IPSA GROUP PLC Annual Report and Accounts for the year ended 31 March

IPSA Group PLC Annual Report 31 March 2013 IPSA Group PLC 5th Floor, Prince Consort House 27-29 Albert Embankment London SE1 7TJ United Kingdom Tel: +44 (0) 20 7793 5615 Fax: +44 (0) 20 7793 7654 www.ipsagroup.co.uk IPSA GROUP PLC Annual Report and Accounts for the year ended 31 March 2013 Stock code: IPSA

IPSA Group PLC Annual Report 2013 IPSA Group PLC is a company incorporated in England and Wales which has been established to develop, own and manage power generation plants in southern Africa. The Company has been quoted on the AIM Market of the London Stock Exchange PLC since September 2005 and on the AltX market of the Johannesburg Stock Exchange since October 2006. The Company s management has an established track record in developing power projects worldwide and relevant experience in the electricity sector in South Africa. Its principal business objective is the development and ownership of power generation facilities in southern Africa in order to sell electricity and/or steam to companies and communities on commercial terms. For more information on IPSA Group PLC go to www.ipsagroup.co.uk

www.ipsagroup.co.uk 01 Our Governance Our Financials Our Performance CONTENTS Our Performance Chairman s Statement 2 Chief Executive s Review of Operations 4 Our Governance Group Directors Report 6 Corporate Governance Statement 9 Report of the Independent Auditors 11 Our Financials Consolidated Statement of Comprehensive Income 12 Consolidated Statement of Financial Position 13 Parent Company Statement of Financial Position 14 Consolidated Statement of Cash Flows 15 Parent Company Statement of Cash Flows 16 Consolidated Statement of Changes in Equity 17 Parent Company Statement of Changes in Equity 18 Notes to the Financial Statements 19

02 IPSA GROUP PLC Annual Report 2013 CHAIRMAN S STATEMENT I am pleased to present to the shareholders of IPSA Group PLC (the Group ) the Report and Accounts for the year ended 31 March 2013. The net finance expense declined from 1.2 million to 0.5 million as a result of reduced indebtedness following the disposal of the first pair of Turbines last year. Richard Linnell Chairman In operating terms the Group has performed satisfactorily. However, the failure to dispose of the remaining two Siemens Westinghouse 701DU turbines (the Turbines ) during the financial year under review, together with significant deterioration in the sterling/zar exchange rate has resulted in a Group after tax loss of 1.9 million. Group turnover at 4.3 million is almost the same for this year in comparison to last year (2012: 4.4 million). The Group recorded an overall improvement in its operating figures. However an impairment charge of 1 million (2012: nil) has been booked against the carrying value of the plant in South Africa, further details are set out in note 14. As a result the operating loss increased from 1.45 million last year to 1.95 million loss in the current year. As in the year to 31 March 2012, there were again a number of one-off items. In total, these amounted to a credit of 0.6 million (2012: 8.3 million credit, including 6.1 million profit on the sale of 2 turbines) and comprised costs associated with the turbines of 410k (2012: 256k), legal costs associated with the loans on the turbines (which were in default) plus costs associated with extending the repayment of some loans, totalling 500k (2012: 320k), foreign exchange losses on amounts due on the turbines of 459k (2012: 326k credit) and also a credit of 1.9 million in respect of a deposit paid by a prospective purchaser of the remaining two turbines which was subsequently forfeited. Further details are set out in note 9. The carrying value of the remaining Turbines and ancillary equipment in these financial statements remains at 15.71 million. In June 2013 the Company sold the Turbines for US$25 million ( 16.1 million) and the remaining equipment is valued at no less than 4.0 million. Although the combined revenue in the year of 4.3 million from electricity and steam sales was not sufficient to record an operating profit after depreciation, it does nonetheless represent continued reliable performance of the NewCogen plant. Excluding depreciation and the impairment charge, the plant recorded a gross profit of 0.70 million (2012: gross profit 0.73 million) and an operating loss, excluding depreciation and the impairment charge, of 0.03 million (2012: 0.06 million loss). In local currency, turnover was ZAR 58.1 million (2012: ZAR 51.7 million), gross profit before depreciation and the impairment change was ZAR 9.4 million (2012: ZAR 8.6 million) and the operating loss, excluding depreciation and the impairment charge was ZAR 0.8 million (2012: ZAR 0.7 million). As I touched on briefly in my review of the Group financial statements above, the remaining two Turbines were sold in June 2013 to Rurelec PLC and a pro forma balance sheet has been prepared to illustrate the position of the Group at 31 July 2013, following the disposal. Of the total sales price the Group has received US$18.5 million ( 11.9 million) of which 10.2 million has been used to repay trade creditors and borrowings and approximately

