Wrap Text
Summarised consolidated results for the year ended 28 February 2019
HULISANI LIMITED
(Incorporated in the Republic of South Africa)
Registration number 2015/363903/06
("the Group" or "the Company")
Share code: HUL
ISIN: ZAE000212072
SUMMARISED CONSOLIDATED RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2019
Salient features
• First full twelve-month period of operation
• Pleasing operating performance from investments made
• Total dividend flow from investments higher than expected
• Positive cash from operating activities
• Recent relaxation of regulations around licensing of projects below 10 Megawatts
presents exciting opportunities and significant pipeline
Introduction
Hulisani is an investment holding company that generates dividend income on its
investments, which are largely focused on energy projects ranging from gas, solar PV,
concentrated solar, wind and hydro in South Africa and in Sub-Saharan Africa.
Shareholders should note that this is the first full twelve-month period in which the company
has earned income from investment activities, having acquired its equity investments during
the February 2018 financial year, after it ceased to be a Special Purpose Acquisition
Company (“SPAC”) on 22 March 2017. Accordingly, the comparable year (February 2018)
includes equity investments acquired during the year and income earned for only a portion
of the financial year, whereas the February 2019 financial year includes income from these
investments for the full twelve-month period.
Hulisani’s key portfolio includes:
• 25% interest in GRI Wind Steel;
• 6.7% interest in the Kouga Wind Farm;
• 66% shareholding in the RustMo1 Solar Farm; and
• An interest in the Avon and Dedisa Peaking Power Plants, held indirectly through a
convertible loan into Legend Power Solutions (which holds 27% in each of the Avon and
Dedisa Peaking Power Plants).
Financial review
Group results
Group revenue, which consists of sales of electricity from RustMo1 Solar, increased to R50.4
million from R37.4 million, largely as a result of timing, considering this is the first full twelve-
month period of operation for the Group. Similarly, the increase in Group operating costs from
R57.7 million to R73.3 million is largely attributable to timing considerations.
Considering the significant growth in investments over the past year, Group cash costs rose
to R48.7 million, largely attributable to salaries and non-recurring investment-related
consultancy fees, amounting to R8.8 million. The net cash from operating activities amounts
to R11m.
www.hulisani.co.za
t: +27 (0) 87 806 2425 e: info@hulisani.co.za a: 4th Floor, North Tower, 90 Rivonia Road, Sandton, South Africa, 2196
Company results
Hulisani’s investments are largely paying better dividends than anticipated and, at the holding
company level, dividends increased from R18.1 million to R36.9 million. Dividends received
from Kouga Wind Farm were 60% higher at R24 million, against budgeted dividends of R15
million. The dividend received from RustMo1 Solar Farm was as budgeted at R12,3 million.
The increased investment activity at the holding company resulted in higher operating
expenses of R33.9 million. The operating results before non-cash expenses amount to R3
million. Non-cash expenses include impairment losses, depreciation and expected credit loss
provisions. Operating costs include non-recurring expenses of R9.4m, consisting mainly of
advisory and legal fees relating to the year’s investment activities. The operating results
before non-cash expenses and non-recurring expenses amount to R12.4m.
The following table reflects the group operating financial results for the year ended 28
February 2019 compared to the corresponding financial period:
Group Group
Audited Audited
2019 2018 Variance Variance
R’000 R’000 R'000 (%)
Revenue 50,371 37,378 12,993 35
Operating expenses (73,303) (57,699) (15,604) (27)
Finance income 7,485 10,107 (2,622) (26)
Finance costs (14,863) (12,298) (2,565) (21)
Share of losses from associates (5,911) (6,492) 581 9
Impairment loss - (60,299) 60,299 100
Fair value adjustment 1,654 (25,055) 26,709 107
Loss before tax (34,611) (113,381) -78,770 69
Headline losses which exclude extraordinary items, such as impairments, to reflect results
from normal operating activities improved to R40.5 million from R56.6 million. The Group’s
basic losses improved to R40.5 million from R116,8 million, which relates largely to an
improvement in impairments in the current year.
While net cash from operating activities for the Group is positive, certain accounting factors
contributed to the losses, which include:
• Amortisation charges on the intangible assets that arose as a result of the purchase
price allocation at Group level;
• Equity accounted investments’ share of losses, which relate to the investment in GRI.
GRI manufactures wind towers and has been affected by the delay of the Power
Purchase Agreements (PPAs), which were recently signed. New wind tower orders
have now improved its prospects; and
• Provisions for expected credit losses as a result of the implementation of the new
IFRS 9.
Fair value gain/(loss)
A fair value loss of R25 million was recognised in the statement of profit or loss and other
comprehensive income in our previous year’s Annual Financial Statements on the Legend
Power Solution convertible loan. In the current year under review, a fair value gain of R1.6
million was recognised in the statement of profit or loss and other comprehensive income.
This was driven by improved revenue projections in line with increased activity of the plant.
2
Outlook
South Africa’s energy sector, specifically from renewable sources, remains attractive
especially considering the recent signing of Power Purchase Agreements (PPAs) for
Independent Power Producers (IPPs) by the Minister of the Department of Energy (DOE) and
Eskom. This is a very encouraging development in terms of policy certainty in South Africa
which is further amplified by the government’s commitment to finalise the Integrated
Resource Plan 2019 and commence Round 5 of the Renewable Energy Independent Power
Producer Programme (REIPPP) as well as the Gas to Power Programme (GTPP) in South
Africa.
Hulisani’s portfolio of advanced projects in the renewable energy sector will benefit from the
signing of the recent PPAs and enhance its returns. It will further benefit from the upcoming
REIPPP and GTPP projects. Hulisani’s current projects pipeline in the secondary market is
approximately R1.2 billion in the focus projects – this is in relation to operating and revenue
generating energy assets within South Africa.
