TIDMLEAF
RNS Number : 9777W
Leaf Clean Energy Company
16 December 2019
Leaf Clean Energy Company
Annual Report
For the year ended 30 June 2019
Chairman's statement
Dear Shareholder:
As you are all aware, Leaf eventually prevailed in its
litigation against Invenergy. We distributed $64.9 million in
August (101 pence per share outstanding on July 29, 2019) and we
distributed an additional $27.7 million (102 pence per share
outstanding on October 28, 2019) in November, both times via a
compulsory redemption of shares. The board of Leaf is now focused
on determining the most cost-effective means to a) determine its
tax liability, b) monetize the VREC investment, and c) delist and
liquidate the company. We are planning to complete those actions
within the first calendar quarter of 2020.
At 30 June 2019 Leaf's Net Asset Value ("NAV") was $95.7 million
(30th June 2018: $19.4 million) Accordingly, at 30 June 2019 NAV
per share was $1.82 per share (30 June 2018: $0.37) as calculated
using number of outstanding shares. Primary drivers for the change
were the $99.5 million gain on investments due to Leaf's collection
of damages from Invenergy offset in part by $10.5 million in tax
expense, an increase in our contingent costs provision of $4.9
million, transaction-related costs of $3.2 million, and
administrative costs of $2.3 million. At 30 June 2019 assets
consisted of cash balances of $106.0 million (of which $64.9
million was returned to shareholders in August 2019 and $27.7
million was returned to shareholders in November 2019) investment
balances of $nil and $0.2 million of receivables.
On 6 November 2019, the Board announced to seek the agreement of
shareholders to de-list the Company from AIM. The Board noted the
Company's investment objective (to realise its investments and
return the proceeds to Shareholders) was substantially achieved and
also noted that the Company had no desire to make a relevant
acquisition or acquisitions. The Board concluded that it is no
longer necessary for the Shares to be admitted to trading on
AIM.
Invenergy
On 2 May, 2019, the Delaware Supreme Court issued its opinion in
Leaf Invenergy Company, LLC v. Invenergy Wind LLC, C.A. No. 11830,
2018 (the "Invenergy Lawsuit"), reversing the Court of Chancery's
prior award of $1 in nominal damages to Leaf as a result of
Invenergy Renewables LLC's (formerly known as Invenergy Wind LLC)
("Invenergy") breach of the parties' limited liability company
agreement. The Supreme Court held that Leaf was entitled to damages
in the full amount of its contractually defined Target Multiple
and, therefore, remanded the matter back to the Court of Chancery
to enter judgment consistent with its decision.
On June 14, 2019, the Chancery Court entered its nal order and
judgement, ordering Invenergy to pay Leaf $114.5 million,
consisting of: a) the contractually defined $126.1 million Target
Multiple Invenergy should have paid Leaf on 15 December 2015 to
redeem Leaf's ownership interest in Invenergy, less b) the
previously announced $3.9 million tax distribution Invenergy made
to Leaf in January 2016, less c) the previously announced $36.4
million partial redemption payment Invenergy made to Leaf pursuant
to the Chancery Court's final order of 14 June 2018, plus d) $28.8
million of statutory pre- and post-judgement interest, within 10
calendar days of the order. This amount continued to accrue
statutory interest from 3 May 2019 at a rate of 8.0%, compounded
quarterly until the award was paid by Invenergy on 20 June
2019.
On June 20, 2019, pursuant to the Chancery Court's nal order and
judgement, Leaf received a payment from Invenergy in the amount of
$107.2 million, being the $114.5 million amount owed on 2 May 2019,
plus $1.3 million of additional interest through 20 June 2019, less
$8.6 million of mandatory tax withholding. Concurrently with the
provisioning of the aforementioned payment, Invenergy notified Leaf
that it planned to appeal the final order and judgement.
On July 9, 2019, Invenergy filed a notice of appeal with the
Delaware Supreme Court to contest the Final Order and Judgement
issued by the Chancery Court on June 14, 2019. Leaf filed a motion
to expedite such appeal. In its opposition to expedite, Invenergy
stated that it was appealing only the award of prejudgment interest
to Leaf. The Delaware Supreme Court granted the expedited treatment
and heard the appeal without oral argument on September 18, 2019.
On September 19, 2019, the Delaware Supreme Court affirmed the
award of pre-judgement interest.
After Invenergy stated that it was only appealing the award of
pre-judgement interest, Leaf returned $64.9 million (GBP53.1
million) to the shareholders via a compulsory partial redemption of
shares in August 2019. On October 28, 2019, Leaf announced that it
would return $27.7 million (GBP21.5 million) which was completed in
November 2019.
Investments
Vital Renewable Energy Company ("VREC")
Leaf has an investment in VREC, the owner of a sugar-cane based
facility in Brazil which produces ethanol and refined sugar. Over
the last twelve months, VREC underwent a substantial expansion
program. Its performance has been strong. Unfortunately Leaf owns a
very illiquid security in a depressed market for similar projects.
Merger activity is non-existent. Leaf's interest in VREC is subject
to several restrictions on transfer. Nevertheless, we continue to
work with the other shareholders of VREC to seek an exit for Leaf.
As per the latest development there have been no buyers for this
investment therefore the board has decided to write down the
investment in VREC to $ nil.
EnergÃa Escalona ("Escalona")
Leaf has an investment in Escalona, a hydroelectric project
development company based in Mexico City. Development activities
are substantially complete but the market for electricity in Mexico
has dramatically decreased over the past twenty-four months.
Conclusion
We appreciate the loyalty shown by our shareholders while we
undertook the lengthy and contentious battle with Invenergy. I hope
you agree that such loyalty was eventually rewarded. As I stated
earlier in this statement, Leaf's board has turned its attention to
cost cutting, completing our tax analysis and filings, monetizing
VREC and shutting down in an orderly manner and therefore the
financial statements have not been prepared under the assumption
that Leaf will continue as a going concern. Our current plan is to
complete these tasks by the end of the first calendar quarter of
2020. When those tasks are complete, the Leaf Board will determine
if there is sufficient capital to make a further modest
distribution.
Again, I thank you for your faith in our Board. It has been a
pleasure serving you these last five years.
Mark Lerdal
Chairman
Management report
Overview
During the year ended 30 June 2019, Leaf's management continued
its work implementing Leaf's orderly realisation strategy (see
Strategy section below). These activities consisted of working with
Leaf's legal counsel in pursuing the breach of contract claim filed
by Leaf against its investee (Invenergy) while also monitoring
Leaf's remaining investments with a view towards future realisation
events for these holdings.
Towards the end of the previous fiscal year, under the direction
of the Delaware Supreme Court, the Delaware Chancery Court
("Court") ordered Invenergy to redeem Leaf's stake in Invenergy
under the terms of the Material Partial Sale provision of the
Operating Agreement. This order, along with the Delaware Supreme
Court's decision in Leaf's appeal of the Court's $1 damages award
in the Invenergy lawsuit, superseded and mooted the prior
Court-ordered June 2018 redemption under the put/call provisions of
the Operating Agreement. Following the October 2017 sale of Lehigh
Technologies, Inc. to Michelin and the June 2019 redemption by
Invenergy of Leaf's ownership stake in Invenergy under the Material
Partial Sale provision of the Operating Agreement, Leaf's portfolio
consists of two remaining investments: VREC and Escalona. Leaf is a
minority holder in VREC and a majority holder in Escalona.
As a result of Leaf winning its appeal and pursuant to the
Court's nal order and judgement on remand from the Supreme Court,
Leaf received a payment from Invenergy in the amount of $107.2
million, being the $114.5 million amount owed on 2 May 2019, plus
$1.3 million of additional interest through 20 June 2019 (total
interest of $30.0 million), less $8.6 million of mandatory tax
withholding. Concurrently with the provisioning of the
aforementioned payment, Invenergy notified Leaf that it planned to
appeal the final order and judgement.
On July 9, 2019, Invenergy filed a notice of appeal with the
Delaware Supreme Court to contest the Final Order and Judgement
issued by the Chancery Court on June 14, 2019. Leaf filed a motion
to expedite such appeal. In its opposition to expedite, Invenergy
stated that it was appealing only the award of prejudgment interest
to Leaf. The Delaware Supreme Court granted the expedited treatment
and heard the appeal without oral argument on September 18, 2019.
On September 19, 2019, the Delaware Supreme Court affirmed the
award of pre-judgement interest.
After Invenergy stated that it was only appealing the award of
pre-judgement interest, Leaf returned $64.9 million (GBP53.1
million) to the shareholders via a compulsory partial redemption of
shares in August 2019. On October 28, 2019, Leaf announced that it
would return $27.7 million (GBP21.5 million) which was completed in
November 2019.
Strategy
Leaf's investment strategy is an orderly realisation and return
of capital to the shareholders, which will occur on an
asset-by-asset basis in timeframes appropriate for each asset. The
Leaf Board at its discretion will balance the goal of returning
capital expediently to investors with the goal of maximising the
realisation value of the investments.
Leaf's remaining holdings are all in the equity of unlisted
companies. Therefore, realisations of these investments require the
cooperation of the investee companies and of other investors as
well as Leaf. In addition, the individual circumstances and market
conditions surrounding each investment must be taken into account,
affecting the timescale before which a particular investment can be
realised. This means that some investments may be considered
appropriate for sale in the short term, while others may be held
for a longer period.
Leaf will not invest in any new portfolio companies and has
turned its attention to cost cutting, completing tax analysis and
filings, monetizing VREC and shutting down in an orderly
manner.
Financial highlights
Below is a summary of financial highlights across the Leaf
portfolio during the one-year period ended 30 June 2019:
Invenergy-related highlights
Please refer to Note 22 to the consolidated financial statements
for more background and information regarding the Invenergy lawsuit
and put/call process.
Background from prior periods:
-- On 18 July 2016 Leaf filed a motion for entry of an order and
final judgment, asking the Court to order Invenergy to pay damages
of $126.1 million, based on the calculation of the Target Multiple
per the terms of the Operating Agreement, less the $3.9 million
previously reported tax distribution from Invenergy, plus interest
on the net $122.2 million in damages at the Delaware statutory rate
of interest of 6%, compounded quarterly, from the date of the
breach.
-- On 12 August 2016, Invenergy filed an answering brief to
Leaf's motion, disputing that Leaf is entitled to the damages Leaf
is seeking and arguing that Leaf is entitled, at most, to nominal
damages. Invenergy also asserted that any obligation it owes to
Leaf is excused because of the put/call process described in the
interim statements. On this same date, Invenergy also filed a
motion to amend its original answer to the lawsuit to add five
additional affirmative defences and two counterclaims.
-- On 6 October 2016, the Court heard oral arguments by the
parties on the Leaf and Invenergy motions.
-- In two orders on 7 and 10 October 2016 which can be
downloaded and viewed in their entirety at the following URL:
http://www.leafcleanenergy.com/media-relations/download-centre/,
the Court denied Leaf's and Invenergy's motions, apart from
allowing one of Invenergy's counterclaims.
o The Court allowed Invenergy to assert a counterclaim against
Leaf alleging that Leaf acted in bad faith by causing its appraiser
in the put/call to provide a biased and inaccurate appraisal.
o The Court made additional rulings, including: 1) finding that
Leaf's claims are not excused as a result of Leaf exercising the
put, 2) that an exchange of mutual releases required in the
put/call will not moot the lawsuit, and 3) that Leaf's right to a
remedy for Invenergy's breach is not barred because Leaf did not
seek injunctive relief to block the closing of the TerraForm
Transaction.
-- On 7 April 2017, the third appraisal in the put-call process
was completed by an appraiser mutually selected by Leaf and
Invenergy. This appraiser valued Leaf's 2.3% stake in Invenergy at
$42.5 million.
-- A trial was held by the Court on 25-27 October 2017 to
determine the damages that will be awarded to Leaf due to
Invenergy's breach and to rule on Invenergy's counterclaim. The
Court held post-trial argument on 19 January 2018.
-- On 19 April 2018, the Court issued a post-trial opinion with
respect to Leaf's claims and Invenergy's counterclaim. In its
opinion, the Court held that Leaf is only entitled to nominal
damages of $1 as a result of Invenergy's breach of the Operating
Agreement. In addition, the Court rejected Invenergy's counterclaim
seeking a declaration that Leaf had breached certain provisions
governing Leaf's ability to put its shares, and Invenergy's ability
to call those shares, and ordered the parties to complete the
put/call process in accordance with the Operating Agreement.