www.ipsagroup.co.uk 03 1.7 million has been retained by the Company in cash and shares in the purchaser. The balance of the purchase price (US$6.5 million/ 4.2 million) is due to be paid before June 2015. The amount owed to Turbocare SpA is currently under dispute, but has been fully provided for in the accounts at 4.2 million. Our Performance The disposal of the remaining two Turbines has been beneficial for the Group and we will work on further asset realisations over the coming year. We are now proceeding with plans to expand the facility at Newcastle in order to maximise the benefit of the existing MTPPP contract, which expires at the end of March 2015. Prior to that, in accordance with the tariff rules, NewCogen will, from March 2014, experience a one off 8 per cent. fall in the price that it receives for electricity. In anticipation of that reduction, and in order to take advantage of opportunities arising from a continued shortage of capacity being added to the South African power system, we are developing further longer term plans to add additional, more efficient, capacity to the Newcastle site based on power purchase agreements, leveraging our generating licence, gird connection and gas availability, as well as seriously considering development at other locations in South Africa. Our Governance Our Financials Richard Linnell Chairman 6 September 2013

04 IPSA GROUP PLC Annual Report 2013 CHIEF EXECUTIVE S REVIEW OF OPERATIONS NewCogen In the past year we have seen reliable operations at the NewCogen power plant, with availability of over 95 per cent. exchange movements. In light of this, the directors have recorded an impairment charge of 1 million against the carrying value of the plant. Phil Metcalf Chief Executive Over the second full year of operation ending in March 2013, NewCogen generated 46,277 MWh of electricity (2012: 46,470 MWh), predominantly during peak hours on a two shifting basis, and delivered just under 68,700 tonnes of steam (2012: 57,000 tonnes). Electricity was delivered to Eskom under the MTPPP contract, which remains in place until March 2015. Steam was delivered to Karbochem and Lanxess under ad hoc arrangements in the absence of a firm long term contracts. We continue to enjoy excellent relationships with ESKOM, the local Newcastle Municipality and our gas supplier, Spring Lights Gas (Pty) Limited ( Spring Lights ). We consumed during the 12 months to end of March 2013 approximately 683,000 GJ of gas which represented a minor shortfall against our minimum Take of Pay obligation of 700,000 GJ which will be addressed in the next operational period. Electricity prices are adjusted annually under the MTPPP contract. In April 2013, the price was increased by 9.8 per cent. in line with the December 2012 inflation figures. Gas prices are adjusted twice a year, now taking place in April and October, based on a combination of South African inflation figures and the price of Brent Crude in ZAR. The April increase was an increase of 10 per cent, and in October, it was 2.8 per cent. Future projections for gas price increases are currently forecast to be less than the increase we are anticipating in the electricity prices over the next year, but margins are susceptible to oil price and foreign Certain major maintenance activities have been carried on out one of the gas turbines, which resulted in a reduction of revenues over approximately one month. The second gas turbine will undertake maintenance in a similar manner during the next operational period, with a similar reduction in revenues over six weeks in this case. We continue to explore a number of opportunities to increase capacity at the Newcastle site, with programs already underway and a number of others being actively developed. NewCogen takes the safety of its employees seriously and I am very pleased to report that there have been zero incidences or Lost Time Accidents in the past year. The Turbines The sale of last two of the Gas Turbines was completed for $25 million with Rurelec in June 2013. This sale did not include the Balance of Plant, which remains for sale and is valued at between $6-$10 million. $6.5 million of proceeds from the sale of the turbines is still awaited, but the initial consideration has allowed settlement with all major creditors, and no loans are now in default. Standard Bank in particular was fully paid out in March 2013. On 15 October 2012 the Company announced that it had agreed to sell its two remaining Siemens Westinghouse 701 DU gas turbines to Iris Eco Power Sdn Bhd ("Iris"), a Malaysian power development

