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Registered number: 08372348
GCP BIOMASS 1 LTD
AUDITED
DIRECTORS' REPORT
AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2019
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COMPANY INFORMATION
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Chartered Accounts & Statutory Auditors
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CONTENTS
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Independent auditors' report
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Statement of income and retained earnings
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Notes to the financial statements
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DIRECTORS' REPORT
FOR THE YEAR ENDED 31 MARCH 2019
The directors present their report and the financial statements for the year ended 31 March 2019.
Directors' responsibilities statement
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The directors are responsible for preparing the Directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors who served during the year were:
Disclosure of information to auditors
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Each of the persons who are directors at the time when this Directors' report is approved has confirmed that:
∙so far as the director is aware, there is no relevant audit information of which the Company's auditors are unaware, and
∙the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Page 1
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DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 MARCH 2019
The auditors, Wellden Turnbull Limited, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
In preparing this report, the directors have taken advantage of the small companies exemptions provided by section 415A of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
Page 2
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INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OFGCP BIOMASS 1 LTD
Disclaimer of opinion
We were engaged to audit the financial statements of GCP Biomass 1 Ltd (the 'Company') for the year ended 31 March 2019, which comprise the Statement of Income and Retained Earnings, the Balance Sheet and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We do not express an opinion on the accompanying financial statements of the Company. Because of the significance of the matter described in the basis for disclaimer of opinion section of our report, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.
Basis for disclaimer of opinion
The audit evidence available to us was limited because the directors are unable to substantiate and formally evidence the timing and amount of the future cash flows in relation to the Company's loan debtors. The carrying value of the loan debtors are stated at £61,981,797 as at 31 March 2019. This is based on an assessment of all available information, but the directors are unable to ascertain whether this is materially correct due to significant uncertainty regarding the future cash flows over the remaining term of the loans. As a result we are unable to obtain sufficient appropriate audit evidence concerning the carrying amount of the loan debtors of £61,981,797 and their resulting recoverability.
The uncertainty regarding the level and timing of cash flows receivable from the debtor indicates a material uncertainty, which may cast significant doubt on the Company's ability to continue as a going concern. The Company may therefore be unable to realise its assets and meet its liabilities as they fall due.
Opinion on other matters prescribed by the Companies Act 2006
Notwithstanding our disclaimer of opinion on the financial statements, in our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the Directors' report has been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
Notwithstanding our disclaimer of an opinion on the financial statements, in the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit performed subject to the pervasive limitation described above, we have not identified material misstatements in the Directors' report.
Arising from the limitation of our work referred to above:
∙we have not received all the information and explanations we require for our audit; and
∙we were unable to determine whether adequate accounting records have been kept.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
∙returns adequate for our audit have not been received from branches not visited by us; or
∙the financial statements are not in agreement with the accounting records and returns; or
∙certain disclosures of directors' remuneration specified by law are not made; or
∙the directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemptions in preparing the Directors' report and from the requirement to prepare a Strategic report.
Page 3
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INDEPENDENT AUDITORS' REPORT TO THE SHAREHOLDERS OFGCP BIOMASS 1 LTD
Responsibilities of directors
As explained more fully in the Directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditors' responsibilities for the audit of the financial statements
Our responsibility is to conduct an audit of the Company’s financial statements in accordance with International Standards on Auditing (UK) and to issue an auditor’s report. However, because of the matter described in the basis for disclaimer of opinion section of our report, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Use of our report
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
Mark Nelligan ACA (Senior statutory auditor)
for and on behalf of
Wellden Turnbull Limited
Chartered Accounts
Statutory Auditors
Munro House
Portsmouth Road
Cobham
Surrey
KT11 1PP
Date: 28/11/2019
Page 4
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STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED 31 MARCH 2019
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Impairment of loan debtor
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Impairment of loan creditor
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Retained earnings at the beginning of the year
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Retained earnings at the end of the year
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The notes on pages 7 to 12 form part of these financial statements.
