Mainstream Energy Solutions Limited
Annual report
31 December 2020
Mainstream Energy Solutions Limited
Annual Report
Contents Page
Corporate information 1
Directors' report 2
Statement of directors' responsibilities 8
Statement of corporate responsibility 9
Independent auditor's report 10
Consolidated and separate statements of financial position 13
Consolidated and separate statements of profit or loss and other comprehensive income 15
Consolidated statement of changes in equity 16
Separate statement of changes in equity 17
Consolidated and separate statements of cash flows 18
Notes to the consolidated and separate financial statements 19
Other national disclosures 87
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Corporate Information:
Registration Number: RC 938936
Board of Directors: Col. Sani Bello (rtd) Chairman
Engr. Lamu Audu Managing Director
Siraj Abdullahi
Alh Ibrahim Ismail Executive Director
Chief Tunde Afolabi MFR Director
Chief Victor Odili OON Director
Alh Awwal Kyari Manga Director
Sen. Tunde Ogbeha CON, mni. Director
Mr. Omatseyin Ayida Director
Col. Ayegbeni Peters (rtd.) Director
Mr. Edward Edozien Director
Mal Abubakar Ismaila Isa OFR, mni. Director
Alh. Mahamadou Tahoua Arzika Director
Engr. Ebele Ofunneamaka Okeke CFR. Director
Director(Representing NIGELEC)
Director
Registered and business 6 Yedseram Street, Off IBB Way
Office: Maitama, FCT, Abuja
Operational bases: Kaniji Hydroelectric Power Station,
Kaniji,
Company Secretary: Niger State,
Independent Auditor: Nigeria
Jebba Hydroelectric Power Station,
Jebba,
Kwara/Niger State,
Nigeria.
Atinuke Taiwo
6 Yedseram Street, Off IBB Way
Maitama, FCT, Abuja
KPMG Professional Services
KPMG Tower
Bishop Aboyade Cole Street
Victoria Island
Lagos
Bankers: Access Bank Plc
TIN: Fidelity Bank Plc
Guaranty Trust Bank Plc
Wema Bank Plc
Stanbic IBTC Bank Plc
Polaris Bank Limited
First bank of Nigeria Limited
Keystone Bank Limited
United Bank for Africa Plc
16911077-0001
1
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Directors' report
For the year ended 31 December 2020
The Directors present their annual report on the affairs of the Mainstream Energy Solutions Limited
("the Company") and its subsidiaries (collectively referred to as "the Group") together with the
consolidated and separate audited financial statements and auditor's report for the year ended 31
December 2020.
Incorporation and legal status of the Company
Mainstream Energy Solutions Limited ("the Company") was incorporated on 28 February 2011 under
the Companies and Allied Matters Act as a private limited liability Company, and commenced
operations in February 2011 in Nigeria.
Principal Activity
The principal activity of the Company is to own and operate power plants for the generation of electric
power in Nigeria. The Company has a direct subsidiary and another indirect sub-subsidiary. Below are
the details of the Company's subsidiaries:
Company name Principal Activity % of Year
end/Relati
Hydropolis Equity onship
Investments Limited 31 Dec/
Capital Subsidiary
Hydropolis Mining
Nigeria Limited Held 31 Dec/
Subsidiary
The principal activity of the Company is to operate 99.9%
the Amfani industrial and residential park in Niger
state. The industrial park will provide a ready
energy environment for industries by channeling
excess energy generated from Kanji Hydro Power
Plant to the park.
The Company was incorporated as a private
Company on 18 January 2016.
The principal activities of the Company are 100%
mining, rock crushing, quarry stone blasting,
dredging, reclamation, borehole, drilling,
irrigation, damming, drainage services of all
descriptions as well as supply and deal in
excavators, earth moving plants blasters and rock
crushers.
The Company was incorporated on 19 September
2019.
Concession agreement
The Federal Government of Nigeria, as represented by the Ministry of Finance Incorporated through
the Bureau of Public Enterprises (BPE), transferred its rights to the operations, restoration and
maintenance of the hydroelectric production facilities located on the River Niger and the related hydro
properties of Kainji Hydro Electric Plc (Kainji and Jebba Power Plants) to the Company through a
concession agreement.
This concession agreement was signed between BPE and the Company on 21 February 2013, for a
period of thirty (30) years. However, the Kainji Hydro Electric Power plants were officially handed
over to Company on 1 November 2013.
2
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Director's report (cont'd)
Business review
The Electric Power Sector Reform Act 2005 (Act No 6 of 2005) was established for the privatization
and transition of the Nigerian electricity market. As part of the Federal Government of Nigeria's
(FGN) initiative to transform the power sector, the Nigerian Electricity Regulatory Commission
(NERC) was established under the Electric Power Sector Reform Act 2005. NERC is Nigeria's
independent regulatory agency for the Nigerian electricity industry comprising generation,
transmission and distribution sectors and regulates the activities of the Company.
In line with the transition, the Company and other players in the Nigerian power sector operated under
the Interim Rules issued by the regulatory body - NERC. The Transitional Stage Electricity Market
(TEM) with its market rules was declared on 1 February 2015. However, the Bulk Power Purchasing
Agreement (PPA) with the Nigerian Bulk Electricity Trading Company (NBET), covering the terms
upon which NBET is to engage during the TEM in the bulk purchase and resale of electric capacity,
electric energy and ancillary services with the Company, was activated on 1 April 2016.
The Company, in accordance with the TEM rules, continues to generate electricity which is provided
to various electricity distribution companies (EDCs) through NBET, and other eligible customers
under the NERC-R-111 Eligible customer regulations of 2017.
The Jebba and Kainji Hydroelectric Power Plant currently have a generating capacity of 578.4 mega-
watts (MW) and 760mega-watts (MW) respectively.
Revenue is generated from billings for capacity made available and energy shared to the EDCs and
other eligible customers. This is represented by the monthly final settlement statements received from
the Market Operator.
Operating results:
The following is a summary of the Groups's and Company's operating results:
in millions of Naira Group 2019 Company 2019
Revenue 2020 68,114 2020 68,114
Profit before tax 83,140 14,418 83,140 15,473
20,594 20,893
Income tax credit/(expense) (3,863) (3,863)
48,436 48,436
Profit for the year 10,555 11,610
Total comprehensive income for the 69,030 69,329
year 10,340
89,396 91,015 11,612
Dividend
The directors have declared an interim dividend of $0.13/NGN47 (2019:$0.01/NGN30) per ordinary
share of NGN1. This amounts to a total dividend of NGN23.5 billion ($65.8 million) for the 2020
financial year (2019:NGN15 billion ($48.96 million) ).
3
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Director's report (cont'd)
The Directors and their interests
The directors who served during the year and the their interests were as follows:
Name Date of Appointment Nationality
26 July 2020
Col. Sani Bello (rtd) (Chairman) Nigerian
Engr. Lamu Audu (Managing Director) Nigerian
Mr. Siraj Abdullahi (Executive Director) Nigerian
Malam Abubakar Ismaila Isa OFR, mni. Nigerian
Chief Tunde J. Afolabi MFR Nigerian
Chief Victor Odili OON Nigerian
Mr. Edward Edozien Nigerian
Sen. Tunde Ogbeha CON, mni Nigerian
Mr. Omatseyin Ayida Nigerian
Col. Ayegbeni Peters (rtd.) Nigerian
Alhaji Ibrahim Ismail Nigerian
Alh Awwal Kyari Manga Nigerian
Mr. Mahamadou Tahoua Arzika Nigerien
Engr. Ebele Ofunneamaka Okeke CFR. Nigerian
The interests of the directors in the issued share capital of the Company is as follows:
Number of Ordinary shares of
NGN1 each
2020 2019
Col. Sani Bello (rtd) (Chairman)-direct shareholding 63,110 63,110
indirect shareholding 3,500 -
Col Ayegbeni Peters (rtd)- direct shareholding 24,430 24,430
Alh Ibrahim Ismail- indirect shareholding 6,176 6,176
Chief Tunde Afolabi MFR- direct shareholding
51,864 56,451
-indirect shareholding 10,611 10,611
Chief Victor Odili OON- indirect shareholding through 43,034 43,034
Hermitage Overseas Corp 1,300 1,300
Alh Awwal Kyari Mangal- indirect shareholding 19,232 19,232
Sen. Tunde Ogbeha CON, mni.- indirect shareholding
Mr. Omatseyin Ayida- indirect shareholding 3,938 3,938
Mr. Mahamadou Tahoua Arzika - -
Mr. Ebele Ofunneamaka Okeke CFR. - -
Mallam Abubakar Ismaila CAN, mni- indirect shareholding
19,528 19,528
Engr. Lamu Audu (Managing Director)- indirect shareholding
861 861
Siraj Abdullahi (Executive Director)- indirect shareholding
3,431 3,431
Directors' Interest in Contract:
In accordance with section 303 of the Companies and Allied Matters Act (CAMA) 2020, no director
had direct or indirect interest in contracts with the group during the year.