www.ipsagroup.co.uk 05 company, for consideration of US$31 million (approximately 19.4 million). Unfortunately, the purchaser was unable to complete and the contract was terminated on 28 February 2013 In accordance with the terms of the Following completion of the sale of the turbines both the Sterling loans to NewCogen and the short term loans to IPSA have been repaid. Whilst cash remains tight, we are now able to move forward with moments, but I am encouraged to see the options becoming available for growth in the future and for a revitalised, restructured and re-capitalised IPSA can finally start to realise its full potential in a growing and welcoming Our Performance contract the deposit of US$3.1 million was expansion projects although some and well regulated market. not refundable and the funds were therefore additional modest funding will be required retained by the Company and used to pay to achieve this in the short term. Phil Metcalf creditors. Working capital Working capital has continued to be very tight for IPSA, but the situation has been managed through the year successfully. In August 2012 the Company received confirmation of the withdrawal of the claim by Sasol Gas Limited against NewCogen, the Company's wholly owned subsidiary, for sums claimed under the gas supply agreement terminated in August 2009 (the "Claim") following payment by NewCogen of the sum of ZAR 7 million (approximately 550k). Funding for the settlement was provided by Sterling Trust Limited, our largest shareholder, by way of a loan to NewCogen. The credit of 3.2 million arising from this satisfactory settlement was included in last year s Income statement. On 27 March 2013 the Company obtained a new short term loan in the amount of 4.2 million and used the proceeds to repay all of the Company's secured bank debt which had been in default for a considerable period of time. The new funding arrangement allowed sufficient time to achieve a sale of the Turbines, which duly took place in the first quarter of the new financial year. General, restructuring of the Board renewed focus on South Africa, and other projects As far as we have been able to with limited funds, we have continued to monitor the market and examine opportunities which have arisen from time to time. With reserve margins at an all-time low in South Africa and with a backdrop of positive encouragement towards independent power producers ( IPPs ) in South Africa, particularly with the introduction recently of a program sponsored by the Department of Energy for new capacity, the resolution of the legacy problems at IPSA is very well timed, and we will have many excellent opportunities to develop the business in the coming 12 months. It is of particular note that we have the capacity and infrastructure available and permitted in Newcastle to install addition capacity quickly in response to such enquiries and a growing number of potential Industrial based PPAs. To make the most of this opportunity we are restructuring the Board, with the first steps already taken, with an intent and purpose to focus our management execution out of a base in South Africa, such that we are much closer to the major decision makers in Government, ESKOM and our main customers. Chief Executive 6 September 2013 Our Governance Our Financials The short term loan was subsequently increased in order to allow us to fund our maintenance program. Since joining as the CEO in September of 2011, there have been many challenging

06 IPSA GROUP PLC Annual Report 2013 GROUP DIRECTORS REPORT The directors submit their report and audited financial statements for the year ended 31 March 2013. Principal activities and review of the business The principal activities of the Group comprise the acquisition and development of power generation assets, initially in markets in southern Africa. The Group s strategy is to create a portfolio of power generation assets in southern Africa, in conjunction with project partners where the directors believe this to be advantageous. In the event that appropriate opportunities present themselves outside this geographic area, the Group s investment boundaries may be extended. The parent Company is also engaged in the purchase and sale of power related equipment and products. The Company was incorporated on 1 July 2005 and was admitted to AIM in September 2005. In October 2006, the Company obtained a secondary listing, on the Alternative Exchange of the Johannesburg Stock Exchange Limited ( Alt X ). A review of the Group s activities and future plans is set out in the Chairman s Statement and the Chief Executive s Review. Principal risks and uncertainties Risks are formally reviewed by the Board and appropriate processes and controls put in place to monitor and mitigate them. Key business risks include: 1) Expansion of the plant in South Africa such that the operating profit provides an acceptable return on the investment; and 2) Securing new electricity generating opportunities in the region in order to provide long term profitable growth for shareholders; and 3) Developing an expansion strategy for the future; and 4) Securing sufficient financial resources to support the above. In addition to these factors which, if satisfactorily resolved, will have a significant positive impact on the Group s liquidity, the future growth and profitability of the Group will be influenced by: 1) The demand for and profitability of the electricity supplied can be affected by changes in economic activity in South Africa, market capacity, and pricing, including changes in the price of both electricity and gas; 2) Movements in the value of the ZAR relative to sterling since changes in the rate of exchange affect the sterling value of assets located in South Africa and will, in the future, affect the value of dividends which the Company expects to receive from its activities in South Africa; 3) Political factors the directors consider the Government of the Republic of South Africa supports the provision of efficient power generation by IPPs and that the Company s listing on AltX, with local shareholders now owning a significant portion of the Company, further strengthens the Group s position in the Republic of South Africa; and 4) The credit market conditions remain difficult and there exists continued uncertainty over the availability of suitable project finance to fund future expansion of the existing plant and new projects. Key performance indicators Following the set-backs of earlier plans, which included the proposed major project at Coega, the Group is still at an early stage in its development and accordingly the current key performance indicators continue to focus on: 1) Operating efficiency and input costs of the NewCogen plant; and 2) Generation of positive cash flow from the existing plant. As the Group s operations expand, further key performance indicators will become relevant. Results and dividends The Group results for the year ended 31 March 2013 are set out in the Consolidated Statement of Comprehensive Income. No dividend has been paid or is proposed. Going Concern The directors have continued to adopt the going concern basis for the preparation of the financial statements since the directors consider that the Company and the Group have sufficient financial resources available to continue trading for the foreseeable future (see also note 3.2). Share capital Details of the authorised and issued share capital are set out in note 20. During the year, there were no changes in the issued share capital of the Company. Directors The directors who served during the year are as follows: R Linnell N Bryson M Cox resigned 3 July 2013 P Earl J Eyre resigned 3 July 2013 P Metcalf R Sampson resigned 3 July 2013 E Shaw

