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Notes to the Group Accounts

For the year ended 31 December 2012

1 Accounting policies

The Company is a public limited company which is listed on the London Stock Exchange and is incorporated and domiciled in the UK. The address of the registered office is 120 Bothwell Street, Glasgow G2 7JS, UK.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

Basis of preparation

The Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain financial assets and financial liabilities (including derivative instruments) at fair value.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of the revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

Changes in accounting policy and disclosures

(a) New and amended standards adopted by the Group

There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2012 that would be expected to have a material impact on the Group.

(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2012 and not early adopted

IAS 19, 'Employee benefits' was amended in June 2011. The impact on the Group will be to replace interest cost and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability. We do not expect this to have a material impact on the Group.
Improvements to International Financial Reporting Standards 2011 were issued in May 2012. This is a collection of amendments to five standards. We do not expect these to have a material impact on the Group.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

Basis of consolidation

The Group financial statements consolidate the financial statements of Aggreko plc and all its subsidiaries for the year ended 31 December 2012. Subsidiaries are those entities over which the Group has the power to govern financial and operating policies, generally accompanying a shareholding that confers more than half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportion of the share of the acquiree's net assets.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Revenue recognition

Revenue for the Group represents the amounts earned from the supply of temporary power, temperature control, oil-free compressed air and related services and excludes sales taxes and intra-Group revenue. Revenue can comprise a fixed rental charge and a variable charge related to the usage of assets or other services. In all cases, revenue is recognised in accordance with the contractual arrangements, for fixed rental charges, over the rental period and for variable elements as the asset is utilised or service is provided. Revenue is accrued or deferred at the balance sheet date depending on the date of the most recent invoice issued and the contractual terms.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the plc Board of Directors.

Aggreko's segments comprise Middle East & Developing Europe, Europe, North America and International Local (together the Group's Local business) and Power Projects. Power Projects is managed as a single business, with the deployment of assets varying from year to year depending on the location of projects.

The risks and rewards within Power Projects are significantly different from those within the Group's Local business. The Local business focuses on smaller, more frequently occurring events, whereas the Power Projects business concentrates on large contracts, which can arise anywhere in the world.

This is reflected by the Group's divisional management and organisational structure and the Group's internal financial reporting systems. The segmental analysis is in Note 4 to the Accounts.

Central administrative costs are allocated between segments based on revenue.

Leases

Leases where substantially all of the risks and rewards of ownership are not transferred to the Group are classified as operating leases. Rentals under operating leases are charged against operating profit on a straight line basis over the term of the lease.

Exceptional items

Items are classified as exceptional gains or losses where they are considered by the Group to be material and are different from events or transactions which fall within the ordinary activities of the Group and which individually, or if of a similar type, in aggregate, need to be disclosed by virtue of their size or incidence if the financial statements are to be properly understood. Details of the exceptional items are provided in Note 7 to the financial statements.

Property, plant and equipment

Property, plant and equipment is carried at cost less accumulated depreciation and impairment losses. Cost includes purchase price, and directly attributable costs of bringing the asset into the location and condition where it is capable for use. Borrowing costs are not capitalised since the assets are assembled over a short period of time.

Freehold properties are depreciated on a straight line basis over 25 years. Short leasehold properties are depreciated on a straight line basis over the terms of each lease.

Other property, plant and equipment are depreciated on a straight line basis at annual rates estimated to write off the cost of each asset over its useful life from the date it is available for use. Assets in the course of construction are not depreciated. Non rental fleet assets which are contract specific are depreciated over the life of the contract. The periods of depreciation are reviewed on an annual basis and the principal periods used are as follows:

Rental fleet	8 to 10 years
Vehicles, plant and equipment	4 to 15 years

Intangibles

Intangible assets acquired as part of a business combination are capitalised, separately from goodwill, at fair value at the date of acquisition if the asset is separable or arises from contractual or legal rights and its fair value can be measured reliably. Amortisation is calculated on a straight-line method to allocate the fair value at acquisition of each asset over their estimated useful lives as follows: customer relationships: 10 years; non-compete agreements: over the life of the non-compete agreements.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight line basis over their estimated useful lives, which is currently deemed to be 4 years.

The useful life of intangible assets is reviewed on an annual basis.

Goodwill

On the acquisition of a business, fair values are attributed to the net assets acquired. Goodwill arises where the fair value of the consideration given for a business exceeds the fair value of such assets. Goodwill arising on acquisitions is capitalised and is subject to impairment reviews, both annually and when there are indicators that the carrying value may not be recoverable.

For the purpose of the impairment testing, goodwill is allocated to each of the Group's cash generating units expected to benefit from the synergies of the combination. Cash generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, then the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. Any impairment of goodwill is recognised immediately in the income statement.

Impairment of property, plant and equipment and other intangible assets (excluding goodwill)

Property, plant and equipment and other intangible assets are amortised/depreciated and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. Value in use is calculated using estimated cashflows. These are discounted using an appropriate long-term pre-tax interest rate. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Foreign currencies

Items included in the financial statements for each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (functional currency). The Group's consolidated financial statements are presented in Sterling, which is the Group's presentational currency.

At individual Company level, transactions denominated in foreign currencies are translated at the rate of exchange on the day the transaction occurs. Assets and liabilities denominated in foreign currency are translated at the exchange rate ruling at the balance sheet date. Non-monetary assets are translated at the historical rate. In order to hedge its exposure to certain foreign exchange risks, the Group enters into forward contracts and foreign currency options.

On consolidation, assets and liabilities of subsidiary undertakings are translated into Sterling at closing rates of exchange. Income and cash flow statements are translated at average rates of exchange for the period. Gains and losses from the settlement of transactions and gains and losses on the translation of monetary assets and liabilities denominated in other currencies are included in the income statement.

Derivative financial instruments

The activities of the Group expose it directly to the financial risks of changes in forward foreign currency exchange rates and interest rates. The Group uses forward foreign exchange contracts, foreign currency options and interest rate swap contracts to hedge these exposures. The Group does not use derivative financial instruments for speculative purposes.

Derivatives are initially recorded and subsequently measured at fair value, which is calculated using standard industry valuation techniques in conjunction with observable market data. The fair value of interest rate swaps is calculated as the present value of estimated future cash flows using market interest rates and the fair value of forward foreign exchange contracts is determined using forward foreign exchange market rates at the reporting date. The treatment of changes in fair value of derivatives depends on the derivative classification. The Group designates derivatives as hedges of highly probable forecasted transactions or commitments ('cash flow hedge').

In order to qualify for hedge accounting, the Group is required to document in advance the relationship between the item being hedged and the hedging instrument. The Group is also required to document and demonstrate an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will be highly effective on an ongoing basis. This effectiveness testing is re-performed at each period end to ensure that the hedge remains highly effective.

Cash flow hedge

Changes in the fair value of derivative financial instruments that are designated, and effective, as hedges of future cash flows are recognised directly in equity and any ineffective portion is recognised immediately in the income statement. If the cash flow hedge is of a firm commitment or forecasted transaction that subsequently results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges of transactions that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit and loss.

Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise.

Hedge accounting is discontinued when the hedging instrument no longer qualifies for hedge accounting. At that time any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to the income statement.

Overseas net investment hedges

Certain foreign currency borrowings are designated as hedges of the Group's overseas net investments, which are denominated in the functional currency of the reporting operation.

Exchange differences arising from the retranslation of the net investment in foreign entities and of borrowings are taken to equity on consolidation to the extent the hedges are deemed effective. All other exchange gains and losses are dealt with through the income statement.

Taxation

Deferred Tax

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill, negative goodwill nor from the acquisition of an asset, which does not affect either taxable or accounting income. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Provision for income taxes, mainly withholding taxes, which could arise on the remittance of retained earnings, principally relating to subsidiaries, is only made where there is a current intention to remit such earnings.

Current tax

The charge for the current tax is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using taxation rates that have been enacted or substantially enacted by the balance sheet date.

Inventories

Inventories are valued at the lower of cost and net realisable value, using the FIFO or weighted average cost basis. Cost of raw materials, consumables and work in progress includes the cost of direct materials and, where applicable, direct labour and those overheads that have been incurred in bringing the inventories to their present location and condition.

Inventory is written down on a case by case basis if the anticipated net realisable value declines below the carrying amount of the inventories. Net realisable value is the estimated selling price less cost to completion and selling expenses. When the reasons for a write-down of the inventory have ceased to exist, the write-down is reversed.

Employee benefits

Wages, salaries, social security contributions, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by the employees of the Group. Where the Group provides long-term employee benefits, the cost is accrued to match the rendering of the services by the employees concerned.

The Group operates a defined benefit pension scheme and a number of defined contribution pension schemes. The cost for the year for the defined benefit scheme is determined using the attained age method with actuarial updates to the valuation being carried out at each balance sheet date. Actuarial gains and losses are recognised in full, directly in retained earnings, in the period in which they occur and are shown in the statement of comprehensive income and expense. The current service cost of the pension charge as well as the expected return on pension scheme assets and interest on pension scheme liabilities are included in arriving at operating profit.

The retirement benefit obligation recognised in the balance sheet is the present value of the defined benefit obligation at the balance sheet date less the fair value of the scheme assets. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using interest rates of high-quality corporate bonds.

Contributions to defined contribution pension schemes are charged to the income statement in the period in which they become chargeable.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost. An impairment is recorded for the difference between the carrying amount and the recoverable amount where there is objective evidence that the Group will not be able to collect all amounts due. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or large and old outstanding balances, particularly in countries where the legal system is not easily used to enforce recovery, are considered indicators that the trade receivable is impaired. When a trade receivable is uncollectible it is written off against the provision for impairment of trade receivables.

Trade payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost.

Provisions

Provisions are recognised where a legal or constructive obligation has been incurred which will probably lead to an outflow of resources that can be reasonably estimated. Provisions are recorded for the estimated ultimate liability that is expected to arise, taking into account the time value of money where material.

A contingent liability is disclosed where the existence of the obligation will only be confirmed by future events, or where the amount of the obligation cannot be measured with reasonable reliability. Contingent assets are not recognised, but are disclosed where an inflow of economic benefits is probable.

Share-based payments

IFRS 2 'Share-based Payment' has been applied to all grants of equity instruments. The Group issues equity-settled share-based payments to certain employees under the terms of the Group's various employee-share and option schemes. Equity-settled share-based payments are measured at fair value at the date of the grant. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on an estimate of the shares that will ultimately vest. Fair value is measured using the Black-Scholes option-pricing model.

Own shares held under trust for the Group's employee share schemes are classed as Treasury shares and deducted in arriving at shareholders' equity. No gain or loss is recognised on disposal of Treasury shares. Purchases of own shares are disclosed as changes in shareholders' equity.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and deposits with a maturity of three months or less. The definition is also used for the cashflow statement.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any difference between the proceeds, net of transaction costs, and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate.

Dividend distribution

Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.

Key assumptions and significant judgements

The Group uses estimates and makes judgements in the preparation of its Accounts. The most sensitive areas affecting the Accounts are discussed below.

Property, plant and equipment

Rental fleet accounts for £1,196 million, or around 94%, of the net book value of property, plant and equipment used in our business; the great majority of equipment in the rental fleet is depreciated on a straight-line basis to a residual value of zero over 8 years, although we do have some classes of non-power fleet which we depreciate over 10 years. The annual fleet depreciation charge of £222 million (2011: £175 million) relates to the estimated service lives allocated to each class of fleet asset. Asset lives are reviewed regularly and changed if necessary to reflect current thinking on their remaining lives in light of technological change, prospective economic utilisation and the physical condition of the assets.

Intangible assets

In accordance with IFRS 3 (revised) 'Business Combinations' goodwill arising on acquisition of assets and subsidiaries is capitalised and included in intangible assets. IFRS 3 (revised) also requires the identification of other acquired intangible assets. The techniques used to value these intangible assets are in line with internationally used models but do require the use of estimates and forecasts which may differ from actual outcomes. Future results are impacted by the amortisation period adopted for these items and, potentially, by any differences between forecast and actual outcomes related to individual intangible assets. The amortisation charge for intangible assets in 2012 was £5 million (2011: £4 million). Substantially all of this charge relates to the amortisation of intangible assets arising from business combinations.