Opportunities for IPPs in South Africa are continually being created, especially for captive
power plants where power is generated for specific clients. The recent relaxation of
regulations around licensing of projects below 10 Megawatts presents a great opportunity and
significant pipeline for Hulisani. This provides Hulisani with additional opportunities to pursue
investments to create a pipeline of projects in this area and grow the company’s quality
energy asset base and diversify its sources of revenue. Hulisani will continue to actively build
capability and aggressively pursue opportunities in the renewable energy sector with a view
to achieve greater scale, diversity and flexibility in our asset base. Hulisani is also continually
assessing various forms of funding to enable the conclusion of the focus projects in the
pipeline.
Directors
The following changes to the board of directors took effect during the period under review:
Directors Designation Nationality Changes
NP Gosa* Non-executive Independent South African Resigned 31 December 2018
MH Zilimbola# Non-executive South African Resigned 22 February 2019
Appointed alternate director
MH Zilimbola# Non-executive South African
26 February 2019
MF Modau (Chief
Executive South African Resigned 28 February 2019
Investment Officer)
* Independent Non-executive
# Non-independent Non-executive
3
Summarised consolidated statement of financial position as at 28
February 2019
Group
2019 2018
Note(s) R '000 R '000
Assets
Non-current asset
Property, plant and equipment 8 125,771 133,914
Intangible assets 9,10 145,965 152,830
Investments in associates 4 118,829 148,810
Investment at fair value through profit and loss 5 76,786 75,143
Loans receivable 6 10,127 -
Investment at amortised cost 7 19,276 -
Financial asset at fair value through other comprehensive 7 - 8,961
income
496,754 519,658
Current Assets
Trade and other receivables 22,475 29,140
Cash and cash equivalents 31,697 35,517
54,172 64,657
Total Assets 550,926 584,315
Equity and Liabilities
Equity
Stated capital 500,000 500,000
Non-distributable reserves - 773
Accumulated loss (165,093) (122,874)
Equity attributable to equity holders of parent 334,907 377,899
Non-controlling interest 30,370 34,625
365,277 412,524
Liabilities
Non-Current Liabilities
Long term borrowings 11 110,895 121,692
Deferred tax liability 39,616 35,814
150,511 157,506
Current Liabilities
Trade and other payables 15,382 3,722
Borrowings 11 11,470 10,563
Dividend payable 3,247 -
Bank overdraft 5,039 -
35,138 14,285
Total Liabilities 185,649 171,791
Total Equity and Liabilities 550,926 584,315
4
Summarised consolidated statement of comprehensive income for the
year ended 28 February 2019
Group
2019 2018
Note(s) R '000 R '000
Revenue 50,371 37,378
Other income 17 977
Operating gains /(losses) 1,593 (25,055)
Operating expenses (73,303) (57,699)
Impairment loss - (60,299)
Operating loss (21,322) (104,698)
Investment income 7,485 10,107
Finance costs (14,863) (12,298)
Share of the loss from equity accounted investments 4 (5,911) (6,492)
Loss before taxation (34,611) (113,381)
Taxation (3,797) (2,463)
Loss for the year (38,408) (115,844)
Other comprehensive income:
Items that may be reclassified to profit or loss:
Changes in the fair value of available-for-sale financial
asset - 773
Other comprehensive income for the year - 773
Total comprehensive loss for the year (38,408) (115,071)
Loss for the year attributable to:
Owners of the parent (40,475) (116,864)
Non-controlling interest 2,067 1,020
(38,408) (115,844)
Total comprehensive loss attributable to:
Owners of the parent (40,475) (116,091)
Non-controlling interest 2,067 1,020
(38,408) (115,071)
Basic and diluted loss per share (c) 14 (81) (234)
5
Summarised consolidated statement of changes in equity for the year
ended 28 February 2019
Total
Non- attributable to
distributable Accumulated equity holders Non-controlling
Stated capital reserves loss of the interest Total equity
company
28 February 2019 R '000 R '000 R '000 R '000 R '000 R '000
Group
Balance at 01 March 2017 500,000 - (6,010) 493,990 - 493,990
Loss for the year - - (116,864) (116,864) 1,020 (115,844)
Other comprehensive income - 773 - 773 - 773
Total comprehensive loss for the - 773 (116,864) (116,091) 1,020 (115,071)
year
Dividends paid - - - - (5,027) (5,027)
Business combinations - - - - 38,632 38,632
Total contributions by and - - - - 33,605 33,605
distributions to owners of
company recognised directly in
equity
Opening balance as previously 500,000 773 (122,874) 377,899 34,625 412,524
reported
Adjustments
Change in accounting policy (Note
2) - (773) (1,744) (2,517) - (2,517)
Balance at 01 March 2018 as 500,000 - (124,618) 375,382 34,625 410,007
restated
Loss for the year - - (40,475) (40,475) 2,067 (38,408)
Total comprehensive loss for the - - (40,475) (40,475) 2,067 (38,408)
year
Disposal of a subsidiary - - - - 272 272
Dividends - - - - (6,594) (6,594)
Total contributions by and - - - - (6,322) (6,322)
distributions to owners of
company recognised directly in
equity
Balance at 28 February 2019 500,000 - (165,093) 334,907 30,370 365,277
6
Summarised consolidated statement of cash flows for the year ended 28
February 2019
Group
2019 2018
Note(s) R '000 R '000
Cash flows from operating activities
Cash (used in)/generated from operations 11,044 (30,533)
Net cash from operating activities 11,044 (30,533)
Cash flows from investing activities
Purchase of property, plant and equipment 8 (1,148) (628)
Sale of property, plant and equipment 8 109 -
Business combinations - (100,464)
Acquisition of investments in associates 4 - (223,951)
Subscription of debt investments at amortised cost (12,500) -
Purchase of financial assets - (108,188)
Interest received 4,866 8,000
Dividends received 17,156 8,350
Net cash from investing activities 8,483 (416,881)
Cash flows from financing activities
Proceeds from borrowings 11 622 -
Repayment of borrowings 11 (10,512) (2,697)
Dividends paid (3,347) (5,027)
Interest paid (15,149) (7,896)
Net cash from financing activities (28,386) (15,620)
Total cash movement for the year (8,859) (463,034)
Cash at the beginning of the year 35,517 498,551
Total cash at end of the year 26,658 35,517
7
Notes to the Summarised consolidated financial statements for the year
ended 28 February 2019
1. Basis of presentation
The summarised consolidated financial statements for the year ended 28 February 2019 have
been prepared in accordance with the JSE Limited Listings Requirements (Listings
Requirements) and the requirements of the Companies Act, Act 71 of 2008 applicable to
summarised financial statements. The Listings Requirements require financial statements to
be prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (IFRS), the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Reporting Pronouncements as issued by the Financial Reporting Standards Council, and
contain the information required by IAS 34 Interim Financial Reporting. The summarised
consolidated financial information should be read in conjunction with the consolidated
financial statements for the year ended 28 February 2019, which have been prepared in
accordance with IFRS.