-- On 14 June 2018, the Court entered its final order and
judgment with respect to Leaf's claims and Invenergy's
counterclaim, awarding Leaf nominal damages of $1 as a result of
Invenergy's breach of the Operating Agreement by engaging in a
defined "Material Partial Sale" without either obtaining Leaf's
consent or paying Leaf a contractually defined return on its
investment. The Court's final order also entered judgment in Leaf's
favour on Invenergy's counterclaim seeking a declaration that Leaf
had breached certain provisions governing Leaf's ability to put its
shares, and Invenergy's ability to call those shares, thereby
establishing the redemption price to be paid to Leaf in connection
with that put/call process at $50,7 million.
The final order and judgment contemplated that, in the event
Leaf appealed the Court's award of nominal damages in its final
order and judgment, Invenergy intended to cross-appeal the Court's
determination with respect to its counterclaim and therefore would
be obligated to pay Leaf $36.4 million, representing an amount that
Invenergy does not contest is owed to Leaf, within 5 business days
of Leaf's notice of appeal and that the remainder of the redemption
price would be paid into an interest bearing account controlled by
the Court to be distributed following, and depending on, the
appeal. Leaf continues to believe, as the Court found, that
Invenergy's counterclaim is without merit.
The Court's orders of 19 April 2018 and 14 June 2018 can be
downloaded and viewed in their entirety at the following URL:
http://www.leafcleanenergy.com/media-relations/download-centre/.
-- Also on 14 June 2018, following entry of the Court's final
order and judgment, Leaf filed its notice of appeal to the Delaware
Supreme Court.
-- On 20 June 2018, as ordered by the Court, Invenergy redeemed
all of Leaf's ownership interests in Invenergy, paying Leaf $36.4
million. Subsequently, Invenergy deposited an additional $15.3
million into the Court-controlled account.
-- On 25 June 2018, Invenergy filed its notice of cross-appeal
related to its counterclaim to the Delaware Supreme Court.
Developments during the period:
-- On 13 February 2019, the Delaware Supreme Court heard oral
argument in Leaf's appeal of the damages awarded to it in the
Invenergy lawsuit.
-- On 2 May 2019, the Delaware Supreme Court issued its opinion
in Leaf's appeal, reversing the Court's prior award of $1 in
nominal damages to Leaf as a result of Invenergy's breach of the
parties' limited liability company agreement. The Supreme Court
held that Leaf was entitled to damages in the full amount of its
contractually defined Target Multiple and, therefore, remanded the
matter back to the Court of Chancery to enter judgment consistent
with its decision.
-- On June 14, 2019, the Court entered its nal order and
judgement, ordering Invenergy to pay Leaf $114.5 million,
consisting of: a) the contractually defined $126.1 million Target
Multiple Invenergy should have paid Leaf on 15 December 2015 to
redeem Leaf's ownership interest in Invenergy, less b) the
previously announced $3.9 million tax distribution Invenergy made
to Leaf in January 2016, less c) the previously announced $36.4
million partial redemption payment Invenergy made to Leaf pursuant
to the Court's final order of 14 June 2018, plus d) $28.8 million
of statutory pre- and post-judgement interest, within 10 calendar
days of the order. The Court order also specified that this amount
would continue to accrue statutory interest from 3 May 2019 at a
rate of 8.0%, compounded quarterly until the award had been paid by
Invenergy.
-- On June 20, 2019, pursuant to the Court's nal order and
judgement, Leaf received a payment from Invenergy in the amount of
$107.2 million, being the $114.5 million amount owed on 2 May 2019,
plus $1.3 million of additional interest through 20 June 2019
(total interest of $30.0 million), less $8.6 million of mandatory
tax withholding. Concurrently with the provisioning of the
aforementioned payment, Invenergy notified Leaf that it planned to
appeal the final order and judgement.
Developments after the one-year period ended 30 June 2019:
-- On July 9, 2019, Invenergy filed a notice of appeal with the
Supreme Court to contest the Final Order and Judgement issued by
the Court on June 14, 2019.
-- On July 10, 2019, in an effort to bring about what the board
hoped would be a speedy resolution of what it believed to be yet
another attempt by Invenergy to avoid its obligations under the
limited liability agreement, Leaf filed a motion to expedite with
the Supreme Court in order to accelerate the appeal proceedings. In
its opposition to the motion, Invenergy clarified that it was only
appealing the Chancery Court's award of prejudgment interest to
Leaf.
-- On July 24, 2019, the Supreme Court issued an order granting
Leaf's motion to expedite the aforementioned proceedings.
-- On July 25, 2019, the Supreme Court issued a notice stating
the Supreme Court would consider the appeal, without oral argument,
on September 18, 2019.
-- On September 19, 2019, the Supreme Court issued its opinion
in Invenergy's appeal, upholding the Chancery Court's award of $30
million of prejudgment interest to Leaf.
-- On 6 November 2019 Leaf announced the approval by the
directors to apply to the London Stock Exchange for cancellation of
admission to trading of the Company's ordinary shares on AIM.
Other highlights
-- On 4 July 2018, Leaf repurchased and cancelled 65,592,161 of
the 118,162,853 shares that were outstanding as at 30 June 2018.
The July 2018 redemption was completed on 10 July 2018, following
payment to the holders of the cancelled shares. In relation to this
redemption Leaf booked a liability of $25.7 million in the accounts
as at 30 June 2018 and accordingly reduced share capital and
premium by this same aggregate amount. Leaf also reduced the number
of shares outstanding to 52,570,692 for the purposes of the 30 June
2018 financial statements for consistency, even though there were
actually 118,162,853 shares outstanding as at 30 June 2018.
Following the 4 July 2018 cancellation of the repurchased shares,
there were 52,570,692 ordinary shares in issue.
-- On 9 August 2019, after the period end, Leaf repurchased and
cancelled 34,943,699 of the 52,570,692 shares that were outstanding
as at 30 June 2019. The August 2019 redemption was completed on 16
August 2019, following payment to the holders of the cancelled
shares. The Leaf Board hadn't yet decided to undertake this
redemption as of 30 June 2019, and therefore no liability was
booked in the 30 June 2019 annual accounts with respect to this
redemption and the share capital and premium were maintained at
their pre-redemption aggregate amounts. Leaf also maintained the
number of shares outstanding at 52,570,692 for the purposes of
these 30 June 2019 financial statements. Following the 9 August
2019 cancellation of the repurchased shares, there were 17,626,993
ordinary shares in issue. On 28 October 2019 Leaf announced the
return of approximately $27.7 million of cash with approximately
99.35% of Leaf's issued share capital to be redeemed and cancelled.
On 12 November 2019, Leaf repurchased and cancelled 17,512,382
shares.
-- Lehigh was sold to Michelin North America, Inc. ("Michelin")
by way of a merger that was completed on 13 October 2017. Under the
terms of the deal the Leaf is entitled to approximately $400,000
being its pro rata portion of the total proceeds. The proceeds have
been placed in a two-year general indemnity escrow by Michelin to
meet any liabilities that might arise pursuant to the terms of the
transaction. Subsequent to the end of the period, Leaf received
word that a claim had been made against the indemnity escrow and as
a result, Leaf received approximately $229,000 on 22 October 2019
following the expiration of the escrow term on 13 October 2019.
Financial performance
The Leaf's total net asset value ("NAV") on 30 June 2019 was
$95.7 million, $76.3 million higher than on 30 June 2018. This
change resulted from the $76.3 million comprehensive gain for the
period, which in turn consisted primarily of a $99.5 million gain
on investments due to Leaf's collection of damages from Invenergy
following the Court's final order in the Invenergy lawsuit (see
above), offset in part by $10.5 million in tax expense, an increase
in our contingent costs provision of $4.9 million,
transaction-related costs of $3.2 million, administrative costs of
$2.3 million.
In June 2019 Leaf collected $107.2 million from Invenergy,
consisting of the $85.8 million remaining due from the $126.1
million Target Multiple that Invenergy should have paid Leaf to
redeem Leaf's Invenergy stake on 15 December 2015 - net of the $3.9
million tax distribution received in January 2016 and the $36.4
million partial put/call payment received in June 2018 - plus $30.0
million in statutory interest awarded by the Court to compensate
Leaf for the time elapsed since the date of Invenergy's breach of
the Operating Agreement, less $8.6 million of mandatory tax
withholding, which Invenergy paid to the US tax authorities on
Leaf's behalf. Leaf believes it owes $10.5 million in taxes and
therefore has recognized $10.5 million in tax expense and a $1.9
million tax liability.
The $4.9 million increase in the provision for future contingent
costs resulted mainly from an increase in the provision for future
payments from Leaf's incentives plans due to higher expected
returns of cash to the shareholders as a result of winning the
appeal of damages in the Invenergy lawsuit. The transaction-related
expenses resulted primarily from $2.2 million in success fees owed
to Leaf's legal counsel and financial advisors in connection with
Leaf winning its appeal, and legal costs associated with
prosecuting the appeal. The success fees were paid prior to the end
of the period.
At the end of the period, $106.0 million of Leaf's NAV was held
in cash, of which $64.9 (GBP53.1 million converted at the exchange
rate GBP1:$1.223367 prevailing at the date of announcement of the
redemption 29 July 2019) million was returned to shareholders in
August 2019 via a compulsory partial redemption of shares approved
by the board following the period end. An additional $27.7 million
(GBP21.5 million converted at the exchange rate GBP1:$1.285753
prevailing at the date of announcement of the redemption 28 October
2019) was returned to shareholders in November via another
compulsory partial redemption. $nil was held in investments.
NAV per share for Leaf was 182.00 cents or 143.31 pence at
$1.2699 to the GBP1. This was an increase of 394.56 per cent for
the one-year period from 30 June 2018. The increase was due to the
comprehensive gain for the period (+414.3%), which was in turn
primarily the result of the net gain on investments (+505.8%),
partly offset by tax expense (-53.5%), contingent costs provision
(-24.8%), transaction-related expenses (-16.4%), and administration
expenses (-11.6%).
Portfolio update
Key updates regarding Leaf's portfolio companies during the
annual report period include the following:
Invenergy Renewables LLC (Invenergy)
As mentioned above, on 20 June 2019 Invenergy, North America's
largest independently owned clean power generation company, paid an
additional $85.8 million to complete its redemption of Leaf's
ownership interests in Invenergy in accordance with the Court's
order of 14 June 2019. Due to the June 2018 Court-ordered
redemption via the put/call provision of the Operating Agreement,
which was superseded and mooted by the Supreme Court's 2 May 2019
decision and the Court's 14 June 2019 order, Leaf no longer held an
investment in Invenergy as at 30 June 2018 or 30 June 2019.
Invenergy has appealed the $30.0 million of interest awarded by the
Court. The Delaware Supreme Court granted the expedited treatment
and heard the appeal without oral argument on September 18, 2019.
On September 19, 2019, the Delaware Supreme Court affirmed the
award of pre-judgement interest. Please refer to the Invenergy
Highlights above and to Note 22 to the financial statements for
further details.
Vital Renewable Energy Company (VREC)
VREC, a renewable energy company focused on the development of
sugar-cane-based ethanol and sugar has commenced the 2019/2020
crushing season after having completed its off-season maintenance
program. VREC successfully completed its industrial expansion
program that was underway during the previous crushing season and
has expanded its crushing capacity by approx. 40% year over year.
This expanded capacity, subject to the expansion of the
agricultural program at VREC, should help facilitate additional
growth in the financial performance of the business over the medium
term. As per the latest development, there has been no buyers for
this investment and the board therefore has decided to write down
the investment in VREC to $ nil.
EnergÃa Escalona (Escalona)
Escalona, the hydroelectric project development company based in
Mexico City, has substantially completed project development
activities. Given the finalization of the development of the
project, Leaf, in collaboration with its partner in Mexico, are
actively engaged in seeking to exit the project.
Outlook
Leaf's management and board are very gratified to see justice
finally done in relation to Invenergy's December 2015 breach of the
Operating Agreement, and to be able, finally, to fully realize the
value of the Invenergy investment for Leaf's shareholders. The
final appeal of the interest by Invenergy was ruled in Leaf's
favour by the Delaware Supreme Court on September 19, 2019.
While the board and management understand Leaf's tax provision
to be sensible, based on advice from its tax counsel, given the
inherent uncertainties in the positions that might be taken by the
US tax authorities, especially in light of current unresolved
regulations in relation to the recently enacted Tax Cuts and Jobs
Act, and the timing of the resolution of these uncertainties, net
amounts realised may differ materially from the board's estimates
as incorporated in the financial statements. The NAV includes
provision of $2.49 million for expected wind down and liquidation
costs as Leaf expects to complete its orderly wind down and
liquidation. The timing for this is uncertain as it is largely
dependent on resolving tax matters, but the board and management
hope to achieve this by first half of calendar 2020.
The financial statements have been prepared under the assumption
that Leaf will not continue as a going concern entity in accordance
with IAS 1.25.
The realisation of Leaf's remaining assets and the wind down and
liquidation of the company will likely not be completed until the
first half of calendar 2020.