www.ipsagroup.co.uk 07 Directors interests The beneficial interests of the current directors and also those who served during the year in the share capital of the Company at 30 August 2013, being the last practicable date for reporting this information, were as stated below: 30.08.2013 31.03.2013 31.03.2012 N Bryson 50,000 50,000 50,000 M Cox n/a 40,000 40,000 J M Eyre n/a 1,250,000 1,250,000 E R Shaw 1,268,750 1,268,750 1,268,750 P R S Earl 250,000 250,000 250,000 Our Performance The Company issued 2.1 million share options to directors during the year, as set out below. The options vested immediately at an exercise price of 5p per share and their fair value was nil. R Linnell 192,067 N Bryson 213,407 M Cox 230,480 P Earl 393,203 J M Eyre 356,857 P Metcalf 93,899 R Sampson 213,407 E R Shaw 399,499 Our Governance Significant shareholdings in the Company In addition to the shareholdings shown above, the Company is aware of the following notifiable interests of 3 per cent. or more in the issued share capital of the Company 30 August 2013, being the last practicable date for reporting this information. Number of shares % holding Sterling Trust Ltd 31,794,105 29.57 Neville Registrars Ltd** 18,288,796 17.01 YF Finance Limited 6,430,000 5.98 Vidacos Nominees Ltd 4,737,600 4.41 The Bank of New York (Nominees) Ltd 4,431,435 4.12 Pershing Nominees Limited 3,670,370 3.41 Our Financials **includes 12,093,487 shares held as nominee for METC Metlife.

08 IPSA GROUP PLC Annual Report 2013 GROUP DIRECTORS REPORT Policy and practice on payment of suppliers It is the policy of all Group companies, with respect to suppliers, to a) determine payment terms when agreeing the terms of each transaction, b) ensure suppliers are made aware of the terms of payment and c) pay in accordance with the contractual and legal obligations. In view of the delay in realising cash from the sale of the remaining two Turbines until after the year-end, the Company s average creditor payment period for the year ended 31 March 2013 exceeded one year. Risk management policies and objectives The financial risk management policies and objectives are set out in note 23. Directors responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements; and 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 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 confirm that: Auditors The auditors, Grant Thornton UK LLP, have indicated their willingness to continue in office and a resolution concerning their re-appointment will be proposed at the Annual General Meeting. By order of the Board Susan Laker Company Secretary 6 September 2013 Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare financial statements in accordance with International Financial Reporting Standards as adopted by the European Union ( IFRSs ). The financial statements are required by law to give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; so far as each of the directors is aware, there is no relevant audit information of which the Company's auditors are unaware; and the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