Goodwill of £143 million (2011: £65 million) is not amortised but is tested annually for impairment and carried at cost less accumulated impairment losses. The impairment review calculations require the use of forecasts related to the future profitability and cash generating ability of the acquired assets. There were no impairment charges in 2012 and 2011.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost. An impairment is recorded for the difference between the carrying amount and the recoverable amount where there is objective evidence that the Group may not be able to collect all amounts due. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default, or large and old outstanding balances, particularly in countries where the legal system is not easily used to enforce recovery, are considered indicators that the trade receivable is impaired.

The majority of the contracts the Group enters into are small relative to the size of the Group and, if a customer fails to pay a debt, this is dealt with in the normal course of business. However, some of the contracts the Group undertakes in developing countries are very large, and are in jurisdictions where payment practices can be unpredictable. The Group monitors the risk profile and debtor position of all such contracts regularly, and deploys a variety of techniques to mitigate the risks of delayed or non-payment; these include securing advance payments and guarantees. As a result of the rigorous approach to risk management, historically the Group has had a low level of bad debt write-offs. When a trade receivable is uncollectible it is written off against the provision for impairment of trade receivables. At 31 December 2012 the provision for impairment of trade receivables in the balance sheet was £63 million (2011: £36 million).

Taxation

Aggreko's tax charge is based on the profit for the year and tax rates in force at the balance sheet date. As well as corporation tax, Aggreko is subject to indirect taxes such as sales and employment taxes across various tax jurisdictions in the approximately 100 countries in which the Group operates. The varying nature and complexity of the tax law requires the Group to review its tax positions and make appropriate judgements at the balance sheet date. In addition the recognition of deferred tax assets is dependent upon an estimation of future taxable profits that will be available against which deductible temporary differences can be utilised. In the event that actual taxable profits are different, such differences may impact the carrying value of such deferred tax assets in future periods. Further information is shown at Note 10 and Note 22 to the Annual Report and Accounts.

Financial risk management

Financial risk factors

The Group's operations expose it to a variety of financial risks that include liquidity, the effects of changes in foreign currency exchange rates, interest rates and credit risk. The Group has a centralised treasury operation whose primary role is to ensure that adequate liquidity is available to meet the Group's funding requirements as they arise, and that financial risk arising from the Group's underlying operations is effectively identified and managed.

The treasury operations are conducted in accordance with policies and procedures approved by the Board and are reviewed annually. Financial instruments are only executed for hedging purposes and transactions that are speculative in nature are expressly forbidden. Monthly reports are provided to senior management and treasury operations are subject to periodic internal and external review.

Liquidity, funding and capital management

The intention of Aggreko's strategy is to deliver long-term value to its shareholders whilst maintaining a balance sheet structure that safeguards the Group's financial position through economic cycles. Total capital is equity as shown in the Group balance sheet.

Given the proven ability of the business to fund organic growth from operating cashflows, and the nature of our business model, we believe it is sensible to run the business with a modest amount of debt. We say 'modest' because we are strongly of the view that it is unwise to run a business which has high levels of operational gearing with high levels of financial gearing. Given the above considerations, we believe that a Net Debt to EBITDA ratio of around 1 times is appropriate for the Group over the longer term. Absent a major acquisition, or the requirement for an unusual level of fleet investment, this level gives us the ability to deal with the normal fluctuations in capital expenditure (which can be quite sharp: +/– £100 million in a year) and working capital, and is well within our covenants to lenders which stand at 3 times Net Debt to EBITDA.

At the end of 2012, Net Debt to EBITDA (pre-exceptional items) had increased to 0.9 times from 31 December 2011 when the ratio of Net Debt to EBITDA was 0.7 times.

The Group maintains sufficient facilities to meet its normal funding requirements over the medium term. At 31 December 2012 these facilities totalled £863 million in the form of committed bank facilities arranged on a bilateral basis with a number of international banks and private placement notes. US$100 million (£62 million) of private placement notes were issued during June 2012. In addition during the year committed bank facilities of £154 million were arranged. The financial covenants attached to these facilities are that EBITDA should be no less than 4 times interest and net debt should be no more than 3 times EBITDA; at 31 December 2012, pre-exceptional items, these stood at 25 times and 0.9 times respectively. The Group does not consider that these covenants are restrictive to its operations. The maturity profile of the borrowings is detailed in Note 18 in the Annual Report and Accounts. Since the year end £30 million of committed facilities have matured.

Net debt amounted to £593 million at 31 December 2012 and, at that date, un-drawn committed facilities were £294 million.

Interest rate risk

The Group's policy is to manage the exposure to interest rates by ensuring an appropriate balance of fixed and floating rates. The Group's primary funding is at floating rates through its bank facilities. In order to manage the associated interest rate risk, the Group uses interest rate swaps to vary the mix of fixed and floating rates. At 31 December 2012, £311 million of the net debt of £593 million was at fixed rates of interest resulting in a fixed to floating rate net debt ratio of 52:48 (2011: 71:29). The Group monitors its interest rate exposure on a regular basis by applying forecast interest rates to the Group's forecast net debt profile after taking into account its existing hedges. The Group also calculates the impact on profit and loss of a defined interest rate shift for all currencies. Based on the simulations performed, the impact on profit or loss of a +/– 100 basis-point shift, after taking into account existing hedges, would be £2.9 million (2011: £1.2 million). The sensitivity analysis is performed on a monthly basis and is reported to the Board.

Foreign exchange risk

The Group is subject to currency exposure on the translation of its net investments in overseas subsidiaries into Sterling. In order to reduce the currency risk arising, the Group uses direct borrowings in the same currency as those investments. Group borrowings are predominantly drawn down in the principal currencies affecting the Group, namely US Dollar, Canadian Dollar, Euro and Brazilian Reais.

The Group manages its currency flows to minimise foreign exchange risk arising on transactions denominated in foreign currencies and uses forward contracts where appropriate in order to hedge net currency flows.

The negative impact of currency decreased our revenues by £6.0 million (2011: decreased by £26.0 million) and trading profit by £1.0 million (2011: decreased by £8.7 million) for the year ended 31 December 2012. The Group monitors the impact of exchange closely and regularly carries out sensitivity analysis. For every 5 cents movement in the US Dollar to GBP exchange rate there is an approximate impact of £8.8 million (2011: £9.2 million) in trading profit¹ in terms of translation. For every 5 cents movement in the Euro to GBP exchange rate there is an approximate impact of £0.4 million (2011: £0.5 million) in trading profit in terms of translation.

Currency translation also gave rise to a £58 million decrease in reserves as a result of year on year movements in the exchange rates (2011: decrease of £11.9 million). For every 5 cents movement in the Dollar and Euro, there is an approximate impact in equity of £15.8 million and £0.7 million respectively (2011: £10.4 million and £0.5 million), arising from the currency translation of external borrowings which are being used as a net investment hedge, however this will be offset by a corresponding movement in the equity of the net investment being hedged.

Credit risk

Cash deposits and other financial instruments give rise to credit risk on amounts due from counterparties. The Group manages this risk by limiting the aggregate amounts and their duration depending on external credit ratings of the relevant counterparty. In the case of financial assets exposed to credit risk, the carrying amount in the balance sheet, net of any applicable provisions for loss, represents the amount exposed to credit risk.

Management of trade receivables

The management of trade receivables is the responsibility of the operating units, although they report monthly to Group on debtor days, debtor ageing and significant outstanding debts. At an operating unit level a credit rating is normally established for each customer based on ratings from external agencies. Where no ratings are available, cash in advance payment terms are often established for new customers. Credit limits are reviewed on a regular basis. Some of the contracts undertaken in our Power Projects business are substantial, and are in jurisdictions where payment practices can be unpredictable. The Group monitors the risk profile and debtor-position of all such contracts regularly, and deploys a variety of techniques to mitigate the risks of delayed or non-payment; these include securing advance payments, bank guarantees and various types of insurance. On the largest contracts, all such arrangements are approved at Group level. Contracts are reviewed on a case by case basis to determine the customer and country risk.

Insurance

The Group operates a policy of buying cover against the material risks which the business faces, where it is possible to purchase such cover on reasonable terms. Where this is not possible, or where the risks would not have a material impact on the Group as a whole, we self-insure.

1 Trading profit represents operating profit before gain on sale of property, plant and equipment.

2 Cashflow from operating activities

	2012 £ million	2011 £ million
Profit for the year	276.0	260.1
Adjustments for:
Tax	91.0	63.6
Depreciation	236.3	185.5
Amortisation of intangibles	4.6	3.6
Finance income	(1.9)	(1.0)
Finance cost	26.6	19.7
Profit on sale of PPE (see below)	(4.5)	(4.6)
Share based payments	13.5	19.8
Changes in working capital (excluding the effects of exchange differences on consolidation):
Increase in inventories	(32.8)	(29.3)
Increase in trade and other receivables	(52.3)	(74.4)
(Decrease)/increase in trade and other payables	(83.5)	65.8
Net movement in provisions for liabilities and charges	5.7	–
Cash generated from operations	478.7	508.8

In the cash flow statement, proceeds from sale of PPE comprise:

	2012 £ million	2011 £ million
Net book amount	8.1	8.0
Profit on sale of PPE	4.5	4.6
Proceeds from sale of PPE	12.6	12.6

Profit on sale of PPE is shown within other income in the income statement.

3 Cash and cash equivalents

	2012 £ million	2011 £ million
Cash at bank and in hand	22.8	16.8
Short-term bank deposits	0.1	36.4
	22.9	53.2

Cash and bank overdrafts include the following for the purposes of the cashflow statement:

	2012 £ million	2011 £ million
Cash and cash equivalents	22.9	53.2
Bank overdrafts (Note 18)	(21.5)	(18.7)
	1.4	34.5

4 Segmental reporting
(a) Revenue by segment

	Total revenue		Inter-segment revenue		External revenue
	2012 £ million	2011 £ million	2012 £ million	2011 £ million	2012 £ million	2011 £ million
Middle East & Developing Europe	145.0	133.8	0.2	0.1	144.8	133.7
Europe	222.6	168.9	0.1	0.1	222.5	168.8
North America	304.3	258.8	0.1	0.1	304.2	258.7
International Local	234.0	173.5	0.5	0.6	233.5	172.9
Local business	905.9	735.0	0.9	0.9	905.0	734.1
Power Projects	679.0	662.8	0.8	0.8	678.2	662.0
Eliminations	(1.7)	(1.7)	(1.7)	(1.7)	–	–
Group	1,583.2	1,396.1	–	–	1,583.2	1,396.1

(i) Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third-parties.
(ii) The International Power Projects business has been renamed as the Power Projects business. This is a global segment administered from Dubai. At the end of 2011 and 2012 the assets of the Power Projects segment are predominantly located in the Middle East, Asia-Pacific, Latin America and Africa.
(iii) In accordance with how management monitors the business the results and net assets of the Russia business are now included in the Middle East & Developing Europe segment instead of the Europe segment as previously reported. Comparative figures have been restated but the effect is not considered material. As a consequence of this the Middle East & South East Europe segment has been renamed the Middle East & Developing Europe segment.