Report of the directors
The directors hereby submit their annual report of the audited
consolidated financial statements of the Leaf for the financial
year ended 30 June 2019.
The Company
Leaf Clean Energy Company ("Leaf") was incorporated in the
Cayman Islands on 14 May 2007. Leaf was established to invest in
clean energy projects, predominantly in North America. Clean energy
includes activities such as the production of alternative fuels,
renewable power generation and the use of technologies to reduce
the environmental impact of traditional energy. The investments of
Leaf will be realised in an orderly and expedient manner, that is,
with a view to achieving a balance between: (i) returning cash to
shareholders at such times and from time to time and in such manner
as the board may (in its absolute discretion) determine; and (ii)
maximising the realisation value of Leaf's investments. In light of
the realisation strategy, there will be no specific investment
restrictions applicable to Leaf's portfolio going forward, except
that Leaf will not make any investment in a new portfolio
company.
Results and dividends
The financial performance and financial position of the Leaf for
the year ended 30 June 2019 are set out in the attached
consolidated financial statements. The directors did not declare a
dividend during the year ended June 30, 2019 (June 30,
2019:$Nil).
Subsequent redemption
On 29 July 2019, after the end of the period, Leaf announced the
approval by the directors of the return of approximately $64.9
million of cash (GBP53.1 million converted at the exchange rate
GBP1:$1.223367 prevailing at the date of announcement of redemption
29 July 2019) to the shareholders via a compulsory partial
redemption of shares equivalent to 101.0 pence per share
outstanding at the time of the announcement (the "Redemption"). The
Redemption price per share was 151.94 pence (by reference to the
Leaf Bard's estimate of the NAV per share as at 31 May 2019), with
approximately 66.47% of Leaf's issued share capital redeemed on 9
August 2019. The Redemption completed on 16 August 2019, after the
end of the period.
On 28 October 2019 Leaf announced the approval by the directors
of the return of approximately $27.7 million of cash (GBP21.5
million converted at the exchange rate GBP1:$1.285753 prevailing at
the date of announcement of the redemption 28 October 2019) to the
shareholders via a compulsory redemption of shares equivalent to
122 pence per share outstanding at the time of the announcement
(the "Redemption"). The Redemption price per share was 122.8 pence
(by reference to the Leaf Board's estimate of the NAV per share as
at 30 September 2019), with approximately 99.35% of Leaf's issued
share capital to be redeemed and cancelled.
Directors and directors' interests
The directors during the year were:
Mark Lerdal (executive
chairman)
Stephen Coe (non-executive
director)
Peter O'Keefe (non-executive
director)
Details of interests
The interests of the directors in the share capital of Leaf as
at 30 June 2019 are set out below:
Name 2019 2018
Peter O'Keefe No. of ordinary No. of ordinary
shares shares
Stephen Charles Coe 20,824 46,807
8,898 20,000
99.35% of the above numbers of shares owned by Messrs. Coe and
O'Keefe were redeemed after the period end in the compulsory
Redemption.
Notified shareholdings
As at the date of this report, the following interests in the
ordinary shares of Leaf of 3.2% and over of the issued share
capital had been notified to Leaf:
% of issued share
Name No. of shares capital
INVESCO Asset Management Limited 18,998,136 36.14%
Weiss Asset Management 15,549,519 29.58%
Crystal Amber Advisers (UK) LLP 13,252,336 25.21%
99.35% of the above numbers of shares were redeemed in
connection with the compulsory Redemption.
Independent auditors
Our auditors, KPMG, being eligible have expressed their
willingness to continue in office.
Corporate governance
In line with the London Stock Exchange's recent changes to the
AIM Rules requiring all AIM-listed companies to adopt and comply
with a recognised corporate governance code, the board has decided
to adopt and comply with the Quoted Companies Alliance (QCA)
Corporate Governance Code (the "QCA Code"). A Statement of
Compliance with the QCA Corporate Governance Code outlining how
Leaf complies with the QCA Code will be published on Leaf's website
going forward from 28 September 2018.
Board of directors
Leaf has an experienced board which is currently comprised of
three directors, Mark Lerdal is the executive chairman of the
board, Stephen Coe and Peter O'Keefe are non-executive
directors.
Audit committee
An audit committee has been established to operate with effect
from Admission. The current audit committee is chaired by
non-executive director Stephen Coe. Mr. Coe qualified as a
Chartered Accountant with Price Waterhouse in 1990. Mark Lerdal,
Leaf's executive chairman, and non-executive director Peter O'Keefe
are the other members on this three-member committee. It meets
whenever there is business to discuss and at least twice each year.
The audit committee is responsible for ensuring that the financial
performance of the Leaf is properly monitored, controlled and
reported on. It also communicates with the auditors and reviews the
auditors' reports relating to accounts and internal control
systems.
Remuneration committee
Leaf has established a remuneration committee, comprising Mark
Lerdal and Peter O'Keefe. The remuneration committee meets when the
board considers it necessary to review the level of directors'
fees.
Leaf takes all reasonable steps to ensure compliance by the
directors, the directors' families and any employees with the
provisions of the Market Abuse Regulations (MAR) of the European
Union and the AIM Rules relating to dealings in securities of Leaf
and has adopted the Model Code under the FCA's Listing Rules for
this purpose.
Nomination committee
Leaf does not currently consider it necessary to establish a
nomination committee.
Internal control
There are inherent limitations in any system of internal control
and such a system can provide only reasonable, but not absolute,
assurances against material misstatement or loss. The Leaf does not
have its own internal audit function but places reliance on
compliance and other control functions of its service providers.
Where necessary the board obtains specialist advice from
advisers.
On behalf of the board
Mark Lerdal
Chairman
Statement of directors' responsibilities in respect of the
annual report and the financial statements
The directors are responsible for preparing the directors'
report and the consolidated financial statements in accordance with
applicable law and regulations. In addition, the directors have
elected to prepare the consolidated financial statements in
accordance with International Financial Reporting Standards.
The consolidated financial statements are required to give a
true and fair view of the state of affairs of the Leaf and the
profit or loss of the Leaf for that year.
In preparing these consolidated financial statements, the
directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
International Financial Reporting Standards; and
-- prepare the consolidated financial statements on the going
concern basis unless it is inappropriate to presume that the Leaf
will continue in business.
The directors are responsible for keeping proper accounting
records that are sufficient to show and explain the Leaf Group's
transactions and disclose with reasonable accuracy at any time its
financial position. They have general responsibility for taking
such steps as are reasonably open to them to safeguard the assets
of the Leaf and to prevent and detect fraud and other
irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on Leaf's
website. Legislation governing the preparation and dissemination of
consolidated financial statements may differ from one jurisdiction
to another.
Independent auditors' report to the board of directors
Independent Auditors' Report to the Board of Directors
We have audited the accompanying consolidated financial
statements of Leaf Clean Energy Company (the "Company"), which
comprise the consolidated statement of financial position as of 30
June 2019, and the related consolidated statements of comprehensive
income, changes in equity, and cash flows for the year then ended,
and the related notes to the consolidated financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards
("IFRS"); this includes the design, implementation, and maintenance
of internal control relevant to the preparation and fair
presentation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditors'
judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and
fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. Accordingly, we
express no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness
of significant accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial
statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our qualified
audit opinion.
Basis for Qualified Opinion
KPMG were previously engaged to audit the consolidated financial
statements of the Company as at and for the year ended 30 June
2018. At 30 June 2018, the Company recognized a receivable balance
of "Additional proceeds receivable from put/call redemption of
Invenergy stake", amounting to USD 14,237,000 that was subject to a
cross appeal proceedings as described in note 22 to the
consolidated financial statements, the outcome of which was
uncertain. Due to this uncertainty, we were not able to obtain
sufficient, appropriate audit evidence about the rights to receive
the receivable and the related carrying amount of this balance. As
a result, we were unable to determine whether any adjustments might
be necessary to the amount of Additional proceeds receivable from
put/call redemption of Invenergy stake presented in the
consolidated statement of financial position as of 30 June 2018 and
the elements making up the consolidated statements of comprehensive
income and changes in equity for the year ended 30 June 2018.
Because of the significance of the matter, we were not able to
obtain sufficient appropriate audit evidence to provide a basis for
an audit opinion on the consolidated statement of financial
position as of 30 June 2018 and the consolidated statements of
comprehensive income, changes in equity, and cash flows for the
year then ended and accordingly disclaimed an opinion in respect of
those consolidated financial statements on 28 September 2018.
As disclosed in Note 22, the Invenergy lawsuit was settled
during the year ended 30 June 2019, and all receivables related to
Invenergy have been realized as at 30 June 2019. Due to the matter
described in the preceding paragraph, we were unable to determine
whether any adjustments related to the recognition of additional
proceeds receivable from put/call redemption of Invenergy stake of
USD 14,237,000 as at 30 June 2018, might be necessary to the net
gain on additional proceeds from redemption of Invenergy stake in
the consolidated statement of comprehensive income for the year
ended 30 June 2019.
The Company has recognized an income tax expense of USD
10,524,000 in the consolidated statement of comprehensive income
and a related income tax liability of USD 1,948,000 in the
consolidated statement of financial position as at 30 June 2019. We
were unable to obtain sufficient appropriate audit evidence to
support the portion of the 'net gain on additional proceeds from
redemption of Invenergy stake' attributable to non-US sources,
which is a key input into the calculation of the income tax expense
and related income tax liability, accordingly we were unable to
determine whether any adjustments were necessary to the income tax
expense or carrying amount of the income tax liability.
As disclosed in Note 2: basis of preparation and Note 3:
significant accounting policies, the consolidated financial
statements have not been prepared on a going concern basis and the
Company determines fair value based on net realizable value.
Management estimated the net realizable value of investments at
fair value through profit and loss as USD nil as at 30 June 2019
due to the fact that there are no potential buyers for these
investments. We were unable to obtain sufficient appropriate audit
evidence to assess the valuation of these investments, accordingly
we were unable to determine whether any adjustments were necessary
to the carrying amount of the investments at fair value through
profit and loss.
Qualified Opinion
In our opinion, except for the matter described in the Basis for
Qualified Opinion paragraphs, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Leaf Clean Energy Company as of 30 June 2019,
and the results of its operations and its cash flows for the year
then ended in accordance with IFRS.
Emphasis of Matter
We draw attention to Note 2.2 in the financial statements, which
describes that the going concern basis of preparing the financial
statements has not been used because subsequent to year end, on
October 14, 2019, the Board of Directors, resolved to wind up the
Company. Our opinion is not modified in respect of this matter.
Other Matter
Our audit was conducted for the purpose of forming an opinion on
the consolidated financial statements of Leaf Clean Energy Company,
which comprise the consolidated statement of financial position as
of 30 June 2019, and the related consolidated statements of
comprehensive income, changes in equity, and cash flows for the
year then ended, and the related notes to the consolidated
financial statements. The 'Biographies of the directors',
'Chairman's statement', 'Management report', 'Report of the
directors' and 'Statement of directors' responsibilities in respect
of the annual reports and the consolidated financial statements'
are presented for purposes of additional analysis and is not a
required part of the consolidated financial statements. Such
information has not been subjected to the auditing procedures
applied in the audit of the consolidated financial statements, and
accordingly, we do not express an opinion or provide any assurance
on it.
KPMG
Consolidated statement of comprehensive income for the year
ended 30 June 2019
Note Year ended Year ended
30 June 2019 30 June 2018
US$'000 US$'000
Interest and other
income - 2
Net (loss) on
investments at fair
value through
profit or loss 12.1 (2,000) (48,711)
Net gain/(loss) on
additional proceeds
from redemption of
Invenergy stake 22 101,523 -
Net foreign exchange
gain/(loss) 292 (276)
--------------------- ----- --------------------------- ---------------------------------------------------------------------------------------------------------
Gross portfolio
return 99,815 (48,985)
Transaction-related
costs 7 (3,219) (4,466)
Administration
expenses 6 (2,282) (1,419)
Interest on
shareholders loan
and
amortisation of
loan facility fee - (308)
Write off of
doubtful
intercompany
receivable 19 (94) (116)
Wind 23 (2,492) -
down/liquidation
costs provision
expense
Contingent costs
provision
(expense)/reversal 8 (4,872) 770
--------------------- ----- --------------------------- ---------------------------------------------------------------------------------------------------------
Profit/(loss) before
taxation 86,856 (54,524)
Taxation 18 (10,524) 11,341
--------------------- ----- --------------------------- ---------------------------------------------------------------------------------------------------------
Total profit/(loss)
and total
comprehensive
loss for the period 76,332 (43,183)
===================== ===== =========================== =========================================================================================================
Profit/(loss) for
the period
attributable
to equity holders 76,332 (43,183)
--------------------- ----- --------------------------- ---------------------------------------------------------------------------------------------------------
Basic and diluted
profit/(loss) per
share (cents) 10 142.76 (36.55)
===================== ===== =========================== =========================================================================================================
The accompanying notes form an integral part of these
consolidated financial statements.
