Registered number: 06606245
LOCAL GENERATION LIMITED
FINANCIAL STATEMENTS
INFORMATION FOR FILING WITH THE REGISTRAR
FOR THE YEAR ENDED 31 DECEMBER 2022
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LOCAL GENERATION LIMITED
REGISTERED NUMBER: 06606245
BALANCE SHEET
AS AT 31 DECEMBER 2022
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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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Net current (liabilities)/assets
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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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Provisions for liabilities
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LOCAL GENERATION LIMITED
REGISTERED NUMBER: 06606245
BALANCE SHEET (CONTINUED)
AS AT 31 DECEMBER 2022
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 have been delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The Company has opted not to file the statement of income and retained earnings in accordance with provisions applicable to companies subject to the small companies' regime.
The financial statements were approved and authorised for issue by the board and were signed on its behalf on 4 August 2023.
The notes on pages 3 to 17 form part of these financial statements.
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Local Generation Limited is a private company limited by shares, incorporated in England and Wales (Registration number: 06606245). The registered office address is Control Tower, Hemswell Cliff Industrial Estate, Hemswell Cliff, Gainsborough, DN21 5TU.
The principal activity of the company is the generation of green electricity and gas by operating an anaerobic digestion plant as a sustainable alternative to landfill, selling the plant capacity and utilising the outputs.
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.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in applying the Company's accounting policies (see note 3).
Monetary amounts in these financial statements are rounded to the nearest £.
The following principal accounting policies have been applied:
At 31 December 2022 the company had net current liabilities of £1,168,271 (2021: net current assets of £3,120,045) and net assets of £7,278,729 (2021: £6,784,260). The company is dependent upon the funds provided by GVO B-1 Limited, the 76% shareholder of the company. At the year end there are amounts due to GVO B-1 Limited by Local Generation Limited of £1,266,911 (2021 : £7,452,043). GVO B-1 Limited has provided the company with a letter of support that for at least the next 12 months, and will continue to make available such funds as are needed by the company. This should enable the company to continue in operational existence for the foreseeable future by meeting its liabilities as they fall due for payment.
Having reviewed the company's current position and forecasts for the next twelve months which shows promising results, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the going concern basis was adopted in preparing the financial statements.
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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Foreign currency translation
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Functional and presentation currency
The Company's functional and presentational currency is GBP.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.
At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction and non-monetary items measured at fair value are measured using the exchange rate when fair value was determined.
Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss except when deferred in other comprehensive income as qualifying cash flow hedges.
Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the Statement of Income and Retained Earnings within 'finance income or costs'. All other foreign exchange gains and losses are presented in profit or loss within 'other operating income'.
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. Revenue is measured as the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.
Revenue from the sale of energy is recognised at the point at which the energy is produced. Revenue from energy sales that is contingent on future notification of past events is recognised when notification is received.
Revenue from sales of food waste services (gate fees) is recognised on the date that food waste is received.
Grants are accounted under the accruals model as permitted by FRS 102. Grants relating to expenditure on tangible fixed assets are credited to the Statement of Comprehensive Income at the same rate as the depreciation on the assets to which the grant relates. The deferred element of grants is included in creditors as deferred income.
The amount of government grants receivable is presented in deferred income and is credited to the Profit and Loss Account over the useful economic lives of the assets to which the grants relate.
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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Operating leases: the Company as lessee
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Rentals paid under operating leases are charged to profit or loss on a straight-line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight-line basis over the lease term, unless another systematic basis is representative of the time pattern of the lessee's benefit from the use of the leased asset.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
All borrowing costs are recognised in profit or loss in the year in which they are incurred.
Defined contribution pension plan
The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Company has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they fall due. Amounts not paid are shown in accruals as a liability in the Balance Sheet. The assets of the plan are held separately from the Company in independently administered funds.
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Current and deferred taxation
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The tax expense for the year comprises current and deferred tax. Tax is recognised in profit or loss 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 income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the balance sheet date in the countries where the Company operates and generates income.