The summarised consolidated financial statements were prepared under the supervision of
the chief financial officer, MP Dem, CA (SA).
Audit opinion
This summarised report is extracted from audited information but is not itself audited. The
annual financial statements were audited by PricewaterhouseCoopers Inc., who expressed
an unmodified opinion thereon. The audited annual financial statements and the auditor’s
report thereon are available for inspection at the Company’s registered office and on the
Company’s website. The directors take full responsibility for the preparation of the
summarised consolidated financial statements and that the financial information has been
correctly extracted from the underlying annual financial statements.
Accounting policies
The accounting policies applied in preparing the summarised consolidated financial
statements are in terms of IFRS and consistent with those applied in the previous annual
financial statements, except for the adoption of new accounting policies as set out below:
• IFRS 15 – Revenue from contracts with customers; Revenue from customer contract
derived from providing services is recognised in the accounting period in which the
services are rendered, and at a point in time. The adoption of this new standard had no
material impact on the revenue recognition.
• IFRS 9 – Financial instruments; All recognised financial assets that are within the scope
of IFRS 9 are required to be subsequently measured at amortised cost or fair value on
the basis of the entity’s business model for managing the financial assets and the
contractual cash flow characteristics of the financial assets. The measurement of
impairment losses is based on an expected credit loss model, which takes into account
the probability weighting as well as forward looking information. The impact is detailed in
note 3.
2. Critical accounting estimates and judgements
The preparation of financial statements requires the use of accounting estimates which, by
definition, will seldom equal the actual results. Management also needs to exercise
judgement in applying the group’s accounting policies. Estimates and judgements are
continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The areas involving significant estimates or judgements are:
8
(i) Investment in associates decision.
Hulisani holds 100% of issued shares in Red Cap Investments (Pty) ("Red Cap”) Ltd and
Eurocape Renewables (Pty) Ltd ("Eurocape"). Red Cap and Eurocape hold 5.46% and
1.21% interest in Kouga Wind Farm (RF) (Pty) Ltd respectively, combined to 6.67%.
Hulisani management made a judgement regarding the classification of this acquisition to an
investment in associates as Hulisani has a directorship representation in the board of the
investee. The board representation indicates a level of significant influence by Hulisani.
(ii) Estimated fair value of financial assets at fair value through profit and loss.
Hulisani issued a convertible loan to Legend Power Solutions. The group has elected to
classify the financial asset at fair value through profit and loss. The fair value is determined
by using the discounted cash flow method by discounting the dividend income. The expected
cash flows are discounted using an appropriate discount rate. In determining the recoverable
amount, the group made key assumptions on base revenue from underlying plant operations,
discount rate and period of operation. The loan participates in 9% of distributable profits
available to LPS’ shareholders. On maturity the loan will convert to 9% of equity in LPS.
(iii) Impairment of investments in subsidiaries.
Management identified impairment indicators relating to the investments in Red Cap
Investments (Pty) Ltd (“Red Cap”), Eurocape Renewables (Pty) Ltd (“Eurocape”), Pele
SPV13 (Pty) Ltd and Momentous Technologies (Pty) Ltd (“Momentous”). The nature of the
investments is that the values wind down over time, in line with the passing of the agreed
time in the Power Purchase Agreements with Eskom. The expected cash flows are
discounted using an appropriate discount rate. In determining the expected cash flows, the
group made key assumptions on forecasted revenue and discount rate.
(iv) Goodwill impairment.
The carrying value of goodwill in the group is R45m and arose on acquisition of a majority
stake in RustMo1 Solar Farm (Pty) Ltd (“RustMo1”). RustMo1 is considered to be a
separately identifiable cash generating unit and goodwill has been allocated to this cash
generating unit. The recoverable amount of goodwill was based on a value in use discounted
cash flow method. In determining the recoverable amount, the group made key assumptions
on forecasted revenue and the discount rate.
(v) IFRS 9 Expected Credit Losses
Hulisani management made a judgement regarding the assessment of receivables for
impairments using reasonable and supportable information that was available without undue
cost or effort in accordance with the requirements of IFRS 9 to determine the credit loss
allowance of the respective items at the date they were initially recognised and at statement
of financial position date.
The loss allowances for financial assets are based on assumptions about risk of default and
expected loss rates. The group uses judgement in making these assumptions and selecting
the inputs to the impairment calculation, based on the group’s history, existing market
conditions as well as forward looking estimates at the end of each reporting period.
