Mainstreams Energy Solution

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

15. Taxation

(a) Amounts recognized in profit or loss

Group Company

in millions of Naira 2020 2019 2020 2019

*Restated *Restated

Current tax expense:

Income tax 7,300 1,325 7,300 1,325

Tertiary education tax 650 265 650 265

Nigeria police trust fund levy 2 22 2

7,952 1,592 7,952 1,592

Deferred tax (credit)/expense:

Origination and reversal of temporary (56,388) 2,271 (56,388) 2,271

differences

Total Income tax (credit)/expense (48,436) 3,863 (48,436) 3,863

* See Note 37

(b) Reconciliation of effective tax rates

The tax on the Company's profit before tax differs from the theoretical amount as follows:

Group Company

in millions of Naira % 2020 % 2019 % 2020 % 2019

*Rest *Restat

ated ed

Profit before tax 20,594 14,418 20,893 15,473

Income tax using statutory tax rate 30 6,178 30 4,325 30 6,268 30 4,642

Effect of tertiary education tax 2 412 2 288 2 418 2 309

rate

Effect of Nigerian police trust - - 2- 2- 2

fund levy

Effect of:

Tax incentives (1) (193) (2) (302) (1) (182) (2) (302)

Non-deductible expenses 1 179 3 425 1 246 1 89

Change in estimate (267) (55,012) - - (264) (55,188) - -

Unrecognised deductible - - (6) (875) - - (6) (875)

temporary differences

Total income tax credit in (235) (48,436) 3,863 (231) (48,436) 25 3,863
income statement

* See Note 37 Group Company

(c) Movement in current tax liability 2020 2019 2020 2019

in millions of Naira *Restated *Restated

Balance at 1 January 1,592 - 1,592 -
Net charge for the year (Note 15(a))
Payments during the year 7,952 1,592 7,952 1,592
Effect of movement in exchange rate
during the year (1,678) - (1,678) -
Balance at 31 December
893 - 893 -
* See Note 37
8,759 1,592 8,759 1,592

47

Notes to the consolidated and separate financial statements

15. Taxation cont'd
(d). Recognised deferred tax assets and liabilities
Group/Company
Deferred tax assets and liabilities are attributable to the following:

in millions of Naira 31 D
Property, plant and equipment
Conession receivables (
Impairment allowance (
Concession liability (5
Unrealised foreign exchange difference,net (
(6
(e). Movement in temporary differences during the year
Group/Company

in millions of Naira Balance Recognised in mov
1/1/2019 profit or loss e
Property, plant and equipment
Conession receivables (313) 286 rat
Impairment allowance (1,847) 803
Unrealised foreign exchange (2,627) 1,191
difference,net
Concession liability - -

(114) (9)
(4,901) 2,271

Mainstream Energy Solutions limited
Annual Report

31 December 2020

s (cont'd)

Assets Liabilities Net

Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

- (27) 385 - 385 (27)
--
(1,431) (1,044) -- (1,431) (1,044)
--
(3,063) (1,436) -- (3,063) (1,436)

57,516) (123) 385 - (57,516) (123)

(1,034) - (1,034) -

63,044) (2,630) (62,659) (2,630)

Effect of Balance Recognised in Effect of Balance
vement in 31/12/2019 profit or loss movement in 31/12/2020
exchange
te during (27) 387 exchange 385
(1,044) (363) rate during (1,431)
the year (1,436) (1,529) (3,063)
- (972) the year (1,034)
- -
- 25 (57,516)
- (23) (62,659)
(99)
- (63)
-
(123) (53,911) (3,481)
(2,630) (56,388) (3,641)

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

15. Taxation cont'd

(f) Unrecognised deferred tax assets

Due to unpredictability of availability of sufficient future taxable profits, deferred tax assets have

not been recognised in respect of the following items for the Group:

Group Company

in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

*Restated

Property, plant and equipment 14 4 - -

Unrelieved loss 490 400 - -

504 404 - -

16. Intangible asset Concession Total
Group/Company cost Software

in millions of Naira 201,753 16 201,769
*Restated - --
Cost
Balance as at 1 January 2019 201,753 16 201,769
Foreign currency translation difference

Balance as at 31 December 2019

Balance as at 1 January 2020 201,753 16 201,769
Write-off - (19) (19)
Foreign currency translation difference
48,053 3 48,056
Balance as at 31 December 2020
249,806 - 201,750

Amortisation 34,746 1 34,747
*Restated 6,723 1 6,724
3 -3
Balance as at 1 January 2019
Charge for the year 41,472 2 41,474
Foreign currency translation difference

Balance as at 31 December 2019

Balance as at 31 January 2020 41,472 2 41,474
Charge for the year 7,822 - 7,822
Write-off - (2) (2)
Foreign currency translation difference - 10,382
10,382
Balance as at 31 December 2020 - 49,296
59,676

Carrying Amounts 190,130 - 190,130
Balance as at 31 December 2020 160,281 14 160,295
Balance as at 31 December 2019 167,007 15 167,022
Balance as at 1 January 2019

* See Note 37

49

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

16. Intangible asset (cont'd)
(a) Amortisation of NGN7.82 billion (2019 : NGN6.72 billion) is included in ‘cost of sales’ in the
statement of profit or loss and other comprehensive income.
(b) Concession cost included in Intangible assets represents the unamortised costs related to the
acquisition of the right to operate, maintain, refurbish, repower, replace or expand the Kainji and
Jebba hydroelectric power plants for 30 years. See Note 8 for details on the Service concession
agreement.

50

Notes to the consolidated and separate financial statements

17. Property, plant and equipment
Group

(a) The movement in property, plant & equipment were as follows:

in millions of Naira Critical
Restated* Land Building spare parts M
Cost
455 719 -
Balance as at 1 January 2019 -2 -
Additions -- -
Disposals
Foreign currency translation -- -
difference 455 721 -

Balance as at 31 December 2019 455 721 -
- 22 256
Balance as at 1 January 2020 --
Addition -
Disposals 109 174
Foreign currency translation 564 917 17
difference 273
Balance as at 31 December 2020 - 59
- 29 -
Accumulated depreciation -- -
Balance as at 1 January 2019 -
Charge for the year --
Disposals - 88 -
Foreign currency translation -
difference
Balance as at 31 December 2019

Mainstream Energy Solutions limited
Annual Report

31 December 2020

s (cont'd)

Plant & Motor Furniture Computer Work in Total
Machinery Vehicles & Fittings equipment progress
3,291
7 778 205 325 802 1,792
(110)
2 288 72 41 1,387
(14)
- (107) - (3) - 4,959

1 (1) - (1) (13) 4,959
3,300
10 958 277 362 2,176 (116)

10 958 277 362 2,176 1,037
9,180
185 648 97 71 2,021
877
- (54) - (62) - 256
(102)
13 258 - 85 311
-
208 1,810 444 456 4,508 1,031

7 347 172 292 -
-
- 155 31 41 -

- (99) - (3) -
-
- -- -

7 403 203 330

Notes to the consolidated and separate financial statements

17. Property, plant and equipment cont'd

in millions of Naira Critical
Land Building spare parts M

Accumulated depreciation - 88 -
Balance as at 1 January 2020 - 32 4
Charge for the year -- -
Disposals
Foreign currency translation - 22 -
difference - 142 4
Balance as at 31 December 2020
564 775 269
Carrying Amounts 455 633 -
Balance as at 31 December 2020 455 660 -

Balance as at 31 December 2019

Balance as at 1 January 2019

Mainstream Energy Solutions limited
Annual Report

31 December 2020

s (cont'd)

Plant & Motor Furniture Motor Work in Total
Machinery Vehicles & Fittings Vehicles progress
1,031
7 403 203 330 - 308
-
1 214 28 29 - (130)
252
- (54) - (76) -
- 1,461
2 104 49 75
7,719
10 667 280 358 3,928
2,414
198 1,143 164 98 4,508
3 555 74 32 2,176
- 431 33 33 802

Notes to the consolidated and separate financial statements

17. Property, plant and equipment cont'd

Company Critical spare

in thousands of Naira Land Building parts
Cost
Balance as at 1 January 2019 455 719 -
Addition - 2-
Disposal - --
Foreign currency translation
difference - --
455 721 -
Balance as at 31 December 2019

Balance as at 1 January 2020 455 721 -
256
Addition - 22
-
Disposal --
17
Foreign currency translation 273

difference 109 174

Balance as at 31 December 2020 564 917

Accumulated depreciation - 59 -
Balance as at 1 January 2019 - 29 -
-- -
Charge for the year
-- -
Disposal - 88 -
Foreign currency translation
difference

Balance as at 31 December 2019

Mainstream Energy Solutions limited
Annual Report

31 December 2020

s (cont'd)

e Plant & Motor Furniture & Computer
s Machinery
Vehicle Fittings equipment Total
-7 NGN'000
-- 760 205 325
-- 246 54 32 2,471
(107) - (3) 334
--
-7 1 (1) - (110)
900 258 354
-7 -
6 181 900 258 354 2,695
-- 577 94 57
(54) - (62) 2,695
7 14 1,187
3 202 248 68 84 (116)
1,671 420 433
1,187
4,480

- 7 347 172 292 877
246
- - 147 29 41 (99)

- - (99) --

-- - - (3) (3)

- 7 395 201 330 1,021

Notes to the consolidated and separate financial statements

17. Property, plant and equipment (cont'd)

Company (cont'd) Critical spare
in thousands of Naira
Land Building parts

Balance as at 1 January 2020 - 88 -
Charge for the year - 32 4
Disposal -- -
Foreign currency translation
difference - 22 -
- 142 4
Balance as at 31 December 2020

Carrying Amounts

Balance as at 31 December 2020 564 775 269
-
Balance as at 31 December 2019 455 633 -

Balance as at 1 January 2019 455 660

* See Note 37

(b)There are no impairment losses on any class of the Group's and Company

(c) The Hydro property at the Kainji and Jebba Hydro Power Plants have not
(PPE) as these do not meet the criteria for recognition as PPE under IAS 16.