(b) Profit by segment

	Trading profit pre intangible asset amortisation		Amortisation of intangible assets arising from business combinations		Trading profit
	2012 £ million	2011 £ million	2012 £ million	2011 £ million	2012 £ million	2011 £ million
Middle East & Developing Europe	28.1	30.0	(0.1)	(0.1)	28.0	29.9
Europe	40.6	11.7	(0.1)	(0.1)	40.5	11.6
North America	68.4	51.8	(2.5)	(2.5)	65.9	49.3
International Local	37.4	30.7	(1.7)	(0.7)	35.7	30.0
Local business	174.5	124.2	(4.4)	(3.4)	170.1	120.8
Power Projects	210.7	217.1	(0.1)	(0.1)	210.6	217.0
Group	385.2	341.3	(4.5)	(3.5)	380.7	337.8

	Gain/(loss) on sale of PPE		Operating profit
	2012 £ million	2011 £ million	2012 £ million	2011 £ million
Middle East & Developing Europe	0.1	(0.3)	28.1	29.6
Europe	0.7	(0.1)	41.2	11.5
North America	2.1	2.7	68.0	52.0
International Local	0.8	0.7	36.5	30.7
Local business	3.7	3.0	173.8	123.8
Power Projects	0.8	1.6	211.4	218.6
Operating profit pre exceptional items	4.5	4.6	385.2	342.4
Exceptional items (Note 7)			6.5	–
Operating profit post exceptional items			391.7	342.4
Finance costs – net			(24.7)	(18.7)
Profit before taxation			367.0	323.7
Taxation			(91.0)	(63.6)
Profit for the year			276.0	260.1

(c) Depreciation and amortisation by segment

	2012 £ million	2011 £ million
Middle East & Developing Europe	27.0	24.0
Europe	18.6	17.3
North America	39.8	33.3
International Local	40.8	24.1
Local business	126.2	98.7
Power Projects	114.7	90.4
Group	240.9	189.1

(d) Capital expenditure on property, plant and equipment and intangible assets by segment 2012

	£ million	2011 £ million
Middle East & Developing Europe	27.7	29.5
Europe	56.3	25.3
North America	61.8	67.6
International Local	144.3	74.2
Local business	290.1	196.6
Power Projects	212.9	229.5
Group	503.0	426.1

Capital expenditure comprises additions of property, plant and equipment (PPE) of £439.6 million (2011:
£418.2 million), acquisitions of PPE of £46.9 million (2011: £4.8 million), and acquisitions of other intangible assets of £16.5 million (2011: £3.1 million).

(e) Assets/(liabilities) by segment

	Assets		Liabilities
	2012 £ million	2011 £ million	2012 £ million	2011 £ million
Middle East & Developing Europe	182.1	173.0	(16.4)	(16.8)
Europe	169.6	147.9	(55.6)	(42.9)
North America	324.7	310.4	(41.2)	(40.4)
International Local	460.2	243.7	(54.9)	(37.8)
Local business	1,136.6	875.0	(168.1)	(137.9)
Power Projects	932.2	876.7	(192.1)	(259.4)
	2,068.8	1,751.7	(360.2)	(397.3)
Tax and finance payable	43.7	20.5	(106.2)	(75.4)
Derivative financial instruments	10.9	0.2	(13.8)	(13.9)
Borrowings	–	–	(594.4)	(399.0)
Retirement benefit obligation	–	–	(4.0)	(5.5)
Total assets/(liabilities) per balance sheet	2,123.4	1,772.4	(1,078.6)	(891.1)

(f) Average number of employees by segment

	2012 Number	2011 Number
Middle East & Developing Europe	400	342
Europe	871	806
North America	953	865
International Local	1,108	655
Local business	3,332	2,668
Power Projects	1,984	1,594
Group	5,316	4,262

(g) Reconciliation of net operating assets to net assets

	2012 £ million	2011 £ million
Net operating assets	1,708.6	1,354.4
Retirement benefit obligation	(4.0)	(5.5)
Net tax and finance payable	(62.5)	(54.9)
	1,642.1	1,294.0
Borrowings and derivative financial instruments	(597.3)	(412.7)
Net assets	1,044.8	881.3

5 Profit before taxation

The following items have been included in arriving at profit before taxation:

	2012 £ million	2011 £ million
Staff costs (Note 8)	300.6	270.9
Cost of inventories recognised as an expense (included in cost of sales)	82.3	72.9
Depreciation of property, plant and equipment	236.3	185.5
Amortisation of intangibles (included in administrative expenses)	4.6	3.6
Gain on disposal of property, plant and equipment	(4.5)	(4.6)
Trade receivables impairment	31.9	4.8
Operating lease rentals payable	33.9	28.6

6 Auditors' remuneration

	2012 £000	2011 £000
Audit services
Fees payable to the Company's auditor for the audit of the Company's annual accounts and consolidated financial statements	207	184
Fees payable to the Company's auditor and its associates for other services:
– The audit of the Company's subsidiaries	635	468
– Other assurance related services	79	118
– Tax compliance	74	46
– Tax advising	30	82

7 Exceptional Items

(i) 2012

The definition of exceptional items is contained within Note 1 of the 2012 Annual Report and Accounts. A net exceptional credit of £6.5 million before tax was recorded in the year to 31 December 2012 in respect of the Group's acquisition of Poit Energia and costs associated with the recent Group reorganisation. There are three elements to the net exceptional credit. The first element is an exceptional credit arising from the release of £17.3 million of the £20.4 million deferred consideration relating to the Poit Energia acquisition earn out period. We completed the acquisition and the legal merger of the two businesses earlier than we anticipated, and accordingly we agreed with the vendors that we would terminate the earn out period early in return for a payment of £3.1 million of the possible £20.4 million. Secondly, and partially offsetting this credit, there are £4.4 million of integration costs for the Poit acquisition. Thirdly there are £6.4 million of costs relating to the Group reorganisation. These costs include professional fees, severance costs, relocation costs and travel/expenses directly related to the reorganisation.

Geographically these exceptional items can be split into: Middle East & Developing Europe: costs of £0.3 million, Europe: costs of £3.0 million, North America: costs of £0.6 million, International Local: a credit of £12.5 million and Power Projects: costs of £2.1 million.

(ii) 2011

The UK Finance Act 2011 introduced legislation exempting the profits of foreign branches of UK resident companies from UK Corporation tax; this is applicable to a significant portion of our Power Projects business. The impact of this exemption was that in 2011 there was a release to the income statement of a previously created deferred tax liability of £28.6 million which will no longer crystalise. Given its size and nature, this release was treated as an exceptional item.

8 Employees and Directors

Staff costs for the Group during the year:

	2012 £ million	2011 £ million
Wages and salaries	254.4	221.7
Social security costs	23.2	22.1
Share-based payments	13.5	19.8
Pension costs – defined contribution plans	7.3	5.6
Pension costs – defined benefit plans (Note 27)	2.2	1.7
	300.6	270.9

Full details of Directors' remuneration are set out in the Remuneration Report.

The key management comprise Executive and Non-executive Directors.

	2012 £ million	2011 £ million
Short-term employee benefits	3.7	4.5
Post-employment benefits	0.4	0.3
Share-based payments	2.6	3.9
	6.7	8.7

9 Net Finance Charge

	2012 £ million	2011 £ million
Finance costs on bank loans and overdrafts	(26.6)	(19.7)
Finance income on bank balances and deposits	1.9	1.0
	(24.7)	(18.7)

10 Taxation

	2012 £ million	2011 £ million
Analysis of charge in year
Current tax expense:
– UK corporation tax	9.7	47.1
– Double taxation relief	–	(24.5)
	9.7	22.6
– Overseas taxation	73.5	71.7
	83.2	94.3
Adjustments in respect of prior years:
– UK	(6.9)	(2.8)
– Overseas	0.7	(5.4)
	(6.2)	(8.2)
	77.0	86.1
Deferred taxation (Note 22):
– temporary differences arising in current year	6.6	8.1
– movements in respect of prior years	10.1	(2.0)
– exceptional release (Note 7)	–	(28.6)
	93.7	63.6

Tax on exceptional items	(2.7)	–
	91.0	63.6

Exceptional items comprises a release of £17.3 million deferred consideration which is non taxable and a total of £10.8 million of exceptional expenses relating to the Poit Energia acquisition and the Group reorganisation which are tax deductible thereby resulting in an exceptional tax credit of £2.7 million.

The tax (charge)/credit relating to components of other comprehensive income is as follows:

	2012 £ million	2011 £ million
Deferred tax on hedging reserve movements	(0.7)	0.7
Deferred tax on retirement benefits	0.5	1.2
Current tax on exchange movements	(0.1)	1.0
	(0.3)	2.9

The tax (charge)/credit relating to equity is as follows:

	2012 £ million	2011 £ million
Current tax on share-based payments	21.1	7.3
Deferred tax on share-based payments	(20.6)	5.5
	0.5	12.8

Variances between the current tax charge and the standard 24.5% (2011: 26.5%) UK corporate tax rate when applied to profit on ordinary activities for the year are as follows:

	2012 £ million	2011 £ million
Profit before taxation – post-exceptional	367.0	323.7
Exceptional items	(6.5)	–
Profit before taxation – pre-exceptional	360.5	323.7

Tax calculated at 24.5% (2011: 26.5%) standard UK corporate rate	89.9	85.8
Differences between UK and overseas tax rates	3.9	15.5
Permanent differences	(4.2)	(1.2)
Deferred tax effect of future rate changes	0.2	0.8
Deferred tax assets not recognised	–	1.3
Tax on current year profit	89.8	102.2
Prior year adjustments – current tax	(6.2)	(8.0)
Prior year adjustments – deferred tax	10.1	(2.0)
Total tax on profit – pre-exceptional	93.7	92.2
Deferred tax – exceptional release	–	(28.6)
Tax on exceptional items	(2.7)	–
Total tax on profit – post-exceptional	91.0	63.6

Effective tax rate – pre-exceptional	26.0%	28.5%

11 Dividends

	2012 £ million	2012 per share (p)	2011 £ million	2011 per share (p)
Final paid	36.2	13.59	33.2	12.35
Interim paid	22.0	8.28	18.9	7.20
	58.2	21.87	52.1	19.55

In addition, the Directors are proposing a final dividend in respect of the financial year ended 31 December 2012 of 15.63 pence per share which will absorb an estimated £41.6 million of shareholders' funds. It will be paid on 23 May 2013 to shareholders who are on the register of members on 26 April 2013.

12 Earnings per share

Basic earnings per share have been calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of shares in issue during the year, excluding shares held by the Employee Share Ownership Trusts which are treated as cancelled.

	2012	2011
Profit for the year (£ million)	276.0	260.1
Weighted average number of ordinary shares in issue (million)	265.0	265.6
Basic earnings per share (pence)	104.14	97.91

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options.

	2012	2011
Profit for the year (£ million)	276.0	260.1
Weighted average number of ordinary shares in issue (million)	265.0	265.6
Adjustment for share options and B shares (million)	0.7	1.1
Diluted weighted average number of ordinary shares in issue (million)	265.7	266.7
Diluted earnings per share (pence)	103.86	97.49

The effective interest rate on short-term bank deposits was 1.0% (2011: 0.2%); these deposits have an average maturity of less than 90 days. Cash is only held in banks which have been approved by Group Treasury.
Cash and bank overdrafts include the following for the purposes of the cashflow statement:

	2012 £ million	2011 £ million
Profit for the year	276.0	260.1
Exclude exceptional items	(9.2)	(28.6)
Adjusted earnings	266.8	231.5

An adjusted earnings per share figure is presented below.

	2012	2011
Basic earnings per share pre-exceptional items (pence)	100.67	87.14
Diluted earnings per share pre-exceptional items (pence)	100.40	86.76

13 Goodwill

	2012 £ million	2011 £ million
Cost
At 1 January	65.0	60.4
Acquisitions (i)	89.0	4.8
Exchange adjustments	(11.0)	(0.2)
At 31 December	143.0	65.0

Accumulated impairment losses	–	–

Net book value	143.0	65.0

(i) Goodwill on acquisitions comprises goodwill on Poit Energia acquisition (£88.0 million) and goodwill on Power Plus Rental & Sales Ltd acquisition (£1.0 million). (Refer to Note 29).

Goodwill impairment tests
Goodwill has been allocated to cash generating units (CGUs) as follows:

	2012 £ million	2011 £ million
Middle East & Developing Europe	1.1	1.2
Europe	10.2	10.9
North America	38.2	40.0
International Local	92.1	11.4
Local business	141.6	63.5
Power Projects	1.4	1.5
Group	143.0	65.0

Goodwill is tested for impairment annually or whenever there is an indication that the asset may be impaired. Goodwill is monitored by management at an operating segment level. The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for value in use calculations are those relating to expected changes in revenue and the cost base, discount rates and long-term growth rates. The discount rate used for business valuations was 8.9% after tax (2011: 8.3%), based on the weighted average cost of capital (WACC) of the Group. Before tax the estimated discount rate was 12.2% (2011: 11.3%). The WACC was calculated using the market capitalisation basis as at 31 December 2012 (i.e. equity valued basis).