Deferred tax balances are recognised in respect of all timing differences that have originated but not reversed by the balance sheet date, except that:
∙The recognition of deferred tax assets is limited to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits; and
∙Any deferred tax balances are reversed if and when all conditions for retaining associated tax allowances have been met.
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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Current and deferred taxation (continued)
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Deferred tax balances are not recognised in respect of permanent differences except in respect of business combinations, when deferred tax is recognised on the differences between the fair values of assets acquired and the future tax deductions available for them and the differences between the fair values of liabilities acquired and the amount that will be assessed for tax. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.
Tangible fixed assets under the cost model are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Land is not depreciated. Depreciation on other assets is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Capital works in progress are not depreciated until they are completed and revenue generating.
Depreciation is provided on the following basis:
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Freehold land and buildings
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Combined heat and power generation engine
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Fixtures, fittings and office equipment
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Capital works in progress
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The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
Included in Freehold property is land at a value of £1,374,921 which is not depreciated.
Investments in joint ventures are measured at cost less accumulated impairment. The investments are reviewed annually for any impairment triggers.
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Associates and joint ventures
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Associates and Joint Ventures are held at cost less impairment.
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
Stocks are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is based on the cost of purchase on a first in, first out basis. Work in progress and finished goods include labour and attributable overheads.
At each balance sheet date, stocks are assessed for impairment. If stock is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
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. Cash equivalents are highly liquid investments that mature in no more than three months from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value.
Short-term creditors are measured at the transaction price. Other financial liabilities, including bank loans, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
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Provisions for liabilities
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Provisions are made where an event has taken place that gives the Company a legal or constructive obligation that probably requires settlement by a transfer of economic benefit, and a reliable estimate can be made of the amount of the obligation.
Provisions are charged as an expense to profit or loss in the year that the Company becomes aware of the obligation, and are measured at the best estimate at the balance sheet date of the expenditure required to settle the obligation, taking into account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried in the Balance Sheet.
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
2.Accounting policies (continued)
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 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 in case of an out-right short-term loan that is not at market rate, the financial asset or liability is measured, initially at the present value of future cash flows discounted at a market rate of interest for a similar debt instrument and subsequently at amortised cost, unless it qualifies as a loan from a director in the case of a small company, or a public benefit entity concessionary loan.
Investments in non-derivative instruments that are equity to the issuer are measured:
∙at fair value with changes recognised in the Statement of Income and Retained Earnings if the shares are publicly traded or their fair value can otherwise be measured reliably;
∙at cost less impairment for all other investments.
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.
For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Company would receive for the asset if it were to be sold at the balance sheet date.
Financial assets and liabilities are offset and the net amount reported in the Balance Sheet when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Judgments in applying accounting policies and key sources of estimation uncertainty
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The estimates and judgements that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the financial period are as follows:
Depreciation
Tangible fixed assets are depreciated over their useful lives taking into account residual values where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. Residual values consider matters such as future market conditions, the remaining estimated life of the asset and the discount required to apply cash flows on estimated disposal values to calculate their net present values.
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The average monthly number of employees, including directors, during the year was 21 (2021 - 15).
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Freehold land and buildings
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Combined Heat & Power Generation Engine
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Fixtures, fittings and office equipment
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Capital works in progress
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Transfers between classes
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Charge for the year on owned assets
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Charge for the year on financed assets
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
5.Tangible fixed assets (continued)
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Transfers between classes
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Charge for the year on owned assets
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Charge for the year on financed assets
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Investment in joint ventures
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The following were joint ventures of the Company:
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Biocow Environmental Services Limited
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Green Gas Trading Limited
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Running of Biomethane Certification Scheme
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Biocow Environmental Services Limited
The company holds a 50% equity shareholding (and voting rights) in Biocow Environmental Services Limited, a joint venture registered in the UK at Somerset Farm Cants Drove, Murrow, Wisbech, Cambs, England, PE13 4HN. The investment is held at carrying amount of £232,887 (2021 - £682,581). As at the year ended 31 December 2022, this investment recorded a loss of £207,409 (2021 - loss of £189,528) and had net liabilities of £38,351 (2021 - net assets of £169,058).