(d)None of the Group's and Company's assets have been pledged as security

Mainstream Energy Solutions limited
Annual Report

31 December 2020

s (cont'd)

e Plant & Motor Furniture & Computer
s Machinery
Vehicle Fittings equipment Total
-7
41 395 201 330 1,021
-- 193 22 22 274
(54) - (76)
-2 (130)
4 10 104 49 74
638 272 350 251
1,416

9 192 1,033 148 83 3,064

- - 505 57 24 1,674

- - 413 33 33 1,594

y's property, plant and equipment.
t been recognised as part of the Company's Property Plant and Equipment

at the end of the reporting period (2019 : Nil).

Notes to the consolidated and separate financial statements (cont'd)

17. Property, plant and equipment cont'd

(e)Work-in-progress relates to the cost of incurred in the establishment of Anafanni Industrial Park
by Hydropolis Investments Limited.

Group Company

in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

Land and building 3,853 2,083 - -
Road development
3,243 537 - -

7,096 2,620 - -

* See Note 37
18. Right-of-use assets

The leased property relates to office building by Hydropolis Investments Limited with a rental
contract made for a fixed period of 2 years with extension options. The contract does not contain
non lease components when its stand alone price is considered. The lease agreement does not
impose any covenants other than the security interest in the leased asset that is held by the lessor.
The leased asset cannot be used as security for borrowing purposes.

Lease liabilities for the lease of right of use assets in the period was nil as full advance payment
was made for the leased property.

(i) Right-of-use assets

in millions of Naira Group

Balance at 1 January 31 Dec 2020 31 Dec 2019
Additions during the year *Restated
Depreciation (See Note 10 (b))
Effect of foreign currency translation difference 33 -
Balance at 31 December - 41

(22) (9)
41

15 33

* See Note 37

(ii) Amount recognised in profit or loss Group
in millions of Naira
Depreciation of right-of-use asset 31 Dec 2020 31 Dec 2019
*Restated

22 9

* See Note 37 Group
(iii) Amount recognised in statement of cashflows
31 Dec 2020 31 Dec 2019
in millions of Naira *Restated

Cash payments for the principal portion of the lease liability - 135
Total cash outflow for leases - 135

* See Note 37

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

19. Investment in subsidiaries

(a) Investment in subsidiaries are stated at cost and analysed as follows:

Group Company

in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

*Restated

Hydropolis Investments Limited - - 8,961 4,455

- - 8,961 4,455

* See Note 37

(b) The details of subsidiary at 31 December 2020 is as shown below:

Name of entity Status and shareholding % Principal activities

Hydropolis Investments structures
Limited
The Company holds 99.99% 99.9 Operate the Amfani industrial

interest in the Hydropolis 9% and residential park in Kanji

Investments Limited. This state. The industrial park will

accounts for 1,2499,999 provide a ready energy

ordinary shares with the environment for industries by

remaining 1 ordinary share channeling excess energy

being held by Colonel Peter generated from Kanji Hydro

Aiyegbeni. Power Plant to the park.

Hydropolis Investments

Limited is yet to commence

operations as at year end.

(c) Hydropolis Investments Limited also has investment in a subsidiary as show below:

Name of entity Status and shareholding % Principal activities

Hydropolis Mining structures
Nigeria Limited
Hydropolis Investments Limited 99.9 To carry on the business of

holds 99.99% interest in 9% mining, rock crushing, quarry

Hydropolis Mining Nigeria stone blasting, dredging,

Limited. This accounts for reclamation, borehole,

999,999 ordinary shares with the drilling, irrigation, damming,

remaining 1 ordinary share drainage services of all

being held by Colonel Peter descriptions as well as supply

Aiyegbeni. and deal in excavators, earth

moving plants blasters and

rock crushers. Hydropolis

Mining Nigeria Limited is yet

to commence operations as at

year end.

The place of business of the Hydropolis Investments Limited and Hydropolis Mining Nigeria
Limited is Nigeria.

56

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

20 Other assets

Other assets comprise

Group Company

in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

*Restated *Restated

Concession receivables from Kainji

Hydro Electric Plc (Note 20 (a)) 1,954 1,370 1,954 1,370

Deposit for shares- Quest Electricity

Nigeria Limited (Note 20 (c) 594 480 594 480

Deposit for shares- Highland Disco 594 480 594 480

Nigeria Limited (Note 20 (c)

Deposit for shares- Kainiji 53 - 53 -

Acquaculture Limited (Note 20 (c)

Advance on tax credit 24 - 24 -

Advance to suppliers 1,376 - 1,376 -

Special deposit with commercial

bank (Note 20 (b)) 5,693 4,598 5,693 4,598

10,288 6,928 10,288 6,928

* See Note 37

(a)Concession receivables represents the cost incurred till date on the implementation of capacity
recovery plan agreed post acquisition. 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. As at year end, the Group and Company are yet to complete the
capacity recovery plan, and has obtained a 2 year extension for the completion of the capacity
recovery plan. All costs incurred on the implementation of the capacity recovery plan shall be
reimbursable in accordance with the Service concession agreement at the end of the concession
agreement from the Federal Government of Nigeria represented by the Bureau of Public
Enterprises (BPE). See Note 8. Cost incurred in each year are recorded in present value terms
over the remaining period of the concession, and amount discounted in previous years are
unwound to present value. The total cost incurred by the Company at the Power plants amounted
to NGN18.58 billion (2019: NGN11.46 billion).

Additions in 2020 have been discounted over 23 years, being the remaining life of the
concession, while previously discounted amounts are annually being unwound for the discount.
The present value of NGN1.95 billion (2019: NGN1.37 billion) has been recognised as the
carrying amount. An amount of NGN7.07 billion and NGN0.12 billion (2019: NGN4.06 billion
and NGN0.08 billion) have been recognised in finance costs and finance income respectively as
day one loss and unwinding of discount on Concession receivables.
A discount rate of 8% was used for the discounting as this represents an estimated pre-tax
interest rate that would be applied for such credit term.

(b)Special deposit represents a deposit of NGN5.69 billion issued in favour of Bureau of Public
Enterprises (BPE). In line with the concession agreement, the Company is required to provide
BPE with an unconditional and irrevocable performance bond as a security for the due and
punctual performance of its obligation under the concession agreement. The deposit is domiciled
with a Nigerian financial institution until termination of the concession agreement, and earned
interest at a rate of 9% per annum during the year. Interest income on this instrument is recorded
as part of interest income on other financial assets (See Note 12).

c)Deposit for shares relates to the amount paid by the Group and Company which is expected to be
settled by delivery of a number of shares of the Companies. As at year end, the Group and
Company are yet to be allotted shares for the amounts deposited.

57

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

21. Loan receivables

Group Company

in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

Convertible loan note in Quest

Electricity Nigeria Limited 1,483 1,421 1,483 1,421

Convertible loan note in Highland

Disco Acquisition Limited 1,483 1,421 1,483 1,421

2,966 2,842 2,966 2,842

The Group and Company invested in a convertible loan note of NGN1.5 billion each in Quest
Electricity Nigeria Limited and Highland Disco Acquisition Limited in 2019. The loans were for a
5 year tenor at an interest rate of 11% per annum, with a 2 year moratorium on principal and
cumulative interest repayments starting from 16 July 2019. The Group and Company have
designated this as financial assets measured at FVTPL. Subsequent to year, the Board of Directors
approved the divestment of these loan receivables (See Note 36).

Information about the Group’s exposure to credit and currency risk is provided in note 33.