The prior year WACC, which was previously calculated using shareholders' funds, have been restated using the market capitalisation basis to be consistent with best practice. On the basis that the business carried out by all CGUs is closely related and assets can be redeployed around the Group as required, a consistent Group discount rate has been used for all CGUs. Values in use were determined using current year cashflows, a prudent view of future market trends and excludes any growth capital expenditure. A terminal cash flow was calculated using a long-term growth rate of 2.0%.

As at 31 December 2012, based on internal valuations, Aggreko plc management concluded that the values in use of the CGUs significantly exceeded their net asset value.

The Directors consider that there is no reasonably possible change in the key assumptions made in their impairment calculations that would give rise to an impairment.

14 Other intangible assets

	2012 £ million	2011 £ million
Cost
At 1 January	31.5	28.9
Acquisitions (Note 29)	16.5	3.1
Exchange adjustments	(2.6)	(0.5)
At 31 December	45.4	31.5
Accumulated amortisation
At 1 January	15.2	11.9
Charge for the year	4.6	3.6
Exchange adjustments	(0.7)	(0.3)
At 31 December	19.1	15.2
Net book values:
At 31 December	26.3	16.3

Amortisation charges in the year comprised amortisation of assets arising from business combinations of £4.5 million (2011: £3.5 million) and amortisation of other intangible assets of £0.1 million (2011: £0.1 million). Amortisation charges in the year have been recorded in administrative expenses.

15 Property, plant and equipment

Year ended 31 December 2012
	Freehold properties £ million	Short leasehold properties £ million	Rental fleet £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2012	58.3	16.7	2,012.6	78.9	2,166.5
Exchange adjustments	(1.6)	(0.4)	(88.1)	(2.7)	(92.8)
Additions	2.6	1.8	415.3	19.9	439.6
Acquisitions (Note 29)	–	0.1	43.8	3.0	46.9
Disposals	(0.4)	(0.6)	(52.9)	(4.0)	(57.9)
At 31 December 2012	58.9	17.6	2,330.7	95.1	2,502.3
Accumulated depreciation
At 1 January 2012	16.7	9.0	997.8	56.0	1,079.5
Exchange adjustments	(0.6)	(0.3)	(39.6)	(1.4)	(41.9)
Charge for the year	1.8	1.7	222.1	10.7	236.3
Disposals	(0.4)	(0.5)	(46.0)	(2.9)	(49.8)
At 31 December 2012	17.5	9.9	1,134.3	62.4	1,224.1
Net book values:
At 31 December 2012	41.4	7.7	1,196.4	32.7	1,278.2
At 31 December 2011	41.6	7.7	1,014.8	22.9	1,087.0

Included within freehold properties are assets in the course of construction totalling £nil (2011: £17.2 million) in relation to the Group's new manufacturing facility.

Year ended 31 December 2011
	Freehold properties £ million	Short leasehold properties £ million	Rental fleet £ million	Vehicles, plant and equipment £ million	Total £ million
Cost
At 1 January 2011	46.2	15.8	1,659.8	71.4	1,793.2
Exchange adjustments	(0.1)	(0.4)	(0.5)	(0.6)	(1.6)
Additions	12.3	1.4	392.4	12.1	418.2
Acquisitions	–	0.1	4.2	0.5	4.8
Disposals	(0.1)	(0.2)	(43.3)	(4.5)	(48.1)
At 31 December 2011	58.3	16.7	2,012.6	78.9	2,166.5
Accumulated depreciation
At 1 January 2011	15.3	8.1	858.1	52.9	934.4
Exchange adjustments	–	(0.3)	0.5	(0.5)	(0.3)
Charge for the year	1.5	1.4	174.7	7.9	185.5
Disposals	(0.1)	(0.2)	(35.5)	(4.3)	(40.1)
At 31 December 2011	16.7	9.0	997.8	56.0	1,079.5
Net book values:
At 31 December 2011	41.6	7.7	1,014.8	22.9	1,087.0
At 31 December 2010	30.9	7.7	801.7	18.5	858.8

Included within freehold properties are assets in the course of construction totalling £17.2 million (2010: £6.0 million) in relation to the Group's new manufacturing facility.

16 Inventories

	2012 £ million	2011 £ million
Raw materials and consumables	172.2	140.6
Work in progress	5.3	6.8
	177.5	147.4

17 Trade and other receivables

	2012 £ million	2011 £ million
Trade receivables	356.2	300.5
Less: provision for impairment of receivables	(63.3)	(36.3)
Trade receivables – net	292.9	264.2
Prepayments	24.1	24.9
Accrued income	69.4	64.1
Other receivables	34.5	29.6
Total receivables	420.9	382.8

The value of trade and other receivables quoted in the table above also represent the fair value of these items.

The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:

	2012 £ million	2011 £ million
Sterling	12.5	19.4
Euro	44.4	37.7
US Dollar	211.9	198.8
Other currencies	152.1	126.9
	420.9	382.8

Movements on the Group's provision for impairment of trade receivables are as follows:

	2012 £ million	2011 £ million
At 1 January	36.3	33.4
Net provision for receivables impairment	31.9	4.8
Receivables written off during the year as uncollectable	(2.9)	(2.0)
Exchange	(2.0)	0.1
At 31 December	63.3	36.3

Credit quality of trade receivables

The table below analyses the total trade receivables balance per operating segment into fully performing, past due and impaired.

31 December 2012
	Fully performing £ million	Past due £ million	Impaired £ million	Total £ million
Middle East & Developing Europe	18.9	5.2	2.4	26.5
Europe	18.8	11.1	2.9	32.8
North America	26.7	22.9	1.1	50.7
International Local	17.6	22.8	3.4	43.8
Local business	82.0	62.0	9.8	153.8
Power Projects	58.7	90.2	53.5	202.4
Group	140.7	152.2	63.3	356.2

31 December 2011
	Fully performing £ million	Past due £ million	Impaired £ million	Total £ million
Middle East & Developing Europe	21.2	4.1	1.8	27.1
Europe	22.9	7.0	2.8	32.7
North America	23.8	18.6	1.4	43.8
International Local	15.8	12.3	1.6	29.7
Local business	83.7	42.0	7.6	133.3
Power Projects	58.4	80.1	28.7	167.2
Group	142.1	122.1	36.3	300.5

Trade receivables are classified as impaired if they are not considered recoverable. 42% of the amounts past due are less than 30 days past due (2011: 38%).

The Group assesses credit quality differently in relation to its two business models as explained below:

Local business

Our Local business serves customers in Middle East & Developing Europe, Europe, North America, Asia, Australasia, Latin America and Africa. It is a high transaction intensive business focused on frequently occurring events and the majority of the contracts in this business are small relative to the size of the Group. There is no concentration of credit risk in this business other than in the case of a major event, for example, the London Olympics, which was included in the Europe Local business segment. Apart from these type of major events there are a large number of customers who are unrelated and internationally dispersed.

Power Projects

Our Power Projects business concentrates on medium to very large contracts. Most projects in this business are worth over £1 million and some can be worth over £10 million. Customers are mainly in developing countries and include power utilities, governments, armed forces, oil companies and mining companies.

In addition the majority of the contracts above are in jurisdictions where payment practices can be unpredictable. The Group monitors the risk profile and debtor position of all such contracts regularly, and deploys a variety of techniques to mitigate the risks of delayed or non-payment; these include securing advance payments, bonds and guarantees. On the largest contracts, all such arrangements are approved at a Group level. Contracts are reviewed on a case by case basis to determine the customer and country risk. To date the Group has also had a low level of bad debt in the Power Projects business although the risk of a major default is high.

The total trade receivables balance as at 31 December 2012 for our Power Projects business was £202.4 million (2011: £167.2 million). Within this balance, receivable balances totalling £117.3 million (2011: £98.4 million) had some form of payment cover attached to them. This payment cover guards against the risk of customer default rather than the risk associated with customer disputes. The risk associated with the remaining £85.1 million (2011: £68.8 million) is deemed to be either acceptable or payment cover is not obtainable in a cost effective manner.

18 Borrowings

	2012 £ million	2011 £ million
Non-current
Bank borrowings	198.7	202.5
Private placement notes	232.7	178.3
	431.4	380.8

Current
Bank overdrafts	21.5	18.7
Bank borrowings	163.0	18.2
	184.5	36.9
Total borrowings	615.9	417.7
Short-term deposits	(0.1)	(36.4)
Cash at bank and in hand	(22.8)	(16.8)
Net borrowings	593.0	364.5

Overdrafts and borrowings are unsecured.

(i) Maturity of financial liabilities

The maturity profile of the borrowings was as follows:

	2012 £ million	2011 £ million
Within 1 year, or on demand	184.5	36.9
Between 1 and 2 years	–	170.0
Between 2 and 3 years	173.9	–
Between 3 and 4 years	24.8	32.5
Between 4 and 5 years	–	–
Greater than 5 years	232.7	178.3
	615.9	417.7

(ii) Borrowing facilities

The Group has the following undrawn committed floating rate borrowing facilities available at 31 December 2012 in respect of which all conditions precedent had been met at that date:

	2012 £ million	2011 £ million
Expiring within 1 year	190.3	–
Expiring between 1 and 2 years	–	95.3
Expiring between 2 and 3 years	54.4	–
Expiring between 3 and 4 years	49.6	193.2
Expiring between 4 and 5 years	–	–
Expiring after 5 years	–	–
	294.3	288.5

Since the year end, £30 million of committed facilities have matured.

(iii) Interest rate risk profile of financial liabilities

The interest rate profile of the Group's financial liabilities at 31 December 2012, after taking account of the interest rate swaps used to manage the interest profile, was:

				Fixed rate debt
	Floating rate £ million	Fixed rate £ million	Total £ million	Weighted average interest rate %	Weighted average period for which rate is fixed Years
Currency:
US Dollar	205.7	294.7	500.4	4.3	7.9
Euro	–	16.4	16.4	5.0	0.6
Canadian Dollars	15.6	–	15.6	–	–
Australian Dollars	7.7	–	7.7	–	–
New Zealand Dollars	9.7	–	9.7	–	–
South African Rand	7.6	–	7.6	–	–
Mexican Pesos	7.6	–	7.6	–	–
Russian Rubles	6.1	–	6.1	–	–
Brazilian Reais	18.6	–	18.6	–	–
Indian Rupees	9.7	–	9.7	–	–
Peruvian Neuvo Sol	5.1	–	5.1	–	–
Colombian Pesos	5.9	–	5.9	–	–
Other currencies	5.5	–	5.5	–	–
At 31 December 2012	304.8	311.1	615.9

Currency:
US Dollar	100.2	243.2	343.4	4.5	7.9
Euro	–	16.8	16.8	5.0	1.6
Canadian Dollars	15.2	–	15.2	–	–
Brazilian Reais	11.0	–	11.0	–	–
Indian Rupees	9.0	–	9.0	–	–
New Zealand Dollars	8.9	–	8.9	–	–
Other currencies	13.4	–	13.4	–	–
At 31 December 2011	157.7	260.0	417.7

The floating rate financial liabilities principally comprise debt which carries interest based on different benchmark rates depending on the currency of the balance and are normally fixed in advance for periods between one and three months.

The weighted average interest rate on fixed debt is derived from the fixed leg of each interest rate swap and coupons applying to fixed rate private placement notes.

The effect of the Group's interest rate swaps is to classify £78.4 million (2011: £81.7 million) of borrowings in the above table as fixed rate. The notional principal amount of the outstanding interest rate swap contracts at 31 December 2012 was £78.4 million (2011: £81.7 million).

(iv) Interest rate risk profile of financial asset

	Cash at bank and in hand £ million	Short-term deposits £ million	Total £ million
Currency:
Sterling	0.1	–	0.1
US Dollar	3.6	–	3.6
Euro	0.6	0.1	0.7
United Arab Emirates Dirham	3.0	–	3.0
Brazilian Reais	3.6	–	3.6
Chilean Pesos	3.0	–	3.0
Other currencies	8.9	–	8.9
At 31 December 2012	22.8	0.1	22.9

Currency:
Sterling	–	6.4	6.4
US Dollar	5.6	25.3	30.9
Euro	1.1	4.3	5.4
Other currencies	10.1	0.4	10.5
At 31 December 2011	16.8	36.4	53.2

All of the above cash and short-term deposits are floating rate and earn interest based on relevant LIBID (London Interbank Bid Rate) equivalents or government bond rates for the currency concerned.