4
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Directors' report (cont'd)
Shareholding structure
The shareholding structure of the Company is as follows:
Ordinary Shares of NGN1:00 each
2020 2020 2019 2019
% Shareholding % Shareholding
units'000 units'000
Col. Sani Bello (rtd) 12.6 63,110 13.3 66,610
Chief. Tunde Afolabi 10.4 51,864 11.3 56,451
Blue Black Global Investment Limited 9.7 48,330 7.8 38,880
Hermitage Overseas Corporation 8.3 41,534 8.3 41,534
Prof. Emmanuel Edozien OFR 7.4 37,158 7.4 37,158
Col. Aiyegbeni Peters (rtd) 4.9 24,430 4.9 24,430
Nigerien Electricity Company (NIGELEC) 4.6 23,206 4.6 23,206
Confluence Cable Networks Limited 4.6 23,169 4.6 23,169
Kainji Power Holding Limited 4.0 20,083 2.0 10,132
Masanawa Enterprises Nigeria Limited 3.8 18,867 3.8 18,867
GRM Consulting Limited (Representing 3.5 17,325 3.5 17,325
Mainstream Staff )
Barbedos Group 3.2 16,036 3.2 15,836
Anchorage Holdings Limited 3.1 15,661 3.1 15,661
TAK Energy Solutions Limited 3.0 15,172 3.0 15,172
Paqua Energy 2.8 13,987 2.8 13,987
Hartnik Investment Limited 2.6 13,146 2.3 11,571
Terra Petra Investment limited 1.9 9,265 1.8 9,024
Crust Energy Limited 1.3 6,609 2.9 14,263
Alhaji Ismaila Isa (OFR mni) 1.1 5,541 1.1 5,541
Seven Sisters Properties Limited 0.8 4,002 0.8 4,002
Babangida Aminu Mohammed 0.6 3,107 0.6 3,107
Abubakar A. 0.6 3,107 0.6 3,107
Yinka Folawiyo Petroleum Limited 0.6 3,107 0.6 3,107
Agrindel Investments Limited 0.6 3,107 0.6 3,107
MBS Merchants Limited 0.6 2,960 0.6 2,960
Mr. Oluremi Jibowu 0.5 2,323 0.6 2,839
Silverbog Investment Limited 0.4 2,085 0.4 2,085
Ni Energy Limited 0.4 2,065 0.4 2,065
Allstream Energy Solutions limited 0.4 1,900 0.6 2,996
Monument Private Equity 0.2 800 0.6 2,800
Adelu Richard 0.4 1,864 0.4 1,864
Sijuwade Yinka 0.2 1,243 0.2 1,243
Folawiyo Tunde 0.2 1,243 0.2 1,243
Soyoye Gabriel 0.2 932 0.2 932
Akinsanya Gbadebo 0.1 621 0.1 621
Afolabi O.A. 0.1 311 0.1 311
Jurewa Investment Limited 0.1 300 - -
Estate of Salau Akinola - 211 0.1 311
Bello Azeez - 111 0.1 311
Anterium Nigeria Limited - 100 - -
Fakunle Ezekiel - 8 0.1 308
Obodex Nigeria Limited - - 0.4 1,864
100 500,000 100 500,000
5
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Directors' report (cont'd)
Employment and employees
(a) Employee training and involvement
The Group places considerable value on the involvement of its employees in major policy matters
and maintains a practice of keeping them informed on matters affecting them as employees, and
on the various factors affecting the performance of the Group through formal and informal
meetings.
Employees receive on-the-job training, complimented where necessary with additional facilities
from training institutions.
(b) Employment of physically challenged persons
The Group has no physically challenged employees. However, applications for employment by
physically challenged persons are always fully considered, bearing in mind the respective
aptitudes and abilities of the applicants. In the event of members of staff becoming physically
challenged, every effort is made to ensure that their employment with the Group continues and
that appropriate training is arranged. The training, career development and promotion of
physically challenged persons should, as far as possible, be identical to those of other employee
(c) Employee health, safety and welfare
The Group places a high premium on the health, safety and welfare of its employees in their place
of work. The Group's policy includes having various forms of insurance policies to secure and
protect its employees. In addition, it operates on-site medical facilities and services for immediate
attention to employees as may be necessary in the course of operations.
Charitable donations
In accordance with section 43(2) of the Companies And Allied Matters Act (CAMA) 2020. The Group
and Company did not make any donation or gift to any political party, political association or for any
political purpose in the course of the year under review (2019: Nil).
During the year, as part of the Group and Company's social responsibility activities, the Group and
Company donated a total amount of NGN500 million for the COVID-19 Intervention Fund to the
Federal Government (2019:Nil). Other donations made during the year were as follows;
in millions of Naira 2020 2019
Mainstream Foundation 1,862 852,788
Host communities
Etsu Yankpa of Jebba Kingdom - 59,907
- 500
1,862
913,195
Property, plant and equipment:
Information relating to changes in property, plant and equipment is disclosed in Note 17 to the
financial statements.
6
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Mainstream Energy Solutions Limited
Report on the Audit of the Consolidated and Separate Financial Statements
Opinion
We have audited the consolidated and separate financial statements of Mainstream Energy Solutions
Limited (“the Company”) and its subsidiaries (together, “the group”), which comprise:
• the consolidated and separate statements of financial position as at 31 December, 2020;
• the consolidated and separate statements of profit or loss and other comprehensive income;
• the consolidated and separate statements of changes in equity;
• the consolidated and separate statements of cash flows for the year then ended; and
• the notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated and separate financial statements give a true and fair view
of the consolidated and separate financial position of the Company and its subsidiaries as at 31
December, 2020, and of its consolidated and separate financial performance and its consolidated and
separate cash flows for the year then ended in accordance with International Financial Reporting
Standards (IFRSs) and in the manner required by the Companies and Allied Matters Act (CAMA), 2020
and the Financial Reporting Council of Nigeria Act, 2011.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit
of the consolidated and separate Financial Statements section of our report. We are independent of the
Group and Company in accordance with International Ethics Standards Board for Accountants
International Code of Ethics for Professional Accountants (including International Independence
Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the
consolidated and separate financial statements in Nigeria and we have fulfilled our other ethical
responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Matter
The consolidated and separate financial statements of Mainstream Energy Solutions Limited as at and for
the years ended 31 December 2019 and 31 December 2018 (from which the consolidated and separate
statements of financial position as at 1 January 2019 has been derived), excluding the adjustments
described in Note 37 to these consolidated and separate financial statements were audited by another
auditor who expressed an unmodified opinion on those financial statements on 10 November 2020.
As part of our audit of the consolidated and separate financial statements as at and for the year ended 31
December 2020, we audited the adjustments described in Note 37 that were applied to restate the
corresponding information presented as at and tor the year ended 31 December 2019 and the
consolidated and separate statements of financial position as at 1 January 2019.
We were not engaged to audit, review, or apply any procedures to the consolidated and separate
financial statements for the year ended 31 December 2019 or 31 December 2018 (not presented herein)
or to the consolidated and separate statements of financial position as at 1 January 2019, other than with
respect to the adjustments described in Note 37 to these consolidated and separate financial
statements. Accordingly, we do not express an opinion or any other form of assurance on those financial
statements taken as a whole. However, in our opinion, the adjustments described In Note 37 are
appropriate and have been properly applied.
Other Information
The Directors are responsible for the other information. The other information comprises the corporate
information, directors’ report, statement of directors’ responsibilities, statement of corporate
responsibility and other national disclosures, but does not include the consolidated and separate financial
statements and our auditor’s report thereon.
Our opinion on the consolidated and separate financial statements does not cover the other information
and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated and separate financial statements, our responsibility is to
read the other information and in doing so, consider whether the other information is materially
inconsistent with the consolidated and separate financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Consolidated and separate Financial Statements
The Directors are responsible for the preparation of consolidated and separate financial statements that
give a true and fair view in accordance with IFRSs and in the manner required by the Companies and
Allied Matters Act (CAMA), 2020 and the Financial Reporting Council of Nigeria Act, 2011, 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 consolidated and separate financial statements, the directors are responsible for
assessing the Group and 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 Group and Company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated and separate Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated and separate financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue
an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated and separate financial
statements, whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group and Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
• Conclude on the appropriateness of directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group and Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated and separate financial statements or, if
such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group and Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated and separate financial
statements, including the disclosures, and whether the consolidated and separate financial
statements represent the underlying transactions and events in a manner that achieves fair
presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with the Audit Committee regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
Report on Other Legal and Regulatory Requirements
Compliance with the requirements of Schedule 5 of the Companies and Allied Matters Act (CAMA),
2020.
i. We have obtained all the information and explanations which to the best of our knowledge and
belief were necessary for the purpose of our audit.
ii. In our opinion, proper books of account have been kept by the Company, so far as appears from
our examination of those books.
iii. The Company’s statement of financial position and statement of profit or loss and other
comprehensive income are in agreement with the books of account.
Signed: .......................................