22 Tax assets

Tax assess comprise withholding tax receivables (advance payment of Companies Income Tax)

which is available to offset the actual tax liabilities. Based on the current tax laws in Nigeria, these

withholding taxes do not expire.

Group Company

in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

*Restated *Restated

Balance, at 1 January 365 235 365 235

Additions during the year 33 138 33 131

Foreign currency translation difference 98 1 90 (1)

Balance, at 31 December 496 374 488 365

* See Note 37

58

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

23. Trade and other receivables

Trade and other receivables comprise: Group Company

in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

Trade receivables *Restated *Restated
Interest receivables
Amount due from related parties (See 105,695 87,949 105,695 87,949
Note 23 (a))
Employee receivables*** 4,569 8,648 4,569 8,648
Other receivables
470 424 - -

618 238 618 238
129 221 129 221
111,481 97,480 111,011 97,056

* See Note 37

Trade and other receivables is also analysed into:

Current 111,099 97,480 110,629 97,056
- 382 -
Non-current 382
97,480 111,011 97,056
111,481

Information about the Group and Company's exposure to credit and market risks and impairment
losses for trade and other receivables is included in Note 33(B).

*** Included in Employee receivables is an amount of NGN222.18 million which represents
amount granted to the employees under the loan staff home ownership scheme. The funds provided
to the employees accrues management fee at a rate of 3% per annum. Management fee earned
during the year amounts to NGN9 million (2019:NGN9 million).

(a) The Group's related party receivables represents amount due from Dantata & Sowoe
Construction (Nigeria) Limited. During the prior year, Hydropolis Investments Limited entered
into an agreement with Dantata & Sowoe Construction (Nigeria) Limited (a related party), to
provide a promissory note up to a maximum aggregate of NGN470.02 million. All unpaid amounts
under this promissory note accrue interest at an annual interest rate of 15%. Interest income
recognised during the year amounted to NGN70 million (2019: NGN 44.75 million).

24. Prepayments Group Company
In millions of Naira
31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

Insurance 1,189 255 1,189 255

25. Cash and cash equivalents Group Company
31 Dec 2020 31 Dec 2019
In millions of Naira 31 Dec 2020 31 Dec 2019

Cash in hand *Restated *Restated
Cash in bank
Cash and cash equivalents 11 1 1
Short term investments 8,855 4,536
8,940 4,812 8,856 4,537
* See Note 37
8,941 4,813 29,625 11,565

30,102 11,565 38,481 16,102

39,043 16,378

59

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

Information about the Group and Company's exposure to credit and market risks and impairment
losses for Cash and cash equivalents is included in Note 33(B).

26. Share capital 31 Dec 2020 31 Dec 2019
In millions of Naira
Authorised: 500 500
500,000,000 ordinary shares of NGN1 each 1,636,661 1,636,661
Converted at NGN305.5 to US$1
500 500
Issued and fully paid: 1,636,661 1,636,661
500,000,000 ordinary shares of NGN1 each
Converted at NGN305.5 to US$1

All ordinary shares rank equally with regard to the Company's residual assets. The holders of
ordinary shares are entitled to receive dividends as declared from time to time and are entitled to
one vote per share at the meetings of Company.

27. Share premium
Share premium represents the excess of amount received over the nominal value of the total issued
share capital as at the reporting date

There was no change in the balance of share premium from the previous year. Share premium is
allotted to the shareholders in the proportion of their shareholding structure.

28. Translation reserve
Foreign exchange reserve comprises of all foreign currency differences arising from the translation
of the financial statements prepared in the Group and Company's functional currency (US Dollars)
into these financial statements prepared in the Company's presentation currency (Nigerian Naira).

Group Company
31 Dec 2020 31 Dec 2019
In millions of Naira 31 Dec 2020 31 Dec 2019
185 183
Balance at 1 January (352) (137)
Additional foreign currency
translation difference 20,366 (215) 21,686 2
Balance at 31 December 20,014 (352) 21,871 185

29. Non-controlling interest
The Non controlling interest represents 0.01% shareholding of the subsidiaries, Hydropolis
Investments Limited and Hydropolis Mining Nigeria Limited. Upon incorporation of these
subsidiaries, the Company acquired 99.99% stake representing 1,249,999 ordinary shares out of
1,250,000 shares, and 999,999 out of 1,000,000 ordinary shares respectively. Non controlling
interest is not material to the financial statements.

60

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

30. Concession liability

Group Company

In millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

*Restated *Restated

Balance at 1 January 199,441 186,587 199,441 186,587

Unwinding of discount for the year (See

Note 12) 14,751 12,850 14,751 12,850

Payment during the year (8,027) - (8,027) -

Foreign currency translation difference 47,701 4 47,701 4

Balance at 31 December 253,866 199,441 253,866 199,441

Non current 204,855 152,767 204,855 152,767

Current 49,011 46,674 49,011 46,674

253,866 199,441 253,866 199,441

* See Note 37

Concession liability was recognised on November 1, 2013 and relates to payments to be made in

the future for the concession rights obtained. These future payments amounting to $1.269 billion

have been discounted to present value using a discount rate of 7.658% which represents the

estimated yield on FGN Euro bonds with similar duration to the estimated future cashflows. It also

takes into consideration the upfront payment of a five year annual operating fee of $207.87

million(NGN30 billion) in arriving at the carrying amount of the concession liability at initial

recognition.

(a) Compliance with payment obligations under the concession agreement
Based on the concession agreement, the first, second and third installment of the annual concession
fee of $50.7 million (NGN19.29 billion) under this Concession Agreement, amounting to $101.4
million(NGN19.26 billion) fell due for payment on 1 November 2018, 2019 and 2020 respectively.
As at the date of issue of these financial statements, $23.14 million (NGN8 billion) of this amount
has been paid. In addition, royalty fees amounting to NGN10.11 billion (2019: NGN8.74 billion)
(Note 31) remained unpaid as at year end.

The Concession Agreement provides that MESL’s events of default include any breach of any of
the payment obligations imposed on MESL that is not remedied within 15 days after notice from
the counterparties giving reasonable notice of the breach and demanding remedy thereof, provided
this has not arisen from a breach of the concession agreement by the BPE or a Federal Government
of Nigeria (FGN) default. An event of default by MESL can result in any of the counterparties
terminating the Concession Agreement.

The Company is owed NGN108.3 billion for capacity and energy supplied, by another government
parastatal, the Nigerian Bulk Electricity Trading Company (NBET). The amount has been
outstanding for periods ranging from ten months to over four years. This is a breach of NBET's
payment obligations under the Power Purchase Agreement with Mainstream. In the opinion of the
Directors and based on legal advice from an independent solicitor, this constitutes an event of
default on the part of the FGN. The Directors are also of the opinion that since the FGN’s event of
default necessitated MESL’s failure to pay the matured obligations, there has been no MESL event
of default based on the terms of the concession agreement and there are therefore no contractual
grounds for BPE to terminate the concession agreement.

61

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

31. Trade and other payables

Group Company

in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

Trade payables 5,793 1,058 5,791 843
Accrued expenses 1,000 904 994 902
Other payables (See Note 31 (a)) 385 416 385
Sundry payables 416 691 852 691
Royalties 852 8,742
Dividend payable (See Note 31 (b)) 10,110 8,742 10,110 1,234
Amount due to related parties (See Note 1,967 1,234 1,967
32(e)) 42
35 13 37 12,839
Statutory deductions 20,173 13,027 20,167
305
535 326 505 13,144
20,708 13,353 20,672

Trade and other payables is also analysed into:

Non-current 416 385 416 385

Current 20,292 12,968 20,256 12,759

20,708 13,353 20,672 13,144

* See Note 37

(a) Other payables represents the present value of Kainji Hydro Electric Plc assets (inventory

items and cash balance) utilized by the Company post acquisition. In the previous years, the

Company utilized cash balance and inventory with an original amount of NGN2.35 billion

discounted at a discount rate of 8%. The Company utilised additional bank balance of Kainji

Hydro Electric Plc amounting to NGN0.42 million) (2019: Nil). Previously discounted amounts

are annually being unwound for the discount to increase the liability. The present value of

NGN0.42 billion (2019: NGN0.39 billion) has been recognised as the carrying amount, and

NGN0.03 billion recognised in finance cost (2019: NGN28 million).

(b) The directors declared and paid a dividend of $0.13/NGN47 (2019:$0.1/NGN30) per ordinary
shares of NGN1. This amounts to a total dividend of $65.8 million(NGN23.5 billion) for the year
(2019:$48.95 million(NGN15 billion)).