9
3. Change in accounting policies
The financial statements have been prepared in accordance with International Financial
Reporting Standards on a basis consistent with the prior year except for the adoption of the
following new or revised standards.
Application of IFRS 9 Financial Instruments
In the current year, the group has applied IFRS 9 Financial Instruments (as revised in July
2014) and the related consequential amendments to other IFRSs. IFRS 9 replaces IAS 39
Financial Instruments and introduces new requirements for 1) the classification and
measurement of financial assets and 2) impairment for financial assets. Details of these new
requirements as well as their impact on the group's financial statements are described below.
The group has applied IFRS 9 in accordance with the transition provisions set out in IFRS 9.
Classification and measurement of financial assets
The date of initial application (i.e. the date on which the group has assessed its existing
financial assets and financial liabilities in terms of the requirements of IFRS 9) is 01 March
2018. Accordingly, the group has applied the requirements of IFRS 9 to instruments that
have not been derecognised as at 01 March 2018 and has not applied the requirements to
instruments that have already been derecognised as at 01 March 2018. Comparatives in
relation to instruments that have not been derecognised as at 01 March 2018 have not been
restated. Instead, cumulative adjustments to retained earnings have been recognised in
retained earnings at 01 March 2018.
All recognised financial assets that are within the scope of IFRS 9 are required to be
subsequently measured at amortised cost or fair value on the basis of the entity’s business
model for managing the financial assets and the contractual cash flow characteristics of the
financial assets.
The measurement requirements are summarised below:
• Debt investments that are held within a business model whose objective is to collect the
contractual cash flows, and that have contractual cash flows that are solely payments of
principal and interest on the principal amount outstanding, are subsequently measured at
amortised cost.
• Debt investments that are held within a business model whose objective is both to collect
the contractual cash flows and to sell the debt instruments, and that have contractual
cash flows that are solely payments of principal and interest on the principal amount
outstanding, are subsequently measured at fair value through other comprehensive
income.
• All other debt investments and equity investments are subsequently measured at fair
value through profit or loss, unless specifically designated otherwise.
• Debt instruments that are subsequently measured at amortised cost or at fair value
through other comprehensive income are subject to new impairment provisions using an
expected loss model. This contrasts the incurred loss model of IAS 39.
The directors reviewed and assessed the group's existing financial assets as at 01 March
2018 based on the facts and circumstances that existed at that date and concluded that the
initial application of IFRS 9 has had the following impact on the group's financial assets as
regards to their classification and measurement:
10
Debt instruments
(i) Reclassification of Ignite preference shares from available-for-sale to
amortised cost
In line with IFRS 9 requirements management assessed the classification of the preference
shares in reference to the business model of the group. The financial asset meets both
criteria of hold to collect business model test; and solely payments of principal and interest
(SPPI) contractual cash flow characteristics test, as such it has been classified as
subsequently measured at amortised cost under IFRS 9. This resulted to a reclassification of
the Ignite preference shares from available-for-sale to investment at amortised cost. The
impact of the reclassification is noted as a change in accounting policy, and the fair value
adjustment of R773k recognised in the prior year has been reversed in the beginning of the
prior year (Refer to note 7).
The main effects resulting from this reclassification are as follows:
Financial assets – 01 March 2018 Fair value through Investment at
other comprehensive amortised cost
income (Available-for-
sale)
R’000 R’000
Closing balance 28 February 2018 – IAS 39 8,961 -
Reclassify preference shares from available- (8,188) 8,188
for-sale to amortised cost
Opening balance 01 March 2018 – IFRS 9 773 8,188
The impact of these changes on equity is as follows:
Effect on Available- Effect on
for-sale Reserves retained
earnings
R’000 R’000
Opening balance – IAS 39 773 -
Reclassify preference shares from available- (773) (773)
for-sale to amortised cost
Opening balance 01 March 2018 – IFRS 9 - (773)
(ii) Impairment of financial assets
In relation to the impairment of financial assets, IFRS 9 requires an expected credit loss
model as opposed to an incurred credit loss model under IAS 39. The expected credit loss
model requires the group to account for expected credit losses and changes in those
expected credit losses at each reporting date to reflect changes in credit risk since initial
recognition of the financial assets. In other words, it is no longer necessary for a credit event
to have occurred before credit losses are recognised.
11
Specifically, IFRS 9 requires the group to recognise a loss allowance for expected credit
losses on debt investments subsequently measured at amortised cost or at fair value through
other comprehensive income, lease receivables, contract assets and loan commitments and
financial guarantee contracts to which the impairment requirements of IFRS 9 apply.
In particular, IFRS 9 requires the group to measure the loss allowance for a financial
instrument at an amount equal to the lifetime expected credit losses if the credit risk on that
financial instrument has increased significantly since initial recognition, or if the financial
instrument is a purchased or originated credit-impaired financial asset. On the other hand, if
the credit risk on a financial instrument has not increased significantly since initial recognition
(except for a purchased or originated credit-impaired financial asset), the group is required to
measure the loss allowance for that financial instrument at an amount equal to 12 months
expected credit losses. IFRS 9 also provides a simplified approach for measuring the loss
allowance at an amount equal to lifetime expected credit losses for trade receivables,
contract assets and lease receivables in certain circumstances.
As at 01 March 2018, the directors reviewed and assessed the group's existing financial
assets and amounts due from customers for impairment using reasonable and supportable
information that was available without undue cost or effort in accordance with the
requirements of IFRS 9 to determine the credit risk of the respective items at the date they
were initially recognised, and compared that to the credit risk as at 01 March 2018 and 28
February 2019.