Ayodele A. Soyinka, FCA
FRC/2012/ICAN/00000000405
For: KPMG Professional Services
Chartered Accountants
24 December 2021
Lagos, Nigeria
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Consolidated and separate statements of financial position
as at
Group Company
31 Dec 31 Dec 1 Jan 31 Dec 31 Dec 1 Jan
2020 2019 2019 2020 2019 2019
in millions of Naira Notes *Restated *Restated *Restated *Restated
Assets
Intangible assets 16 190,130 160,295 167,022 190,130 160,295 167,022
7,719 3,928 2,414 3,064 1,674 1,594
Property, plant and 17(a)
382 - - 382 - -
equipment
15 33 - - - -
Trade and other 23 - - - 8,961 4,455 2,133
4,901 62,659 2,630 4,901
receivables 62,659 2,630 5,651 10,288 6,928 5,651
10,288 6,928 - 2,966 2,842
Right-of-use assets 18 2,842 179,988 278,450 178,824 -
2,966 176,656 181,301
Investment in subsidiary 19 274,159
Deferred tax assets 15(d)
Other assets 20
Loan receivables 21
Total non-current
assets
Inventories 22 - - 146 - - 146
Tax assets 23 496 374 235 488 365 235
Trade and other 111,099 97,480 89,635 110,629 97,056 89,635
receivables 24
Prepayments 25 1,189 255 323 1,189 255 323
Cash and cash 39,043 16,378 11,204 38,481 16,102 10,301
equivalents
Total current assets 151,827 114,487 101,543 150,787 113,778 100,640
Total assets 425,986 291,143 281,531 429,237 292,602 281,941
Equity 26 500 500 500 500 500 500
Share capital 27 16,196 16,196 16,196 16,196 16,196 16,196
Share premium 28 105,943 60,413 64,858 107,373 61,544 64,934
Retained earnings 20,014 21,871
Translation reserve 29 142,653 (352) (137) 145,940 185 183
Total equity attributable 76,757 81,417 78,425 81,813
to the owners of the
company - - -- - -
Non-controlling interest 142,653 76,757 81,417 145,940 78,425 81,813
Total equity
13
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Consolidated and separate statements of profit or loss and other
comprehensive income
for the year ended
Group Company
31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019
in millions of Naira Notes *Restated *Restated
Revenue 9 83,140 68,114 83,140 68,114
Cost of sales 10(a) (28,385) (17,428) (28,385) (17,428)
Gross profit 54,755 50,686 54,755 50,686
Other income 11 245 272 175 227
General and administrative
expenses 10(b) (9,307) (11,201) (8,923) (10,061)
Impairment loss on financial 33
assets (5,086) (17,821) (5,086) (17,804)
(B)(a)
40,607 21,936 40,921 23,048
Result from operating 8,310 10,102 8,290 10,042
activities (17,620) (17,617)
(28,323) (7,518) (28,318) (7,575)
Finance income 12 (20,013) 14,418 (20,028) 15,473
Finance costs 12 (3,863) (3,863)
20,594 20,893
Net finance costs 48,436 48,436
Profit before income taxation
Income tax expense 15(a)
Profit for the year 69,030 10,555 69,329 11,610
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation
differences 20,366 (215) 21,686 2
21,686 2
Other comprehensive income, 91,015 11,612
net of tax 20,366 (215)
Total comprehensive income 89,396 10,340
for the year
Profit attributable to:
Owners of Company 69,030 10,555 69,329 11,610
- - -
Non-controlling interest -
10,555 69,329 11,610
69,030
10,555 91,015 11,612
Total comprehensive income attributable to: - - -
Owners of Company 69,030 10,555 91,015 11,612
Non-controlling interest -
69,030
* See Note 37
The accompanying notes form an integral part of these financial statements
15
Consolidated statement of changes in equity
for the year ended
in millions of Naira Share Shar
capital premium
Balance at 1 January 2019 as previously reported
Impact of correction of errors (See Note 37) 500 16,19
Restated balance at 1 January 2019 -
16,19
500
Total comprehensive income for the year(restated) -
Profit for the year -
Other comprehensive income for the year
-
Total comprehensive income for the year
(restated)
Transactions with owners of the Company -
Dividend declared during the year (See Note 31 (b)) -
Total transactions with owners of the Company
Restated balance as at 31 December 2019 500 16,19
Balance as at 1 January 2020 500 16,19
Total comprehensive income for the year -
Profit for the year -
Other comprehensive income for the year
-
Total comprehensive income for the year
Transactions with owners of the company -
Dividend declared during the year (See Note 31 (b)) -
Total transactions with owners of the Company
Balance as at 31 December 2020 500 16,19
The accompanying notes form an integral part of these financial statements
Mainstream Energy Solutions limited
Annual Report
31 December 2020
Attributable to owners of the Company
*Restated *Restated
*Restated Foreign currency Non-
re Retained translation controlling
m earnings reserve Total interest Total
47,502
96 30,748 - 47,444 58 33,915
81,417
- 34,110 (137) 33,973 (58)
10,555
96 64,858 (137) 81,417 - (215)
- 10,555 - 10,555 - 10,340
-- (215) (215) -
- 10,555 (215) 10,340 -
- (15,000) - (15,000) - - (15,000)
- (15,000) - (15,000) (15,000)
96 60,413 (352) 76,757 - 76,757
96 60,413 (352) 76,757 - 76,757
- 69,030 - 69,030 - 69,030
-- 20,366 20,366 - 20,366
- 69,030
20,366 89,396 - 89,396
- (23,500)
- (23,500) - (23,500) - (23,500)
- (23,500) - (23,500)
96 105,943
20,014 142,653 - 142,653
Separate statement of changes in equity Share capital
500
for the year ended -
500
in millions of Naira
-
Balance as at 1 January 2019 as previously reported -
Impact of correction of errors (See Note 37)
Restated balance at 1 January 2019 -
-
Total comprehensive income for the year (restated) 500
Profit for the year
Total comprehensive income for the period (restated)
Transactions with owners of the Company
Total comprehensive income for the year (See Note 31 (b))
Total transactions with owners of the Company
Restated balance as at 31 December 2019
Balance as at 1 January 2020 500
Total comprehensive income for the year: -
Profit for the year -
Total comprehensive income for the year
Transactions with owners of the Company -
Dividend declared during the year (See Note 31 (b)) -
500
Total transactions with owners of the Company
Balance as at 31 December 2020
The accompanying notes form an integral part of these financial statements
Mainstream Energy Solutions limited
Annual Report
31 December 2020
Share premium *Restated *Restated Total
16,196 Retained Foreign currency 47,572
- earnings translation reserve 34,241
81,813
16,196 30,876 -
34,058 183 11,612
11,612
64,934 183
(15,000)
- 11,610 2 (15,000)
- 11,610 2
78,425
- (15,000) -
- (15,000) - 78,425
16,196 185
61,544 91,015
16,196 185 91,015
61,544
(23,500)
- 69,329 21,686 (23,500)
- 69,329 21,686 145,940
- (23,500) -
- (23,500) -
16,196 107,373 21,871
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Consolidated and separate statements of cash flows
for the year ended
Group Company
Notes 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019
in millions of Naira *Restated *Restated
Cashflows from operating activities
Profit for the year 69,030 10,555 69,329 11,610
Adjustments for:
Depreciation - PPE 10(b) 136 256 274 246
Depreciation - ROU 22 9 - -
Write-off of Intangible assets 17 - 17 -
Amortization 16 7,822 6,724 7,822 6,724
Finance cost 19,994 7,518 25,712 16,220
Income tax expense 15(a) (48,436) 3,863 (48,436) 3,863
Impairment loss on financial assets 5,086 17,821 5,086 17,804
Gain on disposal of PPE 20 8 20 8
53,691 46,754 59,824 56,475
Changes in:
tax assets 32 138 33 131
inventories - 146 - (146)
trade and other receivables 3,570 (25,663) (3,468) (33,868)
prepayments (820) 68 (820) 68
trade and other payables 4,362 (203) 4,099 (425)
Cash generated from operating activities 60,835 21,240 59,668 22,235
Income tax paid (1,574) - (1,574) -
Net cash from operating activities 59,261 21,240 58,094 22,235
Cashflows from investing activities
Acquisition of property, plant and 17 (3,300) (1,792) (1,187) (334)
equipment (8,439) (2,698) (8,439) (2,698)
1,200 1,371 1,180 1,312
Expenditure on improvement of power plants - -
(3,235) (2,322)
Interest received (10,539) (3,119) (11,681) (4,042)
Investment in subsidiary
Net cash used in investing activities
Cashflows from financing activities
Dividend paid to shareholders 31(c) (23,110) (16,492) (23,110) (16,492)
(8,247) - (8,247) -
Payment of concession liability - - -
(87) (41) (82)
Payment of lease (90) (86)
(31,444) (16,623) (31,439) (16,578)
Bank charges paid
Net cash (used in) financing activities
Net increase in cash and cash equivalents 18,852 1,498 16,548 1,615
Cash and cash equivalents at 1 January 16,378 11,204 16,102 10,301
Effect of movement in exchange
rates on cash held (3,183) (3,676) (5,831) (4,186)
Cash and cash equivalents as at 31
December 39,043 16,378 38,481 16,102
* See Note 37
The accompanying notes form an integral part of these financial statements
18
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements
1 Reporting entity
Mainstream Energy Solutions Limited ("the Company") was incorporated on 28 February 2011 as a
limited liability Company. The Company operates in the power sector and its principal activity is to
own and operate power plants for the generation of electric power in Nigeria.
The Company has its operating base at the Kainji and Jebba Hydropower plants in Niger state and
Kwara/Niger state respectively, while its registered business office is as follows:
96 Yedseram Crescent
Maitama
FCT Abuja,
Nigeria.
The Company has two subsidiaries which are yet to commence operations. Below are the details of
the Company's subsidiaries:
The Company owns 99.99% of Hydropolis Investments Limited(HIL) which was incorporated on
18 January 2016. HIL's principal activity is to operate the Amfani industrial and residential park in
Kanji state. The industrial park will provide a ready energy environment for industries by
channeling excess energy generated from Kanji Hydro Power Plant to the park. Hydropolis
Investments Limited is yet to commence operations.
On 19 September 2019, Hydropolis Investments Limited invested in a new subsidiary; Hydropolis
Mining Nigeria Limited. Hydropolis Investments Limited owns 99.99% of Hydropolis Mining
Nigeria Limited. Hydropolis Mining was incorporated to carry on the business of mining, rock
crushing, quarry stone blasting, dredging, reclamation, borehole, drilling, irrigation, damming,
drainage services of all descriptions as well as supply and deal in excavators, earth moving plants
blasters and rock crushers. Hydropolis Mining Nigeria Limited is also yet to commence operations.
2 Basis of preparation
(a) Statement of compliance
The consolidated and separate financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) as issued by the International Accounting
Standards Board (IASB) and in the manner required by the Companies and Allied Matters Act,
(CAMA) 2020 and the Financial reporting Council of Nigeria Act, 2011.
These financial statements were approved the Board of Directors on __2_4__D_e_c_e_m_b_e_r_______
2021.
(b) Basis of measurement
These consolidated and separate financial statements have been prepared on the historical cost basis,
except as otherwise stated.
3 Functional and presentation currency
These financial statements have been presented in Nigerian Naira (NGN), in line with Rule 8 of the
Financial Reporting Council of Nigeria, stating that the presentation currency of entities operating
in Nigeria is the Nigerian Naira. The Company's functional currency remains the United States
Dollar("US Dollar").
All financial information presented in Naira (NGN) has been rounded to the nearest (N'000,000)
except when otherwise stated.
