31 December 2021 Annual Report
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021
COMPANY PROFILE M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 Mainstream Energy Solutions Limited (MESL) was incorporated in 2011 and licensed as a power generating company. MESL took over Kainji and Jebba Hydro Power Plant (HPP) with a total installed capacity of 1338.4MW through a concession agreement in November 2013. The two hydro plants are cascaded 100km apart with Kainji dam being on the upstream of Jebba. The two hydro plants; the Kainji and Jebba have installed capacities of 760MWand 578.4MWrespectively. Upon takeover in November 2013, the total available capacity of the two plant was 582MW. As at today, MESL has proudly restored the Power Plants to 922MW over the course of eight years. We currently generate an average of 20 percent of power to Nigeria's national grid. Kainji was commissioned as Nigeria rst Hydro Power Plant in 1968 while Jebba Power Plant was commissioned in 1985. VISION MISSION CORE VALUES We are focused on contributing to National development through generating electricity safely and reliably to meet Nigeria's electricity requirements. To be the recognized performance leader of electric power industry in Nigeria and beyond. To generate and deliver electricity in a safe, reliable, efciant and most environmentally friendly manner. Team work Responsibility Innovation Integrity Passion
CONTENTS M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 Chairman’s Statement Managing Director/CEO's Review Corporate Information Director’s Report Statement of Director’s Responsibilities Statement of Corporate Responsibility Independent Auditor’s Report Consolidated and Separate Statements of Financial Position Consolidated and Separate Statements of Prot or Loss and other Comprehensive Income Consolidated Statement of Changes in Equity Separate Statement of Changes In Equity Consolidated and Separate Statements of Cash Flows Notes to the Consolidated and Separate Financial Statements Other National Disclosures iii 1 2 9 10 11 14 16 17 18 19 20 79
Statements
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 CHAIRMAN'S SPEECH AT THE 10TH ANNUAL GENERAL MEETING OF MAINSTREAM ENERGY SOLUTIONS LIMITED ON DECEMBER 10, 2021 Distinguished Shareholders, Members of the Board, Ladies and Gentlemen, I welcome you to the 10th Annual General Meeting of your dynamic company, Mainstream Energy Solutions Limited (MESL). As is customary, I will present a summary of your company's endeavors in the year 2021. OVERVIEWOFTHE YEAR 2021 In the year under review, the power sector experienced a series of undulating events, which could determine the course of the next coming years. Several key players at the distribution segment capitulated due to the illiquidity of the sector, which has been a major concern for all participants. On the other hand, the company achieved a major milestone in its capacity expansion strides by signing the rehabilitation of Unit 1G9 and installation of Units 1G3 & 1G4 at the Kainji Hydropower Plant with Power China Huadong Engineering Corporation Limited and units 2G5 at Jebba Hydropower plant by Andritz Hydro. This will increase our capacity to take on more eligible customers, which will in turn improve the viability of the company and boost Nigeria's production capacity, consequently bolstering the economy. FINANCIALPERFORMANCE Our revenue was ₦97.9billion for the year ended December 31, 2021, representing a 17.8 per cent increase over the previous year's gure of ₦83.1billion. the prot-Before-Tax rose to ₦29.1billion in 2021 from ₦20.9billion in 2020, representing a 39.2 per cent increase. During the same period, Shareholders' fund grew by 2.1 per cent, from ₦145.9billion in 2020 to ₦149billion in 2021. CORPORATE SOCIALRESPONSIBILITY The Company's Foundation, (Mainstream Foundation) was once again at the forefront of providing critically needed support to communities around the river Niger. The Dr. Amina Bello Women Center which currently stands as one of the largest Vesico Vaginal Fistula hospitals in the northwestern corridor, was commissioned on May 22nd 2021, and it is now fully operational. This amazing feat was achieved by the dedication of the Foundation team in conjunction with Raise Foundation. We also commissioned the Alhaji Saidu Namaska Health Care Center in Nasarawa to cater for the primary health needs of the communities within the axis of the dam. Our intervention in the areas of poverty reduction and skills acquisition was impressively underscored by the yearly starter pack distribution carried out at Borgu Emirate. The Foundation empowered young entrepreneurs in various empowerment schemes such as poultry farming, sh farming, catering, carpentry, plumbing, piping, welding, and tailoring. Our Foundation continues to positively change the economic narrative of these communities. CHAIRMAN’S STATEMENT i
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 FUTURE OUTLOOK I strongly believe that the future presents great opportunities for the company, especially with our investment in the downstream aspects of the value chain, where our acquisition of 60% of Yola Electricity Distribution Company ts into our organizational strategy of being a recognized sector player with versatility at both ends. Nonetheless, we take nothing for granted and will continually engage with all relevant stakeholders with steady steps of making our company consistently protable. At the international level, the company secured membership on the Board of the International Hydro Association, which has increased our visibility on the global map of hydropower organizations. The positive consequence of this on our global prole cannot be overemphasized. In concluding, I want to appreciate the members of the Board of Directors for their support at all times and the dynamic Management team and Staff of this great company who will always have my appreciation, for without them, the glowing achievements I consistently mention will not be possible. Thank you. Chairman ii