(v) Preference share capital

2012

Number

2012

£000

2011

Number

2011

£000

Authorised:

Redeemable preference shares of 25p each

199,998

No redeemable preference shares were allotted as at 31 December 2012 and 31 December 2011. The Board is authorised to determine the terms, conditions and manner of redemption of redeemable shares.

19 Financial instruments

As stated in our accounting policies Note 1 the activities of the Group expose it directly to the financial risks of changes in foreign currency exchange rates and interest rates. The Group uses forward foreign exchange contracts and interest rate swap contracts to hedge these exposures. The movement in the hedging reserve is shown in the Statement of Changes in Equity.

(i) Fair values of financial assets and financial liabilities

The following table provides a comparison by category of the carrying amounts and the fair values of the Group's financial assets and financial liabilities at 31 December 2012. Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction between informed and willing parties, other than a forced or liquidation sale and excludes accrued interest. Market values have been used to determine fair values.

	2012		2011
	Book value £ million	Fair value £ million	Book value £ million	Fair value £ million
Primary financial instruments held or issued to finance
the Group's operations:
Current borrowings and overdrafts	(184.5)	(184.5)	(36.9)	(36.9)
Non-current borrowings	(431.4)	(431.4)	(380.8)	(380.8)
Short-term deposits	0.1	0.1	36.4	36.4
Cash at bank and in hand	22.8	22.8	16.8	16.8
Derivative financial instruments held:
Interest rate swaps	(12.9)	(12.9)	(13.5)	(13.5)
Foreign currency options	10.8	10.8	–	–
Forward foreign currency contracts	(0.8)	(0.8)	(0.2)	(0.2)

(ii) Summary of methods and assumptions

Interest rate swaps and foreign currency derivatives

Fair value is based on market price of these instruments at the balance sheet date. In accordance with IFRS 7, interest rate swaps are considered to be level 2 with fair value being calculated at the present value of estimated future cash flows using market interest rates. Forward foreign currency contracts and currency options are considered to be level 1 as the valuation is based on quoted market prices at the end of the reporting period.

Current borrowings and overdrafts/Short-term deposits

The fair value of short-term deposits and current borrowings and overdrafts approximates to the carrying amount because of the short maturity of these instruments.

Non-current borrowings

In the case of non-current borrowings, the fair value approximates to the carrying value reported in the balance sheet.

(iii) Derivative financial instruments

Numerical financial instruments disclosures are set out below. Additional disclosures are set out in the financial review and accounting policies relating to risk management.

	2012		2011
	Assets £ million	Liabilities £ million	Assets £ million	Liabilities £ million
Current:
Interest rate swaps – cash flow hedge	–	(0.4)	–	–
Forward foreign currency contracts – cash flow hedge	0.1	(0.9)	0.2	(0.4)
Currency options – cash flow hedge	5.0	–	–	–
Non-current:
Interest rate swaps – cash flow hedge	–	(12.5)	–	(13.5)
Currency options – cash flow hedge	5.8	–	–	–
	10.9	(13.8)	0.2	(13.9)

Net fair values of derivative financial instruments

The net fair value of derivative financial instruments that are designated as cash flow hedges at the balance sheet date was:

	2012 £ million	2011 £ million
Interest rate swaps	(12.9)	(13.5)
Currency options	10.8	–
Forward foreign currency contracts	(0.8)	(0.2)
	(2.9)	(13.7)

The net fair value losses at 31 December 2012 on open forward exchange contracts that hedge the foreign currency risk of future anticipated revenues are £0.5 million and that hedge the foreign currency risk of future anticipated expenditure are £0.3 million. These will be allocated to revenues and costs when the forecast revenues and costs occur (2011 anticipated future expenditure: £0.2 million). The net fair value liabilities at 31 December 2012 on open interest swaps that hedge interest risk are £12.9 million (2011: liabilities of £13.5 million). These will be debited to the income statement finance cost over the remaining life of each interest rate swap. Currency options are financial assets which are considered to have two components (intrinsic element and time element). The intrinsic element hedges the foreign currency risk of future anticipated revenues and this will be allocated to revenues when the forecast revenues occur. The time element is expensed to the income statement in line with the life of the options.

Hedge of net investment in foreign entity

The Group has designated as a hedge of the net investment in its overseas subsidiaries its US Dollar, Euro, Canadian Dollar, Australian Dollar, South African Rand, Russian Ruble, Mexican Peso and New Zealand Dollar denominated borrowings. The fair value of these borrowings were as follows:

	2012 £ million	2011 £ million
US Dollar	499.5	339.8
Euro	16.4	16.8
Canadian Dollars	15.6	15.2
Australian Dollars	7.7	–
New Zealand Dollars	9.7	8.9
South African Rand	6.2	–
Mexican Pesos	7.6	–
Russian Rubles	6.1	–

The foreign exchange gain of £17.9 million (2011: loss of £14.3 million) on translation of the borrowings into Sterling has been recognised in exchange reserves.

(iv) The exposure of the Group to interest rate changes when borrowings reprice is as follows:

As at 31 December 2012
	<1 year £ million	1-5 years £ million	>5 years £ million	Total £ million
Total borrowings	184.5	198.7	232.7	615.9
Effect of interest rate swaps and other fixed rate debt	(16.4)	–	(294.7)	(311.1)
	168.1	198.7	(62.0)	304.8

As at 31 December 2011
	<1 year £ million	1-5 years £ million	>5 years £ million	Total £ million
Total borrowings	36.9	202.5	178.3	417.7
Effect of interest rate swaps and other fixed rate debt	–	(16.8)	(243.2)	(260.0)
	36.9	185.7	(64.9)	157.7

As at 31 December 2012 and 31 December 2011 all of the Group's floating debt was exposed to repricing within 3 months of the balance sheet date. £16.4 million of interest rate swaps are due to mature in 2013. The Group's interest rate swap portfolio is reviewed on a regular basis to ensure it is consistent with Group policy as within Note 1 to the Group Accounts.

The effective interest rates at the balance sheet date were as follows:

	2012	2011
Bank overdrafts	8.6%	9.4%
Bank borrowings	2.7%	2.4%
Private placement	4.2%	4.5%

Maturity of financial liabilities

The table below analyses the Group's financial liabilities and net-settled derivative financial liabilities into the relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

As at 31 December 2012
	<1 year	1-2 years	2-5 years	>5 years
Borrowings	184.5	–	198.7	232.7
Derivative financial instruments	1.3	–	–	12.5
Trade and other payables	130.9	–	3.5	80.4
	316.7	–	202.2	325.6

As at 31 December 2011
	<1 year	1-2 years	2-5 years	>5 years
Borrowings	36.9	170.0	32.5	178.3
Derivative financial instruments	0.4	1.0	–	12.5
Trade and other payables	148.2	4.6	1.9	66.2
	185.5	175.6	34.4	257.0

No trade payable balances have a contractual maturity greater than 90 days.

Derivative financial instruments settled on a gross basis

The table below analyses the Group's derivative financial instruments which will be settled on a gross basis into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

As at 31 December 2012
	<1 year
Forward foreign exchange contracts – cashflow hedges
Outflow	53.3
Inflow	(52.5)
	0.8

As at 31 December 2011
	<1 year
Forward foreign exchange contracts – cashflow hedges
Outflow	21.7
Inflow	(21.3)
	0.4

All of the Group's forward foreign currency exchange contracts are due to be settled within one year of the balance sheet date.

20 Trade and other payables

	2012 £ million	2011 £ million
Trade payables	124.3	144.3
Other taxation and social security payable	7.9	18.5
Other payables	75.7	53.4
Accruals	107.0	147.0
Deferred income	22.8	18.5
	337.7	381.7

The value of trade and other payables quoted in the table above also represent the fair value of these items.

21 Provisions

	Reorganisation and Poit integration £ million	Statutory employee termination benefit £ million	Total £ million
At 1 January 2012	–	0.3	0.3
New provisions	10.8	–	10.8
Utilised during year	(5.1)	–	(5.1)
At 31 December 2012	5.7	0.3	6.0

	2012 £ million	2011 £ million
Analysis of total provisions
Current	5.1	–
Non current	0.9	0.3
	6.0	0.3

(i) The provision for reorganisation and Poit integration comprises the estimated costs of the Group reorganisation and also the integration of the Poit Energia acquisition into the Group. The provisions are generally in respect of professional fees, severance costs, relocation costs and travel expenses directly related to the reorganisation and integration. The provision is expected to be fully utilised by the end of 2015.

(ii) The provision for the statutory employee termination benefit relates to a statutory employee termination benefit scheme in France. The provision is expected to be utilised within 14 years.

22 Deferred tax

	2012 £ million	2011 £ million
At 1 January	8.1	(20.3)
Impact of reduction in UK CT rate	0.2	1.0
Deferred tax on acquisitions (Note 29)	0.9	–
Charge to the income statement (Note 10)	(16.9)	(7.1)
(Debit)/credit to other comprehensive income	(0.2)	1.9
(Debit)/credit to equity	(20.6)	5.5
Exchange differences	0.2	(1.5)
Exceptional release	–	28.6
At 31 December	(28.3)	8.1

The proposed reductions in the main rate of UK corporation tax by 1 per cent per year to 21 per cent by 1 April 2014 are expected to be enacted separately each year. The overall effect of the changes from 23 per cent to 21 per cent, if these applied to the deferred tax balance at 31 December 2012 would be to reduce the deferred tax asset by approximately £0.7 million (being £0.7 million recognised in 2013).

No deferred tax liability has been recognised in respect of unremitted earnings of subsidiaries. It is likely that the majority of the overseas earnings will qualify for the UK dividend exemption and the Group can control the distribution of dividends by its subsidiaries. In some countries, local tax is payable on the remittance of a dividend. Were dividends to be remitted from these countries, the additional tax payable would be £18.1 million.

The movements in deferred tax assets and liabilities (prior to off setting of balances within the same jurisdiction as permitted by IAS 12) during the period are shown below. Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.

Deferred tax assets are recognised to the extent that the realisation of the related deferred tax benefit through future taxable profits is probable. The Group did not recognise deferred tax assets of £1.0 million (2011: £2.6 million) of which £1.0 million (2011: £2.6 million) relates to carried forward tax losses as our forecasts indicate that these assets will not reverse in the near future.

Deferred tax assets of £8.0 million (2011: £2.9 million) have been recognised in respect of entities which have suffered a loss in either the current or preceding period.

Deferred tax liabilities
	Accelerated capital depreciation £ million	Other temporary differences £ million	Total £ million
At 1 January 2012	(62.2)	54.6	(7.6)
Charge to the income statement	(6.1)	(15.6)	(21.7)
Debit to other comprehensive income	–	(0.2)	(0.2)
Debit to equity	–	(20.6)	(20.6)
Exchange differences	–	0.2	0.2
Acquisition (Note 29)	–	0.9	0.9
At 31 December 2012	(68.3)	19.3	(49.0)

Deferred tax assets
	Accelerated capital depreciation £ million	Other temporary differences £ million	Total £ million
At 1 January 2012	4.4	11.3	15.7
Credit/(charge) to the income statement	(0.9)	5.9	5.0
At 31 December 2012	3.5	17.2	20.7

The net deferred tax liability due after more than one year is £28.3 million (2011: asset of £8.1 million).

23 Share capital

	Notes	2012 Number of shares	2012 £000	2011 Number of shares	2011 £000
(i) Ordinary shares of 13^549/₇₇₅ pence (2011: 13⁵⁴⁹/₇₇₅ pence)
At 1 January		266,719,246	36,563	274,318,271	54,864
Share conversion (1 ordinary share for every 39.4 B shares as at 31 May 2012)	(ii)	94,280	13	–	–
Share consolidation (31 for 32 shares as at 8 July 2011*)		–	–	(8,601,897)	–
Share split:
Deferred ordinary shares		–	–	–	(12,278)
B shares		–	–	–	(448)
Transfer to capital redemption reserve		–	–	–	(5,772)
Employee share option scheme		1,552,557	213	1,002,872	197
At 31 December		268,366,083	36,789	266,719,246	36,563

(ii) Deferred ordinary shares of 6¹⁸/₂₅ pence (2011: 6¹⁸/₂₅ pence)
At 1 January		182,700,915	12,278	–	–
Share split		–	–	182,700,915	12,278
At 31 December		182,700,915	12,278	182,700,915	12,278

(iii) B shares of 6¹⁸/₂₅ pence (2011: 6¹⁸/₂₅ pence)
At 1 January		6,663,731	448	–	–
Transfer to capital redemption reserve	(i)	(2,947,585)	(198)	–	–
Share conversion	(ii)	(3,716,146)	(250)	–	–
Share split		–	–	6,663,731	448
At 31 December		–	–	6,663,731	448

(iv) Deferred ordinary shares of ¹/₇₇₅ pence (2011: nil)
At 1 January		–	–	–	–
Share conversion	(ii)	18,352,057,648	237	–	–
At 31 December		18,352,057,648	237	–	–
* Based on 275,260,704 ordinary shares of 20 pence each on the record date of 8 July 2011.