19
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
4 Use of judgements and estimates
In preparing these consolidated and separate financial statements, the directors have made
judgments, estimates and assumptions that affect the application of the Group and Company's
accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognized prospectively.
(a) Judgements
Information about judgments made in applying accounting policies that have the most significant
effects on the amounts recognised in the financial statements is included in the following note:
-Note 30(a) - Compliance with payment obligations under concession agreement
-Note 10(a)(i) - Determination of Pre-tax gross sales for computation of royalties.
(b) Assumptions and estimation uncertainties
Information about the assumptions and estimation uncertainties that have a significant risk of
resulting in a material adjustment to the carrying amounts of assets and liabilities within the year
ending 31 December 2021 are included in the following note:
-Note 33(A)- determining the fair value of loan receivables.
-Note 33(B)(ii) Measurement of ECL allowance for trade receivables; key assumptions in
determining the weighted-average loss rate;
5 Measurement of fair values
A number of the Group and Company's accounting policies and disclosures require the
measurement of fair values, for both financial and non-financial assets and liabilities. When
applicable, further information about the assumptions made in determining fair values is disclosed
in the notes specific to that asset or liability.
Management has the responsibility for overseeing fair value measurement. Management regularly
reviews significant unobservable inputs and valuation adjustments.
When measuring the fair value of an asset or a liability, the Group and Company uses observable
market data as far as possible. Fair values are categorized into different levels in a fair value
hierarchy based on the inputs used in the valuation techniques as follows:
- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
- Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. as derived from prices).
- Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
If the input used to measure the fair value of an asset or a liability fall into different levels of the
fair value hierarchy, then the fair value measurement is categorized in its entirety in the same level
of the fair value hierarchy as the lowest level input that is significant to the entire measurement.
The Group and Company recognize transfers between levels of the fair value hierarchy at the end
of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values is included in the Note
33.
20
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in
these financial statements except where otherwise indicated.
(a) Foreign currency
i. Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency of the Company at
the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the
functional currency at the exchange rate at the reporting date. Non-monetary assets and
liabilities that are measured at fair value in a foreign currency are translated to the functional
currency at the exchange rate when the fair value was determined. Non-monetary items that are
measured based on the historical cost in a foreign currency are not translated. Foreign currency
differences are generally recognised in profit or loss.
Exchange differences on loans to or from a foreign operation for which settlement is neither
planned nor likely to occur and therefore forms part of the next investment in the foreign
operation, which are recognised initially in other comprehensive income and reclassified from
equity to profit or loss on disposal or partial disposal of the net investment.
ii. Foreign operations
The assets and liabilities of foreign operations, are translated into United States Dollars at the
exchange rates at the reporting date. The income and expenses of foreign operations are
translated into United States Dollar at the average exchange rates for the year.
Foreign currency differences are recognised in OCI and accumulated in the translation reserve,
except to the extent that the translation difference is allocated to NCI. When a foreign operation
is disposed of in its entirety or partially such that control, significant influence or joint control is
lost, the cumulative amount in the translation reserve related to that foreign operation is
reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of part
of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative
amount is reattributed to NCI. When the Group disposes of only part of an associate or joint
venture while retaining significant influence or joint control, the relevant proportion of the
cumulative amount is reclassified to profit or loss.
iii. Translation to the presentation currency
The Group and/or Company’s functional currency (US Dollar) is different from the presentation
currency (Nigerian Naira). The results and financial position of the Group and/or Company are
translated into the presentation currency as follows:
- assets and liabilities for each statement of financial position presented are translated at the
closing rate at the date of that statement of financial position;
- income and expenses for each statement presenting profit or loss and other comprehensive
income are translated at average exchange rates (unless this is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction dates, in which case, income
and expenses are translated at the dates of the transactions);
- cash flows are translated at average exchange rate.
All resulting exchange differences are recognised as a separate component of equity through
other comprehensive income.
21
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(b) Financial instruments
The Group and Company classify non-derivative financial assets into loans and receivables and
classifies non-derivative financial Liabilities into the other financial liabilities.
(i) Recognition and initial measurement
Trade receivables and debt securities issued are initially recognised when they are originated.
All other financial assets and financial liabilities are initially recognised when the Group and
Company becomes a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or
financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction
costs that are directly attributable to its acquisition or issue. A trade receivable without a
significant financing component is initially measured at the transaction price.
(ii) Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as measured at: amortised cost; fair value
through other comprehensive income (FVOCI) – debt investment; FVOCI – equity investment;
or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Group and
Company change its business model for managing financial assets, in which case all affected
financial assets are reclassified on the first day of the first reporting period following the change
in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and
is not designated as at FVTPL:
– it is held within a business model whose objective is to hold assets to collect contractual cash
flows; and
– its contractual terms give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not
designated as at FVTPL:
–– it is held within a business model whose objective is achieved by both collecting contractual
cash flows and selling financial assets; and
–– its contractual terms give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Group and
Company may irrevocably elect to present subsequent changes in the investment’s fair value in
OCI. This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost or FVOCI as described above
are measured at FVTPL. On initial recognition, the Group and Company may irrevocably
designate a financial asset that otherwise meets the requirements to be measured at amortised
cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting
mismatch that would otherwise arise.
22
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(b) Financial instruments (cont'd)
Financial assets – Business model assessment
The Group and Company make an assessment of the objective of the business model in which a
financial asset is held at a portfolio level because this best reflects the way the business is
managed and information is provided to directors. The information considered includes:
– the stated policies and objectives for the portfolio and the operation of those policies in
practice. These include whether management's strategy focuses on earning contractual interest
income, maintaining a particular interest rate profile, matching the duration of the financial
assets to the duration of any related liabilities or expected cash outflows or realising cash flows
through the sale of the assets;
– how the performance of the portfolio is evaluated and reported to the directors
– the risks that affect the performance of the business model (and the financial assets held within
that business model) and how those risks are managed;
– how managers of the business are compensated – e.g. whether compensation is based on the
fair value of the assets managed or the contractual cash flows collected; and
– the frequency, volume and timing of sales of financial assets in prior periods, the reasons for
such sales and expectations about future sales activity.
Transfers of financial assets to third parties in transactions that do not qualify for derecognition
are not considered sales for this purpose, consistent with the Group’s continuing recognition of
the assets. Financial assets that are held for trading or are managed and whose performance is
evaluated on a fair value basis are measured at FVTPL.
Financial assets – Assessment of whether contractual cash flows are solely payments of
principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset
on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for
the credit risk associated with the principal amount outstanding during a particular period of time
and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as
a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the
Group and Company consider the contractual terms of the instrument. This includes assessing
whether the financial asset contains a contractual term that could change the timing or amount of
contractual cash flows such that it would not meet this condition. In making this assessment, the
Group and Company consider:
– contingent events that would change the amount or timing of cash flows;
– terms that may adjust the contractual coupon rate, including variable-rate features;
– prepayment and extension features; and
– terms that limit the Group and Company’s claim to cash flows from specified assets (e.g. non-
recourse features).
A prepayment feature is consistent with the solely payments of principal and interest criterion if
the prepayment amount substantially represents unpaid amounts of principal and interest on the
principal amount outstanding, which may include reasonable additional compensation for early
termination of the contract. Additionally, for a financial asset acquired at a discount or premium
to its contractual par amount, a feature that permits or requires prepayment at an amount that
substantially represents the contractual par amount plus accrued (but unpaid) contractual interest
(which may also include reasonable additional compensation for early termination) is treated as
consistent with this criterion if the fair value of the prepayment feature is insignificant at initial
recognition.
23
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(b) Financial instruments (cont'd)
Financial assets – Subsequent measurement and gains and losses
Equity investments These assets are subsequently measured at fair value. Dividends are
at FVOCI recognised as income in profit or loss unless the dividend clearly represents
a recovery of part of the cost of the investment. Other net gains and losses
are recognised in OCI and are never reclassified to profit or loss.
Financial assets at These assets are subsequently measured at fair value. Net gains and losses,
FVTPL including any interest or dividend income, are recognised in profit or loss.
Financial assets at These assets are subsequently measured at amortised cost using the effective
amortised cost interest method. The amortised cost is reduced by impairment losses.
Interest income, foreign exchange gains and losses and impairment are
recognised in profit or loss. Any gain or loss on derecognition is recognised
in profit or loss
Financial liabilities – Classification, subsequent measurement and gains and losses
Financial liabilities are classified as measured at amortised cost using the effective interest
method. Interest expense and foreign exchange gains and losses are recognised in profit or loss.
Any gain or loss on derecognition is also recognised in profit or loss.
Concession liability
Concession liabilities are initially recognised at fair value. The valuation model uses inputs which
are observable in the market namely the ruling exchange and interest rates at the measurement
date. The fair value of the concession liabilities is classified as a non current liability when the
remaining period to maturity date is more than 12 months, and a current liability when the
remaining period to maturity is less than 12 months.
(iii) Derecognition
Financial assets
The Group and Company derecognise a financial asset when the contractual rights to the cash
flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows
in a transaction in which substantially all of the risks and rewards of ownership of the financial
asset are transferred or in which the Group and Company neither transfers nor retains
substantially all of the risks and rewards of ownership and it does not retain control of the
financial asset.
The Group and Company enter into transactions whereby it transfers assets recognised in its
statement of financial position, but retains either all or substantially all of the risks and rewards of
the transferred assets. In these cases, the transferred assets are not derecognised.
Financial liabilities
The Group and Company derecognise a financial liability when its contractual obligations are
discharged or cancelled, or expire. The Group and Company also derecognise a financial liability
when its terms are modified and the cash flows of the modified liability are substantially
different, in which case a new financial liability based on the modified terms is recognised at fair
value.
On derecognition of a financial liability, the difference between the carrying amount extinguished
and the consideration paid (including any non-cash assets transferred or liabilities assumed) is
recognised in profit or loss.
24
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(iv) Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement
of financial position when, and only when, the Group and Company currently have a legally
enforceable right to set off the amounts and it intends either to settle them on a net basis or to
realise the asset and settle the liability simultaneously.