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Page 5
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GCP BIOMASS 1 LTD
REGISTERED NUMBER:08372348
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BALANCE SHEET
AS AT 31 MARCH 2019
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Debtors: amounts falling due after more than one year
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Debtors: amounts falling due within one year
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Creditors: amounts falling due within one year
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Total assets less current liabilities
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Creditors: amounts falling due after more than one year
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The financial statements have been prepared in accordance with the provisions applicable to companies subject to the small companies regime and in accordance with the provisions of FRS 102 Section 1A - small entities.
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 7 to 12 form part of these financial statements.
Page 6
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2019
GCP Biomass 1 Ltd is a private company, limited by shares, incorporated in England and Wales, registered number 08372348. The registered office is 24 Savile Row, London, W1S 2ES.
2.Accounting policies
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Basis of preparation of financial statements
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The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Section 1A of Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
These financial statements are presented in sterling which is the functional currency of the Company and rounded to the nearest £.
The following principal accounting policies have been applied:
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Compliance with accounting standards
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The financial statements have been prepared using FRS102 The Financial Reporting Standard applicable in the UK and the Republic of Ireland, including the disclosure and presentation requirements of Section 1A, applicable to small companies. There we no material departures from this standard.
The Company is in a net liability position and has been loss-making. The Company is part of a financing structure, the underlying loans structured such that the actual cash inflow from the loan debtor exceeds the Company’s cash outflows to service the loan creditor and overheads over the loan term.
The Company’s largest loan debtor, the carrying value of which is £37,190,191 (2018 - £40,954,560) at the year end date, operates 11 anaerobic digestion plants in the UK a number of which have suffered as a result of performance issues. The debtor balance has been restated to reflect the best estimate of the present value of future cash flows to be generated by the plants. Revised forecasts reflect the director’s decision post the year end date to decommission one of the underperforming plants. An impairment has been recognised against the loan debtor of £5,596,190 (2018 - £3,145,464) in the financial year.
The Company’s other loan debtor, the carrying value of which is £24,791,606 (2018 - £20,130,353) at the year end date, defaulted in 2017 and as a result of breaches of loan covenants with the senior loan creditor was put into lock-up. During the year the debtor has come out of lock-up and cash distributions have been received. The directors have restated the loan debtor balance to reflect a revised best estimate of the present value of future cash flows to be generated which has resulted in the recognition of an impairment in the financial year of £2,985,372.
The directors have concluded that these circumstances represent a material uncertainty that casts a significant doubt on the Company’s ability to continue as a going concern. Nevertheless the directors believe preparing the financial statements on the going concern basis is appropriate due to the ongoing support of its lender, a company providing infrastructure debt financing. This support gives the Company the financial resources to be able to meet its liabilities as they fall due for the foreseeable future.
Page 7
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2019
2.Accounting policies (continued)
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured.
Interest receivable is recognised over the loan period using the effective interest method, which takes into account related fees and transaction costs.
Short term debtors are measured at transaction price, less any impairment. Loans receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
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Cash and cash equivalents
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Cash is represented by cash in hand and deposits with financial institutions repayable without penalty on notice of not more than 24 hours.
Short term creditors are measured at the transaction price. Other financial liabilities, including bank and other loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
Interest payable is recognised using the effective interest method, which takes into account related fees and transaction costs. Interest payable is included within cost of sales as it is directly attributable to the interest receivable included in revenue.
Tax is recognised in the Statement of income and retained earnings, except that a charge attributable to an item of income and expense recognised as other comprehensive income or to an item recognised directly in equity is also recognised in other comprehensive income or directly in equity respectively.
The current tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet in the countries where the Company operates and generates income.
The Company only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in non-puttable ordinary shares.