Green Gas Trading Limited
The company holds a 2% equity shareholding (and voting rights) in Green Gas Trading Limited, a joint venture registered in the UK at Sustainable Workspaces Third Floor, Riverside Building, County Hall, Westminster Bridge Road, London, England, SE1 7PB. The investment is held at carrying amount of £2,000 (2021 - £2,000).
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Amounts owed by group undertakings
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Amounts owed by joint ventures and related parties
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Prepayments and accrued income
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Details of amounts owed by group undertakings and related parties and other loans are included below in Note 18.
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Cash and cash equivalents
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Creditors: Amounts falling due within one year
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Amounts owed to group undertakings
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Amounts owed to joint ventures
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Other taxation and social security
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Obligations under finance lease and hire purchase contracts
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Accruals and deferred income
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Details of amounts owed to group undertakings and related parties are included below in Note 18.
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Creditors: Amounts falling due after more than one year
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Net obligations under finance leases and hire purchase contracts
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Amounts owed to group undertakings
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Government grants received
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The company signed a loan agreement with its parent company on 31 December 2021. The loan becomes repayable from the 10th anniversary of the loan agreement date, and is unsecured and interest free.
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Analysis of the maturity of loans is given below:
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Amounts falling due within one year
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Amounts falling due 2-5 years
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The bank loan relates to a loan from Royal Bank of Scotland which is secured, repayable March 2023 and on which annual interest rate at the year end was 3.6%. There is a fixed and floating charge over the undertaking and all property and assets present and future.
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Hire purchase and finance leases
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Minimum lease payments under hire purchase fall due as follows:
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Charged to profit or loss
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The provision for deferred taxation is made up as follows:
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Accelerated capital allowances
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Allotted, called up and fully paid
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14,313 (2021 - 14,313) Ordinary shares of £1.00 each
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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At 31 December 2022 the Company had capital commitments as follows:
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Contracted for but not provided in these financial statements
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The Company operates a defined contributions pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable to the Company to the fund and amounted to £12,834 (2021: £11,625). Contributions totalling £3,064 (2021: £5,208) were payable to the fund at the balance sheet date and are included in creditors.
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Commitments under operating leases
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At 31 December 2022 the Company had future minimum lease payments due under non-cancellable operating leases for each of the following periods:
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Later than 1 year and not later than 5 years
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LOCAL GENERATION LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
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Related party transactions
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The company had transactions with fellow subsidiary companies which have all been concluded under normal market conditions. The amount outstanding from fellow subsidiaries at the year end was £646,842 (2021: £5,300,105) and the amount owing to these subsidiaries was £2,143,879 (2021: £1,406,032).
During the year, the company made related party transactions and had balances outstanding with entities who had common key management personnel who were deemed able to exercise significant influence over both entities.
The company made sales of £1,335 (2021: £nil) to these entities and purchases of £830,112 (2021: £640,828). At the year end, the amounts outstanding from these entities were £13 (2021: £nil) and the amounts outstanding to these entities were £191,754 (2021: £69,193).
The company has provided a loan to a joint venture for £309,500 (2021: £309,500). This loan is unsecured, interest free and repayable upon demand.
The company has received loans from its Parent, GVO B-1, the balance of which at the year end was £1,266,911 (2021: £7,452,043). Amounts owed to group undertakings are unsecured, interest free and repayable from the 10th anniversary of the loan agreement date.
The above balances can be seen in Notes 7, 9 and 10 respectively as amounts owed by/to group undertakings.
The company has received loans from its shareholders, the balances of which total £816,218 (2021 - £816,218). This loan is unsecured, interest free, and repayable on demand.
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GVO B-1 Limited is the ultimate parent and controlling company by virtue of its majority shareholding in the company. The registered office of GVO B-1 Limited is 2 Aldford Street, London, W1K 2AB.
GVO B-1 Limited is also the holding company of the smallest and largest group in which this company's results are consolidated.
The auditors' report on the financial statements for the year ended 31 December 2022 was unqualified.
The audit report was signed on 4 August 2023 by Grahame Maughan (Senior Statutory Auditor) on behalf of Ryecroft Glenton.
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