www.ipsagroup.co.uk 09 CORPORATE GOVERNANCE STATEMENT For the year ended 31 March 2013 Policy statement The Board is committed to applying high standards of corporate governance and integrity to all our activities. The Company is not required by the rules of the AIM market of the London Stock Exchange ( AIM ) to comply with the UK Corporate Governance Code (September 2012) (the Code ). However the Board has been briefed on the Code and is accountable to the Company s shareholders for good corporate governance and therefore seeks to comply with the Code in so far as is practicable as a smaller company. The Company s primary listing is on AIM and as a result, the Group is exempt from complying with the requirements of the King Code of corporate governance in South Africa. Internal controls The directors are responsible for the Group s systems of internal control. Whilst no risk management process or systems of internal control can completely eliminate the risk of material misstatement or loss, the Group s systems are designed to provide the directors with reasonable assurance that problems are identified in a timely manner and dealt with appropriately. The Board considers that there have been no substantial weaknesses in financial controls resulting in material loss, contingencies or uncertainties and thus disclosable in these Accounts. The Board has considered the need for an internal audit function and has concluded that there is no current need for such a function. Board composition and independence During the year under review, the Board comprised eight members made up of a Non-Executive Chairman, four Executive directors and three Non-Executive directors. The Board is responsible for the overall direction, strategic objectives and key policies for reviewing performance of the Company and the Group as well as approving major capital expenditure, potential acquisitions and financial matters. The Board meets regularly and has a schedule of business reserved to it including raising new capital, entering into financing facilities for projects, treasury policies and approval of annual operating budgets and monitoring of key risks. The Board met 13 times during 2012-13. External advice is available to the directors if they consider it necessary. The Chairman and Non- Executive directors met 4 times during the financial year without the Executive directors being present. The Chairman of the Board is Richard Linnell. The other Non-Executive directors who served during the year were Neil Bryson, Rizelle Sampson and Peter Earl. The Executive directors were Phil Metcalf, who is Chief Executive; Elizabeth Shaw, Chief Operating Officer; Michael Cox, Finance director and Mike Eyre, director of Technical Operations and Engineering. All directors are involved in significant decisions. Since the year-end, the Board has been reduced to 5 members, following the departure of Michael Cox, Mike Eyre and Rizelle Sampson. Shareholder relations The Group values the views of its shareholders and recognises their interest in the Group s strategy and performance, Board membership and quality of management. It therefore holds regular meetings with and gives presentations to its institutional shareholders to discuss objectives. Corporate governance statement The Annual General Meeting ( AGM ) is used to communicate with private investors with whom dialogue is encouraged. Additional information is supplied through the circulation of the interim report and the Annual Report and Accounts. The Company maintains up to date information on the investor section of its website www.ipsagroup.co.uk. Audit committee During the year, the Audit Committee comprised Neil Bryson and Rizelle Sampson who are both Non-Executive directors and was chaired by Neil Bryson. The Committee s remit is to review financial reporting practices, internal financial controls and internal and external audit policy including the appointment of the Company s auditor. During the year, the Audit Committee met twice to review the draft half year and annual financial statements. Remuneration committee The Remuneration Committee comprised Richard Linnell, Neil Bryson and Rizelle Sampson and was chaired by Richard Linnell. The Remuneration Committee reviews the remuneration policy for the Executive directors and for senior management. The Executive directors determine the remuneration arrangements for the Non-Executive directors. No director may participate in decisions regarding his own remuneration. Details of the directors remuneration can be found in the Remuneration Report in note 27. Appointment of directors The Nomination Committee presently comprises Richard Linnell as Chairman and Neil Bryson. The Committee is responsible for monitoring the composition of the Board Our Performance Our Governance Our Financials

10 IPSA GROUP PLC Annual Report 2013 CORPORATE GOVERNANCE STATEMENT For the year ended 31 March 2013 and meets to make recommendations to the Board on all new Board appointments and succession planning. The Board has not used external consultants in the appointment of directors. Health, safety and environmental protection policy The Group is committed to compliance with all relevant laws and regulations and continues to assess its operations to ensure protection of the environment, the community and the health and safety of its employees. The Group maintains appropriate procedures to ensure that all activities are carried out in compliance with safety regulations, in a culture where the safety of personnel is paramount and which recognises environmental sustainability and respect for cultural and heritage issues. Share dealing code The Company has a Share Dealing Code which covers dealings by Persons Discharging Managerial Responsibilities. The Company s code complies with the provisions of the Code and restricts dealings in shares during designated close periods and at any time when they are in possession of unpublished price sensitive information. Statement of non-compliance Peter Earl, being a former Chief Executive Officer, and Rizelle Sampson, due to her interest in a company with an option to acquire more than 3 per cent. of the issued share capital, were not regarded as independent as defined by the Code. Susan Laker Company Secretary 6 September 2013

www.ipsagroup.co.uk 11 REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF IPSA GROUP PLC For the year ended 31 March 2013 We have audited the financial statements of IPSA Group PLC for the year ended 31 March 2013 which comprise the consolidated statement of comprehensive income, the consolidated and Parent Company statements of financial position, the consolidated and Parent Company statements of cash flows, the consolidated and Parent Company statements of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company s International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s (APB s) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB s website at www.frc.org.uk/apb/scope/private.cfm. Opinion on financial statements In our opinion: the financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 March 2013 and of the Group's loss for the year then ended; Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or the Parent Company financial statements are not in agreement with the accounting records and returns; or certain disclosures of directors remuneration specified by law are not made; or Our Performance Our Governance 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 the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; we have not received all the information and explanations we require for our audit. state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors Responsibilities Statement as set out in the the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Christopher Smith Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants London 6 September 2013 Our Financials Directors Report, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors' Report for the financial period for which the financial statements are prepared is consistent with the financial statements.