Debt instruments (other than those wholly repayable or receivable within one year), including loans and other accounts receivable and payable, are initially measured at present value of the future cash flows and subsequently at amortised cost using the effective interest method. Debt instruments that are payable or receivable within one year, typically trade debtors and creditors, are measured, initially and subsequently, at the undiscounted amount of the cash or other consideration expected to be paid or received. However, if the arrangements of a short-term instrument constitute a financing transaction, like the payment of a trade debt deferred beyond normal business terms or financed at a rate of interest that is not a market rate or in the case of an out-right short-term loan not at market rate, the financial asset or liability is measured, initially, at the present value of the
Page 8
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2019
2.Accounting policies (continued)
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Financial instruments (continued)
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future cash flow discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Statement of income and retained earnings.
For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
Exceptional items are transactions that fall within the ordinary activities of the Company but are presented separately due to their size or incidence.
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Judgements in applying accounting policies and key sources of estimation uncertainty
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The key source of estimation uncertainty at the reporting date that has a risk of causing a material adjustment to the carrying amount of the loan debtor is the uncertainty regarding the amount and timings of cash flows from the Company’s loan debtors. The directors restated loan debtors to the best estimate of the present value of future cash flows based on revised forecasts but it is not possible to estimate reliably to confirm that the carrying value is materially correct.
The key assumption concerning the future and other key sources of estimation uncertainty at the reporting date that has a risk of causing a material adjustment to the carrying amount of the loan debtor and loan creditor is future inflation rates.
Loans are stated at amortised cost and the effective interest rate calculations are based on the directors'
assumption that inflation will not exceed 3% per annum over the remaining loan term. If inflation was
considerably in excess of 3% there could be a material impact on the carrying value of the loan.
Loan principals are subject to annual inflation indexation based on the Retail Price Index ("RPI") if inflation exceeds 3% in a given year indexation is applied at half the excess over 3%.
Estimates and judgements are continually evaluated and are based on historical experience, independent
forecasts and other factors that are believed to be reasonable under the circumstances.
The loan interest receivable and payable calculations and the associated amortised cost balances assume that all future loan capital and interest receipts and payments will be in accordance with the current loan agreements for the remaining loan term.
The Company has taken advantage of the exemption not to disclose amounts paid for non audit services as these are disclosed in the group accounts of the parent company.
Page 9
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2019
There were no employees in the year under review apart from the directors who did not receive any remuneration.
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Impairment of loan debtor
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Impairment of loan creditor
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The Company's loan debtors have continued to suffer from performance issues and remained in default on the loan facilities. The directors have restated the loan debtor balance based on their best estimate of the present value of the future cash flows at the year end date at £61,981,797. This has resulted in the recognition of an impairment charge of £8,581,562 (2018 - £3,145,464) comprising both the interest due and payable in the financial year as well as an impairment against the loan principal balance no longer deemed recoverable based on forecasts.
Post the year end date the directors agreed with its lender to write down the loan creditor balance to reflect the impact of decommissioning an underperforming anaerobic digestion plant. This has resulted in the recognition of a gain of £4,125,238.
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Due after more than one year
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Prepayments and accrued income
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Other debtors comprise loans receivable balances accounted for at amortised cost.
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Page 10
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2019
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Creditors: Amounts falling due within one year
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Accruals and deferred income
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Creditors: Amounts falling due after more than one year
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External loans comprise loan notes accounted for at amortised cost and are repayable in instalments.
The loan notes are secured by a debenture over all assets of the Company, present and future.
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The aggregate amount of liabilities repayable wholly or in part more than five years after the balance sheet date is:
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Allotted, called up and fully paid
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1,000 (2018 - 1,000) Ordinary shares of £0.01 each
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Profit and loss account
The profit and loss account represents cumulative profits and losses net of all adjustments.
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Related party transactions
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The Company is exempt under the terms of Financial Reporting Standard 102 (FRS 102) paragraph 33.1A, from disclosing related party transactions with other group companies, on the grounds that the Company is wholly owned within the Group and the Company is included in consolidated financial statements prepared by the Group.
Page 11
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2019
The Company's immediate and ultimate parent undertaking is GCP Intermediary Holdings Limited. The consolidated financial statements of GCP Intermediary Holdings Limited may be obtained from Companies House or from its registered office 24 Savile Row, London, W1S 2ES.
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