Impact on the financial statements
IFRS 9 was adopted without restating comparative information. The reclassifications and the
adjustments arising from the new impairment rules are therefore not reflected in a restated
balance sheet as at 28 February 2018 but are recognised in the opening balance sheet on 1
March 2018.
The following tables show the adjustments recognised for each individual line item. Line items
that were not affected by the changes have not been included. As a result, the sub-totals and
totals disclosed cannot be reconciled from the numbers provided.
Balance sheet (Extract) 28 February IFRS 9 01 March 2018
2018 Restated
R’000 R’000 R’000
Trade and other receivables 29,140 (1,744) 27,396
Total assets 29,140 (1,744) 27,396
Retained earnings 29,140 (1,744) 27,396
Total equity 29,140 (1,744) 27,396
12
Reconciliation of the reclassifications and remeasurements of financial assets as a result of
adopting IFRS 9
The following table presents a summary of the financial assets as at 01 March 2018. The
table reconciles the movement of financial assets from their IAS 39 measurement categories
and into their new IFRS 9 measurement categories. "FVPL" denotes "fair value through profit
or loss".
Previous measurement New measurement category: IFRS 9
IAS 39 FVPL – designated Amortised cost
Previously Fair value
through profit or loss
(designated):
Convertible loan 75,143 75,143 -
Previously Loans and
receivables:
Trade and other 29,140 - 29,140
receivables
Previously Available for
sale:
Redeemable preference 8,961 - 8,961
shares
113,244 75,143 38,101
Application of IFRS 15 Revenue from contracts with customers
In the current year, the group has applied IFRS 15 Revenue from Contracts with Customers
(as revised in April 2016) and the related consequential amendments to other IFRSs. IFRS
15 replaces IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty
Programmes, IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers
of Assets from Customers and SIC-31 Revenue - Barter Transactions Involving Advertising
Services.
IFRS 15 introduces a 5-step approach to revenue recognition. Far more prescriptive
guidance has been added in IFRS 15 to deal with specific scenarios. However, the group
derives revenue from the sale of electricity at a point in time, to a single external customer,
Eskom. Revenue is measured at the transaction price agreed under the contract. The
group recognises revenue when the amount of revenue can be reliably measured. Revenue
is recognised in the amount to which the group has a right to invoice. The customer is
invoiced on a monthly basis and consideration is payable when invoiced.
Therefore, adoption of IFRS 15 did not have a significant impact on revenue recognition.
13
4. Investments in associates
The table below provides a summary of the investments the group holds in associates. A
detailed breakdown is provided for each investment.
Group
2019 2018
R'000 R'000
Balance at the beginning of the period 148,810 -
Addition - 223,951
Impairment loss - (60,299)
Loss attributable to Hulisani Limited (5,911) (6,492)
Dividends received (24,070) (8,350)
Balance at the end of the period 118,429 148,810
Summarised financial information of material associates
(a) Kouga Wind Farm (Pty) Ltd
Hulisani holds 100% of issued shares in Red Cap Ltd and Eurocape. Red Cap and
Eurocape hold 5.46% and 1.21% interest in Kouga Wind Farm (RF) (Pty) Ltd respectively,
combined to 6.67%. Red Cap and Eurocape are investment holding companies.
Group
2019 2018
R'000 R'000
Balance at the beginning of the period 122,312 -
Addition - 141,450
Impairment loss - (14,314)
Profit attributable to Hulisani Limited 5,318 3,526
Dividends received (24,070) (8,350)
Balance at the end of the period 103,560 122,312
14
(b) GRI Wind Steel SA (Pty) Ltd
On 27 July 2017 the Company acquired 50% of the share capital in Pele SPV13 (Pty) Ltd
(“Pele SPV13”) for a cash consideration of R41.25m and subscribed for preference shares
of R41.25m to Pele SPV198 (Pty) Ltd (“Pele SPV198”). The transaction resulted in an
acquisition of a 25% stake in GRI Wind Steel South Africa (Pty) Ltd (“GRI”) by Pele SPV13.
The preference share subscription agreement includes a requirement that Pele SPV198
pledges its shares held in Pele SPV13 to Hulisani until the preference share funding is
repaid. Therefore, until such time the preference shares have been repaid risks and rewards
associated to Pele SPV198 investment in Pele SPV13 have transferred to Hulisani. In
addition, at the end of the reporting period Pele SPV198 has an option to acquire the 50%
interest in Pele SPV13 once the preference share funding has been repaid. The value of the
option however has been determined to be immaterial.
Group
2019 2018
R'000 R'000
Balance at the beginning of the period 26,498 -
Addition - 82,501
Impairment loss - (45,985)
Loss attributable to Hulisani Limited (11,229) (10,018)
Balance at the end of the period 15,269 26,498
5. Investments at fair value through profit or loss
Convertible loan to Legend Power Solution (Pty) Ltd
Hulisani Limited issued a convertible loan to Legend Power Solution (Pty) Ltd (“LPS”), a
company with an underlying investment in Avon and Dedisa Peaking Power. The loan
participates in 9% of distributable profits available to LPS shareholders and will convert to a
9% equity stake in LPS. The loan will convert when senior funding in LPS has been fully
repaid to the lender. Management has elected to measure the financial asset at fair value
through profit or loss.
Group
2019 2018
R '000 R '000
Designated at fair value through profit or loss:
Convertible loan to Legend Power Solution 76,786 75,143
76,786 75,143
15
Group
2019 2018
R'000 R'000
Balance at the beginning of the period 75,143 -
Additions - 100,000
Fair value gain/(loss) 1,643 (24,857)
Balance at 28 February 2018 76,786 75,143
Refer to Note 13 for further information on valuation inputs.