Consolidated statement of financial position as at 30 June
2019
Note Year ended Year ended
30 June 2019 30 June 2018
US$'000 US$'000
Assets
Investments at fair value through
profit or loss 12.1 - 2,000
Total non-current assets - 2,000
------------------------------------- ----- ----------------------- --------------
Trade and other receivables 14 174 106
Additional proceeds receivable
from put/call redemption of
Invenergy stake 22 - 14,237
Cash and cash equivalents 15 105,953 29,975
------------------------------------- ----- ----------------------- --------------
Total current assets 106,127 44,318
------------------------------------- ----- ----------------------- --------------
Total assets 106,127 46,318
===================================== ===== ======================= ==============
Equity
Share capital 17 18 18
Share premium 17 271,310 271,310
Retained losses (175,650) (251,982)
------------------------------------- ----- ----------------------- --------------
Total equity 95,678 19,346
------------------------------------- ----- ----------------------- --------------
Liabilities
Provision for future contingent
costs 8 5,752 880
Provision for wind down/liquidation
costs 23 2,492 -
Tax liability 1,948 -
Trade and other payables 16 257 347
Accrual for compulsory redemption
of shares - 25,745
Total current liabilities 10,449 26,972
------------------------------------- ----- ----------------------- --------------
Total liabilities 10,449 26,972
------------------------------------- ----- ----------------------- --------------
Total equity and liabilities 106,127 46,318
===================================== ===== ======================= ==============
Net asset value per share (cents) 5 182.00 36.80
===================================== ===== ======================= ==============
The accompanying notes form an integral part of these
consolidated financial statements.
The consolidated financial statements were approved by the board
of directors on 5 December 2019 and signed on their behalf by:
Mark Lerdal Stephen Coe
Executive Chairman Non-executive Director
Consolidated statement of changes in equity for the year ended
30 June 2019
Share Capital Share Premium Retained Losses Total
Equity
US$'000 US$'000 US$'000 US$'000
----------------------------------------- -------------- -------------- ---------------- ----------
Balance at 1 July 2017 27 297,046 (208,799) 88,274
Compulsory redemption of shares (9) (25,736) (25,745)
Total comprehensive loss for the year - - (43,183) (43,183)
----------------------------------------- -------------- -------------- ---------------- ----------
Balance at 30 June 2018 18 271,310 (251,982) 19,346
========================================= ============== ============== ================ ==========
Total comprehensive income for the year - - 76,332 76,332
----------------------------------------- -------------- -------------- ---------------- ----------
Balance at 30 June 2019 18 271,310 (175,650) 95,678
========================================= ============== ============== ================ ==========
The accompanying notes form an integral part of these
consolidated financial statements.
Consolidated statement of cash flows for the year ended 30 June
2019
Year ended Year ended
30 June 2019 30 June 2018
US$'000 US$'000
Cash flows from operating activities
Proceeds from sale of investments - 36,462
Additional proceeds from redemption of Invenergy
stake 115,760 -
Tax (payments)/refund (8,606) 2
Transaction-related costs paid (3,536) (6,619)
Operating expenses paid (2,166) (1,562)
Advances to investee companies (21) (10)
Interest paid on shareholders loan - (183)
Fees for shareholders loan - (125)
Net cash generated from operating activities 101,431 27,965
--------------------------------------------------- ------------------- -------------------
Cash flows from investing activities
Net cash generated from/(used in) investing - -
activities
--------------------------------------------------- ------------------- -------------------
Cash flows financing activities
Proceeds from shareholders loan - 2,000
Partial redemption of shares (25,745) -
Repayment of shareholders loan - (2,000)
Net cash generated (used in) financing activities (25,745) -
--------------------------------------------------- ------------------- -------------------
Net increase in cash and cash equivalents 75,686 27,965
Cash and cash equivalents at start of the year 29,975 2,286
Effect of exchange rate fluctuations on cash
and cash equivalents 292 (276)
--------------------------------------------------- ------------------- -------------------
Cash and cash equivalents at end of the year 105,953 29,975
--------------------------------------------------- ------------------- -------------------
The accompanying notes form an integral part of these
consolidated financial statements.
Reconciliation of total gain/(loss) and Year ended Year ended
total comprehensive gain/(loss) for the 30 June 2019 30 June 2018
year to net cash generated/(used in) from US$'000 US$'000
operating activities
Total profit/(loss) and total comprehensive
profit/(loss) for the year 76,332 (43,183)
Adjustments for:
Net loss on investments at fair value through
profit or loss 2,000 280
Net realised (gain)/loss on additional
proceeds from redemption of Invenergy stake (101,523) 48,431
Proceeds from sale of investments - 36,462
Additional proceeds from redemption of 115,760 -
Invenergy stake
Provision for wind down/liquidation costs 2,492 -
Taxation 1,948 -
(Decrease) in net deferred tax liability - (11,341)
Increase/(decrease) in provision for future
contingent costs 4,872 (770)
Net foreign exchange (gain)/loss (292) 276
Operating profit before changes in working
capital 101,589 30,155
Movement in trade and other receivables (68) (41)
Movement in trade and other payables (90) (2,149)
Net cash generated from operating activities 101,431 27,965
----------------------------------------------- --------------- ---------------
The accompanying notes form an integral part of these
consolidated financial statements.
Notes to the consolidated financial statements for the year
ended 30 June 2019
1. Leaf
Leaf Clean Energy Company (the "Company" or "Leaf") was
incorporated in the Cayman Islands on 14 May 2007. Leaf was
established to invest in clean energy projects, predominantly in
North America. Clean energy includes activities such as the
production of alternative fuels, renewable power generation and the
use of technologies to reduce the environmental impact of
traditional energy. The investments of Leaf will be realised in an
orderly and expedient manner, that is, with a view to achieving a
balance between: (i) returning cash to shareholders at such times
and from time to time and in such manner as the board may (in its
absolute discretion) determine; and (ii) maximising the realisation
value of Leaf's investments. In light of the realisation strategy,
there will be no specific investment restrictions applicable to
Leaf's portfolio going forward.
The shares of Leaf were admitted to trading on the AIM market of
the London Stock Exchange ("AIM") on 28 June 2007 when dealings
also commenced.
During the period, Leaf's executive chairman, agents, and
management team (the latter being employees of Leaf) performed all
significant functions.
The consolidated financial statements as at and for the year
ended 30 June 2019 are for the Leaf Group. Refer to note 20.
The consolidated financial statements of Leaf as at and for the
year ended 30 June 2019 are available upon request from Leaf's
registered office at PO Box 309, Ugland House, George Town, Grand
Cayman KY1-1104, Cayman Islands or at www.leafcleanenergy.com.
2. Basis of preparation
2.1 Statement of compliance
Leaf and its subsidiaries' (together the "Leaf Group")
consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRS), taking
into account the fact that Leaf is not a going concern due to the
fact that it expects to complete its orderly wind down strategy in
less than twelve months from the end of the reporting period end
date. Leaf has consistently applied the accounting policies as set
out in note 3 to all periods presented with the inclusion of new
standards and amendments mentioned below.
a. IFRS 9 Financial Instruments (issued on 24 July 2014)
b. Amendments to IFRS 2: Classification and Measurement of
Share-based Payment Transactions (issued on 20 June 2016)
c. IFRS 15 Revenue from Contracts with Customers
d. IFRS 16 - Leases (issued on 13 January 2016)
e. Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures (issued on 12 October 2017)
The Directors do not expect the adoption of the above standards
and interpretations to have a material impact on the Group's
financial statements in the period of initial application.
These consolidated financial statements were approved by the
board of directors on 5 December 2019.
2.2 Basis of measurement
The consolidated financial statements have been prepared on the
historical cost basis except for the investments held at fair value
through profit and loss that are measured at fair value in the
consolidated statement of financial position.
The financial statements are not prepared on a going concern
basis (IAS 1.25), which is aligned with management's strategy of
the orderly realization on an asset-by-asset basis in timeframes
appropriate for each asset and the return of capital to
shareholders. The financial statements are prepared to disclose
overall net realizable value and accordingly the directors estimate
of fair value of investments is based on expected net realizable
value and all the future estimated liquidation expenses have been
accrued.
2.3 Functional and presentation currency
The consolidated financial statements are presented in United
States Dollars ("US$"), which is the Leaf Group's functional
currency.
2.4 Use of estimates and judgements
The preparation of consolidated financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the year
in which the estimate is revised and in any future years
affected.
The most significant area requiring estimation and judgement by
the directors is the net realizable value of unquoted investments
(see note 12), provision for contingent costs (see note 8) and
provision for wind down/ liquidation costs (see note 23).
2.5 Disclosure on changes in significant accounting policies
This note explains the impact of the adoption of IFRS 9
Financial applied to the Leaf group from 1 July 2018. IFRS 9
replaces the provisions of IAS 39 that relate to the recognition,
classification and measurement of financial assets and financial
liabilities, derecognition of financial instruments, impairment of
financial assets and hedge accounting. The adoption of IFRS 9
Financial Instruments has resulted in changes in accounting
policies and in accordance with the transitional provisions in IFRS
9 (7.2.15) and (7.2.26), comparative figures have not been
restated.
The following table and the accompanying notes below explain the
original measurement categories under IAS 39 and the new
measurement categories under IFRS 9 for each class of the group's
financial assets and financial liabilities as at 1 July 2018.
Original carrying New carrying
Original classification New classification amount under IAS amount under
under IAS under IFRS 39 IFRS 9
Financial Assets 39 9 US$'000 US$'000
---------------------- ------------------------- -------------------- ------------------ --------------
Investment at
fair value through Mandatorily
profit or loss Held for trading at FVTPL 2,000 2,000
---------------------- ------------------------- -------------------- ------------------ --------------
Additional proceeds
receivable from
put/call redemption
of Invenergy Loans and
stake receivables Amortised cost 14,237 14,237
---------------------- ------------------------- -------------------- ------------------ --------------
Cash and cash Loans and
equivalents receivables Amortised cost 29,975 29,975
Trade and other Loans and
receivables receivables Amortised cost 106 106
46,318 46,318
================== ==============
Original New carrying
classification Original carrying amount under
under IAS New classification amount under IAS IFRS 9
Financial Liabilities 39 under IFRS 9 39 US$'000 US$'000
------------------------ ----------------- -------------------- ------------------ --------------
Provision for
future contingent Amortised
costs cost Amortised cost 880 880
Accrual for compulsory
redemption of Amortised
shares cost Amortised cost 25,745 25,745
Trade and other Amortised
payables cost Amortised cost 347 347
26,972 26,972
================== ==============
3 Significant accounting policies
The accounting policies set out below have been applied
consistently to all years presented in these consolidated financial
statements, with the exception of the adoption of the new standards
such as IFRS 9 Financial Instruments which has had no significant
impact on the measurement of assets and liabilities, and no impact
on the disclosures included in the financial statements.
3.1 Financial instruments
Financial assets and financial liabilities
(i) Recognition and initial measurement
The Leaf group initially recognises financial assets and
financial liabilities at FVTPL on the trade date, which is the date
on which the Leaf group becomes a party to the contractual
provisions of the instrument. Other financial assets and financial
liabilities are recognised on the date on which they are
originated.
A financial asset or financial liability is measured initially
at fair value plus, for an item not at FVTPL, transaction costs
that are directly attributable to its acquisition or issue.
(ii) Classification and subsequent measurement
Classification of financial assets- policy applicable from 1
July 2018
On initial recognition, the Leaf group classifies financial
assets as measured at amortised cost or FVTPL.
Amortised cost- a financial asset is measured at amortised cost
if both of the following conditions are met:
- the asset is held within a business model whose objective is
to hold assets in order to collect contractual cash flows; and
- the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
All other financial assets of the group are measured at fair
value through profit or loss.
The group has determined that it has two business models.
- Held-to-collect business model: this includes cash and cash
equivalents and trade and other receivables. These financial assets
are held to collect contractual cash flow.
- Other business model: this includes investments held at fair
value through profit or loss. These are written off due to the view
of the directors of no net realizable value, but they were
nevertheless held as investments at 30 June 2019.
Classification of financial assets- policy applicable before 1
July 2018
The Fund classified financial assets into the following
categories.
Financial assets at FVTPL:
- Held for trading: Investments at fair value through profit or loss.
Financial assets at amortised cost:
- Loans and receivables: cash and cash equivalents, additional
proceeds receivable from put/call redemption of Invenergy stake and
trade and other receivables.