Group Company

in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019
Balance at 1 January
Dividend declared 1,234 1,032 1,234 1,032

Dividend paid 23,500 15,000 23,500 15,000
Foreign currency translation
difference 24,734 16,032 24,734 16,032
Balance at 31 December
(23,110) (16,492) (23,110) (16,492)

343 1,694 343 1,694
1,967 1,234 1,967 1,234

62

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

32. Related party transactions

(a) Parent and ultimate controlling party

The Group and Company in the normal course of business, carry out transactions with other
business entities that fall within the definition of related party transactions. The prices and
terms of transactions with principals and related parties are approved by management. The
ultimate controlling party of the group are the shareholders.

The Company is owned by various shareholders and does not have any parent company or
ultimate controlling company.

(b) Transactions with key management personnel
Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning,
directing and controlling the activities of the Company, directly or indirectly, including any
director of the of the Company. In addition to the directors, key management personnel
includes all senior management personnel of the Company such as the General Managers,
Chief Operating and Technical Officers.
Transactions with the Key management personnel compensation compromise the following:

Group Company

in millions of Naira 2020 2019 2020 2019

Directors fees and allowance 488 2,048 403 1,946
Salaries and wages-Executive
management 453 373 453 373

(c) Other related party relationships and transactions
The following are the nature of relationships and transactions with related parties during the
year:

Group

Transaction values for the year ended 31 December

Name of related party Nature of Relationship & 2020 2019
*Restated
transactions
40
Allstream Energy Common director & Supply of fuel 12
160
Solutions Limited
913
Confluence Cable MESL Shareholder & Professional -

Networks Limited services

Mainstream Common director & donations 1,862

Foundation**

63

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

32 Related party transactions (cont'd)

Company

Transaction values for the year ended 31 December

Name of related party Nature of Relationship & 2020 2019
*Restated
transactions
8
Hydropolis Investments Subsidiary/Common director & 9
40
Limited Investment
913
Allstream Energy Common director & Supply of fuel 12

Solutions Limited

Mainstream Common director & donations 1,862

Foundation**

**Included in the transaction with Mainstream Foundation during the year 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.

(d) Amount due from related parties

Group Company

in millions of Naira 2020 2019 2020 2019

*Restated

Dantata & Sawoe Construction Company

(Nig) Limited 470 424 - -

470 424 - -

* See Note 37

(e) Amount due to related parties

Group Company

in millions of Naira 2020 2019 2020 2019

*Restated *Restated

Mainstream Foundation 35 13 35 11

Hydropolis Investments Limited - - 2 31

35 13 37 42

* See Note 37

33. Financial instruments - Fair value and risk management

A. Accounting classifications and fair values

The following table shows the carrying amounts and fair values of financial assets and financial
liabilities, including their levels in the fair value hierarchy. It does not include fair value
information for financial assets and financial liabilities not measured at fair value if the carrying
amount is a reasonable approximation of fair value.
Further, for the current year the fair value disclosure of lease liabilities is also not required.

64

Notes to the consolidated and separate financial statements

Group C

Financial F

31 December 2020 assets at

in millions of Naira Note amortised cost

Financial assets measured at fair value

Loan receivables 21 -

-

Financial assets not measured at fair value 20 10,288
Other assets 23 111,481
Trade and other receivables 25
Cash and cash equivalents 39,043

160,812

Financial liabilities not measured at fair value 31 -
Trade and other payables 30 -
Concession liability -

31 December 2019 21 -
Financial assets measured at fair value -
Loan receivables
6,928
Financial assets not measured at fair value 20 97,480
Other assets 23 16,378
Trade and other receivables 25 120,786
Cash and cash equivalents

Financial liabilities not measured at fair value 31 -
Trade and other payables 30 -
Concession liability
-

Mainstream Energy Solutions limited
Annual Report

31 December 2020

s (cont'd) Fair value

Carrying amount Total Level 1 Level 2 Level 3 Total

Financial Other 2,966
assets at financial 2,966
FVTPL liabilities

2,966 - 2,966 - 2,966 -
2,966 - 2,966 - 2,966 -

- - 10,288 - - - -

- - 111,481 - - - -

- - 39,043 - - - -

- - 160,812 - --

- 20,173 20,173 - - - -
- 253,866 253,866 - - - -

- 274,039 274,039 - - - -

2,842 - 2,842 - 2,842 - 2,842
2,842 - 2,842 - 2,842 - 2,842

- - 6,928 -- --
- - 97,480 -- --
- - 16,378 -- --
- - 120,786 -- --

- 13,027 13,027 - - - -
- 199,441 199,441 - - - -

- 212,468 212,468 - - - -

Notes to the consolidated and separate financial statements

Company Ca

31 December 2020 Financial
in millions of Naira Note assets at

Financial assets measured at fair value amortised cost F
Loan receivables
21 -
-

Financial assets not measured at fair value 20 10,288
Other assets 23 111,011
Trade and other receivables 25
Cash and cash equivalents 38,481

159,780

Financial liabilities not measured at fair value 31 -
Trade and other payables 30 -
Concession liability
-

31 December 2019 20 6,928
Financial assets not measured at fair value 23 97,056
Other assets 25 16,102
Trade and other receivables
Cash and cash equivalents 120,086

Financial liabilities not measured at fair value 31 -
Trade and other payables 30 -
Concession liability
-

Mainstream Energy Solutions limited
Annual Report

31 December 2020

s (cont'd)

arrying amount Fair value

Financia Level 1 Level 2 Level 3 Total
l assets Other Total
2,966
at financial 2,966
FVTPL liabilities

2,966 - 2,966 - 2,966 -
2,966 - 2,966 - 2,966 -

- - 10,288 - - - -

- - 111,011 - - - -

- - 38,481 - - - -

- - 159,780 - --

- 20,167 20,167 - - - -
- 253,866 253,866 - - - -

- 274,033 274,033 - - - -

- - 6,928 - - - -
- - 97,056 - - - -
- - 16,102 - - - -
- - 120,086 - - - -

- 12,839 12,839 - - - -
- 199,441 199,441 - - - -
- 212,280 212,280 - - - -

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

B. Financial risk management overview

The Group and Company have exposure to the following risks from its use of financial
instruments:

 Credit risk
 Liquidity risk
 Market risk

This note presents information about the Group and Company’s exposure to each of the above
risks, the Group and Company's objectives, policies and processes for measuring and managing
risk, and the Group and Company's management of capital. Further quantitative disclosures are
included throughout these financial statements.

Risk management
The Group and Company’s board of directors has overall responsibility for the establishment and
oversight of the Group’s risk management framework. The board of directors has established the
risk management committee, which is responsible for developing and monitoring the Group and
Company’s risk management policies. The committee reports regularly to the board of directors on
its activities.

The Group and Company’s risk management policies are established to identify and analyse the
risks faced by the Group and Company, to set appropriate risk limits and controls and to monitor
risks and adherence to limits. Risk management policies and systems are reviewed regularly to
reflect changes in market conditions and the Group and Company’s activities. The Group and
Company through its training and management standards and procedures aims to maintain a
disciplined and constructive control environment in which all employees understand their roles
and obligations.

The Group and Company's audit and risk committee oversees how management monitors
compliance with the Group and Company’s risk management policies and procedures and reviews
the adequacy of the risk management framework in relation to the risks faced by the Group and
Company. The Group and Company's audit and risk committee is assisted in its oversight role by
internal audit. Internal audit undertakes both regular and adhoc reviews of risk management
controls and procedures, the results of which are reported to the audit and risk committee.

(a)Credit risk
Credit risk is the risk of financial loss to the Group and Company if a customer or counterparty
to a financial instrument fails to meet its contractual obligations, and arises principally from the
Group and Company’s receivables from customers and investments in debt securities.
The carrying amounts of financial assets represent the maximum credit exposure.

Group Company

in millions of Naira 31 Dec 2020 31 Dec 2019 31 Dec 2020 31 Dec 2019

*Restated *Restated

Cash and cash equivalents (Note 25) 39,043 16,378 38,481 16,102

Trade receivables and other 111,481 97,480 111,011 97,056

receivables (Note 23)

Special deposit with commercial

bank (Note 20) 5,693 4,598 5,693 4,598

156,217 118,456 155,185 117,756

67

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

B. Financial risk management overview (cont'd)
Impairment losses on financial assets recognised in profit or loss were as follows.

Group Company

in millions of Naira 2020 2019 2020 2019

Impairment loss on trade and interest 5,086 17,585 5,086 17,585
receivables
Impairment loss on other receivables - 17 - -
Impairment loss on other assets - 40 - 40
Impairment loss on Investment - 179 - 179
5,086 17,821 5,086 17,804

(i) Trade receivables and interest receivables

The Group and Company's exposure to credit risk is influenced mainly by the characteristics of its
customer. However, management also considers the factors that may influence the credit risk of its
customer base, including the default risk of the industry and country in which customers operate.

