these values, the following amounts were paid by the Company. Total remuneration £ 0 ( 2021: £ 499,000) and pension contributions £ 0 ( 2021: £ 13,000). The highest paid Director received emoluments of £0 (202 1 : £337,000) from the Company. The number of directors accruing retirement benefits under a money purchase scheme was 0 (2021: 1).
Two directors were remunerated by the Company through fees for services to the Group as a whole.
Total fees paid in the year were £403,000 (2021: £173,000) . It is not possible to allocate their remuneration between their services as Directors of different companies.
In the prior year, the Company successfully exited administration via a creditors' coluntary agreement ("CVA"). The exit from the CVA process saw £486,760,000 of liability balances released, creating an exceptional income in the profit and loss account. This release comprised £475,709,000 of amounts previously due to group companies and £11,051,000 of trade creditor balances as a number of external supplier contracts were terminated. The year ended 31 March 2021 also saw a further impairment recognised against amounts due from group companies of £1,975,000 due to the impact of administration in these respective companies.
The actual charge/(credit) for the year can be reconciled to the expected (credit)/charge for the year based on the profit or loss and the standard rate of tax as follows:
During the year, an impairment of £Nil (2021: £2,000) against the value of fixed assets (Assets Under Construction) was recognised.
The cumulative borrowing costs capitalised total £66,680,000 (2021: £66,680,000). Interest was charged on the loans relating to capital expenditure at a rate of 4.5% above the LIBOR base rate.
Details of the company's subsidiaries at 31 March 2022 are as follows:
Registered office addresses (all UK unless otherwise indicated):
Amounts owed by Group companies are unsecured and repayable on demand.
The amounts owed to Group companies are unsecured, bear interest at 4.55% above LIBOR and are repayable on demand.
Amounts owed to Group undertakings relates to an unsecured loan that had been repayable at 30 June 2022 and bore interest at 8.125% per annum. The loan doesn't currently bear any interest and there are no fixed terms for repayment.
Other loans relate to the funding received from the secured lender. The funding has a variable interest rate and there are no fixed terms for repayment.
The decommissioning provision has been made under FRS 102 'Provisions, contingent liabilities and contingent assets' for estimated decommissioning costs which are calculated as the present value of estimated decommissioing costs using a discount rate of 1.78% (2021: 1.78%). Included within fixed assets is an amount of £5,820,000 (2021: £5,820,000) which refects the Group's expectation to recover future decommissioning costs from sales of electricity during 2023 and future years. This asset is being depreciated over the expected life of the power station.
During the prior year, the Group contributed into a defined contribution pension scheme held by its parent company, Calon Energy Limited. During the prior year, all employees were transferred to NAES Power Solutions Limited under TUPS regulations.
On 31 May 2016 Calon Energy Limited drew on an existing facility in place with Beal Bank. The details of the new facility are currently in negotiation with the secured lender and are expecting to be completed during the following year.
There are no capital commitments as at the year end.
In accordance with section 33 of FRS102 ‘Related party disclosures’, the Group is exempt from disclosing transactions with entities that are part of the Calon Energy Group as it is a wholly-owned subsidiary of Calon Energy Limited.
During the prior year, the Group transacted on an arm’s length basis with with Macquarie Bank Limited in relation to the Energy Management Service Agreement as follows. There were no such tranasctions in the year ended 31 March 2021.
Year ended 31 March 2021
|
Value of transactions (to)/from the Group during the year £’000 |
Outstanding amount due to/(from) the Group as at 31 March 2021 £’000 |
|
|
|
|
|
|
|
|
|
Transaction fees Other fees |
(244) (598) |
- - |
Net sales of power |
29,612 |
- |
Net purchases of gas |
(16,555) |
- |
Net purchases of carbon |
(16,445) |
- |
|
|
|
|
(4,230) |
- |
|
|
|
Calon Energy (Severn) Limited owns 100% of the ordinary share capital in Severn Power Limited and is considered to be the immediate parent company.
Calon Energy Limited, a company incorporated in England and Wales, heads the smallest group for which consolidated financial statements would be prepared and is regarded as the ultimate controlling party of the Group. However, on 24 June 2020 both Calon Energy (Severn) Limited and Calon Energy Limited entered administration and therefore there is no requirement to prepare consolidated financial statements.