(c) Property, plant and equipment
i. Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and
any accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. Property,
plant and equipment under construction are disclosed as capital work-in-progress. The cost of
self-constructed assets includes the cost of materials and direct labour, any other costs directly
attributable to bringing the assets to a working condition for their intended use including, where
applicable, the costs of dismantling and removing the items and restoring the site on which they
are located and borrowing costs on qualifying assets.
If significant parts of an item of property, plant and equipment have different useful lives, they
are accounted for as separate items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by
comparing the proceeds from disposal with the carrying amount of property, plant and
equipment, and are recognized net within other income in profit or loss.
ii. Subsequent expenditure
Subsequent expenditure is capitalised only if it is probable that the future economic benefits
associated with the expenditure will flow to the Group and Company.
iii Depreciation
Depreciation is calculated to write off the cost of items of property, plant and equipment less
their estimated residual values using the straight-line method over their estimated useful lives,
and is generally recognised in profit or loss. Land is not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
Assets Estimated useful lives
- Furniture and Fittings 4 years
- Motor vehicles 5 years
- Computer equipment 3 years
- Plant & Machinery 10 years
- Land Indefinite
- Buildings 30 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
Capital work-in-progress is not depreciated. The attributable cost of each asset is transferred to
the relevant asset category immediately the asset is available for use and depreciated
accordingly.
25
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(d) Leases
At inception of a contract, the Group and Company assess whether a contract is, or contains, a
lease. A contract is, or contains a lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration. To assess whether a contract
conveys the right to control the use of an identified asset, the Group and Company use the
definition of a lease in IFRS 16.
i. As a lessee
At commencement or on modification of a contract that contains a lease component, the Group
and Company allocate the consideration in the contract to each lease component on the basis of its
relative stand-alone prices. However, for the leases of property the Group and Company have
elected not to separate non-lease components and account for the lease and non-lease components
as a single lease component.
The Group and Company recognise a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which comprises the
initial amount of the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the
commencement date to the end of the lease term, unless the lease transfers ownership of the
underlying asset to the Group and Company by the end of the lease term or the cost of the right-
of-use asset reflects that the Group and Company will exercise a purchase option. In that case the
right-of-use asset will be depreciated over the useful life of the underlying asset, which is
determined on the same basis as those of property and equipment. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements
of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid
at the commencement date, discounted using the interest rate implicit in the lease or, if that rate
cannot be readily determined, the Group and Company’s incremental borrowing rate. Generally,
the Group and Company use its incremental borrowing rate as the discount rate.
The Group and Company determine its incremental borrowing rate by obtaining interest rates from
various external financing sources and makes certain adjustments to reflect the terms of the lease
and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
– fixed payments, including in-substance fixed payments;
– variable lease payments that depend on an index or a rate, initially measured using the index or
rate as at the commencement date;
– amounts expected to be payable under a residual value guarantee; and
26
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(d) Leases (cont'd)
– the exercise price under a purchase option that the Group and Company are reasonably certain to
exercise, lease payments in an optional renewal period if the Group and Company are reasonably
certain to exercise an extension option, and penalties for early termination of a lease unless the
Group and Company are reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is
remeasured when there is a change in future lease payments arising from a change in an index or
rate, if there is a change in the Group and Company’s estimate of the amount expected to be
payable under a residual value guarantee, if the Group and Company change its assessment of
whether it will exercise a purchase, extension or termination option or if there is a revised in-
substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the
carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of
the right-of-use asset has been reduced to zero.
The Group and Company presents right-of-use assets that do not meet the definition of investment
property in ‘property, plant and equipment’ in the statement of financial position.
Short-term leases and leases of low-value assets
The Group and Company have elected not to recognise right-of-use assets and lease liabilities for
leases of low-value assets (i.e below NGN1.9 million) and short-term leases. The Group and
Company recognise the lease payments associated with these leases as an expense on a straight-
line basis over the lease term.
ii. As a lessor
At inception or on modification of a contract that contains a lease component, the Group and
Company allocate the consideration in the contract to each lease component on the basis of their
relative stand-alone prices.
When the Group and Company act as a lessor, it determines at lease inception whether each lease
is a finance lease or an operating lease.
To classify each lease, the Group and Company make an overall assessment of whether the lease
transfers substantially all of the risks and rewards incidental to ownership of the underlying asset.
If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of
this assessment, the Group and Company consider certain indicators such as whether the lease is
for the major part of the economic life of the asset.
When the Group and Company is an intermediate lessor, it accounts for its interests in the head
lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference
to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a
head lease is a short-term lease to which the Group and Company apply the exemption described
above, then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Group and Company apply
IFRS 15 to allocate the consideration in the contract.
The Group and Company apply the derecognition and impairment requirements in IFRS 9 to the
net investment in the lease. The Group and Company further regularly review estimated
unguaranted residual values used in calculating the gross investment in the lease.
The Group and Company recognise lease payments received under operating leases as income on
a straight-line basis over the lease term as part of ‘other income’.
27
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(d) Leases (cont'd)
Generally, the accounting policies applicable to the Group and Company as a lessor in the
comparative period were not different from IFRS 16 except for the classification of the sub-lease
entered into during current reporting period that resulted in a finance lease classification.
(e) Finance income and finance costs
The Group and Company's finance income and finance costs include:
- interest income on deposits;
- interest expense on borrowings;
- fair value loss on derivative financial liability;
- unwinding of the discount on provisions;
- foreign currency gain or loss on financial assets and liabilities; and
- bank charges
Interest income or interest expense is recognised using the effective interest method.
The 'effective interest rate' is the rate that exactly discounts estimated future cash payments or
recopies through the expected life of the financial instruments to:
- the gross carrying amount of the financial assets; or
- the amortized cost of the financial liability
In calculating interest income and expense, the effective interest rate is applied to the gross
carrying amount of the asset (when the asset is not credit impaired) or to the amortised cost of the
liability.
However, for financial assets that have become credit impaired subsequent to initial recognition,
interest income is calculated by applying the effective interest rate to the amortised cost of the
financial asset. If the asset is no longer credit-impaired, then the calculation of interest income
revert to the gross basis.
Foreign currency gains and losses are reported on a net basis as either finance income or finance
cost depending on whether foreign currency movements are in a net gain or net loss position
except for foreign currency translation differences recorded in other comprehensive income.
(f). Impairment
i. Non-derivative Financial Assets
Financial instruments
The Group and Company recognise loss allowances for ECLs on financial assets measured at
amortised cost. The Group and Company measure loss allowances at an amount equal to lifetime
ECLs, except for the bank balances for which credit risk (i.e. the risk of default occurring over the
expected life of the financial instrument) has not increased significantly since initial recognition,
which are measured at 12 month ECL.
Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs.
When determining whether the credit risk of a financial asset has increased significantly since
initial recognition and when estimating ECLs, the Group and Company consider reasonable and
supportable information that is relevant and available without undue cost or effort. This includes
both quantitative and qualitative information and analysis, based on the Group and Company's
historical experience and informed credit assessment and including forward-looking information.
The Group and Company assume that the credit risk on a financial asset has increased significantly
if it is more than 30 days past due.
28
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(f) Impairment (cont'd)
The Group and Company consider a financial asset to be in default when:
– the borrower is unlikely to pay its credit obligations to the Group and Company in full, without
recourse by the Group and Company to actions such as realising security (if any is held); or
– the financial asset are more than 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a
financial instrument.
12-month ECLs are the portion of ECLs that result from default events that are possible within the
12 months after the reporting date (or a shorter period if the expected life of the instrument is less
than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over
which the Group and Company is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present
value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance
with the contract and the cash flows that the Group and Company expect to receive).
ECLs are discounted at the effective interest rate of the financial asset.
Credit-impaired financial assets
At each reporting date, the Group and Company assess whether financial assets carried at amortised
cost are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
– significant financial difficulty of the borrower or issuer;
– a breach of contract such as a default or being more than 90 days past due;
– the restructuring of a loan or advance by the Group and Company on terms that the Group and
Company would not consider otherwise;
– it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
– the disappearance of an active market for security because of financial difficulties.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross
carrying amount of the assets.
Write-off
The gross carrying amount of a financial asset is written off when the Group and Company have no
reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group
has a policy of writing off the gross carrying amount when the financial asset is 4 years past due
based on historical experience of recoveries of similar assets.
The Group and Company expect no significant recovery from the amounts written off. However,
financial assets that are written off could still be subject to enforcement activities in order to comply
with the Group and Company’s procedures for recovery of amounts due.
29
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(f) Impairment (cont'd)
ii Non-financial assets
At each reporting date, the Group and Company review the carrying amounts of its non-financial
assets (other than inventories and deferred tax assets) to determine whether there is any indication
of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
For impairment testing, assets are grouped together into the smallest group of assets that generates
cash flows from continuing use that are largely independent of the cash flows of other assets or
cash generating units (CGUs).
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its
fair value less costs to sell. Value in use is based on the estimated future cash flows, 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 or CGU.
An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its estimated
recoverable amount.
Impairment losses are recognised in profit or loss. An impairment loss is reversed only to the extent
that the asset's carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.
(g) Employee benefits
i. Defined contribution plan
A defined contribution plan is a post-employment benefit plan (pension fund) under which the
Group and Company pay fixed contributions into a separate entity. The Group and Company have
no legal or constructive obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee service in the current and prior years.
In line with the provisions of the Pension Reform Act 2014, the Group and Company have
instituted a defined contribution pension scheme for its permanent staff. Employees contribute 8%
each of their basic salary, transport, and housing allowances to the Fund on a monthly basis. The
Group and Company’s contribution is 10% of each employee’s basic salary, transport, and
housing allowances. Staff contributions to the scheme are funded through payroll deductions while
the Group and Company’s contribution is recognised in profit or loss as employee benefit expense
in the periods during which services are rendered by employees.
ii Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed
as the related service is provided.