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 Dear Shareholders, OVERVIEWOFTHE POWER SECTOR IN 2021 The year 2021 saw Mainstream Energy Solutions Limited ("MESL" or the "Company") reinforce its formidable position as the largest Hydropower Generation Company ("GenCo") in West Africa despite the prevailing challenges in the power sector of Nigeria. In the year under review, the Company's rst quarter started on a challenging note with the break-down of turbines at the plants, therefore posing a threat to the budgeted power generation for the period. However, with diligent work by the plant engineers, the machines were xed and reconnected to the Grid. The second quarter saw the Company make signicant progress in its growth strategy, amid operational and environmental challenges to the MESL's core business including threats to bilateral revenues, ailing plant infrastructure, delays in deployment of contractors for Capacity Recovery & Expansion Projects due to the COVID-19 Pandemic. The Third Quarter faced some challenges with NERC issuing a directive to suspend the contracts with all Eligible Customers subject to regularization with NBET. Management has responded by aggressively engaging the NERC and NBET. The year ended on a positive note with management making considerable progress in stakeholder engagements in the pursuit of initiatives such as the renegotiation of the contracted capacity with NBET for bilateral sales. The Company took all the necessary steps to secure its bilateral revenues in the wake of imminent threats to same, the National Control Centre was engaged by the management to address grid management issues. PLANTOPERATIONS AND MAINTENANCE The year ended December 31 t, 2021, saw MESLdeliver 5,904.4GWh of electricity to the national grid compared to 5,686.7GWh in 2020. This shows a 3.8% increase in generation, the highest recorded since the takeover as operators of Kainji and Jebba HPPs . This was a massive recovery from the marginal drop in generation that occurred last year. MESL signed two contracts with Power China for expansion of Kainji Hydropower Plant by the installation of new units 1 G3 & 1 G4 and recovery of unit 1 G9. MESLalso signed a contract with Andritz on the overhaul of Jebba unit 2G5. OTHER NOTABLE HIGHLIGHTS MESL made remarkable headway in other aspects of the business including but not limited to the following: Business Expansion: Quest Electricity Nigeria Limited, our afliate company completed the takeover of Yola Electricity Distribution Company (YEDC), Key staff from the company were assigned to serve as the inaugural management team. Bilateral Electricity Sales: The Company has gained an incremental revenue from our bilateral sales from the previous year, the table below shows the gures. MANAGING DIRECTOR/CEO's REVIEW iii
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 StakeholderEngagement: The Company took initiative involving stakeholders in the year under review and proceeded with more horizon within and outside of Nigeria, these includes but are not limited to the following: Ÿ MESL represented by the MD/CEO was elected to the Board of the International Hydropower Association (IHA), for the next two years, this will aid in our global brand visibility and inuencing policies. Ÿ The Company executed an MOU for strategic partnership with NIGELEC to explore avenues for collaborations in other power sector projects. Human Resources: The Extended Leadership Program successfully delivered on Management's mandate to drive the corporate objectives setting for the year. Corporate Social Responsibility: Mainstream Foundation executed 154 projects in 2021, improving on the 140 executed in 2020. 2022 OUTLOOK The year 2022 marks a vital year in the life of MESL, as the Company seeks to extend its tracks beyond Nigeria by focusing on ve (5) key areas, namely Growth, Operational Excellence, Talent Management, Stakeholder Management and Community Engagement. The Company seeks to sustain its standing as a performance groundbreaker in Nigeria and West Africa, as such, our main priority is focused on Rapid Capacity Recovery and Expansion to deliver on our corporate objective of generating 6,000,000 MWh of electricity in 2022. From a business expansion perspective, the Company is looking towards a successful submission of bid documents for the concession of Kashimbila 40MW HPP, commence processes to be concessionaires of Zungeru 700MW HPP, exploring greeneld projects within Nigeria and investment opportunities within the West African Power Pool (WAPP) and beyond. The Company also seeks to complete the Business Continuity & Disaster Recovery Plan, completion of ISO certication and investment in critical transmission infrastructure to improve reliability of power to customers to ensure revenues. Finally, to ensure that all these are achieved, the Company will engage in extensive stakeholder engagements with the regulators, media, customers, the wider Nigerian Electricity Supply Industry (NESI) and our immediate communities, to continue to impel policy within the industry. Thank you. Engr. Lamu Audu Managing Director/CEO Year 2020 2021 Growth Local Bilateral N7,803,639,160.08 N9,324,548,948,00 19% Foreign Bilateral N21,587,821,387.72 N24,170,229,231.85 12% iv
Corporate Information M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 1
DIRECTORS’ REPORT For the year ended 31 December 2021 M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 2
DIRECTORS’ REPORT (Cont’d) M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 3
DIRECTORS’ REPORT (Cont’d) M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 4
DIRECTORS’ REPORT (Cont’d) M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 5
DIRECTORS’ REPORT (Cont’d) M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 6
DIRECTORS’ REPORT (Cont’d) M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 7
DIRECTORS’ REPORT (Cont’d) M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 8
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS For the year ended 31 December 2021 M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 9
STATEMENT OF CORPORATE RESPONSIBILITY FOR THE FINANCIAL STATEMENTS For the year ended 31 December 2021 M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 10
Independent Auditor’s Report & Financials
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 11
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D 12
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D 13
CONSOLIDATED AND SEPARATE STATEMENTS FOR FINANCIAL POSITION as at M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 14
CONSOLIDATED AND SEPARATE STATEMENTS FOR FINANCIAL POSITION (Cont’d) M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 15
CONSOLIDATED AND SEPARATE STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 16
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 17 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the year ended
M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 18 SEPARATE STATEMENT OF CHANGES IN EQUITY For the year ended
CONSOLIDATED AND SEPARATE STATEMENTS OF CASH FLOWS For the year ended M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 19
Notes
NOTES TO THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS M A I N S T R E A M E N E R G Y S O L U T I O N S L I M I T E D Annual Report 31 December 2021 20
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