6. Loans receivables
(i) Loan to Pele Green Energy (Pty) Ltd
The loan to Pele Green Energy (Pty) Ltd ("Pele Green") is issued for a period of 5 years,
repayable annually on the anniversary of the issue date. The interest rate is set at prime rate
plus 2%.
(ii) Loan to Ignite Energy Projects (Pty) Ltd
Hulisani has a receivable to the value of R5m to Ignite Energy Projects (Pty) Ltd (“Ignite”),
the loan bears no interest and has no repayment terms.
Loans receivable are presented at amortised cost, which is net of loss allowance, as follows:
Group
2019 2018
R '000 R '000
Pele Green Energy (Pty) Ltd 5,877 -
Ignite Energy Projects (Pty) Ltd 4,250 -
10,127
Credit loss allowances
The following tables set out the carrying amount, loss allowance and measurement basis of
expected credit losses for loans receivable as at the end of the financial period:
Group - 2019
Basis of loss Gross Carrying Loss Amortised
Instrument allowance amount allowance cost
R’000 R’000 R’000
Pele Green Energy (Pty) Ltd 12m ECL 6,679 (802) 5,877
Ignite Energy Projects (Pty) Ltd 12m ECL 5,000 (750) 4,250
11,679 (1,552) 10,127
16
7. Investment at amortised cost
Preference shares to Ignite Energy Projects (Pty) Ltd
Hulisani Limited has invested in preference share issued by Ignite Energy Projects (Pty) Ltd
("Ignite") to the value of R20.7m. The preference shares redeem in 5 years, and the interest
rate is set at prime plus 2.35%. Refer to note 3 for detail on the reclassification of the
investment.
The investment is presented at amortised cost, which is net of loss allowance, as follows:
Group
2019 2018
R '000 R '000
Ignite Energy Projects (Pty) Ltd 19,276 8,961
19,276 8,961
Credit loss allowances
The following tables set out the carrying amount, loss allowance and measurement basis of
expected credit losses for the investment as at the end of the financial period:
2019
Gross
Basis of loss Carrying Loss Amortised
Instrument allowance amount allowance cost
R’000 R’000 R’000
Ignite Energy Projects (Pty) Ltd 12m ECL 22,678 (3,402) 19,276
22,678 (3,402) 19,276
8. Property, plant and equipment
2019 2018
Cost Accumulated Carrying Cost Accumulated Carrying
depreciation value depreciation value
R'000 R'000 R'000 R'000 R'000 R'000
Land 2,212 - 2,212 2,212 - 2,212
Plant and 135,496 (14,831) 120,665 135,025 (6,356) 128,669
machinery
Furniture and 2,810 (854) 1,956 2,783 (434) 2,349
fixtures
Motor vehicles 595 (40) 555 248 (56) 192
Office equipment 375 (123) 252 372 (60) 312
IT equipment and 330 (199) 131 278 (98) 180
software
Total 141,818 (16,047) 125,771 140,918 (7,004) 133,914
17
Reconciliation of property, plant and equipment – 2019
Opening
balance Additions Disposals Depreciation Total
R'000 R'000 R'000 R'000 R'000
Land 2,212 - - - 2,212
Plant and machinery 128,669 471 - (8,475) 120,665
Furniture and fixtures 2,349 27 - (420) 1,956
Motor vehicles 192 595 (139) (94) 555
Office equipment 312 3 - (63) 252
IT equipment and 180 52 - (101) 131
software
133,914 1,148 (139) (9,152) 125,771
Reconciliation of property, plant and equipment – 2018
Additions
through
Opening business
balance Additions combinations Disposals Depreciation Total
R'000 R'000 R'000 R'000 R'000 R'000
Land & Building - - 2,212 - - 2,212
Plant and machinery - - 135,025 - (6,356) 128,669
Furniture and fixtures 2,292 471 2 - (416) 2,349
Motor vehicles - - 248 - (56) 192
Office equipment 323 49 - - (60) 312
IT equipment and 141 108 - - (69) 180
software
2,756 628 137,487 - (6,957) 133,914
Property, plant and equipment encumbered as security
The following assets have been encumbered as security for the secured long-term
borrowings:
Group
2019 2018
R'000 R'000
Property, plant and equipment:
- Land and building 2,212 2,212
- Plant and machinery 120,664 128,669
- Other assets 620 215
Total non-current assets pledged as security 123,496 131,096
Total assets pledged as security 123,496 131,096
The fixed asset register is available for inspection at Hulisani’s registered address.
18
9. Intangible assets
Cost Accumulated Carrying Cost Accumulated Carrying
amortisation value amortisation value
R'000 R'000 R'000 R'000 R'000 R'000
Development cost 25,030 (2,661) 22,369 25,030 (1,140) 23,890
Goodwill 44,761 - 44,761 44,761 - 44,761
Customer contract 88,188 (9,353) 78,835 88,188 (4,009) 84,179
Total 157,979 (12,014) 145,965 157,979 (5,149) 152,830
Reconciliation of intangible assets - 2019
Opening balance
Amortisation Total
R'000 R'000 R'000
Development cost 23,890 (1,521) 22,369
Goodwill 44,761 - 44,761
Customer contract 84,179 (5,344) 78,835
152,830 (6,865) 145,965
Reconciliation of intangible assets - 2018
Addition
through
Opening business
balance Additions combinations Amortisation Total
R'000 R'000 R'000 R'000 R'000
Development cost - 25,030 (1,140) 23,890
Goodwill - 44,761 - - 44,761
Customer contract - 88,188 (4,009) 78,835
- 44,761 113,218 (5,149) 152,830
Refer to note 10 for further details on goodwill.