A liability is recognized for the amount expected to be paid under short-term cash bonuses if the
Group and Company have a present legal or constructive obligation to pay this amount as a result
of past service provided by the employee, and the obligation can be estimated reliably.
iii Termination benefits
Termination benefits are expensed at the earlier of when the Group and Company can no longer
withdraw the offer of those benefits and when the Group and Company recongise cost for a
restructuring. If the benefits are not expected to be settled wholly within 12 months of the end of
the reporting period, then they are discounted.
30
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(g) Employee benefits (cont'd)
iv Redundancy benefits
Redundancy benefits are measured on an undiscounted basis and are expensed when
the involuntary loss of employment occurs.
(h) Provisions, contingent liabilities and assets
Provisions
Provisions comprise liabilities for which the amount and timing are uncertain. They arise from
legal and tax risks, litigation and other risks, and restoration costs. A provision is recognized if, as
a result of a past event, the Group and Company has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow of economic benefits will be required
to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of the time value of money and the risks
specific to the liability. The unwinding of the discount is recognized as finance cost.
A provision for restructuring is recognised when the Group and Company have approved a
detailed and formal restructuring plan, and the restructuring either has commenced or has been
announced publicly. Future operating losses are not provided for.
Contingent liabilities
A contingent liability is a possible obligation that arises from past events and whose existence
will be confirmed only by the occurrence or non-occurrence of one or more uncertain future
events not wholly within the control of the Group and Company, or a present obligation that
arises from past events but is not recognised because it is not probable that an outflow of
resources embodying economic benefits will be required to settle the obligation, or the amount of
the obligation cannot be measured with sufficient reliability.
Contingent liabilities are only disclosed and not recognised as liabilities in the statement of
financial position. If the likelihood of an outflow of resources is remote, the possible obligation is
neither a provision nor a contingent liability and no disclosure is made.
Contingent assets
A contingent asset is a possible asset whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events not wholly within the control of the
Group and Company. Contingent assets usually arise from unplanned or other unexpected events
that give rise to the possibility of an inflow of economic benefits to the Group and Company.
Contingent assets are not recognised in financial statements since this may result in the
recognition of income that may never be realised. However, the Group and Company are required
to disclose a brief description of the nature of the contingent assets at the reporting date. When
the realisation of income is virtually certain, then the related asset is not a contingent asset and its
recognition is appropriate. Contingent assets are assessed continually to ensure that developments
are appropriately reflected in the financial statements. If it has become virtually certain that an
inflow of economic benefits will arise, the asset and the related income are recognised in the
financial statements of the period in which the change occurs.
31
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(i) Revenue
Service concession agreement
Revenue related to service under a service concession arrangement is recognised in the period in
which the services are provided by the Group and Company.
Sale of power
The Group and Company recognise revenue from the sale of power in the course of ordinary
activities, and is measured at the fair value of the consideration received or receivable, net of
value added tax. The Group and Company's customers are broadly divided into two categories
based on the similarities of the services arrangements. These are:
(i) Bulk Trader: Revenue (capacity and energy) is the total tariff price (capacity and energy
generated) as indicated in the Power Purchase Agreement (PPA) with Nigeria Bulk Electricity
Trading Plc (NBET) at the time the utility service is rendered.
Capacity generated
Capacity generated is the net generating capacity of the plant at reference site conditions,
measured in megawatts (MW) and available for dispatch at any given time in the absence of any
availability event. Revenue is recognised for capacity based on a pre-agreed tariff set out in the
Power Purchase Agreement and the megawatts available for each billing period.
Energy generated
Energy delivered is the actual electricity delivered to NBET which is measured in kilowatt-hours
(kWh). Revenue is recognised for energy delivered based on a pre-agreed tariff set out in the PPA
and the net electrical output delivered to the customer at the delivery point as defined in the PPA.
Revenue is recognised when title to, and control of the electricity is passed to the customer
(NBET) i.e. when electricity is delivered to the delivery point in accordance with the PPA.
Performance obligations & Payment terms
On the basis that the customer, NBET cannot benefit from capacity payments on its own and
capacity and energy delivered are not sold separately in the electricity market in Nigeria, the
Group and Company have considered both to be a single performance obligation. No significant
element of financing is deemed present as the sales are made with a contractual credit term of 15
days.
(ii) Bilateral customers: Revenue (energy) is the total tariff price as indicated in the Power
Purchase Agreement (PPA) with the customers at the time the utility service is rendered. Energy
delivered is the actual electricity consumed at the customers location which is measured in
kilowatt-hours (kWh). Revenue is recognised for energy delivered based on a pre-agreed tariff set
out in the PPA and the net electrical output delivered to the customer at the delivery point as
defined in the PPA. Revenue is recognised when the energy is delivered to the customer and
captured at the delivery point at the customer's satiation in accordance with the PPA.
Payment terms
The bilateral customers are divided into two:
Local bilateral customers: No significant element of financing is deemed present as the sales are
made with a contractual credit term of 15 days.
International bilateral customers: No significant element of financing is deemed present as the
sales are expected to be settled 10 days in advance.
.
32
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(j) Income tax
Income tax expense comprises current tax (Company income tax, tertiary education tax, and
Nigeria Police Trust Fund levy) and deferred tax. It is recognised in profit or loss except to the
extent that it relates to a business combination, or items recognised directly in equity or in other
comprehensive income.
The Group and Company had determined that interest and penalties relating to income taxes,
including uncertain tax treatments, do not meet the definition of income taxes, and therefore are
accounted for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets.
(i) Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the
year, and any adjustment to tax payable or receivable in respect of previous years.
The amount of current tax payable or receivable is the best estimate of the tax amount expected to
be paid or received that reflects uncertainty related to income taxes, if any. It is measured using
tax rates enacted or substantively enacted at the reporting date and is assessed as follows:
- Companies income tax is computed on taxable profits;
- Tertiary education tax is computed on assessable profits; and
- Nigeria Police Trust Fund levy is computed on net profit (i.e. profit after deducting all expenses
and taxes from revenue earned by the Group and Company during the year).
Total amount of tax payable under CITA is determined based on the higher of two components
namely Companies Income Tax (based on taxable income (or loss) for the year); and minimum
tax. Taxes based on profit for the period are treated as income tax in line with IAS 12.
The Group and Company offset the tax assets arising from tax assets and current tax liabilities if,
and only if, the entity has a legally enforceable right to set off the recognised amounts, and
intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
The tax asset is reviewed at each reporting date and written down to the extent that it is no longer
probable that future economic benefit would be realised.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.
33
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(j) Income tax (cont'd)
Deferred tax is not recognised for:
– temporary differences on the initial recognition of assets or liabilities in a transaction that is not
a business combination and that affects neither accounting nor taxable profit or loss;
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible
temporary differences to the extent that it is probable that future taxable profits will be available
against which they can be used. Future taxable profits are determined based on the reversal of
relevant taxable temporary differences. If the amount of taxable temporary differences is
insufficient to recognise a deferred tax asset in full, then future taxable profits, adjusted for
reversals of existing temporary differences, are considered, based on the business plans approved
by the board of the Group and Company.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised; such reductions are reversed when the
probability of future taxable profits improves.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences
when they reverse, using tax rates enacted or substantially enacted at the reporting date. The
measurement of deferred tax reflects the tax consequences that would follow from the manner the
Group and Company expect, at the reporting date, to recover or settle the carrying amount of its
assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are met.
(iii) Minimum tax
The Company is subject to the Companies Income Tax Act (CITA). Total amount of tax payable
under CITA is determined based on the higher of two components namely, Company Income Tax
(based on taxable income (or loss) for the year); and Minimum tax (determined as 0.5% of the
qualifying Company's turnover less franked investment income).
Where the minimum tax charge is higher than the Company Income Tax (CIT), a hybrid tax
situation exists. In this situation, the CIT is recognised in the income tax expense line in the profit
or loss and the excess amount is presented above the income tax line as Minimum tax.
(k) Tax assets
Tax assets are advance payments of income taxes deducted by the Group and Company’s
customers at source upon invoicing. Tax assets are measured at cost.
The Group and Company offset the tax assets arising from withholding tax credits and current tax
liabilities if, and only if, the entity has a legally enforceable right to set off the recognised
amounts, and it intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously. The tax asset is reviewed at each reporting date and written down to the extent
that it is no longer probable that future economic benefit would be realized. Tax asset written
down are recognized in profit or loss as income tax expense.
(l) Statement of cash flows
The statement of cash flows is prepared using the indirect method. Changes in statement of
financial position items that have not resulted in cash flows have been eliminated for the purpose of
preparing the statement. Dividends paid to ordinary shareholders are included in financing
activities. Finance costs paid is also included in financing activities while finance income received
is included in investing activities.
34
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(m) Share capital
The Company has only one class of shares, ordinary shares. Ordinary shares are classified as
equity. When new shares are issued, they are recorded in share capital at their par value. The
excess of the issue price is recorded in the share premium reserve.
Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects are
recognised as a deduction from equity.
(n) Operating profit
Operating profit is the result generated from the continuing principal revenue producing activities
of the Group and Company as well as other income and expenses related to operating activities.
Operating profit excludes net finance costs, and income taxes.
(o) Dividend
Dividend is accrued when declared, being when it is appropriately authorised and no longer at the
discretion of the Group and Company, on or before the end of the reporting period but not
distributed at the end of the reporting period.
(p) Operating expenses
Expenses are decreases in economic benefits during the accounting period in the form of
outflows, depletion of assets or incurrence of liabilities that result in decrease in equity, other than
those relating to distributions to equity participants. Expenses are recognized on an accrual bases
regardless of the time of spending cash.