Subsequent measurement of financial assets
Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains
and losses, including any interest or dividend income and expense
and foreign exchange gains and losses, are recognised in profit or
loss in 'net income from financial instruments at FVTPL. These are
written off due to the view of the directors of no net realizable
value, but they were nevertheless held as investments at 30 June
2019. Leaf holds two investments in unlisted private equity,
included in this category.
Financial assets at amortised cost
These assets are subsequently measured at amortised cost using
the effective interest method. Interest income is recognised in
'interest income calculated using the effective interest method',
foreign exchange gains and losses are recognised in 'net foreign
exchange loss' and impairment is recognised in 'impairment losses
on financial instruments' in the statement of comprehensive income.
Any gain or loss on derecognition is also recognised in profit or
loss.
Cash and cash equivalents and trade receivable are included in
this category.
Financial liabilities- classification, subsequent measurements,
and gains and losses
A financial liability is classified as at FVTPL if it is
classified as held-for-trading, it is a derivative or it is
designated as such on initial recognition. Financial liabilities at
FVTPL are measured at fair value and net gains and losses,
including any interest expense, are recognised in profit or
loss.
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method. Interest
expense and foreign exchange gains and losses are recognised in
profit or loss. Any gain or loss on derecognition is also
recognised in profit or loss.
Financial liabilities at amortised cost includes provision for
future contingent costs, tax liability, provision for wind
down/liquidation costs and trade payable.
(iii) Fair value measurement
'Fair value' is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the
principal or, in its absence, the most advantageous market to which
the group has access at that date. As at 30 June 2019 the financial
statements are not prepared on a going concern basis and
accordingly the directors have estimated the fair value of
investments using the net realizable value. The fair value of a
liability reflects its non-performance risk.
The Leaf group recognises transfers between levels of the fair
value hierarchy as at the end of the reporting period during which
the change has occurred.
(iv) Amortized cost measurement
The 'amortised cost' of a financial asset or financial liability
is the amount at which the financial asset or financial liability
is measured on initial recognition minus the principal repayments,
plus or minus the cumulative amortisation using the effective
interest method of any difference between that initial amount and
the maturity amount and, for financial assets, adjusted for any
loss allowance.
(v) Impairment
The Leaf group recognises loss allowances for expected credit
losses (ECL) on financial assets measured at amortised cost.
The Leaf group measures loss allowances at an amount equal to
lifetime ECL, except for the following, which are measured at
12-month ECLs:
- Financial assets that are determined to have low credit risk at the reporting date; and
- Other financial assets for which credit risk (i.e. the risk of
default occurring over the expected life of
the asset) has not increased significantly since initial recognition.
Measurement of expected credit losses
12-month expected credit losses
12-month expected credit losses are calculated by multiplying
the probability of a default occurring in the next 12 months with
the total (lifetime) expected credit losses that would result from
that default, regardless of when those losses occur. Therefore,
12-month expected credit losses represent a financial asset's
lifetime expected credit losses that are expected to arise from
default events that are possible within the 12 months period
following origination of an
asset, or from each reporting date for those assets in initial
recognition stage.
Lifetime expected credit losses
Lifetime expected credit losses are the present value of
expected credit losses that arise if a borrower defaults on its
obligation at any point throughout the term of a lender's financial
asset (that is, all possible default events during the term of the
financial asset are included in the analysis). Lifetime expected
credit losses are calculated based on a weighted average of
expected credit losses, with the weightings being based on the
respective probabilities of default.
(vi) Derecognition
The Company derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire or it
transfers the financial asset and the transfer qualifies for
derecognition in accordance with IFRS 9.
A financial liability is derecognised when the obligation
specified in the contract is discharged, cancelled or expired.
On derecognition of a financial liability, the difference
between the carrying amount extinguished and the consideration paid
(including any non-cash assets transferred or liabilities assumed)
is recognised in profit or loss.
(vii) Offsetting
Financial assets and financial liabilities are offset and the
net amount presented in the statement of financial position when,
and only when, the group has a legally enforceable right to offset
the amounts and intends either to settle them on a net basis or to
realise the asset and settle the liability simultaneously.
Income and expenses are presented on a net basis for gains and
losses from financial instruments at FVTPL and foreign exchange
gains and losses.
(viii) Specific instruments- Cash and cash equivalents
Cash and cash equivalents comprise cash held in bank that
largely will be utilised to settle additional tax liability in
respect of the gain on the court-ordered redemption of Leaf's stake
in Invenergy, running costs through completion of the wind down and
for costs relating to completing the liquidation of the Company.
Once the tax situation has been resolved, the Board intends to seek
Shareholder approval to the liquidation of the Company and remit
any surplus funds to Shareholders.
3.2 Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares are
recognised as a deduction from equity, net of any tax effects.
Repurchase of share capital
When share capital recognised as equity is repurchased, the
amount of the consideration paid, which includes directly
attributable costs, net of any tax effects, is recognised as a
deduction from equity.
3.3 Revenue and expense recognition
Interest income is recognised on a time-proportionate basis
using the effective interest rate method.
Dividends receivable on equity and non-equity shares, which
carry significant equity rights, are recognised as revenue when the
shareholders' right to receive payment has been established,
normally the ex-dividend date. When no ex-dividend date is
available, dividends receivable on or before the year end are
treated as revenue for the year. Provision is made for any
dividends not expected to be received.
Expenses are accounted for on an accrual basis and are charged
to the consolidated statement of comprehensive income. This
includes expenses directly related to making an investment which is
held at fair value through profit or loss.
Certain future contingent costs have been accrued for as per
note 8. Future estimated liquidation expenses have been accrued as
per note 23.
Net loss from financial instruments at FVTPL includes all
unrealised fair value changes with respect to their net realisable
value. Net gain on additional proceeds from redemption of Invenergy
stake includes the Leaf's collection of damages from Invenergy
following the Court's final order in the Invenergy lawsuit as per
note 22.
3.4 Foreign currency translation
Transactions in foreign currencies are translated to the
functional currency of the Leaf Group at the exchange rates at the
date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are
retranslated to the functional currency at the exchange rate at
that date. Non-monetary assets and liabilities denominated in
foreign currencies that are measured at fair value are retranslated
to the functional currency at the exchange rate on the date that
the fair value was determined. Foreign currency differences arising
on retranslation are recognised in the consolidated statement of
comprehensive income.
Exchange differences arising on the settlement of monetary items
at rates different from those at which they were translated on
initial recognition during the period or in the previous financial
statement are recognised in profit or loss in the period in which
they arise. When a gain or loss on a non-monetary item is
recognised in other comprehensive income, any exchange component of
that gain or loss are recognised in other comprehensive income.
Conversely, when a gain or loss on a non-monetary item is
recognised in profit or loss, any exchange component of that gain
or loss are recognised in profit or loss.
3.5 Dividends and redemption of shares
Dividends payable are recognised as a liability in the period in
which they are declared and approved. Future dividends and
redemption of shares through the liquidation of the company have
not been accrued as per 30 June 2019.
3.6 Earnings per share
The Leaf Group presents basic and diluted earnings per share
(EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the basic earnings attributable to ordinary shareholders
of Leaf by the weighted average number of ordinary shares
outstanding during the year. Diluted EPS is determined by adjusting
the basic earnings attributable to ordinary shareholders and the
weighted average number of ordinary shares outstanding, adjusted
for any shares held by the Leaf
Group, for the effects of all dilutive potential ordinary
shares, which comprise convertible notes and share options granted
to employees
3.7 Income tax expense
Income tax expense comprises current and deferred tax. It is
recognised in profit or loss except to the extent that it relates
to a business combination, or items recognised directly in equity
or in other comprehensive income.
Current tax
Current tax comprises the expected tax payable or receivable on
the taxable income or loss for the year and any adjustment to the
tax payable or receivable in respect of previous years. The amount
of current tax payable or receivable is the best estimate of the
tax amount expected to be paid or received that reflects
uncertainty related to income taxes, if any. It is measured using
tax rates enacted or substantively enacted at the reporting date.
Current tax also includes any tax arising from dividends. Current
tax assets and liabilities are offset only if certain criteria are
met.
Deferred tax
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the tax bases used for taxation
purposes.
Deferred tax assets are recognised for unused tax losses, unused
tax credits and deductible temporary differences to the extent that
it is probable that future taxable profits will be available
against which they can be used. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised; such
reductions are reversed when the probability of future taxable
profits improves which the Leaf Group expects, at the reporting
date, to recover or settle the carrying amount of its assets and
liabilities. Deferred tax assets and liabilities are offset only if
certain criteria are met.
United States taxation
Certain of Leaf's investments have been in the equity of US
companies which are considered to be US Real Property Interests as
defined by the US Foreign Investor Real Property Tax Act
("FIRPTA"). Also, certain of Leaf's investments have been in US
partnership interests. Leaf is subject to US federal taxation under
FIRPTA on income attributable to US Real Property Interests.
With respect to such investments, Leaf recognises a deferred tax
liability equal to the applicable blended US federal and state tax
rates multiplied by the difference between the carrying value of
Leaf's investment for financial reporting purposes and the
applicable tax base used for applicable US federal and state
taxation. Leaf reviews the deferred tax liability in connection
with the revaluation process and adjusts accordingly. Leaf has not
recognised a deferred tax liability as at 30 June 2019.
Leaf recognises a deferred tax asset with respect to unused
taxable losses, to the extent that Leaf will have sufficient future
taxable income against which to offset such losses. The tax asset
is equal to such unused losses multiplied by the applicable blended
US federal and state tax rates. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised; such
reductions are reversed when the probability of future taxable
profits improves. Leaf has not recognised a deferred tax asset as
at 30 June 2019.
Cayman Islands taxation
Leaf received from the Governor-in-Cabinet of the Cayman
Islands, an undertaking that, for a period of 20 years from 5 June
2007 no laws of the Cayman Islands imposing any tax on profits,
income, gains or appreciation shall apply to Leaf and that no such
tax or any tax in the nature of estate duty or inheritance tax
shall be payable on the shares, debentures
or other obligations of Leaf. Under the current Cayman Islands
law, no tax will be charged on profits or gains of Leaf and
dividends of Leaf would be payable to Shareholders resident in or
outside the Cayman Islands without deduction of tax.
3.8 Subsidiaries
Subsidiaries are investees controlled by Leaf. Leaf controls an
investee if it is exposed to, or has rights to, variable returns
from its involvement with the investee and has the ability to
affect those returns through its power over the investee.
The Leaf Board concluded that Leaf meets the definition of an
investment entity and measures investments in its subsidiaries at
fair value through profit or loss.
4 Financial risk management
The Leaf Group's investments expose it to a variety of financial
risks: market risk (including market price risk, foreign exchange
risk and interest rate risk), credit risk and liquidity risk.
Market price risk
The portfolio companies in which Leaf invests operate in sectors
that may be affected by the prevailing prices of electricity, oil,
natural gas and other commodities. As energy and fuels derived from
non-renewable sources become more expensive or scarce, renewable
energy and alternative fuels become more valuable. Conversely, if
non-renewable energy and fuels become more abundant or, for other
reasons become less expensive, the value of renewable or
alternative fuels may be negatively affected. As a result, the
performance of the project companies is likely to be dependent upon
prevailing prices for these commodities, which have been
historically, and may continue to be, volatile and subject to wide
variations for a variety of reasons beyond the control of the Leaf
Group. These factors include the level of consumer product demand,
weather conditions, governmental regulations in producing and
consuming countries, the price and availability of alternative
fuels, the supply of oil and natural gas, and overall geo-political
and economic conditions. Therefore, volatility of commodity prices
may adversely affect the value of the Leaf Group's investments.
Leaf does not have any material direct market price risk. Leaf
does not manage the market price risk of its investee companies
either, relying instead on the management of each investee company
to appropriately manage its own risks.
The Leaf Group's investments comprise interests in companies
which are not publicly traded or freely marketable. The Leaf Group
may also be restricted from selling certain securities by contract
or regulatory considerations. Such investments may therefore be
difficult to value or realise. Any such realisation may involve
significant time and expense.
The below table summarises the valuation methodologies and key
assumptions in deriving the aggregate fair value of the investments
as at 30 June 2019 of nil (2018 : $2 million):
Significant inputs
Name of Investment Valuation methodology / assumptions
------------------------------------- ------------------------- -----------------------
Vital Renewable Energy Company, Estimated net realizable Director's estimate
LLC ("VREC") value of achievable selling
price less cost
of selling.
Energia Escalona s.r.l. ("Escalona") Estimated net realizable Director's estimate
value of achievable selling
price less cost
of selling.
------------------------------------- ------------------------- -----------------------
The below table summarises the valuation methodologies and key
assumptions in deriving the aggregate fair value of the investments
as at 30 June 2018.
