Income reclassification leads to deficit at MPC

MPC Caribbean Clean Energy Limited, a management company for renewable projects across the region, reclassified two items of income in its audited accounts, resulting in substantial losses.

The year-end December 2019 unaudited report showed an accumulated profit of some US$408,000, but the audited results reversed that to a deficit of US$197,400 on MPC’s balance sheet.

The bulk of the deviations stems from valuation gains and dividend income which accounted for a sizeable chunk of revenue, but was removed in the audited report. This led to substantially lower net profit and, in turn, contributed to the accumulated deficit.

The independent auditor BDO Barbados did not mention the matter in its statement accompanying the results, but MPC Clean Energy Chairman Fernando Zuniga told the Financial Gleaner that BDO raised the matter with the company, which led to the reclassification.

Zuniga said that during the review of the financial statements the auditors were not able to obtain sufficient information to support the previously reported valuation gains, which were also removed, along with dividend income. As a result of the adjustments, total audited revenue stand at US$272,400, compared to US$1.9 million unaudited.

“Due to the structure of the fund, which invests predominantly through shareholder loans instead of equity, the lack in valuation gains caused the distributions received in September 2019, which have been funded by shareholder loans, to be reclassified from dividend income to a capital repayment,” said Zuniga.

“Based on this, the distribution of the company to the shareholders has been reclassified to a capital repayment. However, no impairment was recognised on the underlying investment,” he said.

DEVIATIONS

The deviations in the balance sheet were most notable in the movement from the unaudited accumulated profit to an audited accumulated deficit. The energy investor’s total assets also moved from US$11.6 million unaudited to US$10 million audited, while its capital base was remeasured from US$11.5 million to US$9.9 million.

MPC Caribbean trades on stock exchanges in Jamaica and Trinidad & Tobago. The company, controlled by German firm MPC Capital, raised capital on the two regional markets in 2019 via an initial public offering of shares, amounting to US$11.4 million; and this year raised another round of capital, US$10.2 million, via a rights issue on both exchanges.

MPC Caribbean’s major assets include holdings in a wind plant in Tilawind, Costa Rica, and a solar plant at Paradise Park in Jamaica.

steven.jackson@gleanerjm.com