Following the return of capital using a B share structure in July 2011, the Group made a further purchase of B shares on 3 May 2012 and completed a conversion of B shares into ordinary shares and deferred shares on 31 May 2012.

The main terms of the further purchase and subsequent conversion of the B shares were:

(i) on 14 March 2012 an offer was made to the holders of the 6,663,731 B shares to purchase the B shares for 55 pence each. This resulted in the purchase and subsequent cancellation of 2,947,585 B shares on 3 May 2012 resulting in a cash payment from the Company of £1.6 million. As a result of this transaction £198k was transferred from B shares to the capital redemption reserve being 2,947,585 shares at par value 6¹⁸/₂₅ pence. This left a total of 3,716,146 B shares in issue.

(ii) on 31 May 2012 the Group converted all outstanding B shares into 94,280 ordinary shares and 18,352,057,648 deferred shares of ¹/₇₇₅ pence each. The ratio used for the conversion of B shares to ordinary shares was 1 ordinary share for every 39.4 B shares. This ratio was calculated on the basis of 1 ordinary share for every (M/55) B share (where M represents the average of the closing mid-market quotations in pence of the ordinary shares on the London Stock Exchange, as derived from the Official List for the five business days immediately preceding the Conversion Date). Fractional entitlements were disregarded and the balance of the aggregate nominal value of such shares were constituted by reclassifying B shares as deferred shares of ¹/₇₇₅ pence each, which have the same rights and restrictions as the deferred shares of 6¹⁸/₂₅ pence.

(iii) The B share Continuing Dividend accrued in respect of the period between 11 July 2011 and 31 May 2012 was paid to holders of B shares on 31 May 2012.

During the year 524,335 ordinary shares of 13⁵⁴⁹/₇₇₅pence each have been issued at prices ranging from £2.82 to £17.30 (US $23.69) to satisfy the exercise of options under the Savings-Related Share Option Schemes ('Sharesave') by eligible employees. In addition 1,028,222 shares were allotted to US participants in the Long-term Incentive Plan by the allotment of new shares at 13⁵⁴⁹/₇₇₅ pence per share.

Share options

The options under the Savings-Related Share Option Schemes have been granted at a discount of 20% on the share price calculated over the three days prior to the date of invitation to participate, mature after three to five years and are normally exercisable in the six months following the maturity date. The options under the US Stock Purchase Plan have been granted at a discount of 15% to the share price on the date of grant, mature after two years and are normally exercisable in the three months following the maturity date.

There is no legal obligation upon the Company to satisfy the options existing under the Savings-Related Share Option Schemes other than by the allotment of new issue shares.

It is intended to satisfy awards to US participants in the Long-term Incentive Plan by the allotment of new shares. The maximum award would be made on achieving the performance targets set out within the Remuneration Report.

For the Sharesave and US Stock Options the Black-Scholes option-pricing model was used. The fair value per option granted and the assumptions used in the calculation are as follows:

Grant type	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave
Grant date	9-Nov-07	9-Nov-07	9-Nov-07	31-Oct-08	31-Oct-08	31-Oct-08	30-Oct-09	30-Oct-09
Share price at grant date (£)	5.7	5.7	5.7	4.3	4.3	4.3	7.6	7.6
Option price (£)	5.0	5.0	4.9	4.4	4.4	4.4	5.5	5.5
Number granted	264,698	84,907	9,792	567,259	211,082	44,223	281,110	70,609
Vesting period (years)	3.0	5.0	4.0	3.0	5.0	4.0	3.0	5.0
Expected volatility (%)	32.0	26.8	26.8	36.1	32.4	33.4	42.6	37.0
Expected life (years)	3.3	5.3	4.3	3.3	5.3	4.3	3.3	5.3
Risk free rate (%)	4.7	4.7	4.7	3.4	3.8	3.6	2.2	2.8
Expected dividends expressed as a dividend yield (%)	1.3	1.3	1.3	2.0	2.0	2.0	1.4	1.4
Fair value per option (£)	1.8	2.0	1.9	1.1	1.2	1.2	3.1	3.3

Grant type	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave
Grant date	30-Oct-09	20-Nov-09	25-Oct-10	25-Oct-10	25-Oct-10	25-Oct-10	25-Oct-10	25-Oct-10
Share price at grant date (£)	7.6	7.5	16.9	16.9	16.9	16.9	16.9	16.9
Option price (£)	5.5	5.5	12.4	12.4	12.9	12.4	12.4	12.9
Number granted	8,439	16,577	48,187	111,294	3,119	13,793	21,402	3,962
Vesting period (years)	4.0	3.0	3.0	3.0	4.0	5.0	5.0	5.0
Expected volatility (%)	39.7	42.6	43.4	43.4	40.0	38.1	38.1	38.1
Expected life (years)	4.3	1.4	3.3	3.3	4.3	5.3	5.3	5.3
Risk free rate (%)	2.5	2.1	1.0	1.0	1.4	1.7	1.7	1.7
Expected dividends expressed as a dividend yield (%)	1.4	1.4	0.9	0.9	0.9	0.9	0.9	0.9
Fair value per option (£)	3.2	3.0	6.8	6.8	6.8	7.4	7.4	7.1

Grant type	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave
Grant date	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11
Share price at grant date (£)	17.3	17.3	17.3	17.3	17.3	17.3	17.3	17.3
Option price (£)	12.6	13.4	12.7	12.8	12.1	12.6	13.4	12.7
Number granted	74,416	3,869	8,065	16,189	116,222	13,707	2,378	588
Vesting period (years)	3.0	3.0	3.0	3.0	3.0	5.0	5.0	5.0
Expected volatility (%)	41.6	41.6	41.6	41.6	41.6	38.8	38.8	38.8
Expected life (years)	3.3	3.3	3.3	3.3	3.3	5.3	5.3	5.3
Risk free rate (%)	0.9	0.9	0.9	0.9	0.9	1.5	1.5	1.5
Expected dividends expressed as a dividend yield (%)	0.8	0.8	0.8	0.8	0.8	0.8	0.8	0.8
Fair value per option (£)	6.9	6.5	6.8	6.8	7.2	7.7	7.3	7.6

Grant type	Sharesave	Sharesave	Sharesave	Sharesave	US Stock Plan	Sharesave	Sharesave	Sharesave
Grant date	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	28-Oct-11	16-Oct-12	16-Oct-12	16-Oct-12
Share price at grant date (£)	17.3	17.3	17.3	17.3	17.3	22.8	22.8	22.8
Option price (£)	12.8	12.1	13.6	13.6	14.7	19.1	18.9	19.1
Number granted	889	31,756	10,826	6,725	75,769	65,861	8,193	1,648
Vesting period (years)	5.0	5.0	4.0	5.0	2.0	3.0	3.0	3.0
Expected volatility (%)	38.8	38.8	41.2	38.8	32.2	30.4	30.4	30.4
Expected life (years)	5.3	5.3	4.3	5.3	2.1	3.3	3.3	3.3
Risk free rate (%)	1.5	1.5	1.2	1.5	0.6	0.3	0.3	0.3
Expected dividends expressed as a dividend yield (%)	0.8	0.8	0.8	0.8	0.8	1.0	1.0	1.0
Fair value per option (£)	7.6	7.9	7.0	7.2	4.3	6.2	6.3	6.2

Grant type	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	Sharesave	US Stock Plan
Grant date	16-Oct-12	16-Oct-12	16-Oct-12	16-Oct-12	16-Oct-12	16-Oct-12	16-Oct-12
Share price at grant date (£)	22.8	22.8	22.8	22.8	22.8	22.8	22.8
Option price (£)	19.2	19.2	19.2	19.2	19.2	19.3	19.4
Number granted	8,226	1,466	1,320	5,182	470	142,689	67,808
Vesting period (years)	4.3	3.0	3.0	3.0	3.0	3.0	2.0
Expected volatility (%)	38.4	30.4	30.4	30.4	30.4	30.4	29.2
Expected life (years)	3.3	3.3	5.3	5.3	5.3	5.3	2.1
Risk free rate (%)	0.6	0.3	0.3	0.3	0.3	0.3	0.3
Expected dividends expressed as a dividend yield (%)	1.0	1.0	1.0	1.0	1.0	1.0	1.0
Fair value per option (£)	7.9	6.1	6.1	6.1	6.1	6.1	5.3

The expected volatility is based on the volatility of the total return from the Company's shares over the period to grant equal in length to the expected life of the awards. The expected life is the average expected period to exercise. The risk free interest rate is the expected return on UK Gilts of a similar life.

A summary of movements in share options in Aggreko shares is shown below:

	Sharesave schemes Number of Shares	Weighted average exercise price (£)	US Stock option plans Number of Shares	Weighted average exercise price (£)	Long-term Incentive Plans Number of Shares	Weighted average exercise price (£)
Outstanding at 1 January 2012	1,556,906	7.00	131,804	14.04	1,727,182	nil
Granted	235,055	19.11	67,808	19.35	262,412	nil
Exercised	(480,736)	4.13	(43,599)	14.32	(1,028,222)	nil
Lapsed	(136,383)	6.54	(9,765)	10.89	(39,470)	nil
Outstanding at 31 December 2012	1,174,842	10.65	146,248	16.82	921,902	nil
Weighted average contractual life (years)	2		1		1

The weighted average share price during the year for options exercised over the year was £4.97 (2011: £4.29). The total charge for the year relating to employee share based payment plans was £13.5 million (2011: £19.8 million), all of which related to equity-settled share based payment transactions.

Options outstanding over ordinary shares as at 31 December 2012 (including those of the Executive Directors), together with the exercise prices and dates of exercise, are as follows:

	Price per share	Earliest exercise date	Latest exercise date	2012 Number	2011 Number	Market price (£)¹
Sharesave – Nov 2006	£2.82	Nov 2011	May 2012	–	70,157	3.74
	£2.87	Nov 2011	May 2012	–	16,985	3.74
Sharesave – Nov 2007	£4.91	Nov 2011	May 2012	–	3,880	5.73
	£5.04	Nov 2012	May 2013	31,435	31,435	5.73
	£4.91	Nov 2012	May 2013	4,390	4,390	5.73
Sharesave – Oct 2008	£4.37	Jan 2012	Jun 2012	–	437,148	4.33
	£4.37	Jan 2013	Jun 2013	25,921	27,354	4.33
	£4.37	Jan 2014	Jun 2014	132,220	162,850	4.33
	£4.37	Jan 2014	Jun 2014	8,617	8,617	4.33
Long-term Incentive Plan – Apr 2009	–	Apr 2012	Oct 2012	–	1,059,278	5.23
US Stock Option Plan – Oct 2009	US$10.64	Nov 2011	Jan 2012	–	8,279	7.60
Sharesave UK 3 year – Oct 2009	£5.53	Jan 2013	Jun 2013	94,166	95,982	7.60
Sharesave International 3 year – Oct 2009	US$8.77	Jan 2013	Jun 2013	113,029	123,490	7.60
	US$8.77	Jan 2013	Jun 2013	16,577	16,577	7.60
	€ 6.02	Jan 2013	Jun 2013	22,232	22,232	7.60
	CAD$9.53	Jan 2013	Jun 2013	3,515	3,892	7.60
Sharesave French 4 year – Oct 2009	€ 6.02	Jan 2014	Jun 2014	5,953	7,865	7.60
Sharesave UK 5 year – Oct 2009	£5.53	Jan 2015	Jun 2015	30,143	30,143	7.60
Sharesave International 5 year – Oct 2009	US$8.77	Jan 2015	Jun 2015	20,207	25,719	7.60
	€ 6.02	Jan 2015	Jun 2015	1,295	1,295	7.60
Long-term Incentive Plan – Apr 2010	–	Apr 2013	Oct 2013	502,140	509,320	11.89
US Stock Option Plan – Oct 2010	US$22.52	Nov 2012	Jan 2013	8,287	48,154	16.85
Sharesave UK 3 year – Oct 2010	£12.39	Jan 2014	Jun 2014	40,645	44,505	16.85
Sharesave International 3 year – Oct 2010	US$19.57	Jan 2014	Jun 2014	81,742	90,411	16.85
	CA$20.21	Jan 2014	Jun 2014	902	973	16.85
	AU$20.21	Jan 2014	Jun 2014	4,860	6,954	16.85
	€ 14.39	Jan 2014	Jun 2014	6,305	7,055	16.85
Sharesave French 4 year – Oct 2010	€ 14.52	Jan 2015	Jun 2015	2,855	3,119	16.85
Sharesave UK 5 year – Oct 2010	£12.39	Jan 2016	Jun 2015	11,337	11,337	16.85
Sharesave International 5 year – Oct 2010	US$19.57	Jan 2016	Jun 2016	11,818	13,473	16.85
Sharesave International 5 year – Oct 2010	CA$20.21	Jan 2016	Jun 2016	296	296	16.85
Sharesave International 5 year – Oct 2010	AU$20.21	Jan 2016	Jun 2016	3,602	7,217	16.85
Sharesave International 5 year – Oct 2010	€ 14.39	Jan 2016	Jun 2016	416	416	16.85
Sharesave French 5 year – Oct 2010	€ 14.52	Jan 2016	Jun 2016	3,962	3,962	16.85
Long-term Incentive Plan – Apr 2011	–	Apr 2014	Oct 2014	157,350	158,584	15.35
US Stock Option Plan – Oct 2011	US$23.69	Nov 2013	Jan 2014	70,310	75,371	17.28
Sharesave UK 3 year – 28 Oct 2011	£12.60	Jan 2015	Jun 2015	70,822	74,416	17.28
Sharesave International 3 year – 28 Oct 2011	US$19.43	Jan 2015	Jun 2015	104,964	113,034	17.28
Sharesave International 3 year – 28 Oct 2011	CA$20.38	Jan 2015	Jun 2015	5,397	8,065	17.28
Sharesave International 3 year – 28 Oct 2011	AU$20.23	Jan 2015	Jun 2015	3,869	3,869	17.28
Sharesave International 3 year – 28 Oct 2011	€ 14.60	Jan 2015	Jun 2015	15,819	16,189	17.28
Sharesave French 4 year – 28 Oct 2011	€ 15.52	Jan 2016	Jun 2015	10,672	10,826	17.28
Sharesave UK 5 year – 28 Oct 2011	£12.60	Jan 2017	Jun 2017	13,707	13,707	17.28
Sharesave International 5 year – 28 Oct 2011	US$19.43	Jan 2017	Jun 2017	26,491	26,491	17.28
Sharesave International 5 year – 28 Oct 2011	CA$20.38	Jan 2017	Jun 2017	–	588	17.28
Sharesave International 5 year – 28 Oct 2011	AU$20.23	Jan 2017	Jun 2017	2,378	2,378	17.28
Sharesave International 5 year – 28 Oct 2011	€ 14.60	Jan 2017	Jun 2017	889	889	17.28
Sharesave French 5 year – 28 Oct 2011	€ 15.52	Jan 2017	Jun 2017	6,339	6,725	17.28
Long-term Incentive Plan – Apr 2012	–	Apr 2015	Oct 2015	262,412	–	21.86
US Stock Option Plan – 16 Oct 2012	US$31.15	Nov 2014	Jan 2015	67,651	–	22.78
Sharesave UK 3 year – 16 Oct 2012	£19.11	Jan 2016	Jun 2017	65,861	–	22.78
Sharesave International 3 year – 16 Oct 2012	US$31.00	Jan 2016	Jun 2017	142,689	–	22.78
Sharesave International 3 year – 16 Oct 2012	CA$30.26	Jan 2016	Jun 2017	1,648	–	22.78
Sharesave International 3 year – 16 Oct 2012	AU$29.61	Jan 2016	Jun 2017	8,193	–	22.78
Sharesave International 3 year – 16 Oct 2012	€ 23.74	Jan 2016	Jun 2017	8,438	–	22.78
Sharesave French 4 year – 16 Oct 2012	€ 23.74	Jan 2017	Jun 2017	8,226	–	22.78
				2,242,992	3,415,892

1 Market price as at the date of grant.

24 Treasury shares

2012

£ million

2011

£ million

Treasury shares

(34.3)

(48.9)

Interests in own shares represents the cost of 2,176,628 of the company's ordinary shares (nominal value 13⁵⁴⁹/₇₇₅ pence). Movement during the year was as follows:

	2012 Number of shares	2011 Number of shares
1 January	4,805,289	6,087,304
Purchase of shares (Note (i))	508,162	589,000
Long-term Incentive Plan Maturity	(3,136,823)	(1,734,930)
Share consolidation (31 for 32 shares) (Note 23)	–	(136,085)
31 December	2,176,628	4,805,289

(i) Purchased at an average share price of £21.64 (2011: £17.15).

These shares represent 0.8% of issued share capital as at 31 December 2012 (2011: 1.8%).

These shares were acquired by a Trust in the open market using funds provided by Aggreko plc to meet obligations under the Long-term Incentive Arrangements. The costs of funding and administering the scheme are charged to the income statement of the Company in the period to which they relate. The market value of the shares at 31 December 2012 was £37.9 million (31 December 2011: £96.9 million).

25 Capital commitments

2012

£ million

2011

£ million

Contracted but not provided for (property, plant and equipment)

12.8

21.0

26 Operating lease commitments – minimum lease payments

	2012 £ million	2011 £ million
Commitments under non cancellable operating leases expiring:
Within 1 year	21.3	15.3
Later than 1 year and less than 5 years	35.4	24.4
After 5 years	9.6	9.4
Total	66.3	49.1

27 Pension commitments

Overseas

Pension arrangements for overseas employees vary, and schemes reflect best practice and regulation in each particular country. The charge against profit is the amount of contributions payable to the defined contribution pension schemes in respect of the accounting period. The pension cost attributable to overseas employees for 2012 was £6.5 million (2011: £4.8 million).

United Kingdom

The Group operates pension schemes for UK employees. The Aggreko plc Pension Scheme ('the Scheme') is a funded, contributory, defined benefit scheme. Assets are held separately from those of the Group under the control of the Directors of Aggreko Pension Scheme Trustee Limited. The Scheme is subject to valuations at intervals of not more than three years by independent actuaries.

A valuation of the Scheme was carried out as at 31 December 2011 using the Attained Age method to determine the level of contributions to be made by the Group. The actuaries adopted a valuation basis linked to market conditions at the valuation date. Assets were taken at market value. The major actuarial assumptions used were:

Return on investments	4.2%
Rate of increase in salaries	4.9%
Increase in pensions	3.3%

At the valuation date, the market value of the Scheme's assets (excluding AVCs) was £59.4 million which was sufficient to cover 78% of the benefits that had accrued to members, after making allowances for future increases in earnings.

As part of the valuation at 31 December 2011, the Company and the trustees have agreed upon a Schedule of Contributions and a Recovery Plan. During 2012 the Company contributions for benefits building up in the future were 28.6% of pensionable earnings. From 1 February 2013 the Company will pay contributions of 35.9% of pensionable earnings. To address the Scheme deficit the Company made contributions of £0.6 million under the previous Recovery Plan in January 2012 and £3.5 million in December 2012 in line with the Recovery Plan agreed for the Scheme following the actuarial valuation at 31 December 2011.

The Company plans to make further additional contributions of £2.5 million in 2013, £2.0 million in 2014 and £1.25 million each year until the year ended 31 December 2018. Employee contributions are 6% of pensionable earnings.

The Scheme closed to all new employees joining the Group after 1 April 2002. New employees are given the option to join a defined contribution scheme. Contributions of £0.8 million were paid to the scheme during the year (2011: £0.8 million). There are no outstanding or prepaid balances at the year end.

An update of the Scheme was carried out by a qualified independent actuary using the latest available information for the purposes of this statement. The major assumptions used in this update by the actuary were:

	31 Dec 2012	31 Dec 2011
Rate of increase in salaries	4.8%	4.9%
Rate of increase in pensions in payment	3.2%	3.3%
Rate of increase in deferred pensions	3.3%	3.4%
Discount rate	4.5%	4.8%
Inflation assumption	3.3%	3.4%
Expected return on Scheme assets	3.9%	4.3%
Longevity at age 65 for current pensioners (years)
Men	23.8	23.5
Women	26.3	26.4
Longevity at age 65 for future pensioners (years)
Men	26.5	25.3
Women	29.1	28.1

The expected return on Scheme assets is based on market expectations at the beginning of the period for returns over the entire life of the benefit obligation.

The assets in the Scheme and the expected rate of return were:

	Long term rate of return expected at 31 Dec 2012	Value at 31 Dec 2012 £ million	Long term rate of return expected at 31 Dec 2011	Value at 31 Dec 2011 £ million	Long term rate of return expected at 31 Dec 2010	Value at 31 Dec 2010 £ million
Equities	5.5%	26.2	5.5%	23.2	6.6%	24.5
Property	5.5%	3.9	5.5%	4.1	6.6%	5.0
Gilts	2.5%	15.5	2.5%	15.5	3.6%	11.1
Bonds	3.4%	18.7	4.5%	14.8	4.8%	10.3
Cash	0.0%	5.3	0.0%	1.5	0.0%	2.1
Total		69.6		59.1		53.0

The expected rate of return on assets is stated net of expenses.

The amounts included in the balance sheet arising from the Group's obligations in respect of the Scheme are as follows:

	2012 £ million	2011 £ million	2010 £ million
Fair value of assets	69.6	59.1	53.0
Present value of funded obligations	(73.6)	(64.6)	(56.2)
Liability recognised in the Balance Sheet	(4.0)	(5.5)	(3.2)

An alternative method of valuation is the estimated cost of buying out benefits at 31 December 2012 with a suitable insurer. This amount represents the amount that would be required to settle the Scheme liabilities at 31 December 2012 rather than the Company continuing to fund the ongoing liabilities of the Scheme. The Company estimates the amount required to settle the Scheme's liabilities at 31 December 2012 is around £91 million which gives a Scheme shortfall on a buyout basis of approximately £21 million.

The amounts recognised in the income statement are as follows:

	2012 £ million	2011 £ million
Current service costs	1.7	1.7
Interest cost	3.1	3.0
Expected return on Scheme assets	(2.6)	(3.0)
	2.2	1.7

Of the total charge of £2.2 million, £0.6 million (2011: £0.5 million) and £1.6 million (2011: £1.2 million) were included, respectively in cost of sales and administrative expenses.

Changes in the present value of the defined benefit obligation are as follows:
	2012 £ million	2011 £ million
Present value of obligation at 1 January	64.6	56.2
Service cost	1.7	1.7
Interest cost	3.1	3.0
Contributions from Scheme members	0.4	0.4
Benefits paid	(1.0)	(0.8)
Actuarial losses	4.8	4.1
Present value of obligation at 31 December	73.6	64.6

Present value of Scheme assets are as follows:
	2012 £ million	2011 £ million
Fair value of Scheme assets at 1 January	59.1	53.0
Expected return on Scheme assets	2.6	3.0
Employer contributions	5.9	4.4
Contributions from Scheme members	0.4	0.4
Benefits paid	(1.0)	(0.8)
Actuarial gains/(losses)	2.6	(0.9)
Fair value of Scheme assets at 31 December	69.6	59.1

Analysis of the movement in the balance sheet
	2012 £ million	2011 £ million
At 1 January	(5.5)	(3.2)
Total expense as above	(2.2)	(1.7)
Contributions	5.9	4.4
Net actuarial losses	(2.2)	(5.0)
At 31 December	(4.0)	(5.5)

Cumulative actuarial gains and losses recognised in equity
	2012 £ million	2011 £ million
At 1 January	28.1	23.1
Actuarial losses recognised in the year	2.2	5.0
At 31 December	30.3	28.1

The actual return on Scheme assets was a gain of £5.2 million (2011: gain of £2.1 million).