Name of Investment Valuation methodology Significant inputs
/ assumptions
------------------------------------- ---------------------- ----------------------
Vital Renewable Energy Company, Market multiples Choice of comparable
LLC ("VREC") companies, publicly
available data about
operating results
------------------------------------- ---------------------- ----------------------
Energia Escalona s.r.l. ("Escalona") Income approach Forecast cash flows
discount rate
------------------------------------- ---------------------- ----------------------
The valuation of investments amounts to USD nil as per June 30
2019. As the valuation amounts USD nil, there was no market price
risk to the Leaf group as at 30 June 2019.
Foreign exchange risk
The Leaf Group was exposed to foreign exchange risk with regard
to transactions made in Sterling and balances held in Sterling.
An analysis of net assets by currency exposure as at 30 June
2019 is as follow,
Net Assets Net Assets
US$'000 US$'000
30 June 2019 30 June 2018
------- ------------- -------------
GBP 98,082 1,287
Total 98,082 1,287
------- ------------- -------------
The Leaf Group's investments in VREC and Escalona are exposed to
the Brazilian Real ("Reals") and the Mexican Peso ("Peso"),
respectively. VREC has primary operations in Brazil with most of
its costs (including debt-related costs) and revenues denominated
in Reals. The Leaf Group does not currently take any measures to
hedge against these exposures.
During the years ended 30 June 2019 and 30 June 2018, Leaf did
not have material exposure to the Peso or the Real.
Interest rate risk
The Leaf Group had no borrowings as at 30 June 2019 and 2018. As
interest rates earned on the Leaf Group's cash balances are
minimal, there was no material interest rate risk to the Leaf Group
as at 30 June 2019 and 2018.
Credit risk
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Leaf Group .
The carrying amounts of financial assets, excluding equity
investments in portfolio companies, best represent the maximum
credit risk exposure at the reporting date. This relates also to
financial assets carried at amortised cost, as they have a
short-term maturity.
At the reporting date, the Leaf Group's financial assets exposed
to credit risk amounted to the following:
Year ended Year ended
30 June 2019 30 June 2018
US$'000 US$'000
---------------------------------------------- ------------- -------------
Trade and other receivables 174 106
Additional proceeds receivable from put/call
redemption of Invenergy stake - 14,237
Cash and cash equivalents 105,953 29,975
Total 106,127 44,318
---------------------------------------------- ------------- -------------
The maximum exposure to credit risk is represented by the
carrying amount of each financial asset in the consolidated
statement of financial position. Management does not expect any
counterparty to fail to meet its obligations. Except for the $94
thousand write off of doubtful intercompany receivable shown in the
financial statements (2018: $116 thousand), no impairment
provisions have been made as at the year end and no debtors were
past their due date.
Leaf's intermediary subsidiaries are equity investments of the
Leaf Group which are not subject to credit risk, given that the
purpose of these subsidiaries is to hold the Leaf Group's
underlying investments in the investee companies, and all such
underlying investments are in the form of equity instruments that
are not subject to credit risk.
Cash balances are held with P-1* financial institutions.
*- A Moody's rating of Prime-1 (P-1) means that the issuer has a
superior ability to repay short-term debt obligations.
Liquidity risk
Liquidity risk is the risk that the Leaf Group will not be able
to meet its financial obligations as they fall due. The Leaf
Group's approach to managing liquidity is to ensure, as far as
possible, that it will have sufficient liquidity to meet their
liabilities as they fall due, under both normal and stressed
conditions, without incurring unacceptable losses. The Leaf Group's
liquidity position is monitored by Leaf's board of directors.
Residual undiscounted contractual maturities of financial
liabilities:
30 June 2019 Total, Less than 1-3 3 months 1-5 years Over No stated
all maturities 1 month months to 1 year US$'000 5 years maturity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
----------------------- ---------------- ---------- --------- ----------- ---------- --------- ----------
Financial liabilities
Trade and other
payables (257) (257) - - - - -
Total (257) (257) - - - - -
----------------------- ---------------- ---------- --------- ----------- ---------- --------- ----------
30 June 2018 Total, Less than 1-3 3 months 1-5 years Over No stated
all maturities 1 month months to 1 year US$'000 5 years maturity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------------ ---------------- ---------- --------- ----------- ---------- --------- ----------
Financial liabilities
Accrual for compulsory
redemption of shares (25,745) (25,745) - - - - -
Trade and other
payables (347) (347) - - - - -
Total (26,092) (26,092) - - - - -
------------------------ ---------------- ---------- --------- ----------- ---------- --------- ----------
Due to minimal amount of liability there was not material
liquidity risk to the Leaf Group as at 30 June 2019.
5. Net Asset Value per Share
The net asset value (NAV) per share as at 30 June 2019 is 182.00
cents based on net assets of $95.7 million and 52,570,692 ordinary
shares in issue as at that date.
6. Administration expenses
Year ended Year ended
30 June 2019 30 June 2018
US$'000 US$'000
Salaries and related costs 1,144 516
Directors' remuneration (note 9) 425 345
Legal and professional fees (1) 215 98
Administration fees 175 150
Other expenses 108 84
Audit fees 64 64
Directors' and officers' insurance expense 53 53
Registrar fees and costs 43 38
Rental fees 40 39
Travel and subsistence expenses 15 32
Total 2,282 1,419
============================================ ============== ==============
(1) Administration expenses do not include transaction related
legal or professional services costs, which are reported as
transaction related expenses on the condensed consolidated
statement of comprehensive income. See note 7.
7. Transaction-related costs
The amount disclosed for the year ended 30 June 2019 consists
primarily of $2.2 million in success fees owed to Leaf's legal
counsel and financial advisors in connection with Leaf winning its
appeal, and other legal costs associated with the complaint filed
on 21 December 2015 by Leaf against Invenergy Renewables LLC,
including Leaf's appeal of the damages award and defence of
Invenergy's cross-appeal prosecuting the appeal. The success fees
were paid prior to the end of the period.
8. Contingent costs provision
The Leaf Board has adopted incentive compensation arrangements
for Leaf and its advisors under which Company payees will receive
incentive payments only when cash is returned to the shareholders
and certain advisors have received incentive payments depending on
additional damages awarded Leaf following the conclusion of the
Invenergy lawsuit. The arrangements for Leaf payees include a
sliding scale of incentives based on cash returned to the
shareholders, in addition to severance payments to Leaf employees
to be deducted from any future incentive payments owed to employees
under these arrangements. As at 30 June 2019, the Leaf Group
updated its prior estimate of these contingent costs to be $5.75
million (30 June 2018: $0.88 million), using an estimate of total
cash that will be returned to the shareholders that is based on the
30 June 2019 net asset value, including net proceeds of $107.2
million received from Invenergy, less the estimated remaining cash
requirements of Leaf in completing the realisation of the remaining
investments. Revisions to the estimate of total cash that will be
returned to shareholders and other factors result in adjustments to
the provision for future incentive payments, which are recognised
in profit or loss during the period of the adjustment.
9. Directors' remuneration
Details of the directors' basic annual remuneration are as
follows:
Basic annual remuneration
US$'000
Mark Lerdal (executive chairman) 250
Stephen Coe (non-executive director) 70
Peter O'Keefe (non-executive director) 25
Directors' fees and expenses were:
30 June 2019 Directors' Director's Reimbursements Total
fees bonus
US$'000 US$'000 US$'000
Mark Lerdal (Chairman) 250 58 12 320
Stephen Coe 70 16 86
Peter O'Keefe 25 6 31
Total 345 80 12 437
======================== =========== =========== =============== ========
30 June 2018 Directors' fees Reimbursements Total
US$'000 US$'000 US$'000
Mark Lerdal (Chairman) 250 22 272
Stephen Coe 70 - 70
Peter O'Keefe 25 - 25
Total 345 22 367
======================== ================ =============== ========
From 1 January 2019 through 30 April 2019, in order to reduce
the Company's cash burn while Leaf pursued its appeal of the $1
damages award in the Invenergy lawsuit, the directors cut their
fees and the salaries of the employees by 70%, on the condition
that should Leaf win its appeal, each director and employee would
receive the foregone fee/salary plus a deferral bonus equal to the
deferred amount. The amounts under "Director's bonus" above reflect
the fee-deferral bonuses received by the respective directors upon
the successful conclusion of the appeal.
Each director is entitled to receive reimbursement of any
expenses in relation to their appointment. Total reimbursement to
the directors for the year ended 30 June 2019 amounted to $12
thousand (2018: $22 thousand) with nothing outstanding at 30 June
2019 (2018: nil).
10. Basic earnings/(loss) per share
Basic and Diluted
Basic and diluted earnings/(loss) per share is calculated by
dividing the earnings/(loss) attributable to equity holders of Leaf
by the weighted average number of ordinary shares in issue during
the year:
Year ended Year ended
30 June 2019 30 June 2018
Profit/(Loss) attributable to equity holders (US$'000) 76,332 (43,183)
Weighted average number of ordinary shares in issue (thousands) 53,469 118,163
----------------------------------------------------------------- -------------- -----------------------------
Basic and fully diluted profit/(loss) per share (cents) 142.76 (36.55)
================================================================= ============== =============================
There is no difference between the basic and diluted earnings
per share for the year.
11. Classification of financial assets and liabilities
The below table sets out the classifications of the carrying
amounts of the group's financial assets and financial liabilities
into categories of financial instruments.
As at 30 June 2019
Mandatorily Financial assets
Financial Assets Note at FVTPL at amortised cost Total
----------------------------- ----- ----------- -------------------- --------
Financial assets at
FVPL 12.1 - - -
Cash and cash equivalents 15 - 105,953 105,953
Trade and other receivables 14 - 174 174
----------- -------------------- --------
Total - 106,127 106,127
----------- -------------------- --------
Financial liabilities Total
Mandatorily at
Financial Liabilities Note at FVTPL amortised cost
-------------------------- ----- ------------ ---------------------- ------------------
Provision for future
contingent costs 8 - 5,752 5,752
Tax Liability - 1,948 1,948
Provision for wind
down/ liquidation costs 23 - 2,492 2,492
Trade and other payables 16 - 257 257
------------ ---------------------- ------------------
Total - 10,449 10,449
------------ ---------------------- ------------------
As at 30 June 2018
Held for
Financial Assets Note trading Loans and receivables Total
----------------------------- ----- ------------------- ---------------------- -------
Investment at fair
value through profit
or loss 12.1 2,000 - 2,000
Additional proceeds
receivable from put/call
redemption of Invenergy
stake 22 - 14,237 14,237
Cash and cash equivalents 15 - 29,975 29,975
Trade and other receivables 14 - 106 106
------------------- ---------------------- -------
2,000 44,318 46,318
------------------- ---------------------- -------
Held for Financial liabilities Total
Financial Liabilities Note trading at amortised cost
-------------------------- ----- --------- ---------------------- --------------
Provision for future
contingent costs 8 - 880 880
Accrual for compulsory
redemption of shares - - 25,745 25,745
Trade and other payables 16 - 347 347
--------- ---------------------- --------------
- 26,972 26,972
--------- ---------------------- --------------
12. Critical accounting estimates and assumptions
These disclosures supplement the commentary on the use of
estimates and judgments (see note 2.4).
Key sources of estimation uncertainty
Determining fair values
The determination of fair values for financial assets for which
there is no observable market prices requires the use of valuation
techniques as described in accounting policy 3.1 and 3.3. For
financial instruments that trade infrequently and have little price
transparency, fair value is less objective, and requires varying
degrees of judgement depending on liquidity, concentration,
uncertainty of market factors, pricing assumptions and other risks
affecting the specific instrument. See also "Valuation of financial
instruments" below.
Critical judgements in applying the Leaf Group's accounting
policies
Critical judgements made in applying the Leaf Group's accounting
policies include:
Valuation of financial instruments
The Leaf Group's accounting policy on fair value measurements is
discussed in accounting policy 3.1. The Leaf Group measures fair
value using the following hierarchy that reflects the significance
of inputs used in making the measurements:
-- Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.
-- Level 2: Valuation techniques based on observable inputs,
either directly (i.e., as prices) or indirectly (i.e., derived from
prices). This category includes instruments valued using: quoted
market prices in active markets for similar instruments quoted
market prices for identical or similar instruments in markets that
are considered less than active; or other valuation techniques
where all significant inputs are directly or indirectly observable
from market data.
-- Level 3: Valuation techniques using significant unobservable
inputs. This category includes all instruments where the valuation
technique includes inputs not based on observable data and the
unobservable inputs have a significant
effect on the instrument's valuation. This category includes
instruments that are valued based on quoted prices for similar
instruments where significant unobservable adjustments or
assumptions are required to reflect differences between the
instruments.
Fair values of financial assets and financial liabilities that
are traded in active markets are based on quoted market prices or
dealer price quotations. For all other financial instruments, the
Leaf Group determines fair values using valuation techniques.