Management has established a credit policy under which each new customer is analysed
individually for creditworthiness before the Group and Company’s standard payment and delivery
terms and conditions are offered. The Group and Company limits its exposure to credit risk from
trade receivables by establishing a maximum payment period for its customers. The Group and
Company has a concentration risk as its major customer is the Nigerian Bulk Electricity Trading
Plc accounts for 66% of it sales, and has been transacting with the Group and Company for over
seven years and none of this customer's balance has been written off or are credit-impaired at the
reporting date. In monitoring customer credit risk, customers are grouped according to their credit
characteristics, including their geographic location, bulk or private customer.

As at 31 December 2020, the exposure to credit risk for trade and unbilled receivables by
geographic region was as follows:

Carrying amounts

Group Company

in millions of Naira 2020 2019 2020 2019

Nigeria 108,947 96,597 108,947 96,597
Other country 1,317 -
- 1,317
110,264 96,597
96,597 110,264

As at 31 December 2020, the exposure to credit risk for trade and unbilled receivables by
counterparty as follows:

Carrying amounts

Group Company

in millions of Naira 2020 2019 2020 2019

Bulk trader- NBET 108,265 95,630 108,265 95,630
Local bilateral customers 682 967
International bilateral customer 967 682 -
1,317
110,264 - 1,317 96,597

96,597 110,264

68

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

33. Financial risk management cont'd

(ii) Expected credit loss assessment for trade and interest receivables

The Group and Company use an allowance matrix to measure the ECLs of trade receivables from
customers.

Loss rates are calculated using a 'roll rate' method based on the probability of a receivable
progressing through successive stages of delinquency to write-off. Roll rates are calculated
separately for exposures in different segments based on the following credit risk characteristics.
The Group and Company determines the credit loss by segregating the receivables into its
indivdiual characteristic and applying experienced pattern and evidence of settlement by the
customer. Credit risk grades are defined using qualitative and quantitative factors that are
indicative. The Group and Company have considered NBET's confirmation of interest penalty on
late payment at market rate in determining the shortfall on issued invoices.

The following table provides information about the exposure to credit risk and ECLs for the Group
and Company's trade receivables from bilateral customers as at 31 December 2020.

31 December 2020 Weighted- Gross carrying Loss allowance Credit-
In millions of Naira average
loss rate amount impaired
Neither due nor past due
0-90 days past due 0% 9,958,839 - No
91-180 days past due 0%
181-273 days past due 0% 19,102,892 - No
274 - 365 days past due 0%
Over 1 year past due 0% 16,726,842 - No
Over 2 years past due 67%
Over 3 years past due 43% 9,583,134 - No
23%
636,042 - No

15,438,060 10,310,256 Yes

25,706,192 10,985,007 Yes

45,565,047 11,157,680 Yes

142,717,048 32,452,943

31 December 2019 Weighted- Gross carrying Loss allowance Credit-
In millions of Naira average
loss rate amount impaired
Neither due nor past due
0-90 days past due 0% 8,641,461 - No
91-180 days past due 0%
181-273 days past due 0% 11,887,296 - No
274 - 365 days past due 0%
Over 1 year past due 0% 8,952,252 - No
Over 2 years past due 1.9%
Over 3 years past due 2.39% 11,135,145 - No
4.39%
4,627,537 - No

16,131,095 8,327,912 Yes

20,853,647 8,704,600 Yes

39,422,950 8,989,032 Yes

121,651,383 26,021,544

Management believes that the unimpaired amounts that are past due are still collectible in full
based on historical payment behavior and extensive analysis of the customer's credit risk.

69

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

33 Financial risk management cont'd
(iii) Employee receivables

The Group and Company advance funds and salaries to employees for operational and personal
activities respectively. To mitigate credit risk, the Group and Company monitor the progress of
such activities which have been funded and make monthly deductions from employee salary for
salary advances. The Group and Company review the balances on a periodic basis taking into
consideration functions such as continued employment relationship and ability to offset amounts
against transactions due to these employees. Where such does not exist, the amounts are impaired.

(iv) Cash and cash equivalents

The Group and Company held cash and cash equivalents of NGN39.04 billion and NGN38.48
billion as at 31 December 2020 respectively (2019: NGN16.38 billion and NGN16.10 billion)
respectively, which represents its maximum credit exposure on these assets.

Impairment on cash and cash equivalents has been measured on a 12 month expected loss basis
and reflects the short term maturities of the exposures. The Group and Company consider that its
cash and cash equivalents have low credit risk based on the external ratings of the counterparties.
The cash and cash equivalents are held with banks and financial institutions that have good credit
ratings ranging from A+ to BBB- rating based on Standard & Poor/Fitch. The Group and
Company did not recognise any impairment on its cash and cash equivalents (2019: Nil)

(v) Amount due from related parties
The Group and Company have transactions with its related parties who are related to the Group
and Company by virtue of common directorship who influence the financial and operating
policies of both entities. In the directors' view, all amounts are collectible. Amount due from
related parties were assessed for impairment in accordance with IFRS 9. No impairment loss was
recognised with respect to these receivables for the Group and Company (2019: Nil).

(vi) Movements in the allowance for impairment in respect of trade and unbilled receivables

The movement in the allowance for impairment in respect of trade and unbilled receivables during

the year was as follows

Group Company

in millions of Naira 2020 2019 2020 2019

*Restated *Restated

Balance at 1 January 26,017 8,432 26,017 8,432

Net impairment loss allowance during the

year 5,086 17,585 5,086 17,585

Balance at 31 December 31,103 26,017 31,103 26,017

* See Note 37

(b).Liquidity risk

Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting the

obligations associated with its financial liabilities that are settled by delivering cash or another

financial asset. The Group and Company manages liquidity risk by ensuring that sufficient funds

are available to meet its commitments as they fall due. The Group and Company use both long term

and short term cash flow projections to monitor funding requirements for activities and to ensure

there is sufficient cash to meet operational needs while maintaining sufficient headroom on its

undrawn committed borrowing facilities at all times so that the Group and Company did not breach

borrowing limits on any of its borrowing facilities. Cash flow projections take into consideration

the Group’s debt financing plans, covenant compliance and internal balance sheet ratio targets.

70

Notes to the consolidated and separate financial statements

Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabiliti
agreements:
Group

Carrying
amount

Non- derivative financial liabilities

31 December 2020

Concession liability 30 253,866 1,2

Trade and other payables* 31 19,757

273,623 1,2

31 December 2019 30 199,441 1,2
Concession liability
Trade and other payables* 31 12,642

212,083 1,2

Company

Non- derivative financial liabilities Notes Carrying 1,2
31 December 2020 amount 1,2
Concession liability 30 1,2
Trade and other payables* 31 253,866 1,2
19,751
31 December 2019 30
Concession liability 31 273,617
Trade and other payables*
199,441
12,454

211,895

*excludes statutory deductions per Note 31.

Mainstream Energy Solutions limited
Annual Report

31 December 2020

s (cont'd)

ies including estimated interest payments and excluding the impact of netting

Contractual cashflows

2 months or 2 -12 5 years and

Total less months 1 - 2 years 2 - 5 years above

269,016 109,981 50,761 101,521 152,282 854,471
19,757 19,757 - - - -

288,773 129,738 50,761 101,521 152,282 854,471

269,016 59,221 50,761 101,521 152,282 905,231
12,642 12,642 - - - -
71,863
281,658 50,761 101,521 152,282 905,231

Contractual cashflows

2 months or 2 - 12 1 - 2 years 2 years or 5 years and
less months
Total mote above

269,016 109,981 50,761 101,521 152,282 854,471
19,751 19,751 - - - -

288,767 129,732 50,761 101,521 152,282 854,471

269,016 59,221 50,761 101,521 152,282 905,231
12,454 12,454 - - - -
71,675
281,470 50,761 101,521 152,282 905,231

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

33 Financial instruments - Fair value and risk management cont'd

(c). Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates
and equity prices will affect the Group and Company's income or the value of its holdings of
financial instruments. The objective of market risk management is to manage and control market
risk exposures within acceptable parameters, while optimising the return.

The Group and Company manage market risks by keeping costs low through various cost
optimizations programs. Moreover, market developments are monitored and discussed regularly,
and mitigating actions are taken where necessary.

Currency risk

The Group and Company are exposed to transactional foreign currency risk to the extent that
there is a mismatch between the currencies in which sales, purchases receivables and borrowings
are denominated and the respective the functional currencies of the Group Companies. The
functional currencies of the parent company and its subsidiary are the United States Dollar and
Nigerian Naira respectively. The currencies in which these transactions are primarily
denominated are US Dollars and Nigerian Naira.

In managing currency risk, the Group and Company aim to reduce the impact of short-term
fluctuations on earnings. Although the Group and Company have various measures to mitigate
exposure to foreign exchange rate movement, over the longer term, however, permanent changes
in exchange rates would have an impact on profit. The Group and Company monitor the
movement in the currency rates on an ongoing basis.