History of experience gains and losses

	2012	2011	2010	2009	2008
Experience adjustments arising on Scheme assets:
Amount (£m)	2.6	(0.9)	2.6	2.8	(7.9)
Percentage of Scheme assets	3.7%	(1.5%)	4.9%	6.5%	(24.2%)

Experience adjustments arising on Scheme liabilities:
Amount (£m)	(1.0)	–	–	1.1	–
Percentage of present value Scheme liabilities	(1.4%)	0.0%	0.0%	2.3%	0.0%

Present value of Scheme liabilities (£m)	73.6	64.6	56.2	48.6	40.6

Fair value of Scheme assets (£m)	69.6	59.1	53.0	42.8	32.6
Deficit (£m)	4.0	5.5	3.2	5.8	8.0

The contributions expected to be paid during the financial year ending 31 December 2013 amount to £4.8 million.

28 Significant investments

The principal subsidiary undertakings of Aggreko plc at the year end, and the main countries in which they operate, are shown below. All companies are wholly owned and, unless otherwise stated, incorporated in UK or in the principal country of operation and are involved in the supply of temporary power, temperature control and related services.

All shareholdings are of ordinary shares or other equity capital.

Aggreko Argentina S.R.L.		Argentina
Poit Energia Argentina		Argentina
Aggreko Generators Rental Pty Limited		Australia
Aggreko Barbados Limited		Barbados
Aggreko Belgium NV		Belgium
Aggreko Energia Locacao de Geradores Ltda		Brazil
Aggreko Cameroon S.R.L.		Cameroon
Aggreko Canada Inc		Canada
Aggreko Financial Holdings Limited +		Cayman Islands
Aggreko Chile Limitada		Chile
Aggreko (Shanghai) Energy Equipment Rental Company Limited		China
Aggreko Colombia SAS		Colombia
Aggreko Costa Rica S.A.		Costa Rica
Aggreko Cote d'lvoire S.A.R.L.		Cote d'Ivoire
Aggreko (Middle East) Limited		Cyprus*
Aggreko DRC S.P.R.L.	Democratic Republic of the Congo
Aggreko Dominican Republic	Dominican Republic
Aggreko Energy Ecuador CIA		Ecuador
Aggreko Finland Oy		Finland
Aggreko France S.A.R.L.		France
Aggreko Deutschland GmbH		Germany
Aggreko Hong Kong Limited		Hong Kong
Aggreko Energy Rental India Private Limited +++		India
PT Aggreko Energy Services		Indonesia
Aggreko Ireland Limited		Ireland
Aggreko Italia S.R.L.		Italy
Aggreko Japan Limited		Japan
Aggreko Kenya Energy Rentals Limited		Kenya
Aggreko Malaysia SDN BHD		Malaysia
Aggreko Shanduka Mauritius Limited***		Mauritius
Aggreko Energy Mexico SA de CV		Mexico
Aggreko Services Mexico SA de CV		Mexico
Aggreko SA de CV ++++		Mexico
Aggreko Mocambique Limitada		Mozambique
Aggreko Namibia Energy Rentals (Pty) Ltd		Namibia
Aggreko (NZ) Limited		New Zealand
Aggreko Projects Limited		Nigeria
Aggreko Gas Power Generation Limited ++++		Nigeria
Aggreko Norway AS		Norway
Aggreko Energy Rentals Panama SA		Panama
Aggreko Generator Rentals (PNG) Limited ++++		Papua New Guinea
Aggreko Peru S.A.C.		Peru
Poit Energia del Peru S.A.C.		Peru
Aggreko Polska Spolka Z Organiczona		Poland
Aggreko Trinidad Limited	Republic of Trinidad & Tobago
Aggreko South East Europe S.R.L.		Romania
Aggreko Eurasia LLC		Russia
Aggreko Rwanda Limited		Rwanda
Aggreko Senegal S.A.R.L.		Senegal
Aggreko (Singapore) PTE Limited		Singapore
Aggreko Energy Rental South Africa (Proprietary) Limited		South Africa
Aggreko South Korea Limited		South Korea
Aggreko Iberia SA		Spain
Aggreko (Thailand) Limited		Thailand
Aggreko Americas Holdings B.V. +		The Netherlands
Aggreko Euro Holdings B.V. +		The Netherlands
Aggreko Rest of the World Holdings B.V. +		The Netherlands
Aggreko (Investments) B.V. ++		The Netherlands
Aggreko Nederland B.V.		The Netherlands
Generatoren Koopmans B.V. ++++		The Netherlands
Aggreko Enerji ve Isi Kontrol Ticaret Anonim Sirketi		Turkey
Aggreko Finance Limited +		UK
Aggreko Holdings Limited +		UK
Aggreko European Finance ++		UK
Aggreko International Projects Holdings Limited		UK+
Aggreko International Projects Limited		UK**
Aggreko Pension Scheme Trustee Limited		UK
Aggreko UK Limited		UK
Aggreko US Limited		UK
Aggreko Generators Limited ++++		UK
Aggreko Luxembourg Holdings ++++		UK
Aggreko Quest Trustee Limited ++++		UK
CS1 Limited ++++		UK
Dunwilco (680) Limited ++++		UK
Rotor Wheel UK Limited ++++		UK
Aggreko Uruguay S.A.		Uruguay
Delebau S.A.		Uruguay
Aggreko Holdings Inc +		USA
Aggreko USA LLC +		USA
Aggreko LLC		USA
Aggreko de Venezuela C.A.		Venezuela

* Registered in Cyprus ** Administered from Dubai and registered in the UK
*** Aggreko ownership is 70%, remainder is held by Shanduka Africa Investments Limited
+ Intermediate holding companies ++ Finance Company
+++ The financial year end of Aggreko Energy Rental India Private Limited is 31 March due to local taxation requirements
++++ Dormant Company

29 Acquisitions

(i) Poit Energia

On 16 April 2012 the Group completed the acquisition of the entire share capital of Companhia Brasileira de Locacoes ('Poit Energia'), a leading provider of temporary power solutions in South America. The acquisition of Poit Energia supports Aggreko's strategy of expanding its Local business in fast growing economies; it strengthens Aggreko's business in South America, both in terms of geographical footprint and access to sectors which Aggreko is currently not in or has limited exposure.

The purchase consideration, paid in cash, comprised a fixed element of £104.7 million and further payments up to a maximum of £20.4 million if performance targets for the year to 31 December 2012 were met. At the acquisition date the total £20.4 million was accrued as this was considered the most likely outcome. This gave a total consideration of £125.1 million.

The Group completed the acquisition and the legal merger of Poit Energia with the existing Aggreko Brazil business earlier than anticipated and accordingly agreed with the vendors that the earn out period would be terminated early in return for a payment of £3.1 million out of the possible deferred consideration of £20.4 million. The resulting difference of £17.3 million has been taken to the income statement in the period as an exceptional credit. (Refer to Note 7).

The initial transaction price of £137.5 million (R$404 million) disclosed at the time of the acquisition was made up of £104.7 million consideration payable to the owners of Poit Energia plus £32.8 million of debt (including loans and financing) to be paid off by Aggreko on behalf of Poit Energia. Of the £137.5 million, £133.0 million was settled by 31 December 2012 comprising £104.7 million of the fixed consideration and £28.3 million of debt (£22.2 million of loans and financing and £6.1 million of working capital payments). The remaining debt amount of £4.5 million will be settled in the normal course of business as it falls due.

The revenue and operating profit included in the consolidated income statement from 16 April 2012 to 31 December 2012 contributed by Poit Energia was £33.2 million and £2.8 million respectively. Had Poit Energia been consolidated from 1 January 2012, the consolidated income statement for the year ended 31 December 2012 would show revenue and operating profit of £48.5 million and £3.6 million (including the vendors' transaction fees) respectively.

The acquisition method of accounting has been adopted and the goodwill arising on the purchase has been capitalised. Acquisition related costs of £1.5 million have been expensed in the year and are included within the exceptional items in the income statement.

The details of the transaction and fair value of assets acquired are shown below:

	Fair value £ million
Intangible assets	16.5
Property, plant and equipment	46.9
Inventories	2.8
Trade and other receivables	9.5
Deferred tax asset	6.5
Cash and cash equivalents	3.4
Trade and other payables	(19.4)
Deferred tax liability	(5.6)
Loans and financing	(23.5)
Net assets acquired	37.1
Goodwill	88.0
Consideration	125.1
Less deferred consideration released and taken to income statement (Note 7)	(17.3)
Less cash and cash equivalents acquired	(3.4)
Net cash outflow	104.4

Reconciliation to cash flow statement:

	£ million
Acquisitions (net of cash acquired) per cash flow statement	104.4
Add back cash acquired	3.4
Total consideration paid out at 31 December 2012 (comprising fixed consideration of £104.7 million and £3.1 million of deferred consideration paid)	107.8
Acquisitions: repayment of loans and financing per cash flow statement	22.2
Working capital movements (included as part of working capital movements in Note 2)	6.1
Total cash outflow in the period (comprising £133.0 million of initial transaction price and £3.1 million of deferred consideration paid)	136.1

The fair values contain some provisional amounts which will be finalised in quarter one 2013. These include the physical condition of fleet assets which have still to be finally assessed. Goodwill represents the value of synergies arising from the integration of the acquired business. Synergies include direct cost savings and the reduction of overheads as well as the ability to leverage Aggreko systems and access to assets.

(ii) Power Plus Rental & Sales Ltd

On 19 August 2008 the Group acquired substantially all the assets and business of Power Plus Rental & Sales Ltd. During the year to 31 December 2012 the Group agreed with the vendors that £1.0 million of the deferred consideration was payable. At 31 December 2012 this amount was accrued and goodwill was adjusted accordingly. This amount was subsequently paid to the vendor in January 2013.

Notes to the Group Accounts

1 Accounting policies

Basis of preparation

Changes in accounting policy and disclosures

(a) New and amended standards adopted by the Group

(b) New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2012 and not early adopted

Basis of consolidation

Revenue recognition

Segmental reporting

Leases

Exceptional items

Property, plant and equipment

Intangibles

Goodwill

Impairment of property, plant and equipment and other intangible assets (excluding goodwill)

Foreign currencies

Derivative financial instruments

Cash flow hedge

Overseas net investment hedges

Taxation

Deferred Tax

Current tax

Inventories

Employee benefits

Trade receivables

Trade payables

Provisions

Share-based payments

Cash and cash equivalents

Borrowings

Dividend distribution

Key assumptions and significant judgements

Property, plant and equipment

Intangible assets

Trade receivables

Taxation

Financial risk management

Financial risk factors

Liquidity, funding and capital management

Interest rate risk

Foreign exchange risk

Credit risk

Management of trade receivables

Insurance

2 Cashflow from operating activities

3 Cash and cash equivalents

4 Segmental reporting (a) Revenue by segment

(b) Profit by segment

(c) Depreciation and amortisation by segment

(d) Capital expenditure on property, plant and equipment and intangible assets by segment 2012

(e) Assets/(liabilities) by segment

(f) Average number of employees by segment

(g) Reconciliation of net operating assets to net assets

5 Profit before taxation

6 Auditors' remuneration

7 Exceptional Items

(i) 2012

(ii) 2011

8 Employees and Directors

9 Net Finance Charge

10 Taxation

11 Dividends

12 Earnings per share

13 Goodwill

14 Other intangible assets

15 Property, plant and equipment

16 Inventories

17 Trade and other receivables

Credit quality of trade receivables

Local business

Power Projects

18 Borrowings

(i) Maturity of financial liabilities

(ii) Borrowing facilities

(iii) Interest rate risk profile of financial liabilities

(iv) Interest rate risk profile of financial asset

(v) Preference share capital

19 Financial instruments

(i) Fair values of financial assets and financial liabilities

(ii) Summary of methods and assumptions

4 Segmental reporting
(a) Revenue by segment