Leaf, through its wholly-owned subsidiaries, holds full or
partial ownership interests in a number of unquoted clean energy
companies. These investments are classified as level 3 in the fair
value hierarchy.
Investments
Investments in underlying investee companies (held through
various wholly owned intermediary subsidiaries) comprise ordinary
stock, and preferred stock, preferential return of capital and
capped rights to share in profits. The directors, with advice from
Leaf's employee management team, have reviewed the carrying value
of each investment and calculated the aggregate value of the Leaf
Group's portfolio. Investments are measured at the directors'
estimate of fair value at the reporting date.
12.1 Investments at fair value through profit or loss
The following table shows a reconciliation of the opening
balances to the closing balances for fair value measurements in
Level 3 of the fair value hierarchy.
Year ended Year ended
30 June 2019 30 June 2018
---------------------------------------------------------------------------------- -------------- --------------
Balance brought forward 2,000 101,410
Additional investments in subsidiaries - -
Proceeds from sale of investments - (36,462)
Additional proceeds receivable from sale of investments - (14,237)
Movement in fair value of investments (2,000) (48,711)
Balance carried forward - 2,000
---------------------------------------------------------------------------------- -------------- --------------
Total realised and unrealised (losses)/gain for the year included in (2,000) -
profit or loss relating to investments held at the end of the reporting period.
================================================================================== ============== ==============
Investments are stated at fair value through profit or loss on
initial recognition. Loans are reviewed for impairment in
conjunction with the related equity investment in the investee
company. All investee companies are unquoted. Leaf has an
established control framework with respect to the measurement of
fair values. The directors, with advice from the management team,
have overall responsibility for all significant fair value
measurements, including Level 3 fair values. The management team
regularly reviews significant unobservable inputs and valuation
adjustments.
Included in "Net (loss) on investments at fair value through
profit and loss" on the consolidated statement of comprehensive
income is an amount received for an investment sold during the year
ended 30 June 2019.
12.2 (a) Significant unobservable inputs used in measuring fair
value
The table below sets out information about significant
unobservable inputs used at 30 June 2019 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
Sensitivity to
changes in
significant
Fair value at 30 Valuation Unobservable unobservable
Description June 2019 US$'000 technique input Range inputs
------------------ ------------------ ------------------- ------------------ ----------------- ------------------
Unlisted private nil Net realizable Director's $0 to $1 million The estimated
equity value estimate of fair value would
investments achievable price increase
(decrease) if the
estimated
achievable price
were
higher/lower.
Director's $0 to $1 million The estimated
estimated cost of fair value would
selling increase/
(decrease) if the
estimated cost of
selling were
lower/higher.
Estimate of achievable sale price: Represents the Leaf
Director's estimate of the price Leaf can achieve under various
scenarios, based on their collective experience, and various
aspects of each investment.
Estimate of the cost of selling: Represents the Leaf Director's
estimate of the costs that would be incurred to sell the
investments under various scenarios.
Description Fair value at 30 Valuation Unobservable Range Sensitivity to
June 2018 technique input changes in
US$'000 significant
unobservable inputs
Unlisted private $2,000 Market multiples, Operational $54/mm tons - The estimated fair
equity income approach multiples $57/mm tons value would
investments increase (decrease)
if the operational
multiples were
higher/lower.
Discount rates 7.2% The estimated fair
value would
increase/(decrease)
if the discount
rate were
lower/higher
Forecast cash n/a n/a
flows
The table below sets out information about significant
unobservable inputs used at 30 June 2018 in measuring financial
instruments categorised as Level 3 in the fair value hierarchy.
Significant unobservable inputs are developed as follows.
Operational multiples: Represent amounts that market
participants would use when pricing the investments. Operational
multiples are selected from comparable public companies based on
geographic location, industry, size, target markets and other
factors that management considers to be reasonable. The traded
multiples for the comparable companies are determined by dividing
the enterprise value of the company by its operational metric and
further adjusted if appropriate for considerations such as the lack
of marketability and other differences between the comparable peer
group and specific company.
Discount rate: Represents the rate used to discount projected
levered or unlevered forecasted cash flows and terminal value for a
project or company to their present values as part of the
calculation of enterprise value for the project or company, or for
the expected cash flows to Leaf from a forecasted transaction.
Forecast cash flows: Cash flows are forecast by Leaf by
considering possible operational scenarios and transaction terms,
the amount to be paid or received under each scenario and the
probability of each scenario.
12.2 (b) Effects of unobservable input on fair value
measurement
Although Leaf believes that its estimates of fair value are
appropriate, the use of different methodologies or assumptions
could lead to different measurements of fair value. For fair value
measurements in Level 3, changing one or more of the assumptions
used to reasonably possible alternative assumptions would have the
following effects on Leaf's net asset value (NAV) at 30 June 2019
($ millions): (Favourable: nil, Unfavourable: nil).
The favourable and unfavourable effects of using reasonably
possible alternative assumptions for the above unobservable inputs
for the valuation of Leaf's unlisted private equity investments
have been calculated by varying these inputs in the applicable
valuation models based on a reasonable lower and upper range as
determined by the Leaf Directors. The most significant unobservable
inputs are estimates by the directors of the achievable sale price
and the cost of selling. The Leaf Director's view is that all
reasonable combination of assumptions for achievable sales price
and cost of selling of the investments result in $nil of net
value.
For fair value measurements in Level 3, changing one or more of
the assumptions used to reasonably possible alternative assumptions
would have the following effects on Leaf's net asset value (NAV) at
30 June 2018 ($ millions): (Favourable: 1.0, Unfavourable: (1.0
)).
The favourable and unfavourable effects of using reasonably
possible alternative assumptions for the above unobservable inputs
for the valuation of Leaf's unlisted private equity investments
have been calculated by varying these inputs in the applicable
valuation models based on a reasonable lower and upper range as
determined by Leaf Management. The most significant unobservable
inputs are the discount rate, and operational multiples. The
discount rate used in the models at 30 June 2018 was 7.2% (with
reasonably possible alternative assumptions ranging between 6.2%
and 8.2%). The operational multiples used in the model at 30 June
2018 ranged between $54/mm tons and $57/mm tons, with reasonably
possible alternative assumptions of $41.5/mm tons to $72/mm
tons.
13. Financial instruments not measured at fair value
The carrying value of short-term financial assets and financial
liabilities (cash, debtors and creditors) approximate their fair
value. The carrying value of the convertible and the new loan note
instruments are also considered to approximate fair value.
14. Trade and other receivables Year ended Year ended
30 June 2019 30 June 2018
US$'000 US$'000
Prepayments 97 103
Other receivables 46 3
Receivable from Invenergy 31
Total 174 106
--------------------------------- -------------- --------------
Amounts due from group companies are unsecured, interest free
and receivable on demand.
15. Cash and cash equivalents
Year ended Year ended
30 June 2019 30 June 2018
US$'000 US$'000
Bank current account balances 105,953 29,975
------------------------------- -------------- --------------
Total 105,953 29,975
------------------------------- -------------- --------------
16. Trade and other payables
Year ended Year ended
30 June 2019 30 June 2018
US$'000 US$'000
Other creditors 193 282
Audit fees payable 64 65
Total 257 347
-------------------- -------------- --------------
17. Share capital
Ordinary shares of GBP0.0001 Number of shares Share capital Share premium
each
US$'000 US$'000
At 30 June 2019 52,570,692 18 271,310
At 30 June 2018 52,570,692 18 271,310
The authorised share capital of the Leaf Group is GBP 25,000
divided into 250 million ordinary Shares of GBP 0.0001 each.
Under the terms of the placement on 22 June 2007, Leaf issued
200,000,000 shares of GBP0.0001 each par value at a price of GBP1
each. The difference between the issue price and the par value was
transferred to share premium account, net of share issue
expenses.
Leaf repurchased 10,582,873 shares in October 2015. Share
capital and premium received was translated to US dollars at the
exchange rate prevailing at the date of receipt of the
proceeds.
Leaf repurchased 65,592,161 shares in June 2018. Share capital
and premium received was translated to US dollars at the exchange
rate prevailing at the date of receipt of the proceeds.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of Leaf. All shares rank equally with regards to
the Leaf Group's assets.
Capital management
At an extraordinary general meeting ("EGM") held on 1 July 2014,
Leaf's shareholders voted to accept the board's proposed resolution
to change the Leaf Group's investment strategy to an orderly
realisation and return of capital to the shareholders, which will
occur on an asset-by-asset basis in timeframes appropriate for each
asset. The details of the strategy are disclosed in the EGM
circular for this meeting, which can be found on Leaf's
website.
The Leaf Group's capital comprises share capital, share premium
and reserves and is not subject to externally imposed capital
requirements.
18. Income tax
Year ended Year ended
30 July 2019 30 July 2018
US$'000 US$'000
--------------------------------------------- ------------- -------------
Current tax expense
Current year 10,524
Deferred tax expense
Temporary differences (gain)/loss - (11,341)
Tax (gain)/expense on continuing operations 10,524 (11,341)
--------------------------------------------- ------------- -------------
Of the $10.52 million of current-year tax expense, $8.6 million
was withheld by Invenergy from amounts it owed Leaf in the
court-ordered redemption of Leaf's ownership interests in
Invenergy. This $8.6 of this withheld amount was paid to the US tax
authorities on Leaf's behalf and the remaining $0.31 million is
owed back to Leaf by Invenergy. The remaining $1.94 million of tax
expense has been recognized as a liability on Leaf's balance sheet.
The final calculation of tax liability will be determined by
information which needs to be provided by third parties. The Board
has used historical information to make a best estimate of
potential liabilities and believes it has been prudent in its
estimate.
Year ended
30 June 2019
US $'000
Taxable gain on Invenergy Investment 57,764
Taxable loss carried forward on sale of Leaf
LFG/JRE (21,401)
-------------------------------------------------- -------------------------------------------
Taxable profit 36,363
================================================== ===========================================
Tax rate (26% * 57,763,959) - (21% * 21,400,904)
Taxation 10,524
-------------------------------------------------- -------------------------------------------
Tax paid 8,576
Tax liability 1,948
-------------------------------------------------- -------------------------------------------
Total Tax expense 10,524
================================================== ===========================================
The US tax authorities recently (May 2019) issued a proposed
regulation (Proposed Regulation 1.864(c)(8)-1(b)), which, if
finalized by the US tax authorities and adopted by Leaf would
result in a significantly better tax result for Leaf than the
estimate used for the accrual of tax liability in these financial
statements. It is not possible to assess whether the proposed
regulation will be implemented or within what timescale.
The Leaf Group believes that its accruals for tax liabilities
are adequate for all open tax years based on its assessment of many
factors, including interpretations of tax law and prior
experience.
Balance as at 30 June 2019
-------------------------------
Net balance Deferred Deferred
2019 at Recognised in tax tax
profit or loss
US$'000 01 July 2018 during the period Net assets Liabilities
----------------------------- ------------- ------------------- ----- ---------- ------------
Investments held
at fair value through
profit and loss - - - - -
Net tax assets (liabilities) - - - - -
----------------------------- ------------- ------------------- ----- ---------- ------------
19. Related party transactions
Parties are considered to be related if one party has the
ability to control the other party or to exercise significant
influence over the other party in making financial or operational
decisions.
Leaf's directors are related parties and details of their fee
arrangements are given in note 9 and their shareholdings are
disclosed under report of the directors. During the period, 55.1%
of the numbers of shares disclosed in the report as
being owned by Messrs. Coe and O'Keefe as at 30 June 2018 were
redeemed by Leaf as a result of the compulsory redemption announced
in the previous accounting period on 25 June 2018.
Leaf's incentive plans disclosed in note 8 will be paid out to
related parties.
During the year ended 30 June 2019, an intercompany receivable
of $94 thousand was written off as nonrecoverable.
20. The subsidiaries
The following subsidiaries of the Leaf Group are held at fair
value on the consolidated financial statements in accordance with
IFRS 10:
Country of Principal activity Effective interest held
incorporation
------------------------------------------ ---------------- -------------------- ------------------------
EnergÃa Escalona Coopertief U.A Netherlands Hydro Energy 87.5%
Escalona B.V Netherlands Hydro Energy 87.5%
Energentum Renewable Energy S.A. de C.V. Mexico Hydro Energy 87.5%
EnergÃa Escalona s.r.l. Mexico Hydro Energy 51.2%
Leaf Invenergy Company Cayman Islands 100%
Leaf VREC Company Cayman Islands 100%
21. Capital commitments
As at 30 June 2019, there were no capital commitments in respect
of investments.