Exposure to currency risk

The summary quantitative data about the Group and Company's exposure to currency risk as
reported to the management of the Group and Company is as follows:

Group

31 December 2020 31 December 2019
EURO GBP NGN
In thousands EURO GBP NGN
- - 3,154
Financial assets - - 10,288 - - 1,726
Trade and other receivables - - 2,966 - - 6,928
Other assets 11 1 719,664 - --
Loan receivables 10 1 600,277
Cash and cash equivalents

Financial liabilities - - (8,090) - - (6,541)
Trade and other payables

Net statement of financial 11 1 727,982 10 1 602,390
position exposure

72

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

33 Financial instruments - Fair value and risk management cont'd

Exposure to currency risk (cont'd)
Company

31 December 2020 31 December 2019
EURO GBP NGN
In thousands EURO GBP NGN
- - 3,154
Financial assets - - 1,726
Trade and other - - 10,288
receivables - - 2,966 - - 6,928
Other assets 11 1 47,773 - --
Loan receivables 10 1 31,465
Cash and cash equivalents

Financial liabilities - - (7,745) - - (6,196)
Trade and other payables

Net statement of 11 1 56,436 10 1 33,923
financial position
exposure

The following significant exchange rates were applied during the year:

Average rate Year end spot rate

Dec 2020 Dec 2019 Dec 2020 Dec 2019

GBP 1.3358 1.2769 0.8509 0.8962

EURO 1.1815 1.1198 1.1232 1.1444

NGN 0.00326 0.00327 0.00326 0.00326

The average and reporting date exchange rates applied by the Group and Company represent

Central Bank of Nigeria Exchange rate. They represent the prescribed rate for settling USD

denominated obligation.

Sensitivity analysis
The sensitivity analysis for currency rate risk shows how changes in the future cash flows of a
financial instrument will fluctuate because of changes in exchange rates. The analysis includes
only outstanding foreign currency denominated monetary items and adjusts their translation at
period end for the percentage change in foreign currency rates below. The balances are cash and
bank balances and concession liabilities. The sensitivity of the Group and Company's earnings to
fluctuations in exchange rates is reflected by varying the exchange rates

Increase in profit or loss

Effect in thousands of USD Group Company

31 December 2020 Strengthening Weakening Strengthening Weakening
NGN(10% movement)
GBP (10% movement) 2,373 (2,373) 184 (184)
EUR(10% movement) 1 (1) 1 (1)

12 (12) 12 (12)

31 December 2019 1,964 (1,964) 111 (111)
NGN(10% movement) 1 (1) 1 (1)
GBP (10% movement)
EUR(10% movement) 11 (11) 11 (11)

73

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

33 Financial instruments - Fair value and risk management cont'd

Interest rate risk

The Group and Company's interest rate risk arises from short and long-term borrowings. The
borrowings are usually issued at a fixed rate and do not expose the Group and Company to
interest rate risk. As at 31 December 2019, the Group and Company did not have any borrowings
and as such is not exposed to interest rate risk (2019: Nil).

Exposure to interest rate risk

The interest rate profile of the Group and Company’s interest-bearing financial instruments as
reported to the management of the Group and Company is as follows:

Group Company

in millions of Naira 2020 2019 2020 2019

Fixed-rate instruments 30,102 11,565 29,625 11,565
Short term investments (See Note 25) 5,693 4,598 5,693 4,598
Special deposits (See Note 20)
35,795 16,163 35,318 16,163

(d). Capital risk management
The Group and Company’s objectives when managing capital are to safeguard its ability to
continue as a going concern in order to provide returns for shareholders and benefits for other
stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to
maintain or adjust the capital structure, the Group and Company may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to
reduce debt.

The Group and Company monitor capital using a ratio of 'net debt' to 'total equity'. Net debt is
calculated as total liabilities (as shown on the statement of financial position) less cash and cash
equivalents. Total equity is calculated as the sum of all equity components on the statement of
financial position.

The net debt to total equity ratio at 31 December 2020 and 31 December 2019 are as follows:

Group Company

in millions of Naira 2020 2019 2020 2019

Total liabilities NGN'000 NGN'000 NGN'000 NGN'000
Less: Cash and cash equivalents(See Note
25) 283,333 214,386 283,297 214,177
Adjusted net debt
Total equity (39,043) (16,378) (38,481) (16,102)
Adjusted net debt to equity ratio
244,290 198,008 244,816 198,075
142,653 76,757 145,940 78,425
2.526
1.712 2.580 1.678

There were no changes in the Group and Company's approach to capital management during the
year. The Group and Company are not subject to externally imposed capital requirements.

74

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

34. Contingent liabilities
At the statement of financial position reporting date, there were a number of pending litigation
against the Group and Company for stated amounts of NGN117.65 million (2019:NGN82.76
million).
On advice of the legal counsel, the Directors are of the opinion that no material losses are expected
to arise. Therefore, no provision regarding these has been made in these financial statements as the
likelihood of an outflow of economic resources arising is remote (2019: Nil).

35. Disclosure of non-audit services
During the year, KPMG Professional Services provided non-audit services to the Group and
Company for a fee of NGN75 million. During the year, KPMG Professional Services provided an
audit related service for a fee of NGN35million (2019:Nil).

36. Events after reporting period
Divestment of investments
Subsequent to year end, the Group and Company approved its plans to divest its investment in
Hydroplois Investment Limited, its Loan receivables in Quest Electricity Nigeria Limited and
Highland Disco Acquisition Limited, its deposit for shares in Quest Electricity Nigeria Limited,
Highland Disco Acquisition Limited, and Kainji Aquaculture Limited by a group restructuring
plans. The Directors consider this to be a non-adjusting subsequent events.

Except as otherwise stated above, there were no significant events after the reporting date which
could have had a material effect on the state of affairs of the Group and the Company as at 31st
December 2020 and the profit for the year ended on that date which have not been adequately
accounted for or disclosed in this financial statements.

37. Correction of errors and reclassifications
During the year, the Group and Company discovered some errors in the prior years financial
statements. The errors have been corrected by restating each of the affected financial statements
line items for the prior periods, and presenting a third statement of financial position. Also, some
figures in the prior year financial statements have been reclassified for the purpose of
comparability with the current year presentation format. The following notes and tables
summarises the errors and their impact on the financial statements.

(i) In prior years, the Group and Company erroneously prepared its financial statements up to 31
December 2019 using the Nigerian Naira as the functional currency. During the year, the Group
and Company evaluated its functional currency based on an assessment of its underlying
transactions with the assessment indicated that its functional currency should have been the US
dollar since 1 April 2016. As a result, the financial statements have been misstated. The error has
however been corrected by restating each of the affected financial statements line items for prior
periods and recognising a foreign currency translation reserve.

(ii) The Group and Company discovered that it had classified the value of its land and building
together and erroneously computed depreciation charge on the total amount since inital
recognition. As a consequence, the Group and Company's depreciation charge and the net book
value of land and building in prior years have been overstated and understated respectively. The
error has been corrected by restating each of the affected financial statements line items for prior
periods.

75

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

37. Correction of errors and reclassifications (cont'd)

(iii) Upon initial recognition of the concession fee payable, the Group and Company erroneously
used a rate of 12.8% to discount the annual operating fee to the BPE. Given the change in
functional currency it was determined that 7.63% more appropriately reflects the market
assessment of the time value of money and those risks specific to the liability at the date of initial
recognition. As a consequence the intangible assets, concession liability, direct costs and finance
costs in the prior periods were understated. The error has been corrected by restating each of the
affected financial statement line items for prior periods.

(iv) The Group and Company had previously classified prepayment as other current assets. This
has been reclassified as Prepayments during the year.

(v) The Group and Company had previously included and disclosed tax assets (withholding tax
credit notes) as financial assets at amortized cost in the consolidated and separate statements of
financial position. This has been reclassified as tax assets during the year.

(vi) During the year the Group and Company discovered that the amounts ascribed to certain
temporary differences were not updated to reflect changes in the underlying income tax
computations for the year. The errors resulted in an mistatement of deferred tax assets, deferred
tax expense, income tax charge, and income tax liability. The error has been corrected by restating
each of the affected financial statements line items for the prior periods.

Statement of profit or loss and other comprehensive income Group Company

in millions of Naira 2019 2019
Income tax expense:
-Impact of adjustments on CIT 1,901 1,901
-Impact of adjustments on deferred tax 4,904 4,904
6,805 6,805

(vii) During the year, the Group discovered that the amounts ascribed to Non-controlling interests
were incorrectly calculated. The error resulted in the overstatement of the Non-controlling
interests with a corresponding understatement of retained earnings. The error has been corrected
by restating each of the affected financial statements line items for the prior periods.