12 IPSA GROUP PLC Annual Report 2013 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 March 2013 12 months 12 months 31.3.13 31.3.12 Notes 000 000 Revenue 4 4,327 4,371 Cost of sales 6 (5,247) (4,438) Gross loss (920) (67) Administrative expenses 7 (1,037) (1,380) Operating loss (1,957) (1,447) Profit on sale of non-current asset 8 6,116 Other income 9 566 2,200 Net finance expense 10 (485) (1,227) (Loss)/profit before tax (1,876) 5,642 Tax expense 11 (Loss)/profit after tax (1,876) 5,642 Other comprehensive income Exchange differences on translation of foreign operation (977) (980) Total comprehensive (loss)/income (2,853) 4,662 (Loss)/profit per ordinary share 13 (1.74p) 5.25 (basic, diluted and headline) The accompanying accounting policies and notes form an integral part of these financial statements

www.ipsagroup.co.uk 13 CONSOLIDATED STATEMENT OF FINANCIAL POSITION at 31 March 2013 31.3.13 31.3.12 Notes 000 000 Assets Non-current assets Property, plant and equipment 14 8,376 11,070 8,376 11,070 Current assets Trade and other receivables 17 582 816 Cash and cash equivalents 18 100 35 682 851 Our Performance Non-current assets classified as assets held for sale 19 15,712 15,712 Total assets 24,770 27,633 Equity and liabilities Equity attributable to equity holders of the parent: Share capital 20 2,150 2,150 Share premium account 26,767 26,767 Foreign currency reserve (4,011) (3,034) Profit and loss reserve (15,266) (13,390) Total equity 9,640 12,493 Our Governance Current liabilities Trade and other payables 21 7,336 7,814 Borrowings 22 7,794 7,326 15,130 15,140 Total equity and liabilities 24,770 27,633 The financial statements were approved by the Board on 6 September 2013. Our Financials P C Metcalf Director E R Shaw Director Company registration number: 5496202 The accompanying accounting policies and notes form an integral part of these financial statements

14 IPSA GROUP PLC Annual Report 2013 PARENT COMPANY STATEMENT OF FINANCIAL POSITION at 31 March 2013 31.3.13 31.3.12 Notes 000 000 Assets Non-current assets Investments 15 22,649 500 Trade and other receivables 16 22,653 22,649 23,153 Current assets Trade and other receivables 17 29 21 Cash and cash equivalents 18 2 14 31 35 Non-current assets classified as assets held for sale 19 15,712 15,712 Total assets 38,392 38,900 Equity and liabilities Equity attributable to equity holders of the parent: Share capital 20 2,150 2,150 Share premium account 26,767 26,767 Profit and loss reserve (3,845) (3,630) Total equity 25,072 25,287 Current liabilities Trade and other payables 21 6,532 6,664 Borrowings 22 6,788 6,949 13,320 13,613 Total equity and liabilities 38,392 38,900 The financial statements were approved by the Board on 6 September 2013. P C Metcalf Director E R Shaw Director Company registration number: 5496202 The accompanying accounting policies and notes form an integral part of these financial statements

www.ipsagroup.co.uk 15 CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended at 31 March 2013 12 months 12 months 31.3.13 31.3.12 000 000 (Loss)/profit for the year (1,876) 5,642 Add back net finance expense 485 1,227 Deduct profit on sale of asset held for sale (1,935) (6,116) Adjustments for: Depreciation and impairment 1,675 809 Impairment of asset held for sale 780 Unrealised exchange losses 427 464 Change in trade and other receivables 233 2,150 Change in trade and other payables (515) (16,400) Our Performance Cash used in operations (1,506) (11,444) Interest paid (3,243) (8) Interest received 34 Net cash used in operations (4,715) (11,452) Cash flows from investing activities Purchase of plant and equipment (384) (1) Proceeds from sale of asset held for sale 22,912 Deposit on asset held for sale 1,935 1,257 1,551 24,168 Cash flow from financing activities Loans received 4,799 1,359 Loans repaid (1,570) (14,073) 3,229 (12,714) Increase in cash and cash equivalents 65 2 Cash and cash equivalents at start of year 35 33 Cash and cash equivalents at end of year 100 35 Our Governance Our Financials The accompanying accounting policies and notes form an integral part of these financial statements