Expenses are recognized in the statement of profit or loss when a decrease in future economic
benefit related to a decrease in an assets or an increase of a liability has arisen that can be
measured reliably. Expenses are measured at historical cost. Only the portion of cost of a
previous period that is related to the income earned during the reporting period is recognized as
an expense. Expenses that are not related to the income earned during the reporting period, but
expected to generate future economic benefits, are recorded in the financial statement as assets.
The portion of assets which is intended for earning income in the future periods shall be
recognized as an expense when the associated income is earned.
Expenses are recognized in the same reporting period when they are incurred in cases when it is
not probable to directly relate them to particular income earned during the current reporting
period and when they are not expected to generate any income during the coming years.
(q) Cost of sales
Cost of sales represents decreases in economic benefits during the accounting period that are
directly related to revenue-generating activities of the Group and Company. Cost of sales is
recognized on an accrual bases regardless of the time of spending cash and measured at historical
cost.
Only the portion of cost of a previous period that is related to revenue earned during the reporting
period is recognized as Cost of sales.
35
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(r) Basis of consolidation
(i) Business combination
The Group accounts for business combinations using the acquisition method when control is
transferred to the Group (see (r) (iii)). The consideration transferred in the acquisition is
generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that
arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit
or loss immediately. The consideration transferred does not include amounts related to the
settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation
to pay contingent consideration that meets the definition of a financial instrument is classified as
equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other
contingent consideration is remeasured at fair value at each reporting date and subsequent
changes in the fair value of the contingent consideration are recognised in profit or loss.
(ii) Non-controlling interest
Non-controlling interest are measured at their proportionate share of the acquire's identifiable net
assets at the acquisition date. Changes in the Group's interest in a subsidiary that do not result in
a loss of control are accounted for as equity transaction.
(iii) Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is
exposed to, or has the right to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity. The financial statements of
subsidiaries are included in the consolidated financial statements from the date on which control
commences until the date on which control ceases.
(iv) Transaction eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from
intra-group transaction, are eliminated in preparing the consolidated financial statements.
Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment
(v) Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the
subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is
recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair
value when control is lost.
(s) Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, other short-
term highly liquid investments with original maturities of three months or less that are readily
convertible to cash which are subject to an insignificant risk of changes in their fair value, and
are used by the Group and Company in the management of its short-term commitments.
36
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(t) Intangible assets
(i) Recognition and measurement
Intangible assets that are acquired by the Group and Company are measured at cost less
accumulate amortisation and accumulated impairment losses.
Service Concession Agreement
The Group and Company recognise an intangible asset arising from a service concession
arrangement when it has a right to charge for use of the concession infrastructure. The intangible
asset is measured initially at cost which comprises of the fair value of the fixed payment
made/payable to the grantor and other directly attributable expenditure. An intangible asset
received as consideration for providing construction or upgrade services in a service concession
arrangement is measured at fair value on initial recognition with reference to the fair value of the
services provided. Subsequent to initial recognition, the intangible asset is measured at cost, less
accumulated amortisation and accumulated impairment losses.
Other intangible assets with finite useful lives
Other intangible assets, including IT Software and the solar generating license acquired by the
Company and have finite useful lives are measured at cost less accumulated amortisation and any
accumulated impairment losses.
(ii) Subsequent measurement
Subsequent expenditure on the concession infrastructure and solar generating license is
capitalised only when it increases the future economic benefits embodied in the specific
intangible asset to which it relates. All other expenditure is recognised in profit or loss as the
obligation falls due.
(iii) Amortisation of intangible assets
Amortisation is calculated to write off the cost of intangible assets using the straight line method
over their estimated useful life and is generally recognized in profit or loss account.
The estimated useful lives for current and comparative periods are as follows:
- Concession cost Over the concession period
- IT software 4 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
(u) Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal market
or, in its absence, the most advantageous market to which the Group and Company have access
at that date. The fair value of a liability reflects its non-performance risk.
When available, the Group and Company measure the fair value of an instrument using the
quoted price in an active market for that instrument. A market is regarded as active if
transactions for the asset or liability take place with sufficient frequency and volume to provide
pricing information on an ongoing basis.
37
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
6 Significant accounting policies (cont'd)
(v) Fair value measurement (cont'd)
If there is no quoted price in an active market, then the Group and Company use valuation
techniques that maximise the use of relevant observable inputs and minimise the use of
unobservable inputs. The chosen valuation technique incorporates all of the factors that market
participants would take into account in pricing a transaction.
The best evidence of the fair value of a financial instrument at initial recognition is normally the
transaction price - i.e. the fair value of the consideration given or received. If the Group and
Company determine that the fair value at initial recognition differs from the transaction price
and the fair value is evidenced neither by a quoted price in an active market for an identical
asset or liability nor based on a valuation technique that uses only data from observable
markets, then the financial instrument is initially measured at fair value, adjusted to defer the
difference between the fair value at initial recognition and the transaction price.
Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life
of the instrument but no later than when the valuation is wholly supported by observable market
data or the transaction is closed out.
(w)Keep or deal items (other payables)
The Group and Company have classified items provided by the grantor as keep or deal items in
which the Group and Company may retain or sell at its discretion. These are measured at fair
value on initial recognition with a corresponding liability representing the obligation to provide
services in the future. This obligation is unwound to the profit or loss on a straight line basis
over the period of service.
7 Standards and interpretations not yet effective
A number of new standards are effective for annual periods beginning after 1 January 2020 and
earlier application is permitted; however, the Group and Company has not early adopted the new or
amended standards in preparing these financial statements.
The following new standards are not expected to have a significant impact on the Group and
Company's financial statements.
Onerous contracts- cost of fulfilling a contract (Amendment to IAS 37) Interest rate benchmark
reform-Phase2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
Covid 19- related rent Concession (Amendment to IFRS 16).
Property, plant and equipment: proceeds before intended use(Amendment to IAS 16).
Reference to conceptual framework (Amendment to IFRS 3).
Classification of liabilities as current or non-current (Amendment to IAS 1).
IFRS 17-Insurance contracts and amendments to IFRS 17 Insurance contracts.
38
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
8 Service Concession agreements
The Group and Company operate a service concession agreement for the generation of electricity.
The Group and Company entered into an operation and maintenance agreement with Kainji Hydro
Electric Plc and the Bureau of Public Enterprises (BPE) to operate and maintain the Kainji and Jebba
hydroelectric power plants, design and conduct the restorations, generate power at these sites, sell all
electricity produced and to provide the ancillary services. The Concession period is for 30 years
starting from 1 November 2013.
The hydro property includes the site, the moveable assets, the fixed assets including the dam
structures (that is, Kanji and Jebba hydroelectric power plants) as stated in the agreement. The Plants
remain the property of Kanji Hydroelectric Plc and will revert to Kanji Hydroelectric Plc at the end
of the concession. It also includes the licences (that is, the generation license and the water license)
to use the assets. These licences have validity period of 15 years, and the Group and Company are
responsible for the renewal licences.
The Group and Company through the Bureau of Public Enterprise ("BPE") will provide the Federal
Government a guaranteed minimum annual payment for each year that the Jebba and Kainji Hydro
Electric Power Plant is in operation. Additionally, the Group and Company have the right to charge a
predetermined price for capacity available and energy generated which the Company will collect and
retain. At the end of the concession period, the Jebba and Kainji Hydro Electric Power Plant will
become the property of the Federal Government and the Group and Company will have no further
involvement in its operation or maintenance requirements.
The service concession agreement does not contain a renewal option. The rights of the grantor to
terminate the agreement include poor performance by the Group and Company and in the event of a
material breach in the terms of the agreement. The rights of the Group and Company to terminate the
agreement include a material breach in the terms of the agreement, and any changes in law that
would render it impossible for the Group and Company to fulfil its requirements under the agreement
See Note 30(a) for details on compliance with payment obligation under the concession agreement..
The sum paid by Group and Company to the Bureau of Public Enterprises comprises of a fixed entry
fee and an upfront annual fee. The fixed entry fee of $30 million was paid in two tranches. An
upfront annual fee of $207.87 million representing the first five annual fees was paid upfront in two
tranches. These together represents the commencement fee. The amount paid is analysed below.
in millions of Naira 4,656
Fixed entry fee ($30million @NGN155.2/$) 32,261
Upfront annual fee ($207.87 million @NGN155.2/$) 36,917
Commencement fee
The Group and Company are also expected to pay an annual fee of USD50.76 million commencing
on the fifth anniversary of the first payment until the end of the concession period.
The rights and obligations of the Group and Company include;
(i) Operation and maintenance of the power stations;
(ii) Design and conducting the restorations;
(iii) Generation of power at the site;
(iv) Sale of electricity produced; and
(v) Provision of other ancillary services
39
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
8 Service Concession agreements (cont'd)
The Group and Company are entitled to receive revenue from the Nigeria Bulk Electricity Trading
Plc (NBET) and other independent customers based on electricity supplied at tariffs regulated by the
Nigerian Electricity Regulatory Commission (NERC). The licences in the Service Concession
Arrangement have been classified as an intangible asset and measured at cost less amortisation in the
financial statements. The plant remains the property of Kainji Hydro Electric Plc, an entity owned by
the Federal Government of Nigeria (FGN). On expiration of the the concession, the Group and
Company shall have no further obligations.
Intangible assets model
The intangible asset model applies to the Group and Company as the Group and Company are being
paid by the users of the electricity and neither Bureau of Public Enterprise (BPE) nor Kanji
Hydroelectric company have provided a contractual guarantee in respect of the recoverable amount.
The intangible asset corresponds to the right granted by the Bureau of Public Enterprises to the
Group and Company to charge users of the public service in remuneration of the electricity supplied.
Intangible assets resulting from the application of IFRIC 12 - Service concession arrangement are
recorded in the Statement of financial position under Note 16, and are amortized generally on a
straight line basis, over the contract.