(viii) The Group and Company had previously classified concession receivables from Kainji
Hydro Electric Plc as Financial assets at amortized cost. This has been reclassified as Other assets
during the year.

(ix) The Group and Company had previously classified Deposit for shares in Quest Eletricity
Nigeria Limited and Highland Disco Acquisition Limited, and Special deposit with commercial
bank as Financial assets at amortized cost and a current asset in the consolidated and separate
statements of financial position. This has been reclassified as Other assets (Non-current asset)
during the year.

(x) The Group and Company had previously classified trade and unbilled receivables as Trade
receivables in the consolidated and separate statements of financial position. This has been
reclassified as Trade and other receivables during the year.

(xi) The Group and Company had previously classified convertible loan note granted to Quest
Electricity Nigeria Limited and Highland Disco Acquisition Limited as trade and unbilled
receivables as Financial assets at fair value through profit or loss in the consolidated and separate
statements of financial position. This has been reclassified as Loan receivables during the year.

76

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

37. Correction of errors and reclassifications (cont'd)
(xii) The Company had previously incorrectly classified investment in Hydropolis Investment
Limited as Deposit for shares (current assets) in the separate statements of financial position. This
has been reclassified as Investment in subsidiaries during the year.
(xiii) The Group and Company had previously classified the specific impairment on its receivables
in general and administrative expenses in the consolidated and separate statements of profit or loss
and other comprehensive income. This has been reclassified as Impairment loss on financial assets
during the year.
(xiv) The Group and Company had previously classified interest income from receivables from
BET and short term investments in other income in the consolidated and separate statements of
profit or loss and other comprehensive income. This has been reclassified as finance income
during the year.

77

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

37. Correction of errors and reclassifications (cont'd)

Consolidated Statement of financial position

Impact of correction of errors

As

previously Adjustments/R

In millions of Naira reported eclassification As restated

1 January 2019

Assets

Property, plant and equipment (i)(ii) 2,525 (111) 2,414

Intangible assets (i)(iii) 61,259 105,763 167,022

Deferred tax assets (i)(vi) 25,012 (20,111) 4,901

Other assets (viii)(ix) - 5,651 5,651

Financial assets at amortized cost (viii) 1,053 (1,053) -

Total non-current assets 89,849 90,139 179,988

Inventories (v) 146 - 146
Tax assets (iv) - 235 235
Other current assets (i)(x) (323)
Trade receivables (i)(x) 323 (87,213) -
Trade and other receivables (iv) 87,213 89,635 -
Prepayments (v)(ix) 323 89,635
Financial assets at amortized cost (i) - (4,934) 323
Cash and cash equivalents - (166) -
Total current assets 4,934 (2,443) 11,204
Total assets 11,370 87,696 101,543
103,986 281,531
193,835

Equity (i)(vi)(vii) 500 - 500
Share capital (i) 16,196 - 16,196
Share premium 30,748 34,110 64,858
Retained earnings (vii) (137)
Translation reserve - 33,973 (137)
Total equity attributable to the owners of 47,444 81,417
the Company (58)
Non-controlling interest 58 33,915 -
Total equity 47,502 81,417

Liabilities (iii) 130,175 25,296 155,471
Concession liability 356 - 356
Trade and other payables
Total non-current liabilities 130,531 25,296 155,827

Trade and other payables (i) 13,217 (46) 13,171
Concession liability (iii) 2,585 28,531 31,116
Total current liabilities 28,485 44,287
Total liabilities 15,802 53,781 200,114
Total equity and liabilities 146,333 87,696 281,531
193,835

78

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

37. Correction of errors and reclassifications (cont'd)

Separate Statement of financial position

Impact of correction of errors

As

previously Adjustments/R

In millions of Naira reported eclassification As restated

1 January 2019

Assets

Property, plant and equipment (i)(ii) 1,552 42 1,594

Intangible assets (i)(iii) 61,259 105,763 167,022

Deferred tax assets (i)(vi) 25,012 (20,111) 4,901

Investment in subsidiaries (xi) 1 2,132 2,133

Other assets (viii)(ix) - 5,651 5,651

Financial assets at amortized cost (viii) 1,053 (1,053) -

Total non-current assets 88,877 92,424 181,301

Tax assets (v) - 235 235
Inventories 146 - 146
Other current assets (iv) 324
Trade receivables (i)(x) 87,213 (324) -
Trade and other receivables (i)(x) (87,213) -
Prepayments (iv) - 89,635
Financial assets at amortized cost (xi)(v) - 89,635 323
Cash and cash equivalents 7,055 323 -
Total current assets 10,301 10,301
Total assets 105,039 (7,055) 100,640
193,916 - 281,941

(4,399)
88,025

Equity (vi)(vi) 500 - 500
Share capital (i) 16,196 - 16,196
Share premium 30,876 34,058 64,934
Retained earnings 183
Translation reserve - 34,241 183
Total equity 47,572 81,813

Liabilities (iii) 130,175 25,296 155,471
Concession liability 356 - 356
Trade and other payables
Total non-current liabilities 130,531 25,296 155,827

Trade and other payables (i) 13,228 (43) 13,185
Concession liability (vi) 2,585 28,531 31,116
Total current liabilities 28,488 44,301
Total liabilities 15,813 53,784 200,128
Total equity and liabilities 146,344 88,025 281,941
193,916

79

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

37. Correction of errors and reclassifications (cont'd)

Consolidated Statement of financial position

Impact of correction of errors

As Adjustment

previously s/Reclassific

In millions of Naira reported ation As restated

31 December 2019

Assets

Property, plant and equipment (i)(ii) 4,305 (377) 3,928

Intangible assets (iii) 58,792 101,503 160,295

Right-of-use assets (i) 39 (6) 33

Deferred tax assets (i)(vi) 17,837 (15,207) 2,630

Other assets (viii)(ix) - 6,928 6,928

Financial assets at fair value through

profit or loss (xi) 2,842 (2,842) -

Loan receivables (xi) - 2,842 2,842

Financial assets at amortized cost (viii) 1,370 (1,370) -

Total non-current assets 85,185 91,471 176,656

Tax assets (v) - 374 374
Other current assets (iv) 255 (255) -
Trade receivables (i)(x) 104,223 (104,223) -
Trade and other receivables (i)(x) 97,480
Prepayments (iv) - 2,842 97,480
Financial assets at amortized cost (v)(ix) - (6,895) 2,842
Cash and cash equivalents (i) 6,895 -
Total current assets 16,429 (51)
Total assets 127,802 (10,728) 16,378
212,987 117,074
80,743 293,730

Equity (i)(vi)(vii) 500 - 500
Share capital (i) 16,196 - 16,196
Share premium 31,750 28,663 60,413
Retained earnings (vii) (352)
Translation reserve - 28,311 (352)
Total equity attributable to the owners of 48,446 76,757
the Company (74)
Non-controlling interest 74 28,237 -
Total equity 48,520 76,757

Liabilities (iii) 129,294 23,473 152,767
Concession liability
Trade and other payables 385 - 385
Total non-current liabilities
129,679 23,473 153,152

Current tax liabilities (i)(vi) 3,493 (1,901) 1,592
Trade and other payables (i) 13,143 (175) 12,968
Concession liability (iii) 18,151 46,674
Total current liabilities 34,787 28,523 61,234
Total liabilities 164,466 26,447 214,386
Total equity and liabilities 212,986 49,920 291,143
78,157

80

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

37. Correction of errors and reclassifications (cont'd)

Separate Statement of financial position

Impact of correction of errors

As Adjustment

previously s/Reclassific

In millions of Naira reported ation As restated

31 December 2019

Assets

Property, plant and equipment (i)(ii) 1,623 51 1,674

Intangible assets (i)(iii) 58,792 101,503 160,295

Deferred tax assets (i)(vi) 17,837 (15,207) 2,630

Investment in subsidiaries (xi) 1 4,454 4,455

Other assets (viii)(ix) - 6,928 6,928

Financial assets at fair value through

profit or loss (xi) 2,842 (2,842) -

Loan receivables (xi) - 2,842 2,842

Financial assets at amortized cost (viii) 1,370 (1,370) -

Total non-current assets 82,465 96,359 178,824

Tax assets (v) - 365 365
Other current assets (iv) 255 (255) -
Trade receivables (i)(x) 104,223 (104,223) -
Trade and other receivables (i)(x) 97,056
Prepayments (iv) - 97,056
Financial assets at amortized cost (v)(ix) - 255 255
Cash and cash equivalents (i) 10,827 (10,827) -
Total current assets 16,101
Total assets 131,406 1 16,102
213,871 (17,628) 113,778
292,602
78,731