16 IPSA GROUP PLC Annual Report 2013 PARENT COMPANY STATEMENT OF CASH FLOWS for the year ended at 31 March 2013 12 months 12 months 31.3.13 31.3.12 Notes 000 000 (Loss)/profit for the year (215) 3,840 Add back net finance expense 936 1,185 Deduct profit on sale of asset held for sale (1,935) (6,116) Adjustments for: Impairment of asset held for sale 780 Change in trade and other receivables (8) 2,035 Change in trade and other payables (170) (12,839) Cash used in operations (1,392) (11,115) Interest paid (3,243) Net cash generated from/(used in) operations (4,635) (11,115) Cash flows from investing activities Loan repaid by/(to subsidiary) 4 (343) Proceeds from sale of asset held for sale 22,912 Deposit on asset held for sale 1,935 1,257 1,939 23,826 Cash flow from financing activities Loans received 4,254 1,359 Loans repaid (1,570) (14,073) 2,684 (12,714) Decrease in cash and cash equivalents (12) (3) Cash and cash equivalents at start of year 14 17 Cash and cash equivalents at end of year 2 14 The accompanying accounting policies and notes form an integral part of these financial statements

www.ipsagroup.co.uk 17 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2013 Share Foreign Profit Share premium currency and loss Total capital account reserve reserve equity 000 000 000 000 000 At 31.3.11 2,150 26,767 (2,054) (19,032) 7,831 Profit for the year 5,642 5,642 Other comprehensive income/(loss) (980) (980) Total comprehensive income for the year (980) 5,642 4,662 Our Performance At 31.3.12 2,150 26,767 (3,034) (13,390) 12,493 Loss for the year (1,876) (1,876) Other comprehensive income/(loss) (977) (977) Total comprehensive loss for the year (977) (1,876) (2,853) At 31.3.13 2,150 26,767 (4,011) (15,266) 9,640 Our Financials Our Governance The accompanying accounting policies and notes form an integral part of these financial statements

18 IPSA GROUP PLC Annual Report 2013 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2013 Share Foreign Profit Share premium currency and loss Total capital account reserve reserve equity 000 000 000 000 000 At 31.3.11 2,150 26,767 (7,470) 21,447 Profit for the year 3,840 3,840 Total comprehensive income for the year 3,840 3,840 At 31.3.12 2,150 26,767 (3,630) 25,287 Loss for the year (215) (215) Total comprehensive loss for the year (215) (215) At 31.3.13 2,150 26,767 (3,845) 25,072 The accompanying accounting policies and notes form an integral part of these financial statements

www.ipsagroup.co.uk 19 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2013 1 PRINCIPAL ACTIVITIES AND NATURE OF OPERATIONS The principal activity of IPSA Group PLC and its subsidiaries (the Group ) is the construction, development and operation of electricity generation assets and the supply of electricity to the wholesale market and major end-users. The parent Company is also involved in the purchase and sale of power related equipment and products. During the year under review, the Group s operating activities included the generation and sale of electricity and steam by the Group s gas fired plant in Newcastle, Republic of South Africa, and the continued marketing of the remaining 2 turbines, which were sold after the year-end for $25 million. Our Performance Further details are provided in the Chairman s statement and the Chief Executive s review of operations. 2 GENERAL INFORMATION IPSA Group PLC is the Group s ultimate Parent Company. It is incorporated and domiciled in England and Wales. The address of IPSA Group PLC s registered office is given on the information page. IPSA Group PLC s shares are traded on the AIM market of the London Stock Exchange PLC in London and, since October 2006, the shares have had a dual listing on AltX (the Alternative Exchange, a division of JSE Limited, of the Johannesburg market). 3 SUMMARY OF ACCOUNTING POLICIES 3.1 Basis of preparation The financial statements have been prepared under the historical cost convention and in accordance with applicable International Financial Reporting Standards ( IFRS ) as adopted by the European Union. The measurement bases and principal accounting policies of the Group are set out below. Our Governance 3.2 Going concern As announced in June 2013, the Company completed the sale of the remaining 2 turbines for a total consideration of $25 million ( 16.1 million) of which 11.9 million has been paid and the balance of 4.2 million is expected to be received at least within the next 12 months. This sale enabled the Company to repay all of its loans and settle the majority of its creditors, with the result that at 31 July 2013 there were only two main creditors a) an amount claimed by Turbocare (the supplier of the turbines 4.16 million at 31 March 2013) and b) unpaid salary due to the directors ( 1.25 million at 31 March 2013) and four main assets a) a cash balance of 0.7 million b) an amount of ancillary plant equipment which has been valued at in excess of 4 million, c) 8.5 million shares in Rurelec PLC valued at 1.1 million and d) its 100 per cent investment in Newcastle Cogeneration (Pty.) Ltd. A pro-forma consolidated balance sheet at 31 July 2013, which does not form part of these financial statements, is shown as an appendix at the end of the financial statements. Our Financials The Company is in arbitration proceedings with Turbocare with respect to the amount claimed since a significant portion of the claim by Turbocare (which is fully provided in these financial statements at 4.16 million) is disputed. This process is expected to conclude early next year. The directors have agreed a stand-still in respect of the amounts due to them pending the Company having sufficient cash to settle the overdue amounts. Whilst there remains uncertainty with respect to the final settlement of the debt claimed by Turbocare and also uncertainly on the timing of the receipt of the 4.2 million deferred consideration and the sale proceeds of the ancillary plant equipment, the directors consider that the Company does have adequate resources to continue in operational existence for the foreseeable future and therefore the directors continue to adopt the going concern basis in preparing the annual report and accounts.