22. Investment in Invenergy
On 21 December 2015, as previously announced, Leaf filed a
lawsuit in Delaware Court of Chancery (the "Court") against
Invenergy alleging, in part, that Invenergy breached the Third
Amended and Restated Limited Liability Company Agreement governing
the membership interests in Invenergy (the "Operating Agreement").
Leaf alleged that Invenergy was required to either obtain Leaf's
prior consent to a sale of 832 megawatts of Invenergy's wind power
generation facilities to TerraForm Power for approximately $2
billion (the "TerraForm Transaction"), or, absent such consent,
make a payment to Leaf upon the closing date of the sale.
On 28 December 2015, Invenergy exercised its rights under the
Operating Agreement to redeem the LLC membership units owned by
Leaf, and Leaf exercised its right to put these units to
Invenergy.
On 7 January 2016, Leaf received a $3.9 million cash
distribution from Invenergy pursuant to the terms of Invenergy's
Operating Agreement.
On 15 April 2016, Leaf filed a motion for partial judgment on
the pleadings with respect to its claim that Invenergy breached the
Operating Agreement.
On 30 June 2016, the Court granted Leaf's motion, ruling that,
because Invenergy did not obtain Leaf's prior consent to the
closing of the TerraForm Transaction, Invenergy breached the
Operating Agreement.
On 18 July 2016, Leaf filed a motion for entry of an order and
final judgment, asking the Court to order Invenergy to pay damages
of $126.1 million, based on the calculation of the Target multiple
per the terms of the Operating Agreement, less the $3.9 million
previously reported tax distribution from Invenergy, plus interest
on the net $122.2 million in damages at the Delaware statutory rate
of interest of 6%, compounded quarterly, from the date of the
breach.
On 12 August 2016 Invenergy filed an answering brief to Leaf's
motion, disputing that Leaf is entitled to the damages Leaf is
seeking and arguing that Leaf is entitled, at most, to nominal
damages. Invenergy also asserted in its brief that any obligation
it owes to Leaf is excused because of the put/call process
described in the interim statements. On this
same date, Invenergy also filed a motion to amend its original
answer to the lawsuit to add five additional affirmative defenses
and two counterclaims.
On 6 October 2016, the Court heard oral arguments by the parties
on the Leaf and Invenergy motions. In two orders on 7 and 10
October 2016 which can be downloaded and viewed in their entirety
at the following URL:
http://www.leafcleanenergy.com/media-relations/download-centre/,
the Court denied Leaf's and Invenergy's motions, apart from
allowing one of Invenergy's counterclaims.
-- The Court allowed Invenergy to assert a counterclaim against
Leaf alleging that Leaf acted in bad faith by causing its appraiser
in the put/call to provide a biased and inaccurate appraisal. Leaf
believes this counterclaim to be without merit.
-- The Court made additional rulings, including: 1) finding that
Leaf's claims are not excused as a result of Leaf exercising the
put, 2) that an exchange of mutual releases required in the
put/call will not moot the lawsuit, and 3) that Leaf's right to a
remedy for Invenergy's breach is not barred because Leaf did not
seek injunctive relief to block the closing of the TerraForm
Transaction.
A trial was held by the Court on 25-27 October 2017 to determine
the damages that will be awarded to Leaf due to Invenergy's breach
and to rule on Invenergy's counterclaim. The Court held post-trial
argument on 19 January 2018.
On 19 April 2018, the Court issued a post-trial opinion with
respect to Leaf's claims and Invenergy's counterclaim. In its
opinion, the Court held that Leaf is only entitled to nominal
damages of $1 as a result of Invenergy's breach of the Operating
Agreement. In addition, the Court rejected Invenergy's counterclaim
seeking a declaration that Leaf had breached certain provisions
governing Leaf's ability to put its shares, and Invenergy's ability
to call those shares, and ordered the parties to complete the
put/call process in accordance with the Operating Agreement. As a
result of and following this ruling, Leaf wrote down its investment
in Invenergy from $99.1 million to $50.7 million, the amount
determined by the terms of the Operating Agreement governing the
put/call process.
On 14 June 2018, the Court entered its final order and judgment
in Leaf Invenergy Company, LLC v. Invenergy Wind LLC, C.A. No.
1830-VCL, awarding Leaf nominal damages of $1 as a result of
Invenergy's breach of the Operating Agreement by engaging in a
defined "Material Partial Sale" without either obtaining Leaf's
consent or paying Leaf a contractually defined return on its
investment. The trial court's final order also entered judgment in
Leaf's favour on Invenergy's counterclaim seeking a declaration
that Leaf had breached certain provisions governing Leaf's ability
to put its shares, and Invenergy's ability to call those shares,
thereby establishing the redemption price to be paid to Leaf in
connection with that put/call process at $50.7 million. The final
order and judgment contemplated that, in the event Leaf appealed
the Court's award of nominal damages in its final order and
judgment, Invenergy intended to cross-appeal the Court's
determination with respect to its counterclaim and therefore would
be obligated to pay Leaf $36.4 million, representing an amount that
Invenergy does not contest is owed to Leaf, within 5 business days
of Leaf's notice of appeal and that the remainder of the redemption
price would be paid into an interest bearing account controlled by
the Court to be distributed following, and depending on, the
appeal.
Also on 14 June 2018, following entry of the Court's final order
and judgment, Leaf filed its notice of appeal to the Delaware
Supreme Court.
On 20 June 2018, as ordered by the Court, Invenergy redeemed all
of Leaf's ownership interests in Invenergy, paying Leaf $36.4
million. Subsequently, Invenergy deposited an additional $15.3
million into the Court-controlled account.
On 25 June 2018, Invenergy filed its notice of cross-appeal to
the Delaware Supreme Court.
The following key developments with respect to these proceedings
occurred during the one-year period ended 30 June 2019:
On 13 February 2019, the Delaware Supreme Court heard oral
argument in Leaf's appeal of the damages awarded to it in the
Invenergy lawsuit.
On 2 May 2019, the Delaware Supreme Court issued its opinion in
Leaf's appeal, reversing the Court's prior award of $1 in nominal
damages to Leaf as a result of Invenergy's breach of the parties'
limited liability company agreement. The Supreme Court held that
Leaf was entitled to damages in the full amount of its
contractually defined Target Multiple and, therefore, remanded the
matter back to the Court of Chancery to enter judgment consistent
with its decision.
On June 14, 2019, the Court entered its nal order and judgement,
ordering Invenergy to pay Leaf $114.5 million, consisting of: a)
the contractually defined $126.1 million Target Multiple Invenergy
should have paid Leaf on 15 December 2015 to redeem Leaf's
ownership interest in Invenergy, less b) the previously announced
$3.9 million tax distribution Invenergy made to Leaf in January
2016, less c) the previously announced $36.4 million partial
redemption payment Invenergy made to Leaf pursuant to the Court's
final order of 14 June 2018, plus d) $28.8 million of statutory
pre- and post-judgement interest, within 10 calendar days of the
order. The Court order also specified that this amount would
continue to accrue statutory interest from 3 May 2019 at a rate of
8.0%, compounded quarterly until the award had been paid by
Invenergy.
On June 20, 2019, pursuant to the Court's nal order and
judgement, Leaf received a payment from Invenergy in the amount of
$107.2 million, being the $114.5 million amount owed on 2 May 2019,
plus $1.3 million of additional interest through 20 June 2019
(total interest of $30.0 million), less $8.6 million of mandatory
tax withholding. Concurrently with the provisioning of the
aforementioned payment, Invenergy notified Leaf that it planned to
appeal the final order and judgement.
The following key developments with respect to these proceedings
occurred after the one-year period ended 30 June 2019:
On July 9, 2019, Invenergy filed a notice of appeal with the
Delaware Supreme Court to contest the Final Order and Judgement
issued by the Court on June 14, 2019.
On July 10, 2019, in an effort to bring about what the board
hoped would be a speedy resolution of what it believed to be yet
another attempt by Invenergy to avoid its obligations under the
limited liability agreement, Leaf filed a motion to expedite with
the Delaware Supreme Court in order to accelerate the appeal
proceedings. In its opposition to the motion, Invenergy clarified
that it was only appealing the Court's award of prejudgment
interest to Leaf.
On July 24, 2019, the Delaware Supreme Court issued an order
granting Leaf's motion to expedite the aforementioned
proceedings.
On July 25, 2019, the Delaware Supreme Court issued a notice
stating the court would consider the appeal, without oral argument,
on September 18, 2019.
On September 19, 2019, the Supreme Court issued its opinion in
Invenergy's appeal, upholding the Chancery Court's award of $30
million of prejudgment interest to Leaf. The Delaware Supreme Court
granted the expedited treatment and heard the appeal without oral
argument on September 18, 2019. On September 19, 2019, the Delaware
Supreme Court affirmed the award of pre-judgement interest.
Put/call process summary:
Invenergy called Leaf's interest in Invenergy on 28 December
2015. On the same day, Leaf put its interest to Invenergy in order
to mitigate its damages from Invenergy's breach. Each party
appointed a third-party appraiser to value Leaf's stake in
Invenergy. The results were $73.1 million (from the appraiser
appointed by Leaf) and $36.4 million (from the appraiser appointed
by Invenergy). In accordance with the Operating Agreement terms, a
third appraiser was retained jointly by Leaf and Invenergy to value
Leaf's interest in Invenergy and appraised the value of Leaf's
stake in Invenergy to
be $42.5 million. Pursuant to the Operating Agreement, the
average of the three appraisals ($50.7 million) should determine
the price for Leaf's interest in Invenergy for purposes of the
put/call process. As noted above, Invenergy asserted a counterclaim
alleging that Leaf acted in bad faith by allegedly causing its
appraiser to provide a biased and inaccurate appraisal. The Court
ruled against Invenergy on its counterclaim. Invenergy filed a
cross-appeal with respect to the Court's ruling on its
counterclaim.
In its opinion of 2 May 2019, the Delaware Supreme Court
declined to rule on Invenergy's cross-appeal, noting that the
put/call process had been mooted by its decision to award Leaf the
Target Multiple as damages in respect of Invenergy's breach which
had preceded the triggering of the put/call process.
23. Provision for wind down/liquidation costs
Given that Leaf expects to complete its orderly wind down and
liquidation prior to 30 June 2020, Leaf has recognized a provision
of $2.49 million in expected wind down and liquidation costs.
24. Subsequent Events
On 29 July 2019 Leaf announced the approval by the directors of
the return of approximately $64.9 million of cash (GBP53.1 million
converted at the exchange rate GBP1:$1.223367 prevailing at the
date of announcement of the redemption 29 July 2019) to the
shareholders via a compulsory redemption of shares equivalent to
101 pence per share outstanding at the time of the announcement
(the "Redemption"). The Redemption price per share was 151.94 pence
(by reference to the Leaf Board's estimate of the NAV per share as
at 31 May 2019), with approximately 66.47% of Leaf's issued share
capital to be redeemed and cancelled. On 16 August 2019, Leaf
repurchased and cancelled 34,943,699 shares. Given that the
director's approval of the Redemption occurred after the end of the
period, no liability was recognised on the balance sheet with
respect to the redemption.
Following the 16 August 2019 cancellation of the repurchased
shares, there were 17,626,993 ordinary shares in issue.
On 13 October 2019, Leaf received word that a claim had been
made against indemnity escrow and as a result, Leaf received
approximately $229,000 following the expiration of the escrow
term.
On 28 October 2019 Leaf announced the approval by the directors
of the return of approximately $27.7 million of cash (GBP21.5
million converted at the exchange rate GBP1:$1.285753 prevailing at
the date of announcement of the redemption 28 October 2019) to the
shareholders via a compulsory redemption of shares equivalent to
122 pence per share outstanding at the time of the announcement
(the "Redemption"). The Redemption price per share was 122.8 pence
(by reference to the Leaf Board's estimate of the NAV per share as
at 30 September 2019), with approximately 99.35% of Leaf's issued
share capital to be redeemed and cancelled. On 12 November 2019,
Leaf repurchased and cancelled 17,512,382 shares. Given that the
director's approval of the Redemption occurred after the end of the
period, no liability was recognised on the balance sheet with
respect to the redemption.
On 6 November 2019 Leaf announced the approval by the directors
to apply to the London Stock Exchange for cancellation of admission
to trading of the Company's ordinary shares on AIM. Following the
return of $27.7 million cash to shareholders by way of compulsory
redemption of shares, Leaf announced that it is in a position to
commence formal wind down proceedings, with substantially all
remaining assets distributed to shareholders. Whilst there remains
some uncertainty regarding the quantum of the tax liability, Leaf
board conluded that it was unlikely any further significant
distributions will be made to shareholders by way of compulsory
redemption.
Subsequent events in respect of the investment in Invenergy are
disclosed in note 22.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FFFFSMFUSEFE
(END) Dow Jones Newswires
December 16, 2019 05:20 ET (10:20 GMT)
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