Equity (i)(vi)(vii) 500 - 500
Share capital (i) 16,196 - 16,196
Share premium 32,964 28,580 61,544
Retained earnings 185
Translation reserve - 28,765 185
Total equity 49,660 78,425

Liabilities (iii) 129,294 23,473 152,767
Concession liability
Trade and other payables 385 - 385
Total non-current liabilities
129,679 23,473 153,152

Current tax liabilities (i)(vi) 3,493 (1,901) 1,592
Trade and other payables (i) 12,888 (129) 12,759
Concession liability (iii) 18,151 46,674
Total current liabilities 34,532 28,523 61,025
Total liabilities 164,211 26,493 214,177
Total equity and liabilities 213,871 49,966 292,602
78,731

81

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

37. Correction of errors and reclassifications (cont'd)

Consolidated Statement of profit or loss and other comprehensive income

Impact of correction of errors

As Adjustment

previously s/Reclassific

In millions of Naira reported ation As restated

Revenue (i) 77,778 (9,664) 68,114
Cost of sales (i) (13,034) (4,394) (17,428)
Gross profit (14,058)
(xiv) 64,744 50,686
Other income (xiii) (9,795)
General and administrative expenses (xiii) 10,067 21,831 272
Impairment loss on financial assets (33,032) (21,707) (11,201)
Result from operating activities (xiv) (23,729) (17,821)
(i) 3,886
Finance income 45,665 10,018 21,936
Finance cost (i)(vi) 1,443
84 10,102
Net finance cost (19,063) 11,461 (17,620)

Profit before income taxation (18,979) (12,268) (7,518)

Income tax expense 26,686 6,805 14,418

Profit for the year (10,668) (5,463) (3,863)

16,018 10,555

Other comprehensive income

Items that may be reclassified subsequently to profit or loss:

Foreign currency translation

differences (i) - (215) (215)
(215) (215)
Other comprehensive income, (5,678) 10,340

net of tax -

Total comprehensive income

for the year 16,018

Profit attributable to: 16,002 (5,447) 10,555
Owners of Company 16 (16) -
Non-controlling interest
16,018 (5,463) 10,555

Total comprehensive income attributable to: 16,002 (5,662) 10,340
Owners of Company - - -
Non-controlling interest
16,002 (5,662) 10,340

82

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

37. Correction of errors and reclassifications (cont'd)

Separate Statement of profit or loss and other comprehensive income

Impact of correction of errors

As

previously

In millions of Naira reported Adjustment As restated

Revenue (i) 77,778 (9,664) 68,114
Cost of sales (i) (13,034) (4,394) (17,428)
Gross profit (14,058)
(xiv) 64,744 50,686
Other income (xiii) (9,717)
General and administrative expenses (xiii) 9,944 21,618 227
Impairment loss on financial assets (31,679) (21,531) (10,061)
Result from operating activities (xiv) (23,688) (17,804)
(i) 3,727
Finance income 46,736 9,958 23,048
Finance cost (i)(vi) 1,446
84 10,042
Net finance cost (19,063) 11,404 (17,617)

Profit before income taxation (18,979) (12,284) (7,575)

Income tax expense 27,757 6,805 15,473

Profit for the year (10,668) (5,479) (3,863)

17,089 11,610

Other comprehensive income

Items that may be reclassified subsequently to profit or loss:

Foreign currency translation

differences (i) - 2 2
2 2
Other comprehensive income, (5,477) 11,612

net of tax -

Total comprehensive income

for the year 17,089

Profit attributable to: 17,089 (5,479) 11,610
Owners of Company - - -
Non-controlling interest
17,089 (5,479) 11,610

Total comprehensive income attributable to: 17,089 (5,477) 11,612
Owners of Company - - -
Non-controlling interest
17,089 (5,477) 11,612

83

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

37. Correction of errors and reclassifications (cont'd)

Consolidated Statement of cash flow

Impact of correction of errors

As Adjustment

previously /Reclassific

In millions of Naira reported ation As restated

31 December 2019

Profit for the year - 10,555 10,555

Adjustment for: - 256 256
Depreciation-PPE - 9 9
Depreciation -ROU -
Amortization - 6,724 6,724
Write-off of Intangible assets - - -
Finance cost -
Income tax expense - 7,518 7,518
Impairment loss on financial assets - 3,863 3,863
Gain on disposal of PPE - 17,821 17,821

Changes in: - 8 8
tax assets - 46,754 46,754
inventories -
trade and other receivables - 138 138
prepayments - 146 146
trade and other payables 29,366 (25,663) (25,663)
(1,434)
Cash generated from operating activities 27,931 68 68
Interest received (203) (203)
(8,126) 21,240
Net cash inflow from operating activities 1,434
(6,691) -
21,240

Cashflows from investing activities (2,055) 263 (1,792)
Acquisition of property, plant and equipment 1,434 63 1,371
Interest received -
Payment for financial assets at amortized cost (4,263) 4,263 -
Payment for financial assets at fair value (3,000) 3,000
through profit or loss -
Income from trade income financing 53 (53) -
Proceed from disposal of property, plant and 8 (8)
equipment (2,698)
Expenditure on improvement of power plants - (2,698) (3,119)
Net cash used in investing activities (7,823) 4,704

Cashflows from financing activities (15,000) (1,492) (16,492)
Dividend paid to shareholders (49) - -
Principal element of lease payment -
Bank charges paid (90) (90)
Net cash generated from financing activities (15,049) (1,533) (16,582)

Net (decrease)/increase in cash and cash equivalents 5,059 (3,561) 1,498
Cash and cash equivalents at 1 January 11,370 (166) 11,204
Effect of movement in exchange rates on cash held (3,676)
Cash and cash equivalents as at 31 December - (3,676) 16,378
16,429 (51)

84

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Notes to the consolidated and separate financial statements (cont'd)

37. Correction of errors and reclassifications (cont'd)

Separate Statement of cash flow

Impact of correction of errors

As Adjustment

previously /Reclassific

In millions of Naira reported ation As restated

31 December 2019

Profit for the year - 11,610 11,610

Adjustment for: - 246 246
Depreciation-PPE - - -
Amortization - - -
Write-off of Intangible assets -
Finance cost - 16,220 16,220
Income tax expense - 3,863 3,863
Impairment loss on financial assets -
Gain on disposal of PPE - 17,804 17,804
8 8
Changes in: -
tax assets - 49,751 49,751
inventories -
trade and other receivables - 131 131
prepayments - (146) (146)
trade and other payables 28,390 (33,868) (33,868)
(1,312)
Cash generated from operating activities 27,078 68 68
Interest received (425) (425)
(6,155) 22,235
Net cash inflow from operating activities 1,312
(4,843) -
22,235

Cashflows from investing activities (335) 1 (334)
Acquisition of property, plant and equipment 8 (8) -
Proceed from disposal of property, plant and
equipment (3,000) 3,000 -
Payment for financial assets at fair value
through profit or loss (4,263) 4,263 -
Payment for financial assets at amortized cost 1,312 2,624 (1,312)
Interest received - (2,322)
Investment in subsidiary - (2,698) 2,322
Expenditure on improvement of power plants 4,256 (2,698)
Net cash used in investing activities (6,278) (2,022)

Cashflows from financing activities (15,000) (1,492) (16,492)
Dividend paid to shareholders - (86) (86)
Bank charges paid
Net cash used in financing activities (15,000) (1,578) (16,578)

Net (decrease)/increase in cash and cash equivalents 5,800 (4,185) 1,615
Cash and cash equivalents at 1 January 10,301 - 10,301
Effect of movement in exchange rates on cash held (4,186)
Cash and cash equivalents as at 31 December - (4,186) 16,102
16,101 1

85

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

86

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Other national disclosure

87

Mainstream Energy Solutions Limited
Annual Report

31 December 2020

Value Added Statements

For the year ended 31 December

Group Company

in millions of Naira 2020 2019 2020 2019

Revenue 83,140 68,114 83,140 68,114

Brought materials and services:

-Local (16,408) (28,414) (16,355) (27,296)
(781)
-Imported (546) (546) (781)
38,919
66,186 272 66,239 40,037

Other income 245 39,191 175 227

Value added 66,431 100 100 66,414 100 40,264 100

Group Company

in millions of Naira 2020 % 2019 % 2020 % 2019 %

Applied as follows: 2,016 3 1,999 5 1,931 3 1,970 5
To Employee;
-Salaries and wages

To provider of finance;

-Net finance cost 20,013 30 7,518 19 20,028 30 7,575 19

To Government; (48,436) (73) 3,863 10 (48,436) (73) 3,863 10
-Taxes

Retained in business: 308 - 256 1 62 - 246 1
To maintain and replace
-Property, plant and 69,030 105 10,555 27 69,329 105 11,610 28
equipment 66,431 100 39,191 100 66,414 100 40,264 100
To augment retained
earnings

88