Maintenance, restoration and upgrade of hydro-electric power plants
The Group and Company and Kainji Hydro Electric Plc agreed on a detailed capacity recovery plan
(post acquisition plan) to restore the plants to their full operational capacity by rehabilitating those
parts that need to be refurbished. The capacity recovery plan spells out the work to be performed by
the Group and Company to rehabilitate the installed capacity. The implementation of the capacity
recovery plan involves three main activities which include; refurbishment of generation assets and
related parts, repairing civil works and other maintenance activities and development of additional
studies.
The Group and Company commenced the implementation of the detailed capacity recovery plan
from the second year post acquisition, and is expected to be completed in five years. The related
costs are recognised and recorded as concession receivables (See Note 20(a)), recoverable from the
Bureau of Public Enterprises (BPE) at the end of the concession. As at year end, the Group and
Company was yet to complete the rehabilitation works as detailed in the capacity recovery plan, and
obtained a 2 year extension for the completion of the of the capacity recovery plan.
Keep or deal items (other payables)
Items provided by the grantor are keep or deal items in which the Group and Company may retain or
sell at its discretion. These are measured at fair value on initial recognition with a corresponding
liability representing the obligation to provide services in the future. This obligation is unwound to
the profit or loss on a straight line basis over the period of service (See Note 31 (a)).
40
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
9.Revenue
Revenue from contracts with customers is disaggregated by customer and nature as follows:
Group Company
in millions of Naira 2020 2020 2020 2020
NBET - Jebba Power Station *Restated *Restated
Capacity
Energy 28,158 25,504 28,158 25,504
6,111 5,418 6,111 5,418
NBET- Kainji Power Station 16,752 25,646 16,752 25,646
Capacity 3,637 5,451 3,637 5,451
Energy
Energy sales to International bilateral 21,258 - 21,258 -
customer
Energy sales to Local bilateral 7,224 6,095 7,224 6,095
customers 83,140 68,114 83,140 68,114
* See Note 37
(a) Contract balances
The following table provides information about receivables from contracts with customers.
Group Company
in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019
Receivables which are included in *Restated *Restated
trade and other receivables(See
Note 23 ) 105,695 87,949 105,695 87,949
* See Note 37
41
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
10. Expenses by nature Group Company
Expense by nature comprise:
in millions of Naira 2020 2019 2020 2019
*Restated *Restated
(a) Cost of sales 3,817 2,233 3,817 2,233
Repairs and maintenance expenses 1,586 1,508 1,586 1,508
Employee benefit expense (See
Note 14(a)) 7,822 6,723 7,822 6,723
Amortisation (See Note 16) 546 781 546 781
Technical service fees (Note 10 (a)
(ii)) - 7 - 7
Fuel expenses 10,356 1,731 10,356 1,731
Regulatory charges (Note 10 (a) (iii))
Other expenses 254 211 254 211
Royalties (Note 10 (a) (i)) 4,004 4,234 4,004 4,234
28,385 17,428 28,385 17,428
* See Note 37
(i) Amount represents accrued monthly royalty payable to the Bureau of Public Enterprises
being five per cent (5%) of the Company's pre-tax gross sales revenue over the previous month.
Management has determined Pre-tax gross sales as total revenue( See Note 9(a)) and income
income from Kainji and Jebba receivables (See Note 12 (a)).
(ii) Amount represents technical service fees for specific technical services related to a safe and
optimized operation and maintenance of Kainji and Jebba Hydroelectric power plants.
(iii) Amount represents regulatory charges due to the Nigerian Electric Regulatory Commission
(NERC) and the Transmission Company of Nigeria (TCN) under the Use of transmission
network system agreement.
42
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
10 Expenses by nature (cont'd)
(b) General and administrative expense
Group Company
in millions of Naira 2020 2019 2020 2019
Legal and other professional *Restated *Restated
expenses
Auditor's remuneration 601 1,864 544 989
Depreciation (See Note 17 (a))
Depreciation on right-of-use- 64 123 62 121
asset(See Note 18 (i)) 308 256 274 246
Health and safety expenses
Travelling expenses 22 9 --
Corporate social responsibility (Note
10 (b) (i)) 136 90 135 90
Office supplies and expenses 632 894 613 799
Training expenses 1,862 913 1,862 913
Directors fees and allowances (See
Note 32 (b)) 138 113 109 102
Employee benefit expenses (See 90 252 90 252
Note 14(a))
Statutory levies 488 2,048 403 1,946
Outsourced services (Note 10 (b)
(ii)) 2,016 1,999 1,931 1,970
Amortization (See Note 16)
Write-off of Intangible assets (See 103 277 103 275
Note 16) 1,201 1,020 1,191 1,020
Repairs and maintanance
Subscription -1 -1
Business promotion expenses 17 - 17 -
Insurance expenses
Security expenses 294 131 271 139
Information technology related 215 211 215 211
expenses 185 250 185 250
660 552 643 552
86 47 86 45
189 151 189 140
9,307 11,201 8,923 10,061
* See Note 37
(i) Included in corporate social responsibility, is the sum of NGN797.65 million (2019:
NGN851.85 million) being 1% cash revenue contributed to the Mainstream Foundation as
approved by the Board of Directors.
(ii) Outsourced services represents the cost of cleaning, driving, group life insurance services.
43
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
11. Other income Group Company
in millions of Naira 2020 2019 2020 2019
Income from promissory note (See Note *Restated *Restated
23 (a))
Management fee on staff housing fund 70 45 --
Profit from disposal of Property, plant
and equipment 99 99
Income from schools and hospital (See 20 8 20 8
Note 11 (a))
146 210 146 210
245 272 175 227
* See Note 37
(a) Income from schools and hospital represents income earned by the Group and Company from
the schools and hospital facility operated at Kainji and Jebba Hydropower plants.
12. Finance income/(costs) Group Company
in millions of Naira
2020 2019 2020 2019
*Restated *Restated
Finance costs 87 91 82 88
Bank charges 14,751 12,850 14,751 12,850
Unwinding of discount on concession
liability (See Note 30) 7,073 4,058 7,073 4,058
Day one loss on discounting of
Concession receivable (See Note 20 (a)) - 158 - 158
Fair value loss on loan receivables 31 28 31 28
Unwinding of discount on other
payables (See Note 31 (a)) 6,381 435 6,381 435
Net foreign exchange loss 28,323 17,620 28,318 17,617
Total finance costs
Finance income 3,020 4,086 3,020 4,086
Interest income on Kainji
receivables(See Note 12(a)) 3,846 4,560 3,846 4,560
Interest income on Jebba receivables
(See Note 12(a)) 1,200 1,372 1,180 1,312
Interest income on other financial assets 125 - 125 -
Fair value gain on loan receivables 119 119
Unwinding of discount on Concession 84 84
receivables (See Note 20 (a)) 8,310 8,290
Total finance income 10,102 10,042
Net finance costs recognised in profit 20,013 7,518 20,028 7,575
or loss
* See Note 37
(a)Interest income on Kainji and Jebba receivables represents interest charged on late payment of
invoices issued to Nigeria Bulk Electricity Trading Plc (NBET). The interest is charged at 4%
plus daily NIBOR rate on all past due receivables.
44
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
13. Profit before income tax
Profit before income tax is stated after charging:
Group Company
in millions of Naira 2020 2019 2020 2019
Depreciation (See Note 17 (a)) *Restated *Restated
Depreciation on right-of-use-asset
(See Note 18 (i)) 308 256 274 246
Amortization (See Note 16)
Employee benefit expense (See Note 22 9 --
14(a))
Net impairment of financial assets 7,822 6,724 7,822 6,724
(See Note 33(B)(a)) 3,611 3,478 3,517 3,478
Auditor's remuneration
Net finance costs 5,086 17,821 5,086 17,804
64 123 62 121
20,013 7,518 20,028 7,575
* See Note 37
14. Employee benefit expense
(a) Employee benefit expense during the year comprises: Company
Group
in millions of Naira 2020 2019 2020 2019
*Restated 453 *Restated
Salaries and wages-Executive 453
management 373 373
Salaries and allowances- Other staff 2,394
Pension contribution (employer's 81 2,142 2,300 2,142
contribution) 95 81 95
Performance bonus 683
Terminal benefits - 652 683 652
216 - 216
3,611 3,478
3,517 3,478
Included in: 1,586 1,508 1,586 1,508
Cost of sales(See Note 10(a)) 2,016 1,999 1,931 1,970
General and Administrative expenses
(See Note 10 (b)) 3,602 3,507 3,517 3,478
* See Note 37
45
Mainstream Energy Solutions Limited
Annual Report
31 December 2020
Notes to the consolidated and separate financial statements (cont'd)
14. Employee benefit expense cont'd
(b) Higher paid employees in the Company, other than directors, whose duties are wholly or
mainly discharged in Nigeria received remuneration (excluding pension contributions) in the
following ranges:
Group Company
2020 2019 2020 2019
Below NGN1000,000 -- - -
NGN1000,000 - NGN2,999,999 23 24 23 24
NGN3,000,000 - NGN4,999,999 69 87 69 84
NGN5,000,000 - NGN6,999,999 57 68 55 67
NGN7,000,000 - NGN9,999,999 37 28 37 28
Above NGN10,000,000 45 48 43 48
231 255 227 251
(c) The average number of full time persons employed during the year (other than executive
directors) was as follows:
Executive Management Group 2019 Company 2019
Technical and Operations
Administration 2020 4 2020 4
226 225
4 4
218 25 213 22
255 251
16 10
238 227
(d) Directors' remuneration
Director's remuneration charged to profit or loss are as follows:
Group Company
2020 2019
in millions of Naira 2020 2019
*Restated
*Restated 453 373
199 204
Executive director's compensation 453 373 204 1,742
856 2,319
Directors' fees 199 204
25 124
Other emoluments 204 1,742
856 2,319
The directors' remuneration shown above includes:
Highest paid director 25 124
Other directors received emoluments in the following ranges:
NGN50,000,000 - NGN100,000,000 Group 2019 Company 2019
Above NGN100,000,000 2020 161 2020 131
1901 16 14 12 14
16 12
46
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