20 IPSA GROUP PLC Annual Report 2013 NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2013 3.3 Basis of consolidation The Group financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 31 March 2013. Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights. Unrealised gains on transactions between the Group and subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiary entities have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Acquisitions of subsidiaries are dealt with by the acquisition method. The acquisition method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the acquired company, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the acquired entity are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. 3.4 Intangible assets acquired as part of a business combination In accordance with IFRS 3: Business Combinations, an intangible asset acquired in a business combination is deemed to have a cost to the Group of its fair value at the acquisition date. The fair value of an intangible asset reflects market expectations about the probability that the future economic benefits embodied in the asset will flow to the Group. Where an intangible asset might be separable, but only together with a related tangible or intangible asset, the group of assets is recognised as a single asset separately from the goodwill where the individual fair values of the assets in the group are not reliably measured. Where the individual fair value of the complementary assets is reliably measurable, the Group recognises them as a single asset, provided the individual assets have similar lives. Subsequent to initial recognition, intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is provided to write-off the cost of the intangible asset over its useful economic life. 3.5 Impairment of property, plant, equipment and intangible assets At each balance sheet date, the Group reviews the carrying amount of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

www.ipsagroup.co.uk 21 3.6 Foreign currency translation The financial information is presented in pounds sterling, which is also the functional currency of the Parent Company. In the separate financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of remaining balances at year end exchange rates are recognised in the income statement under other income or other expenses, respectively. Our Performance In the consolidated financial statements, all separate financial statements of subsidiary entities, originally presented in a currency different from the Group s presentation currency, have been converted into sterling. Monetary assets and liabilities have been translated into sterling at the closing rate at the balance sheet date. Income and expenses have been converted into sterling at the average rates over the reporting period. Any differences arising from this procedure have been recognised in other comprehensive income and accumulated in the Foreign Currency Reserve. 3.7 Income and expense recognition Revenue from the sale of goods and services is recognised when i) the Group has transferred to the buyer the significant risks and rewards of ownership of the goods and services which is when supply has been made, ii) the amount of revenue can be reliably measured and iii) the costs incurred or to be incurred in respect of the transaction can be measured reliably. In the year ended 31 March 2013 the Group s revenue comprised the sale of electricity and steam from the plant in South Africa. In the year to 31 March 2012, the profit from the sale of the 2 turbines held as assets for sale was credited to other income. Our Governance Operating expenses are recognised in the consolidated statement of comprehensive income upon utilisation of the service or at the date of their origin. All other income and expenses are reported on an accrual basis. 3.8 Property, plant and equipment Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. No depreciation is charged during the period of construction. All operational plant and equipment in the course of construction is recorded as plant under construction until such time as it is brought into use by the Group. Plant under construction includes all direct expenditure. On completion, such assets are transferred to the appropriate asset category. Depreciation is calculated to write down the cost or valuation less estimated residual value of all property, plant and equipment other than freehold land by equal annual instalments over their estimated useful economic lives. The periods generally applicable are: Our Financials Plant and equipment: 3 to 25 years Material residual values are updated as required, but at least annually, whether or not the asset is revalued. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. 3.9 Non-current assets classified as held for sale Assets are categorised as non-current assets classified as held for sale when the directors intend that the asset be sold rather than employed as an operating asset. Non-current assets classified as held for sale are valued at the lower of cost and fair value less costs to sell.