10. Goodwill
2019 2018
Accumulated Carrying Accumulated Carrying
Cost impairment value Cost impairment value
R '000 R '000 R '000 R '000 R '000 R '000
Goodwill 44,761 - 44,761 44,761 - 44,761
Total 44,761 - 44,761 44,761 - 44,761
19
Reconciliation of goodwill – 2019
Opening balance Total
R '000 R '000
Goodwill 44,761 44,761
44,761 44,761
Reconciliation of goodwill - 2018
Additions through
Opening balance business combinations Total
R '000 R '000 R '000
Goodwill - 44,761 44,761
- 44,761 44,761
The goodwill relates to the acquisition of the RustMo1 Solar Farm (Pty) Ltd (“RustMo1”) and
it is mainly attributable to the deferred tax liability recognised on the fair value of intangible
assets.
Impairment of goodwill
For impairment testing goodwill acquired through business combinations is allocated to the
RustMo1 CGU, which is also an operating and a reportable segment.
The carrying amount of the goodwill allocated to the CGU:
RustMo1 Total
R’000 R’000
Goodwill 44,761 44,761
44,761 44,761
The group performed its annual impairment test at 28 February 2019. The recoverable
amount of the cash generating unit to which goodwill has been allocated to is based on value
in use discounted cash flow method. No impairment loss was recognised on goodwill in the
period under review.
The recoverable amount has been determined based on a value in use calculation using cash
flow projections from financial model approved by senior management covering the remaining
period of the Power Purchase Agreement (“PPA”).
The key inputs to the discounted cash flow model are as follows:
• Discount rate – 13.2%
• Base revenue - Base revenue is determined using the energy rate inflated at CPI over the
term of the Power Purchase Agreement. The base revenue in the cash flow projections,
year ending 28 February 2020, is R51.6 million.
The model is most sensitive to changes in base revenue and discount rate.
• If all assumptions remained unchanged, a 5% decrease in base revenue results in a
decrease in the recoverable amount, and further impairment of R9m;
• If all assumptions remained unchanged, a 1% increase in discount rate results in a
decrease in the recoverable amount, and further impairment of R6m.
20
11. Borrowings
Group
2019 2018
R '000 R '000
Held at amortised cost
Secured
Nedbank loan 60,735 65,978
IDC loan 61,008 66,277
Unsecured
622 -
Lead Africa Capital loan
122,365 132,255
Split between non-current and current portions
Non-current liabilities 110,895 121,692
Current liabilities 11,470 10,563
122,365 132,255
Group
2019 2018
R'000 R'000
Balance at the beginning of the period 132,255 -
Arising from acquisition of subsidiary - 134,952
Addition 622 -
Repayments (10,512) (2,697)
122,365 132,255
IDC loan
The IDC loan is secured, bears interest at 11.60% and is repayable in semi-annual
instalments over a term of 14 years.
Nedbank
The Nedbank loan is secured, bears interest at 11.65% and is repayable in semi-annual
instalments over a term of 14 years.
Lead Africa Capital loan
The Lead Africa loan is unsecured, bears interest at prime plus 1% and was repaid on 31
March 2019.
(i) Assets pledged as security
See note 8 for all assets pledged as security
21
12. Contingencies
Momentous Technology (“MT”) is the original developer “RustMo1” project and initially held
15% of the shares in RustMo1. Momentous acquired a further 51% in RustMo1 in the prior
year from Evolution One en Commandite Partnership. The relationship between inter alia
Evolution and MT in respect of their shareholding in Rustmo1 was regulated by an Amended
and Restated Shareholders Agreement (the “SHA”), dated 4 November 2012. The SHA
entitled Evolution to subscribe for additional shares in RustMo1 should the RustMo1 project
Internal Rate of Return (“IRR”) be lower than the agreed IRR on the Adjustment Date (being
16 November 2016). Having undertaken its own calculations, Evolution was of the view that it
did not achieve the minimum project agreed IRR and sought to enforce its right to subscribe
for shares in RustMo1 on the Adjustment Date.
On 2 November 2018, Evolution initiated arbitration proceedings at the Arbitration Foundation
Southern Africa to enforce its rights. Management has engaged external legal counsel and
believes it has a strong case and no provision is required at this point.
13. Fair value information
Fair value hierarchy
Levels of fair value measurements
The following presents the group’s financial instruments measured and recognised at fair
value at 28 February 2019. The group has classified its financial instruments into the three
levels prescribed under the accounting standards.
Level 3
Group
2019 2018
R'000 R'000
Recurring fair value measurements
Assets
Financial assets designated at fair value through profit (loss)
Convertible loan 76,786 75,143
76,786 75,143
22
Transfers of assets and liabilities within levels of the fair value hierarchy
There were no transfers between levels 1 and 2 for recurring fair value measurements during
the year.
Reconciliation of assets and liabilities measured at level 3
Opening Purchases Gains/(losses) Gains/(losses) Closing
balance recognised in recognised in balance
profit(loss) other
comprehensive
income
Notes R’000 R’000 R’000 R’000 R’000
Group – 2019
Assets
Financial assets
designated at
fair value
through profit 11
(loss)
Convertible loan 75,143 - 1,643 - 76,786
Total 75,143 - 1,643 - 76,786
Group – 2018
Assets
Financial assets
designated at fair
value through
profit (loss) 11
Convertible loan - 100,000 (24,857) - 75,143
Total - 100,000 (24,857) - 75,143
23
Information about valuation techniques and inputs used to derive level 3 fair values
convertible loan
The key unobservable inputs, together with the weighted average range of probabilities, are
as follows:
Relationship of unobservable inputs to fair value
High Low
Discount rate The higher the The lower the discount
discount rate the lower rate the higher the fair
the fair value value
Base revenue from plant operation The higher the base The lower the base
revenue the higher the revenue the lower the fair
fair value value
Period of operation The longer the period the The shorter the period the
higher the fair value lower the fair value
The fair value is determined by using the discounted cash flow method by discounting the
dividend income. LPS has underlying investment in the Avon and Dedisa open cycle
gas/diesel turbine (OCGT) plants. The dividend income is based on the operational results of
the Avon and Dedisa plant.
The key inputs to the discounted cash flow model of the underlying operational plants are as
follows:
1. Discount rate – 13.6%
2. Base revenue from plant operation – Base revenue is determined using the Power
Purchase Agreement capacity rate for Dedisa and for Avon. The base revenue in the
cash flow projections of Dedisa and Avon, year ending 28 February 2020, is R2.5
billion.
3. Period of operation - 30 years
The model is most sensitive to changes in base revenue from operations, discount rate and
period of operation.
If all assumptions remained unchanged, a 5% decrease in base revenue results in a
further reduction in fair value of R14m;
If all assumptions remained unchanged, a 1% increase in discount rate results in a further
reduction in fair value of R8m.
If all assumptions remained unchanged, a 5 year reduction in the period of operation results
in a further reduction in fair value of R9m.
24
Valuation processes applied by the Group
The group finance department obtains input from independent valuation experts in
performing valuations of financial assets required for financial reporting purposes, including
level 3 fair values. The valuations expert communicates directly with the chief financial officer
(CFO).
The convertible loan is valued by using the Dividend Discount Model. The discount rates
used for the valuations are the prevailing market rates at the time of the valuations.
The group conducts valuations twice a year, at the interim financial reporting period and also
at the year-end reporting
14. Earnings per share
Reconciliation between earnings and headline earnings is as follows:
Group
2019 2018
R '000 R '000
Basic and diluted loss per share (cents) (81) (234)
Basic and diluted headline loss per share (cents) (81) (113)
The calculation of earnings per share for the year ended 28 February 2019 was based on the
loss attributable to ordinary shareholders of Hulisani Limited, and a weighted average
number of ordinary shares.
Group
2019 2018
R '000 R '000
Reconciliation of profit or loss for the year to
headline earnings
Profit or loss for the year attributable to equity holders of the
parent (40,475) (116,864)
Adjustments:
Effects of remeasurements for subsidiaries, net of NCI and tax: 14 60,299
Impairment loss - 60,299
Loss on sale of property, plant and equipment 20 -
Tax effect (6) -
Headline earnings (40,461) (56,565)
Weighted average number of ordinary shares ('000) 50,000 50,000
25
15. Related parties
Related party balances
Group
2019 2018
R '000 R '000
Trade receivables (a) 650 -
Loans receivable (a) 6,679
Other receivables (b) 5,201 5,201
Loan receivables (c) - 416
(a) A subsidiary of Pele Green (Pty) Ltd, Pele SPV198 (Pty) Ltd entered into an
agreement with Hulisani Limited to jointly subscribe for ordinary shares in Pele
SPV13 (Pty) Ltd. Hulisani Limited subscribed for cumulative preference shares in
Pele SPV198 (Pty) Ltd for the entity's funding of the ordinary shares subscription in
Pele SPV13 (Pty) Ltd. Other receivables are due from Pele Green Energy (Pty) Ltd,
a parent company to Pele SPV198 (Pty) Ltd.
(b) Sponsor fees refundable to Hulisani by Nibira (Pty) Ltd. The payment was rendered
invalid and the amount remains owing to the group at the end of the financial period.
(c) The loan is provided to Umhlaba Land Lease Co., Momentous Technologies and
Optimise Advisory Services (Pty) Ltd subsidiaries of Hulisani, and Gromac Holding
(Pty) Limited an associate of the Group. Hulisani has provided working capital funding
to the subsidiaries, in line with the shareholder’s agreement.
Related party transactions
Group
2019 2018
R '000 R '000
Consulting fees (a) 2,467 4,765
Dividends (b) 3,297 2,514
Management fees (c) 2,458 3,580
(a) Umhlaba Land Lease Co. (Pty) Ltd and Optimise Advisory Solution (Pty) Ltd used the
consulting services of GraysMaker Advisory (Pty) Ltd and Marsay (Pty) Ltd
respectively.
(b) Dividends were paid to Momentous Solar Farm (Pty) Ltd by RustMo1.
(c) Management fees were paid to Momentous Operations Services (Pty) Ltd by
RustMo1.
Compensation to directors and other key management
Group
2019 2018
R '000 R '000
Short-term employee benefits 7,737 6,534
7,737 6,534
26
16. Dividends
There are no dividends declared for the period.
17. Going concern
The summarised consolidated results for the year ended 28 February 2019 which are a
summarised set of the audited financial statements, have been prepared on a going concern
basis. This basis presumes that funds will be available to finance future operations and that
the realization of assets and settlement of liabilities, contingent obligations and commitments
will occur in the ordinary course of business.
On behalf of the Board
ME Raphulu
Chief Executive Officer
Registered Office:
4th Floor, North Tower, 90 Rivonia Road, Sandton, Gauteng.
Auditors:
PricewaterhouseCoopers Inc.
Sponsor:
PSG Capital Proprietary Limited
Transfer secretaries:
Computershare Investor Services Proprietary Limited, 70 Marshall Street Johannesburg,
2001
Company secretary:
The Paperclip, 31 Pineview Estate, Pineview Road, Kengies, Fourways, 2146
Directors:
ME Raphulu (Chief Executive Officer), MP Dem (Chief Financial Officer), PC Mdoda*
(Chairman), A Notshe^, MH Zilimbola^ (Alternate director), DR Hlatshwayo*, HH Schaaf*#, B
Marx*.
* Independent Non-executive # German ^ Non-independent Non-executive
Johannesburg
31 May 2019
Sponsor
PSG Capital
27
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